Federal Reserve Bulletin, 1993-04

VOLUME 79 • NUMBER 4 • APRIL 1993 FEDERAL RESERVE 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 • Richard Spillenkothen • Edwin M. Truman The Federal Reserve Bulletin is issued monthly under the direction of the staff publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, 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 251 THE COMMUNITY REINVESTMENT ACT: 274 STATEMENTS TO THE CONGRESS EVOLUTION AND CURRENT ISSUES Griffith L. Garwood, Director, Division of The Community Reinvestment Act has had a Consumer and Community Affairs, gives the major influence on reinvestment activity Federal Reserve's perspectives on bankthroughout the country and has stimulated holding-company-related community developgreater attention to local needs, especially in ment corporations (CDCs) and other types of low-income and minority areas. Yet many community development equity investments, financial institutions complain that complying which are approved by the Federal Reserve, with the CRA is costly and burdensome, while and says that although the Federal Reserve community and consumer groups believe that fully supports the CDC concept, it believes financial institutions are not doing enough to that its use has limitations and that it should help meet the credit needs of residents and not be oversold, before the Subcommittee on business in low- and moderate-income areas. Financial Institutions Supervision, Regulation Today the act remains a source of concerns and Insurance of the House Committee on to regulators, bankers, and community activ- Banking, Finance and Urban Affairs, Febists, but it also continues to offer wide oppor- ruary 3, 1993. tunities for creatively meeting the credit needs of communities. 279 Richard F. Syron, President, Federal Reserve Bank of Boston, testifies on the credit availability problems that have arisen in low- 268 TREASURY AND FEDERAL RESERVE income communities and focuses on abusive FOREIGN EXCHANGE OPERATIONS practices in second-mortgage lending in Boston, before the Subcommittee on Consumer During the November-January period under Credit and Insurance of the House Committee review, the dollar continued to appreciate on Banking, Finance and Urban Affairs, Febagainst the German mark and the Japanese ruary 4, 1993. yen from the low levels established in the previous period. The dollar gained 1 percent 281 John R La Ware, Member, Board of Goveragainst the yen, 4.5 percent against the mark, nors, and Chairman, Federal Financial Instituand 5.5 percent on a trade-weighted basis. tions Examination Council, discusses the appropriate level of regulation of banking institutions and also the study of regulatory 271 INDUSTRIAL PRODUCTION AND burden made by the Federal Financial Institu- CAPACITY UTILIZATION tions Examination Council in 1992 and says Industrial production rose 0.4 percent in Janu- that the regulatory burden imposed on banks ary, compared with revised gains of 0.2 per- may threaten their role in providing important cent in December and 0.5 percent in Novem- services to the economy, before the Subcomber. Total industrial capacity utilization mittee on Financial Institutions Supervision, increased 0.2 percentage point in January, to Regulation and Insurance of the House Com- 79.5 percent, the highest rate since October mittee on Banking, Finance and Urban 1991. Affairs, February 18, 1993. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

285 Lawrence B. Lindsey, Member, Board of Gov- minority applicants for home mortgages and ernors, provides the Federal Reserve's per- that regulators, lenders, and community spectives on the current status of the Commu- groups must work together to eliminate this nity Reinvestment Act (CRA), and says that gap, before the Senate Committee on Bankthe CRA is working better than is often recog- ing, Housing, and Urban Affairs, February 24, nized and that it has provided much of the 1993. momentum for the responses by financial institutions to the needs of their communities, 317 ANNOUNCEMENTS especially in lower-income areas, before the Subcommittee on Consumer Credit and Insur- Issuance of final rule to revise the capital ance of the House Committee on Banking, adequacy guidelines for bank holding Finance and Urban Affairs, February 18,1993. companies. 292 Alan Greenspan, Chairman, Board of Gover- Proposal to extend the provisions of Regulanors, discusses developments in the economy tion E to electronic benefit transfer programs; and the conduct of monetary policy and proposed amendments to capital adequacy says that in 1992 the financial condition of guidelines for state member banks and bank households, firms, and financial institutions holding companies. improved and confidence rebounded late in the year, before the Senate Committee on Revisions to the money stock data. Banking, Housing, and Urban Affairs, February 19, 1993. (Chairman Greenspan presented 323 RECORD OF POLICY ACTIONS OF THE identical testimony before the Subcommittee FEDERAL OPEN MARKET COMMITTEE on Economic Growth and Credit Formation of the House Committee on Banking, Finance At its meeting on December 22, 1992, the and Urban Affairs, February 23, 1993.) Committee adopted a directive that called for maintaining the existing degree of pressure on 302 Chairman Greenspan focuses on the economic reserve positions and that did not include a outlook and the relationship between fiscal presumption about the likely direction of any policy and monetary policy and says that the adjustments to policy during the intermeeting Federal Reserve intends to continue to foster period. Accordingly, the directive indicated economic expansion in the near term while that in the context of the Committee's longusing the tools at its disposal to promote a run objectives for price stability and sustainfinancial environment conducive to sustain- able economic growth, and giving careful able, long-term growth, before the House consideration to economic, financial, and Committee on the Budget, February 24, 1993. monetary developments, slightly greater or slightly lesser reserve restraint would be 307 Governor La Ware speaks about concerns acceptable during the intermeeting period. The related to credit discrimination in mortgage reserve conditions contemplated at this meetlending, and says that the Federal Reserve ing were expected to be consistent with M2 Board is committed to rigorously enforcing growth at an annual rate of about 1V2 percent fair lending laws, before the Senate Commitand with M3 about unchanged over the fourtee on Banking, Housing, and Urban Affairs, month period from November through March. February 24, 1993. 314 President Syron discusses the Federal Reserve 331 LEGAL DEVELOPMENTS Bank of Boston's recent study of mortgage lending patterns and says that a statistically Various bank holding company, bank service significant and economically important gap corporation, and bank merger orders; and exists between denial rates for white and pending cases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 FINANCIAL AND BUSINESS STATISTICS All BOARD OF GOVERNORS AND STAFF These tables reflect data available as of February 24, 1993. A74 FEDERAL OPEN MARKET COMMITTEE AND STAFF; ADVISORY COUNCILS A3 GUIDE TO TABULAR PRESENTATION A76 FEDERAL RESERVE BOARD A4 Domestic Financial Statistics PUBLICATIONS A44 Domestic Nonfinancial Statistics A53 International Statistics A78 MAPS OF THE FEDERAL RESERVE SYSTEM A69 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES A80 FEDERAL RESERVE BANKS, BRANCHES, A70 INDEX TO STATISTICAL TABLES AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues Griffith L. Garwood and Dolores S. Smith, of the tainty in the law's application. But it also continues Division of Consumer and Community Affairs, to offer each depository institution wide opportuniprepared this article. Jane E. Ahrens, Michael S. ties for meeting its CRA responsibilities creatively, Bylsma, and Adrienne D. Hurt provided research in a manner that best accommodates the institution assistance. and the community it serves. The Community Reinvestment Act took effect in November 1978. How well is it working? The answer is, probably a lot better than is often recog- BACKGROUND nized. The legislation has had a major influence on reinvestment activity throughout the country and In the mid-1970s, a prevalent view among some has brought greater attention to local needs, espe- members of the Congress was that many financial cially in low-income and minority areas. It has also institutions accepted deposits from households and engendered creative strategies and techniques to small businesses in inner cities while lending and stimulate lending for community development. In investing those deposits primarily elsewhere. They many parts of the country, community groups and believed that, given this disinvestment, or "redlinfinancial institutions have moved from adversarial ing," credit needs for urban areas in decline were relations to cooperation in pursuit of mutual goals. not being met by the private sector; moreover, the Yet many financial institutions complain that problem was worsening because public resources complying with the Community Reinvestment Act were becoming increasingly scarce. (CRA) is costly and burdensome. Some criticize In January 1977, the original Senate bill on comthe law's requirements as too vague; others say that munity reinvestment was introduced. In the hearits implementation amounts, de facto, to credit ings that followed, opponents of the legislation allocation. Some also are adversely affected by the voiced serious concerns that the bill threatened to law's existence when they seek to expand opera- allocate credit to geographic areas, according to the tions, particularly if a public protest is filed. Many volume of deposits coming from those areas, or to community and consumer groups, on the other specific types of loans, without regard for credit hand, believe that financial institutions are not demand or the merits of loan applications. The law doing enough to help meet the credit needs of would therefore disrupt the normal flow of capital residents and businesses in low- and moderate- from areas of excess supply to areas of strong income areas. In part, they blame the supervisory demand and undermine the safety and soundness of agencies for being too lenient in assessing CRA depository institutions. Proponents of the bill stated performance and too generous in assigning grades. that it was meant to ensure only that lenders did not Caught in the middle, the agencies over the years ignore good borrowing prospects in their communihave addressed the divergent views and expanded ties and that they treated creditworthy borrowers the guidance they offer while seeking to maintain evenhandedly. Senator William A. Proxmire, the the flexibility called for by the law. bill's sponsor, stressed that it would neither force Today the act remains a source of concerns com- high-risk lending nor substitute the views of regulamon to regulators, bankers, and community tors for those of banks. He said that safety and activists—the paperwork burden, the disproportion- soundness should remain the overriding factor ate effect on small institutions, and a lack of cer- when agencies evaluate applications for corporate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

252 Federal Reserve Bulletin • April 1993 expansion; meeting the credit needs of the commu- regarding a deposit facility—a charter, a merger, nity was only one of the criteria to consider. an acquisition, a branch, an office relocation, or Believing that systematic, affirmative programs deposit insurance. would encourage lenders to give priority to credit The act sets no criteria or guidelines for assessneeds in their home areas, the Congress passed the ing the performance of an institution. It does not Community Reinvestment Act, and the President explain how an institution's "community" should signed it into law on October 12, 1977.1 The CRA be selected, how credit needs are to be determined, reaffirmed the principle that financial institutions how to define low- and moderate-income neighbormust serve "the convenience and needs" of the hoods, or what constitutes satisfactory compliance. communities in which they are chartered to do With little guidance available from the statute, the business by extending credit in these communities. agencies held hearings in 1978 to elicit the public's This principle is one that federal law governing suggestions on how the CRA should be interpreted deposit insurance, bank charters, and bank mergers and implemented. Not surprisingly, views differed. had embodied long before the enactment of the Consumer groups favored specific rules—for exam- CRA. Likewise, the Bank Holding Company Act— ple, the application of loan-to-deposit ratios for passed initially in 1956—requires the Board, in evaluating CRA performance—whereas industry acting on acquisitions by banks and bank holding witnesses voiced concerns about credit allocation companies, to evaluate how well an institution and focused on the need for flexible standards. meets the convenience and needs of its communi- The joint regulations subsequently adopted by ties within the limits of safety and soundness. Thus, the agencies reflected a set of principles that continthe mandate of the CRA was, in many respects, ues to mark the administration of the CRA: Flexialready in place. bility is important, agency rules should not allocate credit, and institutions in different communities may approach the CRA in various ways. To deal BASIC PROVISIONS with the lack of standards in the law, the regulations established twelve factors against which the The CRA is directed primarily at the four federal agencies would assess the performance of instituagencies that supervise the institutions covered by tions (see box). the law—the Board of Governors of the Federal In assessing an institution's CRA record, the Reserve System (the Board), the Office of the supervisory agency examines for technical compli- Comptroller of the Currency (OCC), the Federal ance with a few specific rules and qualitatively Deposit Insurance Corporation (FDIC), and the evaluates the institution's performance in serving Office of Thrift Supervision (OTS, formerly the its entire community. The rules call for an institu- Federal Home Loan Bank Board). First, the tion to do the following: agencies are to use their supervisory authority to encourage financial institutions to help meet local • Formulate and adopt a public "CRA statecredit needs in a manner consistent with safe and ment" that delineates the communities it serves, sound operation. Second, as part of their examina- lists the principal types of credit it offers, and tions, the agencies are to assess an institution's indicates where a person should write to comment record of serving its entire community, including on the institution's CRA performance low- and moderate-income neighborhoods. Third, • Maintain a file of comments from the public they must take that record into account when they about its CRA performance (as of 1990, this "pubassess an institution's application for approval lic comment file" also must contain the supervisory agency's most recent assessment of the institution's CRA record) 1. In retrospect, the Congress enacted the CRA with surprising • Publicly display a notice about the availability ease. In the Senate, a markup of the original bill was reported out of the Banking Committee and adopted as part of the Housing and of the CRA statement and the public comment file. Community Development Act of 1977. No companion reinvestment bill was introduced in the House; after minimal floor debate, The agencies also adopted uniform examination House members adopted the Senate bill as amended by a conference committee of the two houses. procedures. Like the regulations, the procedures Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 253 Twelve Performance Factors ijliisisi The federal supervisory agencies consider the following • The institution's record of opening and closing factors in assessing an institution's record of perfor- offices and providing services at offices mance under the Community Reinvestment Act: • The institution's participation, including investment, in local community development and redevelopment • Activities conducted by the institution to ascertain projects or programs the credit needs of its community, including the extent of • The institution's origination of residential mortgage the institution's efforts to communicate with members of loans, housing rehabilitation loans, home improvement its community regarding the credit services being pro- loans, and small business or small farm loans within its vided by the institution community, or the purchase of such loans originated in • The extent of the institution's marketing and special the community credit-related programs to make members of the commu- • The institution's participation in government innity aware of the credit services offered by the institution sured, guaranteed, or subsidized loan programs for hous- • The extent of participation by the institution's board ing, small businesses, or small farms of directors in formulating the institution's policies and • The institution's ability to meet various community reviewing its performance with respect to the purposes of credit needs based on its financial condition and size, the Community Reinvestment Act legal impediments, local economic conditions, and other • Any practices intended to discourage applications for types of credit set forth in the institution's CRA • Other factors that, in the supervisory agency's judgstatement ment, reasonably bear upon the extent to which an insti- • The geographic distribution of the institution's credit tution is helping to meet the credit needs of its entire extensions, credit applications, and credit denials PH I • Evidence of prohibited discriminatory credit practices or other illegal credit practices stressed that financial institutions could use various approval. A poor CRA performance may, however, means to learn about, and help meet, the financial be outweighed by other factors, such as the need to needs of the surrounding community. The CRA did merge a weak institution into a strong one, in not establish hard and fast rules or ratios by which which case the application may still be approved. to judge an institution's performance. But an institution could expect negative marks if its pattern of loan applications, extensions, and rejections Policy Statements of 1980 and 1989 showed a concentration of credit approvals in highincome neighborhoods that was inappropriate given In December 1979 the Federal Reserve Board the institution's delineated service area and the issued a policy statement on the CRA to guide state presence of qualified applicants in lower-income member banks; the Board also forwarded the stateareas. ment to the Federal Financial Institutions Examina- In considering an application for a deposit facil- tion Council (FFIEC) for consideration by the three ity, the supervisory agency assesses the applicant's other supervisory agencies responsible for imple- CRA record—including its CRA rating and any menting the CRA. In September 1980 the FFIEC actions taken to improve performance following an adopted a statement similar to the Board's and examination—as part of its decision to approve or covering these principal points: deny the application. In the past, the agencies at times approved an application even though CRA • Although directed toward meeting community performance was unsatisfactory if the applicant credit needs, the CRA does not impose credit offered substantial commitments for future perfor- allocation. mance. Today, an institution generally is expected • Disparities in loan-to-deposit ratios are not, on to have a satisfactory CRA program in place and their face, evidence of discrimination or poor perworking well before its application can receive formance under the CRA. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

254 Federal Reserve Bulletin • April 1993 • In the absence of substantial efforts to ascer- A crucial feature of the 1989 policy statement tain credit needs and publicize credit services, a was its emphasis on an institution's management of lack of applications is not an adequate explanation CRA performance as part of day-to-day activities. for little or no lending in a particular neighborhood. The statement reaffirmed the value of an institu- • Institutions are expected to offer throughout tion's discretion in developing the products best their communities the types of credit listed on their suited to its expertise and the specific needs of its CRA statements. community. It stressed that the CRA requires an • Favorable weight will be given to an institu- ongoing effort by an institution to ascertain the tion's conceited effort to tailor and adapt programs needs of its entire community, develop products and services to the needs of low- and moderate- in response, and market them throughout the income neighborhoods in its community. community. • Commitments for future action will not be The statement also dealt with the CRA in the viewed as part of the CRA record of performance, context of protested applications. It stressed that an but they may receive weight as an indicator of institution's CRA evaluation rating would receive potential for improvement. great weight. It encouraged community groups to • Communication between applicants and pro- bring CRA issues to the attention of banks and testing parties is encouraged, but the agencies will regulators without delay rather than to wait until an not approve or enforce agreements. application was pending. Given the desirability of processing cases in a timely manner, the statement made clear that extensions of comment periods In subsequent years the CRA attracted increasing would be the exception, not the rule. The agencies public attention. Reduced federal funding for also cautioned institutions to address their CRA community and housing programs and charges of responsibilities and to have policies in place and discriminatory lending patterns intensified interest working well before they filed an application, sigin bank performance. Community groups grew in naling a shift away from approving applications on number and experience and became more sophisti- the strength of promised performance. In general, cated in dealing with information about lending institutions could not hope to use commitments patterns. Challenges to applications multiplied, made in the application process to overcome a the handling of CRA protests became a significant seriously deficient record. aspect of the application process, particularly in major acquisitions by bank holding companies, and the volume and complexity of the CRA issues rose Guidelines for CRA Evaluations as the number of low CRA ratings grew. The growing pressure on institutions increased In August 1989 the Congress amended the CRA to their demands for guidance regarding the adequacy require public release of examination assessments of a CRA record and what to expect in the applica- and change the CRA rating scale, effective July 1, tion process. In April 1989 the agencies released a 1990. To define the standards, the FFDEC issued second CRA policy statement based on their "Guidelines for Disclosure of Written Evaluations decade of experience in evaluating applications, and Revised Assessment Rating System" in April dealing with protests, and conducting examina- 1990. The guidelines detailed performance requiretions. Given the discomfort caused, on the one ments and information about how examiners would hand, by any notion of credit allocation and, on the evaluate institutions. They placed emphasis on the other, by a perceived lack of detailed direction, the need for a managed CRA program: Were proce- 1989 statement attempted to give more guidance dures in place at the institution to promote commuto institutions but not hamstring them with rigid nity dialogue? How did the institution take its requirements. The statement added specificity assessment of community needs into account in about the responsibilities of institutions under the product design and marketing? If it analyzed its CRA, the manner in which the agencies would geographic distribution of credit on an ongoing assess performance, and some of the elements basis, what were the institution's own goals for found in effective programs. lending distribution, and had they been met? Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 255 Although this approach steered clear of any sem- institutions are serving the credit needs of minority blance of credit allocation, it created a different populations in their local communities. The proviproblem by appearing to place undue emphasis on sions of the CRA focus on issues broader than the documentation. Widely reported statements from financing of low- and moderate-income housing, some regulators that "if it isn't documented, it but community activists have always emphasized didn't happen" contributed to that belief. So did mortgage lending, in large part because of the some efforts of trade associations and CRA con- combination of unmet needs in low-income areas sultants, who prepared elaborate check lists of the and the ready availability of mortgage data.2 As documentation that institutions should provide to amended in 1989, HMDA calls for lenders to examiners. The requirement that public assess- record the race, sex, and income of applicants for ments be factually supported by "facts and data"— all mortgages and home improvement loans, a provision added to the law in 1991—brought including loans denied and withdrawn; lenders preother requests for recorded activities that the exam- viously reported only loans that they originated or iners could cite. purchased.3 For both 1990 and 1991, the HMDA In 1992, amid rising concerns about excessive data have shown the rate of loan denials to be reliance on paperwork, the agencies issued new generally higher for minority and Hispanic loan examiner guidelines. These made clear that exam- applicants than for Asian and white applicants. The iners should base the evaluation of CRA perfor- data also show that the rate of such denials genermance primarily on how well an institution was ally increases in neighborhoods as the percentage helping to meet credit needs, not on the amount of of nonwhite residents increases.4 documentation it maintained. A lack of documenta- Other factors have contributed to an intensified tion was not a sufficient basis for assigning a poor focus on the CRA. The financial support of federal rating if satisfactory performance was otherwise programs for low- and moderate-income housing, demonstrated or apparent. The agencies also for example, has dropped significantly over the emphasized their expectation that documentation past decade. In constant dollars, the total budget for would normally be found in a well-managed pro- low-income housing programs was reduced by gram and that it would generally be less formal and more than half between 1980 and 1991, and federal less extensive in small and rural institutions. support for rental housing also contracted sharply. These cutbacks have placed yet greater pressure on PUBLIC FOCUS ON THE CRA 2. Bills to expand HMDA to other types of credit, such as small In recent years, interest in CRA activities has business loans and personal loans, have been introduced over the increased dramatically, especially since the CRA years. For example, in 1992 Representative Maxine Waters of evaluations became publicly available. Public dis- California introduced a bill to expand the types of loans for which applicant characteristics are collected under HMDA and to expand closure in some respects has further empowered the analysis required to evaluate an institution's CRA performance community groups and individuals concerned about (Community Credit Improvement Act of 1992, H.R. 6206 § 101, financial institutions' lending practices. Applica- 102 Cong. 2 Sess., 1992). 3. To maximize use of the expanded data, the Federal Reserve tion activities, marking a movement toward interhas developed a system that facilitates access and provides analyses state banking and the industry's restructuring, have of the data by demographic characteristics, such as race, gender, provided a ready forum in which to raise CRA and income levels, and by geographic boundaries. Examiners are able to compare the HMDA data for a single reporting lender with issues. Those interested in the CRA, moreover, the HMDA data for others within a defined geographic market. now include not just the traditional groups of com- They also can compare the income levels and race of applicants munity activists but also local government officials, with characteristics of the census tracts where the properties that secure the loans are located. unions, churches, the media, and others. 4. Glenn B. Canner and Dolores S. Smith, "Home Mortgage Coverage of mortgage lending issues by news Disclosure Act: Expanded Data on Residential Lending," Federal organizations, particularly of the data produced Reserve Bulletin, vol. 77 (November 1991), pp. 859-84; and Canner and Smith, "Expanded HMDA Data on Residential Lending: under the Home Mortgage Disclosure Act One Year Later," Federal Reserve Bulletin, vol. 78 (November (HMDA), has fueled the debate over how well 1992), pp. 801-24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

256 Federal Reserve Bulletin • April 1993 financial institutions to support local efforts to tions Reform, Recovery and Enforcement Act of create housing.5 1989 (FIRREA). FIRREA amended the CRA to Some state governments require commitments to give the public access to examination assessments community reinvestment before out-of-state institu- and CRA ratings prepared by federal regulators. tions can operate in their localities. They premise The disclosure mandated by FIRREA had implicaentry on a standard of net new benefits to the state, tions for depository institutions and examiners: such as increased in-state lending and investments. Institutions with a negative CRA assessment now To encourage CRA-related programs, some munic- had to face the public display of the rating; and ipalities, too, condition their placement of deposits examiners preparing CRA reports were under much upon the institution's making specific types of greater pressure to be precise and to be able to loans. In Chicago, for example, institutions must substantiate their findings. file reports on their residential and commercial The agencies' written evaluations have two seclending in the Chicago metropolitan area before tions: public and confidential. The public section they can qualify for the city's deposits. Even pri- discloses the examiner's conclusions, using the vate organizations may evaluate potential deposito- assessment factors developed jointly by the four ries using CRA factors; in 1991, the American Bar supervisory agencies, and supporting facts; it gives Association resolved to place its accounts when- a rating and explains the basis for it. The amended ever possible in financial institutions that have CRA mandates four possible choices ("outstandshown outstanding or satisfactory performance in ing," "satisfactory," "needs to improve," and helping to meet the credit needs of their communi- "substantial noncompliance") from which agenties, including low- and moderate-income neigh- cies are to select in assessing the record of deposiborhoods. tory institutions. The confidential portion includes All this interest has turned the public and con- references to customers, employees, or other memgressional spotlight on the agencies' process for bers of the community who provided information examining the CRA performance of institutions to the examiner and comments of a supervisory and encouraging economic development efforts. nature that the agencies believe ought not be public. To implement these rules and promote uniformity in evaluations, the FFIEC published inter- EXAMINATIONS agency guidelines and a rating system. The guidelines group the regulation's twelve assessment The CRA relies primarily on the examination pro- factors into five performance categories: cess to ensure that depository institutions meet the credit needs of their local communities. The federal • What the institution does to ascertain commuagencies have virtually identical CRA regulations, nity needs and they work together to promote uniform mea- • How the institution markets products and what sures of performance among depository institutions types of credit are offered and actually extended and consistent results within and among agencies. • Where the institution makes loans and where it A major change for the CRA examination prohas placed offices or closed them cess occurred with passage of the Financial Institu- • Whether evidence of discrimination or other illegal credit practices exists 5. For data on HUD's budget for low-income housing, see • To what extent the institution participates in Cushing N. Dolbeare, "At a Snail's Pace, FY 1993: A Source Book community development. on the Proposed 1993 Budget and How it Compares to Prior Years" (Washington: Low Income Housing Information Service, 1992). See also, Marion A. Cowell, Jr., and Monty D. Hagler, "The The guidelines provide examiners and institu- Community Reinvestment Act in the Decade of Bank Consolida- tions with sample profiles of CRA records of pertion," Wake Forest Law Review, vol. 27 (1992), p. 90, note 64. formance; these profiles correlate the quality and For data on the participation of the Federal Housing Administration in insuring mortgages on multifamily residential projects, see quantity of certain actions and efforts to the ratings Report on the Status of the Community Reinvestment Act, before the for each assessment factor. Subcommittee on Housing and Urban Affairs of the Senate Com- The public can influence an agency's evaluation mittee on Banking, Housing and Urban Affairs, 102 Cong. 2 Sess., p. 21 (Government Printing Office, 1992). of an institution's CRA record. Examiners review Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 257 CRA comments from persons in the community adopting jointly developed examination standards placed in the institution's public comment file, and and guidelines, and even reviewing examination may contact such persons directly. The examiners reports across agencies to identify any lack of also seek out local officials, community groups, comparability in approach. Within the Federal and others knowledgeable about local credit needs Reserve, staff members at the Board participate so that they can make an informed judgment about regularly in CRA examinations of state member those needs and the institution's responsiveness. banks in connection with reviews of each Reserve The Federal Reserve uses consumer compliance Bank and sample reports from each Reserve Bank examinations—as distinct from the commercial District to test for the consistent application of the examinations for safety and soundness—to assess Board's examination policy. the CRA records of state member banks and their Nonetheless, institutions and the public alike compliance with fair lending and other consumer express concern that, among the regulatory agenstatutes. These consumer examinations are con- cies and between different regions, examiners may ducted, in general, every eighteen months. Banks apply differing standards when they assign ratings with a demonstrated need for greater oversight are for CRA performance. Given the subjective nature examined more often; the lowest CRA rating of of the CRA and the thousands of institutions "substantial noncompliance" can bring a reexami- examined—each with its own business goals and nation within six months. Banks with exemplary strengths, in communities with different needs and records may be examined every twenty-four characteristics—some unevenness is probably months. The frequency with which other regulators unavoidable. Even though consistency remains examine their respective institutions may differ elusive, it is an important goal. somewhat from the Federal Reserve schedule. Critics of the agencies' enforcement of the CRA The CRA examinations take into account the also complain about the current ratings results, size, location, and organizational structure of the which in the aggregate are roughly comparable individual institutions and the nature and needs of across agencies (table 1). About 10 percent of the communities they serve. Size and financial examined institutions receive an "outstanding" ratstrength will affect the expected scope of an institu- ing, and another 70 percent to 80 percent receive a tion's efforts to identify and respond to credit "satisfactory." Some community groups see a conneeds. For example, examiners would generally tradiction between these results and public data expect large institutions to undertake specialized indicating that even highly rated institutions have CRA-related activities to a greater extent, given significant racial disparities in their home mortgage their relative resources and expertise. Institutions lending. that are part of a multibank holding company may There probably is good reason for the current be able to draw on the resources of the parent and distribution of CRA ratings. All banks and thrift affiliates. institutions pledge to meet the "convenience and Expectations also vary about how banks of vari- needs" of their communities when they are charous sizes demonstrate CRA performance in differ- tered; this was so long before the CRA came on the ent settings. For example, CRA recordkeeping and scene. The fact that regulators have been assessing documentation will generally be less formal and their CRA performance since 1978 also could be extensive in small and rural banks than in large expected to have a positive effect. In addition, the urban institutions. This also holds true for the "satisfactory" category—into which the vast extent and sophistication of analyses of lending majority of institutions fall—is quite broad and patterns for the CRA and other purposes. includes some with good performance and some with marginal but still satisfactory records. Adding a fifth rating has been suggested; doing so might permit a finer distinction in rating activities at the Consistency and Level of Ratings high or low end of a "satisfactory" rating and help produce a wider array of ratings. The agencies have worked to promote uniformity in CRA enforcement—using a common rating The reliability of the rating system takes on scheme, conducting interagency examiner training, special importance in light of legislation proposed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

258 Federal Reserve Bulletin • April 1993 1. Distribution of CRA ratings, by supervisory agency and asset size of institution, January 1-September 30, 1992 Number except as noted in recent years to reward institutions for good CRA a bank holding company of similar size, but strucratings. Institutions that have a "satisfactory" or tured as a single bank with multiple branches, will "outstanding" CRA rating—and meet other statu- have a single CRA rating, and deficiencies in a few tory criteria—could be eligible for expedited branches might have no major effect on that rating. approval procedures for opening new branches or If legislation for interstate branching is enacted, could self-certify their compliance with the CRA the concept of a single CRA rating for a multistate, and avoid routine examination. They could estab- multibranch depository institution becomes more lish branches across state lines, or engage in new troublesome. Would the agency simultaneously expanded powers, or enjoy a "safe harbor" from examine branches in each state for compliance with protests. the CRA? If examinations were not contemporane- Given the current rating distribution, the tying of ous, how would a "moving" rating be determined? legislative rewards to CRA ratings does raise cer- One answer would be to change the nature of the tain concerns, however. If the standard for any focus and of the examination itself from the bank reward were set at a rating of "satisfactory" or to the areas that it serves. Some legislative proposbetter, almost all institutions would qualify; yet als, for example, call for separate evaluations for limiting the rewards to the "outstanding" category each metropolitan area in which an institution could be overly restrictive. maintains a branch, or separate evaluations for branches in each state, all to be factored into a single rating or used to assign separate ratings for each major locality. Ratings Anomalies The CRA rating system—one rating per depository institution—may affect similar institutions differently depending on their corporate structure. A APPLICATIONS bank holding company with ten subsidiary banks will have ten separate CRA ratings because each The CRA offers a very big carrot—or stick—for bank is examined and assigned a rating. A poor encouraging depository institutions to meet their rating for even one bank, depending on its size, communities' credit needs. Agencies consider an may cause problems for the holding company. Yet institution's record when evaluating an application Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 259 to start a new facility, open or relocate a branch, or demands" for lending commitments, financial conmerge, consolidate with, or acquire another institu- tributions, and other concessions. At times, the tion. Thus, depository institutions and holding com- applicants themselves may want to negotiate, rather panies wanting to expand banking operations must than stand on their record. assess their CRA performance, as well as financial, Few applications filed with the Federal Reserve managerial, and competitive factors, when gauging are protested on CRA grounds—between 1 percent their chances for approval. and 2 percent since 1988. If a protest is received, Because the 1989 policy statement gives guide- the Federal Reserve stands ready to facilitate prilines for evaluating the CRA aspects of applica- vate meetings between the applicant and the protestions, a common thread runs through the agencies' tant. These meetings are not required. Their purevaluation procedures, although timing and other pose is to collect information and find areas of processing rules may differ. In the case of the agreement or misunderstanding, not to force nego- Federal Reserve, Federal Reserve Banks decide tiated settlements. Neither the Federal Reserve nor most applications under authority delegated by the the other agencies will defer action pending negoti- Board. Often, a prospective applicant may discuss ation between the parties. Nor will the agencies its proposed application with Reserve Bank offi- enforce agreements that may be reached between cials in advance of its submission. Once an applica- an institution and a protestant; the agencies' CRA tion is filed, the depository institution publishes enforcement extends only to commitments made notices in local newspapers and the Federal by applicants directly to the agencies. Reserve publishes a notice in the Federal Register. Agencies may hold public meetings to obtain The Board's public comment period is thirty days information not available otherwise or to expedite for most applications, but because the notices in the the application process. For example, the Board in newspaper and in the Federal Register generally the past two years held public meetings and are not published concurrently, the public usually received testimony from numerous witnesses on has a longer period in which to comment. the application by Mitsui Taiyo Kobe Bank, Limited, to convert Taiyo Kobe Bank and Trust Company from a nonbank trust company into a bank; on Protests of Applications the application by NCNB Corporation to acquire C&S/Sovran Corporation; and on the application Protests of applications are received from many by BankAmerica Corporation to acquire Security sources and on many grounds. Protests from the Pacific Corporation. insurance industry have commonly been made, for The Board is required to consider CRA perforexample, when bank holding companies seek to mance in all applications to acquire or expand a engage in insurance activities, on the ground that depository institution. Not all applications that raise doing so is unlawful. Disgruntled shareholders may CRA issues for the agencies involve protests. At challenge the adequacy of the price offered for the Federal Reserve in the past three years, 63 pershares. Other protestants may raise antitrust issues. cent of applications with CRA issues were sub- Protests of applications are therefore neither new jected to an intensive analysis, not because of a nor restricted to CRA matters. Nonetheless, the protest but because of deficiencies brought to light linkage between the approval of an application and during the examination process. the evaluation of CRA performance raises the polit- In holding company cases, CRA evaluations may ical and economic stakes of the application process especially complicate the application process beboth for community groups and for applicants. cause of the likely involvement of several agencies. The restructuring of the financial industry has Outdated or incomplete CRA examinations can involved high-profile expansion moves, and com- cause delays. If a protest is filed, the agencies will munity groups have used protests aggressively to evaluate the merits and investigate allegations. If a apply leverage on applicants. In private negotia- public meeting is held, the volume of information tions, protestants may threaten to create regulatory to be considered can be formidable. In BankAmerdelays—and perhaps impediments to approval— ica's application to acquire Security Pacific, for and applicants often complain of "unreasonable example, the Board received almost 350 comments Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

260 Federal Reserve Bulletin • April 1993 and heard the testimony of about 175 witnesses in grounds an application from Continental Bank Corpublic hearings held in four cities.6 poration and Continental Illinois Bancorp, Inc., to In a contested application, the ability to request acquire an Arizona bank despite commitments from and obtain information to conduct an evaluation Continental to improve its CRA performance in can be slowed by procedural rules governing com- specific ways. The Board stated that such commitmunication that includes some parties to the dis- ments could be taken into account only "when pute but not others. Once an application is pro- there has been a basic level of compliance on tested, the Federal Reserve generally must notify which the commitments can be evaluated."8 In all parties before discussing issues raised in the Continental's case, the inadequacy of past CRA protest with any one of them. The agency may performance made it inappropriate to consider such communicate with the parties individually about commitments. purely procedural matters or matters unrelated to More recently, the Board denied an application the protest, but isolating issues that are not related from Gore-Bronson Bancorp, Inc., to acquire a in some substantive way to the protest is often Chicago bank despite Gore-Bronson's commitdifficult. Thus, whereas ordinarily the information ment to address CRA deficiencies at two subsidiary needed to complete an application record might banks. The CRA record had been less than satisfacreadily be obtained from an institution, the process tory for two examination cycles for one bank, and in a contested application is more formal and time- for the other bank the CRA record had actually consuming. deteriorated under Gore-Bronson's ownership.9 In dealings between applicants and protestants, And in February 1993 the Board denied the applithe agencies are sometimes caught in the middle. cation of Farmers & Merchants Bank of Long Their responsibility is to evaluate fairly the entire Beach to establish another branch and make addirecord on an application, including the issues raised tional investments in bank premises. The denial by protestants. Throughout the application process, was based on the bank's prolonged compliance they attempt to balance the need for a thorough problems in the consumer lending area (which had review of the statutory factors with the necessity led to a cease-and-desist order) and a deficient for an orderly process and a timely decision. In the CRA program. Although the bank had begun takcase of the Federal Reserve, a substantive written ing corrective measures during the application proprotest has the potential to extend the processing cess, the Board was unconvinced that the bank's period somewhat. In general, however, the worry compliance and CRA programs were viable and about delay is exaggerated. Significant delay as the successful.10 result of a CRA protest or a rating issue is the Still, the Board may deem commitments approexception, not, as commonly assumed, the rule. For priate when the proposed acquisition involves a example, of the cases acted on by the System in troubled institution whose loss would be a detri- 1992 that involved CRA issues, only about 9.5 per- ment to the convenience and needs of its commucent took longer to process than 60 days—the nity. For example, the Board approved the applica- Board's internal deadline.7 tion of First Union Corporation, Charlotte, North Carolina, and First Union Corporation of Florida, Jacksonville, Florida, to acquire Florida National Commitments Banks of Florida, Inc., a financially weak institution. The CRA performance of First Union's sub- Since 1989 the supervisory agencies have viewed sidiary banks showed problems in certain specific commitments for future action as largely inapplica- areas; but under section 3 of the BHC Act, the ble to an assessment of the applicant's CRA performance. In February 1989 the Board denied on CRA 8. "Legal Developments," Federal Reserve Bulletin, vol. 75 (April 1989), Continental Bank Corporation and Continental Illinois Bancorp, Inc., p. 305. 6. "Legal Developments," Federal Reserve Bulletin, vol. 78 9. "Legal Developments," Federal Reserve Bulletin, vol. 78 (May 1992), BankAmerica Corporation, pp. 338-69. (October 1992), Gore-Bronson Bancorp, Inc., pp. 784-86. 7. Some of the cases may have involved proposals that required 10. "Legal Developments," Federal Reserve Bulletin (this the applicant to file more than one application. issue), Farmers & Merchants Bank of Long Beach, p. 365. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 261 Board also must consider the convenience and the CRA record of a quite small banking subsidineeds of the communities the applicant will serve. ary. The deficiencies in that case were serious and The Board reasoned that maintaining services to substantive; they had continued through successive Florida National's customers—including those in examinations, and steps taken over a significant low- to moderate-income neighborhoods—was an period of time had been insufficient to cure the overriding factor; the Board also noted that First problems.13 Union recently had taken significant steps to Over the years, questions have been raised about improve its CRA performance.11 the bearing of the CRA on various kinds of applica- The Federal Reserve Board has denied few appli- tions. The obligation to help meet the credit needs cations on CRA grounds, but it denies relatively of local communities rests with insured depository few applications generally. In 1992, only six appli- institutions and their deposit facilities. Thus, the cations were turned down, one of them because of CRA does not apply to applications by bank hold- CRA deficiencies. This record does not, however, ing companies to acquire most nonbanking entities fully reflect the influence that the CRA has had. under section 4(c)(8) of the BHC Act. The Board Institutions with poor CRA records often do not had determined, however, that the terms and purfile an application with their supervisory agency. poses of the CRA and the BHC Act indicate that Others take concrete steps to address weaknesses in the Board has to consider CRA performance in a their CRA performance before filing an applica- section 4(c)(8) application by a bank holding comtion. Still other applications are withdrawn if appli- pany to acquire a savings association. As a deposicants anticipate an adverse finding after the agen- tory institution, a savings association is subject to cy's preliminary review. the CRA, and consequently its acquisition as a What happens when some subsidiaries of a bank deposit facility is covered by the CRA.14 holding company have less than satisfactory records and the other subsidiaries have adequate, or better, records? In the application of SunTrust COMMUNITY AFFAIRS PROGRAM Banks, Inc., to acquire shares of Peoples Bank of Lakeland, substantially all of SunTrust's subsidiary The CRA mandates that the regulators encourage banks had ratings that were satisfactory or better. institutions to help meet local credit needs. In fur- The four subsidiaries identified as having CRA therance of this mandate, the Board established a problems represented less than 10 percent of Sun- community affairs program more than a decade Trust's assets, and the problems did not indicate ago. The community affairs staff of each Reserve either chronic institutional or CRA deficiencies. Bank routinely assists institutions with information The Board approved the application, noting that about community development strategies and techwhenever problems were identified in the CRA niques and other reinvestment issues. They work performance of its banks, SunTrust had taken with financial institutions, banking associations, immediate steps to correct them and had done so in government, businesses, and community groups to the case of these four institutions. The Board create programs for community development lendapplied the principle that weight can be given to ing that help finance affordable housing, small and CRA commitments in addressing specific problems when the institution has an otherwise satisfactory CRA record.12 13. "Legal Developments," Federal Reserve Bulletin, vol. 77 In the case of First Interstate BancSystem of (December 1991), First Interstate BancSystem of Montana, Inc., pp. 1007-10. Montana, on the other hand, the Board denied an 14. Similarly, regulators consider CRA performance when a application for a corporate reorganization based on bank holding company acquires the assets and liabilities of a thrift institution in a merger that is subject to the so-called Oakar amendment to the Federal Deposit Insurance Act. See "Legal Developments," Federal Reserve Bulletin, vol. 79 (February 1993), letter, Jennifer J. Johnson, Associate Secretary of the Board of Governors 11. "Legal Developments," Federal Reserve Bulletin, vol. 76 of the Federal Reserve System, to John H. HufFstutler, Assistant (February 1990), First Union Corporation, p. 88. General Counsel, BankAmerica Corporation, pp. 148-52. Con- 12. "Legal Developments," Federal Reserve Bulletin, vol. 76 versely, the Board has determined that the CRA does not apply to (July 1990), SunTrust Banks, Inc., pp. 542^5. applications under the Change of Bank Control Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

262 Federal Reserve Bulletin • April 1993 minority business, and other community revitaliza- and technical assistance to its members. The center tion projects. has already published an educational guide, and in Reserve Banks help facilitate the broad-based 1993 it expects to sponsor workshops and publish a offering of credit through conferences for bankers compendium of contacts at community lending on topics such as barriers faced by minority bor- agencies and organizations. The center is also rowers, steps to ensure that credit is offered on an involved in credit counseling outreach, offering equitable basis, ways of participating in economic camera-ready copies of a five-part series of brodevelopment programs, and credit issues affecting chures on such issues as home buying and credit Native Americans. Reserve Banks also provide rights for member banks to publish and distribute technical assistance, helping institutions to create in their communities. community development corporations (CDCs) and Two recent surveys illustrate the banking indusmultibank lending consortiums and, in the case of try's efforts. In a survey of banks, thrifts, and institutions with unsatisfactory CRA ratings, help- holding companies, the Consumer Bankers Associing them to strengthen their CRA program. Reserve ation found that roughly 90 percent of its respon- Banks publish descriptions of CDCs, limited part- dents have programs that target purchase-money nerships, and other community development lending for low- to moderate-income housing. projects in which bank holding companies have Nearly 95 percent of the programs include mortbeen allowed to invest. They prepare profiles that gage products with flexible requirements for downidentify key community and economic develop- payment, loan-to-value ratios, and debt-to-income ment needs and describe resource organizations in ratios designed to make home financing more availmajor communities. able and affordable.15 And in late 1992, the OCC For example, the Federal Reserve Banks of San announced the results of a survey to which nearly Francisco and Philadelphia have produced commu- 55 percent of all national banks responded. A manity profiles used by local financial institutions to jority of the respondents engaged in community address specific issues and projects. The Federal development lending and financed low- to Reserve Bank of Boston has developed a training moderate-income housing, small businesses, and curriculum on community-development finance for small farms. The type of lending tended to differ bankers. Reserve Banks also publish a variety of according to their asset size. For instance, among other brochures and manuals that assist lenders in the largest banks (assets of more than $1 billion), community development activities. Their commu- 86 percent focused on low- to moderate-income nity affairs newsletters have a combined circulation housing, whereas among the smallest banks (assets of more than 40,000. of less than $100 million), 72 percent reported Other federal banking agencies also have com- making small-farm loans. munity affairs programs. The OCC's Community Depository institutions have access to various Development Division, for instance, oversees CDC forms of assistance to support their CRA activities. and investment programs and approves applica- For example, the Federal Home Loan Bank System tions by national banks to invest in CDCs in accor- offers two loan programs to its membership of dance with the National Bank Act and its interpre- savings banks, savings and loan associations, and tations. The FDIC has a community affairs program banks. It advances funds or subsidizes belowthat, like the Federal Reserve's, has a regional market-rate loans originated for low- to moderatepresence. income families and for businesses in low- to moderate-income neighborhoods. Its Community Investment Program provides home lending funds to projects aimed at individuals with incomes of up INDUSTRY INITIATIVES to 115 percent of an area's median income; an Affordable Housing Program provides home lend- The CRA has stimulated an abundance of activity by financial institutions and others. For example, in late 1992 the American Bankers Association estab- 15. Consumer Bankers Association, Affordable Mortgage Surlished a Center for Community Development vey: A Survey of Bank Mortgage Programs as of June 30, 1992 whose primary mission is to provide information (Washington: CBA, 1992), pp. 2,4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 263 ing funds to support housing for people with law's administration, including potential conflict incomes of 80 percent of an area's median income with safety and soundness, continue to be raised— and rental housing funds where at least 20 percent as do numerous proposals for better definitions of of the units are occupied by very low income standards, easing of the regulatory burden, and tenants.16 incentives for superior performance. Increasingly, attention has turned to the role of the secondary markets in funding loans to low- to moderate-income applicants or in low- to Concern with Safety and Soundness moderate-income neighborhoods. Secondary markets provide liquidity to lenders by purchasing the The mandate of the CRA, that institutions are to loans that lenders originate, enabling them to meet help meet community credit needs in a manner additional credit needs. For example, more than consistent with safety and soundness, requires lendhalf of the "affordable mortgages" reported by the ing choices in which some lenders believe they are respondents to the Consumer Bankers' survey are "damned if they do and damned if they don't." sold to the secondary market. Loans in low- to moderate-income neighborhoods, The Federal National Mortgage Association whether residential or commercial, often require (Fannie Mae) and the Federal Home Loan Mortunderwriting standards or terms that differ from an gage Corporation (Freddie Mac) have both aninstitution's more traditional products and from an nounced initiatives in recent years to purchase agency's loan classification standards. loans with underwriting guidelines or payment Anecdotal evidence suggests that, by and large, terms that do not meet their more traditional loan the losses on lending that addresses CRA responsipurchase programs. The Congress has spurred these bilities is not significantly different from the losses corporations to support low- and moderate-income on other product lines. But lenders express frustraloans by setting specific volume goals over a twotion that federal financial regulatory agencies may year period beginning with 1993. For example, for criticize the very loans the agencies are otherwise all the loans they purchase, 30 percent of the units encouraging. They argue that the nontraditional financed must be for low- to moderate-income borloans may satisfy examiners monitoring CRA comrowers, 30 percent must be located in central urban pliance, but the loans could well be downgraded areas, and $3.5 billion ($1.5 billion for Freddie internally by the bank's loan committee or by Mac, $2 billion for Fannie Mae) must finance loans commercial examiners unfamiliar with special to low-income and very low income home features—such as "equity substitutes" in the form buyers.17 of government guarantees—that may in fact make them very sound loans. The agencies have repeatedly emphasized that OTHER ISSUES the CRA does not contemplate the erosion of safety and soundness. To reduce the perception that com- Throughout its fifteen-year history, the CRA's mercial and CRA examiners work at cross purseemingly simple but vague and imprecise charge poses, for example, the Federal Reserve provides has caused much consternation. The act, after all, is training to commercial examiners on the CRA. not an arcane banking matter of interest only to Nevertheless, there is a widespread impression that specialists in finance; in practice, it touches on institutions are being "whipsawed," and the agensocial issues of great sensitivity and complexity, cies are having to take special care not to send including issues of race and economic class, and its mixed messages. day-to-day influence on covered institutions has been significant. As a result, questions about the Lack of Certainty 16. Federal Home Loan Bank Act, 12 U.S.C. § 1430(i),(j) (Supp. Ill 1992). Rules that are more precise would, of course, ease 17. Housing and Community Development Act of 1992, P.L. 102-550, 106 Stat. 3672, §§ 1332-34 (1992). the task of examiners, institutions, and the public in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

264 Federal Reserve Bulletin • April 1993 determining the adequacy of CRA performance. and tie CRA ratings to minimum specified amounts Many lenders express frustration at the business of of such investments.18 translating the broad mission of the CRA into Moving toward a cafeteria-style menu of valuespecific actions. To be sure, most lenders would weighted, "approved" CRA activities—in a manoppose overt credit allocation and would resist ner similar to what New York has proposed—has being told what products to offer, or in what vol- some appeal in that it would offer certainty. Potenume, or on what terms, or to whom. But many want tially it also could increase desirable CRA-related to know, from the start, exactly what the "right" activities in local communities. At the same time, activities might be for CRA performance and what creating such a list would inevitably transfer deciit takes to get an "outstanding" CRA rating. Exam- sionmaking in some measure from an institution to iners who judge performance, and community the government. As it stands, the CRA's broad groups who evaluate institutions, likewise would standard allows each depository institution to be be more comfortable with greater certainty. creative in meeting credit needs within its lending The problem lies in preserving flexibility and community. The incentive to offer innovative serproviding precision at the same time. The CRA can vice may be lost if institutions find it necessary to be criticized for its ambiguities, but that same choose between engaging in services they know "flaw" allows for variations by institutions in will earn them CRA credit and taking a chance on meeting their responsibilities under the law. Over something that does not quite fit into a prethe years, the regulators have emphasized their approved pigeonhole. Also, the CRA is meant to position that no single community reinvestment encourage institutions to meet the credit needs of program is perfect for every institution. Financial their entire community. Communities could be left institutions can design CRA programs that fit then- with unmet credit needs if institutions were able to own business orientation and the special needs of fulfill their total CRA responsibilities by a single their communities. Still, the agencies have offered CRA-related action, such as a passive investment extensive guidance on the CRA—policy state- in one community development organization in a ments, examination procedures, assessment factors sole low- to moderate-income neighborhood. considered in evaluations, elements of successful CRA programs, and advice through community affairs programs. Throughout, they have empha- Paperwork Burden sized flexibility, seeking to give detailed guidance without imposing specific mandates. Among lenders, and even community representa- Initially the industry wanted flexible CRA rules tives, one major source of dissatisfaction with the out of concern about regulatory credit allocation. CRA is the paperwork that they believe the agen- The industry argued that neither the law nor the cies require to demonstrate an institution's record regulations should set minimums or mandate the of performance. Small institutions, in particular, types of loans an institution must offer. Increas- complain that the documentation provided to ingly, however, depository institutions and trade agency examiners is costly and unnecessary. groups have asked for more precise rules. Recent Recent studies by trade groups among banks of all interest in community development banks has even sizes point to the CRA as imposing substantial brought suggestions that institutions be allowed to compliance costs. In a June 1992 study by the meet their CRA obligations by specified invest- American Bankers Association on the sources of ments in such institutions. regulatory burden, the CRA topped the list as the The State of New York, which has a community most significant. A study by the Independent Bankreinvestment law much like the federal law, is ers Association of America estimated that compliconsidering a proposal that would identify specific activities for which depository institutions covered 18. The state's community reinvestment law is in N.Y. Banking by the state's statute could earn CRA "credit." The Law §28-b (McKinney 1990). The proposal for earning CRA system would require institutions to establish credits is in New York State Banking Department, "Proposed Comprehensive Policy Statement Relating to the New York State investment targets for the CRA, measure these Community Reinvestment Act: Request for Public Comment" investments in relation to the institution's assets, (September 9, 1992). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 265 ance with the CRA cost about $1 billion annually meeting credit needs, not on process, and that an out of a total $3 billion for selected laws. institution's size has a bearing on how formal the Some community groups, too, criticize regula- proof of performance needs to be. Regarding geotors for elevating form over substance. More atten- graphic analysis, the FFIEC stated that the extent tion is focused on documenting community out- and sophistication of analyses expected by the reach, they say, than on whether an institution agencies will depend on the size and location of the actually is making loans. While they may have a institution. What may be required for a large insticommon complaint with some in the industry, how- tution to track its loans, for instance, is not required ever, their suggested correction for the problem is for a small institution, which could be served by a likely to be more mandated lending—a result most more informal system. in the industry would oppose. Any well-conceived, ongoing CRA process will The technical "hard paper" burden of the CRA involve normal business documentation. To recogis in fact rather small: a CRA statement listing the nize the credit needs in their communities, as well types of loans the institution is willing to make; a as to know whether they are meeting those needs, map showing the boundaries of the local communi- institutions must have a process in place that proties it serves; evidence (usually a notation in the vides relevant information. This is certainly the minutes) that the board of directors has reviewed case for most large institutions, especially those the statement at least annually; a lobby notice with widespread branch networks. Smaller institudescribing how the public can comment on the tions, too, need to demonstrate performance, but institution's CRA performance; and a file with its their documentation may not have to be as sophisti- CRA statement, agency assessment, and public cated or extensive. comments available for inspection. All are modest Despite agency efforts to contain the problem of requirements, but they do not, of course, reflect the CRA paperwork, it remains troubling. Through the true extent of the documentation actually needed. FFIEC, the federal regulators continue to evaluate Other paperwork is unavoidable. The statute calls the paperwork issue as well as other CRA enforcefor the public CRA assessments to contain "facts ment matters to see whether clarification or addiand data" to support the examiner's conclusions, tional change is warranted. and as a practical matter most of these "facts and data" can come only from the institution. One of the twelve assessment factors for CRA Exempting Small Institutions performance requires the examiner to evaluate the geographic distribution of the institution's credit The agencies generally have tried to be sensitive to extensions, applications, and credit denials. After the complaints of small institutions that they are considerable debate on this point, the FFIEC in disproportionately affected by the CRA. The insti- December 1991 issued a policy that strongly tutions say they must serve the needs of their entire encourages institutions to analyze the geographic community just to exist as viable businesses, and distribution of their major product lines as part of that, therefore, CRA requirements are unnecessary their CRA planning process. Institutions also are for them. Exemptions for small institutions are not encouraged to collect lending data and correlate a novel concept. For example, a depository instituthem with the relevant demographic facts relating tion's size determines whether it is covered by to the institution's community. The board of direc- HMDA and, if it is covered, the data that it must tors and senior management are expected to review report. the analyses in setting and evaluating the institu- Community groups do not believe that small tion's CRA program. Understandably, this geo- institutions necessarily meet the credit needs of graphic tracking also has contributed to complaints their communities as a matter of course, and they about CRA paperwork. point to the low loan-to-deposit ratios of some In June 1992 the FFIEC issued examination pro- small banks.19 They say small institutions need to cedures to address the outcry about unnecessary paperwork burden. The revised procedures empha- 19. FFIEC, Study on Regulatory Burden (Washington: FFIEC, size that examiners should focus on performance in 1992), Appendix A, p. 2. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

266 Federal Reserve Bulletin • April 1993 do more, not less, to comply with the CRA, and mance should bring its own rewards—new busitherefore they strongly oppose proposals for a ness and enhanced public relations. But after small-institution exemption and for self- assessing what it might cost to be rated outstandcertification. ing, some institutions believe the payoff is not Apparently, the size of an institution is not a worth the extra effort under current law. good indicator of CRA performance. Most institu- Various ideas have been proposed for adding tions in all asset-size categories received "out- statutory "carrots" to the CRA to increase the standing" or "satisfactory" ratings in examina- incentives, including a "safe harbor." A safe hartions in the first three quarters of 1992 (table 1). bor might limit formal protests against applica- Some members of the Congress have taken up tions, for instance, except when the evidence of the proposal to exempt small institutions from the a CRA performance problem is substantial and CRA. One bill would exempt an institution from specific. the CRA if it is in a small town, has assets (aggre- The state of New York is taking public comment gated with the assets of its holding company) of on establishing a safe harbor in the application $75 million or less, and can show that its loans process. A bank with an outstanding rating on its come to 50 percent or more of deposits. Such a three most recent CRA examinations would be proposal would exempt about one-fourth of the assured that its CRA performance would not bar 12,000 institutions supervised by the Federal application approval. The theory is that such a Reserve, the FDIC, and the OCC, but it would scheme would encourage banks to make the CRA a maintain CRA coverage of almost all banking part of their overall, day-to-day business plans. assets. Of the total group's $3.6 trillion in assets, They would strive for outstanding performance and the banks that would be exempted account for not view the CRA primarily in the context of about 3 percent, or $107 billion. applications. The Banking Department acknowl- Another proposal would allow institutions with edges that a safe harbor might be perceived as total assets of $250 million or less to certify their reducing community groups' involvement in the compliance with the CRA—provided, among other CRA. But state officials believe that if public comthings, that they have a "satisfactory" or higher ment were part of CRA examinations and not limrating and remain in compliance with the Equal ited to the application context, its influence could Credit Opportunity Act. Self-certification would be greatly enhanced. take the place of agency examinations. The regula- The Congress has taken a first step in providing tors would be required to examine an institution incentives. Under the Bank Enterprise Act of 1991, only in response to an allegation that it was not insured depository institutions that do business in meeting the credit needs of its entire community. If economically distressed communities can earn banks with assets of up to $250 million were assessment credits for application against their exempted from the CRA, as many as 87 percent of deposit insurance premiums.20 all financial institutions in the country could be excluded. But again, in terms of total dollars of community lending and investments, the likely CONCLUSION effect of the exemption would not be major. Thus, such an exemption might respond to much of the From modest beginnings and minimal legislative concern about paperwork without undermining the review, the CRA has grown in national importance. force of the CRA. At the same time, the vague nature of the act has bedeviled its implementation through the years. In essence, instead of imposing hard and fast rules, Lack of Incentives Financial institutions complain about the lack of 20. 12 U.S.C.A. § 1834 (Supp. 1992). The Congress has proincentives for outstanding performance, noting that vided funds for establishing a Community Enterprise Assessment Credit Board, which will create the guidelines for qualifying activeven a superior CRA rating offers no protection ities. The program cannot be implemented, however, until addifrom a protest. Ideally, of course, good perfor- tional money is appropriated to fund the assessment credits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Community Reinvestment Act: Evolution and Current Issues 267 the statute relies on individual institutions and their low- and moderate-income communities. Indeed, local communities to define credit needs, with the many financial institutions have discovered that expectation that the agencies will encourage this complying with the CRA helps them to compete process and assess its success. To make up for the for new customers and generate profitable lack of precision, the agencies charged with enforc- business. ing the CRA have sought to measure CRA perfor- Although progress in community reinvestment mance in a fair and comprehensive manner and to marks the evolution of the CRA, unresolved probprovide increasing guidance while avoiding any lems remain and frustrations abound for financial appearance of credit allocation. institutions, supervisory agencies, and the public. Through a combination of efforts, the CRA has In many cases, the major source of frustration rests stimulated loans for home purchase, construction, on the law's lack of specificity. Yet that very lack and rehabilitation and for the development of small also may be the law's most important strength. business and minority-owned business in low- and While providing strong incentives for institutions moderate-income areas. It has brought increased to reach out to their entire communities, it leaves participation in public-private partnerships in the question of "how" largely in the hands of the urban and rural communities and has encouraged institution and its community. In so doing, it consupport for community development corporations tinues to encourage and produce important reinand multibank lending consortiums that benefit vestment efforts throughout the nation. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

268 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report, covering the period Novem- The Dollar Trends Higher ber 1992 through January 1993, provides information on Treasury and System foreign exchange After the U.S. election in November, analysts were operations. It was presented by William J. McDon- predicting that the U.S. economy would begin to ough, Executive Vice President of the Federal outperform those of other industrialized countries Reserve Bank of New York and Manager of the and that a narrowing of interest rate differentials System Open Market Account. John W. Dickey would favor the dollar in the coming year. The was primarily responsible for preparation of the prospect of a strengthening dollar was given conreport.1 tinued support by indications that President-elect Clinton would apply fiscal stimulus early in 1993 During the November-January period, the dollar should there be any signs of economic weakness. continued to appreciate against the German mark Although hopes for a reduction in official rates by and Japanese yen from the low levels established in the Bundesbank were disappointed in both Novemthe prior period. The U.S. authorities did not inter- ber and December, expectations for such a move vene in the foreign exchange markets. early in the new year persisted. Anticipating a stronger dollar in the new year, market participants in late December and early January bid up the dollar to its period highs of DM1.6490 on January DEVELOPMENTS IN DOLLAR 8 and ¥126.21 on January 13. EXCHANGE MARKETS After mid-January, however, there was an Over the period, the dollar gained 1 percent in unwinding of long-dollar positions as it became value against the yen, 4.5 percent against the mark, apparent that a reduction in official rates by the and 5.5 percent on a trade-weighted basis.2 The Bundesbank was not imminent and that the Clinton dollar's upward movement was supported, first, by Administration's overall fiscal policy might put the perception that the incoming Clinton Adminis- greater weight on reducing the budget deficit. Many tration would pursue a policy of fiscal stimulus market participants then assumed that if U.S. ecoand, subsequently, by stronger-than-expected U.S nomic conditions were to worsen, responsibility for economic growth and persistent expectations of ensuring adequate economic growth would fall on official rate reductions in Germany and Japan. The the Federal Reserve. Although a reduction in offidollar's trend was interrupted by changing esti- cial U.S. rates was still not seen as likely, an easing mates of the amount of any U.S. fiscal stimulus, by was perceived to be in the range of possible moneperceived postponements of German rate reduc- tary policies, and that perception contributed to the tions, and by widespread market reports of Euro- dollar's brief reversal. But at the end of January, pean central bank sales of dollars. the release of stronger-than-expected U.S. economic data, particularly the strong fourth-quarter 1992 gross domestic product and December 1992 durable goods orders, seemed to erase the pros- 1. The charts for the report are available from Publications pects for interest rate reductions by the Federal Services, Board of Governors of the Federal Reserve System, mail stop 138, Washington, DC 20551. Reserve and refresh the expectation that the U.S. 2. The dollar's movements on a trade-weighted basis are mea- economy would be outperforming others over the sured using an index developed by the staff of the Board of year. Thus, in the closing days of the period, the Governors of the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

269 dollar moved up from January lows of DM1.5660 Federal Reserve reciprocal currency arrangements and ¥122.85 to close the period at DM1.6102 and Millions of dollars ¥124.60. Amount of Institution facility, January 31, 1993 The Market Awaits Interest Rate Reductions Austrian National Bank 250 National Bank of Belgium 1,000 in Germany and Japan Bank of Canada 2,000 National Bank of Denmark . 250 Bank of England 3,000 Throughout the period, on-again, off-again expecta- Bank of France 2,000 Deutsche Bundesbank 6,000 tions for reductions in official interest rates by the Bank of Italy 3,000 Bank of Japan 5,000 Bundesbank and the Bank of Japan punctuated the Bank of Mexico 700 dollar's movements. Netherlands Bank ... 500 In response to continued pressures within the Bank of Norway 250 Bank of Sweden 300 European exchange rate mechanism (ERM), many Swiss National Bank 4,000 market participants expected that the Bundesbank Bank for International Settlements would ease interest rates in early November, and, Dollars against Swiss francs 600 Dollars against other authorized European when this did not occur, attention focused on the currencies 1,250 prospects for an easing in December. Although no Total 30,100 official rate reduction came in December, the Bundesbank's market operations were designed to avoid end-of-year upward pressure on interest rates. Moreover, in statements that appeared to sales, production, and employment data and a acknowledge a weakening in the German economy declining stock market heightened concerns about while expressing optimism about the central bank's weakness in the Japanese economy and returned ability to control inflation, senior Bundesbank offi- attention to the prospects for an immediate reduccials predicted sharp reductions in German interest tion in the ODR. Despite widespread expectations rates during the course of 1993. In the final week of for an ODR cut at the end of January, the dollar December, Bundesbank officials added that an eas- was not able to sustain its mid-January high against ing could occur earlier in 1993 than was previously the yen as exchange market attention focused on expected. During this period, the dollar posted most the January 22 report of a record Japanese trade of its gains toward its January 8 high against the surplus for the calendar year 1992 and on the risk mark. that policymakers might respond to the trade imbal- In early January, the Bundesbank did engineer a ance by seeking an appreciation of the yen. small reduction in market interest rates through its market repurchase operations. However, by mid- January, when the decline in market rates had not been followed by a reduction in the Bundesbank's 2. Net profits or losses (-) official discount and Lombard rates, expectations on U.S. Treasury and Federal Reserve foreign exchange operations1 were that an easing in German monetary policy Millions of dollars would be postponed until early March, and the dollar began its brief reversal against the mark. U.S. Treasury Federal Exchange Period and item Expectations of a reduction in the official dis- Reserve Stabilization Fund count rate (ODR) by the Bank of Japan persisted during the period, gaining in strength as the period Valuation profits and losses on outstanding assets and liabilities closed, although with less direct effect on exchange as of October 31, 1992 3.746.3 2,293.8 rates than in the German case. In December, com- Realized, October 31, 1992ments by Japanese officials focused on the need to January 31, 1993 109.5 25.1 Valuation profits and losses stimulate demand through fiscal policy, and, as a on outstanding assets and liabilities as of result, prospects for a cut in the ODR receded. But January 31, 1993 2.868.4 1,749.9 in January, the release of weak Japanese retail 1. Data are on a value-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

270 Federal Reserve Bulletin • April 1993 Currency Tensions in Europe Continue settlements were completed on a total of $1,455.8 million in forward sales of German marks. Pressures on several European exchange rates, par- As previously reported, these settlements were exeticularly the German mark-French franc rate, per- cuted in May 1992 with the Deutsche Bundesbank sisted during the November-January period. In re- in an effort by both the U.S. and German monetary sponse to these pressures, German and French authorities to adjust the level of their respective authorities repeatedly stated their commitment to foreign currency holdings. During the period, the existing parity between their currencies and $729.4 million and $726.5 million against marks confirmed their participation in market intervention settled on November 23 and December 21 respecin support of the franc. The Spanish peseta and the tively, completing the total of $6,176.6 million of Portuguese escudo were each devalued within the spot and forward dollar purchases from the ERM 6 percent on November 22, and the Irish punt Bundesbank. For each transaction, 60 percent was was devalued 10 percent on January 30. In addi- executed for the account of the Federal Reserve tion, the Swedish and Norwegian monetary author- and 40 percent for the account of the Treasury's ities abandoned their currencies' links to the Euro- exchange stabilization fund (ESF). The Federal pean currency unit on November 19 and December Reserve and the ESF realized profits of $109.5 mil- 10 respectively. lion and $25.1 million respectively from these set- Although these exchange rate pressures within tlements. As of the end of January, cumulative Europe had little direct impact on dollar exchange valuation gains on outstanding foreign currency rates, particularly in comparison with the previous balances were $2,868.4 million for the Federal period, transactions related to the financing of Reserve and $1,749.9 million for the ESF. official European intervention were perceived as The Federal Reserve and the ESF invest their affecting the dollar. Throughout the period, market foreign currency holdings in a variety of instruparticipants reported that both in the course of ments that yield market-related rates of return and rebuilding official reserves and in transactions have a high degree of liquidity and credit quality. A related to financing official borrowings, several portion of the balances is invested in securities European central banks were heavy sellers of dol- issued by foreign governments. As of the end of lars and that, at times, this selling pressure January, the Federal Reserve and the ESF held restrained the dollar's upward trend against the either directly or under repurchase agreements mark. $7,834.0 million and $8,356.0 million equivalent Although the U.S. authorities did not execute any respectively in foreign government securities valforeign exchange transactions during the period, ued at end-of-period exchange rates. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

271 Industrial Production and Capacity Utilization Released for publication February 15 vehicles and parts, the output of consumer goods and business equipment advanced, as did that of Industrial production rose 0.4 percent in January, construction supplies; the production of materials compared with revised gains of 0.2 percent in was little changed, and the output of defense December and 0.5 percent in November. The rise and space equipment continued its decline. At of 4.7 percent in the output of motor vehicles and 111.0 percent of its 1987 average, total industrial parts accounted for about one-half of the overall production in January was 4.0 percent above its gain in total industrial production. Excluding motor year-ago level. Total industrial capacity utilization Industrial production indexes Twelve-month percent change Twelve-month percent change 1988 1989 1990 1991 1992 1993 1988 1989 1990 1991 1992 1993 Capacity and industrial production Ratio scale, 1987 production =100 Ratio scale, 1987 production = 100 —— TToottaall iinndduussttrryy 140 —— MMaannuuffaaccttuurriinngg 140 Capacity . CCaappaacciittyy •• — — — 120 — 120 - - 100 - 100 Production Production 8800 80 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity All series are seasonally adjusted. Latest series, January. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

272 Federal Reserve Bulletin • April 1993 Industrial production and capacity utilization1 Industrial production, index, 1987 =100 Percentage change CCCaaattteeegggooorrryyy 11999922 11999933 19922 19932 JJaann.. 11999922 ttoo Oct.r Nov.r Dec.r Jan.P Oct.r Nov.r Dec.r Jan.? JJaann.. 11999933 Total 109.7 110.3 110.5 111.0 .7 .5 .2 .4 4.0 Previous estimate 109.7 110.1 110.5 .7 .4 .3 Major market groups Products, total3 110.7 111.3 111.9 112.5 1.0 .6 .5 .5 4.6 Consumer goods 111.9 112.6 113.2 114.1 1.1 .7 .5 .8 5.5 Business equipment 126.8 128.2 129.1 130.1 1.1 1.1 .8 .8 8.6 Construction supplies 98.5 98.5 98.6 98.9 1.5 .0 .2 .3 3.7 Materials 108.2 108.6 108.4 108.5 .3 .4 -.3 .1 3.1 Major industry groups Manufacturing 110.6 111.2 111.7 112.4 .7 .5 .5 .6 4.6 Durable 109.5 110.1 110.7 111.5 1.2 .5 .6 .8 5.4 Nondurable 112.0 112.6 113.1 113.4 .2 .6 .4 .3 3.6 Mining 98.8 99.8 98.3 98.6 .5 .9 -1.5 .4 .8 Utilities 110.7 111.3 109.6 108.2 .5 .5 -1.4 -1.3 1.3 Capacity utilization, percent 1992 1993 Average, Low, High, 1967-92 1982 1988-89 Jan. Oct.r Nov.1 Dec. Jan.p Total 82.0 71.8 85.0 78.0 79.0 79.3 79.3 79.5 2.1 Manufacturing 81.3 70.0 85.1 77.0 77.9 78.2 78.4 78.7 2.3 Advanced processing 80.8 71.4 83.6 75.7 76.3 76.6 76.8 77.2 2.9 Primary processing . 82.3 66.8 89.0 80.2 81.9 82.3 82.4 82.5 1.0 Mining 87.4 80.6 87.2 85.3 86.1 86.9 85.6 85.9 .1 Utilities 86.6 76.2 92.3 82.6 85.0 85.3 84.0 82.8 .9 1. Data seasonally adjusted or calculated from seasonally adjusted 3. Contains components in addition to those shown, monthly data. r Revised, 2. Change from preceding month. p Preliminary. increased 0.2 percentage point in January, to nondurables, such as paper and chemicals; the out- 79.5 percent, the highest rate since October 1991. put of energy materials was about unchanged. When analyzed by market group, the data show Since October, the overall output of materials has that the output of consumer goods excluding autos improved only slightly as declines in energy mateand trucks rose 0.4 percent last month: Production rials have about offset increases in durable and advanced in durable goods for the home, such as nondurable materials. carpeting and furniture, and in nondurable goods, When analyzed by industry group, the data show particularly foods and chemical products. The out- that output in manufacturing increased 0.6 percent put of business equipment other than motor vehi- in January and now stands 4.6 percent above its cles, which had risen sharply in October and year-ago level. In addition to the sharp rise in the November, increased more slowly—about 0.3 per- output of motor vehicles and parts, output grew cent—in both December and January; growth in nearly 1 percent or more in petroleum refining, the production of information processing equip- primary metals, nonelectrical machinery, and misment and of industrial equipment also slowed in cellaneous manufacturing. December and January. The production of materi- In January, the rate of factory utilization rose als edged up last month, with gains in durable 0.3 percentage point, to 78.7 percent, and has risen materials, particularly those used by the motor 1.2 percentage points since September. Among advehicle industry, nearly offset by losses among vanced processing industries, motor vehicles and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 273 consumer chemicals contributed most significantly ing the past year. Among primary processing industo the recent increase in operating rates. By con- tries, operating rates for steel and petroleum refintrast, the utilization rate for aerospace and miscel- ing rose sharply in January, while the utilization laneous transportation equipment dropped nearly rate for paper and industrial chemicals declined. 1 percentage point, a decline reflecting slack In January, production at mines increased demand for both defense and nondefense aircraft; 0.4 percent, with strong gains in coal mining, while this rate has fallen nearly 7 percentage points dur- output at utilities fell 1.3 percent. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

274 Statements to the Congress Statement by Griffith L. Garwood, Director, ment Investments, which includes profiles that Division of Consumer and Community Affairs, describe the CDCs and other community devel- Board of Governors of the Federal Reserve opment projects in which bank holding compa- System, before the Subcommittee on Financial nies have invested. Institutions Supervision, Regulation and De- In my remarks today I begin by discussing posit Insurance of the Committee on Banking, CDCs in the context of banking's overall role in Finance and Urban Affairs, U.S. House of financing community development. Second, I will Representatives, February 3, 1993 provide the subcommittee with some background on the Federal Reserve's policies and guidelines Thank you for inviting us to share the Federal for bank holding company CDCs and community Reserve's perspectives on bank-related commu- development investments. Finally, I will share nity development corporations (CDCs) and other with you some observations about key ways in types of community development equity invest- which the equity investment option is being used ments. In my testimony today, I will confine my around the country and some of the more comdiscussion primarily to bank holding company mon misperceptions about bank-related CDCs. CDCs and community development investments, As you know, interest in banking's overall role which are approved by the Federal Reserve. in financing community development is increasing State-chartered banks that are Federal Reserve in banks and their communities. Those seeking members now have authority similar to that of funds for low-income housing projects, small and bank holding companies based on amendments to minority business development, and other comthe Federal Reserve Act passed in late 1992, and munity revitalization efforts have increasingly the Federal Reserve Board is currently develop- looked to banks as the primary source of financing regulatory guidelines that will govern the ing. Because of their expertise in finance, their CDCs and community development investments local presence, and their community reinvestment of state-chartered banks. obligations, financial institutions are viewed as I want to call the subcommittee's attention to natural partners in the community development two publications we have provided with our process by housing groups, community organizawritten statement.1 The first is Community De- tions, small businesses, neighborhood developvelopment Investments, which describes in some ment groups, and city and county governments, detail the Federal Reserve's policies and guide- as well as private developers. lines for bank holding company CDCs and com- Over the past five years, in particular, we have munity development project investments and observed significant growth of bank financing for also outlines key issues that holding companies community development in both large and small should address when considering such invest- communities throughout the country. Some of that ments. Although I will touch briefly on some of growth has been reflected in the increasing use of these guidelines and issues today, those who are community development corporations and investinterested in additional detail should consult the ments by banks and bank holding companies. publication. The second publication is Directory: Bank Holding Company Community Develop- THE ROLE OF BANKS IN COMMUNITY DEVELOPMENT 1. These publications are available from Publications Ser- I want to make clear at the outset, however, that vices, Board of Governors of the Federal Reserve System, Washington, DC 20551. although CDCs and community development in- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 275 vestments remain important tools for banks and banks and bank holding companies for investbank holding companies, they are, in fact, only ment in special community development enables one part of a much larger picture. Despite the them to take a position of ownership by investing significant growth in the number of bank-related equity capital through CDCs and other means. CDCs and the expanding scope of their activities, The practical result is that these institutions the primary way in which financial institutions can expand the roles they can play in the comsupport community development programs and munity development process. Rather than waitprojects continues to be in the more traditional ing for others to initiate projects, institutions form of loans. These loans may include direct using this special authority can also buy, rehabilloans or loan participations, involvement in spe- itate, and sell properties or provide supplemental cial housing or small business lending consortium equity or special debt investments that help make organizations, the offering of credit lines to other projects or business ventures feasible. In effect, community development lenders, or the pur- the CDC option provides an additional dimension chase of loans and other common forms of debt that allows financial institutions to become catasecurities to help meet the credit needs of a lysts for the revitalization of economically disbank's community. Often these loans are pro- tressed areas. vided through collaborative public-private part- Commonly, this option enables financial instinerships. Financing packages may include public tutions to fill gaps in equity capital projects, funds used as loan guarantees, interest rate sub- making the participation of other lenders and sidies, second and third position loans, contin- investors possible. The capacity to provide addigency reserves, or project grants. But, at its tional equity to a project is especially important core, the financing of community development in areas that are poor in capital or with nonprofit by banks is still primarily through lending. community-based development corporations that To illustrate this point, I have included with typically have little working capital to support my written testimony a list of more than ninety neighborhood revitalization projects or to help examples of activities of banks in community them obtain loans. development. These examples were recently compiled by the Community Affairs Officers of the Federal Reserve Banks. Although this com- LEGAL AND REGULATORY ISSUES pilation includes a very small sample of projects, based on information that was readily available, The Federal Reserve's formal involvement with we do believe that it reflects the wide variety of bank holding company CDCs began shortly after community development and reinvestment activ- the 1970 amendments to the Bank Holding Comities being undertaken around the country by pany Act, which provided some flexibility to the banks. With few exceptions, these projects in- Federal Reserve Board concerning permissible clude a combination of public and bank financ- bank holding company activities. In 1971 the Board ing. revised its Regulation Y to authorize bank holding companies to invest in community development equity activities. Section 225.25(b)(6) defines the SPECIAL ROLE FOR CDCs term "community development" as "making equity and debt investments in corporations or projects In the context of banking's overall role in com- designed primarily to promote community welfare, munity development, I want to draw a simple such as the economic rehabilitation and developdistinction between CDCs, project investments, ment of low-income areas by providing housing, and other forms of community development fi- services or jobs for residents." nance in which the banking community engages. Let me emphasize that equity investments in Typical bank lending for community develop- corporations or development projects are not ment requires others who own property or busi- part of the traditional role played by financial nesses to commit capital before lending can institutions. Such investments constitute excepoccur. On the other hand, authority granted to tions to laws that restrict bank and bank holding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

276 Federal Reserve Bulletin • April 1993 company ownership of real estate or nonbanking that neighborhoods and communities in both business ventures and thus require special legal urban and rural settings vary greatly in size, and regulatory authority. They also necessitate a population mix, and economic condition, and it cautious approach by supervisory agencies to has remained flexible in applying the standards of ensure that bank holding companies are using Regulation Y for approval of community develthis authority only for legitimate community de- opment activities. For example, approved comvelopment purposes and in a manner that does munity development activities have included, in not pose undue risk to the bank holding company one case, the creation of a rural test farm for crop or its insured financial institution subsidiaries. experimentation that could help diversify a rural Nevertheless, several Federal Reserve deci- farm economy, and in another case, the rehabilsions have provided bank holding companies itation of a medical services clinic to help attract with considerable flexibility in tailoring their in- doctors to a small rural community. vestments to meet the needs of their disparate communities. Generally, the Federal Reserve has held that holding company investments in CHARACTERISTICS OF CDCS CDC ventures or community development projects generally meet the "community wel- Under Federal Reserve guidelines, community fare" test if they primarily benefit low- and development investments by bank holding commoderate-income persons and economically dis- panies may be made on either a for-profit or a advantaged neighborhoods and communities. nonprofit basis, although most holding company More than seventy bank holding companies CDCs and investments have been for-profit venhave been authorized by the Federal Reserve to tures. Although the Federal Reserve does not invest in CDCs and projects. These investments discourage profit seeking from community develhave had a variety of purposes, including con- opment investments by holding companies, sigstruction or rehabilitation of rental housing for nificant profits are, as a practical matter, generlow- and moderate-income families; purchase, ally not expected. rehabilitation, and sale of affordable homes; in- The Federal Reserve also takes a flexible apdustrial development and the development or proach concerning the amount of capital that bank expansion of small and minority business enter- holding companies commit for community developprises in economically distressed areas; and de- ment investments. Although the Federal Reserve velopment of community facilities that provide sets no minimum or maximum levels for capital health, educational, and other essential services investment by bank holding companies in CDCs or for low- and moderate-income persons. community development projects, it does expect Over the years, the Federal Reserve has made that use of holding company equity for such purclear that investments for corporations or poses will be appropriate for anticipated investment projects that are organized to build or rehabilitate activities, and certainly prudent with respect to the high-income housing or commercial, office, and size, financial condition, and capitalization of the industrial facilities that are not designed explic- holding company. The Federal Reserve will not itly to create long-term job opportunities for low- allow community development equity investments and moderate-income persons—even though in amounts that might pose undue risk to the safety such investments might provide some indirect and soundness of the holding company. Recent benefits to low- and moderate-income persons— legislation related to bank investments sets certain would be presumed not to meet the community limits for banks themselves. welfare test. That distinction is important. The For practical reasons related to the functions Federal Reserve does not want CDC authority of bank holding companies, the Federal Reserve used to enable bank holding companies to engage also does not limit the geographic scope of a in large-scale real estate development or non- holding company's community development inbanking business ventures as a conventional bus- vestments. Bank holding companies typically iness activity. conduct their CDC and project investment activ- Nonetheless, the Federal Reserve recognizes ities in economically disadvantaged neighbor- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 277 hoods and communities in the market areas identified and supported by the holding comserved by their subsidiary banks. As a result, pany's subsidiary banks that are located in many although some holding companies focus their states. The CDC has participated in several community development investment activities in neighborhood housing renovation projects in one community or one state, others with banks in Cleveland, Columbus, and Dayton, Ohio, and in several states have established CDCs that have Milwaukee, Wisconsin. It also has invested in been approved to make investments on an inter- the Ohio Equity Fund, the Wisconsin Equity state or even national basis. Fund, and the National Equity Fund, all of which Despite this flexibility, we do expect that bank help finance acquisition and renovation of lowerholding companies will seek and consider the income housing projects in several communities. views of the affected neighborhoods or commu- Other large holding companies, such as Citicorp, nities when making an investment decision, al- Chase Manhattan Corporation, and J.P. Morgan though the Board does not specify any particular and Company in New York, have formed wholly approach for ensuring community involvement. owned CDCs, but many smaller holding compa- Some holding company CDCs have established nies that serve smaller communities or neighborcommunity advisory committees in each commu- hoods have also used this approach. For examnity where projects are considered, while others ple, Moxham Bank Corporation of Johnstown, use community outreach vehicles already estab- Pennsylvania, formed a CDC that became a lished by their affiliate banks. Although commu- limited partner in a fifty-eight-unit apartment nity representation on the board of directors of a complex for lower-income senior citizens. bank holding company's CDC may be helpful in A second approach, one that is increasingly certain situations, it is not required. popular, is participation in a multi-investor consortium CDC that, in turn, invests in one or more community development projects and business TYPES OF COMMUNITY DEVELOPMENT ventures. Sometimes called multibank or non- INVESTMENTS bank CDCs, these CDCs are intermediaries that pool the investments of several financial institu- Let me now turn to the various approaches used tions or other investors. Participation in a multiby bank holding companies when making com- investor CDC enables a bank holding company to munity development investments. There are four share community development expertise, reprimary ways in which bank holding companies sources, and risks with others; such participation utilize their authority for community develop- is an especially valuable tool for smaller institument equity investment, and these methods are tions that do not have sufficient capital by themnot unlike those used by national banks. First, selves to make larger investments, which can the bank holding company can establish a wholly have the most significant impact on community owned, de novo CDC as a stand-alone subsid- development needs. In rural Illinois, for examiary. Usually, the holding company capitalizes ple, the Tri-County Community Development the CDC with an initial equity contribution and Corporation was created by two bank holding may provide loans or lines of credit to fund companies—FirstBank of Illinois Company, in the CDCs investments and lending. The CDC Springfield, and Farmers Holding Company, in then becomes the vehicle that makes debt and Jacksonville—along with several smaller banks, equity investments in community development all located in three adjacent counties in western projects. An advantage in having a subsidiary Illinois. A local utility, a power cooperative, and CDC is that it can be used by the holding a local chamber of commerce are also investors. company to support a variety of projects over The CDCs purpose is to promote economic time. development and to help new and existing small Currently there are about forty CDCs operat- businesses to expand, thereby creating jobs in ing as wholly owned subsidiaries of bank holding the three-county area. The CDC provided ficompanies. One example is Banc One's CDC, nancing that helped attract a music company which provides equity investments for projects distribution center to the area, and it is also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

278 Federal Reserve Bulletin • April 1993 participating in a state program that assists com- ISSUES RELATED TO CDCS panies in retooling and modernizing their facilities. Although fully supporting the CDC concept, the A third approach used by bank holding com- Federal Reserve believes that the use of commupanies is investment in limited partnerships that nity development corporations and investments are formed to invest in one or more community has limitations and that these mechanisms should development projects. The availability of fed- not be oversold. In that regard, there are several eral low-income housing tax credits has made issues that both financial institutions and policyinvestments in limited partnerships that finance makers should address. low-income housing projects increasingly at- First, bank-related CDCs should not be viewed tractive. An increasing number of large and as a panacea for the ills of our urban neighborsmall bank holding companies have invested in hoods and rural communities nor as the main such partnerships. Holding companies can be vehicle for bank activity. As I noted earlier, the the sole limited partner, or they can be one of option for community development equity inmany partners. vestment is an important and useful tool, one that For example, BB & T Financial Corporation, a we believe can effectively supplement ongoing parent of Branch Banking and Trust Company, bank lending programs and community efforts to has invested as the sole limited partner in three revitalize economically disadvantaged areas. Alseparate low-income housing limited partner- though we continue to expect increased CDC ships that developed a total of 118 rental units in activity by state member banks and bank holding three North Carolina communities. In another companies, we believe that community developcase, First Bank System, headquartered in Min- ment lending by financial institutions and other nesota, formed a CDC that in turn has become an intermediaries will continue to be the primary investor in several limited partnerships in the nongovernmental source of funding for commu- Minneapolis-St. Paul area that support fifteen nity development. separate low-income housing projects; it has also Second, as interest develops in CDCs, there is invested in limited partnerships and projects in a growing need to reiterate how bank CDCs other states that are served by First Bank System relate to the Community Reinvestment Act subsidiaries. (CRA). Under current provisions of the CRA, Finally, bank holding companies may make direct CDCs and project investments can provide posinvestments in single-purpose community develop- itive contributions to an institution's CRA perment projects or business ventures alone or jointly formance, but they are not considered to be a with others. This investment can be made without substitute for the institution's CRA program. By forming a CDC or participating in a limited partner- making loans and equity investments in low- and ship. For example, Perry Bancshares, Inc., in moderate-income areas, CDCs help fulfill CRA's Perry, Oklahoma, purchased an industrial site in its aims. But any expectation a bank may have that community and is working with the local chamber of forming a CDC or making a few low-income commerce to market the site to potential industrial housing investments will automatically result in a users while exploring other potential uses that will satisfactory or better CRA performance rating is benefit the community. unrealistic under current law. In the absence of As these examples illustrate, the option to any other CRA-related activities, a CDC, unless make equity investments for community devel- it is extremely active in community outreach and opment purposes produces several benefits for lending, would not make up for an otherwise deficient CRA record of performance. financial institutions and their communities. Through its Community Affairs programs at Third, it is clear that no one model is approeach of the Federal Reserve Banks, the Federal priate for every financial institution or every Reserve System provides information and tech- community it serves. As even the few examples nical assistance to banks and holding compa- discussed here illustrate, there are many options. nies about community development investment Banks and holding companies must continue to options. have the flexibility to look at community needs Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 279 and create the community development response state government agencies and program rethat best fits their circumstances. sources, or federal program funds that help pro- Fourth, several other issues can impact the vide the subsidies that make community develeffectiveness of bank CDCs and community de- opment projects feasible and affordable for velopment investments. For example, there are lower-income people. While some communities practical limitations on the amount of bank and have many effective partners and can assemble bank holding company capital that can be de- appropriate resources for projects, others do not. voted to community development purposes. Ex- Finally, I think financial institutions and polipectations concerning widespread use of bank cymakers need to consider the human resources capital for community development purposes aspect of CDCs. Community development inmay be too optimistic. Although we believe that vestment requires special knowledge of real esthe trend will continue to be very positive over tate development and business ownership, an the longer term, for many institutions there are understanding of public-private partnerships, limits to the speed with which they can commit and a somewhat different approach to finance large amounts of capital to CDCs and related issues. Although community development ficommunity development investments. nance as a specialty in banks continues to grow, In addition, financial institutions must consider we believe that development of effective specialcommunity resources. CDCs are rarely success- ists and managers to meet the demand and curful unless there are effective partners with which rent expectations of community groups, local to work. These might include other nonprofit governments, and financial institution manage- CDCs, the local business community, local and ment will take time. • Statement by Richard F. Syron, President, Fed- improvements and tide themselves over in perieral Reserve Bank of Boston, before the Subcom- ods of economic distress. Striking the right balmittee on Consumer Credit and Insurance of the ance between protecting homeowners and ensur- Committee on Banking, Finance and Urban Af- ing widespread access to credit is no easy task. fairs, U.S. House of Representatives February 4, The problems created by abusive second-mort- 1993 gage practices in Boston came to light in the spring of 1991, when numerous media accounts Thank you for this opportunity to testify on the appeared of minority homeowners having been credit availability problems that have arisen in victimized by second-mortgage lenders. Commulow-income communities. As you know, this nity activists were effective in bringing these issue has been an important one in the First abuses to the attention of the public and to Federal Reserve District. Accordingly, my pre- government officials. pared statement will focus on what we have The rapid appreciation of house prices in the learned from second-mortgage abuses in Boston. Boston area in the 1980s resulted in many home- Second-mortgage abuses represent one of the owners accumulating significant wealth in the most emotional issues facing the Congress, reg- form of home equity. Middle- and higher-income ulators, lenders, and the public. Some homeown- homeowners frequently took advantage of these ers, usually the elderly or disadvantaged, have gains by borrowing through home equity loans to been literally "conned" out of their homes improve their properties, to send their children to through abusive second-mortgage practices. Oth- college, or simply to finance higher spending. ers, who have not lost their homes, have been so Low- and moderate-income homeowners should burdened by high payments that their lives have have the same opportunities; but unfortunately, been severely disrupted. At the same time, home some unsophisticated residents, frequently unequity is the major asset of most households; aware of the value of their assets, fell prey to borrowing against this asset is the only way that unregulated and aggressive loan brokers and many homeowners can make needed repairs and home improvement contractors. The end result Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

280 Federal Reserve Bulletin • April 1993 of these abuses was to take the equity these companies that were most active in making popeople had built, sometimes over a lifetime. tentially abusive loans helped state officials for- In some cases, unsophisticated homeowners mulate their response. A relatively small number were induced to borrow against their home eq- of companies accounted for most of the probuity in amounts that were larger than their in- lems. Legislation was enacted to license mortcomes could comfortably support. When they gage lenders and brokers and also home improveran into difficulty, the day of reckoning was ment contractors, and new consumer protection postponed with yet larger loans until the poten- regulations were promulgated by the Massachutial to refinance was exhausted. At that point, the setts Attorney General. In addition, the Attorney monthly payments were far beyond their means. General initiated several enforcement actions, Media stories of elderly and infirm homeown- including litigation against several mortgage and ers losing their homes understandably fostered home improvement companies, as well as some deep anger and outrage and fed speculation that individuals. During this process we worked with the extent of victimization reached many thou- State officials and made specific suggestions sands. To help understand the problem, the about approaches that could be taken. Federal Reserve Bank of Boston undertook a Second, the report confirmed that banks did, study to estimate the number of potentially abu- indeed, bear some responsibility for the probsive loans secured by real estate in Boston. I lems arising from second mortgages, even though would like to submit this report for the official they themselves were not high-rate lenders. record. Third, the report indicated that the problem We found that, out of a total of more than was manageable, although it was severe. Once 50,000 nonacquisition mortgages made in the the dimensions and nature of the problem were four years 1987 through 1990, 698 carried an understood, remedies were developed. Earlier initial interest rate of 18 percent or more. An- estimates of the problem's size had been so large other 1,630 were estimated to have interest rates that everyone was overwhelmed. One outcome in the 15 to 18 percent range. The bulk of the was that the Massachusetts Community and loans with interest rates higher than 18 percent Banking Council was able to develop a process was made by a small group of lenders, identified for identifying and aiding victims of secondin the report. No banks were among the lenders mortgage abuses that was acceptable to both with the highest rates or even among the lenders banks and community representatives. making loans at 15 to 18 percent. However, most Our experience in Boston has demonstrated of the large banks had provided financing to some that traditional lenders must play a larger role in high-rate lenders or purchased mortgages from lending in low- and moderate-income neighborthem. hoods but that there is a place for nontraditional The report by the Federal Reserve Bank of lenders to provide credit to individuals who do Boston is subject to several qualifications. Most not qualify for bank credit. However, these nonimportant, the report focused on loans at high traditional lenders should be licensed and reguinterest rates, and, therefore, it did not identify lated to avoid the unscrupulous lending activity as problems those loans with relatively low in- that occurred in the Boston area. terest rates but high points and fees; nor did it The Federal Reserve continues to encourage uncover instances of shoddy workmanship, high and assist banks to increase their presence in pressure sales tactics, or fraudulent documents. low-income and minority communities. Our re- Some people have also noted that the study was cent study of mortgage denial rates in the Boston limited to loans made in the four years 1987 to area is spurring the banking industry to acceler- 1990, whereas newspaper accounts indicated that ate their efforts to detect and eliminate discrimisome problems dated back to 1985. However, natory lending practices. bias in the study may overstate the value of One of the most encouraging developments, to problem mortgages. which the Congress, banks and community The report helped to accomplish the following. groups, and, we hope, the Boston Reserve Bank First, identifying the type and the names of the has contributed, has been the increase in bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 281 branches and automated teller machines (ATMs) serious problem for low-income and minority in Boston's minority communities. To date twen- neighborhoods. Anyone who has listened to the ty-nine branches have either opened, been pre- stories of the human suffering involved cannot served, or upgraded, and thirty-eight ATMs have help but also be deeply moved. We hope that we been installed in these neighborhoods. Increased are making progress not only in understanding access to banking services for lower-income peo- the issue but also in doing something about it. ple will help reduce opportunities for abuse as in Undoubtedly, however, more remains to be the second-mortgage scams. done. We hope that this hearing and others in In summary, the subject of this hearing is a your series will help bring that about. • Statement by John P. LaWare, Chairman, Fed- interests. More recently, because of the banks' eral Financial Institutions Examination Council importance in providing financial services to conand Member, Board of Governors of the Federal sumers and others, they have been viewed as Reserve System, before the Subcommittee on vehicles for implementing social policies, includ- Financial Institutions Supervision, Regulation ing consumer protection and law enforcement. and Insurance of the Committee on Banking, The ever-increasing number and detail of reg- Finance and Urban Affairs, U.S. House of Rep- ulatory requirements and restrictions, whatever resentatives, February 18, 1993 their purpose, have increased the costs and reduced the availability of services from banking I am pleased to be here to discuss regulatory institutions. Excessive requirements and restricburden and particularly the study of this subject tions have imposed a heavy burden on instituthat the Federal Financial Institutions Examina- tions. They have reached the point where the tion Council (FFIEC) conducted last year in aggregate burden may frustrate the purposes of response to section 221 of the Federal Deposit the individual regulations by driving traditional Insurance Corporation Improvement Act of 1991 banking functions to alternative providers of (FDICIA). Some of you may recall that I testified these services that may not be subject to the before this subcommittee on behalf of the Fed- same requirements and restrictions. eral Reserve on regulatory burden last June, while the FFIEC study was in progress. The issue of the appropriate level of regulation SECTION 221: STUDY ON REGULATORY of banking institutions is not new. Banking insti- BURDEN tutions serve a vital role in the U.S. economy because of the critical functions they perform in In enacting section 221 of the FDICIA, the the payments mechanism, as chartered recipients Congress recognized the growing significance of of federally insured deposits, as credit interme- this burden. Section 221 required that the FFIEC diaries, and as the principal vehicle through review the regulatory policies and procedures of which monetary policy is implemented. The the banking agencies and the Department of the strength of the U.S. economy depends on a Treasury to determine whether they impose "unhealthy banking system to support its operations necessary" burden on banking institutions and to and growth. identify any revisions that might reduce burden It is because of the important role that banking without endangering safety and soundness or institutions play in the economy that they are without diminishing compliance with or enforceregulated. Safety and soundness regulations ment of consumer laws. The FFIEC was directed were introduced in the past century to minimize to report its findings by December 19, 1992. the destabilizing effects on the economy of diffi- During early 1992, the four federal banking culties in the banking system. Federal deposit agencies and the Department of the Treasury insurance, introduced in the 1930s, further in- undertook extensive internal reviews of their creased the government's need to protect its policies, procedures, recordkeeping, and docu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

282 Federal Reserve Bulletin • April 1993 mentation requirements. In addition, an inter- was controversial and an agency supported it only agency task force assembled and reviewed the in part or preferred an alternative approach to public comments that the Federal Deposit Insur- meet the goal of the recommendation. ance Corporation (FDIC), the Office of the Some of the more notable recommendations Comptroller of the Currency (OCC), and the include clarifying standards for loan- and lease- Office of Thrift Supervision (OTS) had received loss allowances, developing a uniform interin response to their requests in spring 1992 for agency policy regarding supervisory standards comments on regulatory burden. The FFIEC for assets sold with recourse, and instituting also requested and received public comments on unified Call Reports so that all the banking agenways that the burden might be reduced, and it cies request the same information from regulated held public hearings on this topic in Kansas City, institutions. Each recommendation is currently San Francisco, and Washington, D.C. being considered in FFIEC subcommittees and At the outset, the FFIEC stated its belief that task forces. the goal of this process was not to examine and After careful consideration, the agencies condevelop proposed revisions to the overall statu- cluded that the other suggestions either did not tory scheme governing financial institutions. fully meet the standards set forth in section 221 Rather, it appeared to the council that the con- or concerned noncouncil member agencies. Sepgressional intent was to accept the statutory arately, the Department of the Treasury contribscheme as a given and instead to examine the uted an analysis of the public recommendations manner in which the federal banking agencies concerning the rules implementing the Bank Seand the Department of the Treasury have imple- crecy Act (BSA). mented that scheme through regulations, policy In addition to the analysis of specific suggesstatements, procedures, and recordkeeping re- tions for change, the study addressed more genquirements. erally the nature and cost of regulatory burden. Many commentators, as well as the four fed- Burden ultimately arises from two sources: (1) eral banking agencies themselves, recommended prohibitions that prevent regulated institutions changes that were within the jurisdiction of the from engaging in activities that they might otheragencies. During the year, the agencies acted on wise undertake and (2) requirements for certain many of these suggestions for regulatory im- specific actions or behavior patterns that reguprovement, particularly those related to required lated institutions would not undertake in the reports, examination procedures, and application absence of the requirements. Restrictions on processes. A summary of those actions is in- activities, such as limitations on interstate cluded in the study. Regulators have also in- branching and on investment banking activities, creased their efforts to coordinate policies and fall into the first category, while paperwork and procedures, which should lessen the burden on required compliance activities fall into the secbanking organizations. ond. Both prohibitions and requirements can be Other specific recommendations from the pub- costly to the regulated entity. lic for regulatory change were reviewed by inter- Furthermore, it is often not only the prohibiagency working groups and divided into three tions and requirements themselves but changes categories. The first category consists of approx- in either of them that can impose costs. Cost imately sixty recommendations that warrant fur- studies, as well as public comments and testither consideration as changes that may be effec- mony, indicate that the costs of adjusting to tive in reducing regulatory burden. In most cases, frequent (and sometimes minor) revisions to laws the federal banking agencies agreed on the general and regulations are a major component of reguapproach to a recommendation and developed a latory burden. Therefore, slowing the pace of consensus position, which is described in the legislative and regulatory change, avoiding maraccompanying discussion. In a few cases, further ginally necessary changes, and allowing reasonconsideration and possibly some compromise able transition times for implementation of revimay be required to implement a change in current sions in legal requirements could reduce burden procedures, and in some cases a recommendation meaningfully. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 283 The current approach to regulation, which tant first step. Nonetheless, the sixty suggestions often relies on mandates and uniform standards, are generally quite technical, and their overall has led to inflexibility, which can be costly. Very impact on regulatory burden is likely to be modspecific requirements necessarily bring standard- est. Although many of the suggestions are good ization, especially when detailed standards or ideas and the agencies will give them further methods of compliance are set out in the law consideration, significant relief from regulatory itself and no exceptions are allowed. However, burden will require more substantial changes. such inflexibility can be costly because it tends to Administrative relief, however, is limited by preclude new approaches, prevent innovation, statutory requirements. In many cases, legislaand even limit access to new technology and new tion contains very detailed requirements, and the markets. regulations must track the statutory provisions. Overall, the study concluded that the regula- Thus, the agencies have little power to change tory burden on the banking system is large and many provisions that impose substantial burgrowing. Although the FFIEC did not conduct dens. Legislative changes are required. new cost studies of its own, available studies Although proposed statutory reforms to ease conducted by other researchers suggest that the regulatory burden were not the intended or pricosts attributable to banking regulation are sub- mary focus of last year's study, the council stantial. Despite methodological and coverage recognized when it began the study that suggesdifferences, findings are reasonably consistent tions might well arise regarding appropriate legthat regulatory costs might be in the range of 6 islative action to ease regulatory burden. During percent to 14 percent of noninterest expenses, the course of the study, many valuable suggeswithout including any measurement of the oppor- tions regarding potential statutory revisions were tunity cost of reserve requirements. Because indeed forthcoming. Accordingly, the council's noninterest expenses of the banking industry member agencies have agreed to continue meetwere $124.6 billion in 1991, if the percentage ing to identify and recommend possible statutory estimates are correct, regulatory costs to the changes to further reduce regulatory burden. The industry in 1991 could have been between $7.5 council hopes to prepare a separate report to the billion and $17 billion, without any adjustment Congress on those issues by late spring. for the costs of reserve requirements or prohibited activities. Additionally, cost studies of consumer regula- RECOMMENDATIONS FOR THE FUTURE tions indicate that there appear to be economies of scale appear in compliance costs. In other As I have noted, banking institutions are reguwords, the cost of regulation may fall heaviest on lated because of important public policy considsmaller banks. Descriptive statistics from the erations. Much of the regulation arises ultimately recently completed study by the Independent from four fundamental public policy concerns: Bankers Association of America (IBAA) suggest banking market structure and competition, bankthat scale economies may exist for regulations ing safety and soundness, systemic stability, and other than consumer regulations. consumer protection. The safety and stability of the banking system are vital to the economy. Further, it is difficult to quarrel with the purposes REDUCING REGULATORY BURDEN of individual consumer protections. Nevertheless, the aggregate effect of the implementation In the weeks since the study was submitted to the of a substantial number of desirable policies may Congress, the agencies have continued to con- result in burdening individual banking transacsider the suggestions, and I anticipate that fur- tions to an unacceptable degree. ther action will be taken in the near term. The Many have noted, for example, the tremensteps already taken by the regulatory agencies dous growth in the number of documents inand the sixty specific suggestions for further volved in a home mortgage loan. Similarly, makconsideration represent a beginning—an impor- ing a small business loan, which is often secured Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

284 Federal Reserve Bulletin • April 1993 by real estate, has become costly and can take up questions about the trade-offs to be made beto ninety days, largely because of real estate tween competing public policies, much like the appraisal requirements. Often, the need to adopt ongoing discussion of the federal budget. Beregulations to implement many statutes may gen- cause achieving political consensus for change erate substantial detailed documentation that may be difficult, in my judgment, an independent banks must read and interpret as the agencies nonpolitical commission charged with exploring respond to public comments and address con- possibilities for legislative change would be usecerns about potential bank liability. ful. Such a commission could address a broad In the aggregate, this burden has become sub- range of banking issues (such as regulatory burstantial, raising the costs of banking services and den and the competitive position of U.S. banking thus encouraging bank customers to seek less organizations), offer suggestions and guidance costly loans and services or higher-yielding in- for legislative and regulatory changes, and assist vestments from other financial intermediaries the Congress in developing a specific legislative that are not subject to the same regulatory re- agenda. quirements and restrictions. The movement of business from banking institutions to other intermediaries and directly to money and capital SUMMARY AND CONCLUSION markets may frustrate the purposes for which banking regulations were adopted. I believe this Banking institutions serve a vital role in the U.S. burden has already begun to threaten the com- economy. The regulatory burden that we have petitiveness of the banking industry itself. imposed, however, may now threaten their role Fundamental review is needed of approaches in providing the services that are so important to to regulation in search of mechanisms that will the health of our economy. We must be careful achieve the same goals but with less burden and not to constrain our banking system so much that without the problems that accompany the current it is not responsive to the country's needs. In an approach. New approaches to regulation that are increasingly global and competitive financial more sensitive to cost-benefit trade-offs must be market, the United States can ill afford to handsought and considered. In particular, existing icap its banking institutions—and therefore the market forces and incentives should be har- individuals and businesses they serve—with stinessed as much as possible to achieve regulatory fling and constantly changing rules and regulagoals, rather than relying on microlevel regula- tions. tions that eliminate the flexibility that is impor- The regulatory burden on banking institutions tant in a dynamic industry. is large and growing. The cumulative regulatory To the greatest extent possible, banking regu- burden on the banking industry may well be more lation should provide flexibility by tailoring re- than the sum of its parts. This burden has grown quirements to specific facts and circumstances slowly but relentlessly over the years, layer by and by distinguishing among institutions accord- layer by layer. Although genuine public policy ing to meaningful criteria such as condition, size, benefits may develop from any single regulatory and management competence. Regulations that proposal, it is important to recognize that the provide insufficient flexibility can cause unneces- combined banking regulations and prohibitions sary regulatory burden and create inefficiencies create a substantial, if not approaching unmanby preventing depository institutions from find- ageable, burden for many institutions. When ing the most cost-effective means of complying these burdens are aggregated, they affect the with the law or regulation and by impairing the economy by reducing the efficiency and competability of banking institutions to react to changing itiveness of the banking industry. market conditions. At this time, we need to make fundamental These approaches must be applied not only to decisions. If there is to be a real reduction in future regulatory actions but also to existing burden, we must revisit our overall approach for regulations. Efforts to substantially reduce regu- developing banking laws and establish a more latory burden will undoubtedly raise difficult direct process for balancing the benefits of regu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 285 latory proposals with the burdens they inevitably agencies have little power to change the proviimpose. We cannot continue to view banking sions that impose substantial burdens. Significant institutions as the appropriate vehicle for imple- reductions in regulatory burden will require legmenting government policies without recognizing islative action—and more than minor adjustthe costs. While the intended benefits of a regu- ments to the existing laws and regulations. lation may be evident, we should recognize that I hope that the FFIEC study completed last those benefits are not free to society, or to year represents the start of an ongoing process consumers, because they appear to be paid for by to address the problem of regulatory burden on the banking system. Those costs are shifted to the banking industry. The steps already taken consumers through lower interest rates paid on by the regulatory agencies and the sixty specific deposits and higher costs for loans and other suggestions still under consideration represent banking services. an important, if modest, first step. Perhaps Administrative relief is limited by statutory regulatory relief, like regulatory burden, can be requirements, however. In many instances, the cumulative. • Statement by Lawrence B. Lindsey, Member, "real" community lending. Community groups Board of Governors of the Federal Reserve Sys- say that our grades are too high and that our tem, before the Subcommittee on Consumer effort is lax. Credit and Insurance of the Committee on Bank- Over the years, critics have made many other ing, Finance and Urban Affairs, U.S. House of charges about bank and supervisory agency per- Representatives, February 18, 1993 1 formance, some of which have little foundation in the CRA's intent, actual provisions, or regu- I appreciate the opportunity to provide the Fed- lations. For example, some believe that an instieral Reserve's perspectives on the current status tution's record of making mortgage loans in of the Community Reinvestment Act (CRA). I minority areas should be the only CRA criteria, will include a few comments on the Home Mort- while others think that if a bank has a community gage Disclosure Act (HMDA) and the fair lending development corporation (CDC), it should autolaws, but they are extensive subjects in their own matically get a "pass" on the CRA. But the CRA right. is more complex than the taking into account of The CRA continues to be the source of concern home lending and CDCs. and frustration. Many members of the banking Hearing this cacophony of divergent critiques, community consider the CRA as unnecessary, ideas, and proposals over the past few years, you vague, burdensome, and unfair. Community and would likely have concerns that the CRA may consumer groups often view enforcement as weak not be working as intended. In considering this and have suggested several changes, including point, I would like to cover several related areas new disclosure provisions, to help ensure that in my testimony today. First, as a basis for my banks and supervisory agencies effectively ap- comments, I want to provide an overview of the proach their CRA responsibilities. act and its implementing regulation. Second, I We, as regulators, are often caught in the would like to bring the subcommittee up to date middle. Despite a dramatic increase in resources on recent activities by the supervisory agencies and efforts devoted to the CRA, we continue to to strengthen our CRA assessment programs. receive brickbats from all sides. Bankers think Third, I would like to touch on some of the that we grade too harshly and that we focus on recurring issues affecting the CRA that are of process and paperwork instead of assessing concern to bankers, community representatives, and the supervisory agencies. Finally, I want to share with you some thoughts on the CRA's 1. Griffith L. Garwood, Director of the Board's Division of impact—which we believe has been quite consid- Consumer and Community Affairs, presented this statement erable. on behalf of Governor Lindsey. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

286 Federal Reserve Bulletin • April 1993 I want to make it clear, however, that agencies The CRA does not require that institutions make other than the Federal Reserve are also deeply housing loans, nor does it require that they make involved with the CRA. In fact, from an exami- loans with below-market interest rates or loans nation perspective we have by far the smallest with other terms and conditions that would be number of supervised institutions—less than 10 inconsistent with safe and sound lending. None percent of the total. I caution the subcommittee, of these items are required, or, in my view, even therefore, that a serious exploration of the CRA implied by the CRA. would require testimony from others. This re- The CRA's actual requirements are really quirement, of course, would also be true with directives to the financial institution superviregard to HMDA and fair lending. sory agencies. First, the CRA requires that these agencies encourage each financial institution they supervise to help meet the credit WHAT THE CRA SAYS AND REQUIRES needs of its entire community, including the credit needs of low- and moderate-income Let me begin by reviewing the act and its imple- neighborhoods, in a way that is consistent with menting regulations. Given what seems like a safe and sound banking practices. Second, the blizzard of recent proposals to change the CRA, CRA requires that the supervisory agencies increase its scope, provide safe harbors, or re- assess the performance of financial institutions duce its burden, it is especially important that the in meeting community credit needs. We do that discussion be grounded in a clear understanding primarily through CRA examinations that use about the objectives of the act and its current twelve assessment factors outlined in the CRA requirements. regulation. Third, as a result of 1989 and 1991 On its face, the CRA is a short, rather simple amendments to the CRA, the supervisory agenlaw, as banking laws go. It is only a few pages. It cies are required to prepare for each institution reminds financial institutions that they have a examined a public written CRA evaluation that continuing obligation to help meet the credit includes the CRA rating and provides supportneeds of their entire community, including those ing facts and data. Finally, the CRA requires of low- and moderate-income neighborhoods. that the agencies consider the CRA perfor- These obligations stem from bank charters that mance of each financial institution when restate that banks should meet the convenience viewing its applications for expansion of deposand needs of the communities they serve. itory facilities through branching, mergers, or But the CRA also emphasizes that the obligation acquisitions. to help meet community credit needs, including In performing their responsibilities, the agenthose of low- and moderate-income areas, is an cies have issued regulations that impose a few affirmative one. The CRA's fundamental message is specific requirements on banks and thrift institusimply that each financial institution should, as part tions, but these are essentially technical and of its day-to-day business functions, be as attentive procedural in nature. For example, each bank to the credit needs of low- and moderate-income must develop and update a CRA statement that areas of its community as it is to other areas. delineates its community with a map and de- When considering the CRA's overall message, scribes services offered within that community. I think that it is important to recognize that the Institutions must also post CRA notices in the actual legislative language contains few direc- lobbies of depository facilities and maintain a tives and virtually no requirements that fall di- public comment file that may be inspected by the rectly on financial institutions. public and the banking agencies. The CRA does not require that an institution make any specific types of loans, make any quantity of loans to particular types of persons or NATURE OF THE LAW businesses, or make any specific number of loans in any targeted geographic area. The Congress I believe that virtually everyone who is affected has wisely avoided mandating credit allocation. by the CRA senses that this law is clearly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 287 unusual. It encourages but does not require positive happenings. Let me first talk about the action by financial institutions. It reminds examination side. banks and thrift institutions about their charter obligations but does not mandate any particular Examination Improvements activities. It states that banks should be encouraged to "help" meet community credit needs First, examiner training has been expanded and but does not specify how such encouragement significantly enhanced. Our consumer compliis to be provided or how much help in meeting ance schools for examiners devote considerable credit needs is expected. time to the CRA and related regulations, such as Further, the CRA directs the supervisory those covering fair lending and home mortgage agencies to assess bank performance in helping disclosure. A more advanced compliance school meet community credit needs, but it does not also includes segments on community developdefine good CRA performance. The act also ment. In addition, we regularly conduct a unique, implies potential punishment for institutions with one-week intensive course for examiners, called poor performance—in the form of denials of CRA Advanced Examination Techniques. Over applications to expand—but provides no partic- the past three years, virtually all of our consumer ular incentives to encourage institutions to seek compliance examiners have completed this outstanding performance. With the exception of course. We are also taking steps to help our requirements for such items as CRA statements safety and soundness examiners understand the or CRA notices, lack of action by institutions essentials of the community development market does not constitute a "violation" of the law. so that they can fairly assess the quality of a And most important, the fundamental ap- bank's reinvestment loans. proach of the act, and perhaps the primary Second, in addition to enhanced training for source of most concerns and issues, is that the our examiners, we have been concerned about CRA's focus is on assessments of performance. providing them with better tools to help them get That is, the CRA, at its very heart, is "valua- the job done. To this end, on behalf of the tive." It requires judgments based on a set of Federal Financial Institutions Examination facts and circumstances that vary greatly among Council (FFIEC) the Federal Reserve has develcommunities and institutions. oped a computerized system for analyzing the expanded data collected under the Home Mortgage Disclosure Act (HMDA). The system is extremely versatile and allows the data to be SUPERVISORY AGENCY ROLES segmented by demographic characteristics such AND ACTIONS as race, gender, and income levels, or geographic boundaries. Examiners can now sort through Under the CRA, the supervisory agencies are vast quantities of data to focus attention on charged with encouraging financial institutions to specific lending markets and draw comparisons help meet community credit needs and with between an individual HMDA reporter's perforevaluating their performance. At the Federal mance and of all lenders in the area. With these Reserve, we provide "encouragement" in two capabilities, examiners can more readily deterprimary ways: by conducting CRA examinations mine whether a bank is effectively serving all and by carrying out a comprehensive set of segments of its market, including low- and modeducational, technical assistance, and informa- erate-income and minority neighborhoods. tional programs, primarily through our Commu- Third, in June 1992, the FFIEC issued revised, nity Affairs program. uniform CRA examination procedures that clar- Over the years, the Federal Reserve System ify CRA examination policies. For example, they has strengthened its CRA-related activities on emphasize the importance of using numerical several fronts. My impression is that, in all the data in the public CRA evaluation to the extent talk about the problems with CRA, not enough that they are used in the assessment process and information has been conveyed about the many support the conclusions reached. Our examiners Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

288 Federal Reserve Bulletin • April 1993 now routinely factor into their CRA assessments positive impact on financial institutions and their "hard data" derived from HMDA tables, the responses to their CRA obligations. supervisory Call Reports, bank lending records, and other sources. Expanded Educational, Informational, and Fourth, we have been mindful of the widely Technical Assistance shared perception, often vocalized by bankers, that the CRA entails an undue amount of paper- In addition to examinations, a second key way work. In developing the new examination pro- that the supervisory agencies fulfill our CRA cedures, we endeavored to help reduce the "encouragement" responsibilities is through edamount of paperwork and documentation by ucational, informational, and technical assisemphasizing that institutions should retain for tance activities. These activities are conducted examiners' review only information that is use- jointly by the agencies and through programs ful to the institution's own management needs. administered in each agency. At the Federal We have emphasized to our examiners that Reserve, we provide these educational and infor- CRA documentation will generally be less for- mational services primarily through our Commumal and less extensive in small and rural banks nity Affairs program at each of the twelve Fedthan it is in larger, urban banks. We want to eral Reserve Banks. reduce as much as possible the paperwork To help educate the public and the banking burden on bankers so that they can focus on the community about CRA and community devellending side. opment lending, the Reserve Banks sponsor Fifth, personnel resources allocated to CRA ex- Community Affairs conferences, seminars, and aminations have increased significantly since 1989. workshops. Over the past four years, we have Our examiners and Reserve Bank staff also spend sponsored or cosponsored more than 400 conconsiderable time in follow-up to the examinations ferences, seminars, and workshops for bankers through correspondence, advisory visits, and edu- and others focusing on such topics as CRA and cational activities directed to the industry as a HMDA compliance, options for bank participawhole. The frequency of CRA examinations by the tion in low- and moderate-income housing de- Federal Reserve System has been maintained, de- velopment, downtown and neighborhood revispite the fact that CRA examinations have become a talization, small and minority business lending, more demanding and time-consuming job for exam- the formation of community development coriners. For more than a decade, we have examined porations, and housing finance in rural areas. state member banks with a satisfactory or better During the past year, several Reserve Banks record of past CRA performance every eighteen to conducted workshops on the CRA targeted for twenty-four months. "Problem banks," or those members of bank boards of directors and for with demonstrated weaknesses, are examined every bank senior executives. Community Affairs six to twelve months. staff members have developed community de- Sixth, the agencies have successfully imple- velopment lending curricula and have conmented the public disclosure of CRA evaluations ducted numerous community development and ratings. Written, public evaluations of CRA workshops for bankers. performance have been a reality for well over two In addition, during this same four-year period, years. We and the other supervisory agencies have Community Affairs staff members of both the devoted substantial time and effort in developing the Board and the Reserve Banks made more than system and in training examiners for an unprece- 1,000 formal presentations at conferences, semidented change in the way they do their jobs. nars, and meetings of banking, community, and Since the disclosure provisions became effec- other organizations on community development, tive, the Federal Reserve has examined for CRA the CRA, and other related topics. They have purposes every bank it supervises at least once, responded to thousands of inquiries and requests and many twice, and has presented its findings to for information about the CRA. the public. We believe that this process has Community Affairs staff members also provide proceeded relatively smoothly and has had a CRA-related technical assistance and advice to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 289 individual banks, and some are conducting spe- expansion options or to impede the timing of cial visitations to bank holding companies to their applications. This gives them added incendiscuss CRA issues and opportunities directly tive to have good programs in place. Some with senior management. Community Affairs undoubtedly avoid filing applications, or decide staff members have helped several banks and to withdraw them, when faced with potentially banking groups structure lending consortia or adverse findings. Through the years, many insticommunity development corporations. They tutions have made substantial commitments to have helped mediate disputes between banks and the agencies or to protestants during the applicacommunity organizations. They produce a vari- tion process. ety of publications, from community profiles that Coupled with our examination and educational outline CRA-related opportunities for banks— efforts, I think that the application procedures such as one recently prepared on South Central have also contributed to overall CRA perfor- Los Angeles—to compendiums of programs that mance. banks can use to complement their CRA programs. Nine of the Reserve Banks publish their own community affairs newsletters, which reach a combined total of more than 40,000 bankers, RECURRENT ISSUES community representatives, and others. Increasingly, the Community Affairs program As should be apparent from this summary of is providing direct support to our examination recent agency activities, the CRA continues to staff members, helping them identify community consume an increasing amount of our time and contacts to meet with during examinations, or resources. Despite our belief that things are helping examiners identify community programs much better than many realize, we also recognize in which banks could be involved. that several controversies continue to be related Overall, we believe that the Federal Reserve's to the structure and administration of the CRA. Community Affairs program has greatly strength- Let me touch on a few. ened our efforts to "encourage" and help institutions to meet their CRA obligations. Consistency One of the recurring issues involves the consist- EFFECTS ON APPLICATIONS ency, or lack thereof, in the way CRA evaluations are written and ratings assigned. Both com- Applications that present CRA issues, which munity groups and bankers have alleged that the include those affected by poor CRA ratings as evaluations of the agencies are not equally comwell as by CRA protests, have grown more prehensive and that in some cases the assigned numerous in recent years. During 1992, adverse CRA ratings are not always the same for banks CRA ratings were an issue in forty-four applica- that appear to have similar performance. tions received by the Federal Reserve from Let me say that the supervisory agencies have banks and bank holding companies, compared spent much time and energy, both on an interawith thirty-one such applications in 1991. Pro- gency basis, and within each agency, to deal with tested applications also increased to thirty in inconsistencies in evaluation write-ups. We have 1992 from twenty-four in 1991. an extensive program within the Federal Reserve Although there have been relatively few out- to review reports across Federal Reserve Disright denials of applications on CRA grounds, we tricts to promote uniformity. In May 1991, the would urge caution in using this as a significant FFIEC convened a working group of field exammeasure of CRA's impact. We have found that iners and senior staff members from each of the institutions are taking this aspect of CRA quite agencies to review evaluations across agencies to seriously. They do not want poor CRA examina- help ensure a common approach. We have also tion results, which are afforded great weight in received input from the Federal Reserve's Conour consideration of applications, to reduce their sumer Advisory Council, national community Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

290 Federal Reserve Bulletin • April 1993 organizations, and many others on how we can would provide them with this information. But enhance the quality and consistency of public this process involves, after all, basic types of information. We believe that these issues are information that most bank managements regubeing resolved. larly want to see for all products and services. It should be recognized, however, that it will For smaller institutions, the process is much probably always be somewhat difficult to make simpler and usually should involve use of dayall ratings read consistently, simply because we to-day information that bank management colare rarely comparing "apples to apples." Each lects in any case. financial institution is unique with respect to its However, this "process versus product" debusiness strategy, size, geographical market bate is not an easy one for one fundamental reach, product mix, and organizational structure. reason—the agencies were not given the task, Even banks of the same size in the same com- nor have they assumed the role, of providing munities may offer very different products and rules that allocate credit. Certainly, it would services. Each community is also different with make everything much easier if we had lists of respect to its economic condition, credit needs, "blessed" loans and customers and mathematiorganizations, and resources. cal ratios of loans by category that would match various ratings under the CRA—then we would Process vs. Product simply count the product and be done with it. In fact, the CRA—wisely in my view—provides Both bankers and community groups continue to flexibility for institutions to meet their obligation charge that the agencies appear more interested in many different ways, depending on their in ensuring that institutions have the appropriate strengths and the specialized needs of their com- CRA procedures and documentation than actual munity. Thus, there will always be considerable lending programs in their communities. I believe, focus on having an adequate process in place however, that if that was the case at one point, it which, in fact, delivers product. most certainly is not the case now. However, as I will indicate, this issue is not as simple as it may Easy Grading first appear. In conducting CRA examinations, we do not The distribution of ratings is another recurring focus on process to the exclusion of lending. issue. Community groups say that the CRA We have cautioned our examiners about just grades are much too high, and they contend that this issue in our revised examination proce- the banking agencies are much too lenient. And dures, and we discuss it regularly in examiner roughly 90 percent of the institutions do get a training and other meetings. However, we do satisfactory or better rating. Some bankers, arnot consider certain basic business processes to gue, of course, that because an institution would be irrelevant to the CRA. Most successful in- be out of business if it did not meet the needs of stitutions understand that, if they do not have a its community, all should pass. well-thought-out CRA program, they may be When haggling over the grade distribution, we less effective in finding good lending opportuni- should remember that the CRA ultimately inties in their communities or in being able to take volves performance evaluations. Disagreements credit for their lending activities at examination will always occur over such assessments, time. whether they involve a teacher or a professor We do not believe that most larger institu- grading a paper, a music critic judging a recital, tions, especially those with large branch net- or an employer evaluating an employee. No works, can reasonably claim to know the credit matter how well the criteria are understood, needs in their diverse communities unless they different people—reasonable people— can often have an effective program in place to find out. make different judgments based on the same Similarly, they probably cannot truly know information. whether they are meeting the credit needs with But, clearly, few institutions fail. I think there loans unless they have a process in place that are several good reasons for the current distribu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 291 tion. First, all banks pledge to meet the "conve- THE IMPACT OF THE CRA nience and needs" of their communities when they are chartered. This pledge occurred long How well is the CRA working? Frankly, I think before the CRA came on the scene. Second, we it is working a lot better than is often recognized. have been examining banks for compliance since By any measure it has had a major impact on 1977, and one would expect this pledge to have reinvestment activity by financial institutions had a positive effect. Third, it should be recog- throughout the United States. In recent years, nized that the "satisfactory" category, in which we have seen real momentum in financial instiabout 80 percent fall, is a very broad one—and it tution responses to the needs of their communiincludes some with good performance and some ties, especially in lower-income areas. I believe with more marginal records. that a good part of that momentum is because of the CRA. The CRA has helped stimulate loans for home Discrimination and Home Mortgage mortgages, housing construction and rehabilita- Lending tion, and small and minority business development in low- and moderate-income communities. Finally, a highly sensitive and recurring issue More banks and thrift institutions are seeking involves the relationship of the CRA to both the and participating in public and private partner- Home Mortgage Disclosure Act (HMDA) and ships, in both urban and rural communities, than the fair lending laws, such as the Equal Credit ever before. A growing number of bank-led com- Opportunity Act. Although CRA assessments munity development corporations or multibank incorporate the objectives of these civil rights lending consortia are supporting projects that laws, the CRA is also much broader in scope. benefit low-and moderate-income areas. In- It is well known that regulators have faced cluded with my testimony is a sample of such considerable difficulties in identifying instances activities gathered from across the nation by our of discrimination. It is extremely difficult to find Community Affairs officers.2 conclusive evidence of discrimination through Although beginnings are sometimes adversarinspection of individual loan files during exami- ial, banks and community groups in many cities nations. Lenders usually can demonstrate that have proved that they can work together to the applicant was denied because certain credit promote the goals of the CRA process. I think standards, involving such elements as debt ratios bankers are generally viewing the world a little or credit history, were not met. differently because of the CRA, and the world But we have learned much from the intensive views bankers a little differently as well. For study on mortgage denials conducted by the many institutions, the CRA is becoming increas- Federal Reserve Bank of Boston and from the ingly important. Good CRA performance en- Justice Department's recent case involving De- hances their ability to take advantage of opporcatur Federal Savings and Loan. We are very tunities afforded by mergers and interstate concerned about the results of the Boston study banking. Many bankers are also discovering that and have taken several steps that we hope will good CRA performance also helps them compete help strengthen the capacity of our examiners for customers. Finally, a growing number of to detect and deter discriminatory treatment of bankers are seeing that CRA-related activities applicants. Fortunately, we are seeing a signif- can lead to just good, profitable business. icant growth in affirmative marketing of mortgage and other loan products in minority areas as well as development of special mortgage products that meet the needs of low- and moderate-income persons. Institutions that are making positive efforts to offer and extend credit in minority communities are helping ful- 2. The attachment to this statement is available from the Board of Governors of the Federal Reserve System, Division fill the CRA's aims. of Consumer and Community Affairs, Washington, DC 20051. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

292 Federal Reserve Bulletin • April 1993 CONCLUSION technical assistance programs. The banking community is responding positively, although certainly I would conclude from all of this that despite its more can be done. The CRA is a simple and unusual weaknesses, the CRA is indeed working and work- law. Its lack of specificity—the source of many of its ing quite well. The supervisory agencies have frustrations—may be its strength. In view of this, I stepped up their activities. We continue to would counsel that radical changes to the CRA be strengthen our CRA examination, educational, and cautiously approached. • Statement by Alan Greenspan, Chairman, Board process improved our economy's prospects for of Governors of the Federal Reserve System, long-run sustainable growth. Significant hurdles, before the Committee on Banking, Housing, and of course, still remain to be overcome in the Urban Affairs, U.S. Senate, February 19, 1993 short run. Nonetheless, in the view of the vast majority of business analysts, prospects appear I appreciate this opportunity to discuss with you reasonable for continued economic expansion developments in the economy and the conduct of and further declines in the unemployment rate. monetary policy. Nineteen ninety-two saw an im- The tasks of the monetary and fiscal authorities proved performance of our economy. The expan- alike will be not only to support this prospective sion firmed, and inflation moderated. Some of the growth but also to set policies to enhance the structural impediments to growth seemed to dimin- capacity of our economy to produce rising living ish. In particular, the financial condition of house- standards over time. Before discussing the outholds, firms, and financial institutions improved. In look in more detail, I will reflect on how moneaddition, confidence rebounded late in the year. tary policy has interacted with the forces that Nevertheless, the expansion seemed to exhibit have shaped developments over recent years. little momentum through much of 1992, unemployment remained high, and money and credit growth was sluggish. In response, the Federal RECENT ECONOMIC DEVELOPMENTS AND Reserve took steps to increase the availability of MONETARY POLICY IN PERSPECTIVE bank reserves on several occasions. These actions brought short-term interest rates to their I have often noted before this committee the lowest levels in thirty years. Long-term interest distinctly different nature of the current business rates also fell in 1992 and in early 1993, as cycle. Several extraordinary factors contributed inflation expectations gradually moderated and to the earlier weakening in the economy and have optimism developed about a potential for genuine worked against a brisk and normal rebound from progress in reducing federal budget deficits. the recession. Our economy has been held back in the past Balance sheet restructuring has been, perhaps, few years by a variety of structural factors that the most important of these factors. In the 1980s, have not been typical of post-World-War II bus- debt growth, hand in hand with rising asset iness cycles—certainly not occurring all at once. prices, considerably exceeded that of income, These factors have included record debt bur- and debt burdens rose to record levels. Debtdens, overbuilding in commercial real estate, and financed construction in the commercial real a substantial cutback in defense spending. We estate market was an extreme manifestation of have not been alone in this. Other major indus- this development, but it was apparent as well in trial countries have also been experiencing un- other sectors of the economy. usual impediments to growth, and by comparison The development of these imbalances should the recent performance of the U.S. economy has not be entirely surprising. The economy grew been relatively good. Our monetary policy accontinuously for nearly eight years—from late tions have been directed at facilitating adjust- 1982 through mid-1990, the longest peacetime ments to these developments and have in the expansion on record. In this unusual period of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 293 uninterrupted growth, unrealistic expectations of ductivity, which will boost real wages and living what the economy could deliver seem to have standards over time. developed. In addition, households and busi- A third development restraining the expansion nesses apparently were skeptical that inflation has been the contraction in defense spending. would continue to decline and, based on their Real federal defense expenditures dropped about experience during the 1970s, may even have 6 percent in 1992 and are down 9 percent from expected it to rebound. As a consequence, many their 1987 peak. Those regions of the country may have shaped their investment decisions im- with substantial defense-related activity have portantly based on expectations of inflation- been among the areas whose economies have induced appreciation of asset prices rather than performed especially poorly. Although this deon more fundamental economic considerations. velopment is having a contractionary influence In the commercial real estate sector, assessments on the economy in the short run, over a longer of profit potential that were formed during the period the productive resources freed in this first half of the 1980s simply went too far, leading process will find employment in the private secto an unavoidable period of retrenchment. tor contributing to capital formation and the The difficulties faced by borrowers in servicing growth potential of the economy. their debts as the expansion slowed and the Another less-discussed factor that contributed leveling out or decline in asset prices prompted to the formulation of our recent monetary policy many to cut back expenditures and divert abnor- dates not from the 1980s but rather from the mal proportions of their cash flows to debt repay- 1970s—inflation and inflation expectations. Over ment. This, in turn, fed back into slower eco- the past decade or so, the importance of the nomic growth. In addition, financial institutions interactions of monetary policy with these expecwere faced with impaired equity positions, owing tations has become increasingly apparent. The to sizable loan losses as well as more stringent effects of policy on the economy critically desupervision and regulation and demands by in- pend on how market participants react to Federal vestors and regulators for better capital ratios. In Reserve actions as well as on expectations of our response, they limited the availability of credit future actions. These expectations—and thus the with particular effects on smaller businesses. credibility of monetary policy—are influenced During the past year or so, however, consider- not only by the statements and behavior of the able progress has been made in strengthening Federal Reserve but by those of the Congress balance sheets in both the nonfinancial and finan- and the Administration as well. cial sectors. Moreover, by some measures the Through the first two decades of the postrate of deterioration of the commercial real estate World-War II period, this interaction was paindustry might be slowing, and prices in this tently less important. Savers, investors, firms, sector may soon begin to stabilize. Such devel- and households made economic and financial opments should contribute to the sustainability decisions based on an implicit assumption that of the expansion in the period ahead. inflation over the long run would remain low Intensive business restructuring has been an- enough to be inconsequential. There was a sense other important characteristic of the evolving that our institutional structure and culture, unlike economic situation. In an environment of weak those of many other nations of the world, were demand and intense competition here and alien to inflation. As a consequence, inflation abroad, many firms have found it necessary to premiums embodied in long-term interest rates take aggressive measures to reduce costs. These were low and effectively capped. Inflation expecactions have included selling or closing down tations were reasonably impervious to unexunprofitable units and reducing their work force. pected shifts in aggregate demand or supply. In The availability of new computing and commu- those circumstances, monetary policy had far nication technologies has given the process of more room to maneuver; monetary policy, for restructuring added momentum. Although these example, could ease aggressively without ignitchanges involve difficult adjustments in the short ing inflation expectations. run, they are producing important gains in pro- Even during the rise in inflation of the late Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

294 Federal Reserve Bulletin • April 1993 1960s and 1970s there was a clear reluctance to the goals of maximum employment, stable believe that the inflation being experienced was prices, and moderate long-term interest rates." other than transitory; it was presumed that infla- The goal of moderate long-term interest rates tion would eventually retreat to the 1 percent to is particularly relevant in the current circum- 2 percent area that prevailed during the 1950s and stances, in which balance sheet constraints have the first half of the 1960s. Consequently, long- been a major—if not the major—drag on the term interest rates remained contained. expansion. The halting, but substantial, declines But the dam eventually broke, and the huge in intermediate- and long-term interest rates that losses suffered by bondholders during the 1970s have occurred over the past few years have been and early 1980s sensitized them to the slightest the single most important factor encouraging sign, real or imagined, of rising inflation. At the balance sheet restructuring by households and first indication of an inflationary policy—mone- firms and fostering the very significant reductions tary or fiscal—investors dump bonds, driving up in debt-service burdens. Monetary policy also long-term interest rates. To guard against unex- has played a crucial role in facilitating balance pected losses, investors now demand a consider- sheet adjustments—and thus has enhanced the able premium in bond yields—a premium that sustainability of the expansion—by easing in seems out of proportion to the likely future path measured steps, gradually convincing investors of inflation but one that nevertheless conditions that inflation was likely to remain subdued and the environment of monetary policy today. The fostering the decline in longer-term interest rates. steep slope of the yield curve and the expecta- We have conducted monetary policy against this tions about future interest rates that the slope background for the past several years. During this implies suggest that investors remain quite con- period, Federal Reserve policy was directed at cerned about the possibility of higher inflation fostering sustainable growth in the economy. The over the longer run, even as they appear less Federal Reserve began to ease monetary policy in concerned about that possibility for the next year spring 1989, when it recognized tendencies for the or two. economy to slow. Responding to the downturn that This heightened sensitivity affects the way began in August 1990, we accelerated the reduction monetary policy interacts with the economy. in short-term interest rates. Last year, we extended An overly expansionary monetary policy, or our earlier reductions in interest rates by lowering even its anticipation, is embedded fairly soon in the federal funds rate another percentage point higher inflation expectations and nominal bond through another cut in the discount rate and by yields. Producers incorporate expected cost injections of a large volume of reserves. In addition increases quickly into their own prices, and to reducing interest rates, the Federal Reserve loweventually any increase in output disappears as ered reserve requirements last year for the second inflation rises and any initial decline in long- time in eighteen months to help reduce depository term nominal interest rates is more than re- institutions' costs and to encourage lending. traced. To be sure, a stimulative monetary Although the easing actions over the past few policy can prompt a short-run acceleration of years have been purposely gradual, cumulatively economic activity. But the experience of the they have been quite large. Short-term interest 1970s provided convincing evidence that there rates have been reduced since their 1989 peak by is no lasting tradeoff between inflation and nearly 7 percentage points; looked at differently, unemployment; in the long run, higher inflation short rates have been lowered by two-thirds. buys no increase in employment. Some have argued that monetary policy has been This view of the capabilities of monetary pol- too cautious and that rates should have been icy is entirely consistent with the Humphrey- lowered more sharply or in larger increments. Hawkins Act. As you know, the act requires that In my view, these arguments miss the crucial the Federal Reserve "maintain long-run growth features of our current experience: the sensitivity of the monetary and credit aggregates commen- of inflation expectations and the necessity to surate with the economy's long-run potential to work through structural imbalances to establish a increase production, so as to promote effectively basis for sustained growth. In these circum- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 295 stances, monetary policy clearly has a role to limit the decline in real estate values and boost play in helping the economy grow; the process by the profitability of thrift institutions, as a bywhich monetary policy can contribute, however, product reducing the losses that would have been has been different in some respects than in past borne by the Resolution Trust Corporation and, business cycles. Lower intermediate- and long- ultimately, the taxpayer. term interest rates and inflation are essential to It is now apparent that our July expectation of the structural adjustments in our economy, and a firmer trajectory of output has been borne out. monetary policy thus has given considerable Gross domestic product (GDP) growth is estiweight to helping such rates move lower. mated to have picked up to a 2>Vi percent rate Some have suggested that the decline in inflation during the second half of 1992 after a more permitted more aggressive moves, and, had the modest increase in the first half. Some quickendownward trajectory of short-term interest rates ing in the pace of auto sales could be detected in been a bit steeper, that aggregate demand would the late summer, and spending on other conhave been appreciably stronger. I question that as sumer durables strengthened as well. Singlewell. Basing this argument on the lower inflation family housing starts rebounded. Industrial orthat has occurred is a non sequitur; the disinflation ders, production, and shipments all rose. In very likely would not have occurred in the context association with this stronger trend, payroll emof an appreciably more stimulative policy, and such ployment growth has picked up, and the unema policy could have led to higher inflation in the next ployment rate has dropped back to 7.1 percent by few years. Moreover, such a policy would not have early this year—certainly too high but well below dealt fundamentally with the very real imbalances in the level at midyear. For 1992 as a whole, real our economy that needed to be resolved before gross domestic product is currently estimated to sustainable growth could resume. And it would have increased at about a 3 percent rate. And have run the risk of aborting the process of balance indications are that the expansion is continuing in sheet adjustment before it was completed. The the early months of 1993 although perhaps at a credibility of noninflationary policies would have slightly reduced rate. been strained, and longer-term interest rates likely The news on inflation in 1992 likewise was would be higher, thereby inhibiting the restructuring quite encouraging. The consumer price index of balance sheets and reducing the odds on sustain- (CPI) rose just 3 percent in 1992, at the lower end able growth. of the central tendency of our July projections. Recent evidence suggests that our approach to Excluding volatile food and energy prices, inflamonetary policy in recent years has been appro- tion last year was the lowest in two decades. priate and productive. Even by last July, when I Although the January CPI was surprisingly high, presented our midyear report to the Congress, judging from survey evidence and the behavior of some straws in the wind suggested that the easing long-term interest rates, inflation expectations of monetary policy to that date and the various appear to be gradually diminishing, as market financial adjustments under way in the economy participants gain more confidence that inflation is were proving successful in paving the way for being contained. better economic performance. Households and businesses appeared to have made significant MONEY AND CREDIT IN 1992 progress in shoring up their balance sheets; considerable reductions in debt-servicing require- These favorable outcomes occurred despite slow ments had been achieved, equity had risen, and growth of the money and credit aggregates. The liquidity was higher. In the financial sector, bank Federal Open Market Committee (FOMC) had profitability had improved, and a brisker flow of established ranges of 2Vi to 6V2 percent for M2, 1 bank earnings as well as issuance of new equity to 5 percent for M3, and 4Vi to 8V2 percent for shares and subordinated debt had bolstered cap- domestic nonfinancial sector debt. Over the year, ital ratios, which helped arrest the tightening of M2 actually rose 2 percent, M3 rose Yi percent, lending terms and standards. The lower level of and debt 4YI percent. Thus, both of the monetary interest rates, both short- and long-term, helped aggregates finished the year about Vi percentage Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

296 Federal Reserve Bulletin • April 1993 point below their ranges and debt just at its lower market mutual funds that make up M2. The bound. unprecedented steepness of the yield curve was Interpreting this slow growth was one of the one factor contributing to the apparent rate dismajor challenges the Federal Reserve faced last advantage of M2 assets. The high level of longyear. You may recall that, in establishing the term yields relative to shorter-term rates—rates ranges in February and reviewing them in July, on deposits, in particular—has attracted funds the committee took note of the substantial uncer- from bank and thrift deposits into alternative, tainties regarding the relationships between in- longer-term investments. For example, bond and come and money in 1992. Although the velocity stock mutual funds, which are not included in our of the broad monetary aggregates—the ratio of standard monetary measures, flourished in 1992. nominal GDP to the quantity of money—had not Assets in those funds, excluding institutional changed much in 1991, that result itself was holdings and Individual Retirement Accounts surprising. In the past, when market interest (IRAs) and Keogh accounts, increased $125 bilrates declined, as they had in 1991, savers shifted lion. In the absence of such growth, a sizable funds into M2 because deposit rates usually did proportion of the additional shares doubtless not fall as much as market rates, and this pro- would have resided in deposits. Shifts from deduced a decline in velocity in contrast to what posits to mutual funds have been abetted by the occurred in 1991. As we moved into 1992, there spread of facilities in banks and thrift institutions appeared to be an appreciable likelihood that to sell mutual funds directly to their customers. unusual weakness in M2 growth relative to In addition, the high relative cost of consumer spending would continue. But, in the absence of debt, which has resulted partly from the eliminaconvincing evidence for increases in velocity, the tion of the tax deductibility of consumer interest FOMC elected to leave the ranges unchanged expenses, no doubt has prompted households to from the previous year and noted that it would use funds that otherwise would be held in M2 to need to be flexible in assessing the implications pay off, or avoid taking on, consumer debt. of monetary growth relative to the ranges. Mortgage interest rates also are high, compared In the event, nominal GDP was even stronger with interest rates on deposits, reflecting the relative to the broad aggregates in 1992 than steep yield curve. This relationship has led some seemed likely when their ranges were estab- households to repay mortgage debt with funds lished. Income increased 3V2 percent faster than that might otherwise be held in deposits. M2 over the year and 43A percent faster than M3. Of course, if banks and thrift institutions had The unusual nature of these increases in velocity been expanding their loan portfolios, they would can be illustrated by noting that before 1992 the have had to bid more vigorously for deposits. But velocity of M3 had risen more than 3 percent in a several developments damped growth of bank year only once; the historical increases in M2 and thrift credit. Consequently depositories have velocity comparable with last year's occurred been prompt to reduce rates on deposits. In the solely in the context of sizable increases in business sector, the higher levels of stock and market interest rates in contrast to last year's bond prices have encouraged many corporations declines. to pay down bank debt with the proceeds of a What accounts for this unusual behavior? Why large volume of bond and stock offerings. More is it that our financial system was able to support generally, the attitudes of households and firms 5V2 percent growth in nominal GDP with only 2 toward debt and leverage appear to have changed percent growth in M2 and Vi percent growth in considerably in recent years, perhaps, in part, M3? We cannot be entirely certain we have all mirroring revised expectations about prospects the answers, but certain elements of our evolving for inflation to ease debt burdens or reward financial picture clearly have played a major role. leverage. The most important element perhaps was that The supplies of credit by depositories also savers believed they could earn considerably have been constrained. Incentives to lend have more on their funds if they were invested in been damped by market and regulatory pressures something other than the deposits and money for depository institutions to increase capital Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 297 ratios as well as by other factors raising their long-run relationship between M2 growth and costs of intermediating credit, such as higher inflation, recent developments may indicate that deposit insurance premiums, rising regulatory the velocities of the broader monetary aggregates costs, and more stringent supervisory oversight. are moving toward higher trend levels. It may be As a result, banking and thrift institutions have that the opening of securities markets to increassought to limit or to actually shrink balance sheet ing numbers of borrowers and lenders—in part growth. through securitization of loans by depositories as Together, these supply and demand factors well as their offerings of mutual funds to deposit have accelerated a long-standing process of re- customers—is permanently shunting financing channelling credit flows outside depository insti- around depository institutions. If this is true, the tutions. With reduced needs to fund asset liabilities of these institutions will not be as good growth, banks and thrift institutions have bid less a gauge of financial conditions as they once were. vigorously for deposits as can be observed in the This is not to argue that money growth can be very low returns on such instruments. These low ignored in formulating monetary policy. The yields, as I have noted, provide incentives for Federal Reserve in 1992 paid substantial attendepositors to redirect cash toward alternative tion to developments in the money supply, and investments and repayment of debt. In addition, we will continue to do so in 1993 and beyond. the proceeds of banking firms' offerings of equity Selecting ranges for monetary growth over the shares and subordinated debt have substituted coming year consistent with desired economic for banks' deposit funding and have thus reduced performance, however, is especially difficult monetary growth. when the relationship between money and in- The adjustments in our depository sector have come has become uncertain. Recent experience significant implications for the overall operation suggests that, at least for a time, measuring of the financial system and the performance of money against such ranges may lead to erronethe economy. Historically, banking institutions ous conclusions regarding the stance of monetary have played a critical role in financing small- and policy. medium-sized businesses—firms that in the past The shortfall of the aggregates from their have been a key source of growth in the econ- ranges and suggestions that the Federal Reserve omy. Some of the factors leading to the relative should have been more vigorous in preventing shrinkage of our banking industry, by limiting the the shortfall have raised the general question of availability of credit to smaller firms, have re- the role of the ranges in conducting monetary strained aggregate demand and thus have signif- policy. The annual ranges for money and credit icantly hindered the economic expansion. growth can be useful in communicating to the Nevertheless, the financial markets have Congress and the public the Federal Reserve's shown a remarkable capacity to adjust to the plans for monetary policy and their relationship contraction of the depository sector in a way that to the country's broader economic objectives. mutes the impact on the overall economy. For Lowering the ranges during the 1980s, for ininstance, despite a massive contraction in the stance, served as an important signal of the thrift industry since 1988, housing credit has anti-inflationary commitment of the Federal Reremained readily available and, in fact, relatively serve. inexpensive as a result of the further exploitation In some circumstances, the monetary aggreof financial innovations such as mortgage-related gates can also be valuable by serving as indicasecurities. Similarly, open market sources of tors of the thrust of monetary policy. Deviations funds have flourished in recent years and have of money growth from expectations may well allowed many firms to tap the stock or bond signal that policy is not having its intended effect markets to restructure their balance sheets. and that adjustments should be considered. Over As a result of such adaptations, the relation- much of our nation's financial history several ship between money and the economy may be measures of the money supply had reasonably undergoing a significant transformation. In con- predictable relationships with aggregate income. trast to earlier work that suggested a stable The period of rapid financial change had not yet Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

298 Federal Reserve Bulletin • April 1993 begun, and measuring money was more straight- of maximum sustainable economic growth. Inforward. Recognition of these predictable mon- deed, had there been an attempt to force M2 and ey-income relationships was the basis for the M3 toward the middle of their ranges, intermedi- Federal Reserve's increased emphasis on money ate- and long-term rates might have been signifin the 1970s and the subsequent Humphrey- icantly higher by now than they are currently, Hawkins legislation. The Congress passed the threatening the durability of the expansion. Monetary Control Act at the beginning of the This use of a broad range of indicators is 1980s, and the Federal Reserve adopted proce- appropriate because achievement of the ranges dures to provide greater assurance that targets for growth of particular measures of money and for Ml could be achieved. credit is not, and should not be, the objective of But, even by the mid-1970s, the relationship of monetary policy. Rather, the ranges are a means the monetary aggregates to the economy was to an end. The Humphrey-Hawkins Act, incorbecoming more complex. Financial innovation porating this view, does not require that the and deregulation significantly altered the spec- ranges be attained in circumstances in which trum of available transaction and saving instru- doing so would not be consistent with achieving ments. In the mid-1970s, advances in corporate the more fundamental economic objectives. cash management techniques, such as sweep accounts, reduced the need for business demand deposit balances for any given level of transac- RANGES FOR MONEY AND CREDIT FOR tions. And in the early 1980s, the widespread 1993 availability of negotiable order of withdrawal (NOW) accounts—transaction accounts that pay In establishing ranges for the monetary and interest—led households to treat their checking credit aggregates in the current year, the FOMC accounts to some degree as savings instruments took into account the likelihood that many of the and to shift funds in and out of such accounts factors that have acted in recent years to restrain mainly on the basis of interest rate relationships. money and credit growth relative to income Such developments primarily affected Ml. The would continue, although perhaps with some- FOMC made repeated adjustments to its Ml what diminishing intensity. The yield curve could range to take account of changing velocity and well remain steep, absent very marked progress soon after the mid-1980s had eliminated its target in deficit reduction or a distinct break in longfor this aggregate. Many of the shifts were cap- term inflation expectations, which would tend to tured within the broader aggregates, but adjust- lower long-term interest rates. Banking and thrift ments to their ranges also had to be made from institutions are unlikely to step up the pace of time to time. balance sheet expansion sharply, and the large In the past few years, the broader aggregates, volume of securities they have accumulated in in turn, have become much less reliable guides recent years will allow them to fund a pickup in for the conduct of policy. Eventually, these loan growth without as marked an acceleration of measures may resume a more stable relationship deposit growth. And households and firms are with the economy, or experience may suggest expected to continue to be relatively cautious in useful new definitions for the aggregates. We are using credit. Other factors may add to tendencies currently investigating several possible alterna- for money to expand more slowly than income. tive measures. But, in the meanwhile, the FOMC For example, a resumption of resolutions by the necessarily has given less weight to monetary Resolution Trust Corporation, which has been aggregates in the conduct of policy and has relied inactive for nearly a year, by shifting assets from on a broad range of indicators of future financial thrift institutions onto government balance and economic developments and price pressures. sheets, would tend to substitute federal liabilities And, in particular, the FOMC judged in 1992 that for those of thrift institutions, reducing monetary more determined efforts to push the aggregates growth. into their ranges would not have been consistent Reflecting the expectation that sluggish monewith achieving the nation's longer-term objective tary growth will be associated with sustainable Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 299 expansion in the economy, the Federal Open ranges provide ample room for adequate mone- Market Committee has elected to reduce the tary growth should demands for money relative ranges for M2 and M3 for 1993 by Vi of 1 to income come more into line with historical percentage point. For M2, a range of 2 percent to patterns. In any event, until the relationship 6 percent, measured as usual on a fourth-quarter- between the monetary aggregates and spending to-fourth-quarter basis, was established. A range returns to a more reliable basis, flexibility in the of Vi percent to AVi percent was specified for M3. interpretation of the aggregates relative to their As I have indicated in correspondence with new ranges is required. members of the Congress, the FOMC does not view the reductions in the monetary ranges as signaling a change in the stance of monetary ECONOMIC OUTLOOK FOR 1993 policy. And most emphatically, these reductions do not indicate a desire on the part of the Federal Several of the forces affecting relationships be- Reserve to thwart the expansion. The Federal tween money and income also complicate the Reserve, to the contrary, is endeavoring to con- task of assessing the economic outlook itself. For duct monetary policy in a way that promotes example, the prospects for an easing of supply sustainable economic expansion. The lowering of restrictions on credit from banks and other interthese ranges does not imply any change in our mediaries are difficult to assess, but any major fundamental objectives. The necessity for a re- change in this situation could have important duction in the monetary ranges at this time is implications for the economy. Although banking wholly technical in nature and is a result of the institutions have become much more healthy and forces that are altering the money-income rela- are well positioned to meet an increase in loan tionship. Consistent with this view, the FOMC demand, very few signals of any easing of terms decided to maintain a range of AVi percent to 8V2 or standards on business loans have been apparpercent for domestic nonfinancial sector debt, an ent to date. aggregate whose relationship with nominal GDP In addition, other factors that hobbled the has been less distorted in the past few years than economy in the past several years are likely to that of the monetary aggregates. persist in 1993, although perhaps with diminished Significant uncertainties regarding the appro- intensity. Households and business are likely to priate ranges for monetary growth remain. Al- remain cautious in using credit—a healthy develthough we have made some progress in under- opment for sustained growth but potentially constanding the behavior of the money and credit tinuing to constrain spending in the short run. aggregates over the past year, to a degree this Sizable imbalances in commercial real estate increased understanding has reinforced our ap- remain, and a significant rebound in this sector is preciation of the complexity—and limited pre- doubtless several years off. Government spenddictability—of the economic and financial rela- ing at the federal, state, and local levels is likely tionships that affect money growth and its to remain constrained. Several foreign nations linkages with the economy. are confronting slow economic growth or reces- These uncertainties imply that the relationship sion, which is likely to hold back demand for our between money and GDP growth could turn out exports. And it is apparent from recent ansignificantly different from what currently seems nouncements by several large firms that corpolikely. Accordingly, the Federal Reserve again rate restructuring, involving significant cutbacks will interpret the growth of money and credit in operations and employment, is continuing. relative to their ranges in the context of other Another very considerable uncertainty in the indicators of the financial system, the perfor- economic outlook is fiscal policy. The Congress mance of the economy, and prices. Should recent and the Administration are considering short-run trends affecting the money-income relationship fiscal stimulus and steps to reduce the deficit in continue, growth of the monetary aggregates in the long run. Obviously, government spending the lower portions of their ranges might be ex- and taxes could be affected by such measures in pected. On the other hand, the upper ends of the such a way as to influence directly the overall Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

300 Federal Reserve Bulletin • April 1993 economy this year, although the bulk of any made very substantial progress toward the effect likely would occur in succeeding years. In achievement of price stability, reversing a danaddition, depending on the timing, dimensions, gerous upward trend of inflation and inflationary and credibility of any fiscal measures, market expectations. Last year's VA percent increase in interest rates and stock prices could be affected the core CPI was the lowest in twenty years and appreciably, with implications for private expen- far lower than the debilitating double-digit rates ditures. at the close of the 1970s. As I have indicated to While uncertainties thus remain, the economy this committee on numerous occasions, price appears to have entered the year with noticeable stability does not require that measured inflation momentum to spending. In addition, inventories literally be zero but rather is achieved when are at relatively low levels, and factory orders inflation is low enough that changes in the genhave been rising. Consumer confidence has re- eral price level are insignificant for economic and covered, and spending on durables and homes financial planning. At current inflation rates, we appears to be moving at a brisker pace. Recent are thus quite close to attaining this goal. surveys suggest an appreciable increase in busi- Going forward, the strategy of monetary policy ness investment this year. will be to provide sufficient liquidity to support Against this background, members of the the economic expansion while containing infla- Board and the Federal Reserve Bank presidents tionary pressures. The existing slack implies that project a further gain in economic activity in the economy can grow more rapidly than poten- 1993. The central tendency of our projections is tial GDP for a time, permitting further reductions for real GDP to increase at a 3 to 3V4 percent rate in the unemployment rate even while inflation is this year. Such an increase should result in a contained. decline in the unemployment rate, which would Implementing this strategy, however, will be be expected to finish 1993 at a level of 63A to 7 challenging. Judging the level of potential output percent. Inflation is expected to remain low next and its rate of growth is difficult. Recent inyear. creases in productivity have been unusually Containing, and over time eliminating, infla- strong, given the moderate pace of economic tion is a key element in a strategy to foster growth during much of the expansion, and it is maximum sustainable long-run growth of the unclear whether these rates of productivity gain economy. As I have often emphasized, monetary can be continued. In addition, the monetary policy, by achieving and maintaining price stabil- aggregates do not appear to be giving reliable ity, can foster a stable economic and financial indications of economic developments and price environment that is conducive to private eco- pressures, and numerous other uncertainties nomic planning, savings, investment, and eco- cloud the particular features of the outlook. nomic growth. It is no accident that the periods Monetary policy will have to adjust to unexin our nation's history of low inflation were the pected developments as they occur, taking into times when the economy experienced high rates account a variety of economic and financial indiof private saving, investment, and hence produc- cators. tivity and economic growth. When inflation is The contributions that monetary policy can low, endeavors to boost profit margins necessar- make to maximum sustainable economic growth ily involve reductions in cost rather than increas- would be complemented by a fiscal policy foing prices; thus, low rates of inflation tend to be cused on long-term deficit reduction. In the curassociated with relatively high productivity rent environment, reducing the federal governgrowth. Conversely, periods of high and rising ment's drain on scarce savings would take inflation here and abroad have been character- pressure off long-term interest rates, facilitating ized by financial instability, an excessive amount the readjustment of balance sheets and helping to of resources devoted to protecting financial promote capital formation and more robust ecowealth rather than production of goods and ser- nomic growth over the longer term. vices, and substandard economic growth. The Federal Reserve, in formulating monetary Over the past decade or so, our nation has policy, certainly needs to take into account fiscal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 301 policy developments. Of course, it is not possible It is obviously very difficult to get a consensus for the Federal Reserve to specify in advance on deficit cutting. If it were easy, it would have what actions might be taken in the presence of been done long ago. The debate among the particular fiscal policy strategies. Clearly, the nation's elected representatives will be procourse of interest rates and financial market foundly political, in the best sense of the word. conditions more generally will depend impor- As the nation's central bankers, our primary and tantly on a host of forces—in addition to fiscal professional concern is soon having the strucpolicy—affecting the economy and prices. And tural deficit sharply reduced. the effects of fiscal policy on the economy, in Time is no longer on our side. After declining turn, will depend importantly on the credibility of through 1996, the current services deficit starts long-run deficit reduction and the market reac- on an inexorable upward path again. The deficit tion to any package. The lower long-term interest and the mounting federal debt as a percentage of rates that resulted from a credible deficit-reduc- gross domestic product are corrosive forces tion plan would themselves have an immediate slowly undermining the vitality of our free marpositive effect on the economy. In any event, I ket system. can assure you of our shared goal for the Amer- If we fail to resolve our structural deficit at this ican economy—the greatest possible increase in time, the next opportunity will doubtless conliving standards for our citizens over time. front us with still more difficult choices. How the The past several years have been difficult, and deficit is reduced is very important; that it be the economy is still adjusting to structural imbal- done, is crucial. ances that have built up over recent decades. The In this regard, certain issues that I have disnear-term outlook, as always, is somewhat un- cussed with this committee and others of the certain. But I believe that in many respects the Congress throughout the years are worth repeatinevitable painful adjustments have laid the foun- ing. dation for better performance of our economy First, with current services outlays from 1997 over the longer term. Financial positions have and beyond rising faster than the tax base, stabibeen strengthened; inflation is low and should lizing the deficit as a percentage of nominal gross remain subdued; labor productivity is increasing; domestic product, not to mention a reduction, resources are being shifted from national defense would require ever-increasing tax rates. Hence, to investment and consumption. Nevertheless, there is no alternative to achieving much slower the challenges ahead for policymakers will be growth of outlays. This implies not only the need considerable. While continuing to be supportive to make cuts now but also to control future of the expansion of our economy over coming spending impulses. I trust that the President's quarters, the monetary and fiscal authorities endeavor to reign in medical costs will contribute alike need to structure our policies to enable our importantly to this goal. economy to reach its full potential over time. Second, the hope that we can possibly inflate or grow our way out of the structural deficit is fanciful. Certainly greater inflation is not the SUPPLEMENTAL STATEMENT answer; aside from its serious debilitating effects on our economic system, higher inflation, given The President is to be commended for placing on the explicit and implicit indexing of receipts and the table for active debate the issue of our expenditures, would not reduce the deficit. As I burgeoning structural budget deficit, which will indicated in testimony last month to the Joint increasingly threaten the stability of our eco- Economic Committee, productivity growth may nomic system if we continue to fail to address it. be moving into a faster long-term channel and Leaving aside the specific details, it is a serious may be boosting real growth over time. But even proposal; its baseline economic assumptions are if that turns out to be the case, it would not by plausible; and it is a detailed program-by-pro- itself resolve the basic long-term imbalance in gram set of recommendations as distinct from our budgetary accounts. general goals. Finally, I find misplaced the fear that the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

302 Federal Reserve Bulletin • April 1993 deficit reduction can be overdone and create a not possible for the Federal Reserve to specify in degree of "fiscal drag" that would significantly advance what actions might be taken in the harm the economy. In our current political envi- presence of particular fiscal policy strategies. ronment, to presume that the Congress and the Clearly, the course of interest rates and financial President would jointly cut too much from the market conditions more generally will depend deficit too soon is in the words of my predecessor importantly on a host of forces—in addition to "nothing I would lose sleep over." fiscal policy—affecting the economy and prices. The Federal Reserve recognizes that it has an In any event, I can assure you of our shared goal important role to play in this regard. In formu- for the American economy—the greatest possilating monetary policy, we certainly need to take ble increase in living standards for our citizens into account fiscal policy developments. But it is over time. • Chairman Greenspan presented identical testimony before the Subcommittee on Economic Growth and Credit Formation of the House Committee on Banking, Finance and Urban Affairs, February 23, 1993. Statement by Alan Greenspan, Chairman, Board ing inflation and making further progress toward of Governors of the Federal Reserve System, price stability. This policy approach should help before the Committee on the Budget, U.S. promote sustainable long-term growth of our House of Representatives, February 24, 1993 economy. Fiscal policy similarly can contribute to sustainable and robust economic growth. The Pres- I very much appreciate the opportunity to meet ident's budget proposals have prompted anticiwith you today, especially in view of the crucial pation in the markets that there will be genuine budgetary issues now before the Congress. As progress in the reduction of federal budget defiyou know, in the last few days I have given cits. This anticipation has been the most impordetailed testimony on the conduct of monetary tant factor behind the very significant recent policy in 1992 and our plans for 1993. Accorddeclines in intermediate- and long-term interest ingly, I shall be rather general today in discussing rates. These lower rates are a striking reminder monetary policy, focusing instead on the ecothat reducing federal deficits will free up private nomic outlook and the relationship between fissavings, reduce the cost of credit to private cal policy and monetary policy. borrowers, and encourage accumulation of capi- Our economy recently has made considerable tal that will help enhance growth in the future. progress in overcoming structural imbalances To provide some background for discussion of and improving the prospects for sustainable longfuture monetary and fiscal policies, I would first run growth. The Federal Reserve has contributed like to review recent economic developments to this progress by easing the stance of monetary and the conduct of monetary policy. I will then policy in a measured fashion and thus helping to turn to the economic outlook and our monetary encourage appreciable declines in long-term inpolicy plans for 1993 and conclude with some terest rates. As I will be discussing, considerable comments on fiscal policy and its relationship imbalances in the economy remain, and the unwith monetary policy. certainties are sizable. But, on balance, the prospects are reasonably good for continued economic growth and declines in unemployment in RECENT ECONOMIC DEVELOPMENTS 1993. We at the Federal Reserve intend to continue to conduct policy in such a way as to Our economy has experienced considerable imsupport the economic expansion while contain- pediments to growth in the past few years. In my Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 303 view, adjustments to certain imbalances and gross domestic product (GDP) expanded at only structural changes in the economy have been a 1.6 percent average annual rate during the first important causes of the sluggish performance of five quarters of the recovery. As real GDP the economy until recently. growth was below the expansion of the econo- As I have often noted, balance sheet adjust- my's potential to produce, unemployment conments have been a key element. By the late tinued to rise substantially. 1980s, balance sheets had been weakened con- More recently, however, the expansion has siderably by the large runup in debt over the shown somewhat more vigor. Real GDP rose at a previous seven years or so. But, in addition, 3V2 percent rate in the third quarter and is actual declines in asset prices—particularly in currently estimated to have increased at a 33A commercial real estate prices but, in many lo- percent rate in the fourth quarter. And data that cales, in housing prices as well—unambiguously have become available since this estimate was signaled a serious imbalance between demands prepared suggest that the fourth-quarter growth and supplies for certain structures. These de- could well be revised up substantially. Halfway clines, in turn, represented a significant reduc- through the first quarter, we appear to be growtion in the wealth of many firms and households. ing at a somewhat slower pace than in the second These entities, and many others who experi- half of last year. enced difficulties servicing debt, typically re- The stronger pace of economic growth has sponded by restraining expenditures on real aided the employment picture somewhat. Algoods and services, reducing the forward mo- though payroll employment fluctuated over 1992, mentum of the economy. on balance it rose during the year for the first The difficulties of borrowers and declines in time since 1989. Nevertheless, unemployment real estate values spilled over onto the financial remained a serious problem. The number of institutions that financed such purchases. With unemployed persons rose considerably in the loan losses mounting and under pressure from first half of 1992, despite a moderate gain in GDP, the markets and regulators to improve their cap- and the unemployment rate climbed to 73/4 perital ratios, those institutions tightened terms and cent by midyear. Over the second half of the standards on many types of loans. The reduced year, the number of unemployed persons deavailability of credit limited the ability of certain clined appreciably, and the unemployment rate smaller and medium-sized firms to expand and moved down to 7.3 percent. In January, the rate contributed to the weakening of the economy. edged down further to 7.1 percent. After the invasion of Kuwait and the associ- The modest gains in employment and the conated jump in oil prices and drop in confidence, a tinuing high unemployment rate reflect, in part, recession began. From peak to trough, real gross determined efforts by firms to limit costs and domestic product declined 214 percent. Total boost productivity in an environment of intense employment declined considerably, industrial domestic and foreign competition. Many firms production fell, and capacity utilization dropped. have taken measures to boost profitability by Although an economic recovery began in shrinking their work forces, closing down unspring 1991, it was rather anemic. Some of the profitable units, and employing recent advances factors that had earlier weakened the economy in computing and communications technology continued to weigh on aggregate demand, partic- more effectively. As a result, labor productivity ularly efforts by businesses and households to has shown remarkable gains recently. For exambring down debt burdens, the reduced availabil- ple, output per hour in the nonfarm business ity of business credit, and the hangover in the sector surged 3 percent in 1992, the strongest commercial real estate sector. In addition, state gain since 1975. and local governments, faced with a recession- The substantial slack in labor markets and induced decline in revenues, retrenched. And improvements in productivity growth have conreal federal defense purchases, after having tributed to downward pressure on the inflation peaked in 1987, have moved down considerably, rate. The consumer price index rose just 3 perdepressing demand further. As a result, real cent in 1992, and excluding volatile food and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

304 Federal Reserve Bulletin • April 1993 energy prices, the increase was the lowest in tions stepped up their issuance of equity shares twenty years. Inflation expectations, while lag- and bonds last year. These issues frequently ging somewhat actual inflation developments, were used to pay down bank debt as well as have moved down gradually. bonds carrying relatively high interest rates, and thus they helped lengthen liability structures while reducing the interest cost of debt. In the RECENT MONETARY POLICY nonfinancial business sector, net interest payments as a percentage of cash flow are estimated In the circumstances of hesitant economic to have reversed roughly two-thirds of the runup growth and downward pressures on inflation, that occurred during the previous economic exmonetary policy in 1992 was directed at fostering pansion. a more vigorous, but sustainable, rebound, con- Financial institutions also strengthened their sistent with progress toward price stability. The financial positions. Commercial banks, for in- Federal Reserve, extending a series of policy stance, considerably bolstered their risk-based moves that began in mid-1989, eased policy sev- and total capital ratios. In addition, their liquidity eral times in 1992. We reduced the federal funds increased substantially as a result of their purrate a total of 1 percentage point by providing chases of a large volume of Treasury and mortadditional bank reserves and by reducing the gage-backed securities. With their financial posidiscount rate. In addition, we again lowered tion more secure and the economy firming, banks reserve requirements for depository institutions. no longer tightened business lending terms and These actions helped intermediate- and long- standards in 1992; however, very little, if any, term interest rates move lower. During 1992, the easing of lending conditions occurred either, and yield on long-term Treasury bonds averaged credit remained somewhat difficult for smaller nearly Vi percentage point lower than in the firms to obtain. previous year. In the past few weeks, these The less accommodative stance of banks as reductions have been extended, bringing the rate well as the reluctance of firms and households to on long-term Treasuries below 7 percent—the take on debt and the focus of borrowing on lowest since the early 1970s. long-term markets have resulted in a rechannel- The declines in intermediate- and long-term ing of credit flows outside depository instituinterest rates have helped foster significant bal- tions. This rechanneling, in turn, has markedly ance sheet restructuring by households and by affected the behavior of the monetary aggregates business firms. Low mortgage rates have encour- in relation to income. Both M2 and M3 expanded aged many households to refinance existing very sluggishly in 1992, leaving both aggregates mortgage debt, and some have used the oppor- Vi percentage point below the ranges set by the tunity to tap into home equity to pay off con- Federal Open Market Committee. Domestic nonsumer credit. Lower interest rates on mortgage financial sector debt, by contrast, expanded apas well as consumer credit, combined with more preciably more quickly, AYi percent, leaving this moderate growth of household debt, have re- aggregate at the bottom of its range. sulted in a considerable reduction in household The relatively slow growth of the broad mondebt service payments since their 1990-91 peak. etary aggregates in 1992 was associated with The lower levels of long-term interest rates also much brisker growth of nominal income; that is, have helped buoy housing prices as well as stock velocity increased considerably. Several factors prices. These factors may well have contributed appeared to contribute to the strength in income to the substantial acceleration in personal con- relative to money growth. The steep yield curve sumption expenditures over the second half of encouraged households to shift funds from de- 1992. posits into longer-term instruments, especially In the business sector, balance sheet restruc- bond and stock mutual funds. In addition, interturing activity has been encouraged by the high est rate incentives encouraged some households level of stock prices as well as by relatively low to use deposit balances to pay off or avoid taking long-term interest rates. Nonfinancial corpora- on additional debt. Much of business and house- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 305 hold borrowing was funded in the open markets, tainties regarding credit availability and attitudes either through direct issuance of securities, in the of borrowers toward credit. The effects of these case of businesses, or through issuance by banks factors in limiting economic growth may be and thrift institutions of securities backed by slowly ebbing. As I noted earlier, households, mortgage and consumer debt. Depository insti- firms, and financial institutions have made contutions generally sought to restrain growth in siderable progress in cleaning up their balance their balance sheets as a result of market and sheets, which should help to reduce impediments regulatory factors. Although some small busi- to the flow of credit. Still, borrowers and lenders nesses continued to experience unusual difficul- alike in the past few years have become a good ties in obtaining credit, most other sectors re- deal more cautious about the use of credit; this mained able to tap credit; thus the restraint on development, while restraining aggregate decredit by banking institutions had only a modest mand in the short run, is likely to contribute to negative impact on the overall economy. The net the sustainability of the expansion over the impact of these developments is that the econ- longer term. omy was able to grow at a fairly good pace, A rebound in commercial real estate construcparticularly in the second half of the year, despite tion is still several years off. However, there are very slow money growth. some signs that prices of commercial real estate are bottoming in certain areas. If this proves to be the case, it could bode well for borrowing on ECONOMIC OUTLOOK AND MONETARY the basis of real estate collateral. Loan officers POLICY PLANS FOR 1993 are likely to remain chary about extending such loans as long as declining prices and illiquid real Many of the factors that contributed to the estate markets make it difficult to assess the unusual strength of velocity in 1992 appear likely future value of collateral. But as uncertainties to continue this year. Accordingly, the Federal about loan losses and capital positions ebb, Open Market Committee has decided to lower banks are likely to become gradually more willthe target ranges for monetary aggregates one- ing to extend credit generally. half percentage point. The new range for M2 is 2 The Federal Reserve is working closely with percent to 6 percent, and that for M3 is Vz percent other banking regulators to ensure that undue to 4V2 percent. The lower ranges do not indicate impediments to credit flows are removed. In a change in the Federal Reserve's monetary addition, we continue to monitor indicators of policy. Rather, they are a result of technical the availability of credit and take them into factors that are altering the money-income rela- account in formulating monetary policy. They tionship. This view is reflected in the FOMC's have been an important factor behind our meadecision to leave the range for domestic nonfi- sures to reduce short-term interest rates in the nancial sector debt unchanged at 4V2 percent to past few years, and our reductions in reserve 8V2 percent. requirements were intended to reduce depository Although we have made some progress in institutions' costs and foster a better flow of understanding the factors that recently have af- credit. fected money growth, considerable uncertainties The improvements in household balance regarding the money-income relationship re- sheets probably supported the gains in consumpmain. The upper ends of the monetary ranges tion spending in the second half of 1992. Declines provide substantial room for more rapid money in the unemployment rate, by fostering a sense of growth should velocity tend to return to previous a stabilizing jobs situation, may also have played patterns, while growth in the lower parts of the a role. Going forward, the employment picture ranges could be appropriate should velocity con- will probably continue to be an important factor tinue to strengthen. governing the pace of consumption spending. It Some of the same uncertainties that affect the is possible that the recent strong gains in producmoney-income relationship also affect the out- tivity will be extended and may damp employlook for income growth itself, including uncer- ment growth temporarily. But productivity Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

306 Federal Reserve Bulletin • April 1993 growth will boost real wages over time and case for bringing down the structural budget contribute to rising living standards of our citi- deficit is compelling. The deficit has for some zens. time been eroding the foundations of our eco- Certain other factors will probably continue to nomic strength. Pressures on credit markets rerestrain growth of the economy in 1993. These sulting from large federal deficits have led to high factors include the budgetary problems of state real interest rates, which, in turn, have curtailed and local governments, the downsizing of the investment in productive plant and equipment defense sector, and slow growth or recession in that would have boosted growth in real wages the economies of some of our major trading and output. The federal budget deficits are of partners. Those regions of the United States that particular concern because they have occurred in have particular concentrations of defense-related the context of very low private saving and have employment may continue to experience soft contributed to large current account deficits. conditions during 1993. Substantial reductions in structural budget def- Impediments to growth thus remain, but they icits, conversely, would confer appreciable benhave diminished significantly. Against this back- efits on the economy. The absorption of private ground, the central tendency of the governors' savings by the government would be reduced. and Federal Reserve Bank presidents' forecasts Concerns about the government's future claim is for real GDP to expand 3 percent to 3!/4 percent on real resources would be lowered, and inflation in 1993. This growth would be expected to be expectations might well decline. As a result, associated with some decline in the unemploy- nominal and real intermediate- and long-term ment rate. Inflation is expected to remain well interest rates would be substantially lower than contained. otherwise. The lower level of real interest rates Looking ahead, the strategy of monetary pol- would encourage capital formation in the private icy will be to provide sufficient liquidity to sup- sector—particularly investment in longer-lived port the economic expansion while containing capital—and would boost productivity growth inflationary pressures. The existing slack implies and real incomes. that the economy can grow for a time more The President is to be commended for placing rapidly than potential GDP, permitting further on the table a serious proposal for the reduction reductions in the unemployment rate even while of structural budgetary deficits. Discussion about further progress toward price stability is made. this proposal, and alternatives to it, has already As I have often emphasized, monetary policy, by begun in the Congress and in public forums achieving and maintaining price stability, can across the United States. The debate will be foster a stable economic and financial environ- intensely political in the best sense of the word, ment that is conducive to private economic plan- and identifying what is in the long-term interest ning, savings, investment, productivity, and eco- of the country will not be easy. But reducing the nomic growth. In light of the uncertainties in the structural deficit is crucial. And action must be economic outlook and in the relationship be- taken now. Postponing action would only extend tween the monetary aggregates and the econ- the pattern of sluggish growth of the capital stock omy, the Federal Reserve will need to continue and, with incomes and living standards lagging, to carefully monitor a variety of economic and would ultimately make it even more difficult to financial indicators in conducting monetary pol- engage in the programmatic actions that are icy this year and to make adjustments in our necessary. stance as necessary. I have recently articulated certain key points that I believe are useful to keep in mind in evaluating alternative fiscal approaches. Let me THE ROLE OF FISCAL POLICY repeat them. First, current services outlays under present Fiscal policy, also, can make an important con- law rise faster than the tax base and would thus tribution toward enhancing the ability of our require ever-increasing tax rates, simply to keep economy to produce rising living standards. The the budget deficit as a percentage of nominal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 307 income from beginning to rise again after the mid program oriented toward fiscal consolidation is 1990s. Such tax rate increases could stifle incen- unlikely to have significant restraining effects on tives and dampen economic growth and, inciden- the economy in the near term. Indeed, the Prestally, tax revenues. Hence, there is no alternative ident's proposal would likely involve a modest to achieving much slower growth of health-re- degree of fiscal stimulus over the first year. lated and other outlays. At this pivotal moment, I should emphasize Second, we can no longer afford to hope to that the Federal Reserve shares with the Coninflate or grow our way out of structural budget gress and the Administration the goal of maxideficits. Given the explicit and implicit indexing mum sustainable economic growth. I assure you of receipts and expenditures, higher inflation that the Federal Reserve will do its part to would not reduce the deficit, and even under support your efforts. We at the Federal Reserve optimistic assumptions regarding productivity intend to continue to foster the economic expangrowth, budget deficits would remain massive. sion in the near term while using the tools at our Finally, I find misplaced the fear that deficit disposal to promote a financial environment conreduction would be overdone and create an un- ducive to sustainable long-term growth. Fiscal desirable degree of "fiscal drag." It seems to me policymakers, in turn, by taking difficult but highly unlikely that in the current political envi- necessary measures to reduce the structural defronment the Congress and the Administration icit now, can enhance the growth of the economy would cut too much too soon from the deficit. and promote rising living standards for the Amer- Moreover, given the lags in the impact of ican people for years to come. • changes in fiscal programs on the economy, a Statement by John P. LaWare, Chairman, Fed- the Board is committed to vigorously enforcing eral Financial Institutions Examination Council, fair lending laws. and Member, Board of Governors of the Federal As chairman of the Federal Financial Institu- Reserve System, before the Committee on Bank- tions Examination Council (FFIEC), I was asked ing, Housing, and Urban Affairs, U.S. Senate, to focus my testimony on current efforts to February 24, 1993 enforce fair lending laws and the steps being taken by member agencies to strengthen them. I am pleased to do so. However, as my recent I appreciate the opportunity to speak today to letter to Chairman Riegle indicated, I will be this committee about concerns related to credit unable to answer detailed questions about the discrimination in mortgage lending. fair lending enforcement programs of the other This hearing is very timely given the troubling federal banking agencies. Each of the other questions that have been raised about the fair- FFIEC agencies (the Office of the Controller of ness of the mortgage lending process. Parity in the Currency (OCC), the Office of Thrift Superhow applications are considered, without regard vision (OTS), the National Credit Union Adminto race, sex, or other prohibited bases, is abso- istration (NCUA), and the Federal Deposit Inlutely essential in the United States. Let no one surance Corporation (FDIC)) is represented here have any misunderstanding on the point. Racial today, and they will respond to any questions discrimination, no matter how subtle and you may have about their specific programs. whether intended or not, cannot be tolerated. Before I move on to a discussion of the efforts Simply stated, excluding any segment of our of the FFIEC, let me give you a sense of some of society from fundamental economic opportuni- the actions the Board has undertaken. First, in ties, such as home ownership and equal access to consultation with the other FFIEC agencies, we credit, is morally repugnant and illegal. More- have implemented a system that increases our over, it robs the lending industry and our econ- ability to analyze the Home Mortgage Disclosure omy of growth potential. I can assure you that Act (HMDA) data for use in our fair lending and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

308 Federal Reserve Bulletin • April 1993 Community Reinvestment Act (CRA) enforce- share with you some of its findings. During 1992, ment efforts. Second, we are working with the the Boston Reserve Bank undertook a detailed Department of Justice to target certain state study of mortgage lending in the Boston metromember banks for fair lending examinations politan area, in cooperation with the other fedwhere HMD A data suggest disparate treatment eral financial supervisory agencies and HUD. of minority mortgage loan applicants. Third, we The study was initiated in response to the large have referred several consumer complaints alleg- differences in rates of home loan denials among ing violations of the Fair Housing Act to the white, black, and Hispanic applicants in Boston Department of Housing and Urban Development as revealed by the 1990 HMD A data: a ratio of (HUD) and recently referred a matter to the nearly three rejections for black and Hispanic Department of Justice. Fourth, we have taken applicants to one for white applicants. The study formal enforcement actions, including assess- sought to analyze whether disparities in denial ment of civil money penalties, to enforce com- rates for mortgage loans among surveyed lenders pliance with consumer protection laws, including reflected the equal application of legitimate credit the prohibitions against credit discrimination standards or whether race was a factor in the based on marital status, age, and race found in decisions. the fair lending laws. Fifth, the Board has denied Because income is the only financial attribute three applications in the past two years from of loan applicants collected under HMDA, the financial institutions, primarily because of poor Reserve Bank augmented the HMDA data with CRA performance. In each case, significant evi- thirty-eight additional items of information perdence in the record indicated that these banks taining to financial characteristics, employment were not adequately serving the credit needs of experience, and credit history—data that the their communities. These actions demonstrate, I lenders participating in the study voluntarily probelieve, the strong commitment the Federal Re- vided from their files. The study revealed subserve has made to enforce fair lending laws. stantial differences in the financial and other economic circumstances of typical white applicants and those of minority applicants. Statistical RECENT DEVELOPMENTS analysis also revealed, however, that even after having controlled for significant economic fac- Some recent developments have changed the tors, unexplained differences remained in loan nature of the discussion regarding the issue of approval rates for black, Hispanic, and white credit discrimination. The debate has moved applicants. Specifically, the study revealed that from a discussion about whether unequal treat- minority applicants who had the same credit ment is occurring to how to strengthen enforce- characteristics as white applicants would experiment of fair lending laws. One of these develop- ence a 17 percent denial rate, compared with an ments was a study that the Boston Reserve Bank 11 percent denial rate for white applicants. completed. Another event was a settlement be- Significantly, racial background generally was tween the Department of Justice and an Atlanta not found to be a factor in the case of clearly savings and loan association that resulted from a qualified or clearly unqualified applicants, whatfair lending investigation by the department. In ever their race. Disparities were evident, howeach of these cases, evidence was found of ever, among applicants with some imperfections, disparate treatment in mortgage lending between such as a relatively high debt-to-income ratio or minorities and whites. This finding has increased weaknesses in credit history. For such appliour understanding of this complex issue and will cants, national origin or ethnic background approvide a basis from which the Federal Reserve peared to be a consideration. The authors of the and other agencies can better focus our efforts to study suggest that differences in treatment may strengthen the enforcement of fair lending laws. reflect differences in the level of assistance that applicants received from loan officers to address Boston Study. As I mentioned, the Boston those deficiencies, although no specific evidence study furthered our understanding of issues refrom the Boston study is available on this point. lated to credit discrimination, and I would like to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 309 The degree to which the findings reflect outright dence of disparate treatment was present. These discrimination by individual loan officers and investigations include review of loan files and financial institutions in the market is unclear. The other relevant documents to discover whether reason for this lack of clarity is that this study any individual applicants were treated less favorwas made of the lenders in the Boston market in ably because of race. As I previously indicated, general and did not include a review of individual the Board did refer the name of one institution to lenders to assess whether any specific individuals the Department of Justice where the data from were treated differently because of their race. the Boston study raised concerns about that The findings do confirm, however, that greater mortgage company's compliance with fair lendattention is needed to ensure the fairness of the ing laws. mortgage granting process. HMDA Analysis. Like the HMDA data for 1990, the data for 1991 indicate that greater proportions of black and Hispanic loan appli- EFFORTS BY THE FFIEC TO STRENGTHEN cants are turned down for credit than are Asian FAIR LENDING ENFORCEMENT or white applicants. Income levels account for some of the variation in loan disposition rates While the FFIEC agencies have separate pro- among racial groups. However, even after having grams through which they enforce fair lending controlled for income, white applicants for conlaws, I know that all of us take our enforcement ventional home loans in all income groupings had responsibility very seriously. We have been lower rates of denial than did black and Hispanic working hard to ensure that our efforts are re- applicants. Of course, many factors other than sponsive to the concerns expressed by the Con- income are relevant to a credit decision. And it gress and others. In this regard, the FFIEC has would be erroneous to conclude that the HMDA undertaken several initiatives to strengthen its disparities themselves necessarily all reflect dismember agencies' enforcement of fair lending criminatory practices. Nevertheless, some of laws. these disparities may be caused by the unequal Boston Study Follow-Up. After the release of application of lending criteria, and the data as a the results of the Boston study in October, the whole are obviously troubling. member agencies of the FFIEC issued a joint Analyzing the disturbing disparities revealed statement that addressed the issue of disparate by the HMDA data for use in our fair lending and treatment. In the statement, we attempted to CRA enforcement efforts has become a high shift the focus from a debate about whether priority for the FFIEC. In this regard, I am unequal treatment is occurring to initiatives that pleased to report that the FFIEC has made will ensure that it does not. The interagency significant progress in the manner in which the statement reiterated the agencies' concerns HMDA data are utilized and the ways in which about fair treatment of applicants for mortgage the data are analyzed. Before 1989, the HMDA loans. It pointed to increased empirical data that data revealed information only about the geosuggested that differences in denial rates may be graphic distribution of residential lending by covunsupported by economic factors. The agencies ered institutions. Statutory amendments to the also encouraged financial institutions to intensify HMDA, enacted in 1989, expanded disclosures their fair lending education programs for manage- to include the disposition of applications— apment, lending personnel, and consumers. We proved, denied, withdrawn, or files closed for encouraged efforts to identify and promote ex- incompleteness—and the race or national origiamples of successful techniques used by institu- nal, income, and sex of all applicants, whether tions to ensure equal treatment of loan appli- approved or denied. The amendments also excants, such as self-testing and second reviews of panded coverage to independent mortgage comminority applications. panies, that is, those that are not subsidiaries of depository institutions or holding companies. In addition, each of the agencies has under way investigations of those financial institutions The HMDA data enable the agencies to select that took part in the Boston study where evi- specific loan files to review during on-site exam- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

310 Federal Reserve Bulletin • April 1993 inations and also to target specific lenders for nancial organizations with mortgage lending recmore extensive fair lending and CRA investiga- ords that raise concerns. Staff members of the tions. Several supervisory agencies, as well as Justice Department may, in some instances, parthe Department of Justice, are using the new ticipate in these reviews by going into the finan- HMDA data to identify institutions to review, cial institution with our examiners. based on either the large disparities in denial The FFIEC has also been working to increase rates among different racial groups or the low coordination with the HUD. This work reflects number of applications from minority households the expanded enforcement authority assigned to compared with the racial composition in the the HUD by amendments to the Fair Housing community. Act in 1990. One example is a memorandum of Over the past two years, the Federal Reserve, understanding among the agencies calling for in consultation with the FFIEC agencies, has formal referral of complaints alleging fair housing developed and implemented a computer-based violations to each other and coordination of HMDA data analysis system. The system, which investigations, when that is feasible. uses both the HMDA data and demographic In December 1992, the FFIEC contracted with information, is extremely versatile and allows the an outside consultant for a review of the agennew data to be examined and analyzed in a cies' examination procedures to enforce civil variety of ways. It provides a series of set reports rights laws. The contractor will also review the (in addition to the standard HMDA tables) as existing training processes and recommend imwell as the capability of querying the database for provements. We believe that this third-party more tailored information about an institution's review will ultimately help strengthen the enlending activity. The FFIEC is also working to forcement of fair lending laws by providing a develop a set of standard paper-based reports for fresh look at the current examination procedures examiners to use without electronically access- and training. ing the database. In March 1992, the agencies distributed to the The FFIEC has also worked to ensure that the institutions they supervise a brochure, prepared HMDA data are as accurate as possible. In this by the FFIEC agencies, entitled Home Mortgage regard, the FFIEC issued a revised version of A Lending and Equal Treatment. The brochure Guide to HMDA Reporting, Getting it Right to identifies and cautions lenders about lending help institutions compile and report their data. standards and practices that may produce unin- The guide discusses the law's requirements, cov- tended discriminatory effects. It focuses on race erage, and management responsibilities; it also and includes examples of subtle forms of discrimsets forth detailed directions for gathering data, ination, such as unduly conservative appraisal plus step-by-step instructions for completing the practices in minority areas; property standards reporting form. We have also provided, free of such as size and age that may exclude homes in charge, computer software that may be used for minority and low-income areas; and unrealistireporting HMDA data, which will help screen cally high minimum-loan amounts. The Federal out inaccuracies before the data are submitted. Reserve published a companion brochure in In addition, the FFIEC has developed a process 1991, entitled Home Mortgages: Understanding that assists reporting institutions in identifying the Process and Your Right to Fair Lending, to and correcting errors. inform consumers about the mortgage applica- The FFIEC agencies continue to pursue dis- tion process and about their rights under fair cussions with the Department of Justice, the lending and consumer protection laws. HUD, and the Federal Trade Commission to The FFIEC is also offering specialized training strengthen enforcement of civil rights laws. In for examiners from the member agencies responparticular, the banking agencies are also explor- sible for enforcement of fair lending laws. In fact, ing ways to work with the Department of Justice one of these training sessions will be held next in detecting possible patterns of discrimination week. The issue of credit discrimination and use against minority applicants. One example of co- of the HMDA data will be a focus during this ordination involves targeted examinations of fi- session. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 311 The Federal Reserve is committed to working and Fair Housing Acts. From the beginning, the within the FFIEC to develop ways to enhance examiners were instructed to place special emenforcement effectiveness under the fair lending phasis on violations involving potential discrimlaws. Although substantial progress has been ination of the kind prohibited by those statutes. made, the FFIEC recognizes that its job in this Over the years, the Board has reassessed its area is certainly not finished. enforcement responsibilities and made several changes to its consumer affairs program. This included increased training for examiners in de- FEDERAL RESERVE EFFORTS tecting discriminatory lending practices. Changes were also made in the System's pro- At the beginning of my testimony, I described cessing of consumer complaints to place inparticular efforts that the Board has taken to creased emphasis on investigating serious comenforce the fair lending laws. Those actions— plaints such as allegations of loan discrimination. denial of applications, formal enforcement ac- We have made it clear that failure to comply with tions, civil money penalties, referrals to the certain provisions of the fair lending laws was HUD and the Department of Justice, and coor- viewed by the Board as particularly serious and dination among the agencies to make the best use would require retroactive corrective action. of the HMDA data—have each been possible The Federal Reserve System's consumer combecause the Board has had a solid program in pliance examinations are scheduled at regular place Systemwide for many years to address our intervals, are comprehensive, and are conducted fair lending responsibilities. I would next like to by specialized examiners. Each state member describe these efforts for you in some detail. bank is examined on a regular basis. An average The Board supervises approximately 1,000 of two-thirds of state member banks are examstate member banks for compliance with fair ined each year. Examinations are scheduled evlending laws. This supervision has involved con- ery eighteen months for a bank with a satisfacsumer compliance examinations, consumer com- tory record. A limited number of banks with plaint investigations, and community affairs ef- exceptional records can be examined every two forts. Examiners at the Reserve Banks who are years. Those banks with less-than-satisfactory specially trained in consumer affairs and civil records are to be examined every six months or rights examination techniques conduct the con- every year, depending on the severity of their sumer compliance examinations. The Board and problems. each of the Reserve Banks also have staff mem- The examination procedures focus primarily bers who deal with consumer complaints. In on comparing the treatment of members of a addition, the System has a substantial Commu- protected class with other loan applicants. First, nity Affairs program, many of whose activities the bank's loan policies and procedures are rehelp to advance fair lending. The Board provides viewed. Bank documents are reviewed, and loan general guidance and oversight to Reserve Banks personnel are interviewed. During this phase, the in these areas. examiner will seek to determine, among other things, the bank's credit standards. After the standards have been identified, the examiner will COMPLIANCE EXAMINATIONS determine whether those standards were, in fact, applied uniformly, using a sample of actual loan The Board first established a specialized con- applicants. Special note will be taken of applicasumer compliance examination program in 1977. tions received from minorities, women, and oth- Through it, the twelve Reserve Banks conduct ers whom the laws were designed to protect. The examinations of state member banks to deter- examiner is looking at the same information that mine compliance with consumer protection leg- the bank used to make its credit decision, includislation by using a cadre of specially trained ing credit history, income, and total debt burden. examiners. The scope of these examinations spe- If those standards appear not to have been used, cifically includes the Equal Credit Opportunity or not to have been used consistently, the matter Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

312 Federal Reserve Bulletin • April 1993 would be discussed with lending personnel dis- mance under the Community Reinvestment Act cuss the matter, and a more intensive investiga- takes, on average, an additional thirty-nine tion would typically be made. Finally, an overall hours to complete. analysis of the bank's treatment of applications Although much of the Board's recent effort to from minorities, women, and others who have improve its fair lending examination procedures the characteristics described in the laws is con- has been in concert with the FFIEC, we have ducted to determine whether there are any pat- under way several individual initiatives that we terns or individual instances in which such appli- believe will strengthen our own consumer comcants were treated less favorably than other loan pliance examination program. They represent a applicants. continuation of our ongoing efforts to improve Another regular part of the examination in- our examination techniques and are indicative of cludes conversations with persons in the commu- our commitment in this area. nity who are knowledgeable about local credit The Board has authorized its Division of Conneeds. The examiners will routinely ask about sumer and Community Affairs to hire a person public perceptions of the availability of credit to whose primary job responsibility will be to work minorities and low- and moderate-income per- in the area of fair lending enforcement. This sons. This information may suggest that a partic- person will help coordinate our efforts in this ular area of the bank needs additional scrutiny area and assist our examiners in analyzing the and may provide insights into how the bank is complex issues associated with detection of serving the credit needs of its local community, credit discrimination. particularly those protected by the antidiscrimi- The Federal Reserve is also developing the nation statutes. capability to map the geographic location of a The Board believes that expecting a bank bank's lending products, including mortgage examiner to master both the "safety and sound- loans, with computer programs. This mapping ness" and consumer affairs-civil rights aspects will include demographic information for the of bank examinations is not practical given the bank's local community. We believe that this existing complexities of both areas. Conse- type of analysis and presentation will enhance quently, the Federal Reserve has developed a our ability to assess a bank's CRA performance separate career path for consumer affairs exam- in meeting the credit needs of its local commuiners equivalent to that of our commercial exam- nity, including minority areas. It should also be iners. The Board provides them with special helpful in evaluating a bank's geographic delintraining, including instruction on the CRA and eation of its local CRA service area to ensure that fair lending laws. New examiners attend a three- it does not exclude low- and moderate-income week basic consumer compliance school. Exam- neighborhoods. iners who have eighteen to twenty-four months Finally, Federal Reserve examiners have beof field experience attend a weeklong advanced gun testing a system that will use a statistical compliance school and the one-week advanced model, much like the model used in the Boston CRA class. Special training sessions at the Re- study, to analyze the HMDA data and informaserve Banks supplement this training as neces- tion drawn from loan files from individual instisary. For example, last week, the San Francisco tutions for purposes of helping to determine Federal Reserve sponsored a conference for all compliance with fair lending laws. Notwithstandthe agencies, which focused on issues relating to ing the usefulness of the HMDA data, the data credit discrimination. alone are not sufficient to determine whether a The examination procedures for detecting lender is discriminating unlawfully. Specifically, loan discrimination are set forth in the Board's the data do not reflect the wide range of financial Consumer Compliance Handbook. These pro- and property-related factors that lenders concedures take, on average, twenty-nine hours sider in evaluating loan applications. Conseper examination to complete and result in a quently, our use of a statistical model will include comprehensive assessment of the institution's detailed information from specific application lending practices. Assessing a bank's perfor- files. We hope, and expect, that use of such a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 313 model will enable our examiners to more effec- taged," focusing on barriers faced by minority tively identify any questionable application files. borrowers and steps banks can institute to ensure that credit is offered on an equitable basis. The Boston and New York Reserve Banks cospon- CONSUMER COMPLAINT PROGRAM sored a conference on credit issues affecting economic development programs for Native Ameri- The Federal Reserve's consumer complaint pro- cans, especially those living on reservations. gram is an important element in our overall These programs are but an example of a compreefforts to enforce fair lending laws. The investi- hensive community affairs program at work gation procedures in this regard provide special throughout the Federal Reserve System. guidance with respect to complaints involving loan discrimination. Such complaints, given appropriate circumstances, will prompt an on-site investigation by Reserve Bank personnel at the CONCLUSION state member bank accused of discrimination. As mentioned previously, we have a referral agree- In my view, we are beyond the point of debating ment with HUD for mortgage complaints. I whether disparate treatment of minorities is ocshould note that the Federal Reserve System curring in credit markets. We have known for receives few complaints alleging loan discrimina- some time that certain segments of our society, tion, and few of these, after investigation, have particularly minority consumers and minority been resolved in favor of the complainant. small business owners, have difficulty obtaining credit. This difficulty has had an impact on the ability of minorities to build businesses, own COMMUNITY AFFAIRS PROGRAM homes, accumulate wealth, and, generally, participate in our economy on an equal footing. We The Board believes that ensuring fair access to now know that this difficulty may not be justified credit can, in addition to enforcement of fair by economic factors alone. lending laws, be advanced by focusing on positive The process of fully integrating the minority actions that a lender may take to address such community into the economic mainstream of our concerns. Consequently, through its Community country as quickly as possible should be the Affairs program, the Federal Reserve conducts ultimate goal of efforts to strengthen enforcement outreach, education, and technical assistance ac- of fair lending laws. I have concentrated today on tivities to help financial institutions and the public agency initiatives. But it is important not to understand and address community development overlook those positive actions that lenders have and reinvestment issues. During 1992, resources taken to help improve access to credit. Many devoted to Community Affairs activities at the lenders have undertaken critical self-analysis of Reserve Banks were increased to enable the Fed- their activities, and this has resulted in positive eral Reserve System to respond to the growing programs like reexamination of credit criteria, number of requests for information and assistance second reviews of lending decisions affecting from banks and others on the Community Rein- minority applicants, and specialized consumer vestment Act, fair lending, and community devel- credit education on qualifying for credit. These opment topics. Efforts were expanded to work initiatives are only a few of those recently underwith financial institutions, banking associations, taken by some lenders. governmental entities, business, and community In conclusion, I appreciate the opportunity to groups to develop community lending programs appear before you today to testify on the importhat help finance affordable housing, small and tant and complex issues regarding credit discrimminority business, and other revitalization ination. The Board and the FFIEC share your projects. For example, the Federal Reserve Bank concerns about this issue, and we look forward of Kansas City sponsored a conference for bank- to working with the Congress and others to ers on "Credit and the Economically Disadvan- address this important topic. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

314 Federal Reserve Bulletin • April 1993 Statement by Richard F. Syron, President, Fed- lending within the city of Boston. Although that eral Reserve Bank of Boston, before the Com- study had found that housing and mortgage mittee on Banking, Housing, and Urban Affairs, markets were functioning in a way that hurt U.S. Senate, February 24, 1993 black neighborhoods, the data available at that time could not distinguish the role played by Thank you for this opportunity to discuss the lenders from the actions of buyers, sellers, Federal Reserve Bank of Boston's recent study realtors, and other market participants. After of mortgage lending patterns and the report's the 1990 HMDA data on applications were implications for combatting discrimination in released, the Boston Fed was able to improve mortgage lending. upon its earlier research and focus on the As the committee knows, the Home Mortgage activities of the mortgage lending industry. I Disclosure Act (HMDA) data for 1990 showed would like to submit for the record a copy of the substantially higher denial rates for black and Boston Fed's study, "Mortgage Lending in Hispanic applicants than for white applicants. Boston: Interpreting HMDA Data." This was true in all the major metropolitan sta- The 131 financial institutions that had been the tistical areas, and it was certainly true in Boston. most active mortgage lenders in the Boston met- Approximately 30 percent of black and Hispanic ropolitan area were asked to provide additional mortgage applicants were denied loans in the information on thirty-eight financial, credit his- Boston metropolitan statistical area in 1990, tory, and employment variables for all 1,143 of compared with only 11 percent of white appli- their black and Hispanic mortgage applicants and cants. The 1991 data for Boston, which became for a random sample of 3,300 white applicants. available in fall 1992, show a narrower but still To protect the confidentiality of borrowers, we sizable gap, with 24 percent of black and His- assured the lenders that all information collected panic applicants denied loans, compared with 11 would remain with the Federal Reserve and other percent of white applicants. bank regulatory agencies. The response from When the 1990 HMDA were released, the lenders was excellent, although missing informaimplications of the racial disparities in denial tion, errors in recording the original data, and rates were unclear. Although the HMDA data withdrawn applications resulted in a final sample included information on applicant income, no of 722 black and Hispanic applicants and 2,340 information was collected on applicants' credit white applicants. histories, loan-to-value ratios, debt-to-income or The additional variables collected were chosen so called obligation ratios, and other factors that after numerous conversations with underwriters, lenders commonly consider when they make examiners, and others familiar with the mortgage mortgage loan decisions. Some felt that this lending process. We attempted to include all the missing information could explain the high denial variables that lenders view as relevant to their rates experienced by minorities. Others argued mortgage decisions. The information collected that even if all relevant information were in- from the financial institutions was then combined cluded, substantial bias in mortgage lending still with information on neighborhood characterisexisted. This disagreement has made it difficult to tics from the 1990 Census and used to develop a formulate solutions to improve credit flows to model of mortgage lending decisions in the Bospoor and minority neighborhoods. ton area. Using this model, it was possible to test The Federal Reserve Bank of Boston, with whether race was a significant factor in the the support of the Federal Reserve Board and lending decision once financial, credit history, other supervisory agencies and the cooperation employment, and neighborhood characteristics of mortgage lenders in the Boston area, under- were taken into account. took a major study of mortgage lending in an The analysis revealed that the additional inforeffort to clarify this issue. Racial disparities in mation about each applicant substantially remortgage lending patterns have been a concern duced the disparity in denial rates but did not in Boston for some years, and in 1989 the eliminate the gap. Black and Hispanic mortgage Boston Fed had undertaken a study of mortgage applicants in Boston, on average, had larger debt Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 315 burdens, higher loan-to-value ratios, and weaker mortgage lenders to acknowledge at least the credit histories, and in other respects did not fare possibility that the results of their lending proas well according to the evaluation criteria used cess are discriminatory. As long as lenders by mortgage lenders. But after having taken all sincerely believe that their procedures are bethese factors into account, black and Hispanic yond reproach, efforts to get them to change mortgage applicants were still more likely to be will have limited success. This area is one in turned down than white applicants. Minority which we hope that we have made a contribuapplicants with the same financial, credit history, tion. At least in Boston, our study seems to employment, and neighborhood characteristics have ended the debate over how to interpret the as the white applicants in Boston would have HMDA data. Economic factors do explain experienced a denial rate of 17 percent rather some of the disparity in denial rates, but race than the actual white denial of 11 percent. also plays a role. Lenders' reactions to the The information gathered in this study provides study suggest that they are now questioning some insight into how this outcome occurs. Many what they have always taken for granted. They observers have difficulty accepting that discrimina- are starting to recognize that simply having a tion exists because they do not believe that rational policy that prohibits discrimination does not lenders would turn down a perfectly good applica- prevent discrimination. tion simply because the applicant was black or Consumer advocates, government agencies, Hispanic. The problem is that few applications fit a and lending institutions have developed several narrow definition of perfect. Most applicants, white strategies to help lenders ensure that they are as well as minority, exceed some guideline for treating all prospective borrowers fairly. The obligation or loan-to-value ratios or credit history; Federal Reserve Bank of Boston is in the process or some possess a characteristic that requires addi- of compiling these strategies in a guide that will tional documentation, such as self-employment or soon be available for distribution to lenders. I the fact that they are purchasing a two- to four- suspect that the members of this committee have family home. As a consequence, the mortgage de- heard many of these ideas. They include the cision is not a purely mechanical process. Loan following: (1) ensuring that all employees inoriginators must exercise judgment, and they have volved with the loan process are thoroughly considerable discretion in the way they evaluate familiar with laws related to fair lending, (2) these deviations from perfection and in the degree to having a staff that reflects the racial and ethnic which they take compensating factors into consid- composition of the communities served by the eration. lending institutions, (3) ensuring that compensa- On balance, this discretion is both necessary tion structures for employees do not deter them and desirable. Historically, residential mortgages from serving low-income and minority markets, have been very safe investments. And applicants (4) using carefully designed second review proneed not be perfect to be creditworthy. How- cesses for denied applications, and (5) taking ever, discrimination may enter into the decision- several other approaches. making process. Precisely how this happens is Although the guide does not present something not something that can be answered by this totally new, it makes a contribution by tailoring study. It could be as simple as loan officers being each recommendation to the lender's board of more willing to exercise discretion and put their directors and senior management as well as to own reputations at risk for people who look or loan originators. The commitment to eliminating talk like themselves than for others. However the discrimination must start at the top and continue discrimination occurs, black and Hispanic appli- right through the organization to those who meet cants are more likely to be turned down for the public face to face. mortgages than white applicants who have the The efforts of financial institutions will have to same economic and other characteristics. be reinforced by enhanced regulatory methods. What can be done to address the problem of Because so many mortgage applications violate discrimination in mortgage lending? some guideline or in some way require that the In my judgment, the most critical step is for lender exercise judgment, most denials can ap- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

316 Federal Reserve Bulletin • April 1993 pear appropriate by objective standards. Thus, have higher obligation and loan-to-value ratios discrimination can be difficult to prove when one and weaker credit histories. looks case by case. It is also necessary to exam- In conclusion, the Federal Reserve Bank of ine broad patterns and an institution's entire Boston's study of mortgage lending patterns in loan-making process. The Federal Financial In- the Boston metropolitan statistical area shows stitutions Examination Council is aware of this that the large disparities in denial rates revealed problem and is working on improving its exami- by the HMDA data are partially attributable to nation procedures. the fact that black and Hispanic applicants have Finally, I would like to emphasize that al- greater debt burdens, higher loan-too-value rathough lending discretion may permit discrimina- tios, weaker credit histories, and other economic tion to occur, removing the discretionary ele- characteristics that lenders view with disfavor. ment would be a major mistake. If current However, even after having taken account of all guidelines were to become rules to be applied these factors, a statistically significant and ecowith no exceptions, then even if these rules were nomically important gap remains in denial rates not as tight as the guidelines are today, many for white and minority applicants. Eliminating creditworthy applicants would be denied loans this gap requires that regulators, lenders, and and, thus, the opportunity to own a home. And if community groups understand the nature and the Boston experience is representative of that likely causes of that gap, stop arguing about nationally, black and Hispanic applicants would whether a problem exists, and work more effecfare worse than white applicants because they tively together for the future. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

317 Announcements ISSUANCE OF FINAL RULE TO REVISE REVISIONS TO THE MONEY STOCK DATA CAPITAL ADEQUACY GUIDELINES Measures of the money stock were revised in February of this year as a result of the annual bench- The Federal Reserve Board on February 4, 1993, mark and seasonal factor review. Data in tables issued a final rule revising its capital adequacy 1.10 and 1.21 in the statistical appendix to the guidelines for bank holding companies and state Bulletin reflect these changes beginning with this member banks to provide explicit guidance on the issue. types of intangible assets that may be included in the tier 1 capital calculation for risk-based and Data for the monetary aggregates were benchleverage capital purposes. The rule is effective marked using data from Call Reports through March 9, 1993. September 1992 and other sources. The benchmark incorporated a change in the type of data used to The revised guidelines also include limits and measure large time deposits held by domestic discounts that are applicable to those intangible banks. Reports from issuing banks on holdings of assets included in capital. their certificates of deposit (CDs) by other banks The revision was formulated in a coordinated had previously been used; reports from banks of effort by the staffs of the four federal regulatory CDs they hold are now used, as reports on these agencies for financial institutions and, when made holdings have been found to be more accurate. final by the other agencies, will achieve greater (This item is one of several that are subtracted from consistency among the agencies with respect to the gross large time deposits to measure the quantity of capital treatment of intangible assets. Certain such time deposits held by the nonbank public). aspects of the final rule also implement provisions The benchmark also incorporates corrections for of the Federal Deposit Insurance Corporation the previous misreporting by banks of some bro- Improvement Act of 1991 (FDICIA). kered time deposits. Initially, these deposits had been misclassified as large time deposits, rather than as small time deposits. In addition, the benchmark folded in historical data for several money PROPOSED ACTIONS market mutual funds that began reporting for the first time in 1992. The Federal Reserve Board on February 8, 1993, Seasonal factors for the monetary aggregates issued for public comment a proposal to extend the have been revised using the X-11-ARIMA proceprovisions of Regulation E (Electronic Fund Trans- dure that was applied to data through preliminary fers) to electronic benefit transfer (EBT) programs. estimates for January 1993. The components of the Comments should be received by May 21, 1993. monetary aggregates that are seasonally adjusted The Federal Reserve Board on February 11, this year are identical to those of last year. 1993, also issued for public comment proposed More detail on the revisions is available in the amendments to its capital adequacy guidelines for Board's H.6 statistical release, "Money Stock, state member banks and bank holding companies to Liquid Assets, and Debt Measures," dated Febestablish a limitation on the amount of certain ruary 4, 1993. Complete historical data are deferred tax assets that may be included in the available from the Money and Reserves Projectier 1 capital calculation for risk-based and tions Section, Division of Monetary Affairs, mail leverage capital purposes. Comments should be stop 72, Board of Governors of the Federal Reserve received by March 6, 1993. System, Washington, DC 20551, or telephone Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

318 Federal Reserve Bulletin • April 1993 (202) 452-3062. The historical data are also avail- for Ml, M2, M3, and total nonfinancial debt able on floppy diskette for a fee of $25 per diskette also are available from the Economic Bulletin from the Federal Reserve Board's Publications Sec- Board of the U.S. Department of Commerce. Call tion, mail stop 138, Board of Governors of the (202) 482-1986 for information on how to gain Federal Reserve System, Washington, DC 20551, access to the Economic Bulletin Board. (202) 452-3245. Revised monthly historical data 1. Monthly seasonal factors used to construct Ml, M2, and M3, January 1992-March 1994 NNoonnbbaannkk Other checkable deposits1 Nontransaction components DDeemmaanndd YYeeaarr aanndd mmoonntthh CCuurrrreennccyy ttrraavveelleerrss ddeeppoossiittss cchheecckkss Total Held at banks In M2 In M3 only 1992—January .9955 .9661 1.0124 1.0106 1.0198 .9997 .9957 February .9949 .9708 .9770 .9953 1.0022 1.0019 1.0042 March .9967 .9663 .9825 1.0056 1.0081 1.0046 1.0046 April .9989 .9545 1.0096 1.0320 1.0311 1.0032 .9936 May 1.0019 .9669 .9798 .9938 .9883 .9973 1.0033 June 1.0022 1.0197 .9968 .9989 .9946 .9983 .9997 July 1.0046 1.0753 1.0004 .9924 .9869 .9993 .9960 August 1.0016 1.0863 .9917 .9903 .9876 .9998 1.0075 September .9941 1.0539 .9912 .9916 .9905 .9979 1.0012 October .9963 1.0128 1.0023 .9870 .9861 .9997 .9939 November 1.0008 .9686 1.0130 .9949 .9940 1.0002 1.0036 December 1.0091 .9571 1.0422 1.0063 1.0098 .9980 .9968 1993—January .9960 .9698 1.0124 1.0105 1.0198 .9995 .9952 February .9949 .9727 .9778 .9960 1.0029 1.0020 1.0051 March .9964 .9671 .9835 1.0064 1.0086 1.0047 1.0047 April .9999 .9538 1.0096 1.0318 1.0307 1.0034 .9934 May 1.0013 .9656 .9802 .9943 .9887 .9974 1.0032 June 1.0022 1.0185 .9970 .9992 .9948 .9984 .9993 July 1.0047 1.0731 .9993 .9924 .9869 .9991 .9954 August 1.0008 1.0838 .9910 .9902 .9875 .9997 1.0079 September .9949 1.0539 .9907 .9913 .9903 .9978 1.0014 October .9973 1.0136 1.0023 .9868 .9862 .9997 .9939 November .9997 .9689 1.0136 .9947 .9939 1.0002 1.0040 December 1.0106 .9586 1.0419 1.0057 1.0091 .9981 .9966 1994—January .9957 .9716 1.0126 1.0106 1.0199 .9995 .9946 February .9953 .9734 .9783 .9966 1.0034 1.0020 1.0055 March .9965 .9672 .9839 1.0068 1.0089 1.0047 1.0049 1. Seasonally adjusted other checkable deposits at thrift institutions are adjusted, and seasonally adjusted other checkable deposits at commercial derived as the difference between total other checkable deposits, seasonally banks. Additional tables on seasonal factors follow. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 319 2. Monthly seasonal factors for selected components of the monetary aggregates, January 1992-March 1994 Deposits1 Money market mutual funds Year and month Savings Small- Largeand denomination denomination In M2 In M3 only MMDAs time time 1992—January .9943 1.0033 .9933 .9991 1.0252 February .9963 1.0014 .9980 1.0178 1.0419 March 1.0043 .9989 1.0028 1.0271 1.0144 April 1.0058 .9978 .9970 1.0187 .9952 May 1.0009 .9958 1.0057 .9942 1.0004 June 1.0040 .9966 1.0051 .9899 .9809 July 1.0033 1.0001 .9989 .9870 .9836 August 1.0009 1.0004 1.0041 .9923 .9987 September .9975 1.0012 1.0013 .9927 .9815 October .9977 1.0023 .9972 .9916 .9784 November .9992 1.0013 .9996 .9950 1.0014 December .9950 1.0015 .9963 .9933 1.0004 1993—January .9939 1.0036 .9931 .9987 1.0229 February .9965 1.0013 .9984 1.0186 1.0420 March 1.0047 .9986 1.0031 1.0275 1.0135 April 1.0063 .9976 .9971 1.0189 .9951 May 1.0014 .9954 1.0060 .9950 1.0009 June 1.0043 .9962 1.0055 .9906 .9804 July 1.0035 .9999 .9988 .9872 .9834 August 1.0008 1.0003 1.0041 .9918 .9998 September .9972 1.0015 1.0014 .9920 .9823 October .9975 1.0025 .9969 .9912 .9787 November .9989 1.0015 .9993 .9947 1.0023 December .9946 1.0018 .9961 .9935 1.0002 1994—January .9937 1.0037 .9931 .9985 1.0214 February .9967 1.0012 .9986 1.0189 1.0421 March 1.0050 .9984 1.0032 1.0277 1.0124 1. These seasonal factors are applied to deposits data at both commercial banks and thrift institutions. 3. Weekly seasonal factors used to construct Ml, M2, and M3, December 7, 1992-April 4, 1994 NNoonnbbaannkk Other checkable deposits1 Nontransaction components DDeemmaanndd WWeeeekk eennddiinngg CCuurrrreennccyy ttrraavveelleerrss ddeeppoossiittss cchheecckkss Total Held at banks In M2 In M3 only 1992—December 7 1.0049 .9483 1.0310 1.0176 1.0142 1.0012 .9918 14 1.0055 .9534 1.0420 1.0022 1.0038 1.0007 .9975 21 1.0114 .9585 1.0376 1.0021 1.0095 .9968 .9966 28 1.0155 .9634 1.0464 .9970 1.0054 .9937 1.0082 1993—January 4 1.0061 .9678 1.0743 1.0405 1.0406 .9974 .9805 11 1.0022 .9688 1.0448 1.0390 1.0481 1.0018 , .9907 18 .9977 .9697 1.0146 1.0150 1.0281 .9996 .9961 25 .9907 .9707 .9771 .9841 .9964 .9985 1.0007 FFeebbrruuaarryy 11 .9861 .9717 .9767 .9802 .9866 .9994 1.0028 88 1.0004 .9722 .9836 1.0089 1.0139 1.0010 1.0018 15 .9996 .9726 .9862 .9968 1.0034 1.0022 1.0067 22 .9918 .9730 .9687 .9885 .9978 1.0024 1.0035 March 1 .9878 .9733 .9719 .9931 .9989 1.0029 1.0095 8 1.0013 .9715 .9889 1.0248 1.0258 1.0039 1.0058 15 .9982 .9687 .9953 1.0099 1.0121 1.0057 1.0105 22 .9955 .9660 .9716 .9989 1.0042 1.0046 1.0036 29 .9905 .9632 .9709 .9931 .9932 1.0041 1.0029 April 5 1.0004 .9603 1.0151 1.0353 1.0296 1.0068 .9888 12 1.0056 .9570 1.0205 1.0440 1.0408 1.0088 .9969 19 1.0004 .9536 1.0282 1.0500 1.0525 1.0035 .9919 26 .9946 .9502 .9874 1.0116 1.0155 .9992 .9938 May 3 .9970 .9469 .9896 1.0041 .9999 .9969 .9947 10 1.0069 .9552 .9859 1.0074 .9991 .9977 1.0005 17 1.0011 .9635 .9916 .9935 .9863 .9976 1.0003 24 .9988 .9718 .9575 .9824 .9778 .9967 1.0068 31 1.0001 .9800 .9766 .9847 .9799 .9977 1.0089 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

320 Federal Reserve Bulletin • April 1993 3. Continued NNoonnbbaannkk Other checkable deposits1 Nontransaction components DDeemmaanndd WWeeeekk eennddiinngg CCuurrrreennccyy ttrraavveelleerrss ddeeppoossiittss cchheecckkss Total Held at banks In M2 In M3 only June 7 1.0080 .9925 1.0059 1.0222 1.0127 .9996 1.0055 14 1.0043 1.0082 1.0122 1.0121 1.0090 1.0003 1.0064 21 1.0002 1.0238 .9849 .9965 .9936 .9976 .9988 28 .9937 1.0392 .9776 .9722 .9701 .9966 .9927 July 5 1.0100 1.0531 1.0284 1.0109 1.0009 .9976 .9775 12 1.0096 1.0631 1.0146 1.0063 .9980 1.0017 .9913 19 1.0056 1.0731 1.0023 .9887 .9832 .9991 .9981 26 .9994 1.0831 .9716 .9721 .9708 .9979 1.0016 August 2 .9985 1.0931 .9901 .9851 .9809 .9987 1.0067 9 1.0103 1.0906 1.0020 1.0088 1.0029 1.0006 1.0052 16 1.0048 1.0860 1.0032 .9941 .9893 1.0001 1.0092 23 .9986 1.0814 .9731 .9805 .9810 .9995 1.0063 30 .9894 1.0768 .9787 .9739 .9740 .9989 1.0112 September 6 1.0036 1.0703 1.0014 1.0146 1.0099 .9989 1.0069 13 .9976 1.0612 1.0135 1.0096 1.0091 .9997 1.0061 20 .9930 1.0521 .9864 .9868 .9916 .9973 1.0022 27 .9869 1.0429 .9634 .9556 .9610 .9957 1.0017 October 4 .9936 1.0337 1.0030 .9938 .9903 .9973 .9769 11 1.0061 1.0243 1.0086 .9964 .9941 1.0003 .9947 18 .9997 1.0148 1.0126 .9892 .9867 1.0006 .9939 25 .9947 1.0053 .9836 .9732 .9710 .9992 .9988 November 1 .9896 .9958 1.0025 .9891 .9829 1.0002 .9989 8 1.0034 .9852 1.0149 1.0160 1.0046 1.0015 1.0027 15 1.0010 .9741 1.0230 1.0099 .9992 1.0021 1.0010 22 .9972 .9631 .9989 .9927 .9892 1.0000 1.0020 29 .9980 .9522 1.0120 .9838 .9814 .9973 1.0118 December 6 1.0033 .9483 1.0333 1.0153 1.0093 1.0008 .9995 13 1.0076 .9538 1.0403 1.0021 1.0056 1.0015 1.0047 20 1.0122 .9593 1.0386 .9916 1.0068 .9977 .9942 27 1.0207 .9649 1.0438 .9848 1.0013 .9945 1.0012 1994—January 3 1.0058 .9704 1.0763 1.0179 1.0295 .9950 .9742 10 1.0033 .9709 1.0535 1.0397 1.0459 1.0009 .9902 17 .9975 .9714 1.0191 1.0193 1.0303 1.0006 .9990 24 .9915 .9719 .9760 .9973 1.0094 .9997 .9976 31 .9858 .9724 .9652 .9796 .9894 .9988 1.0004 February 7 .9982 .9729 .9866 1.0131 1.0163 1.0008 1.0023 14 .9985 .9732 .9833 .9973 1.0042 1.0018 1.0101 21 .9966 .9735 .9708 .9901 .9984 1.0024 1.0056 28 .9874 .9739 .9725 .9867 .9948 1.0030 1.0041 March 7 1.0002 .9723 .9934 1.0214 1.0233 1.0039 1.0057 14 .9986 .9694 .9932 1.0117 1.0127 1.0056 1.0045 21 .9956 .9665 .9788 1.0049 1.0064 1.0044 1.0084 28 .9900 .9636 .9680 .9916 .9959 1.0041 1.0103 April 4 .9999 .9606 1.0142 1.0263 1.0232 1.0061 .9828 1. Seasonally adjusted other checkable deposits at thrift institutions are adjusted, and seasonally adjusted other checkable deposits at commercial derived as the difference between total other checkable deposits, seasonally banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 321 4. Weekly seasonal factors for selected components of the monetary aggregates, December 7, 1992-April 4, 1994 Deposits1 Money market mutual funds Week ending Savings Small- Largeand denomination denomination In M2 In M3 only MMDAs time time 1992—December 7 .9996 1.0016 .9967 .9953 1.0044 14 1.0001 1.0014 .9979 .9992 1.0190 21 .9927 1.0011 .9954 .9954 1.0105 28 .9882 1.0016 .9987 .9891 .9971 1993—January 4 .9931 1.0036 .9874 .9793 .9295 11 .9990 1.0041 .9956 .9949 .9736 18 .9945 1.0038 .9958 1.0050 1.0470 25 .9905 1.0033 .9932 1.0060 1.0412 FFeebbrruuaarryy 11 .9917 1.0033 .9909 1.0005 1.0945 88 .9965 1.0029 .9953 1.0112 1.0465 15 .9980 1.0017 .9997 1.0171 1.0493 22 .9958 1.0005 .9988 1.0237 1.0252 March 1 .9965 .9998 1.0011 1.0261 1.0389 8 1.0030 .9995 1.0029 1.0270 1.0164 15 1.0070 .9985 1.0039 1.0278 1.0299 22 1.0047 .9979 1.0021 1.0275 1.0109 29 1.0034 .9984 1.0040 1.0306 1.0201 April 5 1.0112 1.0000 1.0019 1.0183 .9186 12 1.0160 .9984 1.0007 1.0291 1.0220 19 1.0074 .9976 .9962 1.0233 .9988 26 .9975 .9963 .9917 1.0153 1.0169 May 3 .9971 .9961 .9960 1.0003 .9997 10 1.0023 .9957 1.0026 .9927 1.0025 17 1.0034 .9954 1.0041 .9929 .9971 24 1.0008 .9957 1.0108 .9960 1.0061 31 1.0009 .9949 1.0110 .9959 .9983 June 7 1.0071 .9953 1.0108 .9933 .9908 14 1.0088 .9960 1.0128 .9937 .9816 21 1.0032 .9956 1.0021 .9914 .9916 28 .9981 .9972 .9988 .9888 .9791 July 5 1.0037 1.0002 .9967 .9736 .9059 12 1.0070 1.0004 1.0000 .9885 .9731 19 1.0046 .9999 .9980 .9907 1.0117 26 1.0008 .9997 .9982 .9907 .9998 August 2 1.0009 .9998 1.0011 .9893 1.0125 9 1.0050 1.0012 1.0017 .9886 .9941 16 1.0041 1.0003 1.0041 .9903 1.0046 23 .9987 .9998 1.0048 .9943 .9938 30 .9952 1.0001 1.0066 .9947 1.0057 September 6 1.0001 1.0011 1.0048 .9921 .9826 13 1.0022 1.0012 1.0045 .9941 1.0024 20 .9966 1.0013 1.0021 .9935 .9894 27 .9915 1.0018 .9969 .9910 .9771 October 4 .9949 1.0031 .9961 .9859 .9310 11 1.0011 1.0034 .9998 .9928 .9872 18 .9993 1.0026 .9962 .9919 .9738 25 .9954 1.0022 .9960 .9909 .9962 November 1 .9954 1.0017 .9958 .9923 .9854 8 1.0013 1.0017 .9980 .9918 .9982 15 1.0023 1.0021 .9993 .9946 .9908 22 .9974 1.0006 1.0008 .9942 1.0133 29 .9951 1.0017 .9998 .9979 1.0076 December 6 .9993 1.0021 .9985 .9980 1.0118 13 1.0002 1.0020 1.0001 1.0005 1.0174 20 .9936 1.0020 .9958 .9977 1.0168 27 .9879 1.0016 .9939 .9892 .9932 1994—January 3 .9915 1.0017 .9894 .9751 .9364 10 .9987 1.0044 .9944 .9897 .9764 17 .9965 1.0047 .9925 1.0028 1.0519 24 .9908 1.0038 .9932 1.0057 1.0482 31 .9900 1.0031 .9938 1.0058 1.0449 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

322 Federal Reserve Bulletin • April 1993 4. Continued Deposits1 Money market mutual funds Week ending Savings Small- Largeand denomination denomination In M2 IInn MM33 oonnllyy MMDAs time time February 7 .9968 1.0024 .9960 1.0110 1.0318 14 .9992 1.0016 .9986 1.0159 1.0528 21 .9957 1.0006 .9994 1.0219 1.0374 28 .9952 1.0004 1.0003 1.0266 1.0465 March 7 1.0031 .9994 1.0021 1.0265 1.0214 14 1.0076 .9979 1.0026 1.0269 1.0280 21 1.0052 .9975 1.0025 1.0296 1.0082 28 1.0025 .9987 1.0056 1.0287 1.0131 April 4 1.0083 .9994 1.0027 1.0261 .9636 1. These seasonal factors are applied to deposits data at both commercial banks and thrift institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

323 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON DECEMBER 22,1992 Retail sales, buoyed by strong gains in disposable income and a marked improvement in con- The information reviewed at this meeting sug- sumer attitudes, rose sharply in October and posted gested that economic activity was rising apprecia- a further increase in November. Sales of light bly in the fourth quarter. Consumer spending, in trucks were up substantially in the Octoberassociation with an apparent upturn in wage November period, and sales of a wide variety of income and a surge in confidence, had improved other goods, both durable and nondurable, also considerably; sizable gains were being registered in advanced considerably. Single-family starts rose the sales and starts of single-family homes; and over October and November to their highest level business spending for capital equipment remained since February, but starts of multifamily units strong. There also had been solid advances in remained at depressed levels. Sales of new and industrial output, and private payroll employment existing homes continued on an upward trend, had turned up. Data on wages and prices had been although the preliminary estimate for new home slightly less favorable recently, and on balance they sales was down in October. raised the possibility that the trend toward lower The limited data available suggested that real inflation might be slowing a little. business fixed investment was continuing to Total nonfarm payroll employment expanded expand at a brisk pace. Shipments of nondefense for the third consecutive month in November, and capital goods were up on balance over September the average workweek increased further. A sizable and October. A decline in shipments of office and rise in government employment largely reflected computing equipment, which had accounted for temporary hiring to staff polling places during the most of the gains in shipments since early 1991, general election. Private employment also picked was more than offset by a considerable rise in up somewhat, despite a decline in construction shipments of other items. Among other indicators jobs and weaker-than-usual seasonal hiring in the of spending for durable equipment over the retail trade sector. A range of service industries September-October period, sales of heavy trucks recorded further gains in employment, and the rose sharply, and business purchases likely number of jobs in manufacturing increased after accounted for some of the recent sizable increase in three months of sizable declines. The civilian sales of light trucks; on the other hand, shipments unemployment rate fell further in November, to of complete aircraft were weak. Nonresidential 7.2 percent. construction activity turned up on balance in Sep- Industrial production recorded another advance tember and October, partly reflecting a steadying of in November. Motor vehicle assemblies were about expenditures for office buildings, which had unchanged, but significant gains were evident else- plunged during the summer. At the same time, where, notably in the production of business equip- construction of other commercial structures recovment, construction supplies, and industrial materi- ered from a sharp decline in August, while outlays als. The output of consumer goods rose slightly for industrial structures remained weak. A sharp further in November; all of the increase was in the increase in drilling activity occurred in October, production of nondurable goods. Reflecting the apparently in response to higher natural gas prices higher level of output, total utilization of industrial and the expiration at year-end of a drilling subsidy. capacity edged higher in November to a level Business inventories were drawn down appreciaslightly above that at the end of 1991. bly further in October. In manufacturing, reduc- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

324 Federal Reserve Bulletin • April 1993 tions in stocks were smaller in October than in ber; the strongest gains were in the finance, insur- September. The ratios of stocks to shipments in ance, and real estate category, but sizable increases most industries were at or near the bottom of their were recorded in several other sectors as well. recent ranges. In the trade sector, a sharp drop in Nevertheless, average hourly earnings rose more stocks held by auto dealers more than accounted slowly over the twelve months ended in November for an overall decline in retail inventories in Octo- than over the year-earlier period. ber. Aside from auto dealers, a slight increase in At its meeting on November 17, the Committee retail stocks coupled with a strong increase in sales adopted a directive that called for maintaining the produced a small decline in inventory-to-sales existing degree of pressure on reserve positions and ratios. Wholesale inventories fell again in October, that included some bias toward possible easing and the inventory-to-sales ratio for this sector was during the intermeeting period. Accordingly, the near the low end of the range observed over the directive indicated that in the context of the Compast two years. mittee's long-run objectives for price stability and The nominal U.S. merchandise trade deficit nar- sustainable economic growth, and giving careful rowed somewhat in October from its average rate consideration to economic, financial, and monetary in the third quarter, reflecting both a considerable developments, slightly greater reserve restraint increase in the value of exports and a decline in the might be acceptable or slightly lesser reserve value of imports. Most of the expansion in exports restraint would be acceptable during the intermeetwas in capital goods, notably aircraft and industrial ing period. The contemplated reserve conditions machinery, and consumer goods. The reduction in were expected to be consistent with growth of M2 imports was primarily in consumer goods and in and M3 at annual rates of about 3]A and 1 percent passenger cars imported from Canada. Recent indi- respectively over the three-month period from cators generally pointed to continued weakness in September through December. the economies of the major foreign industrial coun- Open market operations during the intermeeting tries. During the third quarter, economic activity period were directed toward maintaining the existcontracted further in Japan and western Germany ing degree of pressure on reserve positions. One and expanded slowly in France and Canada. In small technical decrease was made during the the United Kingdom, activity appeared to have period to expected levels of adjustment plus changed little. seasonal borrowing to reflect the usual pattern of Producer prices of finished goods fell slightly in diminishing needs for seasonal credit. Because of November, reflecting sharp declines in the prices of settlement-day pressures, actual borrowing along food, gasoline, and fuel oil. Excluding the finished with the federal funds rate tended to average a little food and energy components, producer prices above expected levels. edged higher and, for the twelve months ended in Changes in other short-term interest rates were November, rose at a considerably slower pace than mixed over the intermeeting period. In the market in the comparable year-earlier period. By contrast, for Treasury securities, bill rates were essentially at the consumer level, prices of nonfood, non- unchanged while bond yields fell despite the emerenergy goods increased over October and Novem- gence of a more robust economic picture. Tending ber at a faster rate than in the previous several to offset the effects of the latter on long-term rates months. Consumer prices of apparel, tobacco, and was the tenor of statements emanating from the used cars rose sharply in October, and airfares incoming Administration, which were viewed by surged in October and November as domestic air- market participants as reducing the likelihood of a lines sought to restore profit margins that had been large fiscal stimulus package. The recent step-up in squeezed by promotions over the summer. Even the size of bill auctions and the potential for some with these upticks, however, the index of consumer shortening of the maturity of Treasury debt issues prices excluding food and energy increased consid- under the new Administration also might have conerably more slowly in the twelve months ended in tributed to the flattening of the Treasury yield November than in the year-earlier period. Average curve. Market expectations of year-end pressures hourly earnings of private production or nonsuper- sharply boosted interest rates on very short-term visory workers also rose more rapidly in Novem- private paper for a time; however, concerns about Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 325 year-end pressures subsequently abated, and much impetus would in part be offset by weaker export of the rise in rates was retraced. Most three- to demand as a result of slower growth abroad and the six-month private rates fell on balance over the higher level of the dollar; the earlier backup in period; the lower rates likely were associated with long-term interest rates, only part of which was lessened expectations of year-end pressures but retraced in recent weeks, also would have a also might have reflected perceptions of reduced restraining effect. Consumer spending, which had credit risks in a strengthening economy. Buoyed outpaced income growth in the second half of by the prospects for a stronger economy and the 1992, was projected to expand more in line with declines that had occurred in bond yields, most incomes in coming quarters. Residential construcmajor indexes of stock prices reached record highs. tion was expected to strengthen gradually as con- In foreign exchange markets, the trade-weighted cerns about employment security receded and value of the dollar in terms of the other G-10 incomes improved. Spending increases on business currencies was essentially unchanged on balance equipment were expected to be sustained in part over the intermeeting period. The dollar moved by continuing efforts to improve productivity, and moderately higher over the first half of the period investment in industrial building and in commerin response to incoming data suggesting that the cial structures other than office buildings would prospects for sustained economic growth in the begin to pick up in 1993. While recognizing the United States were improving while the economic possibility of a stimulative fiscal initiative in 1993, outlook for Japan and Germany was deteriorating the staff retained for this forecast the assumption in somewhat. Later in the period, the dollar gave up several recent forecasts that fiscal policy would be its gains, partly as a result of strong anti- mildly restrictive. The persisting, though diminishinflationary statements from Bundesbank officials ing, slack in resource utilization over the forecast that damped market expectations of near-term mon- period was expected to be associated with addietary easing in Germany. The relative stability of tional progress in reducing inflation. the dollar contrasted sharply with the rekindling of In the Committee's discussion of current and exchange rate pressures among a number of Euro- prospective economic developments, the members pean currencies. cited growing indications of a somewhat stronger The growth of M2 slowed in November, and on expansion than had seemed to be under way earlier average it had expanded at a moderate pace in and a marked improvement in business and conrecent months; the limited available data indicated sumer confidence, especially over the past month a further reduction in growth of this aggregate in or two. Although substantial uncertainties still sur- December. The recent behavior of M2 largely rounded the outlook, these developments provided reflected a sharp falloff in the expansion of demand encouraging support for forecasts of continued ecodeposits associated with a backup in money market nomic growth at a pace sufficient to reduce gradurates in previous months and a likely slowing in the ally margins of unutilized resources. The expanrate of increase in mortgage refinancing activity. sion now seemed to have gathered fairly broad- M3 expanded at a relatively slow rate in November based momentum that might be reinforced over and appeared to be declining in December. For the the quarters ahead by business efforts to build year, both M2 and M3 apparently grew at rates a up inventories in the context of generally low little below the lower ends of the annual ranges inventory-to-sales ratios. Moreover, the improving established by the Committee. financial condition of many households and busi- The staff projection prepared for this meeting ness firms, notably banking institutions, was a suggested a continuing expansion in economic promising development that should reduce conactivity that would be associated with gradual straints on economic growth over coming quarters. reductions in the margins of unemployed or The possibility of expansionary fiscal measures underutilized labor and capital resources. The was another source of potential short-term stimulus pickup in economic activity in recent months, to the economy, though one surrounded by substanthrough its positive effects on confidence and tial uncertainty with respect to the nature, size, and incomes, was expected to provide greater momen- timing of any fiscal initiatives and the longer-run tum to the economy in the near term. However, this consequences. On the negative side, many of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

326 Federal Reserve Bulletin • April 1993 members stressed what they regarded as a worsen- to be constrained by a number of factors despite the ing outlook for U.S. exports; they also noted the recent surge in consumer confidence. In particular, continuing weakness in commercial construction, an already low saving rate and still substantial defense spending, and the retarding effects on household debt burdens would tend to restrain the employment of ongoing downsizing and restruc- growth in consumption expenditures. Moreover, it turing by many business and financial firms. With seemed likely that gains in employment would regard to the outlook for inflation, some of the continue to be relatively limited, owing to further recent reports on prices and wages had been less business restructuring activities and related favorable than earlier. However, against the back- improvements in productivity that would tend to ground of continuing though diminishing slack in hold down the demand for new workers. Even so, production resources, favorable trends in produc- the pace of business hiring could be expected to tivity, and restrained growth in the broad measures quicken as existing workers were utilized more of money, the members generally continued to fully and the practical limits to increasing output anticipate further progress toward price stability through overtime work were reached. over the forecast horizon. Continuing efforts to improve productivity were The statistical evidence of a stronger expansion seen as likely to stimulate appreciable further was bolstered by anecdotal reports of improving expansion in business fixed investment. Much of business conditions across much of the nation. that expansion was expected to take the form of Confidence appeared to be rising in most areas substantial further growth in outlays for business and indeed seemed to be leading the statistics. equipment, especially if an investment tax credit Some members observed, however, that representa- were to be enacted. At the same time, investment in tives of many larger business firms did not seem to nonresidential structures was projected to stabilize share the ebullient mood of their smaller business for the nation as a whole next year after declining counterparts, possibly reflecting the still active in recent years. In this connection, members drew retrenchment efforts of many large firms and grow- some encouragement from anecdotal reports that ing indications for some of weakening markets prices, rental rates, and other terms relating to the abroad. There also were significant geographic value of commercial real estate seemed to be botexceptions to the improving business climate, nota- toming out in several depressed markets, though a bly in areas that were substantially affected by turnaround involving significant new construction cutbacks in defense spending, business consolida- was unlikely for an extended period in many of tion and cost-cutting activities, and underlying those markets. The outlook for housing construcweakness in the energy industry. On balance, re- tion was more promising, especially for the singlegional weakness in parts of the country such as family sector. Housing activity had strengthened at southern California tended to be masked in the least marginally in recent months in many parts of overall economic statistics by what were increas- the country, and the conjunction of reduced mortingly robust business conditions in the rest of the gage rates and some projected increase in incomes nation. was expected to support at least a gradual uptrend Personal consumption expenditures had posted in housing construction. relatively good gains over the past several months, With regard to fiscal policy, members noted that and retail sales were displaying considerable the bond markets had responded favorably in recent strength in the ongoing holiday season according to weeks to indications that the incoming Administraanecdotal reports from around the country. Further tion would give emphasis to reducing the federal growth in consumer expenditures was expected to budget deficit over time. Indeed, the prompt enactprovide a key underpinning for continuing eco- ment of legislation to achieve that objective nomic expansion. A development that might well undoubtedly would bolster business and consumer be buttressing consumer spending was the improve- confidence as well as bond markets, with favorable ment in existing home sales and the related capital effects on the economy. Some members cautioned, gains that were tending to supplement the recent however, that those effects would tend to be strengthening in disposable incomes. Nonetheless, negated to the extent that lower federal spending the contribution of the consumer sector was likely was offset by legislated increases in required Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 327 spending by business firms to finance worker bene- cited as possibly signifying a risk on the other side fits and other programs; such spending would if such increases persisted—that is, that monetary reduce profits and incentives to expand and ulti- policy might soon be accommodating renewed mately would boost costs and prices. In any event, inflationary pressures. the course of fiscal legislation remained highly In the Committee's discussion of short-run poluncertain in terms of its size, structure, and timing icy for the period until the next meeting, all of the and thus its near- and longer-term effects on the members expressed a preference for maintaining an economy. unchanged degree of pressure on reserve positions; Many of the members saw a substantial risk that all also indicated that they could support a shift lagging exports could exert a significant constraint from the tilt toward ease incorporated in recent on the domestic expansion. There were increasing directives to a symmetrical directive that would not indications of a weaker economic performance in include any bias with regard to possible adjustmany foreign countries, which were reinforced by ments to the degree of reserve restraint during the recent anecdotal reports from contacts at domestic intermeeting period. Improved prospects for modfirms engaged in international business activities. erate economic growth argued for maintaining the However, while the risks for prospective economic Committee's current stance in reserve markets, and activity abroad seemed to be tilted to the down- they also warranted a shift toward a more balanced side, stimulative policy responses by foreign approach to possible intermeeting changes in authorities—some of which had already been policy. At the same time, the still considerable initiated—might well alter developing trends. For uncertainties surrounding the economic outlook, now, though, diverging business trends in the including some lingering questions about the United States and foreign nations in association sustainability of the expansion, indicated the with the rise that had occurred in the dollar over the desirability of a cautious approach to any policy course of recent months pointed to a worsening changes. In this connection, several members trade balance for the United States. referred to the swings in the outlook that had The members generally anticipated further characterized the current expansion, including the progress toward price stability, although some now recent reversal of sentiment regarding the strength expected somewhat less improvement than they of the expansion, and the associated risks of premahad earlier. In the view of many members, key ture or misdirected policy moves. factors underlying a favorable inflation outlook The members observed that the next policy move included the persisting, though decreasing, slack in might be in either direction. For example, the need the utilization of production resources associated for some easing could not be ruled out should the with the moderate expansion expected in overall expansion again appear to be faltering. Substantial economic activity and the slow growth that had weakness in the monetary aggregates over coming occurred for an extended period in the broad mea- months would be one factor to be weighed in sures of money. While recent data on consumer assessing the economic outlook, though velocity prices and wages had a somewhat less favorable developments also would have to be taken into tenor, price competition remained vigorous in mar- account. On the other hand, a stronger economic kets for many goods and developments in long- performance might raise questions as to the need term debt markets suggested some shift in expecta- for a tightening move at some point during the year tions toward lower inflation. It also was noted that ahead as a means of maintaining progress toward ongoing cutbacks in work forces by many employ- price stability while continuing to encourage maxiers, including widely publicized reductions by mum sustainable economic expansion. If a tightensome major corporations, were tending to limit ing move were to be needed, it would be desirable demands for higher wages. Another important to implement such a move before inflation presinfluence was the strong competition from foreign sures showed through in the actual price statistics suppliers in the context of sluggish demands in in order to avoid sharp and potentially disruptive their own markets and the rise in the foreign tightening actions later. One member expressed exchange value of the dollar. Rapid increases in the concern about the risk of maintaining an overly narrow measures of money and reserves also were stimulative monetary policy for too long, with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

328 Federal Reserve Bulletin • April 1993 adverse consequences for inflation; while not pre- about unchanged over the four-month period from pared to tighten policy at this point, he indicated November through March. a preference for biasing the directive toward At the conclusion of the meeting, the following restraint. domestic policy directive was issued to the Federal In the course of this discussion, the members Reserve Bank of New York: took account of a staff analysis that pointed to quite The information reviewed at this meeting suggests sluggish growth in M2 and M3 over the months that economic activity has been rising appreciably in the ahead and to a marked slowing in the expansion current quarter. Total nonfarm payroll employment has of Ml. The broader monetary aggregates were increased slightly since September, and the average expected to continue to be affected by the various workweek has moved higher. The civilian unemployfactors that had inhibited their growth over the past ment rate fell further in November to 7.2 percent. Industrial production posted solid gains in October and two years and that had induced a substantial diver- November. Retail sales increased sharply in October and sion of credit flows from banking institutions into rose further in November. Residential construction activcapital market instruments. Moreover, some special ity appears to have increased from the third-quarter pace. factors that had boosted the growth of the broader Indicators of business fixed investment have been mixed aggregates in recent months, such as the enlarged recently, but on balance they suggest further growth. The nominal U.S. merchandise trade deficit narrowed somevolume of mortgage refinancing activity, would what in October from its average rate in the third quarter. tend to dissipate in the months immediately ahead, Recent data on wages and prices suggest on balance a assuming no significant change in mortgage inter- possible slowing in the trend toward lower inflation. est rates. While the atypically slow growth of the Changes in short-term interest rates have been mixed broader aggregates during the current economic since the Committee meeting on November 17 while recovery did not under prevailing circumstances bond yields have edged lower. In foreign exchange markets, the trade-weighted value of the dollar in terms of have the usual implications for the performance of the other G-10 currencies was essentially unchanged on the economy, given the concomitant and unusual balance over the intermeeting period. rise in their velocities, several members nonethe- Over the course of recent months, M2 has expanded at less expressed concern about the persistence of the a moderate pace, while M3 has continued to expand at a lagging growth. A few were more concerned about very slow rate. More recently, both aggregates have weakened somewhat. Both appear to have grown at rates the behavior of the narrower measures of money a little below the lower ends of the ranges established by such as Ml or the monetary base whose growth the Committee for the year. had been unsustainably rapid over much of 1992, The Federal Open Market Committee seeks monetary though these now gave some indications of moder- and financial conditions that will foster price stability ating. There was general agreement that the perfor- and promote sustainable growth in output. In furtherance of these objectives, the Committee at its meeting on mance of the various monetary aggregates should June 30-July 1 reaffirmed the ranges it had established continue to be monitored with special care. in February for growth of M2 and M3 of 2Vi to 6V2 per- At the conclusion of the Committee's discussion, cent and 1 to 5 percent respectively, measured from the fourth quarter of 1991 to the fourth quarter of 1992. The all of the members indicated their support of a Committee anticipated that developments contributing to directive that called for maintaining the existing unusual velocity increases could persist in the second degree of pressure on reserve positions and that did half of the year. The monitoring range for growth of total not include a presumption about the likely direction domestic nonfinancial debt also was maintained at AV2 to of any adjustments to policy during the intermeet- 8V2 percent for the year. For 1993, the Committee on a tentative basis set the same ranges as in 1992 for growth ing period. Accordingly, in the context of the Comof the monetary aggregates and debt measured from the mittee's long-run objectives for price stability and fourth quarter of 1992 to the fourth quarter of 1993. The sustainable economic growth, and giving careful behavior of the monetary aggregates will continue to be consideration to economic, financial, and monetary evaluated in the light of progress toward price level developments, the Committee decided that slightly stability, movements in their velocities, and developments in the economy and financial markets. greater or slightly lesser monetary restraint would be acceptable during the intermeeting period. The In the implementation of policy for the immediate future, the Committee seeks to maintain the existing reserve conditions contemplated at this meeting degree of pressure on reserve positions. In the context of were expected to be consistent with M2 growth at the Committee's long-run objectives for price stability an annual rate of about IV2 percent and with M3 and sustainable economic growth, and giving careful Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 329 consideration to economic, financial, and monetary Votes for this action: Messrs. Greenspan, Corrigan, developments, slightly greater reserve restraint or Angell, Hoenig, Jordan, Kelley, LaWare, Lindsey, slightly lesser reserve restraint would be acceptable in Melzer, Mullins, Ms. Phillips, and Mr. Syron. Votes the intermeeting period. The contemplated reserve con- against this action: None. • ditions are expected to be consistent with M2 growing at a rate of around 1V2 percent and M3 about unchanged in the period from November through March. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

331 Legal Developments FINAL RULE—AMENDMENTS TO REGULATIONS II.A.2.d.; by revising paragraph (i) of section II.B.; by HAND Y revising section II.B.l.b.; by revising footnote 14 in section II.B.l.b.; and by revising footnote 16 of The Board of Governors is amending 12 C.F.R. Parts section II.B.2., to read as follows: 208 and 225, Regulations H and Y, its capital adequacy guidelines for bank holding companies and state member banks to provide explicit guidance on the types of intangible assets that may be included in II. Definition of Qualifying Capital for the (that is, not deducted from) the Tier 1 capital calcu- Risk-Based Capital Ratio lation for risk-based and leverage capital purposes. The revision also includes limits and discounts that * * * are applicable to those intangible assets included in capital. The revision was formulated in conjunction 1. * * * Tier 1 capital is generally defined as the sum of with the staffs of the four federal financiali nstitutions core capital elements5 less goodwill and other intangiregulatory agencies [the Federal Reserve, Federal ble assets required to be deducted in accordance with Deposit Insurance Corporation (FDIC), Office of the section II.B.l.b. of this appendix. * * * Comptroller of the Currency (OCC), and Office of Thrift Supervision (OTS)] and, when made final by the other agencies, will achieve greater consistency 2 * * * The maximum amount of Tier 2 capital that among the agencies with respect to the capital treat- may be included in a bank's qualifying total capital is ment of intangible assets. In addition, certain aspects limited to 100 percent of Tier 1 capital (net of of the final rule implement provisions of the Federal goodwill and other intangible assets required to be Deposit Insurance Corporation Improvement Act of deducted in accordance with section II.B.l.b. of this 1991 (FDICIA). appendix). * * * Effective March 9, 1993, 12 C.F.R. Parts 208 and 225 are amended as follows: d. * * * The aggregate amount of term subordinated Part 208—Membership of State Banking debt (excluding mandatory convertible debt) and Institutions in the Federal Reserve System intermediate-term preferred stock that may be treated as supplementary capital is limited to 50 percent of 1. The authority citation for Part 208 is revised to read Tier 1 capital (net of goodwill and other intangible as follows: assets required to be deducted in accordance with section II.B.l.b. of this appendix). * * * Authority: 12 U.S.C. 321-338, 248(a), 248(c), 461, 481-486, 601, and 611; 12 U.S.C. 1814 and 1823(j); Q * * * 12 U.S.C. 3105; 12 U.S.C. 3906-3909; 15 U.S.C. 78b, 78/(b), 78/(g), 78/(i), 78o-4(c) (5), 78q, 78q-l, and 78w; (i) (a) Goodwill—deducted from the sum of core 12 U.S.C. 36; 12 U.S.C. 3310 and 3331-3351. capital elements. (b) Certain identifiable intangible assets, that is, intangible assets other than goodwill—deducted from the sum of core capital elements in accor- APPENDIX A—[AMENDED] dance with section II.B.l.b. of this appendix. 2. Appendix A to Part 208 is amended by revising the * * * first sentence and by removing the second sentence of the first undesignated paragraph of section II. A. 1. ; by revising the first undesignated paragraph of section 5. During the transition period and subject to certain limitations set forth in section IV below, Tier 1 capital may also include items defined II.A.2.; by revising the first sentence of section as supplementary capital elements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

332 Federal Reserve Bulletin • April 1993 j * * * require, on a case-by-case basis, an independent valuation of a bank's intangible assets. b. Other intangible assets. The only types of identifi- The amount of purchased mortgage servicing rights able intangible assets that may be included in, that is, and purchased credit card relationships that a bank not deducted from, a bank's capital are readily mar- may include in capital shall be the lesser of 90 percent ketable purchased mortgage servicing rights and pur- of their fair market value, as determined in accordance chased credit card relationships, provided that, in the with this section, or 100 percent of their book value, as aggregate, the total amount of these assets included in adjusted for capital purposes in accordance with the capital does not exceed 50 percent of Tier 1 capital. instructions in the commercial bank Consolidated Re- Purchased credit card relationships are subject to a ports of Condition and Income (Call Report). If both separate sublimit of 25 percent of Tier 1 capital.14 the application of the limits on purchased mortgage For purposes of calculating these limitations on servicing rights and purchased credit card relationpurchased mortgage servicing rights and purchased ships and the adjustment of the balance sheet amount credit card relationships, Tier 1 capital is defined as for these intangibles would result in an amount being the sum of core capital elements, net of goodwill and deducted from capital, the bank would deduct only the all identifiable intangible assets other than purchased greater of the two amounts from its core capital mortgage servicing rights and purchased credit card elements in determining Tier 1 capital. relationships, regardless of the date acquired. This The treatment of identifiable intangible assets set method of calculation could result in purchased mort- forth in this section generally will be used in the gage servicing rights and purchased credit card rela- calculation of a bank's capital ratios for supervisory tionships being included in capital in an amount and applications purposes. However, in making an greater than 50 percent—or in purchased credit card overall assessment of a bank's capital adequacy for relationships being included in an amount greater than applications purposes, the Board may, if it deems 25 percent—of the amount of Tier 1 capital used to appropriate, take into account the quality and compocalculate an institution's capital ratios. In such in- sition of a bank's capital, together with the quality and stances, the Federal Reserve may determine that a value of its tangible and intangible assets. * * * bank is operating in an unsafe and unsound manner because of overreliance on intangible assets in Tier 1 2. 16 An exception to this deduction would be made in capital. the case of shares acquired in the regular course of Banks must review the book value of all intangible securing or collecting a debt previously contracted in assets at least quarterly and make adjustments to these good faith. The requirements for consolidation are values as necessary. The fair market value of pur- spelled out in the instructions to the Call Report. chased mortgage servicing rights and purchased credit card relationships also must be determined at least 3. Appendix A to Part 208 is amended by revising the quarterly. The fair market value generally shall be third undesignated paragraph of section III.C.4. to determined by applying an appropriate market dis- read as follows: count rate to the expected future net cash flows. This determination shall include adjustments for any signif- III. Procedures for Computing Weighted-Risk icant changes in original valuation assumptions, in- Assets and Off-Balance-Sheet Items cluding changes in prepayment estimates or account attrition rates. Examiners will review both the book value and the £ * * * fair market value assigned to these assets, together with supporting documentation, during the examina- 4. * * * The following assets also are assigned a risk tion process. In addition, the Federal Reserve may weight of 100 percent if they have not been deducted from capital: investments in unconsolidated companies, joint ventures, or associated companies; instruments that qualify as capital issued by other 14. Amounts of purchased mortgage servicing rights and purchased banking organizations; and any intangibles, includcredit card relationships in excess of these limitations, as well as all ing those that may have been grandfathered into other identifiable intangible assets, including core deposit intangibles and favorable leaseholds, are to be deducted from a bank's core capital. capital elements in determining Tier 1 capital. However, identifiable intangible assets (other than purchased mortgage servicing rights and purchased credit card relationships) acquire on or before February 19, 4. Appendix A to Part 208 is amended by revising the 1992, generally will not be deducted from capital for supervisory first, second, and third sentences of the first undesigpurposes, although they will continue to be deducted for applications purposes. nated paragraph of section IV.A. to read as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 333 IV. Minimum Supervisory Ratios and and other intangible assets required to be deducted Standards from capital. 3 A. * * * As reflected in Attachment VI, by year-end 1992, all state member banks should meet a minimum 3 Requirements for the deduction of other intangible ratio of qualifying total capital to weighted risk assets assets are set forth in section II.B.l.b. of this appenof 8 percent, of which at least 4.0 percentage points dix. should be in the form of Tier 1 capital. For purposes of section IV.A., Tier 1 capital is defined as the sum of core capital elements less goodwill and other intangi- APPENDIX B—[AMENDED] ble assets required to be deducted in accordance with section II.B.l.b. of this appendix. The maximum 7. Appendix B to Part 208 is amended by revising amount of supplementary capital elements that quali- footnote 2 and by revising the last sentence of the fies as Tier 2 capital is limited to 100 percent of Tier 1 second undesignated paragraph of section II to read as capital. * * * follows: 5. In Appendix A to Part 208, the table in Attachment II is amended by revising the fifth entry of the left column and by revising footnote 1 of the fifth entry of II. THE TIER 1 LEVERAGE RATIO the left column to read as follows: Attachment II—Summary Definition of 2 At the end of 1992, Tier 1 capital for state member Qualifying Capital for State Member Banks* banks includes common equity, minority interest in Using the Year-End 1992 Standards equity accounts of consolidated subsidiaries, and qualifying noncumulative perpetual preferred stock. In Components addition, as a general matter, Tier 1 capital excludes goodwill; amounts of purchased mortgage servicing rights and purchased credit card relationships that, in Less: Goodwill and other intangible assets required to the aggregate, exceed 50 percent of Tier 1 capital; be deducted from capital.1 amounts of purchased credit card relationships that exceed 25 percent of Tier 1 capital; and all other intangible assets. The Federal Reserve may exclude certain investments in subsidiaries or associated com- *See discussion in section II of the guidelines for a panies as appropriate. complete description of the requirements for, and the limitations on, the components of qualifying capital. 1 Requirements for the deduction of other intangible * * * As a general matter, average total consolidated assets are set forth in section II.B.l.b. of this assets are defined as the quarterly average total assets appendix. (defined net of the allowance for loan and lease losses) reported on the bank's Reports of Condition and 6. In Appendix A to Part 208, the table in Attachment Income (Call Report), less goodwill; amounts of pur- VI is amended by revising the second entry of the chased mortgage servicing rights and purchased credit fourth column and by adding a new footnote number 3 card relationships that, in the aggregate, are in excess to the second entry of the fourth column to read as of 50 percent of Tier 1 capital; amounts of purchased follows: credit card relationships in excess of 25 percent of Tier 1 capital; all other intangible assets; and any Attachment VI—Summary of: investments in subsidiaries or associated companies that the Federal Reserve determines should be deducted from Tier 1 capital.3 Final Arrangement—Year End 1992 Common equity, qualifying noncumulative perpetual 3. Deductions from Tier 1 capital and other adjustments are preferred stock, and minority interest less goodwill discussed more fully in section II.B. of Appendix A to this Part. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

334 Federal Reserve Bulletin • April 1993 percent of Tier 1 capital (net of goodwill and other intangible assets required to be deducted in accor- Part 225—Bank Holding Companies and dance with section II.B.l.b. of this appendix). * * * Change in Bank Control Q * * * 1. The authority citation for Part 225 continues to read as follows: (i) (a) Goodwill—deducted from the sum of core capital elements, Authority: 12 U.S.C. 18170) (13), 1818, 1831i, 1843(c) (b) Certain identifiable intangible assets, that is, (8), 1844(b), 3106, 3108, 3907, 3909, 3310, and 3331- intangible assets other than goodwill—deduct 3351. ed from the sum of core capital elements in accordance with section II.B.l.b. of this appendix, j * * * APPENDIX A—[AMENDED] 2. Appendix A to Part 225 is amended by revising the b. Other intangible assets. The only types of idenfirst sentence and by removing the second sentence of tifiable intangible assets that may be included in, the first undesignated paragraph of section II. A. 1. ; by that is, not deducted from, an organization's capital revising the first undesignated paragraph of section are readily marketable purchased mortgage servic- II.A.2.; by revising the first sentence of section ing rights and purchased credit card relationships, II.A.2.d.; by revising paragraph (i) of section II.B.; by provided that, in the aggregate, the total amount of revising section II.B.l.b.; by revising footnote 15 in these assets included in capital does not exceed 50 section II.B.l.b.; and by revising footnote 17 of sec- percent of Tier 1 capital. Purchased credit card tion II.B.2. to read as follows: relationships are subject to a separate sublimit of 25 percent of Tier 1 capital.15 For purposes of calculating these limitations on purchased mortgage servicing rights and purchased credit II. DEFINITION OF QUALIFYING CAPITAL FOR card relationships, Tier 1 capital is defined as the sum THE RISK-BASED CAPITAL RATIO of core capital elements, net of goodwill and all identifiable intangible assets other than purchased mortgage servicing rights and purchased credit card relationships, regardless of the date acquired. This 1. * * * Tier 1 capital is generally defined as the sum of method of calculation could result in purchased mortcore capital elements6 less goodwill and other intangi- gage servicing rights and purchased credit card relable assets required to be deducted in accordance with tionships being included in capital in an amount section II.B.l.b. of this appendix. * * * greater than 50 percent—or in purchased credit card relationships being included in an amount greater than 25 percent—of the amount of Tier 1 capital used to 2 * * * xhe maximum amount of Tier 2 capital that calculate an institution's capital ratios. In such inmay be included in an organization's qualifying total stances, the Federal Reserve may determine that an capital is limited to 100 percent of Tier 1 capital (net of organization is operating in an unsafe and unsound goodwill and other intangible assets required to be manner because of overreliance on intangible assets in deducted in accordance with section II.B.l.b. of this Tier 1 capital. appendix). * * * Bank holding companies must review the book value of all intangible assets at least quarterly and d. * * * The aggregate amount of term subordinated debt (excluding mandatory convertible debt) and 15. Amounts of purchased mortgage servicing rights and purchased credit card relationships in excess of these limitations, as well as all intermediate-term preferred stock that may be other identifiable intangible assets, including core deposit intangibles treated as supplementary capital is limited to 50 and favorable leaseholds, are to be deducted from an organization's core capital elements in determining Tier 1 capital. However, identifiable intangible assets (other than purchased mortgage servicing rights and purchased credit card relationships) acquired on or before 6. During the transition period and subject to certain limitations set February 19, 1992, generally will not be deducted from capital for forth in section IV below, Tier 1 capital may also include items defined supervisory purposes, although they will continue to be deducted for as supplementary capital elements. applications purposes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 335 make adjustments to these values as necessary. The III. PROCEDURES FOR COMPUTING fair market value of purchased mortgage servicing WEIGHTED-RISK ASSETS AND rights and purchased credit card relationships also OFF-BALANCE-SHEET ITEMS must be determined at least quarterly. The fair market value generally shall be determined by applying an £ * * * appropriate market discount rate to the expected future net cash flows. This determination shall include 4. * * * The following assets also are assigned a risk adjustments for any significant changes in original weight of 100 percent if they have not been deducted valuation assumptions, including changes in prepay- from capital: investments in unconsolidated compament estimates or account attrition rates. nies, joint ventures, or associated companies; in- Examiners will review both the book value and the struments that qualify as capital issued by other fair market value assigned to these assets, together banking organizations; and any intangibles, includwith supporting documentation, during the inspection ing those that may have been grandfathered into process. In addition, the Federal Reserve may require, capital. on a case-by-case basis, an independent valuation of an organization's intangible assets. 4. Appendix A to Part 225 is amended by revising the The amount of purchased mortgage servicing first, second, third, and fourth sentences of the first rights and purchased credit card relationships that a undesignated paragraph of section IV.A. to read as bank holding company may include in capital shall follows: be the lesser of 90 percent of their fair market value, as determined in accordance with this section, or 100 percent of their book value, as adjusted for IV. MINIMUM SUPERVISORY RATIOS AND capital purposes in accordance with the instructions STANDARDS to the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C Report). If both the * * * * * application of the limits on purchased mortgage A. * * * As reflected in Attachment VI, by year-end servicing rights and purchased credit card relation- 1992, all bank holding companies56 should meet a ships and the adjustment of the balance sheet amount minimum ratio of qualifying total capital to weighted for these intangibles would result in an amount being risk assets of 8 percent, of which at least 4.0 perdeducted from capital, the bank holding company centage points should be in the form of Tier 1 capital. would deduct only the greater of the two amounts For purposes of section IV.A., Tier 1 capital is from its core capital elements in determining Tier 1 defined as the sum of core capital elements less capital. goodwill and other intangible assets required to be The treatment of identifiable intangible assets set deducted in accordance with section II.B.l.b. of this forth in this section generally will be used in the appendix. The maximum amount of supplementary calculation of a bank holding company's capital ratios capital elements that qualifies as Tier 2 capital is for supervisory and applications purposes. However, limited to 100 percent of Tier 1 capital. In addition, in making an overall assessment of an organization's the combined maximum amount of subordinated debt capital adequacy for applications purposes, the Board and intermediate-term preferred stock that qualifies may, if it deems appropriate, take into account the as Tier 2 capital is limited to 50 percent of Tier 1 quality and composition of an organization's capital, capital. * * * together with the quality and value of its tangible and intangible assets. * * * 5. In Appendix A to Part 225, the table in Attachment II is amended by revising the fifth entry of the left column and by revising footnote 1 of the fifth entry of 2. 17 An exception to this deduction would be made the left column to read as follows: in the case of shares acquired in the regular course of securing or collecting a debt previously contracted in good faith. The requirements for consolidation are spelled out in the instructions to the FR Y-9C Report. 3. Appendix A to Part 225 is amended by revising the 56. As noted in section I above, bank holding companies with less third undesignated paragraph of section III.C.4. to than $150 million in consolidated assets would generally be exempt from the calculation and analysis of risk-based ratios on a consoliread as follows: dated holding company basis, subject to certain terms and conditions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

336 Federal Reserve Bulletin • April 1993 Attachment II—Summary Definition of II. THE TIER 1 LEVERAGE RATIO Qualifying Capital for Bank Holding Companies* (Using the Year-End 1992 3 At the end of 1992, Tier 1 capital for bank holding Standards) companies includes common equity, minority interest in equity accounts of consolidated subsidiaries, quali- Components fying noncumulative perpetual preferred stock, and qualifying cumulative perpetual preferred stock. (Cumulative perpetual preferred stock is limited to Less: Goodwill and other intangible assets required to 25 percent of Tier 1 capital.) In addition, as a general be deducted from capital.1 matter, Tier 1 capital excludes goodwill; amounts of purchased mortgage servicing rights and purchased credit card relationships that, in the aggregate, exceed 50 percent of Tier 1 capital; amounts of purchased See discussion in section II of the guidelines for a credit card relationships that exceed 25 percent of complete description of the requirements for, and the Tier 1 capital; and all other intangible assets. The limitations on, the components of qualifying capital. Federal Reserve may exclude certain investments in 1 Requirements for the deduction of other intangible subsidiaries or associated companies as appropriate. assets are set forth in section II.B.l.b. of this appendix. * * * As a general matter, average total consolidated 6. In Appendix A to Part 225, the table in Attachment VI assets are defined as the quarterly average total assets is amended by revising the second entry of the fourth (defined net of the allowance for loan and lease losses) column; by revising footnote 1; and by revising footnote reported on the banking organization's Consolidated 3, which is referenced in the second entries of the second, Financial Statements (FR Y-9C Report), less goodwill; third, and fourth columns, to read as follows: amounts of purchased mortgage servicing rights and purchased credit card relationships that, in the aggre- Attachment VI—Summary of: gate, are in excess of 50 percent of Tier 1 capital; amounts of purchased credit card relationships in Final Arrangement—Year-End 1992 excess of 25 percent of Tier 1 capital; all other intangible assets; and any investments in subsidiaries or associated companies that the Federal Reserve deter- Common equity, qualifying noncumulative and cumu- mines should be deducted from Tier 1 capital.4 lative perpetual preferred stock,1 and minority interest less goodwill and other intangible assets required to be deducted from capital. 3 ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT 1 Cumulative perpetual preferred stock is limited Orders Issued Under Section 3 of the Bank Holding Company Act within Tier 1 to 25% of the sum of common stockholders' equity, qualifying perpetual preferred stock, and Broadstreet, Inc., minority interest. Atlanta, Georgia 2 * * * 3 Requirements for the deduction of other intangible AmTrade International Bank of Georgia assets are set forth in section II.B. 1 .b. of this appendix. Atlanta, Georgia Order Approving Application to Acquire a Bank, and Applications to Become a Member of the Federal Reserve System and to Establish an Agreement APPENDIX D—[AMENDED] Corporation 2. Appendix D to Part 225 is amended by revising Broadstreet, Inc., Atlanta, Georgia ("Broadstreet"), footnote 3 and by revising the last sentence of the has applied pursuant to section 3 of the Bank Holding second undesignated paragraph of section II to read as follows: 4. Deductions from Tier 1 capital and other adjustments are discussed more fully in section II.B. of Appendix A to this Part. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 337 Company Act (12 U.S.C. § 1842) ("BHC Act") to under section 3 of the BHC Act are consistent with acquire 94 percent of the shares of AmTrade Interna- approval of Broadstreet's application to acquire Bank. tional Bank of Georgia, Atlanta, Georgia ("Bank"), The Board also has considered the factors it is and thereby become a bank holding company within required to consider when reviewing applications for the meaning of the BHC Act. Bank, a de novo bank membership pursuant to section 9 of the Federal chartered under the laws of Georgia,1 has applied Reserve Act and section 208.4 of the Board's Regulapursuant to section 9 of the Federal Act tion H,3 and finds those factors to be consistent with (12 U.S.C. § 321) and section 208.4 of the Board's approval. Bank appears to meet all the criteria in the Regulation H (12 C.F.R. 208.4) to become a member Federal Reserve Act for admission to membership, of the Federal Reserve System. Bank also has applied including capital requirements and considerations repursuant to section 25 of the Federal Reserve Act lated to management character and quality.4 (12 U.S.C. §§ 601-604a) to establish AmTrade Inter- The Board also has considered all the factors it must national Bank of Florida, Miami, Florida ("AmTrade consider under section 25 of the Federal Reserve Act International Bank"), an agreement corporation and section 211.4 of the Board's Regulation K in within the meaning of the Federal Reserve Act.2 considering Bank's application to establish AmTrade Notice of the applications, affording interested per- International Bank, and finds that this application is sons an opportunity to submit comments, has been consistent with approval and with the purposes of the published (57 Federal Register 54,081 (1992)). The Federal Reserve Act.5 Bank has agreed to conform the time for filing comments has expired, and the Board activities of Amtrade International Bank to the rehas considered the applications and all comments quirements of section 25A of the Federal Reserve Act received in light of the factors set forth in section 3(c) and the Board's Regulation K.6 of the BHC Act and in the Federal Reserve Act. On the basis of the foregoing and all the facts of In reviewing Broadstreet's application under sec- record, including all commitments made by Broadstreet tion 3 of the BHC Act, the Board is required to and Bank in the applications and in related corresponconsider various supervisory and other factors, includ- dence, the Board has determined that the applications ing the financial and managerial resources and future should be, and hereby are, approved. The Board's prospects of Broadstreet and Bank, the effects of the determination also is subject to all of the conditions set transaction on competition, and the convenience and forth in Regulation Y and Regulation K, and to the needs of the community to be served. Board's authority to require modification or termina- The record in this case indicates that Broadstreet tion of the activities of a bank holding company or any and Bank will be managed by individuals with banking of its subsidiaries as the Board finds necessary to assure experience, and that both Broadstreet and Bank will compliance with, and to prevent evasion of, the provibe capitalized in excess of minimum capital require- sions of the BHC Act and the Board's regulations and ments upon consummation of this transaction. The orders issued thereunder. For purposes of this action, de novo entry of Bank into the market for international these commitments and conditions are both considered banking services should provide added competition for conditions imposed in writing by the Board in connecthese services. Additionally, Bank has devised a bus- tion with its findings and decision and, as such, may be iness plan that includes methods for meeting the enforced in proceedings under applicable law. The convenience and needs of its community, including a Board's approval of these applications is also condiplan for meeting its responsibilities under the Commu- tioned upon Broadstreet's and Bank's receiving all nity Reinvestment Act (12 U.S.C. §§ 2901 et seq.) necessary Federal and state regulatory approvals. The For these reasons, and based on all the facts of record, acquisition by Broadstreet of the voting shares of Bank the Board concludes that the factors it must consider may not be consummated before the fifth calendar day following the effective date of this Order. By order of the Board of Governors, effective 1. Bank has received approval from the Georgia Department of February 19, 1993. Banking and Finance to be chartered as a "special purpose" bank which, under Georgia law, may be organized for the purpose of "conducting a limited banking business which facilitates the economic, commercial, and export-import trade growth" of Georgia. Ga. Code Ann. § 7-l-394(c). In this capacity, Bank will accept deposits, 3. See 12 U.S.C. §§ 322 and 1816; 12 C.F.R. 208.4. make loans, and otherwise provide credit and banking services 4. See id. primarily to firms and individuals in Georgia and other southeastern 5. See 12 U.S.C. §§ 601-604a; 12 C.F.R. 211.4. An agreement states that are engaged in foreign trade and export activities. corporation is a company formed to engage in international banking 2. These applications comprise the proposal by a group of and financial operations. A member bank may invest in such a investors to acquire First American International Bank, Miami, company if the company enters into an agreement with the Board to Florida, the agreement corporation subsidiary of First American limit its activities to those permissible for an Edge Act corporation. Bank of Georgia, N.A. (In Liquidation), Marietta, Georgia ("First See 12 U.S.C. §§ 603, 611-631. American-Georgia''). 6. See 12 U.S.C. § 611-631; 12 C.F.R. 211, Subpart A. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

338 Federal Reserve Bulletin • April 1993 Voting for this action: Chairman Greenspan and Governors become a bank holding company by acquiring Banks Kelley, Lindsey, and Phillips. Voting against this action: directly. Governors Mullins and Angell. Absent and not voting: Gov- Notice of these applications, affording interested ernor La Ware. persons an opportunity to submit comments, has been given in accordance with the BHC Act and the Board's JENNIFER J. JOHNSON Associate Secretary of the Board Rules of Procedure, 12 C.F.R. 262.3. The time for filing comments has expired, and the Secretary of the Board of Governors ("Secretary"), acting pursuant to Dissenting Statement of Governors Mullins and authority delegated by the Board, has considered the Angell applications and all comments received in light of the factors set forth in section 3(c) of the BHC Act. In our view, the structure of the proposed transaction is On October 30,1992, the twenty subsidiary banks of not clearly consistent with the requirements or purposes First City Bancorporation were declared insolvent and of the Federal Reserve Act. The Federal Reserve Act the FDIC was appointed receiver of each of the banks. imposes limits on the amount that a bank may invest in a Pursuant to section ll(n) of the Federal Deposit Insurso-called agreement corporation. As a result of these ance Act (12 U.S.C. § 1821(n)) ("FDI Act"), the limits, proposals to establish or acquire agreement corpo- FDIC established twenty bridge banks to acquire the rations have involved well-established banks. assets and to assume the liabilities and deposits of the In this case, a newly chartered bank proposes to closed banks. The FDIC solicited offers for the acquiacquire an established agreement corporation. The sition of the bridge banks from qualified bidders purbusiness of this newly chartered bank, at least over the suant to sections ll(n) and 13(c) of the FDI Act foreseeable future, will involve primarily business that (12 U.S.C. §§ 1821(n) and 1823(c)). On January 26, is generated by the agreement corporation. We note 1993, the FDIC selected First Commercial's bid for the that the shareholders in this case could have struc- bridge banks in Lufkin and Tyler, Texas. Tyler Bank tured the proposal in a manner that we believe would and Lufkin Bank will each engage in a purchase and be consistent with the Federal Reserve Act, for exam- assumption transaction with the bridge banks in Tyler ple, by acquiring the assets of the agreement corpora- and Lufkin, respectively, subject to OCC approval tion through a bank in Florida or by acquiring the under the Bank Merger Act (12 U.S.C. § 1828(c)). The agreement corporation through an established bank. FDIC has requested that the Board process this appli- We do not believe that the structure chosen by the cation expeditiously due to the condition of the bridge shareholders in this case is clearly consistent with the banks and to minimize the cost of the transaction to Federal Reserve Act. We would, therefore, deny these the FDIC. applications. Section 3(d) of the BHC Act, the Douglas Amendment, prohibits the Board from approving an applica- February 19, 1993 tion by a bank holding company to acquire any bank located outside of the bank holding company's home state, unless such acquisition is "specifically autho- First Commercial Corporation rized by the statute laws of the State in which such Little Rock, Arkansas bank is located, by language to that effect and not merely by implication."1 FCC, whose home state is Order Approving the Acquisition of Banks and Arkansas for purposes of the Douglas Amendment, Formation of a Bank Holding Company seeks to acquire two banks in Texas. The Texas Banking Code expressly authorizes the acquisition by First Commercial Corporation, Little Rock, Arkansas an out-of-state bank holding company of Texas banks ("FCC"), a bank holding company within the meaning that have been in existence for at least five years,2 and of the Bank Holding Company Act ("BHC Act"), has the Board previously has determined that the interapplied under section 3 of the BHC Act (12 U.S.C. § 1842(a)(3)) to acquire all the voting shares of Citizens First National Bank of Tyler, Tyler, Texas ("Tyler 1.12 U.S.C. § 1842(d). Bank") and Lufkin National Bank, Lufkin, Texas 2. Tyler Bank and Lufkin Bank will each purchase the assets and ("Lufkin Bank") (collectively, "Banks") through its assume the liabilities of a New First City bridge bank established by the FDIC in connection with the resolution of the First City Bancorwholly owned subsidiary, FCC Texas, Inc., Little poration of Texas, Inc., The First City bridge banks are, and Banks Rock, Arkansas ("FCC Texas"). In connection with will be, the successors to the First City Banks, which were in existence for more than five years and are therefore eligible to be this application, FCC Texas has applied under section acquired by an out-of-state bank holding company under Texas law. 3(a)(1) of the BHC Act (12 U.S.C. § 1842(a)(1)) to Tex. Rev. Civ. Stat. Ann. art. 342-916, § 2(b) (West 1992). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 339 state banking statutes of Texas permit the acquisition Delaware (together "Overton"), both bank holding of Texas banking organizations by Arkansas banking companies within the meaning of the Bank Holding organizations.3 Based on all the facts of record, the Company Act ("BHC Act"), have applied for the Secretary concludes that approval of this proposal is Board's approval under section 3(a)(3) of the BHC Act not prohibited by the Douglas Amendment. (12 U.S.C. § 1842(a)(3)) to acquire up to 20 percent of In connection with this application, the Secretary the outstanding shares of Longview Financial Corpohas taken into consideration the competitive effects of ration, Longview, Texas ("Longview"), and thereby the proposed transaction and concludes that consum- indirectly acquire Longview's subsidiary bank, mation of this proposal under the BHC Act would not Longview Bank & Trust Company, Longview, Texas have a significantly adverse effect on competition in ("Longview Bank"). Following consummation of this any relevant banking market. The Secretary also con- acquisition, Overton would own approximately cludes that the financial and managerial resources and 20 percent of the voting shares of Longview, and future prospects of FCC and Banks are consistent with certain management officials of Overton, who also approval. Supervisory factors and factors relating to hold management positions with Longview, would the convenience and needs of the communities to be collectively control an additional 19 percent of the served are also consistent with approval. shares of Longview.1 Thus, as a result of this acquisi- On the basis of the information in the record, the tion, Longview would be considered a subsidiary of Secretary finds that an emergency situation exists so Overton. as to require that the Secretary act expeditiously Notice of the application, affording interested perpursuant to the provisions of section 3(b) of the BHC sons an opportunity to submit comments, has been Act (12 U.S.C. § 1842(b)). Based on all the facts of published (57 Federal Register 59,352 (1992)). The record, the Secretary has determined that the applica- time for filing comments has expired, and the Board tions should be, and hereby are, approved. The Sec- has considered the application and all comments reretary's decision is specifically conditioned on compli- ceived in light of the factors set forth in section 3(c) of ance with all of the commitments made in this the BHC Act. application. For the purpose of this action, these Overton is the 277th largest commercial banking commitments and conditions are deemed to be condi- organization in Texas, controlling deposits of tions imposed in writing by the Secretary in connec- $79.8 million, representing less than 1 percent of the tion with his findings and decision, and, as such, may total deposits in commercial banking organizations in be enforced in proceedings under applicable laws. the state.2 Longview is the 80th largest commercial This transaction may not be consummated before banking organization in Texas, controlling deposits of the fifth day following the effective date of this Order $217.6 million, representing less than 1 percent of the or later than three months after the effective date of total deposits in commercial banking organizations in this Order, unless such period is extended by the the state. Federal Reserve Bank of St. Louis, acting pursuant to Overton and Longview do not compete directly in delegated authority. any relevant banking market. Based on all the facts of By order of the Secretary of the Board, acting record, the Board concludes that consummation of pursuant to delegated authority for the Board of Gov- this proposal will not result in significantly adverse ernors, effective February 8, 1993. effects on competition in any relevant banking market. Overton proposes to inject additional capital into JENNIFER J. JOHNSON Longview Bank, and Overton has demonstrated that it Associate Secretary of the Board has the resources to act as a source of financial and managerial strength to Longview Bank. Thus, based Overton Financial Corporation on all of the facts of the record, the Board concludes Overton, Texas that the financial and managerial resources and future prospects of Overton, Longview, and their subsidiar- Order Approving Acquisition of a Bank Holding ies, and other supervisory factors the Board is re- Company Overton Financial Corporation, Overton, Texas, and its subsidiary, Overton Delaware Corporation, Dover, 1. Overton currently owns approximately 4.8 percent of the shares of Longview, and this proposal represents the acquisition of additional shares. Members of one family hold a total of 64 percent of the shares of Overton and a total of 19 percent of the shares of Longview, and this family has significant representation in the management of both 3. State First Financial Corporation, 73 Federal Reserve Bulletin organizations. 307 (1987). 2. Deposit data are as of June 30, 1991. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

340 Federal Reserve Bulletin • April 1993 quired to consider under section 3 of the BHC Act, are Records of Performance Under the CRA also consistent with approval of this proposal. A. CRA Performance Examinations Convenience and Needs Considerations The Agency CRA Statement provides that a CRA In considering an application under section 3 of the examination is an important and often controlling BHC Act, the Board must consider the convenience factor in the consideration of an institution's CRA and needs of the communities to be served and take record, and that these reports will be given great into account the records of the relevant depository weight in the application process.6 In this case, both of institutions under the Community Reinvestment Act Overton's subsidiary banks—First State Bank, Over- (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA re- ton, Texas ("Overton Bank"), and Lindale State quires the federal financial supervisory agencies to Bank, Lindale, Texas ("Lindale Bank")—have reencourage financial institutions to help meet the credit ceived satisfactory ratings from their primary regulaneeds of the local communities in which they operate, tor in their most recent examinations for CRA perforconsistent with the safe and sound operation of such mance.7 In addition, Longview Bank also received a institutions. To accomplish this end, the CRA requires satisfactory rating in its most recent examination for the appropriate federal supervisory authority to "as- CRA performance.8 sess the institution's record of meeting the credit needs of its entire community, including low- and B. Community Outreach Efforts moderate-income neighborhoods, consistent with the safe and sound operations of such institution," and to Overton Bank, Lindale Bank and Longview Bank all take that record into account in its evaluation of bank have engaged in various activities to ascertain and holding company applications.3 meet the credit needs of their delineated communities, In this regard, the Board has received comments including low- and moderate-income areas. For examfrom the Black State Employees Association of Texas, ple, the most recent CRA examination of Overton Inc., ("Protestant"), alleging generally that Overton Bank noted that the involvement of its directorate and and Longview and their subsidiary banks have not senior management in local civic, social and religious complied with the spirit of CRA and other consumer organizations has enabled bank management to better lending laws in conducting their lending and outreach discern community credit needs. As a result of these activities. In particular, Protestant alleges, on the activities, Overton Bank has made contributions to basis of data collected under the Home Mortgage area churches, including predominately minority Disclosure Act ("HMDA"), that the subsidiary banks member churches, and the bank has extended an of Overton and Longview discriminate against unsecured loan to a predominately minority member African-Americans and other ethnic minorities in their church in the bank's community. lending activities.4 The Board has carefully reviewed In the case of Longview Bank, examiners have the CRA performance records of Overton, Longview, commended its ascertainment efforts, including the and their subsidiary banks, the comments received participation of bank management and personnel in and responses to those comments, and all other rele- civic and charitable groups, as well as its sponsoring of vant facts, in light of the CRA, the Board's regula- various credit education seminars, including hometions, and the Statement of the Federal Financial buying seminars and seminars in managing personal Supervisory Agencies Regarding the Community Re- finances. A community focus group, comprised of investment Act ("Agency CRA Statement").5 individuals from various ethnic and racial backgrounds, meets regularly to provide Longview Bank with information on the loan and deposit needs of its delineated community. Additionally, Longview Bank has sought to ascertain the credit needs of minorities in its community by meeting with various individuals and 3. 12 U.S.C. § 2903. 4. Protestant also alleges that Overton and Longview engage in groups representing minority neighborhoods. discriminatory employment practices. Overton disputes this allegation and maintains that both organizations follow a policy of equal employment opportunity throughout their respective organizations. While the Board fully supports affirmative programs designed to promote equal 6. Id. at 13,745. opportunity in every aspect of a bank's personnel policies and 7. Overton Bank received a "satisfactory" rating from the Federal practices in the employment, development, advancement, and treat- Deposit Insurance Corporation ("FDIC") on February 18, 1991; ment of employees and applicants for employment, the Board believes Lindale Bank received a "satisfactory" rating from the FDIC on that the banks' general personnel practices are beyond the scope of February 22, 1991. factors that may be assessed under the CRA. 8. Longview Bank received a "satisfactory" rating from the FDIC 5. 54 Federal Register 13,742 (1989). on February 1, 1991. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 341 Longview Bank also trains bank employees in prac- identified 15 residences that could receive low interest tices designed to afford equal treatment to credit loans for home-improvement from a fund that Overton applicants. Lindale Bank also has sought to ascertain Bank has agreed to establish. Additionally, Overton and meet community credit needs through the direct Bank reports that 132 (or approximately 21 percent) of involvement of the bank's management and employees its 643 installment loans currently outstanding are to in various community and civic groups. As a result of minorities. these outreach efforts, Lindale Bank has provided In the most recent CRA examination of Lindale financing for several years to minority owned busi- Bank, examiners noted that this bank is committed to nesses and companies whose employees are predom- funding construction of low-income housing. For exinantly minorities. ample, Lindale Bank has provided interim financing to Amy House, Inc., for the construction of low-income C. HMDA Data and Lending Practices homes, and the bank is also providing financing for the purchase of vacant lots upon which several low- The Board has carefully reviewed the 1990 and 1991 income homes will be constructed. Examiners also HMDA data reported by Lindale Bank and Longview noted that Lindale Bank participates in loan programs Bank, in light of Protestant's comments.9 Because all sponsored by the Farmers Home Administration and banks are obligated to ensure that their lending prac- the Small Business Administration ("SBA"). tices are based on criteria that assure not only safe and In an effort to provide financing to potential homesound lending, but also assure equal access to credit buyers in low- and moderate-income areas, Longview by creditworthy applicants regardless of race, the Bank has worked closely with the City of Longview to Board is concerned when the record of an institution develop a program that: indicates disparities in lending to minority applicants. (1) Provides grants of up to $2,500 to cover closing The Board recognizes, however, that HMDA data costs; alone provide only a limited measure of any given (2) Offers below-market interest rates and requires institution's lending in its community. The Board also only a 5 percent down payment; and recognizes that HMDA data have limitations that (3) Allows applicants to establish a favorable credit make the data an inadequate basis, absent other infor- history through non-traditional credit references mation, for conclusively determining whether an insti- such as statements from previous landlords and tution has engaged in illegal discrimination on the basis utility companies. of race or ethnicity in making lending decisions. In this case, an analysis of the relevant HMDA data does not Longview Bank has closed several loans under this indicate that there are disparities in the rates of program since introducing it in August 1992. In addihousing-related loan applications, and in approvals tion, Longview Bank has been active in making SBAand denials that vary by racial or ethnic group in the guaranteed loans, and the bank was recently authoareas served by these banks. Moreover, the most rized to offer Federal Housing Administration loans to recent examinations for CRA performance conducted first-time homebuyers. In its most recent CRA examby bank supervisory agencies found no evidence of ination, examiners also found that the geographic illegal discrimination or other illegal credit practices at distribution of the bank's credit applications, extenthe subsidiary banks of Overton and Longview. sions and denials demonstrates a reasonable penetra- The Board also notes that Overton and Longview tion of all segments of its local community, including have taken certain measures to make the housing- low- and moderate-income neighborhoods. related financing activities of their subsidiary banks more responsive to the credit needs of low- and D. Conclusion Regarding Convenience and moderate-income communities within their delineated Needs Factors service areas. For example, the president of Overton Bank serves as the chairman of the Neighborhood The Board has carefully considered the entire record Improvement Committee, a newly formed organiza- of this application, including the comments submitted tion that aims to identify substandard housing in the by Protestant, in reviewing the convenience and needs low- and moderate-income areas within Overton factor under the BHC Act. Based on a review of the Bank's delineated community and distribute funds to entire record of performance of Overton and the property owners. To date, this committee has Longview and their subsidiary banks, including the performance examinations by the banks' primary regulator, the Board believes that the efforts of Overton and Longview and their subsidiary banks to help meet 9. Because Overton Bank does not operate in a Metropolitan the credit needs of all segments of their delineated Statistical Area, it is not subject to HMDA reporting requirements. 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342 Federal Reserve Bulletin • April 1993 communities, including low- and moderate-income Orders Issued Under Section 4 of the Bank neighborhoods, are consistent with approval of this Holding Company Act application. Thus, based on all of the facts of record, the Board concludes that convenience and needs con- BB&T Financial Corporation siderations are consistent with approval of this appli- Wilson, North Carolina cation. Based on the foregoing, including the conditions and Order Approving Applications to Acquire a Savings commitments described in this Order and those made Association and to Engage in Consumer Lending in this application, and all the facts of record, the Activities Board has determined that this application should be, and hereby is, approved.10 The Board's approval is BB&T Financial Corporation, Wilson, North Carospecifically conditioned upon compliance by Overton lina ("BB&T"), a bank holding company within the with all the commitments made in connection with this meaning of the Bank Holding Company Act ("BHC application. The commitments and conditions relied Act"), has applied for the Board's approval under on by the Board in reaching this decision are deemed section 4(c)(8) of the BHC Act (12 U.S.C. to be conditions imposed in writing by the Board in § 1843(c)(8)) and section 225.23 of the Board's Regconnection with its findings and decision, and as such ulation Y (12 C.F.R. 225.23), to acquire indirectly may be enforced in proceedings under applicable law. First Financial Savings Bank, Inc., Kinston, North This approval is also conditioned upon Overton re- Carolina ("Savings Bank"),1 a state chartered savceiving all necessary Federal and state approvals. ings association, and also to engage in consumer This transaction should not be consummated before lending activities through a subsidiary of Savings the thirtieth calendar day following the effective date Bank.2 BB&T also has requested Board approval of this Order, or later than three months after the pursuant to section 5(d)(3) of the Federal Deposit effective date of this Order, unless such period is Insurance Act, 12 U.S.C. § 1815(d)(3)(A)(ii) (the "FDI Act"), as amended by the Federal Deposit extended for good cause by the Board or the Federal Insurance Corporation Improvement Act of 1991, Reserve Bank of Dallas, acting pursuant to delegated Pub. L. No. 102-242, § 501, 105 Stat. 2236, 2388 authority. (1991), to merge Savings Bank with and into Bank. By order of the Board of Governors, effective Section 5(d)(3) of the FDI Act requires the Board to February 22, 1993. follow the procedures and consider the factors set forth in the Bank Merger Act, 12 U.S.C. § 1828(c), Voting for this action: Chairman Greenspan and Governors Mullins, Angell, La Ware, Lindsey, and Phillips. Absent and in its evaluation of applications under section 5(d)(3) not voting: Governor Kelley. of the FDI Act.3 Notice of the applications, affording interested JENNIFER J. JOHNSON persons an opportunity to submit comments, has Associate Secretary of the Board been published (57 Federal Register 43,229 (1992)). As required by the Bank Merger Act, reports on the competitive effects of the mergers were requested 1. BB&T has proposed a two-step transaction to acquire Savings Bank. Savings Bank's parent company, First Fincorp, Inc., Kinston, North Carolina ("Fincorp"), a unitary savings and loan holding 10. Protestant has requested a public hearing or meeting on the company, would merge with and into BB&T. BB&T proposes to issues raised in its comments. Section 3(b) of the BHC Act does not operate Savings Bank as a savings association for a short period of require the Board to hold a hearing or meeting on an application unless time, and then merge Savings Bank with and into its subsidiary bank, the appropriate supervisory authority of the bank to be acquired Branch Banking and Trust Company, Wilson, North Carolina makes a timely written recommendation of denial of the application. ("Bank"). The merger of Savings Bank into Bank is subject to In this case, the Board has not received such a recommendation. approval by the Federal Deposit Insurance Corporation ("FDIC") Generally, under the Board's rules, the Board may, in its discretion, under the Federal Deposit Insurance Act and the Bank Merger Act. hold a public hearing or meeting on an application to clarify factual 12 U.S.C. §§ 1815(d)(3)(A)(i) and 1828(c). issues related to the application and to provide an opportunity for In connection with this proposal, Fincorp has issued to BB&T an testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The option to purchase, under certain circumstances, up to 24.9 percent of Board has carefully considered this request. In the Board's view, the outstanding common stock of Fincorp. The option will terminate Protestant has had ample opportunity to present written submissions, upon the occurrence of certain events. and Protestant has submitted substantial written comments that have 2. Savings Bank engages in consumer lending activities through City been considered by the Board. In light of these facts, the Board has Finance Company, Inc., Kinston, North Carolina. determined that a public hearing or meeting is not necessary to clarify 3. These factors include considerations relating to competition, the factual record in this application, or otherwise warranted in this financial and managerial resources, future prospects of the existing case. Accordingly, Protestant's request for a public hearing or meet- and proposed institutions, and the convenience and needs of the ing on this application is denied. communities to be served. 12 U.S.C. § 1828(c). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 343 from the United States Attorney General, the Office of this proposal, BB&T would become the largest of the Comptroller of the Currency, and the Federal depository institution8 in the Kinston banking market, Deposit Insurance Corporation. The time for filing controlling deposits of approximately $151.4 million, comments has expired, and the Board has considered representing approximately 31.1 percent of total dethe applications and all comments received in light of posits in depository institutions in the market ("marthe factors set forth in section 4(c)(8) of the BHC Act ket deposits").9 The Herfindahl-Hirschman Index and in the Bank Merger Act. ("HHI") would increase 357 points to 2392 in the The Board has determined that the operation of a Kinston banking market.10 savings association by a bank holding company is In order to mitigate the adverse competitive effects closely related to banking for purposes of section that would otherwise result from consummation of this 4(c)(8) of the BHC Act.4 In making this determina- proposal, BB&T has committed to divest a branch of tion, the Board required that savings associations Savings Bank with deposits of approximately acquired by bank holding companies conform their $11.7 million located in the Kinston banking market.11 direct and indirect activities to those permissible for Accounting for this divestiture, the HHI would inbank holding companies under section 4(c)(8) of the crease 219 points to 2254 in the Kinston banking BHC Act. BB&T has committed to conform all market. activities of Savings Bank to the requirements of In the Goldsboro banking market, BB&T would also section 4 of the BHC Act and Regulation Y.5 become the largest depository institution, controlling The Board previously has determined by regulation deposits of approximately $215.6 million, representing that the consumer lending activities that BB&T approximately 29.6 percent of total market deposits. proposes to conduct are closely related to banking The HHI would increase by 204 points to 1823. Nine for purposes of section 4(c)(8) of the BHC Act.6 depository institutions would remain in the market, BB&T proposes to conduct these activities through including the six largest commercial banking organiza- Savings Bank in accordance with the Board's regu- tions in North Carolina, and numerous potential comlations. petitors may enter the market due to North Carolina statutes permitting statewide branching and reciprocal Competitive Considerations regionwide interstate acquisitions. In the Winston- Under section 4(c)(8) of the BHC Act and under the Bank Merger Act, the Board is required to consider 8. In this context, depository institutions include commercial banks, the competitive effects of this transaction. BB&T and savings banks, and savings associations. Market share data before Savings Bank compete directly in the following bank- consummation are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has ing markets in North Carolina: Kinston, Goldsboro, indicated that thrift institutions have become, or have the potential to Winston-Salem, and Carteret.7 Upon consummation become, significant competitors of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Because the deposits of Savings Bank will be transferred to a commercial bank under this 4. See 12 C.F.R. 225.25(b)(9). proposal, those deposits are included at 100 percent in the calculation 5. Savings Bank engages through subsidiaries in insurance agency of pro forma market share. See Norwest Corporation, 78 Federal activities and real estate activities that would not be permissible for a Reserve Bulletin 452 (1992); First Banks, Inc.,, 76 Federal Reserve bank holding company under the BHC Act. BB&T has committed to Bulletin 669, 670 n.9 (1990). terminate all impermissible insurance and real estate activities within 9. Market deposit data are as of June 30, 1991. two years of consummation of the proposal. During this two-year 10. Under the revised Department of Justice Merger Guidelines, period, BB&T has also committed to limit Savings Bank's insurance 49 Federal Register 26,823 (June 29, 1984), a market in which the activities to renewals of existing policies and not to begin or enter into post-merger HHI is above 1800 is considered to be highly concenany new real estate activities or projects. Savings Bank's remaining trated. In such markets, the Justice Department is likely to challenge nonbanking subsidiaries, First Fin, Inc., (which engages in disposition a merger that increases the HHI by more than 50 points. The Justice of property acquired by Savings Bank through foreclosure) and Department has informed the Board that a bank merger or acquisition Forsyth Financial Services, Inc., (which formerly engaged in real generally will not be challenged (in the absence of other factors estate activities and is currently inactive), both located in Kinston, indicating anticompetitive effects) unless the post-merger HHI is at North Carolina will be dissolved shortly after consummation. least 1800 and the merger increases the HHI by more than 200 points. 6. See 12 C.F.R. 225.25(b)(1). The Justice Department has stated that the higher than normal HHI 7. The Kinston banking market is approximated by Lenoir County thresholds for screening bank mergers for anticompetitive effects (excluding the town of LaGrange), the southern portion of Greene implicitly recognize the competitive effect of limited-purpose lenders County (including the towns of Hookerton and Snow Hill), and the and other non-depository financial entities. western half of Jones County; the Goldsboro Ranally Metro Area 11. BB&T has entered into a binding agreement with a third party ("RMA") banking market is approximated by Wayne County and the purchaser of the branch to be divested, and has committed to town of LaGrange; the Winston-Salem RMA banking market is complete the divestiture within six months after consummation of the approximated by Forsyth County, the southern half of Stokes County, proposal. If BB&T is unable to complete the divestiture within this the northeastern corner of Davie County, and the northwest portion of time, BB&T will transfer the branch to an independent trustee with Davidson County; and the Carteret banking market is approximated instructions to sell the branch promptly. See, e.g., Integra Financial by Carteret County, Craven County, Jones County, and Pamlico Corporation, 78 Federal Reserve Bulletin 623, 624 n.9 (1992); First County, all in North Carolina. Hawaiian, Inc., 11 Federal Reserve Bulletin 52 (1991). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

344 Federal Reserve Bulletin • April 1993 Salem and Carteret banking markets, the HHI in- (2) BB&T and Bank currently meet and upon crease would not exceed Department of Justice guide- consummation of the proposed transaction will lines.12 continue to meet, all applicable capital standards; In light of the relatively small increases in concen- and tration, the divestiture proposed in this case, the (3) Since Savings Bank is located in North Carolina competition offered by other depository institutions, and is merging with a North Carolina savings assothe number of competitors remaining in these markets, ciation, the proposed transaction would comply and the ease of entry into these markets through with the Douglas Amendment if Savings Bank were interstate regional acquisitions and statewide branch- a state bank that BB&T was applying to acquire ing under North Carolina law, and all of the facts of directly. See 12 U.S.C. § 1815(d)(3). record, the Board concludes that consummation of this proposal would not result in any significantly Based on the foregoing and all the facts of record, adverse effect on competition in the Kinston, Golds- the Board has determined that the applications boro, Winston-Salem, or Carteret banking markets, or should be, and hereby are, approved. The Board's in any other relevant banking market. approval of this proposal is specifically conditioned on compliance by BB&T with the commitments Other Considerations made in connection with its applications, as supplemented, including compliance with BB&T's divesti- The record does not indicate that consummation of ture commitments within the prescribed time perithis proposal is likely to result in any significantly ods. The commitments and conditions relied on by adverse effects, such as undue concentration of re- the Board in reaching this decision are deemed to sources, decreased or unfair competition, conflicts of be conditions imposed in writing by the Board in interests, or unsound banking practices that are not connection with its findings and decision, and as likely to be outweighed by the public benefits of this such may be enforced in proceedings under applicaproposal. Accordingly, the Board has determined that ble law. This approval is also conditioned upon the balance of public interest factors it must consider BB&T's receiving all necessary federal and state under section 4(c)(8) of the BHC Act is favorable and approvals. consistent with approval of BB&T's application to The Board's determination also is subject to all of acquire Savings Bank and to engage in consumer the conditions set forth in Regulation Y, including lending activities. those in sections 225.4(d) and 225.23(b)(3), and to the Additionally, the financial and managerial resources Board's authority to require modification or terminaand future prospects of BB&T and its bank subsidiar- tion of the activities of a bank holding company ies and Savings Bank are consistent with approval. or any of its subsidiaries as the Board finds necessary Considerations relating to the convenience and needs to assure compliance with, and to prevent evasion of the communities to be served are also consistent of, the provisions and purposes of the BHC Act and with approval of this application under the factors the Board's regulations and Orders issued thereunconsidered under the Bank Merger Act. der. The Board has also considered the special factors it The merger of Savings Bank with and into Bank must review under section 5(d)(3) of the FDI Act. In shall not be consummated before the thirtieth calendar this regard, the record in this case reflects that: day following the effective date of this Order, and the (1) The transaction will not result in the transfer of acquisition of Savings Bank and the nonbanking comany federally insured depository institution's federal panies of Savings Bank shall not be consummated later deposit insurance from one federal deposit insur- than three months after the effective date of this ance fund to the other; Order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Richmond, pursuant to delegated authority. By order of the Board of Governors, effective February 22, 1993. 12. BB&T would become the ninth largest depository institution in the Winston-Salem banking market, controlling approximately $117.8 million in deposits, representing approximately 2.1 percent of Voting for this action: Chairman Greenspan and Governors market deposits, and the third largest depository institution in the Mullins, Angell, LaWare, Lindsey, and Phillips. Absent and Carteret banking market, controlling approximately $82.5 million in not voting: Governor Kelley. deposits, representing approximately 20.8 percent of market deposits. The HHI would decrease by 42 points to 3973 in the Winston-Salem JENNIFER J. JOHNSON banking market, and would increase by 47 points to 2618 in the Carteret banking market. Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 345 The Long-Term Credit Bank of Japan, Limited swap activities in accordance with all of the provisions Tokyo, Japan and conditions set forth in these orders and the Board's regulations. Order Approving Application to Engage in Various In order to approve this application, the Board is Interest Rate and Currency Swap Activities required to determine that the performance of the proposed activities by LTCB "can reasonably be The Long-Term Credit Bank of Japan, Limited, expected to produce benefits to the public . . . that Tokyo, Japan ("LTCB"), a bank holding company outweigh possible adverse effects, such as undue within the meaning of the Bank Holding Company Act concentration of resources, decreased or unfair com- ("BHC Act"), has applied under section 4(c)(8) of the petition, conflicts of interests, or unsound banking BHC Act (12 U.S.C. § 1843(c)(8)) to engage de novo practices." 12 U.S.C. § 1843(c)(8). through its subsidiaries, Greenwich Capital Deriva- Companies appear to be capable of managing the tives, Inc., and Greenwich Capital Markets, Inc., both risks associated with the proposed activities. LTCB, of Greenwich, Connecticut ("Companies"), in the which has extensive experience in lending and financfollowing activities: ing services worldwide, has undertaken to provide (1) Intermediating in the international swap markets credit screening for all potential counterparties of by acting as an originator and principal in interest Companies. In appropriate cases, Companies will obrate swap and currency swap transactions; tain a letter of credit on behalf of, or collateral from, a (2) Acting as an originator and principal with respect counterparty. In addition, Companies will establish to certain interest rate and currency risk-manage- separate credit risk exposure limits for each swap ment products such as caps, floors and collars, as counterparty. Companies will monitor this exposure well as options on swaps, caps, floors and collars on an ongoing basis, in the aggregate and with respect ("swap derivative products"); to each counterparty. Senior management will be (3) Acting as a broker or agent with respect to the periodically informed of the potential risk to which foregoing transactions or instruments; and Companies are exposed. (4) Acting as adviser to institutional customers re- In order to manage the risk associated with adverse garding financial strategies involving interest rate changes in interest or currency exchange rates ("price and currency swaps and swap derivative products. risk"), Companies will seek to match all the swaps and related instruments in which it is principal and will Notice of the application, affording interested per- hedge any unmatched positions pending a suitable sons an opportunity to submit comments, has been match. Companies will not enter into unmatched or published (54 Federal Register 7030 (1990)). The time unhedged swaps for its own account for speculative for filing comments has expired, and the Board has purposes. Companies' managements will set absolute considered the application and all comments received limits on the level of risk to which their swap portfolios in light of the factors set forth in section 4 of the BHC may be exposed. Companies' exposure to price risk Act. will be monitored by both business management and With total consolidated assets equivalent to approx- internal auditing personnel to guarantee compliance imately $290.8 billion, LTCB is the 21st largest bank- with the risk limitations imposed by management. ing organization in the world.1 In the United States, Auditing personnel will report directly to senior man- LTCB owns a bank subsidiary in New York, New agement to ensure that any violations of portfolio risk York; an agency in Los Angeles, California; and limitations are reported and corrected. With respect to branches in New York, New York; and Chicago, the risk associated with the potential for differences Illinois. Companies engage in a variety of nonbanking between the floating rate indices on two matched or activities, including underwriting and dealing in cer- hedged swaps ("basis risk"), Companies' managetain bank-ineligible securities to a limited extent. ments will impose absolute limits on the aggregate The Board previously has determined by order or basis risk to which Companies' swaps portfolios may regulation that the proposed activities are closely be exposed. If the level of risk threatens to exceed the related to banking and permissible for bank holding limits at any time, Companies will actively seek to companies within the meaning of section 4(c)(8) of the enter into matching transactions for its unmatched, BHC Act.2 LTCB has committed to engage in these hedged positions. Companies' internal auditing staff, together with management, will monitor compliance 1. Asset and ranking data are as of September 30, 1992. 2. See, e.g., The Sanwa Bank, Limited, 77 Federal Reserve Bulletin (1990); The Sumitomo Bank, Limited, 75 Federal Reserve Bulletin 582 64 (1991); The Fuji Bank, Limited, 76 Federal Reserve Bulletin 768 (1989). See also 12 C.F.R. 225.25(b)(4). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

346 Federal Reserve Bulletin • April 1993 with the management-imposed basis risk limits.3 In meet applicable risk-based capital standards under the addition, Companies intend to minimize operations Basle Accord. The Board has also considered that this risk through the recruitment and training of an expe- proposal requires a de minimis capital investment. rienced back-office support staff and the use of a Based on all the facts of record, the Board concludes separate operational and data processing structure for that financial considerations are consistent with approcessing swap and hedging transactions. proval of this application. The managerial resources of In order to minimize any possible conflicts of inter- LTCB are also consistent with approval. ests between Companies' roles as a principal or broker Consummation of the proposal would provide added in swap transactions and their roles as advisor to convenience to LTCB's customers. In addition, the potential counterparties, Companies will disclose to Board expects that the de novo entry of LTCB into the each customer the fact that Companies may have an market for these activities would increase the level of interest as a counterparty principal or broker in the competition among providers of these services. Accourse of action ultimately chosen by the customer. cordingly, the Board has determined that the perfor- Also, in any case in which Companies have an interest mance of the proposed activities by LTCB can reasonin a specific transaction as an intermediary or princi- ably be expected to produce benefits to the public. pal, Companies will advise its customer of that fact Under the framework established in this and prior before recommending participation in that transac- decisions, consummation of this proposal is not likely tion.4 In addition, Companies' advisory services will to result in any significant adverse effects, such as be offered only to sophisticated institutional customers undue concentration of resources, decreased or unfair who would be unlikely to place undue reliance on competition, conflicts of interests, or unsound banking investment advice received and better able to detect practices that are not outweighed by these benefits. investment advice motivated by self-interest.5 LTCB Based on the above and all the facts of record, the has committed to conduct its financial advisory activ- Board has determined that the balance of public interities in accordance with Regulation Y.6 est factors it must consider weigh in favor of approval In every case involving a nonbanking acquisition by of this proposal. On this basis, the Board has detera bank holding company under section 4 of the BHC mined to, and hereby does, approve the application Act, the Board considers the financial condition and subject to the commitments made by LTCB, as well as resources of the applicant and its subsidiaries and the all the terms and conditions set forth in this order and effect of the transaction on these resources.7 LTCB's in the above-noted Board orders that relate to these consolidated tier 1 and total risk-based capital ratios activities. The Board's determination is also subject to all the conditions set forth in Regulation Y, including those in sections 225.4(d) and 225.23(b), and to the 3. In addition to price and basis risk, the value of a swap option is Board's authority to require modification or terminasubject to market expectations of the future direction and rate of change in interest rates, or volatility risk. Company's management tion of the activities of a bank holding company or any will impose absolute limits on the level of volatility risk to which of its subsidiaries as the Board finds necessary to Company's swap portfolio may be exposed. assure compliance with, and to prevent evasion of, the 4. In any transaction in which Company arranges a swap transaction between an affiliate and a third party, the third party will be informed provisions of the BHC Act and the Board's regulations that Company is acting on behalf of an affiliate. and orders issued thereunder. The commitments and 5. LTCB defines an institutional customer as: (A) A bank (acting in an individual or fiduciary capacity), a savings conditions relied on by the Board in this case are and loan association, an insurance company, a registered invest- conditions imposed in writing by the Board in connecment company under the Investment Company Act of 1940, or a tion with its findings and decisions and may be encorporation, partnership, trust, proprietorship, organization or institutional entity that regularly engages in swaps or swap derivative forced in proceedings under applicable law. products transactions; This transaction shall not be consummated later (B) An employee benefit plan with assets exceeding $1 million or than three months after the effective date of this whose investment decisions are made by a bank, insurance company or investment advisor registered under the Investment Advis- Order, unless such period is extended for good cause ers Act of 1940; by the Board or by the Federal Reserve Bank of New (C) A natural person whose individual net worth (or joint net worth York, pursuant to delegated authority. with his or her spouse) at the time of receipt of Company's services exceeds $1 million; By order of the Board of Governors, effective (D) A broker-dealer or options trader registered under the Securities February 16, 1993. Exchange Act of 1934; or other securities, investment or banking professional; (E) Any government or government entity; or (F) An entity all of the equity owners of which are institutional Voting for this action: Chairman Greenspan and Governors customers. Mullins, Angell, Kelley, LaWare, Lindsey, and Phillips. 6. See e.g. 12 C.F.R. 225.25(b)(4)(vi)(C). 7. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve JENNIFER J. JOHNSON Bulletin 155 (1987). Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 347 The Long-Term Credit Bank of Japan, Limited comments received in light of the public interest Tokyo,Japan factors set forth in section 4(c)(8) of the BHC Act. Applicant, with total consolidated assets equivalent to approximately $290.8 billion, is the 21st largest bank Order Approving an Application to Engage in in the world, and the 13th largest bank in Japan.1 Various Securities-Related Activities, Including Applicant is a registered bank holding company by Private Placement, "Riskless Principal", virtue of its ownership of LTCB Trust Company, New Full-Service Brokerage, and Futures Commission York, New York, a state-chartered trust company Merchant Activities, and Trading Foreign Exchange whose deposits are insured by the Federal Deposit Related Products Insurance Corporation. In addition, Applicant maintains branches in New York, New York, and Chicago, The Long-Term Credit Bank of Japan, Tokyo, Japan Illinois, and an agency in Los Angeles, California. ("Applicant"), a foreign bank subject to the provi- Applicant has received approval from the Federal sions of the Bank Holding Company Act ("BHC Reserve System to engage directly and through sub- Act"), has applied under section 4(c)(8) of the BHC sidiaries in a broad range of nonbanking activities. Act (12 U.S.C. § 1843(c)(8)), and section 225.23 of Company is engaged in limited bank-ineligible secuthe Board's Regulation Y (12 C.F.R. 225.23), to en- rities underwriting and dealing activities permissible gage de novo through its wholly owned subsidiaries, under section 20 of the Glass-Steagall Act (12 U.S.C. Greenwich Capital Markets, Inc., Greenwich, Con- § 377).2 In addition, Company has been designated a necticut ("Company"), and Greenwich Asset Man- primary dealer in United States government securities agement, Inc. ("Management Inc."), in the following by the Federal Reserve Bank of New York. Company securities-related activities: also is, and will continue to be, a broker-dealer regis- (1) Acting as agent in the private placement of all tered with the Securities and Exchange Commission types of securities, including providing related ad- ("SEC"), an FCM registered with the Commodity visory services; Futures Trading Commission ("CFTC"), and a mem- (2) Buying and selling all types of securities on the ber of the National Association of Securities Dealers order of investors as a "riskless principal"; ("NASD"). Accordingly, Company is subject to the (3) Providing securities brokerage and related in- record-keeping, reporting, fiduciary standards, and vestment advisory services on a combined basis other requirements of the Securities Exchange Act of ("full-service brokerage activities") pursuant to 1934 (15 U.S.C. § 78c et seq.), the Commodity Exchange Act (7 U.S.C. § 1 et seq.), the SEC, the section 225.25(b)(15) of the Board's Regulation Y CFTC, and the NASD. Management Inc. is an invest- (12 C.F.R. 225.25(b)(15)) to institutional and retail ment advisor registered under the Investment Advicustomers, in conjunction with Company's previsors Act of 1940 (15 U.S.C. § 80b-l et seq.), and a ously approved portfolio investment advisory activ- CTA registered under the Commodity Exchange Act.3 ities. Management Inc. provides investment advice with (4) Trading foreign exchange forward, futures, oprespect to the purchase and sale of futures contracts tions, and options on futures transactions for Comand options on futures contracts in accordance with pany's own account for purposes other than hedgsection 225.25(b)(19) of the Board's Regulation Y ing, in combination with Company's previously (12 C.F.R. 225.25(b)(19)). approved trading and investment advisory activities in foreign exchange-related products for non-affiliated customers; and Private Placement and "Riskless Principal" (5) Acting as a futures commission merchant Activities ("FCM") in the execution and clearance on major commodity exchanges of the futures contracts and Private placement involves the placement of new options on futures contracts set forth in the Appen- issues of securities with a limited number of sophistidix, and providing investment advice as an FCM or cated purchasers in a non-public offering. A financial a commodity trading advisor ("CTA") with respect to such contracts. 1. Data are as of September 30, 1992. Notice of the application, affording interested per- 2. Company may underwrite and deal in municipal revenue bonds, 1-4 family mortgage-related securities, commercial paper, and sons an opportunity to submit comments on the pro- consumer-receivable-related securities. posal, has been published (57 Federal Register 19,623 3. Both Company and Management Inc. are wholly owned subsidiaries of Greenwich Capital Holdings, a non-operating Delaware (1992)). The time for filing comments has expired, and holding company that is a direct, wholly owned subsidiary of Applithe Board has considered the application and all cant. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

348 Federal Reserve Bulletin • April 1993 intermediary in a private placement transaction acts placement and "riskless principal" activities in a solely as an agent of the issuer in soliciting purchasers, manner consistent with the limitations, methods, and and does not purchase the securities and attempt to procedures established by the Board in prior orders,7 resell them. Securities that are privately placed are not as modified to reflect Applicant's status as a foreign subject to the registration requirements of the Securi- bank.8 ties Act of 1933, and are offered only to financially sophisticated institutions and individuals and not to Full-Service Brokerage Activities the public generally. Applicant has committed that Company will not privately place registered securities, The Board recently amended its Regulation Y to and will only place securities with "institutional cus- permit bank holding companies, subject to certain tomers" as that term is defined in section 225.2(g) of restrictions, to engage in full-service brokerage acthe Board's Regulation Y (12 C.F.R. 225.2(g)). tivities for institutional and retail customers, having "Riskless principal" is the term used in the secu- previously determined, by order, that these activities rities business to refer to a transaction in which a are closely related to banking within the meaning of broker-dealer, after receiving an order to buy (or sell) section 4(c)(8) of the BHC Act.9 Applicant has coma security from a customer, purchases (or sells) the mitted to conduct its proposed full-service brokerage security for its own account to offset a contempora- activities in accordance with Regulation Y. Moreneous sale to (or purchase from) the customer.4 over, in any transaction in which Company provides "Riskless principal" transactions are understood in full-service brokerage services with respect to secuthe industry to include only transactions in the rities that Company may hold as a principal in secondary market. Thus, Applicant proposes that connection with its authorized underwriting and Company would not act as a "riskless principal" in dealing activities, Company will provide full and selling securities at the order of a customer that is the appropriate disclosure of its interest in the transacissuer of the securities to be sold, or in any transac- tion, as required by the securities laws, NASD, and tion where Company has a contractual agreement to fiduciary principles.10 place the securities as agent of the issuer. Company also would not act as a "riskless principal" in any transaction involving a security for which it makes a 7. Id. market. 8. See Sumitomo Bank, Limited, 77 Federal Reserve Bulletin 339 (1991); Creditanstalt-Bankverein, 77 Federal Reserve Bulletin 183 The Board previously has determined that, subject (1991); The Royal Bank of Scotland Group PLC, 76 Federal Reserve to a number of prudential limitations that address the Bulletin 866 (1990). potential for conflicts of interests, unsound banking As detailed more fully in these orders, in addition to the commitments imposed by the Board in connection with underwriting and practices, and other adverse effects, the proposed dealing in securties, Applicant has made a number of commitments private placement and riskless principal activities are regarding the conduct of this activity. In particular, Applicant has closely related to banking within the meaning of committed that Company will maintain specific records that will clearly identify all "riskless principal" transactions, and that Comsection 4(c)(8) of the BHC Act.5 In those orders, the pany will not engage in any "riskless principal" transactions for any Board also found that acting as agent in the private securities carried in its inventory. When acting as a "riskless principal", Company will only engage in transactions in the secondary placement of securities, and purchasing and selling market, and not at the order of a customer that is the issuer of the securities on the order of investors as a "riskless securities to be sold; will not act as "riskless principal" in any principal", do not constitute underwriting and deal- transaction involving a security for which it makes a market; and will not hold itself out as making a market in the securities that it buys and ing in securities for purposes of section 20 of the sells as a "riskless principal". Moreover, Company will not engage in Glass-Steagall Act (12 U.S.C. § 377), and that rev- "riskless principal" transactions on behalf of its foreign affiliates that engage in securities dealing activities outside the United States and enue derived from such activities is not subject to the will not act as "riskless principal" for registered investment company 10 percent revenue limitation on underwriting and securities. In addition, Company will not act as a "riskless principal" dealing in ineligible securities.6 In order to address with respect to any securities of investment companies that are advised by Applicant or any of its affiliates. the potential for conflicts of interests, unsound bank- With regard to private placement activities, Applicant has commiting practices, or other adverse effects, Applicant has ted that Company will not privately place registered investment committed that Company will conduct its private company securities or securities of investment companies that are advised by Applicant or any of its affiliates, and will abide by the other restrictions discussed in the above orders. 9. See 12 C.F.R. 225.25(b)(15). 10. In this regard, Applicant has committed that Company will 4. See Securities and Exchange Commission Rule 10b-10. 17 C.F.R. inform its customers at the commencement of the relationship that, as 240.10b-10(a)(8)(i). a general matter, Company may be a principal or may be engaged in 5. See J.P. Morgan & Company Incorporated, 76 Federal Reserve underwriting with respect to, or may purchase from an affiliate, those Bulletin 26 (1990); Bankers Trust New York Corporation, 75 Federal securities for which brokerage and advisory services are provided. At Reserve Bulletin 829 (1989). the time any brokerage order is taken, or any advisory services are 6. Id. provided, the customer will be informed (usually orally) whether Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 349 Trading in Foreign Exchange Related Products processing, reporting, and supervision of foreign exchange transactions. Company also has the opera- Applicant proposes that Company engage in trading tional, accounting, and control systems in place to for its own account in foreign exchange forward, monitor positions resulting from trading in the profutures, options, and options on futures transactions posed foreign exchange-related contracts. Applicant for purposes other than hedging, in combination with also has indicated that the proposed activities will be Company's previously approved trading and invest- monitored in connection with the overall risk management advisory activities in foreign exchange-related ment and monitoring of Company's primary business products for non-affiliated customers.11 The Board activities, that the proposed foreign exchange activipreviously has determined that an FCM trading for- ties would bear a reasonable relationship to the size of eign exchange-related products for its own account Company's securities portfolio, and that revenues for purposes other than hedging is an activity closely generated from Company's present and proposed forrelated to banking for purposes of section 4(c)(8) of eign exchange-related futures activities are expected the BHC Act.12 Applicant also proposes that Man- to represent less than one percent of Company's total agement Inc. provide investment advisory services gross revenues. to non-affiliated customers with respect to the foreign As a primary dealer, Company also is subject to exchange-related products that Company would the regular review and reporting requirements of the trade for its own account for purposes other than Federal Reserve Bank of New York. Moreover, in hedging.13 order to address the potential for conflicts of inter- Company's broad experience in foreign exchange- ests, unsound banking practices, or other adverse related activities indicates that Company would have effects, Applicant has committed that Company will the expertise to engage in the proposed activities. As a conduct these trading activities in a manner consisprimary dealer and a registered FCM, Company has tent with the limitations, methods, and procedures developed broad experience in the execution of for- previously established by the Board.14 Accordingly, eign exchange futures transactions, including the trad- the Board finds that these controls and limitations ing and monitoring of futures and options positions. should ensure prudent operations, minimize any po- Company maintains internal financial and audit con- tential financial risks, and lessen the possibility of trols, reporting personnel, experienced management and support staff, and sophisticated computer support and operational procedures in order to facilitate the 14. In this regard, Applicant has made the following commitments: (1) Company will adopt and periodically review and revise written policies, position limits, internal review procedures and financial controls regarding its trading of foreign exchange forward, futures, options, and options on futures contracts for its own account; Company is acting as agent or principal with respect to a security. (2) Management of Company will review its foreign exchange- Confirmations sent to customers also will state whether Company is related futures activities on a regular basis, and the internal audit acting as agent or principal. See PNC Financial Corp., 75 Federal department will review such activities regularly to ensure confor- Reserve Bulletin 396 (1989). mity with established policies and position limits; 11. Company also trades for its own account in foreign exchange (3) Company will not engage in pit arbitrage activities; and foreign exchange forward, options, futures, and options on (4) Floor traders will not have discretion to execute trades other futures contracts for risk-reduction purposes in accordance with than in accordance with Company's instructions, and will be section 225.142 of the Board's Regulation Y (12 C.F.R. 225.142). authorized to trade only within position limits established by senior Company proposes to provide certain advisory services to non- management; affiliated customers with respect to the foreign exchange-related (5) Company will not engage, without prior Board approval, contracts that Company proposes to trade for its own account for in market-making or specialist activities; and purposes other than hedging. These advisory services, however, will (6) Company will submit quarterly reports to the Federal Reserve be limited to discussions regarding current market conditions, and will Bank of New York indicating: not be provided on a separate fee basis. Moreover, Company will not (i) the total revenue derived from, and the trading volume of, its recommend that a customer purchase or sell particular instruments or foreign exchange activities, contracts. (ii) foreign exchange risk position limits relative to overall risk 12. See The Bank of Tokyo, Ltd., 76 Federal Reserve Bulletin 654 position limits, and (1990); The Hongkong and Shanghai Banking Corporation, 75 Fed- (iii) the value of open foreign exchange trading positions (Comeral Reserve Bulletin 217 (1989). pany may use existing management reports to provide such 13. The Board previously has determined that an affiliate of an FCM information); engaged in trading foreign exchange-related products for its own (7) Applicant and Company will not, without prior Board approval, account for purposes other than hedging may provide investment advise third parties regarding foreign exchange forward, futures, advisory services to non-affiliated customers with respect to those options, and options on futures transactions; and same exchange-related products. See The Sanwa Bank, Limited, 77 (8) Company will make prior disclosure of the fact that Company Federal Reserve Bulletin 64 (1991). Applicant has committed that trades foreign exchange for its own account before executing Management Inc. will make prior disclosure of the fact that Company foreign exchange contracts on behalf of customers; this disclosure trades foreign exchange and foreign exchange-related products for its will occur both at the beginning of the relationship with the own account before advising customers to purchase or sell foreign customer and upon confirmation of each order. exchange or foreign exchange-related contracts. This disclosure will See The Sanwa Bank, Limited, 77 Federal Reserve Bulletin 64 occur both at the beginning of the relationship with the customer, and (1991); The Hongkong and Shanghai Banking Corporation, 75 Fedupon confirmation by Management Inc. of any order. eral Reserve Bulletin 217 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

350 Federal Reserve Bulletin • April 1993 any conflicts of interest involved in the proposed The Board believes that Company has the skills and activities. experience necessary to engage in providing execution, clearance, and investment advisory services in Futures Commission Merchant Activities the proposed contracts. In addition, the proposed FCM activities involve comparable techniques, oper- Applicant has applied to provide, through Company, ations, and risks, and serve very similar purposes, as FCM execution, clearance, and advisory services for the FCM activities that previously have been apaffiliated and non-affiliated customers with respect to proved for Company. the futures contracts and options on futures contracts Applicant has committed to conduct its proposed set forth in the Appendix.15 Applicant also has applied FCM and CTA activities so as to be consistent with to act, through Management Inc., as a CTA for affili- the conditions and restrictions on FCM activities set ated and non-affiliated customers with respect to those forth in Regulation Y.19 The Board has taken into contracts. account and has relied upon these commitments, as The Board previously has determined, by regulation well as the regulatory framework established pursuant and order, that the execution and clearance of futures to law by the CFTC for the trading of futures, and the contracts and options on futures contracts for a variety conditions set forth in sections 225.25(b)(18) and of financial instruments, and the provision of invest- (b)(19) of the Board's Regulation Y (12 C.F.R. ment advisory services with respect to such contracts, 225.25(b)(18) and (b)(19)) with respect to the execuare activities that are closely related to banking within tion, clearance, and provision of investment advice as the meaning of section 4(c)(8) of the BHC Act.16 an FCM or CTA as to futures or options on futures Applicant seeks to engage in FCM execution, clear- contracts. ance and advisory activities with respect to 55 proposed futures contracts and options on futures con- Other Considerations tracts. The Board previously has approved such FCM activities in seven of these contracts,17 but has not In every case involving a nonbanking acquisition unpreviously approved these activities in the other der section 4 of the BHC Act, the Board considers the 48 contracts. financial condition and resources of Applicant and its Each of these proposed contracts are related to subsidiaries and the effect of the proposal on these financial instruments that are broad-based, widely resources.20 Applicant's consolidated tier 1 and total traded, and comparable to the contracts previously risk-based capital ratios meet applicable risk-based approved by the Board. Moreover, the execution and capital standards under the Basle Accord. In view of clearance of these proposed contracts will be gov- these and other facts of record, the Board has detererned by the same operations and procedures appli- mined that the financial factors are consistent with cable to other previously approved contracts.18 approval of this application. The managerial resources of Applicant and its subsidiaries also are consistent with approval. Consummation of the proposal would provide 15. Company is currently engaged in providing FCM execution, added convenience to Applicant's customers. In adclearance and investment advisory services to non-affiliated customers in accordance with sections 225.25(b)(18) and (19) of the Board's dition, the Board expects that the de novo entry of Regulations Y (12 C.F.R. 225.25(18) and (19)), and in providing such Applicant into the market for these services in the FCM services to affiliates in accordance with section 4(c)(1)(C) of the United States would increase the level of competi- BHC Act. 16. See, e.g.,12 C.F.R. 225.25(b)(18) and (19); Manufacturers Ha- tion among providers of these services. Accordingly, nover Corporation, 76 Federal Reserve Bulletin 114 (1990); The the Board has determined that the performance of the Hongkong and Shanghai Banking Corporation, 76 Federal Reserve proposed activities by Applicant can reasonably be Bulletin 770 (1990); Republic New York Corporation,63 Federal Reserve Bulletin 951 (1977). expected to produce public benefits. Under the 17. See National Westminster Bank PLC, 78 Federal Reserve Bulletin 953 (1992) (Long UK Government Bond Futures, 10-Year and 3-Year Australian Government Bond Futures, Australian All Ordinary Share Index Futures, 20-Year and 10-Year Japanese Government Company were to seek to become a clearing member of either Bond Futures, and Tokyo Stock Price Index Futures). exchange. 18. In considering Applicant's proposal to execute and clear con- 19. The requirement in sections 225.25(b)(18)(ii) and (b)(19)(i) of tracts on 10-Year Canadian Government Bond Futures on the Mon- Regulation Y (12 C.F.R. 225.25(b)(18)(ii) and (b)(19)(i)) that Company treal Stock Exchange ("MSE"), and contracts on U.S. Dollar Index not engage in trading for its own account except for hedging purposes Futures and Options on U.S. Dollar Index Futures on the Financial has been modified consistent with the authority granted above to Futures Exchange ("FNX"), the Board also has taken into account permit Company to trade foreign exchange for its own account for the rules of these exchanges, information provided by the SEC purposes other than hedging, subject to the limits discussed above. regarding the MSE, and information provided by the CFTC regarding 20. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve the FNX. The Board also has noted that neither the MSE nor the FNX Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve would require Applicant to provide a parent company guarantee if Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 351 framework established in this and prior Board deci- Options on 3-Year Interest Rate Swap Futures sions, consummation of this proposal is not likely to result in any significantly adverse effects, such as an Financial Futures Exchange undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound U.S. Dollar Index Futures banking practices that are not outweighed by these Options on U.S. Dollar Index Futures benefits. Based on the foregoing and all the facts of record, London International Financial Futures and Options the Board has determined to, and hereby does, Exchange approve the application subject to all of the terms and conditions set forth in this order, and in the ECU-CD Interest Rate Futures above-noted Board regulations and orders that relate ECU Bond Futures to these activities. The Board's determination is also Eurotrak 100 Stock Index Futures subject to all of the terms and conditions set forth in 3-Month Euro Swiss Franc CD Futures the Board's Regulation Y, including those in sections Options on 3-Month Euro Swiss Franc CD Futures 225.4(d) and 225.23(b), and to the Board's authority 3-Month Sterling Euro-CD Futures to require modification or termination of the activi- Options on 3-Month Sterling Euro-CD Futures ties of a bank holding company or any of its subsid- 3-Month Deutschemark Euro-CD Futures iaries as the Board finds necessary to assure compli- Options on 3-Month Deutschemark Euro-CD Futures ance with, and to prevent evasion of, the provisions 10-Year Japanese Government Bond Futures of the BHC Act, and the Board's regulations and Options on 10-Year Japanese Government Bond orders issued thereunder. The Board's decision is Futures specifically conditioned on compliance with all of the 10-Year German Government Bond Futures commitments made in this application, including the Options on 10-Year German Government Bond commitments discussed in this order and the condi- Futures tions set forth in the above-noted Board regulations Long UK Government Bond Futures and orders. These commitments and conditions shall Options on Long UK Government Bond Futures be deemed to be conditions imposed in writing by the Board in connection with its findings and decisions, Marche a Terme d'Instruments Financiers and may be enforced in proceedings under applicable law. French Franc PIBOR-CD Futures This transaction shall not be consummated later ECU Bond Futures than three months after the effective date of this MATIF French Stock Index Futures Order, unless such period is extended for good cause 3-Month Deutschemark Euro-CD Futures by the Board or by the Federal Reserve Bank of New Options on 3-Month Deutschemark Euro-CD Futures York, pursuant to delegated authority. 10-Year French Government Bond Futures By order of the Board of Governors, effective Options on 10-Year French Government Bond Futures February 16, 1993. Montreal Stock Exchange Voting for this action: Chairman Greenspan and Governors Mullins, Angell, Kelley, La Ware, Lindsey, and Phillips. 10-Year Canadian Government Bond Futures JENNIFER J. JOHNSON New York Futures Exchange Associate Secretary of the Board Appendix Commodity Research Bureau Index Futures Options on Commodity Research Bureau Index Chicago Board of Trade Futures 10-Year Japanese Government Bond Futures New Zealand Futures Exchange Options on 10-Year Japanese Government Bond Futures 5-Year New Zealand Government Bond Futures 5-Year Interest Rate Swap Futures Options on 5-Year New Zealand Government Bond Options on 5-Year Interest Rate Swap Futures Futures 3-Year Interest Rate Swap Futures 10-Year New Zealand Government Bond Futures Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

352 Federal Reserve Bulletin • April 1993 Options on 10-Year New Zealand Government Bond Armored Courier, Inc., East Moline, Illinois Futures ("MAC"), to engage in the following armored car 3-Month New Zealand Government Bill Futures activities: Options on 3-Month New Zealand Government Bill (i) Fully-insured transportation of cash, negotiable Futures instruments, securities, and valuables; collecting Barclay's Stock Index Futures currency and checks from commercial customers Options on Barclay's Stock Index Futures and nonbank financial institutions and transporting and depositing these collections at financial institu- Osaka Stock Exchange tions; and delivering cash, negotiable instruments, securities, and valuables to commercial customers Osaka 50 Stock Index Futures and nonbank financial institutions; (ii) Providing related services such as interbank Sydney Futures Exchange transfers, coin wrapping, change delivery, mail delivery, and payroll check cashing; and 10-Year Australian Government Bond Futures (iii) Providing incidental courier services as permit- Options on 10-Year Australian Government Bond ted under section 225.25(b)(10) of Regulation Y. Futures 3-Year Australian Government Bond Futures These activities would be performed in the Quad Cities Options on 3-Year Australian Government Bond market, comprising Rock Island County, Illinois and Futures Scott County, Iowa. With the exception of the pro- 3-Month Australian Government Bill Futures posed incidental courier services, these activities have Options on 3-Month Australian Government Bill not previously been approved by the Board for bank Futures holding companies. Australian All Ordinary Share Index Futures Options on Australian All Ordinary Share Index I. Background Futures In order for the Board to approve an application under Singapore International Monetary Exchange section 4(c)(8), the Board must find that two separate tests are met. The Board must first determine that, as 3-Month Euro-Yen CD Futures a general matter, the proposed activity is "closely related to banking." Second, the Board must deter- Tokyo Stock Exchange mine that the performance of the activity by the applicant bank holding company would be a "proper 20-Year Japanese Government Bond Futures incident" to banking, i.e., that the activity is likely to Tokyo Stock Price Index (TOPIX) Futures produce public benefits that outweigh possible adverse 10-Year Japanese Government Bond Futures effects. Options on 10-Year Japanese Government Bond Futures A. The Application Metrocorp, Inc. Metrocorp owns 100 percent of the common stock of East Moline, Illinois Metrobank, a state-chartered nonmember bank located in East Moline, Illinois, with assets of Metro Armored Courier, Inc. $232 million.1 Metrobank operates a number of auto- East Moline, Illinois matic teller machines ("ATMs") throughout the Illinois side of the Quad Cities market area. Order Denying Application to Engage in Armored In February 1983, Metrobank purchased and began Car Services using an armored van to service its expanding network of ATMs. The van made daily stops at each ATM Metrocorp, Inc., East Moline, Illinois ("Metrocorp"), location, collecting deposits, replenishing cash supa bank holding company within the meaning of the plies, and performing maintenance. These activities Bank Holding Company Act ("BHC Act"), has ap- did not use the full capacity of the van, so Metrobank plied, pursuant to section 4(c)(8) of the BHC Act began providing for-hire service of cash delivery and (12 U.S.C. § 1843(c)(8)) and section 225.23(a)(3) of the Board's Regulation Y (12 C.F.R. 225.23(a)(3)), for permission for its subsidiary, to be known as Metro 1. Data are as of September 30, 1992. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 353 pick-up for several credit unions and other commercial Practice for Hearings (12 C.F.R. Part 263 (1990)), was accounts. In May 1984, the Illinois Commissioner of held on June 16 and July 11, 1989, before an Admin- Banks and Trust Companies informed Metrobank that istrative Law Judge ("ALJ") appointed at the request its activities for third parties were inconsistent with of the Board.3 In a Recommended Decision dated the Illinois Banking Act, because they constituted January 23, 1990, the ALJ concluded that the prounauthorized branch banking, and the for-hire activi- posed armored car activities were not "closely related ties ceased.2 Although the Bank's ATM network has to banking" within the meaning of section 4(c)(8) of grown since that time, the armored van is in service the BHC Act, and recommended that the Board deny only about 60 percent of the time. the application. In light of his conclusion regarding the In order to better utilize its armored van, Metrocorp "closely related" issue, the ALJ declined to make any proposes to transfer ownership of the armored van to factual or legal determinations concerning the "proper a de novo subsidiary, MAC, and to make armored car incident" test or state branching laws. services available to the public on an explicit-fee basis. Following the receipt of exceptions to the Recom- In its application, Metrocorp made certain commit- mended Decision, the Board reviewed the entire ments aimed at minimizing possible conflicts of inter- record of the proceeding, and determined that the ALJ est and anti-competitive practices, similar to those erred in concluding that armored car services are not required of bank holding company-owned courier ser- "closely related to banking" under the relevant statvices. See 12 C.F.R. 225.129. Included among those ute, case law, and prior Board determinations. Accommitments was a representation that the armored cordingly, by Order dated June 18,1990 (the "Remand car subsidiary would operate as a separate profit Order"),4 the Board determined that the provision of center, and would not be subsidized in any way by the armored car services to the general public on a for-hire bank holding company or its banking subsidiaries. basis is an activity that is "closely related to banking or managing or controlling banks" within the meaning B. Initial Board Order of section 4(c)(8) of the BHC Act. The Board remanded the case to the ALJ for a recommended Notice of Metrocorp's application, affording inter- decision on the "proper incident" standard and other ested persons the opportunity to submit comments, unresolved issues, including the effect of state branchwas duly published in the Federal Register (53 Federal ing laws on the proposed activities.5 In view of the Register 50,292 (1988)). Following publication of no- passage of time since the application was filed, and tice of the application, the National Armored Car certain deficiencies then existing in the record, the Association ("Protestant") submitted comments in ALJ was ordered to address and, to the extent necesopposition to the application, and asked the Board to sary, reopen the record regarding, certain issues releorder a formal hearing. vant to the "proper incident" test.6 On May 10, 1989, the Board published an Order requiring a public formal administrative hearing on Metrocorp's proposal (54 Federal Register 20,200 (1989)). The Board directed that the issues to be considered at the hearing were whether the proposed armored car services are "so closely related to banking or managing or controlling banks as to be a proper 3. At the hearing, the ALJ granted motions to intervene in opposition to the application by Brink's Inc., Federal Armored Express, incident thereto," within the meaning of section Inc., and Independent Armored Car Operators Association (hereafter, 225.4(a) of Regulation Y and section 4(c)(8) of the with the National Armored Car Association, collectively referred to as BHC Act, and whether the proposed activities can "Protestants"). Federal Armored Express, Inc., subsequently withdrew its protest by letter dated October 26, 1990. reasonably be expected to produce benefits to the 4. Metrocorp, Inc., 76 Federal Reserve Bulletin 676 (1990). public that outweigh the possible adverse effects. In 5. Under the Board's regulations then applicable to this case, an administrative law judge was required to provide a recommended addition, the Board requested evidence on the risks decision with regard to these unresolved issues prior to a final involved in conducting the activity, the availability of determination by the Board. See 12 C.F.R. 263.11 (1990). Thus, a final insurance against such risks, and the issue of state disposition of Metrocorp's application was not possible at that juncture. branching restrictions. 6. The areas listed by the Board for which additional information A formal public administrative hearing, conducted was necessary included, among others, further information on pricing in accordance with the then-applicable Board Rules of in order to comply with Metrocorp's commitment not to subsidize the operations of MAC (the pricing information then part of the record suggested that Metrobank would pay more per pick-up than new customers on the existing route); projections that included marketing 2. The Illinois Commissioner determined that the provision of and advertising expenses, if any; and a precise breakdown of the armored car services for the bank's own operations was not prohibited services MAC would purchase from Metrobank and the projected by law. costs of these services. 76 Federal Reserve Bulletin at 681 n.34 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

354 Federal Reserve Bulletin • April 1993 C. The Supplemental Decision provide a definitive proposal on the basis of which the Board could make a determination under the proper In accordance with the Remand Order, a formal hear- incident test. The ALJ found that Metrocorp had ing (the "Remand Hearing") was held before the ALJ. offered only a skeletal structure and operating plan Additional evidence was received on the "proper that was fleshed out only to a limited extent at the incident" test and the state branching law issues, hearings. The ALJ stated that Metrocorp's response to through the submission of exhibits and testimony and possible adverse effects was simply to commit to through the participation of Metrocorp, Protestants, operate MAC in conformance with any restrictions the and Board Counsel.7 Following submission of post- Board might require to avoid such effects. hearing briefs and additional evidence in connection The ALJ further determined that on the record as with the state branching law issue, the ALJ issued his developed, Metrocorp had failed to show that the Supplemental Decision—On Remand ("Supplemen- performance of the proposed armored car services can tal Decision"). The Supplemental Decision again rec- reasonably be expected to produce benefits to the ommended denial of the application, and also denied public that outweigh possible adverse effects. With Protestants' request for partial attorneys' fees and respect to possible public benefits, the ALJ concluded expenses. Metrocorp, Board Counsel, and the Protes- that the proposal would produce internal gains in tants filed exceptions to various aspects of the Supple- efficiency for Metrocorp, but determined that on the mental Decision, and Metrocorp and Protestants filed record no presumption of increased competition rereplies to the exceptions. sulting from MAC's de novo entry into the activity could be supported on this record. II. The Proper Incident Test With regard to possible adverse effects, the ALJ ruled that the proposal would likely undermine the In order to find that the activity is a "proper incident" solvency of Metrobank. Finding that MAC would be to banking, section 4(c)(8) requires the Board to con- "a hollow corporate entity" that would rely on sider whether performance of an activity by a bank Metrobank as the "sole basis for funding the armored holding company affiliate can reasonably be expected car service," the ALJ concluded that Metrobank to produce benefits to the public, such as greater would be the "sole source of funds to offset potential convenience, increased competition, or gains in effi- losses and liabilities that may result from MAC's ciency, that outweigh possible adverse effects, such as operations." Supp. Dec. at 24. According to the ALJ, undue concentration of resources, decreased or unfair therefore, it would be the bank, and not the bank competition, or unsound banking practices.8 These holding company, whose assets would be at risk in the examples of benefits and adverse effects are "nonex- armored car operation. haustive,"9 and serve as illustrations of the kinds of Finally, the ALJ determined that the record is factors Congress has instructed the Board to consider. convincing that Metrocorp has not shown that the The burden of proof is upon the applicant in con- proposed activity, as currently structured, would be nection with section 4(c)(8) to establish that the non- lawful under the branch banking laws of Illinois and banking activity it proposes to conduct is not only Iowa, the states in which MAC proposes to operate. closely related to banking, but that it is a proper Metrocorp and Board Counsel have excepted to the incident thereto. E.g., Citicorp v. Board of Governors, ALJ's Supplemental Decision. Board Counsel and 589 F.2d 1182, 1190 (2d Cir.), cert, denied, 442 U.S. Metrocorp argue that the record is sufficient to show 929 (1979). that increases in efficiency, added convenience of In his Supplemental Decision, the ALJ first found service to armored car customers, and increased comthat under Regulation Y an applicant must submit petition would likely result from MAC's operations. evidence that the proposed activity meets the stan- With respect to possible adverse effects and the state dards of section 4(c)(8) of the BHC Act and that in this branching laws, Board Counsel and Metrocorp argue case Metrocorp's application and the record fail to that MAC could operate within sufficient commitments and restrictions, both as provided in the application and as would be required by the Board in its Order, so as to eliminate the risk of adverse effects and 7. At the Remand Hearing, all parties incorporated by reference their earlier submissions and testimony. As the Board noted in its render its operations acceptable to state authorities.10 Remand Order, "a substantial portion of the record is devoted to matters related to the 'proper incident' test." 76 Federal Reserve Bulletin at 680 (1990). 8. 12 U.S.C. § 1843(c)(8). 10. Protestants filed exceptions to two aspects of the ALJ's Sup- 9. Alabama Ass'n of Ins. Agents v. Board of Governors, 533 F.2d plemental Decision. First, they argued that because the activities as 224, 246 (5th Cir. 1976), modified on other grounds, 558 F.2d 729 proposed would violate state branching laws in Iowa and Illinois, they (1977), cert, denied, 435 U.S. 904 (1978). cannot be found to be a "proper incident" to banking. Second, they Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 355 Based on its review of the entire record of this would be offered to, or would apply to, nonaffiliated proceeding, including the transcript, exhibits, written companies. 12 U.S.C. § 371c-l(a)(l). testimony, rulings, and briefs filed in connection with the hearing, the Recommended Decision and the Sup- 1. MAC's Pricing Structure Violates Section 23B plemental Decision filed by the ALJ, the exceptions thereto and the responses to the exceptions, the Board First, the record shows that the proposed service by has determined that the record with respect to this MAC would cost Metrobank more than it is now application fails to support a finding, in this instance, paying for similar armored car services by an unaffilthat the performance of the proposed armored car iated provider. Under the proposal, Metrobank would activities by Metrocorp is a "proper incident" to pay MAC a flat per-stop fee, and an additional mileage banking or to managing or controlling banks. The fee based on the number of miles travelled to the Board therefore adopts the ALJ's recommendation to branch or ATM being serviced. The record demondeny the application. However, because the Board's strates, however, that Metrobank currently pays an decision is based on the narrow grounds explained unaffiliated armored car service a per-stop fee that is below, the Board is not addressing all of the issues lower than that proposed to be paid to MAC. In raised in the Supplemental Decision and the excep- addition, the record indicates that Metrobank pays no tions to that decision. Accordingly, to the extent they mileage fee to the unaffiliated carrier. Although are expressly incorporated in this Order, the Board MAC's higher fee would at times include additional adopts the findings, conclusions and recommendations services (such as ATM servicing) not now provided by of the Supplemental Decision as supported by the the contract carrier, the record indicates that at other evidence of record. times MAC would simply substitute for the pick-up and delivery services currently provided by the unaf- A. Violation of Section 23B filiated entity at a lower cost. It is evident, therefore, that in the case of these services Metrobank would not The entire record in this proceeding has been reviewed be obtaining services from MAC "on terms ... at least to determine whether there is sufficient evidence to as favorable to such bank ... as those prevailing for support a finding that Metrocorp's proposal would comparable transactions with or involving other nonresult in net benefits to the public. Based on this affiliated companies," as required by section 23B. review, it is evident that certain aspects of the present While there may be explanations for MAC's higher application would on their face violate the arm's- price that would justify it under the standards set forth length transaction requirement of section 23 B of the in section 23B, no such explanations appear in this Federal Reserve Act (12 U.S.C. § 371c-l) and that record, and the Board is constrained on this record to therefore the Board would be precluded on that basis conclude that the higher price results in a violation of from approving Metrocorp's application as currently section 23B. structured. Section 23B of the Federal Reserve Act requires 2. Metrobank's Provision of Back-Office Services that certain transactions between an insured bank, Violates Section 23B such as Metrobank, and its affiliates, such as MAC, be conducted on an arm's-length basis. Section 23B gov- Under Metrocorp's proposal, the bulk of MAC's operns any transaction in which an affiliate receives a fee erations, other than the armored car itself and its for its services to the bank or in which the bank drivers, would be provided by Metrobank and its furnishes services to the affiliate. Accordingly, any employees. MAC would lease a desk from Metrobank such transaction is permissible only if it is furnished: for use by the armored car guards and would use (A) On terms and under circumstances . . . that are Metrobank's office equipment for its operations. MAC substantially the same, or at least as favorable to would use Metrobank's employees for its billing and such bank . . . , as those prevailing at the time for accounting, auditing, recordkeeping, street inspeccomparable transactions with or involving other tions, compliance, and customer service functions. A nonaffiliated companies, or Metrobank employee would act as dispatcher and (B) In the absence of comparable transactions, on determine MAC's route. All of MAC's officers and terms and under circumstances . .. that in good faith directors would be officers and directors of Metrobank. All of MAC's operations, except the physical pick-ups and deliveries by the armored car, would be handled by employees of Metrobank. excepted to the ALJ's denial of their costs and fees incurred in In its prior Order in this matter, the Board specificonnection with the branching law issue. The fees issue is considered in the Appendix to this Order. cally called for additional information concerning Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

356 Federal Reserve Bulletin • April 1993 "precise breakdown of the services MAC will pur- The Board notes that Metrocorp has committed to chase from Metrobank and the projected costs of these operate MAC in a manner that complies with all services."11 Despite the fact that Metrobank has been applicable laws, including section 23B. In a number of operating its armored car for a number of years and cases that involved transactions subject to section thus has a basis on which to determine the costs of at 23B, the Board has approved applications based in least some of the services to be provided, Metrocorp part on the applicants' commitments to comply with has provided no detailed cost figures for the wide that section.13 Those cases, however, did not present variety of services Metrobank will provide to MAC. proposals that on their face violate section 23B. In Instead, Metrocorp proposes that MAC pay view of the clear concern expressed by the Board over Metrobank a fee of 15 percent of MAC's direct oper- the very matters that remain unresolved on the present ating expenses to cover all of the services provided by record, the Board does not believe that mere commit- Metrobank to MAC.12 Metrobank's Vice President of ments to operate in accordance with section 23B will Operations, who would be the de facto manager of suffice in this case. MAC, testified that there was no "factual basis" for The Board is also reluctant to impose conditions the 15 percent figure, but that it was "just an estimate" covering the costs and pricing of proposed services of the value of services provided by Metrobank. Rem. where, as here, the evidence submitted by Metrocorp Tr. at 57. in the record before the Board with regard to the Under section 23B, the provision of services by a specifics of the proposed operations of MAC, espebank to an affiliate must be paid for on an arm's-length cially the projections of MAC's expected costs and basis. This requires, where there are no comparable revenues, is exceptionally general and indefinite. transactions between a bank and a nonaffiliate, that the Metrocorp introduced projections of MAC's exbank's provision of services to its affiliate must be on pected costs and revenues, based on "full capacity," terms that in good faith would be offered to or would showing only a slight profit before taxes. Furthermore, apply to nonaffiliated companies. The Board finds that as the ALJ found, the projections are unusually vague Metrobank would not in good faith provide back office and speculative. services to an unaffiliated armored car company by Moreover, the credibility of those projections is charging a flat fee that had no factual basis and without significantly undermined by the fact that compliance determining the relationship of the fee to the actual with state bank branching laws is likely to increase costs of providing the services. costs substantially without resulting in a corresponding increase in revenue. The ALJ found that MAC's 3. The Violations of Section 23B Requires Denial of operations, as currently proposed, would violate state the Application as Currently Structured branching laws in the two states, Illinois and Iowa, in which MAC proposes to operate. The Board agrees Because the proposal would be inconsistent with the with Metrocorp and Board Counsel that nothing in the requirements of section 23B, the Board believes that it record shows that MAC is absolutely precluded by law is constrained to deny the application as currently from engaging in armored car activities in those states. structured. In the Board's view, a proposal to engage However, the structural changes required to permit in nonbanking activities pursuant to section 4(c)(8) will operation would undoubtedly increase MAC's costs. not produce net benefits to the public if it violates the Metrocorp's bank subsidiary is a state-chartered kind of statutory requirement, such as section 23B, nonmember bank subject to the laws of Illinois. Illinois that was specifically intended to prevent unsafe or law limits the number and location of branches by unsound banking practices when a bank affiliate en- state-chartered banks. Illinois Banking Act § 5(15), 111. gages in nonbanking activities. Although section 23B Ann. Stat. ch. 17, para. 311(15) (Smith-Hurd 1981 & was not explicitly addressed by the ALJ or by the Supp. 1992). Mobile branches are not authorized. parties in this proceeding, the issue of the cost of the Illinois law defines a "branch," with certain excepservices to be provided by Metrobank to MAC was tions not relevant here, as "any place of business of a expressly raised by the Board in its Remand Order and bank at which deposits are received, checks paid, or questions concerning the overall pricing structure of loans made."14 Illinois Banking Act § 2, 111. Ann. MAC's services were specifically considered during Stat. ch. 17, 11 302. It is clear that Metrocorp intends the Remand Hearing. Moreover, the facts of record showing the violations of section 23B are not disputed. 13. See, e.g., The Sumitomo Bank, Limited, 11 Federal Reserve Bulletin 339 (1991); The Dai-Ichi Kangyo Bank, Limited, 11 Federal 11. 76 Federal Reserve Bulletin at 681 n.34 (1990). Reserve Bulletin 184 (1991). 12. The desk and telephone would be subject to a separate lease 14. The definition is thus similar to that contained in the National payment to Metrobank. Bank Act, 12 U.S.C. § 36(f). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 357 that MAC will pick up funds from Metrobank custom- allows Metrobank to establish interstate branches, ers to be deposited at Metrobank.15 which would be violative of Iowa law." As noted earlier, the Illinois Commissioner of Banks While the Illinois Commissioner has not made a final and Trust Companies informed Metrobank in the determination as to the permissibility of MAC's 1980s that its armored car activities for third parties planned operations, it is clear that both the Commiswere inconsistent with the Illinois Banking Act, appar- sioner and the Iowa Banking Department have focused ently since the armored car would provide banking on the issue of the degree of connection between the services at locations where Metrobank was not per- bank and the affiliate in determining whether MAC mitted to have a branch. The current application is operates as an agent of the bank when it offers premised on the assumption that the separate corpo- off-premises banking services such as deposit taking rate status of MAC as a subsidiary of Metrobank's and check cashing.16 Thus, it would appear that in holding company would alter that result. order to satisfy the concerns of Illinois and Iowa Prior to the Initial Hearing, the Illinois Commis- authorities, MAC would have to revise its operations sioner was requested to comment on the application. substantially to assure a more complete separation of He concluded that he would not consider MAC's MAC's operations from those of the bank. operation to be a branch, based on the proposed Metrocorp does not contest the opinions of the operation described in the application and commit- Illinois and Iowa authorities. Rather, Metrocorp sugments made by Metrocorp to operate MAC as a gests that the Board grant conditional approval of the "separate and bona fide armored car subsidiary rather application subject to commitments and restrictions than as an agent" of a bank. designed to enforce the separation required by those Following the Remand Hearing, at which a repre- authorities. For example, Metrocorp has suggested sentative of the Illinois Commissioner testified and that the Board require that the majority of the Board of was apprised of additional information concerning the Directors of MAC not be officers or directors of the proposed operation, the General Counsel to the Illi- Bank; that no officers, managers, employees or other nois Commissioner submitted a second letter concern- personnel of MAC be employed by or leased from the ing the application. The letter stated that the Commis- Bank; and that Bank assets, equipment, and services sioner's office "does not have sufficient information to may be provided to MAC only on terms available to draw a conclusion as to whether the operation of the general public or on the basis of explicit, arm's- [MAC] would violate branching restrictions." The length, commercially reasonable terms. Metrocorp's Proposed Findings of Fact Nos. 75-79. letter set forth a number of areas of additional information needed to make such a determination, includ- These structural changes proposed by Metrocorp, ing the extent to which bank personnel are involved in and any others required by Illinois or Iowa authorities, MAC's operation, the manner in which MAC's route will necessarily increase the costs of MAC's operais established, the extent to which bank assets, equip- tions. There is no suggestion in the record, however, ment and services are available to MAC, and the that MAC's revenues will increase to cover these method of compensation for those assets, equipment, costs. The existing revenue projections already inservices, and personnel. clude customers in areas where branching laws might The General Counsel of the Iowa Division of Bank- preclude operations absent resort to expensive strucing has expressed even more serious reservations tural changes. This uncertainty counsels against a about MAC's operations in that state. Iowa law pro- conditional approval on the existing record. hibits persons from " engaging] in this state in the business of receiving money for deposit, [or] transact- B. Other Adverse Effects and Possible Public ing] Iowa law. Iowa Code Ann. § 524.107. Moreover, Benefits branching by Iowa banks is strictly limited in terms of location and number of offices. Iowa Code In view of the narrow grounds for decision in this case, Ann. §§ 524.1102, 524.1202. In a letter submitted after the Board need not reach the other factors listed in the Remand Hearing, the General Counsel opined that section 4(c)(8). Many of the findings and conclusions "due to the extreme dependency on and interrelation- of the ALJ regarding these factors have been excepted ship of Metro Armored Courier, Inc., and Metrobank, Metro Armored Courier, Inc., and Metrobank are, in reality, one and the same corporation, which indirectly 16. The same considerations have guided the Board in previous determinations of whether a bank affiliate is operating as a branch. See, e.g., Grandview Bank & Trust Co. v. Board of Governors, 550 F.2d 415, 417 (8th Cir. 1977); First State Bank of Clute v. Board of 15. According to the application, MAC will also "providfej related Governors, 553 F.2d 950 (5th Cir. 1977); Commercial Nat'l Bank v. services such as . . . payroll check cashing." Board of Governors, 451 F.2d 86, 90 (8th Cir. 1971). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

358 Federal Reserve Bulletin • April 1993 to by the parties. The Board need not reach these Access to Justice Act ("EAJA") and under certain issues in order to decide this case. Thus, as stated principles applicable injudicial proceedings.1 above, the Board does not adopt any of the findings Upon a careful review of the entire record, the and conclusions of the ALJ except as reflected in this Board agrees with the ALJ that Protestants' request Order. for partial reimbursement of their fees and costs should be denied.2 III. Conclusion I. Protestants' EAJA Claim On the basis of the record as a whole, the Board finds that Metrocorp has not met its burden of showing that With respect to Protestants' claim for reimbursement the public benefits resulting from its proposal would under the EAJA, it is clear that the Act precludes such outweigh the likely adverse effects of the proposal as an award to Protestants on the current record. The currently structured. EAJA provides that an agency that conducts an adver- This denial does not affect the Board's prior ruling in sary adjudication shall award to a prevailing party this case that armored car services are closely related other than the United States fees and other expenses to banking and permissible for bank holding compa- incurred by that party in connection with the proceednies, and is without prejudice to the filing of a new ing. Such an award is not required if, among other proposal by this (or any other) applicant to establish a things, the agency determines that the position of the record based on substantial evidence from which a agency was substantially justified.3 The EAJA further favorable determination could be made with respect'to provides that a party seeking such an award must, the conduct of this activity under the "proper inci- "within thirty days of a final disposition in the adverdent" test, as well as the resolution of all other issues sary adjudication," submit to the agency an applicarelevant to a particular proposal. tion showing that the party is a prevailing party and is By order of the Board of Governors, effective eligible to receive an award under the Act.4 In general, February 10, 1993. a partnership, corporation, or other organization is eligible for an award under the Act only if its net worth did not exceed $7 million and it had fewer than 500 Voting for this action: Chairman Greenspan and Governors Mullins, Angell, Kelley, LaWare, Lindsey, and Phillips. employees at the time the adversary adjudication was initiated.5 JENNIFER J. JOHNSON Because the EAJA's authorization for making Associate Secretary of the Board awards of fees or other expenses is by its terms limited to agencies, the statute provides no basis for requiring Appendix Metrocorp to reimburse Protestants for any expenses. Moreover, because Protestants' claim for reimburse- Denial of Protestants' Application for ment from the Board took the form of a motion submit- Reimbursement of Certain Costs and Fees ted to the ALJ during the hearing prior to the Board's final disposition of this proceeding, their claim was Protestants have excepted to the Supplemental Deci- premature under the terms of the Act and failed to show sion's finding that they are not entitled to reimburse- how they are a prevailing party for purposes of the Act ment of some of their costs and attorneys' fees asso- in light of that disposition. In addition, Protestants' ciated with the Remand Hearing. After the Remand motion failed to make any showing whatever that any of Hearing, Protestants submitted a joint request to the ALJ seeking reimbursement from the Board and from Metrocorp for fees Protestants incurred in producing 1. Protestants submitted a claim for $12,713.50 in attorneys' fees representatives of the Illinois and Iowa state bank and $781.48 in witness travel expenses related to the testimony of state regulatory officials on the branching issue. regulators as witnesses at the Remand Hearing. Prot- 2. Counsel for Metrocorp has also requested that should the Board estants asserted that these two witnesses would not determine it has authority to award such expenses and fees under the have had to testify except for alleged misconduct by arguments advanced by Protestants, that it be awarded expenses and costs related to its opposition to Protestants' request for reimburse- Board Counsel and by counsel for Metrocorp. ment, based on the conduct of counsel for Protestants in this matter. In the Supplemental Decision, the ALJ denied the Counsel for Metrocorp has submitted an affidavit listing those exrequest, finding no legal support for granting such an penses for which it seeks reimbursement. In view of the Board's disposition of Protestants' request, however, and in light of its award and stating that the request was not a matter consideration of the entire record, the Board denies Metrocorp's encompassed in the Remand Order. In their excep- request. tions, Protestants assert that an award of fees and 3. 5 U.S.C. § 504(a)(1). 4. 5 U.S.C. § 504(a)(2). costs to them jointly is authorized under the Equal 5. 5 U.S.C. § 504(b)(1)(B). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 359 the Protestants met the minimum net worth and num- these would not provide for such an award on the ber-of-employee eligibility requirements for an award record in this case. The fundamental rule applicable in under the EAJA.6 Accordingly, to the extent Protes- judicial proceedings in this country is that a prevailing tants' claim for reimbursement is based on the EAJA, litigant is not entitled to collect attorneys' fees or other that claim is denied based on the existing record. general costs from the loser, except in limited circum- Although it is possible that one or more of the stances.9 Although courts may award attorneys' fees Protestants, if eligible, might within thirty days of this and costs against a party that has acted in bad faith or Order seek to renew a claim for an EAJA award, the "vexatiously, wantonly, or for oppressive reasons,"10 Board believes that there is serious doubt that Act this exception to the general rule applies only in would authorize any such award in connection with extraordinary circumstances. Awards for bad faith this proceeding. By its terms, the EAJA does not conduct are limited to circumstances where a party, by apply in an adjudication for the purpose of "granting acting without any reasonable basis, violates a clearly or renewing a license."7 This proceeding, an applica- imposed duty that requires the injured party to undertion by a bank holding company for prior Board take unnecessary litigation to vindicate its rights.11 approval to acquire a nonbank company, appears to Protestants have failed to make any showing that fall squarely within the definition of a licensing pro- would meet this very heavy burden of proof. Aside ceeding for which no EAJA award is authorized.8 from a bare assertion of bad faith, Protestants cannot point to, and indeed the record is wholly devoid of, II. Reimbursement of Fees Under Principles any evidence of unreasonable or oppressive conduct Applicable in Judicial Proceedings on the part of counsel for Metrocorp or Board Counsel that would have required unnecessary litigation by the The Board also finds that, to the extent Protestants' Protestants. reimbursement claim is grounded on principles gov- Upon a review of the undisputed representations of erning fee awards in judicial proceedings, the claim counsel, the Board finds no evidentiary basis whatever must also be denied. Recognizing that, apart from the to support a conclusion that either Metrocorp's coun- EAJA, there is no statute or regulation that would sel or Board Counsel acted in bad faith when seeking authorize the Board to award fees or costs to Protes- opinions of the Illinois and Iowa bank regulators on tants in connection with this proceeding, Protestants the branch banking issue prior to the initial hearing in assert that the Board may order reimbursement of fees this case. The mere fact that both state regulators and expenses in the same circumstances in which revised their initial conclusions after reviewing testicourts would make such awards without an explicit mony at the Remand Hearing in no way supports an grant of authority. inference of any improper conduct by counsel with Even if it is assumed that an administrative agency regard to the initial opinion letters. In addition, the like the Board may rely on these judicially-created Board cannot find that Board Counsel's actions in principles governing fee awards, in the Board's view, unsuccessfully opposing the taking of testimony on the branching issue at the Remand Hearing were unreasonable or beyond the bounds of their proper role, given the fact that the branching issue had been raised 6. On the current record, it is far from clear whether any of the at the initial hearing and Protestants could have sought Protestants is eligible for an EAJA award. One Protestant apparently is a major business enterprise. The other two Protestants, which are the introduction of any relevant evidence on this point trade associations, may be required to aggregate the net worth and at that hearing.12 employees of their member businesses for purposes of EAJA eligibility. See National Truck Equipment Ass'n v. National Highway Traffic Safety Admin., 972 F.2d 669, 671-74 (6th Cir. 1992). 7. 5 U.S.C. § 504(b)(1)(C). 8. For purposes of the EAJA, a licensing proceeding includes any 9. E.g., Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. agency process respecting the granting of an agency "permit, certifi- 240,247,257-60 (1975); F.D. Rich Co. v. United States, 417 U.S. 116, cate, approval,... or other form of permission." 5 U.S.C. § 551(9), 129-30 (1974). (8). Agency approvals for a business to engage in specific activities are 10. Alyeska Pipeline Serv. Co., supra, 420 U.S. at 257; F.D. Rich uniformly viewed as licenses within this definition. E.g., Air North Co., supra, 411 U.S. at 129. America v. Department of Transportation, 937 F.2d 1427, 1437 (9th 11. E.g., American Hospital Ass'n v. Sullivan, 938 F.2d 216, 220 Cir. 1991) (certificates of authority to provide air transportation); (D.C. Cir. 1991); Sierra Club v. United States Corps of Engineers, 776 Atlantic Richfield Co. v. United States, 774 F.2d 1193,1200 (D.C. Cir. F.2d 383, 390 (2d Cir. 1985), cert, denied, 475 U.S. 1084 (1986). 1985) (approvals to enter Alaskan-Panama domestic oil trade). The 12. Courts may also allow a successful litigant who has preserved or Board's Rules of Practice and Procedure for Hearings refer to recovered a fund for the benefit of others as well as the litigant to proceedings with respect to applications for "initial licenses" as recover fees and other expenses from the members of the benefitted including, but not limited to, applications for Board approval under class. E.g., Alyeska Pipeline Serv. Co., supra, 421 U.S. at 257-58. section 3 of the BHC Act. 12 C.F.R. 263.56. For purposes of the This rationale has no applicability here, since Protestants' participadefinition of a licensing proceeding, an application under section tion in this proceeding to oppose approval of this application did not 4(c)(8) of the BHC Act is essentially the same as an application under preserve or recover any fund for the benefit of either Metrocorp or the section 3. Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

360 Federal Reserve Bulletin • April 1993 For these reasons, the Board adopts the ALJ's Orders Issued Under Sections 3 and 4 of the recommendation that Protestants' request for partial Bank Holding Company Act attorneys' fees be denied. First Insurance Finance Company Supplement to Order Approving Modifications Des Moines, Iowa to Section 20 Orders Order Approving the Formation of a Bank Holding Supplement to Order Approving Modifications to Company Section 20 Orders to Allow Use of Alternative Indexed Revenue Test to Measure Compliance with First Insurance Finance Company, Des Moines, Iowa the 10 Percent Limit on Bank-Ineligible Securities ("FIFCO"), has applied under section 3(a)(1) of the Activities Bank Holding Company Act ("BHC Act") (12 U.S.C. § 1842(a)(1)) to become a bank holding On January 26, 1993, the Board adopted an alternative company by acquiring all the voting shares of Farmers indexed revenue test pursuant to which a section 20 and Miners State Bank, Lucas, Iowa ("Bank"). subsidiary could choose to adjust its revenue by a FIFCO also has applied under section 4(c)(8) of the series of factors supplied by the Board that vary BHC Act (12 U.S.C. § 1843(c)(8)) to continue to make according to the average duration of the securities and service loans and other extensions of credit purportfolio of the section 20 subsidiary. The Board has suant to the Board's Regulation Y (12 C.F.R. received a request for an interpretation of that part of 225.25(b)(1)). the January 26 Order regarding the operation of the Notice of the applications, affording interested perindexed revenue test. The request asks whether a sons an opportunity to submit comments, has been section 20 subsidiary may, consistent with the Janu- published (57 Federal Register 57,461 (1992)). The ary 26 Order, immediately begin measuring compli- time for filing comments has expired, and the Board ance with the indexed test on an eight-quarter rolling has considered the applications and all comments average basis using revenue figures from the seven received in light of the factors set forth in sections 3(c) quarters prior to 1993 adjusted according to the aver- and 4(c)(8) of the BHC Act. age duration of its securities portfolio during these FIFCO, an Iowa corporation licensed by the Iowa quarters. Division of Banking as an industrial loan company, The Board implemented the indexed revenue test on does not operate any commercial banks in Iowa.1 a prospective basis to allow a section 20 subsidiary Bank controls deposits of $2.8 million and is the that may not have data regarding the average duration smallest commercial banking organization in Iowa, of its securities portfolio prior to 1993 to adopt the representing less than 1 percent of total deposits in indexed method nevertheless. If a section 20 subsid- commercial banking deposits in the state.2 Based on iary has the duration data available to begin measuring all the facts of record, the Board concludes that compliance with the test on an eight-quarter rolling consummation of the proposed transaction would not average basis immediately, it may do so after notifying result in any significantly adverse effects on competithe relevant Federal Reserve Bank.1 tion in any relevant banking market, and concludes By order of the Board of Governors, effective that competitive considerations are consistent with February 23, 1993. approval of the application. As part of this proposal, FIFCO proposes to relo- Voting for this action: Chairman Greenspan and Governors cate the main office of Bank to Indianola, Iowa, which Mullins, Angell, La Ware, Lindsey, and Phillips. Absent and is located approximately 26 miles from Lucas, and not voting: Governor Kelley. maintain a bank office at the former location of its main office in Lucas. Bank has been chartered by the state JENNIFER J. JOHNSON for approximately nine years to conduct a banking Associate Secretary of the Board business in Lucas, Iowa. The Board has received comments from a bank in Indianola, Iowa ("Protestant"), contending that 1. FIFCO is engaged currently in the business of making loans to commercial borrowers to finance insurance premiums. FIFCO does not accept deposits and is not insured by the Federal Deposit 1. Tables of adjustment factors for each of the seven quarters prior Insurance Corporation ("FDIC"). to the first quarter of 1993 will be published in the near future. 2. State data are as of June 30, 1992. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 361 Bank's small amount of deposits and loans make this bank office at its former location in Lucas is consisproposal, in effect, the establishment of a de novo tent with applicable state and federal law. The Board bank in Indianola that does not meet the minimum also concludes that the financial and managerial capital requirements imposed on de novo banks.3 resources and future prospects of FIFCO and Bank, In addition to establishing a de novo bank or a bank and the other supervisory factors that the Board office, Iowa law generally authorizes a bank, with the must consider under section 3 of the BHC Act, are prior approval of the Iowa Superintendent of Bank- consistent with approval. ing ("Superintendent"), to relocate its main office to Protestant also asserts that Bank has a poor record another community and retain its former main office of performance under the Community Reinvestment as a bank office.4 In this case, Bank has been in Act (12 ILS.C. § 2901 et seq.) ("CRA"). The Board existence for approximately nine years, and the notes that the Bank will be under new ownership and Superintendent concluded that the proposal was management that has initiated affirmative steps to properly subject to the Iowa relocation statute. In substantially improve the performance of Bank under approving the proposal under the relocation law, the the CRA, and to correct deficiencies in Bank's per- Superintendent found that the proposal to relocate formance identified in Bank's last examination re- Bank's main office and to establish a bank office at its port.9 In general, the Statement of the Federal Fiformer main office was consistent with all of the nancial Supervisory Agencies Regarding the requirements of Iowa law.5 The Office of the Iowa Community Reinvestment Act indicates that commit- Attorney General also reviewed the Iowa statute and ments for future corrective actions offered in the concluded that this proposal is consistent with re- application process will not be sufficient to overcome quirements of state law and properly governed under a seriously deficient CRA record.10 In this case, the relocation statute.6 The FDIC also approved this however, the inadequate CRA record reflected the proposal under the relocation provisions of the Fedactions of previous owners, and the proposed new eral Deposit Insurance Act.7 The Board believes that owners have committed to take steps to correct these interpretations of Iowa law are reasonable, and deficiencies in CRA performance in a timely fashion that the proposal represents a permissible relocation and to report to the Federal Reserve Bank of Chicago of Bank's main office consistent with applicable law.8 on their progress within six months of consummation On the basis of all the facts of record, the Board of the proposal.11 concludes that the proposed relocation of Bank's FIFCO has committed to ascertain the credit needs main office to Indianola and the establishment of a of its communities through various outreach activities. For example, Bank's new management will meet with local community groups quarterly to discuss the credit needs of the community, and to 3. Upon consummation of this proposal, Bank would have $842,000 in capital. The FDIC requires a de novo bank to operate with at least discuss products and services the bank should offer. $2 million in capital. FDIC Statement of Policy, "Applications for Information gained from these meetings will be pre- Deposit Insurance," 57 Federal Register 12,822 (April 13, 1992). The sented directly to Bank's board of directors and used minimum capital requirement for a bank under Iowa law is $100,000 or such higher amount as the Superintendent deems necessary. Iowa to develop products and services. Bank will distrib- Code Ann. § 524.401 (Supp. 1992). ute in its lobby questionnaires to its customers 4. Id. § 524.312(2). Relocations are limited geographically and FIFCO's proposal complies with these limitations. De novo banks and to further assess which products and services indibank offices are authorized by §§ 524.305 and 524.1201, respectively. viduals believe are needed in Bank's communities. 5. See Order dated January 26, 1993, by R.H. Buenneke, Superin- Bank will also make ongoing needs ascertainment tendent of Banking, State of Iowa. In granting this approval, the Superintendent is required by statute to consider the capital structure calls on businesses, business leaders, and elected of the proposed institution, the ability of the community to support a officials of its communities to document any bank bank, the character and fitness of the bank's directors, and the sufficiency of the proposed bank's personnel. Iowa Code Ann. services and loan programs that need to be imple- §§ 524.1507(2) and 524.305(l)(c)-(f). See a/jo id. § 524.305. mented. Bank intends to advertise its credit services 6. Opinion dated February 4, 1993, by Donald E. Sennefif, Assistant in community newspapers, free shopper guides and, Attorney General, State of Iowa Department of Justice. 7. 12 U.S.C. § 1828(d). See Letter dated February 8, 1993, from where appropriate, on the radio. The board of direc- James O. Leese, to Board of Directors, Farmers & Miners State Bank. tors and Bank's employees will also be responsible 8. In previously considering the effect of a state law, the Board has examined the statute itself, judicial interpretations of that law and, in the absence of judicial interpretations, the opinions of the state's Attorney General or the state's relevant administrative agency. See 9. In its November 1991 compliance examination, Bank received a The Jackson State Bank, 79 Federal Reserve Bulletin 240 (1993). "substantial noncompliance" CRA rating from the FDIC. When the Board has concluded that the opinion of the state authority 10. 54 Federal Register 13,742 (1989). is well reasoned, consistent with the statutory language and not 11. Bank's proposed new president is currently president of another inconsistent with the apparent intent of the statute or its legislative bank in Iowa that received a "satisfactory" CRA rating in its most history, the Board has accorded deference to the state authority. See recent CRA compliance examination conducted by the FDIC in April Bancorp of Mississippi, 72 Federal Reserve Bulletin 257 (1986). 1991. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

362 Federal Reserve Bulletin • April 1993 for marketing Bank's credit, loan, and deposit ser- of the BHC Act is favorable and consistent with vices. approval of FIFCO's application. Bank will also offer a variety of credit products and Based on the foregoing, including the conditions and services to its customers. For example, Bank will commitments described in this Order and those made originate residential mortgage loans, home improve- in these applications, and all of the facts of record, the ment loans, housing rehabilitation loans, small busi- Board has determined that these applications should ness loans, and agricultural loans. In addition, Bank be, and hereby are, approved. The Board's approval is will use the secondary mortgage market to provide specifically conditioned upon compliance by FIFCO customers with long-term real estate mortgage loans, with all the commitments made in connection with and will lend under a variety of government-sponsored these applications. The commitments and conditions lending programs, including the Small Business Ad- relied on by the Board in reaching this decision are ministration, the Farmers Home Administration, the deemed to be conditions imposed in writing by the Iowa Finance Authority, the Young Farmers Loan Board in connection with its findings and decision, and Program, and the Iowa Business Development Corpo- as such may be enforced in proceedings under appliration. cable law. Bank has proposed to establish a geocoding system The determinations as to the nonbanking activity are to ensure even distribution of credit throughout its subject to all the conditions in the Board's Regulation delineated area. In addition, Bank intends to provide Y, including those in sections 225.4(d) and 225.23(b)(3) funds for community development through real estate (12 C.F.R. 225.4(d) and 225.23(b)(3)), and to the loans, and the acquisition of general obligation bonds Board's authority to require such modification or and industrial development bonds. termination of the activities of a holding company or FIFCO has committed to maintain a full service any of its subsidiaries as the Board finds necessary to bank office in Lucas for at least one year. During this assure compliance with, or to prevent evasions of, the period, FIFCO will evaluate the office's operations provisions and purposes of the BHC Act and the and report to the Reserve Bank within six months of Board's regulations and orders issued thereunder. consummation on its financial condition and CRA- The banking acquisition should not be consummated related activities.12 before the thirtieth calendar day following the effective In light of all the facts of record, including the CRA date of this Order, and the banking and nonbanking programs to be implemented by Bank's new manage- acquisitions shall not be consummated later than three ment, the Board believes that considerations relating months after the effective date of this Order, unless to the convenience and needs of the communities to be such period is extended for good cause by the Board or served are consistent with approval. the Federal Reserve Bank of Chicago, acting pursuant FIFCO also has applied, pursuant to section 4(c)(8) to delegated authority. of the BHC Act, to continue to engage directly in By order of the Board of Governors, effective making and servicing loans. The Board has determined February 17, 1993. by regulation that this activity is closely related to banking and generally permissible for bank holding Voting for this action: Chairman Greenspan and Governors companies, and FIFCO proposes to conduct this ac- Mullins, Angell, Kelley, Lindsey, and Phillips. Absent and tivity in accordance with the Board's regulations. not voting: Governor La Ware. Numerous companies provide similar nonbanking services, and this proposal would not have a signifi- JENNIFER J. JOHNSON cantly adverse competitive effect on the markets for Associate Secretary of the Board this nonbanking service. In addition, there is no evidence in the record to indicate that consummation of Orders Issued Under Bank Merger Act this proposal is likely to result in any significantly adverse effects, such as undue concentration of re- Alice Bank of Texas sources, decreased or unfair competition, conflicts of Alice, Texas interests, or unsound banking practice. Accordingly, the Board has determined that the balance of public Order Approving the Merger of Banks and interest factors it must consider under section 4(c)(8) Establishment of Bank Branch Alice Bank of Texas, Alice, Texas ("Alice Bank"), a state member bank, has applied under section 18(c) of 12. The Federal Deposit Insurance Corporation Improvement Act the Federal Deposit Insurance Act (12 U.S.C. of 1992 requires 90-day's notice before closure of a branch bank. 12 U.S.C. § 1831p. § 1828(c)) (the "Bank Merger Act") to purchase the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 363 assets and assume the liabilities of New First City, Definition of Relevant Banking Market Texas-Alice, Alice, Texas ("NFC Bank"). Alice Bank also has applied under sections 9 and 24A of the The Bank Merger Act provides that the Board may not Federal Reserve Act (12 U.S.C. §§ 321 and 371d) to approve a proposal submitted under the Bank Merger establish a branch and make an additional investment Act if the proposal would result in a monopoly or the in bank premises at the location of NFC Bank. effect of the proposal may be substantially to lessen Notice of the applications, affording interested per- competition in any relevant market unless the Board sons an opportunity to submit comments, has been finds "that the anticompetitive effects of the proposed given in accordance with the Bank Merger Act and the transaction are clearly outweighed in the public inter- Board's Rules of Procedure (12 C.F.R. 262.3(b)). As est by the probable effect of the transaction in meeting required by the Bank Merger Act, reports on the the convenience and needs of the community to be competitive effects of the merger were requested from served." 12 U.S.C. § 1828(c)(5). the United States Attorney General, the Office of the In evaluating the competitive factors in this case, Comptroller of the Currency ("OCC"), and the Federal the Board has carefully considered the comments of Deposit Insurance Corporation ("FDIC"). The time for First National Bank of South Texas, San Antonio, filing comments has expired, and the Board has consid- Texas ("FNB") and other commenters.2 FNB argues ered the applications and all comments received, as that the relevant geographic market for analyzing the well as Alice Bank's response to those comments, in competitive effects of this proposal should be limited light of the factors set forth in the Bank Merger Act and to Jim Wells County, Texas, and that consummation in section 9 of the Federal Reserve Act. of this proposal would substantially lessen competition On October 30, 1992, the 20 subsidiary banks of for banking services in this banking market. FNB First City Bancorporation were declared insolvent and relies principally on data relating to the geographic the FDIC was appointed receiver of each of the banks. distribution of deposits and loans, commuting times, Pursuant to section 1 l(n) of the Federal Deposit Insur- newspaper circulation and other means of commercial ance Act ("FDI Act") (12 U.S.C. § 1821(n)), the advertising, and other data regarding the employment FDIC established 20 bridge banks to acquire the assets and services available in Jim Wells County. and to assume the liabilities and deposits of the closed The Board and the courts have found that the banks, and NFC Bank was established to acquire the relevant banking market for analyzing the competitive assets and to assume the liabilities and deposits of effects of a proposal must reflect commercial and First City, Texas-Alice, N.A. The FDIC solicited banking realities and must consist of the local area offers for the acquisition of NFC Bank as well as the where the banks involved offer their services and other subsidiaries of First City Bancorporation from where local customers can practicably turn for alterqualified bidders pursuant to sections ll(n) and 13(c) natives.3 The Board has considered all the facts in this of the FDI Act (12 U.S.C. §§ 1821(n) and 1823(c)). On case, including the comments and information pro- January 26, 1993, the FDIC selected Alice Bank's bid vided by FNB and other commenters, and an on-site for NFC Bank. The FDIC also has requested that the study conducted by the Federal Reserve Bank of Board process this application expeditiously due to the Dallas ("Reserve Bank"), and concludes that the condition of the bridge banks and to minimize the cost relevant geographic market within which to evaluate of the transaction to the FDIC. the competitive effects of this proposal is defined as: Alice Bancshares, Inc., Alice Bank's parent bank Nueces and San Patricio Counties, Alice and Orange holding company, is the 145th largest commercial bank- Grove in Jim Wells County, and San Diego in Duvall ing organization in Texas, controlling deposits of $110.9 County, all in Texas (the "Corpus Christi banking million, representing less than 1 percent of total depos- market"). its in commercial banking organizations in the state. Alice, Texas ("Alice"), is the county seat of Jim NFC Bank controls deposits of $149.3 million, repre- Wells County and is located 44 miles west of Corpus senting less than 1 percent of total deposits in commercial banking organizations in the state. Upon consummation of the proposal, Alice Bancshares would become the 64th largest commercial banking organization in Texas, controlling $260.2 million in deposits, 2. One commenter alleges that this proposal will result in an representing less than 1 percent of the total deposits in increase in unemployment in Alice. The Board has considered these commercial banking organizations in the state.1 comments in light of all the facts of record, including the response by Alice Bank and the condition of NFC Bank, and does not believe that these comments warrant denial of the applications. 3. See CB Financial Corporation, 79 Federal Reserve Bulletin 118 (1993); St. Joseph Valley Bank, 68 Federal Reserve Bulletin 673, 674 1. State deposit data are as of June 30, 1991. (1982). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

364 Federal Reserve Bulletin • April 1993 Christi, with access by means of a major highway.4 In record, the Board finds that the relevant geographic recent years, Corpus Christi has become a hub in market in this case is the Corpus Christi banking south Texas for retail trade, health care and recreation market as defined above. facilities. For example, the record indicates that Corpus Christi provides a wide range of medical services Competitive Effects in the Corpus Christi Banking and commercial retail stores that are used by Alice Market area residents.5 In this regard, Corpus Christi has been designated as a Rand McNally Basic Trading Center Alice Bank is the 12th largest depository institution in for the area that includes Alice, because Corpus the market, controlling deposits of $95.8 million, rep- Christi serves as a center for goods purchased by resenting 2.9 percent of the total deposits in depository residents of that area.6 Residents in the Alice area are institutions in the market.7 NFC Bank controls deposexposed to substantial advertising by Corpus Christi its of $149.3 million, representing approximately retailers in newspapers and on radio and television 4.5 percent of total deposits in depository institutions stations. in the market.8 Upon consummation, Alice Bank Corpus Christi also is the location of the area's would become the fifth largest depository institution in largest employers and offers a variety of employment the market, controlling total deposits of $245 million, opportunities to the residents of Alice. Census data representing approximately 7.4 percent of total deposindicate that commuting from Jim Wells County to the its in depository institutions in the market. The Her- Corpus Christi MSA increased substantially from 1980 findahl-Hirschman Index ("HHI") would decrease to 1990, and the Alice Chamber of Commerce esti- 117 points from a level of 955 to a level of 838.9 mates that approximately 20 percent of the workers Accordingly, in light of the decrease in market conresiding in Alice commute to the Corpus Christi area centration, the unconcentrated nature of the market for jobs. and all other facts of record, the Board concludes that The Reserve Bank conducted a survey of Corpus consummation of the proposal is not likely to result in Christi area financial institutions and found that bank- any significantly adverse effect on competition in any ers consider their market area to cover a 50-mile relevant market. In addition, the Department of Jusradius, which includes Alice, and financial institutions tice has advised the Board that the proposed acquisiin both areas have comparable deposit rates and hours tion will not have a significantly adverse effect on of operation. Alice bankers surveyed also indicated competition. that they consider deposit rates of Corpus Christi The financial and managerial resources and future prosbanks in pricing their products, and deposit data for pects of Alice Bank and Alice Bancshares are consistent Alice Bank and NFC Bank indicate that these institu- with approval. In addition, the Board also finds that tions compete with Corpus Christi financial institu- considerations relating to the convenience and needs of tions for customers in Nueces County. the community to be served are consistent with approval. After review of these data and the other facts of The Board also has considered the factors it is required to record, the Board believes that the record indicates that customers in Alice reasonably can and do turn to 7. Market data are as of June 30, 1991. In this context, depository providers of banking services throughout the Corpus institutions include commercial banks and savings associations. Mar- Christi banking market. On this basis, the Board ket share data are based on calculations in which the deposits of thrift disagrees with the contention of FNB that the geo- institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to graphic market in this case should be limited to Jim become, major competitors of commercial banks. See Midwest Finan- Wells County. Instead, based on all of the facts of cial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). 8. These data do not account for deposit run-off that may have occurred since June 30, 1991. 4. State Highway 44 is a four-lane, divided highway that connects 9. The First City organization, which operated two banks in the Alice with downtown Corpus Christi, and traffic flow is not impeded Corpus Christi market, ranked first among depository institutions in by the few small towns located along this highway. Traffic count data total deposits in the market, and Alice Bank is purchasing only one of indicate substantial local travel between Corpus Christi and Alice, and those First City banks. Under the revised Department of Justice between Alice and San Diego. Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a 5. A Reserve Bank survey employing a small random sample of market in which the post-merger HHI is less than 1000 points is Alice residents suggested that a majority of the surveyed residents considered to be unconcentrated. The Department of Justice has travel to Corpus Christi for medical services and shopping. In addi- informed the Board that a bank merger or acquisition generally will tion, check clearing data from Alice Bank indicate that a substantial not be challenged (in the absence of other factors indicating anticomportion of the checks were negotiated to purchase goods and services petitive effects) unless the post-merger HHI is at least 1800 and the in Nueces County. merger increases the HHI by at least 200 points. The Justice Depart- 6. Basic Trading Centers such as Corpus Christi are also viewed as ment has stated that the higher than normal HHI thresholds for serving their surrounding areas with various specialized services, such screening bank mergers and acquisitions for anticompetitive effects as medical care, entertainment, higher education, and a daily news- implicitly recognizes the competitive effect of limited-purpose lenders paper. and other non-depository financial entities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 365 consider when approving applications for establishment increase to eight the number of branches Bank would of and investment in branches pursuant to sections 9 and operate in Orange County. 24A of the Federal Reserve Act and finds those factors to In considering an application by a state member bank be consistent with approval. to establish an additional branch, the Board is required Based on the foregoing and other facts of record, the to consider the convenience and needs of the commu- Board has determined that the applications should be, nity to be served, and to take into account the instituand hereby are, approved. The Board's approval is tion's record of performance under the Community specifically conditioned upon compliance by Alice Reinvestment Act ("CRA").2 In this regard, examina- Bank with all the commitments made in its application. tions of Bank conducted by the Federal Reserve Bank For purposes of this action, these commitments and of San Francisco ("Reserve Bank") reveal chronic conditions are deemed to be conditions imposed in deficiencies in Bank's regulatory compliance3 and CRA writing by the Board in connection with its findings performance efforts4 that have continued over a proand decision, and, as such, may be enforced in pro- longed period of time. In March 1992, the Board issued ceedings under applicable laws. a cease and desist order regarding Bank's violations of This transaction may not be consummated before laws and regulations relating to Bank's consumer lendthe fifth day following the effective date of this Order ing and credit activities and the Bank's responsibilities or later than three months after the effective date of under the CRA, which continues in effect.5 The Board this Order, unless such period is extended by the also assessed civil money penalties against Bank in Federal Reserve Bank of Dallas, acting pursuant to December 1992 in connection with Bank's violations of delegated authority. consumer lending and credit laws.6 By order of the Board of Governors, effective During the processing of these applications, Bank February 8, 1993. has provided numerous submissions relating to its efforts to improve its regulatory compliance and CRA performance records, including comments from indi- Voting for this action: Vice Chairman Mullins and Governors Angell, Kelley, La Ware, Lindsey, and Phillips. Absent viduals and organizations in support of Bank's lending and not voting: Chairman Greenspan. and community development activities. The Board has carefully considered these submissions, as well as JENNIFER J. JOHNSON Bank's record of regulatory compliance and CRA Associate Secretary of the Board performance, in light of the CRA, the Board's regulations, and the Statement of the Federal Financial Orders Issued Under Federal Reserve Act Farmers & Merchants Bank of Long Beach Long Beach, California 2. See e.g., First of America Bank - Ann Arbor,, 78 Federal Reserve Bulletin 450 (1992); see also 12 U.S.C. § 321; 12 C.F.R. 209, 208.5; Order Denying Establishment of a Branch and 12 U.S.C. §§ 2902(3)(C), 2903(2). Investment in Bank Premises 3. Examiners noted in compliance examinations as of February 22, 1988, January 23, 1989, November 6, 1989, August 6, 1990, and April 22, 1991, that Bank had violated numerous provisions of various Farmers & Merchants Bank of Long Beach, Long Beach, consumer lending and credit laws and regulations. In particular, California ("Bank"), a state member bank, has applied examiners have cited violations of the following provisions: (1) Regulation B (12 C.F.R. part 202) (relating to the Equal Credit pursuant to sections 9 and 24A of the Federal Reserve Act Opportunity Act (15 U.S.C. § 1691 et seq.))\ (12 U.S.C. §§ 321 and 371(d)), to establish a branch office (2) The Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.); (3) Regulation Z (12 C.F.R. part 226) (relating to Truth in Lending at 3233 Park Center Drive, Costa Mesa, California, and to and Fair Credit Billing Acts, Title 1 of the Consumer Credit make an additional investment in bank premises. Protection Act (15 U.S.C. § 1601 et seq.))-, Notice of these applications, affording interested (4) Regulation CC (12 C.F.R. part 229) (relating to the Expedited Funds Availability Act (12 U.S.C. §§ 4001-4010)); and persons an opportunity to submit comments, has been (5) Regulation C (12 C.F.R. part 203) (relating to amendments to the duly published. The time for filing comments has Home Mortgage Disclosure Act that require banks to report pubexpired, and the Board has considered the applications licly data on the race, sex, and income of loan applicants). 4. In recent CRA examinations, the Reserve Bank identified defiand all comments received in light of the factors ciencies in Bank's CRA program in the following areas: contained in the Federal Reserve Act. (1) Ascertainment of community credit needs; (2) Geographic distribution of lending activities; and Bank, with approximately $1.4 billion in deposits, (3) Marketing and types of credit products offered and extended. has 16 branches located throughout Los Angeles and 5. Docket No. 91-080-B-SM, 78 Federal Reserve Bulletin 384 (1992) Orange Counties, California.1 This proposal would ("F&M Cease and Desist Order"). Under this order, Bank is required to institute specific steps to remedy past violations and report regularly to the Reserve Bank on its progress in complying with the requirements of this enforcement action. 1. Deposit data are as of June 30, 1992. 6. 79 Federal Reserve Bulletin 165 (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

366 Federal Reserve Bulletin • April 1993 Supervisory Agencies Regarding the Community Re- By order of the Board of Governors, effective investment Act.7 February 9, 1993. Bank's repeated violations of consumer lending laws and record of performance under the CRA are Voting for this action: Vice Chairman Mullins and Goverindicative of a record that is not consistent with nors Angell, Kelley, LaWare, Lindsey, and Phillips. Absent approval of these applications. Bank has undertaken and not voting: Chairman Greenspan. efforts during the processing of these applications to JENNIFER J. JOHNSON address the long-standing concerns noted in multiple Associate Secretary of the Board examinations by the Reserve Bank. However, in light of Bank's prolonged compliance problems,8 its deficient CRA program, and the relatively short period of Orders Issued Under International Banking Act time since its implementation of corrective measures, the Board is unable to conclude on this record that Banco de Sabadell, S.A. Bank's compliance policies and CRA programs are in Sabadell, Spain place and working well. Accordingly, the Board believes that convenience Order Approving Establishment of an Agency and needs considerations are not consistent with approval of this proposal.9 Other factors the Board is Banco de Sabadell, S.A., Sabadell, Spain required to consider under the Federal Reserve Act do ("Bank"), a foreign bank within the meaning of the not lend sufficient weight to warrant approval of these applications.10 It is therefore the judgment of the International Banking Act ("IBA"), has applied under section 7(d) of the IB A (12 U.S.C. § 3105(d)) to Board that approval of these applications would not be establish a state-licensed agency in Miami, Florida. in the public interest and that these applications should be, and hereby are, denied.11 The Board notes that this A foreign bank must obtain the approval of the Board to establish a branch, agency, commercial lending denial is without prejudice to future applications when company, or representative office in the United Bank is in compliance with all applicable consumer States under the Foreign Bank Supervision Enhancelending laws and Bank's CRA program is in place and ment Act of 1991 ("FBSEA"), which amended the working well. IBA. Notice of the application, affording interested persons an opportunity to submit comments, has been 7. 54 Federal Register 13,742 (1989). published in a newspaper of general circulation in 8. The F&M Cease and Desist Order is based on repeated violations of consumer lending and credit laws and regulations, including some Miami, Florida {Miami Herald, May 1,1992). The time violations that Bank has failed to correct since 1988. Of particular for filing comments has expired and no public comconcern is Bank's repeated violations of the Equal Credit Opportunity Act and the Board's Regulation B. ments were received. 9. The Board has previously stated that disregard for consumer Bank was established in 1881 and operates as a compliance laws provides a separate basis for concluding that conve- private bank under Spanish law.1 Bank, with total nience and needs considerations do not warrant approval of an application, even if an applicant has a satisfactory record of perfor- assets of $11.8 billion as of June 30, 1992, was the mance under the CRA. See First State Holding Company, Inc., eighth largest bank in Spain as of December 31, 1991. 67 Federal Reserve Bulletin 802 (1981). Bank owns 29 subsidiaries that operate in the banking, 10. See 12 U.S.C. § 322; 12 C.F.R. 208.5. 11. Bank has requested a public hearing on its CRA examination financial services, and insurance fields in Spain, Sinreport. The Uniform Interagency Community Reinvestment Act Final gapore, Switzerland, Portugal, the Netherlands, Lux- Guidelines for Disclosure of Written Evaluations and Revised Assessment Rating System (55 Federal Register 18,163 (1990)) do not embourg, and the United States. Bank also operates provide for a formal appeals process under the revised examination one branch in London, five branches in France, and ratings system. Additionally, the Board is not required under the representative offices in New York, Italy, Singapore, Federal Reserve Act to hold a public hearing or meeting in this case. However, under the Board's rules, the Board may, in its discretion, Mexico and Switzerland. hold a public hearing or meeting on an application to clarify factual Bank engages in nonbanking activities in the United issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). States through five subsidiaries.2 Bank will become The Board has carefully considered the hearing requests made by Bank and by other commenters. In the Board's view, Bank and these commenters have had ample opportunity to present submissions, and Bank and these commenters have in fact submitted substantial written 1. The shares of Bank are widely held with no single shareholder comments that have been considered by the Board. In light of these owning 1 percent or more of these shares. facts, the Board has determined that a public meeting or hearing is not 2. These subsidiaries are: PRS International Consulting Inc., necessary to clarify the factual record in these applications, or Miami, Florida; PRS International Brokerage, Inc., Miami, Florida; otherwise warranted in this case. Accordingly, all requests for a public PRS International Advisory Services, Inc., Miami, Florida; PRS meeting or hearing on these applications, including Bank's request, International Real Estate Services, Inc., Miami, Florida; and MB are hereby denied. Trade Promotion, Inc., New York, New York. These companies Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 367 subject to the nonbanking restrictions of section 4 of regulation on a consolidated basis if the Board determines the Bank Holding Company Act upon establishment of that the bank is supervised and regulated in such a manner the proposed agency. In accordance with this provi- that its home country supervisor receives sufficient inforsion, Bank has committed to bring its nonbanking mation on the bank's worldwide operations, including its activities in the United States into compliance with relationship to any affiliate, to assess the bank's overall these restrictions within two years after establishing financial condition and its compliance with law and reguthe proposed agency. Bank also will become a quali- lation (12 C.F.R. 211.24(c)(1)).4 In making its determinafying foreign banking organization under Regulation K tion on this application, the Board considered the followafter establishing the proposed agency (12 C.F.R. ing information. 211.23(b)). The Banco de Espana ensures that Bank has Under the IB A, in order to approve an application by adequate procedures for monitoring and controlling a foreign bank to establish an agency in the United its worldwide operations through required periodic States, the Board must determine that the foreign bank: reports, internal controls, accounting requirements (1) Engages directly in the business of banking and sanctions for noncompliance. The Banco de outside of the United States; Espana imposes reporting requirements on credit (2) Has furnished to the Board the information it entities that require establishing internal controls for needs to assess adequately the application; and compliance. Bank has implemented internal control (3) Is subject to comprehensive supervision or reg- procedures to facilitate compliance with these reulation on a consolidated basis by its home country quirements. supervisor (12 U.S.C. § 3105(d)(2)). The Banco de Espana requires Bank to maintain annual accounts and to commission independent The Board may also take into account additional audits of Bank's separate and consolidated accounts standards as set forth in the IBA (12 U.S.C. each year. In accordance with the procedures and § 3105(d)(3)-(4)) and Regulation K (12 C.F.R. standards governing the accounting practices of a 211.24(c)). credit entity prescribed by the Banco de Espana, Bank engages directly in the business of banking Bank must consolidate for accounting purposes any outside of the United States through its extensive branch and any credit and financial subsidiary that banking operations in Spain. Bank also has provided has more than 50 percent of its capital owned by the Board with the information necessary to assess the Bank.5 A credit entity, such as Bank, must provide application through submissions that address the rele- consolidated balance sheets and income statements vant issues. every six months. The Banco de Espana also exer- The Banco de Espana generally conducts the direct cises supervisory powers over any subsidiary of supervision and regulation of credit entities, such as Bank that is majority-owned or controlled, and may Bank, in Spain and functions as Bank's home country impose sanctions on Bank or its management for not supervisor.3 The Banco de Espana monitors compli- complying with any Spanish law or regulation, inance by credit entities with Spanish laws, regulations, cluding laws designed to ensure oversight of a credit and prudential measures, sets reporting requirements, entity's overall condition. conducts periodic and special examinations, sets pru- The Banco de Espana regularly receives financial dential and financial standards and limits, and may reports from Bank that permit analysis of Bank's take action to enforce such measures. Regulation K provides that a foreign bank will be considered to be subject to comprehensive supervision or 4. In assessing this standard, the Board considers, among other factors, the extent to which the home country supervisor: (i) ensures that the bank has adequate procedures for monitoring and controlling its activities worldwide; provide brokerage, investment advisory, investment management, (ii) obtains information on the condition of the bank and its organization, and administration services with respect to certain subsidiaries and offices through regular examination reports, audit offshore mutual funds and to non-U.S. resident customers. PRS Real reports, or otherwise; Estate also engages in real estate brokerage activities, as an incidental (iii) obtains information on the dealings with and relationship service for clients of the PRS companies. MB Trade provides sales, between the bank and its affiliates, both foreign and domestic; liaison, and trade services to non-U.S. customers in the international (iv) receives from the bank financial reports that are consolidated on trade business. a worldwide basis, or comparable information that permits analysis 3. The Ministry of Economy and Finance of Spain ("Ministry") has of the bank's financial condition on a worldwide consolidated basis; overall responsibility for the Spanish banking system and monetary (v) evaluates prudential standards, such as capital adequacy and policy. It develops regulations and issues orders to ensure the risk asset exposure, on a worldwide basis. efficiency and solvency of the Spanish banking system, and has These are indicia of comprehensive, consolidated supervision. No delegated authority to the Banco de Espana regarding the supervision single factor is essential, and other elements may inform the Board's and inspection of credit entities in Spain. The Ministry may also determination. establish minimum capital levels and ratios and impose sanctions for 5. The Banco de Espana generally does not require consolidation of violations of rules and regulations. insurance subsidiaries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

368 Federal Reserve Bulletin • April 1993 worldwide condition on a consolidated basis, and Board deems necessary to determine and enforce obtains similar information through periodic meetings compliance with the IBA, the Bank Holding Comwith management and on-site examinations. The pany Act of 1956, as amended, and other applicable Banco de Espana also may request any additional Federal law. The Board has reviewed relevant proinformation needed to address any issues presented in visions of Spanish law and has communicated with the reports, meetings, or examinations. The Banco de the appropriate government authorities concerning Espana may conduct special examinations regarding access to information. Bank also has committed to any supervisory matter. cooperate with the Board to obtain any approvals or Information on the dealings and relationship be- consents that may be needed to gain access to tween Bank and its subsidiaries is obtained through information that may be requested by the Board. In reports to and examinations by the Banco de Espana light of these commitments and other facts of record, and through the requirement that the Ministry approve and subject to the condition described below, the investments in other companies. These reports pro- Board concludes that Bank has provided adequate vide information on subsidiaries that Bank need not assurances of access to any necessary information include in its consolidated statements, as well as the Board may request. information on transactions between Bank and its On the basis of all of the facts of record, and subject subsidiaries. The Banco de Espana evaluates pruden- to the commitments made by Bank, as well as the tial standards, such as capital adequacy and risk asset terms and conditions set forth in this Order, the Board exposure, for Bank on a worldwide basis. The Spanish has determined that Bank's application to establish an government adopted risk-based capital standards, as agency should be, and hereby is, approved. Should required by the European Community, into law in July any restrictions on access to information on the oper- 1992. ations or activities of Bank and any of its affiliates Based on all the facts of record, which include the subsequently interfere with the Board's ability to information described above, the Board concludes determine the safety and soundness of Bank's U.S. that Bank is subject to comprehensive supervision and operations or the compliance by Bank or its affiliates regulation on a consolidated basis by its home country with applicable Federal banking statutes, the Board supervisor. may require termination of any of the Bank's direct or In considering this application, the Board has also indirect activities in the United States. Approval of taken into account the additional standards set forth in this application is also specifically conditioned on section 7 of the IBA (12 U.S.C. § 3105(d)(3)-(4». compliance by Bank with the commitments made in Bank has received the consent of its home country connection with this application, and with the condisupervisor to establish the proposed agency. In addi- tions contained in this Order.6 The commitments and tion, the Banco de Espana may share information on conditions referred to above are conditions imposed in Bank's operations with other supervisors, including writing by the Board in connection with its decision, the Board. and may be enforced in proceedings under 12 U.S.C. Bank must comply with risk-based capital standards § 1818 or 12 U.S.C. § 1847 against Bank, its offices adopted by Spain. Bank's capital is in excess of the and its affiliates. minimum levels that would be required by the Basle By order of the Board of Governors, effective Accord and is considered equivalent to capital that February 10, 1993. would be required of a U.S. banking organization. Managerial and other financial resources of Bank are Voting for this action: Chairman Greenspan and Governors also considered consistent with approval. Bank, which Mullins, Angell, Kelley, La Ware, Lindsey, and Phillips. has a number of branches and subsidiaries outside Spain, appears to have the experience and capacity to JENNIFER J. JOHNSON Associate Secretary of the Board conduct banking operations in the United States through the proposed agency. In addition, Bank has established controls and procedures for its U.S. offices to ensure compliance with U.S. law. Under the IBA, the proposed state-licensed agency may not engage in any type of activity that is not permissible for a 6. The Board's authority to approve the establishment of the federally-licensed branch without the Board's ap- proposed agency parallels the continuing authority of the Florida Department of Banking and Finance to license offices of a foreign proval. bank. The Board's approval of this application does not supplant the Finally, Bank has committed that it will make authority of the State of Florida, and its agent, the Florida Department available to the Board such information on the oper- of Banking and Finance, to license the proposed agency of Bank in accordance with any terms or conditions that the Department may ations of Bank and any affiliate of Bank that the impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 369 ACTIONS TAKEN UNDER THE FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 By the Director of the Division of Banking Supervision and Regulation and the General Counsel of the Board 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 First Interstate Bancorp, HomeFed Bank, F.A., First Interstate Bank February 25, 1993 Los Angeles, California San Diego, California of California, Los Angeles, California APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Effective Applicant(s) Bank(s) Date First Bank System, Inc., Bank Western, F.S.B., February 22, 1993 Minneapolis, Minnesota Denver, Colorado Liberty National Bancorp Inc. Financial Dominion of Kentucky February 26, 1993 Louisville, Kentucky Corporation, LNB Acquisition Corp., Radcliff, Kentucky Louisville, Kentucky Old National Bancorp, DCB Corporation, February 25, 1993 Evansville, Indiana Jasper, Indiana SunTrust Banks, Inc., The Flagler Bank Corporation, February 2, 1993 Atlanta, Georgia West Palm Beach, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

370 Federal Reserve Bulletin • April 1993 Section 4 Nonbanking Effective Applicant(s) Activity/Company Date Northern Trust Corporation, to engage de novo in executing and February 10, 1993 Chicago, Illinois clearing futures contracts and options on those futures contracts for customers with respect to NIKKEI 225 Stock Average contracts to be traded on the Chicago Mercantile Exchange APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Section 3 Reserve Effective Applicant(s) Bank(s) Bank Date CCB Financial Corporation, Mutual Savings Bank, Richmond February 25, 1993 Durham, North Carolina Lenoir, North Carolina Citizens Bancshares Company, Blackwater Bancshares, Kansas City February 11, 1993 Chillicothe, Missouri Inc., Blackwater, Missouri Citizens Bancshares Company, First Security Bank of Kansas City February 11, 1993 Chillicothe, Missouri Brookfield/Keytesville, Brookfield, Missouri Commerce Bank Corporation, Commerce Bank of Atlanta February 1, 1993 Winter Haven, Florida Central Florida, Winter Haven, Florida Dairyland Bank Holding Bank of Alma, Minneapolis January 29, 1993 Corporation, Alma, Wisconsin La Crosse, Wisconsin La Farge State Bank, La Farge, Wisconsin FBOP Corporation, Drovers Bank, Chicago February 8, 1993 Oak Park, Illinois Madisonville, Texas Fidelity Bancorp, Inc., The Fidelity Savings Cleveland February 24, 1993 Pittsburgh, Pennsylvania Bank, Pittsburgh, Pennsylvania Horizon Bancorp, Inc., Allegheny Bankshares Richmond February 11, 1993 Beckley, West Virginia Corporation, Lewisburg, West Virginia Raton Capital Corporation, International State Bank, Kansas City January 29, 1993 Raton, New Mexico Raton, New Mexico Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 371 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank Date Snyder Holding Corporation, The Armstrong County Cleveland January 29, 1993 Kittanning, Pennsylvania Trust Company, F&A Financial Company, Kittanning, Kittanning, Pennsylvania Pennsylvania The Farmers National Bank of Kittanning, Kittanning, Pennsylvania Van Diest Investment Company, Hamilton County Chicago February 2, 1993 Ankeny, Iowa Bancshares, Inc., Webster City, Iowa Section 4 Nonbanking Reserve Effective Applicant(s) Activity/ Company Bank Date Banterra Corp, Blankenship Insurance St. Louis February 1, 1993 Eldorado, Illinois Agency, Inc., Eldorado, Illinois BB&T Financial Corporation, Security Financial Richmond February 4, 1993 Wilson, North Carolina Holding Company, Durham, North Carolina Dunn County Bankshares, Inc., Premium Finance Minneapolis February 12, 1993 Menomonie, Wisconsin Corporation Inc., Eau Claire, Wisconsin First Abilene Bankshares, Inc., First Financial Dallas February 3, 1993 Investments, Inc., Abilene, Texas Abilene, Texas First Union Corporation, City Finance Company, Richmond February 16, 1993 Charlotte, North Carolina Big Spring, Texas Garwin Bancorporation, Garwin Insurance Chicago February 2, 1993 Garwin, Iowa Agency, Garwin, Iowa The Long-Term Credit Bank of Peers Holdings, Inc., New York February 19, 1993 Japan, Limited, New York, New York Tokyo,Japan Old Kent Financial Corporation, Gladeshire L.D.H.A., Chicago January 28, 1993 Grand Rapids, Michigan Limited Partnership, Kalamazoo, Michigan UJB Financial Corp., Richard Blackman & Co. New York February 4, 1993 Princeton, New Jersey Inc., Paramus, New Jersey Union Planters Corporation, First Federal Savings St. Louis February 11, 1993 Pemphis, Tennessee Bank of Maryville, Maryville, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

372 Federal Reserve Bulletin • April 1993 PENDING CASES INVOLVING THE BOARD OF amined institution, and remanded for further consid- GOVERNORS eration of the privilege issue. On August 6, 1992, the district court ordered the matter held in abeyance pending settlement of the underlying action. This list of pending cases does not include suits against the Federal Reserve Banks in which the Board Board of Governors v. Kemal Shoaib, No. CV 91-5152 of Governors is not named a party. (C.D. California, filed September 24, 1991). Action to freeze assets of individual pending administrative adjudication of civil money penalty assessment by Adams v. Greenspan, No. 93-0167 (D.D.C., filed the Board. On October 15, 1991, the court issued a January 27,1993). Action by former employee under preliminary injunction restraining the transfer or the Civil Rights Act of 1964 concerning termination disposition of the individual's assets. of employment. Board of Governors v. Ghaith R. Pharaon, No. 91- Sisti v. Board of Governors, No. 93-0033 (D.D.C., CIV-6250 (S.D. New York, filed September 17, filed January 6, 1993). Challenge to Board staff 1991). Action to freeze assets of individual pending interpretation with respect to margin accounts. administrative adjudication of civil money penalty U.S. Check v. Board of Governors, No 92-2892 assessment by the Board. On September 17, 1991, (D.D.C., filed December 30, 1992). Challenge to the court issued an order temporarily restraining the partial denial of request for information under the transfer or disposition of the individual's assets. Freedom of Information Act. UCBC, Inc. v. Board of Governors, No. 92-9572 (10th Cir., filed December 2, 1992). Petition for review of FINAL ENFORCEMENT DECISIONS ISSUED BY civil money penalty assessment against a bank hold- THE BOARD OF GOVERNORS ing company and three of its officers and directors for failure to comply with reporting requirements. On Certification of the Department of the DLG Financial Corporation v. Board of Governors, Treasury—Office of the Comptroller of the No. 392 Civ. 2086-G (N.D. Texas, filed October 9, Currency 1992). Action to enjoin the Board and the Federal Reserve Bank of Dallas from taking certain enforce- In the Matter of a Notice to Prohibit Further Particiment actions, and seeking money damages on a pation Against variety of tort and contract theories. On October 9, 1992, the court denied plaintiffs' motion for a tem- Wesley Godfrey, Jr., Former Chairman and Director porary restraining order. On November 20, 1992, Security National Bank the Board filed a motion to dismiss. On December Shreveport, Louisiana 17, 1992, plaintiffs filed an amended complaint. Zemel v. Board of Governors, No. 92-1056 (D. District OCC No. AA-EC-91-189 of Columbia, filed May 4, 1992). Age Discrimination in Employment Act case. Final Decision State of Idaho, Department of Finance v. Board of Governors, No. 92-70107 (9th Cir., filed February This is an administrative proceeding pursuant to the 24, 1992). Petition for review of Board order return- Federal Deposit Insurance Act ("FDI Act") in which ing without action a bank holding company applica- the Office of Comptroller of the Currency of the tion to relocate its subsidiary bank from Washington United States of America ("OCC") seeks to prohibit to Idaho. The Board's brief was filed on June 29, the Respondent, Wesley Godfrey, Jr., from further 1992. Oral argument was held October 6, 1992. participation in the affairs of any financial institution as In re Subpoena Served on the Board of Governors, a result of his conduct as chairman of the board of Nos. 91-5427, 91-5428 (D.C. Cir., filed December directors, and acting chief executive officer of Security 27, 1991). Appeal of order of district court, dated National Bank, Shreveport, Louisiana (the "Bank"). December 3, 1991, requiring the Board and the The proceeding comes to the Board of Governors of Office of the Comptroller of the Currency to produce the Federal Reserve System (the "Board") in the form confidential examination material to a private liti- of a Recommended Decision by Administrative Law gant. On June 26, 1992, the court of appeals affirmed Judge ("ALJ") Walter J. Alprin recommending that the district court order in part, but held that the bank the Board issue an Order of Prohibition against Godexamination privilege was not waived by the agen- frey by default pursuant to the provisions of cies' provision of examination materials to the ex- 12 U.S.C. § 1818(e)(4) and 12 C.F.R. 19.23(d)(2). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 373 Upon review of the administrative record, the Board sentence answer to the charges in the notice.2 On issues this Final Decision adopting the ALJ's Recom- April 16, 1992, the ALJ issued an order convening a mended Decision and orders that the attached Order of scheduling conference and establishing a provisional Prohibition issue against Godfrey. hearing schedule. On the day designated for the conference, April 27, 1992, counsel for the OCC partici- I. Statement of the Case pated in a telephonic scheduling conference with the ALJ's attorney-advisor, but Godfrey did not partici- A. Procedural History pate. On May 21, 1992, counsel for the OCC filed a motion On October 17, 1991, the OCC issued a Notice of to require Godfrey to supply more definite answers to Intention to Prohibit Further Participation against the OCC's charges. OCC Counsel argued that God- Godfrey pursuant to the provisions of 12 U.S.C. frey's conclusory denial did not meet the standards set § 1818(e)(1), based on allegations that Godfrey had by the Uniform Rules of Practice and Procedure engaged in misconduct during his tenure as chairman ("Uniform Rules")3 applicable to this proceeding, and acting chief executive officer of the Bank. The which do not permit general denials to suffice as an OCC charged that Godfrey's misconduct included: answer. 12 C.F.R. 19.19(b). On June 9, 1992, ALJ writing approximately 70 overdrafts upon his demand Alprin sua sponte issued an order striking Godfrey's deposit account at the Bank; commingling personal answers as failing to provide a specific response to funds with a bank escrow account; failing to secure fire each paragraph of the Notice. Godfrey was granted and automobile insurance for bank property ; making until July 2, 1992 — twenty days, plus three days for an improper capital injection into the Bank; and caus- mail delivery — to file his answer. ing the Bank to make numerous extensions of credit in When Godfrey failed to file the required answer violation of the legal lending limit for the Bank. The within the designated time, OCC Counsel filed a mo- OCC alleged that this conduct violated the law tion for entry of an order of default. Under the (12 U.S.C. §§ 57, 84 and 375b(4); 12 C.F.R. 215.4(d) Uniform Rules of Practice and Procedure applicable to and 32.5(a)(l)(i)), and constituted unsafe and unsound the proceeding, a failure to file an answer constitutes a banking practices and breaches of Godfrey's fiduciary waiver of a respondent's right to appear and contest duty. The OCC also alleged that the conduct caused the allegations in the notices. 12 C.F.R. 19.19(c). OCC substantial financial loss to the Bank, and evidenced Counsel argued that Godfrey's failure to file a respon- Godfrey's personal dishonesty and willful or continu- sive answer, after his initial general denial had been ing disregard for the Bank's safety or soundness. The stricken as non-responsive, constituted a waiver of Notice required that Godfrey file an answer to the Godfrey's right to a hearing, and warranted the entry charges within 20 days of service of the Notice. The of a recommended order of default. Godfrey did not OCC issued a second Notice of Intention to Prohibit file any opposition to the motion for default. against Godfrey, identical to the first, on November On August 13, 1992, the ALJ granted the OCC's 20, 1991, after Godfrey contended that he never re- motion for default, noting that Godfrey had not received the original Notice. sponded to the motion for default in the three weeks A lawyer who had been Godfrey's counsel in unre- that had elapsed since the motion was filed. The lated proceedings accepted service of the Notice on recommended decision on default was referred to the Godfrey's behalf. Then, by agreement of the parties, Board for final decision on September 30, 1992. Godthe proceeding was stayed for sixty days by ALJ frey has filed no exceptions to the recommended Alprin to permit the parties to attempt to reach a decision. settlement. On March 28, 1992, after settlement negotiations had concluded unsuccessfully, and after Godfrey's lawyer had submitted notice that he would not appear for Godfrey in this proceeding,1 Godfrey pro se submitted a request for a hearing and a conclusory one- 2. Godfrey's response to the charges read in its entirety: "All articles except Article I are denied and all issues were explained and corrective actions were taken to avoid violations." Article I of the 1. On February 28, 1992, Godfrey's lawyer wrote Godfrey, with a Notice consisted entirely of jurisdictional allegations. copy to OCC Counsel, advising him that he would no longer represent 3. The Uniform Rules, adopted concurrently by each of the financial Godfrey in any matter because Godfrey had not paid legal fees. The institution regulatory agencies, including the Board and the OCC, lawyer also advised Godfrey to contact the OCC to request a constitute a materially identical set of procedural rules that control continuance or to perfect his right to a hearing, and not to ignore the most aspects of those agencies' enforcement proceedings. Compare existence of the proceeding. The letter indicated that Godfrey had 12 C.F.R. Part 19, Subpart A (OCC) with 12 C.F.R. Part 263, Subpart been given all the original documents relating to this proceeding. A (Board). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

374 Federal Reserve Bulletin • April 1993 B. Statutory Framework charges, and there is no basis for any inference that Godfrey's default is the result of any mischance or The FDI Act sets forth the basis upon which a federal inadvertence.4 The ALJ acted reasonably and in acbanking agency may issue against a bank official an cordance with the Uniform Rules in refusing to accept order of removal from office or prohibition from fur- Godfrey's general denials as an answer and in finding ther participation in banking. In order to issue such an that no good cause existed for relieving Godfrey from order pursuant to section 1818(e)(1), the Board must the consequences of his failure to submit an answer to make each of three findings: the Notice that complied with the requirements of the (1) There must be a specified type of misconduct — Uniform Rules. violation of law, unsound practice, or breach of fiduciary duty ; Conclusion (2) The misconduct must have a prescribed effect — financial gain to the respondent or financial harm or For these reasons, the Board orders that the attached other damage to the institution; and Order of Prohibition issue. (3) The misconduct must involve culpability of a certain degree—personal dishonesty or willful or Order of Removal and Prohibition continuing disregard for the safety or soundness of the institution. 12 U.S.C. § 1818(e)(1). Whereas, pursuant to section 8(e) of the Federal Deposit Insurance Act, as amended, (the "Act") In prohibition cases brought by the OCC with respect (12 U.S.C. § 1818(e)), the Board of Governors of the to a party affiliated with a national bank, the findings Federal Reserve System ("the Board") is of the opinand conclusions of the ALJ are certified to the Board ion, for the reasons set forth in the accompanying to determine whether any order shall issue. Final Decision, that a final Order of Removal and 12 U.S.C. § 1818(e)(4). Prohibition should issue against WESLEY GOD- The Uniform Rules state that an answer must spe- FREY, JR. cifically respond to each paragraph or allegation of fact NOW, THEREFORE, IT IS HEREBY ORcontained in the notice and must admit, deny, or state DERED, pursuant to sections 8(b)(3), 8(e), and 8(j) of that the party lacks sufficient information to admit or the Act, (12 U.S.C. §§ 1818(b)(3), 1818(e) and deny each allegation of fact. 12 C.F.R. 19.19(b). De- 1818(j)), that: nials must fairly meet the substance of each allegation 1. WESLEY GODFREY, JR. is removed from all of fact denied; general denials are not permitted. Id. offices he holds with Security National Bank, The Uniform Rules provide that, following the issue Shreveport, Louisiana, and any other insured deof a notice of intention to prohibit an institution- pository institution or bank holding company; affiliated party, a Respondent's failure to file an an- 2. In the absence of prior written approval by the swer within the time provided constitutes a waiver of Board, and by any other Federal financiali nstitution his or her right to appear and to contest the allegations regulatory agency where necessary pursuant to in the notice. 12 C.F.R. 19.19(c). If no timely answer section 8(e)(7)(B) of the Act (12 U.S.C. is filed, Enforcement Counsel is authorized to file a § 1818(e)(7)(B)), WESLEY GODFREY, JR. is motion for entry of an order of default. Id. Upon a hereby prohibited: finding that no good cause has been shown for the (a) From participating in the conduct of the affairs failure to file a timely answer, the ALJ is directed to of any bank holding company, any insured deposfile a recommended decision containing the findings itory institution or any other institution specified and relief sought by the agency. Id. in subsection 8(e)(7)(A) of the Act (12 U.S.C. § 1818(e)(7)(A)); II. Discussion (b) From soliciting, procuring, transferring, attempting to transfer, voting or attempting to vote In the circumstances of this case, it is clear that the any proxy, consent, or authorization with respect OCC has established the basis for a default order of to any voting rights in any institution described in prohibition under the terms of the Uniform Rules. The subsection 8(e)(7)(A) of the Act (12 U.S.C. fact that Godfrey was duly served with notice of the § 1818(e)(7)(A)); proceeding is supported by the letter from his counsel attesting to that service, and by Godfrey's letter requesting a hearing and generally denying the allegations. The OCC and the ALJ provided Godfrey with 4. Indeed, the fact that Godfrey's lawyer felt it necessary to warn him not to ignore this proceeding suggests that Godfrey's failure to repeated opportunities to appear and contest the appear was a deliberate choice on Godfrey's part. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 375 (c) From violating any voting agreement previ- Upon review of the administrative record, the Board ously approved by the appropriate Federal bank- issues this Final Decision adopting the ALJ's Recoming agency; or mended Decision and orders that the attached Order of (d) From voting for a director, or from serving or Prohibition issue against Owen. acting as an institution-affiliated party as defined in section 3(u) of the Act, (12 U.S.C. § 1813(u)), I. Statement of the Case such as an officer, director, or employee. 3. This Order, and each provision hereof, is and A. Procedural History shall remain fully effective and enforceable until expressly stayed, modified, terminated or sus- On May 11, 1992, the OCC issued a Notice of Intenpended in writing by the Board. tion to Prohibit Further Participation against Owen This Order shall become effective upon the expira- pursuant to the provisions of 12 U.S.C. § 1818(e)(1), tion of thirty days after service is made. based on allegations that Owen had engaged in mis- By Order of the Board of Governors, this 1st day of conduct during his tenure as chairman of the board of February, 1993. directors and president of the Bank, which subsequently failed. The OCC charged that Owen's miscon- Board of Governors of the duct included: causing the Bank to file materially Federal Reserve System inaccurate regulatory reports for three years by failing to record $600,000 in letters of credit that Owen had caused to be issued; participating in violations of a WILLIAM W. WILES Secretary of the Board consent cease and desist order requiring the Bank to correct unsafe and unsound practices; and concealing losses on extensions of credit by, among other things, On Certification of the Department of the altering the loan due dates on loan documents. The Treasury—Office of the Comptroller of the OCC alleged that this conduct violated laws and reg- Currency ulations applicable to national banks and constituted unsafe and unsound banking practices and breaches of In the Matter of a Notice to Prohibit Further Partici- Owen's fiduciary duty. The OCC also alleged that the pation Against conduct caused substantial financial loss or other damage to the Bank, and evidenced Owen's personal Tommie J. Owen, Former President and dishonesty or a willful or continuing disregard for the Chairman of Board of Directors Bank's safety or soundness. The Notice required that Everman National Bank Owen file an answer to the charges within 20 days of Fort Forth, Texas service of the Notice. For reasons that do not appear in the record, the OCC No. AA-EC-92-143 Notice was not served until June 30,1992, when it was sent to Owen's address by certified mail. Under the Final Decision Uniform Rules of Practice and Procedure ("Uniform Rules")1 applicable to this proceeding, Owen's answer This is an administrative proceeding pursuant to the was due to be filed on July 23, 1992—20 days from Federal Deposit Insurance Act ("FDI Act") in which June 30 plus three extra days for service by mail. the Office of Comptroller of the Currency of the 12 C.F.R. 19.12(c)(1). The record contains a certified United States of America ("OCC") seeks to prohibit mail return receipt signed by Joan Owen as Agent for the Respondent, Tommie J. Owen, from further par- Owen dated July 3, 1992. The record also contains a ticipation in the affairs of any financial institution as a certificate from OCC Docket Clerk Lisa Chase, dated result of his conduct as president and chairman of the September 9, 1992, certifying that the OCC had reboard of directors of Everman National Bank, Fort ceived no answer to the Notice, no entry of appear- Worth, Texas, (the "Bank"). The proceeding comes to the Board of Governors of the Federal Reserve System (the "Board") in the form of a Recommended Decision by Administrative Law Judge ("ALJ") 1. The Uniform Rules, adopted concurrently by each of the financial Arthur L. Shipe recommending that the Board issue an institution regulatory agencies, including the Board and the OCC, Order of Prohibition against Owen by default pursuant constitute a materially identical set of procedural rules that control to the provisions of 12 U.S.C. § 1818(e) and 12 C.F.R. most aspects of those agencies' enforcement proceedings. Compare 12 C.F.R. Part 19, Subpart A (OCC) with 12 C.F.R. Part 263, Subpart 19.19(c). A (Board). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

376 Federal Reserve Bulletin • April 1993 ance by counsel on Owen's behalf, and no notice of The Uniform Rules provide that, following the issue self-representation by Owen. of a notice of intention to prohibit an institution- On September 9, 1992, OCC Enforcement Counsel affiliated party, a Respondent's failure to file an anfiled with the ALJ a motion for entry of an order of swer within the time provided constitutes a waiver of default pursuant to the Uniform Rules, which provide his or her right to appear and to contest the allegations that a failure to file an answer constitutes a waiver of in the notice. 12 C.F.R. 19.19(c). If no timely answer a respondent's right to appear and contest the allega- is filed, Enforcement Counsel is authorized to file a tions in the notice. 12 C.F.R. 19.19(c). Owen did not motion for entry of an order of default. Id. Upon a file any opposition to the motion for default. finding that no good cause has been shown for the On October 1, 1992, ALJ Shipe issued a Show Cause failure to file a timely answer, the ALJ is directed to Order, directing that Owen show cause within ten days file a recommended decision containing the findings of receipt of the order why the ALJ should not file a and relief sought by the agency. Id. recommended decision containing the findings and relief sought in the OCC's Notice. The Show Cause Order II. Discussion was personally served upon Owen on October 17,1992. Owen filed no response to the Order. In the circumstances of this case, it is clear that the On November 18, 1992, the ALJ granted the OCC's OCC has established the basis for a default order of motion for default, finding that the Notice had been prohibition under the terms of the Uniform Rules. The duly served upon Owen and that Owen had never filed fact that Owen was duly served with notice of the an answer. The ALJ further noted that Owen had not proceeding and of his obligation to answer is supresponded either to the OCC's motion or to the ALJ's ported by the signed certified mail return receipt. The Show Cause Order. Accordingly, the ALJ found that OCC and the ALJ provided Owen with repeated the record satisfied all of the requisites for default opportunities to respond to the charges, and there is pursuant to 12 C.F.R. 19.19 and that no good cause no basis for any inference that Owen's default is the had been shown as to why an Order of Default should result of any mischance or inadvertence. The ALJ not be entered. acted reasonably and in accordance with the Uniform The Recommended Decision on Default was re- Rules in finding that no good cause existed for relievferred to the Board for final decision on January 22, ing Owen from the consequences of his failure to 1993. Owen has filed no exceptions to the Recomsubmit an answer to the Notice. mended Decision. Conclusion B. Statutory Framework The FDI Act sets forth the basis upon which a federal For these reasons, the Board orders that the attached Order of Prohibition issue. banking agency may issue against a bank official an order of removal from office or prohibition from fur- In the Matter of a Notice to Prohibit Further Particither participation in banking. In order to issue such an pation Against order pursuant to section 1818(e)(1), the Board must make each of three findings: Tommie J. Owen, Former President and (1) There must be a specified type of misconduct — violation of law, unsound practice, or breach of Chairman of Board fiduciary duty ; Everman National Bank (2) The misconduct must have a prescribed effect — Fort Worth, Texas financial gain to the respondent or financial harm or other damage to the institution; and OCC No. AA-EC-92-143 (3) The misconduct must involve culpability of a certain degree—personal dishonesty or willful or Order of Removal and Prohibition continuing disregard for the safety or soundness of the institution. 12 U.S.C. § 1818(e)(1). WHEREAS, pursuant to section 8(e) of the Federal Deposit Insurance Act, as amended, (the "Act") In prohibition cases brought by the OCC with respect (12 U.S.C. § 1818(e)), the Board of Governors of the to a party affiliated with a national bank, the findings Federal Reserve System ("the Board") is of the opinand conclusions of the ALJ are certified to the Board ion, for the reasons set forth in the accompanying to determine whether any order shall issue. Final Decision, that a final Order of Removal and 12 U.S.C. § 1818(e)(4). Prohibition should issue against TOMMIE J. OWEN. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 377 NOW, THEREFORE, IT IS HEREBY ORDERED, FINAL ENFORCEMENT ORDERS ISSUED BY THE pursuant to sections 8(b)(3), 8(e), and 8(j) of the Act, BOARD OF GOVERNORS (12 U.S.C. §§ 1818(b)(3), 1818(e) and 1818(j)), that: 1. TOMMIE J. OWEN is removed from all offices Donald E. Stuwe he holds with Everman National Bank, Fort Worth, Hugo, Colorado Texas, and any other insured depository institution or bank holding company; The Federal Reserve Board announced on Febru- 2. In the absence of prior written approval by the ary 17, 1993, the issuance of an Order of Assessment Board, and by any other Federal financial institution of a Civil Money Penalty against Donald E. Stuwe, an regulatory agency where necessary pursuant to sec- institution-affiliated party of First Liberty Capital Cortion 8(e)(7)(B) of the Act (12 U.S.C. § 1818(e)(7)(B)), poration, Hugo, Colorado. TOMMIE J. OWEN is hereby prohibited: (a) From participating in the conduct of the affairs of any bank holding company, any insured depos- WRITTEN AGREEMENTS APPROVED BY FEDERAL itory institution or any other institution specified RESERVE BANKS in subsection 8(e)(7)(A) of the Act (12 U.S.C. § 1818(e)(7)(A)); (b) From soliciting, procuring, transferring, at- BSD Bancorp, Inc. tempting to transfer, voting or attempting to vote San Diego, California any proxy, consent, or authorization with respect to any voting rights in any institution described in The Federal Reserve Board announced on February 9, subsection 8(e)(7)(A) of the Act (12 U.S.C. 1993, the execution of a Written Agreement between § 1818(e)(7)(A)); the Federal Reserve Bank of San Francisco, and BSD (c) From violating any voting agreement previ- Bancorp, Inc., San Diego, California. ously approved by the appropriate Federal banking agency; or Carney Bank (d) From voting for a director, or from serving or Boynton Beach, Florida acting as an institution-affiliated party as defined in section 3(u) of the Act, (12 U.S.C. § 1813(u)), The Federal Reserve Board announced on Februsuch as an officer, director, or employee. ary 11, 1993, the execution of a Written Agreement 3. This Order, and each provision hereof, is and among the Federal Reserve Bank of Atlanta, the State shall remain fully effective and enforceable until Comptroller and Banking Commissioner of the State expressly stayed, modified, terminated or susof Florida, and the Carney Bank, Boynton Beach, pended in writing by the Board. Florida. This Order shall become effective upon the expiration of thirty days after service is made. Union State Bank By Order of the Board of Governors, this 11th day Upton, Wyoming of February, 1993. The Federal Reserve Board announced on Febru- Board of Governors of the ary 24, 1993, the execution of a Written Agreement Federal Reserve System among the Federal Reserve Bank of Kansas City, the Wyoming State Banking Commissioner, Division WILLIAM W. WILES of Banking, and the Union State Bank, Upton, Secretary of the Board Wyoming. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial and Business Statistics CONTENTS WEEKLY REPORTING COMMERCIAL BANKS Assets and liabilities A3 Guide to Tabular Presentation A21 All reporting banks A23 Branches and agencies of foreign banks Domestic Financial Statistics MONEY STOCK AND BANK CREDIT FINANCIAL MARKETS A4 Reserves, money stock, liquid assets, and debt A24 Commercial paper and bankers dollar measures acceptances outstanding A5 Reserves of depository institutions, Reserve Bank A24 Prime rate charged by banks on short-term credit business loans A6 Reserves and borrowings—Depository A25 Interest rates—money and capital markets institutions A26 Stock market—Selected statistics A7 Selected borrowings in immediately available A27 Selected financial institutions—Selected assets funds—Large member banks and liabilities POLICY INSTRUMENTS FEDERAL FINANCE A8 Federal Reserve Bank interest rates All Federal fiscal and financing operations A9 Reserve requirements of depository institutions A28 U.S. budget receipts and outlays A10 Federal Reserve open market transactions A29 Federal debt subject to statutory limitation A29 Gross public debt of U.S. Treasury—Types and ownership FEDERAL RESERVE BANKS A30 U.S. government securities dealers—Transactions All Condition and Federal Reserve note statements A31 U.S. government securities dealers—Positions A12 Maturity distribution of loan and security and financing holdings A32 Federal and federally sponsored credit agencies—Debt outstanding MONETARY AND CREDIT AGGREGATES A13 Aggregate reserves of depository institutions SECURITIES MARKETS AND and monetary base CORPORATE FINANCE A14 Money stock, liquid assets, and debt measures A16 Bank debits and deposit turnover A3 3 New security issues—State and local A17 Loans and securities—All commercial banks governments and corporations A34 Open-end investment companies—Net sales and asset position A34 Corporate profits and their distribution COMMERCIAL BANKING INSTITUTIONS A34 Nonfarm business expenditures on new A18 Major nondeposit funds plant and equipment A19 Assets and liabilities, last-Wednesday-of-month A35 Domestic finance companies—Assets and series liabilities and business credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • April 1993 Domestic Financial Statistics—Continued A54 U.S. reserve assets A54 Foreign official assets held at Federal Reserve Banks REAL ESTATE A55 Foreign branches of U.S. banks—Balance A3 6 Mortgage markets sheet data A37 Mortgage debt outstanding A57 Selected U.S. liabilities to foreign official institutions CONSUMER INSTALLMENT CREDIT REPORTED BY BANKS A3 8 Total outstanding and net change IN THE UNITED STATES A3 8 Terms A57 Liabilities to and claims on foreigners A58 Liabilities to foreigners FLOW OF FUNDS A60 Banks' own claims on foreigners A61 Banks' own and domestic customers' claims on A39 Funds raised in U.S. credit markets foreigners A41 Summary of financial transactions A61 Banks' own claims on unaffiliated foreigners A42 Summary of credit market debt outstanding A62 Claims on foreign countries—Combined A43 Summary of financial assets and liabilities domestic offices and foreign branches Domestic Nonfinancial Statistics REPORTED BY NONBANKING BUSINESS ENTERPRISES IN THE UNITED STATES SELECTED MEASURES A63 Liabilities to unaffiliated foreigners A44 Nonfinancial business activity—Selected A64 Claims on unaffiliated foreigners measures A45 Labor force, employment, and unemployment A46 Output, capacity, and capacity utilization SECURITIES HOLDINGS AND TRANSACTIONS A47 Industrial production—Indexes and gross value A49 Housing and construction A65 Foreign transactions in securities A50 Consumer and producer prices A66 Marketable U.S. Treasury bonds and notes—Foreign transactions A51 Gross domestic product and income A52 Personal income and saving INTEREST AND EXCHANGE RATES International Statistics A67 Discount rates of foreign central banks A67 Foreign short-term interest rates SUMMARY STATISTICS A68 Foreign exchange rates A53 U.S. international transactions—Summary A69 Guide to Statistical Releases and A54 U.S. foreign trade Special Tables Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected GNMA Government National Mortgage Association e Estimated GDP Gross domestic product n.a. Not available HUD Department of Housing and Urban n.e.c. Not elsewhere classified Development P Preliminary IMF International Monetary Fund r Revised (Notation appears on column heading IO Interest only when about half of the figures in that column IPCs Individuals, partnerships, and corporations are changed.) IRA Individual retirement account * Amounts insignificant in terms of the last decimal MMDA Money market deposit account place shown in the table (for example, less than NOW Negotiable order of withdrawal 500,000 when the smallest unit given is millions) OCD Other checkable deposit 0 Calculated to be zero OPEC Organization of Petroleum Exporting Countries Cell not applicable OTS Office of Thrift Supervision ATS Automatic transfer service PO Principal only CD Certificate of deposit REIT Real estate investment trust CMO Collateralized mortgage obligation REMIC Real estate mortgage investment conduit FFB Federal Financing Bank RP Repurchase agreement FHA Federal Housing Administration RTC Resolution Trust Corporation FHLBB Federal Home Loan Bank Board SAIF Savings Association Insurance Fund FHLMC Federal Home Loan Mortgage Corporation SCO Securitized credit obligation FmHA Farmers Home Administration SDR Special drawing right FNMA Federal National Mortgage Association SIC Standard Industrial Classification FSLIC Federal Savings and Loan Insurance Corporation SMSA Standard metropolitan statistical area G-7 Group of Seven VA Veterans Administration G-10 Group of Ten GENERAL INFORMATION In many of the tables, components do not sum to totals because include not fully guaranteed issues) as well as direct obligaof rounding. tions of the Treasury. "State and local government" also in- Minus signs are used to indicate (1) a decrease, (2) a negative cludes municipalities, special districts, and other political figure, or (3) an outflow. subdivisions. "U.S. government securities" may include guaranteed issues of U.S. government agencies (the flow of funds figures also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 DomesticN onfinancial Statistics • April 1993 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1992r 1992r 1993 MMoonneettaarryy aanndd ccrreeddiitt aaggggrreeggaattee Q1 Q2 Q3 Q4 Sept. Oct. Nov. Dec. Jan. Reserves of depository institutions2 1 Total 23.4 14.9 9.3 27.9 24.4 42.0 20.9 9.1 2.6 2 Required 23.5 15.4 9.9 27.4 23.4 40.9 22.1 6.7 .4 3 Nonborrowed 24.0 14.8 8.4 29.2 23.7 45.6 21.8 8.7 1.7 4 Monetary base3 9.1 7.8 10.5 12.9 17.2 12.2 10.3 9.8 7.7 Concepts of money, liquid assets, and debt4 5 Ml 15.4 10.6 11.7 16.8 18.0 19.1 15.7 8.8 7.8 6 M2 3.3 .6 .8 3.1 2.7 4.6 3.0 -.7 -4.1 7 M3 2.0 -.3 .1 .2 1.2 .0 .6 -4.3 -8.3 8 L 1.4 1.5 1.1 2.3 2.7 2.0 3.9 -1.4 n.a. 9 Debt 4.3 5.4 4.2 4.2 3.3 2.6 6.2 6.6 n.a. Nontransaction components 10 In M25 -1.0 -3.0 -3.2 -2.3 -3.3 -1.3 -2.2 -4.6 -9.1 11 In M3 only6 -4.2 -4.9 -3.6 -13.6 -6.3 -22.7 -11.1 -22.7 -29.9 Time and savings deposits Commercial banks 12 Savings, including MMDAs 18.8 12.6 10.9 12.9 15.8 14.5 10.3 5.7 -3.3 13 Small time7 -19.6 -13.4 -17.4 -17.1 -18.1 -17.3 -18.5 -11.5 -12.3 14 Large time • -15.2 -13.3 -18.6 -18.3 -16.8 -26.5 -16.2 -9.8 -32.2 Thrift institutions 15 Savings, including MMDAs 20.2 18.1 9.2 8.7 10.0 7.7 9.9 5.6 .8 16 Small time7 -24.0 -29.8 -18.6 -21.6 -18.7 -26.8 -21.0 -21.1 -15.8 17 Large time8-9 -26.8 -31.9 -14.9 -11.3 -1.7 .0 -29.1 -21.0 -5.3 Money market mutual funds 18 General purpose and broker-dealer -2.4 -3.3 -7.3 -.9 -17.4 14.5 -2.4 -7.2 -10.0 19 Institution-only 33.0 23.9 32.9 -19.4 -1.1 -53.3 -9.7 -39.6 -27.3 Debt components4 20 Federal 10.0 14.4 10.8 5.9 5.0 -1.4 10.5 16.3 n.a. 21 Nonfederal 2.5 2.5 1.9 3.6 2.7 4.0 4.7 3.2 n.a. 1. Unless otherwise noted, rates of change are calculated from average offices in the United Kingdom and Canada, and (3) balances in both taxable and amounts outstanding during preceding month or quarter. tax-exempt, institution-only money market funds. Excludes amounts held by 2. Figures incorporate adjustments for discontinuities, or "breaks," associ- depository institutions, the U.S. government, money market funds, and foreign ated with regulatory changes in reserve requirements. (See also table 1.20.) banks and official institutions. Also excluded is the estimated amount of overnight 3. Seasonally adjusted, break-adjusted monetary base consists of (1) season- RPs and Eurodollars held by institution-only money market funds. Seasonally ally adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted M3 is computed by adjusting its non-M2 component as a whole and then adjusted currency component of the money stock, plus (3) (for all quarterly adding this result to seasonally adjusted M2. reporters on the "Report of Transaction Accounts, Other Deposits, and Vault L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Cash" and for all weekly reporters whose vault cash exceeds their required Treasury securities, commercial paper, and bankers acceptances, net of money reserves) the seasonally adjusted, break-adjusted difference between current vault market fund holdings of these assets. Seasonally adjusted L is computed by cash and the amount applied to satisfy current reserve requirements. summing U.S. savings bonds, short-term Treasury securities, commercial paper, 4. Composition of the money stock measures and debt is as follows: and bankers acceptances, each seasonally adjusted separately, and then adding Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults this result to M3. of depository institutions; (2) travelers checks of nonbank issuers; (3) demand Debt: Debt of domestic nonfinancial sectors consists of outstanding creditdeposits at all commercial banks other than those due to depository institutions, market debt of the U.S. government, state and local governments, and private the U.S. government, and foreign banks and official institutions, less cash items in nonfinancial sectors. Private debt consists of corporate bonds, mortgages, conthe process of collection and Federal Reserve float; and (4) other checkable sumer credit (including bank loans), other bank loans, commercial paper, bankers deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and acceptances, and other debt instruments. Data are derived from the Federal automatic transfer service (ATS) accounts at depository institutions, credit union Reserve Board's flow of funds accounts. Data on debt of domestic nonfinancial share draft accounts, and demand deposits at thrift institutions. Seasonally sectors are monthly averages, derived by averaging adjacent month-end levels. adjusted Ml is computed by summing currency, travelers checks, demand Growth rates for debt reflect adjustments fcr discontinuities over time in the levels deposits, and OCDs, each seasonally adjusted separately. of debt presented in other tables. M2: Ml plus (1) overnight (and continuing-contract) repurchase agreements 5. Sum of (1) overnight RPs and Eurodollars, (2) money market fund balances (RPs) issued by all depository institutions and overnight Eurodollars issued to (general purpose and broker-dealer), (3) MMDAs, and (4) savings and small time U.S. residents by foreign branches of U.S. banks worldwide, (2) savings (includ- deposits. ing MMDAs) and small time deposits (time deposits—including retail repurchase 6. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. agreements (RPs)—in amounts of less than $100,000), and (3) balances in both residents, and (4) money market fund balances (institution-only), less (5) a taxable and tax-exempt general-purpose and broker-dealer money market funds. consolidation adjustment that represents the estimated amount of overnight RPs Excludes individual retirement accounts (IRAs) and Keogh balances at depository and Eurodollars held by institution-only money market funds. This sum is institutions and money market funds. Also excludes all balances held by U.S. seasonally adjusted as a whole. commercial banks, money market funds (general purpose and broker-dealer), 7. Small time deposits—including retail RPs—are those issued in amounts of foreign governments and commercial banks, and the U.S. government. Season- less than $100,000. All IRA and Keogh account balances at commercial banks and ally adjusted M2 is computed by adjusting its non-Mi component as a whole and thrift institutions are subtracted from small time deposits. then adding this result to seasonally adjusted Ml. 8. Large time deposits are those issued in amounts of $100,000 or more, M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of excluding those booked at international banking facilities. $100,000 or more) issued by all depository institutions, (2) term Eurodollars held 9. Large time deposits at commercial banks less those held by money market by U.S. residents at foreign branches of U.S. banks worldwide and at all banking funds, depository institutions, and foreign banks and official institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A5 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT1 Millions of dollars d A a v il e y r f a i g g e u r o e f s Average of daily figures for week ending on date indicated 1992 1993 1992 1993 Nov. Dec. Jan. Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 327,923 335,874r 336,825 333,627 338,688 342,155r 344,234 336,140 337,363 332,703 U.S. government securities 2 Bought outright—System account .... 288,434 295,258 297,541 294,929 2%, 138 297,076 295,539 299,052 298,631 2%, 880 3 Held under repurchase agreements ... 2,640 3,780 2,582 1,865 6,119 6,432 9,348 864 2,290 0 Federal agency obligations 4 Bought outright 5,534 5,477 5,379 5,485 5,450 5,434 5,413 5,413 5,403 5,331 5 Held under repurchase agreements ... 145 174 189 0 103 546 728 32 168 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 81 62 182 20 59 78 435 40 341 71 8 Seasonal credit 39 18 10 18 20 18 6 6 15 10 9 Extended credit 0 1 1 2 1 0 0 0 1 3 10 Float 575 l,310r 1,028 1,592 831 2,384r 2,628 1,132 741 527 11 Other Federal Reserve assets 30,474 29,795 29,913 29,717 29,%9 30,187 30,136 29,601 29,773 29,879 12 Gold stock 11,059 11,057 11,055 11,057 11,057 11,056 11,056 11,056 11,055 11,055 13 Special drawing rights certificate account . 10,018 8,663 8,018 8,304 8,018 8,018 8,018 8,018 8,018 8,018 14 Treasury currency outstanding 21,396 21,447 21,509 21,441 21,455 21,469 21,483 21,497 21,511 21,525 ABSORBING RESERVE FUNDS 15 Currency in circulation 324,505 330,563 330,373 329,149 331,166 334,120 334,533 331,912 329,782 327,958 16 Treasury cash holdings 504 515 505 517 512 510 507 505 502 502 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,617 6,011 7,693 5,002 7,764 6,320 8,360 5,492 6,988 8,761 18 Foreign 284 201 215 203 220 207 218 196 212 215 19 Service-related balances and adjustments 5,898 5,953 6,428 5,845 5,780 6,333r 6,179 6,539 6,969 6,228 20 Other 293 295 285 293 313 290 342 255 282 276 21 Other Federal Reserve liabilities and capital 7,834 8,109 8,523 8,052 8,399 8,402 8,027 8,262 8,692 8,739 22 Reserve balances with Federal Reserve Banks3 25,460 25,394 23,388 25,369 25,063 26,518 26,624 23,550 24,520 20,622 End-of-month figures Wednesday figures Nov. Dec. Jan. Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 331,113 342,512r 333,085 334,709 347,401 343,646r 350,590 334,532 348,010 332,652 U.S. government securities 2 Bought outright—System account .... 292,6% 295,011 296,977 297,995 2%,066 296,212 296,363 296,764 296,550 297,426 3 Held under repurchase agreements ... 3,256 7,463 0 0 13,132 5,130 16,076 0 10,128 0 Federal agency obligations 4 Bought outright 5,534 5,413 5,310 5,450 5,450 5,413 5,413 5,413 5,348 5,310 5 Held under repurchase agreements ... 254 631 0 0 277 646 920 0 1,027 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 10 671 21 15 87 39 162 36 2,233 251 8 Seasonal credit 25 4 10 22 19 16 4 4 5 15 9 Extended credit 0 0 4 2 0 1 0 0 2 4 10 Float -20 3,253r 234 1,501 2,181 5,904r 1,108 2,558 2,1% -335 11 Other Federal Reserve assets 29,358 30,067 30,529 29,724 30,190 30,286 30,544 29,757 30,521 29,982 12 Gold stock 11,059 11,056 11,055 11,057 11,056 11,056 11,056 11,056 11,055 11,055 13 Special drawing rights certificate account . 10,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 14 Treasury currency outstanding 21,413 21,483 21,539 21,441 21,455 21,469 21,483 21,497 21,511 21,525 ABSORBING RESERVE FUNDS 15 Currency in circulation 327,261 334,737 326,623 329,863 333,200 335,001 333,619 330,872 329,352 327,185 16 Treasury cash holdings 525 508 508 513 510 508 506 502 501 508 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 6,985 7,492 9,572 6,958 6,568 7,270 7,840 5,080 17,577 10,750 18 Foreign 229 206 244 221 178 254 175 203 226 274 19 Service-related balances and adjustments 6,066 6,179r 6,009 5,845 5,780 6,333r 6,179 6,539 6,969 6,228 20 Other 296 372 282 266 305 266 228 282 279 273 21 Other Federal Reserve liabilities and capital 7,759 7,984 9,141 8,069 8,344 8,278 8,143 8,360 8,649 8,624 22 Reserve balances with Federal Reserve Banks3 24,481 25,592r 21,318 23,490 33,045 26,279 34,457 23,265 25,042 19,408 1. For amounts of cash held as reserves, see table 1.12. 3. Excludes required clearing balances and adjustments to compensate for 2. Includes securities loaned—fully guaranteed by U.S. government securities float, pledged with Federal Reserve Banks—and excludes any securities sold and scheduled to be bought back under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Nonfinancial Statistics • April 1993 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1990 1991 1992 1992 1993 Dec. Dec. Dec.r July Aug. Sept. Oct. Nov. Dec.r Jan. 1 Reserve balances with Reserve Banks2 30,237 26,659 25,368 21,206 21,272 22,627 23,626 25,462 25,368 23,636 2 Total vault cash3 31,786 32,510" 34,535 32,145 32,458r 32,342r 32,987r 32,457 34,535 35,991 3 Applied vault cash 28,884 28,872 31,172 28,617 28,890 28,894 29,510 29,205 31,172 32,367 4 Surplus vault cash 2,903 3,638r 3,364 3,528 3,568r 3,448 3,477r 3,252 3,364 3,624 5 Total reserves6 59,120 55,532 56,540 49,823 50,162 51,521 53,136 54,666 56,540 56,003 6 Required reserves 57,456 54,553 55,385 48,857 49,227 50,527 52,062 53,624 55,385 54,746 7 Excess reserve balances at Reserve Banks ... 1,664 979 1,155 965 935 994 1,074 1,043 1,155 1,257 8 Total borrowings at Reserve Banks8 326 192 124 284 251 287 143 104 124 165 9 Seasonal borrowings 76 38 18 203 223 193 114 40 18 11 10 Extended credit9 23 1 1 0 0 0 0 0 1 1 Biweekly averages of daily figures for weeks ending 1992 1993 Sept. 30 Oct. 14 Oct. 28 Nov. 11 Nov. 25 Dec. 9 Dec. 23 Jan. 6r Jan. 20 Feb. 3 1 Reserve balances with Reserve Banks2 22,048 23,810 23,031 25,535 25,730 24,548 25,209 26,569 24,057 21,500 2 Total vault cash3 33,033 32,928r 33,324r 31,688r 32,398 34,315 34,770 34,374 36,389 36,369 3 Applied vault cash4, 29,351 29,438 29,790 28,539 29,117 30,918 31,373 31,105 32,829 32,468 4 Surplus vault cash 3,682 3,490" 3,534r 3,15c 3,281 3,397 3,397 3,269 3,560 3,901 5 Total reserves6 51,399 53,248 52,821 54,074 54,846 55,466 56,582 57,674 56,886 53,968 6 Required reserves .... 50,217 52,099 51,750 53,346 53,485 54,625 55,357 56,289 55,657 52,744 7 Excess reserve balances at Reserve Banks ... 1,182 1,149 1,071 728 1,361 841 1,225 1,385 1,229 1,224 8 Total borrowings at Reserve Banks8 259 185 118 66 138 95 60 269 202 64 9 Seasonal borrowings 196 146 95 53 37 22 19 12 11 11 10 Extended credit9 0 0 0 0 0 0 2 0 1 3 1. Data in this table also appear in the Board's H.3 (502) weekly statistical 5. Total vault cash (line 2) less applied vault cash (line 3). release. For ordering address, see inside front cover. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash 2. Excludes required clearing balances and adjustments to compensate for float (line 3). and includes other off-balance-sheet "as-of' adjustments. 7. Total reserves (line 5) less required reserves (line 6). 3. Total "lagged" vault cash held by depository institutions subject to reserve 8. Also includes adjustment credit. requirements. Dates refer to the maintenance periods during which the vault cash 9. Consists of borrowing at the discount window under the terms and condican be used to satisfy reserve requirements. Under contemporaneous reserve tions established for the extended credit program to help depository institutions requirements, maintenance periods end thirty days after the lagged computation deal with sustained liquidity pressures. Because there is not the same need to periods during which the balances are held. repay such borrowing promptly as there is with traditional short-term adjustment 4. All vault cash held during the lagged computation period by "bound" credit, the money market impact of extended credit is similar to that of institutions (that is, those whose required reserves exceed their vault cash) plus nonborrowed reserves. the amount of vault cash applied during the maintenance period by "nonbound" institutions (that is, those whose vault cash exceeds their required reserves) to satisfy current reserve requirements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A7 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks1 Millions of dollars, averages of daily figures 1992, week ending Monday SSoouurrccee aanndd mmaattuurriittyy Nov. 2 Nov. 9 Nov. 16 Nov. 23 Nov. 30 Dec. 7 Dec. 14 Dec. 21 Dec. 28 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 67,659"^ 73,216r 72,722r 72,006r 73,294r 78,107 79,155 74,281 71,828 2 For all other maturities 15,148 15,385 16,007 15,626 16,355 15,108 14,754 14,242 13,825 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 19,074 18,264 18,965 22,633 17,881 16,203 18,475 19,157 20,597 4 For all other maturities 17,575r 18,399r 19,538r 20,914r 19,369r 18,294 19,201 19,013 18,783 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 15,647 14,849 12,884 13,790 11,784 12,150 11,568 11,118 10,237 6 For all other maturities 20,699 20,852 20,203 21,173 20,397 20,577 22,850 18,899 18,183 All other customers 7 For one day or under continuing contract 23,464 22,855 22,846 23,570 20,912 23,747 23,883 23,265 22,808 8 For all other maturities 13,206 12,731 12,882 12,860 15,722 13,102 13,173 12,897 14,151 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 39,535r 3388,,336699rr 39,813r 34,462r 36,849r 40,002 38,196 38,439 37,991 10 To all other specified customers2 17,793 18,799 21,181 21,060 20,546 22,053 22,097 20,570 18,270 1. Banks with assets of $4 billion or more as of Dec. 31, 1988. 2. Brokers and nonbank dealers in securities, other depository institutions, Data in this table also appear in the Board's H.5 (507) weekly statistical release. foreign banks and official institutions, and U.S. government agencies. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • April 1993 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit Seasonal credit Extended credit3 Federal Reserve Bank 2/2 O 6 n /9 3 Effective date Previous rate 2/2 O 6 n /9 3 Effective date Previous rate 2/2 O 6 n /9 3 Effective date Previous rate Boston 7/2/92 2/18/93 3.10 3.55 2/18/93 3.60 New York ... 7/2/92 2/18/93 2/18/93 Philadelphia.. 7/2/92 2/18/93 2/18/93 Cleveland 7/6/92 2/18/93 2/18/93 Richmond 7/2/92 2/18/93 2/18/93 Atlanta 7/2/92 2/18/93 2/18/93 Chicago 7/2/92 2/18/93 2/18/93 St. Louis 7/7/92 2/18/93 2/18/93 Minneapolis .. 7/2/92 2/18/93 2/18/93 Kansas City.. 7/2/92 2/18/93 2/18/93 Dallas 7/2/92 2/18/93 2/18/93 San Francisco 7/2/92 3.5 3.05 2/18/93 3.10 2/18/93 Range of rates for adjustment credit in recent years4 Range (or F.R. Range (or F.R. Range (or F.R. Effective date A le l v l e F l) . — R. Ba o n f k Effective date A le l v l e F l) . — R. 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 1981—May 5 13-14 14 1986—Aug. 21 5.5-6 5.5 8 14 14 22 5.5 5.5 1978-—Jan. 9 6-6.5 6.5 Nov. 2 13-14 13 70 6.5 6.5 6 13 13 1987—Sept. 4 5.5-6 May 11 6.5-7 7 Dec. 4 12 12 11 6 17 7 7 July 3 7-7.25 7.25 1982—July 20 11.5-12 11.5 1988—Aug. 9 10 7.25 7.25 23 11.5 11.5 11 Aug. ?1 7.75 7.75 Aug. 2 11-11.5 11 Sept. 77 8 8 3 11 11 1989—Feb. 24 6.5-7 7 Oct. 16 8-8.5 8.5 16 10.5 10.5 7 7 70 8.5 8.5 27 10-10.5 10 27 Nov. 1 8.5-9.5 9.5 30 10 10 6.5 6.5 3 9.5 9.5 Oct. 12 9.5-10 9.5 1990—Dec. 19 13 9.5 9.5 6-6.5 6 1979--July 70 10 10 Nov. 22 9-9.5 9 1991—Feb. 1 6 6 Aug. 17 10-10.5 10.5 26 9 9 4 5.5-6 5.5 70 10.5 10.5 Dec. 14 8.5-9 9 Apr. 30 5.5 5.5 Sept. 19 10.5-11 11 15 8.5-9 8.5 May 2 5-5.5 5 71 11 11 17 8.5 8.5 Sept. 13 5 5 Oct. 8 11-12 12 Sept. 17 4.5-5 4.5 10 12 12 1984—Apr. 9 8.5-9 9 Nov. 6 4.5 4.5 13 9 9 7 3.5-4.5 3.5 1980--Feb. 15 12-13 13 Nov. 21 8.5-9 8.5 Dec. 20 3.5 3.5 19 13 13 26 8.5 8.5 24 May 79 12-13 13 Dec. 24 1992—July 2 3-3.5 3 30 12 12 7 3 3 June 13 11-12 11 1985—May 20 7.5-8 7.5 16 11 11 24 7.5 7.5 79 10 10 In effect Feb. 26, 1993 July 78 10-11 10 1986—Mar. 7 7-7.5 7 Sept. 7,6 , . 11 11 10 7 7 Nov. 17 12 12 Apr. 21 6.5-7 6.5 Dec. 5 12-13 13 July 11 6 6 1. Available on a short-term basis to help depository institutions meet tempo- ordinarily is charged on extended-credit loans outstanding less than thirty days; rary needs for funds that cannot be met through reasonable alternative sources. however, at the discretion of the Federal Reserve Bank, this time period may be The highest rate established for loans to depository institutions may be charged on shortened. Beyond this initial period, a flexible rate somewhat above rates on adjustment-credit loans of unusual size that result from a major operating problem market sources of funds is charged. The rate ordinarily is reestablished on the first at the borrower's facility. business day of each two-week reserve maintenance period, but it is never less 2. Available to help relatively small depository institutions meet regular than the discount rate applicable to adjustment credit plus 50 basis points. seasonal needs for funds that arise from a clear pattern of intrayearly movements 4. For earlier data, see the following publications of the Board of Governors: in their deposits and loans and that cannot be met through special industry Banking and Monetary Statistics, 1914-1941, and 1941-1970; and the Annual lenders. The discount rate on seasonal credit takes into account rates on market Statistical Digest, 1970-1979. sources of funds and ordinarily is reestablished on the first business day of each In 1980 and 1981, the Federal Reserve applied a surcharge to short-term two-week reserve maintenance period; however, it is never less than the discount adjustment-credit borrowings by institutions with deposits of $500 million or more rate applicable to adjustment credit. that had borrowed in successive weeks or in more than four weeks in a calendar 3. May be made available to depository institutions when similar assistance is quarter. A 3 percent surcharge was in effect from Mar. 17, 1980, through May 7, not reasonably available from other sources, including special industry lenders. 1980. A surcharge of 2 percent was reimposed on Nov. 17, 1980; the surcharge Such credit may be provided when exceptional circumstances (including sus- was subsequently raised to 3 percent on Dec. 5, 1980, and to 4 percent on May 5, tained deposit drains, impaired access to money market funds, or sudden 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, and to 2 deterioration in loan repayment performance) or practices involve only a partic- percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the ular institution, or to meet the needs of institutions experiencing difficulties surcharge was changed from a calendar quarter to a moving thirteen-week period. adjusting to changing market conditions over a longer period (particularly at times The surcharge was eliminated on Nov. 17, 1981. of deposit disintermediation). The discount rate applicable to adjustment credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Requirements TTyyppee ooff ddeeppoossiitt22 Percent of deposits Effective date Net transaction accounts3 33333 1111122222/////1111155555/////9999922222 1111100000 1111122222/////1111155555/////9999922222 00000 1111122222/////2222277777/////9999900000 00000 1111122222/////2222277777/////9999900000 1. Required reserves must be held in the form of deposits with Federal Reserve permit no more than six preauthorized, automatic, or other transfers per month, Banks or vault cash. Nonmember institutions may maintain reserve balances with of which no more than three may be checks, are not transaction accounts (such a Federal Reserve Bank indirectly on a pass-through basis with certain approved accounts are savings deposits). institutions. For previous reserve requirements, see earlier editions of the Annual The Monetary Control Act of 1980 requires that the amount of transaction Report or the Federal Reserve Bulletin. Under provisions of the Monetary accounts against which the 3 percent reserve requirement applies be modified Control Act, depository institutions include commercial banks, mutual savings annually by 80 percent of the percentage change in transaction accounts held by banks, savings and loan associations, credit unions, agencies and branches of all depository institutions, determined as of June 30 each year. Effective Dec. 15, foreign banks, and Edge corporations. 1992, for institutions reporting quarterly, and Dec. 24, 1992, for institutions 2. The Garn-St Germain Depository Institutions Act of 1982 (Public Law reporting weekly, the amount was increased from $42.2 million to $46.8 million. 97-320) requires that $2 million of reservable liabilities of each depository 4. The reserve requirement was reduced from 12 percent to 10 percent on Apr. institution be subject to a zero percent reserve requirement. The Board is to adjust 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions the amount of reservable liabilities subject to this zero percent reserve require- that report quarterly. ment each year for the succeeding calendar year by 80 percent of the percentage 5. For institutions that report weekly, the reserve requirement on nonpersonal increase in the total reservable liabilities of all depository institutions, measured time deposits with an original maturity of less than IV2 years was reduced from 3 on an annual basis as of June 30. No corresponding adjustment is to be made in percent to IV2 percent for the maintenance period that began Dec. 13, 1990, and the event of a decrease. On Dec. 15, 1992, the exemption was raised from $3.6 to zero for the maintenance period that began Dec. 27, 1990. The reserve million to $3.8 million. The exemption applies in the following order: (1) net requirement on nonpersonal time deposits with an original maturity of 1V5 years negotiable order of withdrawal (NOW) accounts (NOW accounts less allowable or more has been zero since Oct. 6, 1983. deductions); and (2) net other transaction accounts. The exemption applies only to For institutions that report quarterly, the reserve requirement on nonpersonal accounts that would be subject to a 3 percent reserve requirement. time deposits with an original maturity of less than 1 Vi years was reduced from 3 3. Include all deposits against which the account holder is permitted to make percent to zero on Jan. 17, 1991. withdrawals by negotiable or transferable instruments, payment orders of with- 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 drawal, and telephone and preauthorized transfers in excess of three per month percent to zero in the same manner and on the same dates as were the reserve for the purpose of making payments to third persons or others. However, money requirement on nonpersonal time deposits with an original maturity of less than market deposit accounts (MMDAs) and similar accounts subject to the rules that 1 Vi years (see note 4). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic NonfinancialS tatistics • April 1993 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1992 TTyyppee ooff ttrraannssaaccttiioonn 11999900 11999911 11999922 June July Aug. Sept. Oct. Nov. Dec. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 24,739 20,158 14,714 306 0 271 595 4,072 1,064 3,669 ?. Gross sales 7,291 120 1,628 0 0 0 0 0 0 0 Exchanges 241,086 277,314 308,699 22,028r 30,755r 25,041 22,lit 28,907 25,468 29,562 4 Redemptions 4,400 1,000 1,600 0 0 0 0 0 0 0 Others within one year 5 Gross purchases 425 3,043 1,096 285r 0 0 335500""^^ 0 461r 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 25,638 24,454 36,662 3,447r 985r 4,448r 2,753 2,010 7,160 2,777 8 Exchanges -27,424 -28,090 -30,543 -1,854 -1,669 -4,617 -1,905 -982 -4,615 -1,570 9 Redemptions 0 1,000 0 0 0 0 0 0 0 0 One to five years 10 Gross purchases 250 6,583 13,118 l,993r 0 400 3,50C 200 4,172r 200 11 Gross sales 200 0 0 0 0 0 0 0 0 0 1? Maturity shifts -21,770 -21,211 -34,478 -3,447 —514r -4,036 -2,753 -1,762 -6,800 -2,777 13 Exchanges 25,410 24,594 25,811 1,854 1,478 3,567 1,905 884 3,415 1,570 Five to ten years 14 Gross purchases 0 1,280 2,818 597 0 195r 75^ 0 1,176 100 IS Gross sales 100 0 0 0 0 0 0 0 0 0 16 Maturity shifts -2,186 -2,037 -1,915 0 -471 -412 0 -248 -187 0 17 Exchanges 789 2,894 3,532 0 191 700 0 97 800 0 More than ten years 18 Gross purchases 0 375 2,333 655 0 O1 731 0 947 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts -1,681 -1,209 -269 0 0 0 0 0 -173 0 21 Exchanges 1,226 600 1,200 0 0 350 0 0 400 0 All maturities 27. Gross purchases 25,414 31,439 34,079 3,836 0 866 5,927 4,272 7,820 3,969 73 Gross sales 7,591 120 1,628 0 0 0 0 0 0 0 24 Redemptions 4,400 1,000 1,600 0 0 0 0 0 0 0 Matched transactions 75 Gross sales 1,369,052 1,570,456 1,482,467 126,977 127,051 103,708r 116,331 116,024 115,020 144,232 26 Gross purchases 1,363,434 1,571,534 1,480,140 129,216 126,137 101,410*^ 115,579 114,917 117,020 142,578 Repurchase agreements2 7.7 Gross purchases 219,632 310,084 378,374 10,792 12,224 39,484 68,697 18,698 42,373 48,904 28 Gross sales 202,551 311,752 386,257 11,036 12,224 31,868 59,628 35,383 39,117 44,697 29 Net change in U.S. government securities 24,886 29,729 20,642 5,831 -914 6,184 14,244 -13,520 13,075 6,521 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 0 0 31 Gross sales 0 5 0 0 0 0 0 0 0 0 32 Redemptions 183 292 632 40 85 54 37 0 0 121 Repurchase agreements1 33 Gross purchases 41,836 22,807 14,565 402 94 601 3,222 1,778 2,760 1,601 34 Gross sales 40,461 23,595 14,486 402 94 548 1,800 3,253 2,506 1,224 35 Net change in federal agency obligations 1,192 -1,085 -554 -40 -85 -1 1,385 -1,475 254 256 36 Total net change in System Open Market Account 26,078 28,644 20,089 5,791 -1,000 6,183 15,629 -14,995 13,329 6,777 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. acceptances in repurchase agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1992 1993 1992 1993 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 Nov. 30 Dec. 31 Jan. 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,056 11,056 11,056 11,055 11,055 11,059 11,056 11,055 2 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 10,018 8,018 8,018 3 455 449 462 483 508 491 446 519 Loans 4 To depository institutions 56 166 40 2,241 269 35 667755 3355 5 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 7 Bought outright 5,413 5,413 5,413 5,348 5,310 55,,553344 55,,441133 55,,331100 8 Held under repurchase agreements 646 920 0 1,027 0 254 631 0 9 Total U.S. Treasury securities 301,342 312,439 296,764 306,678 297,426 295,952 302,474 296,977 10 Bought outright2 296,212 296,363 296,764 296,550 297,426 292,696 295,011 296,977 11 Bills 142,9% 143,147 143,548 143,334 144,210 139,780 141,794 143,761 1? Notes 118,179 118,179 118,179 118,179 118,179 117,879 118,179 118,179 N Bonds 35,037 35,037 35,037 35,037 35,037 35,037 35,037 35,037 14 Held under repurchase agreements 5,130 16,076 0 10,128 0 3,256 7,463 0 15 Total loans and securities 307,456 318,938 302,217 315,293 303,005 301,775 309,192 302,321 16 Items in process of collection 11,756 7,923 7,394 11,280 5,337 1,912 8,378 4,565 17 Bank premises 1,028 1,026 1,026 1,026 1,026 1,029 1,026 1,026 Other assets 18 Denominated in foreign currencies 21,852 21,522 21,543 21,587 21,609 22,150 21,514 2211,,998800 19 All other4 7,468 7,995 7,179 8,024 7,373 6,245 7,738 7,572 20 Total assets 369,089 376,927 358,894 376,767 357,932 354,679 367,368 357,057 LIABILITIES 21 Federal Reserve notes 314,494 313,091 310,339 308,826 306,675 306,863 314,208 306,110 22 Total deposits 40,960 49,325 35,183 50,256 38,052 37,840 40,148 37,632 23 Depository institutions 33,170 41,083 29,619 32,175 26,753 30,348 32,079 27,533 24 U.S. Treasury—General account 7,270 7,840 5,080 17,577 10,750 6,985 7,492 9,572 25 Foreign—Official accounts 254 175 203 226 274 229 206 244 26 Other 266 228 282 279 273 296 372 282 ?7 Deferred credit items 5,356 6,367 5,011 9,036 4,580 2,216 5,028 4,174 28 Other liabilities and accrued dividends 1,873 2,337 2,242 2,366 2,281 1,894 1,876 2,288 29 Total liabilities 362,683 371,120 352,775 370,484 351,589 348,814 361,260 350,204 CAPITAL ACCOUNTS 30 Capital paid in 3,054 3,064 3,065 3,069 3,069 3,028 3,054 3,074 31 Surplus 2,649 2,716 2,866 2,924 2,967 2,546 3,054 2,974 32 Other capital accounts 702 27 188 290 307 291 0 806 33 Total liabilities and capital accounts 369,089 376,927 358,894 376,767 357,932 354,679 367,368 357,057 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 290,166 289,250 292,767 296,251 300,586 285,765 291,393 297,501 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Bank) 363,714 362,922 364,076 364,614 366,095 359,274 363,479 366,486 36 LESS: Held by Federal Reserve Bank 49,220 49,832 53,736 55,788 59,420 52,410 49,271 60,376 37 Federal Reserve notes, net 314,494 313,091 310,339 308,826 306,675 306,863 314,208 306,110 Collateral held against notes, net. 38 Gold certificate account 11,056 11,056 11,056 11,055 11,055 11,059 11,056 1111,,005555 39 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 10,018 8,018 8,018 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 295,420 294,017 291,266 289,752 287,602 285,787 295,134 287,037 42 Total collateral 314,494 313,091 310,339 308,826 306,675 306,863 314,208 306,110 1. Some of the data in this table also appear in the Board's H.4.1 (503) weekly 3. Valued monthly at market exchange rates. statistical release. For ordering address, see inside front cover. 4. Includes special investment account at the Federal Reserve Bank of Chicago 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities in Treasury bills maturing within ninety days. pledged with Federal Reserve Banks—and excludes securities sold and scheduled 5. Includes exchange-translation account reflecting the monthly revaluation at to be bought back under matched sale-purchase transactions. market exchange rates of foreign exchange commitments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic NonfinancialS tatistics • April 1993 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding 1 Millions of dollars Wednesday End of month TTTyyypppeee aaannnddd mmmaaatttuuurrriiitttyyy gggrrrooouuupppiiinnnggg 1992 1993 1992 1993 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 Nov. 30 Dec. 31 Jan. 31 1 Total loans 56 166 40 2,241 269 35 675 35 2 Within fifteen days 55 165 39 2,240 268 23 673 33 3 Sixteen days to ninety days 1 1 1 1 1 12 1 1 4 Ninety-one days to one year 0 0 0 0 0 0 0 0 5 Total acceptances 0 0 0 0 0 0 0 0 6 Within fifteen days 0 0 0 0 0 0 0 0 7 Sixteen days to ninety days 0 0 0 0 0 0 0 0 8 Ninety-one days to one year 0 0 0 0 0 0 0 0 9 Total U.S. Treasury securities 308,435 312,439 296,764 306,678 297,426 295,952 302,474 296,977 10 Within fifteen days2 18,785 28,631 12,914 21,160 14,844 8,620 12,824 9,160 11 Sixteen days to ninety days 70,610 70,208 73,285 71,940 68,910 75,398 70,610 74,289 12 Ninety-one days to one year 103,582 98,142 95,106 98,361 98,456 95,569 103,582 98,311 13 One year to five years 68,750 68,750 68,750 68,686 68,686 69,757 68,750 68,686 14 Five years to ten years 18,903 18,903 18,903 18,726 18,726 18,803 18,903 18,726 15 More than ten years 27,805 27,805 27,805 27,805 27,805 27,805 27,805 27,805 16 Total federal agency obligations 6,059 6,333 5,413 6,375 5,310 5,788 6,044 5,310 17 Within fifteen days2 836 985 103 1,173 183 647 821 183 18 Sixteen days to ninety days 810 975 995 887 840 548 810 840 19 Ninety-one days to one year 1,064 1,024 966 966 1,023 1,109 1,064 1,023 20 One year to five years 2,511 2,511 2,511 2,511 2,426 2,608 2,511 2,426 21 Five years to ten years 696 696 696 696 696 722 696 696 22 More than ten years 142 142 142 142 142 154 142 142 1. Holdings under repurchase agreements are classified as maturing within fifteen days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A13 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1992 1993 IItteemm DD 1199 ee 88 cc 99 .. DD 1199 ee 99 cc 00 .. DD 1199 ee 99 cc 11 .. DD 1199 ee 99 cc 22 .. June July Aug. Sept. Oct. Nov. Dec. Jan. Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS22 11 TToottaall rreesseerrvveess33 40.56 41.83 45.60 54.48 49.23 49.49 50.32 51.35 53.14 54.07 54.48 54.60 22 NNoonnbboorrrroowweedd rreesseerrvveess 40.29 41.51 45.41 54.36r 49.01 49.21 50.07 51.06 53.00 53.97 54.36r 54.43 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt55 40.31 41.53 45.41 54.36r 49.01 49.21 50.07 51.06 53.00 53.97 54.36r 54.43 44 RReeqquuiirreedd rreesseerrvveess 39.64 40.17 44.62 53.32r 48.32 48.52 49.39 50.35 52.07 53.03 53.32r 53.34 55 MMoonneettaarryy bbaassee66 267.77 293.29 317.24r 350.93r 330.14r 333.02r 336.80" 341.64r 345.12r 348.09" 350.93" 353.19 Not seasonally adjusted 6 Total reserves7 41.77 43.07 46.98 56.10 49.25 49.52 49.81 51.11 52.66 54.13 56.10 55.97 7 Nonborrowed reserves 41.51 42.74 46.78 55.98 49.02 49.24 49.56 50.83 52.52 54.03 55.98 55.80 8 Nonborrowed reserves plus extended credit 41.53 42.77 46.78 55.98 49.02 49.24 49.56 50.83 52.52 54.03 55.98 55.80 9 Required reserves8 40.85 41.40 46.00 54.95 48.33 48.56 48.88 50.12 51.59 53.09 54.95 54.71 10 Monetary base9 271.18 296.68 321.07 354.59 330.94 334.09 336.59 340.11 343.66 347.92 354.59 354.46 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS 11 Total reserves11 62.81 59.12 55.53 56.54 49.50 49.82 50.16 51.52 53.14 54.67 56.54 56.00 12 Nonborrowed reserves 62.54 58.80 55.34 56.42 49.27 49.54 49.91 51.23 52.99 54.56 56.42 55.84 13 Nonborrowed reserves plus extended credit5 62.56 58.82 55.34 56.42 49.27 49.54 49.91 51.23 52.99 54.56 56.42 55.84 14 Required reserves 61.89 57.46 54.55 55.39 48.58 48.86 49.23 50.53 52.06 53.62 55.39 54.75 15 Monetary base12 292.55 313.70 333.61 360.91 336.43 339.87 342.49 346.21 349.81 354.25 360.91 360.92 16 Excess reserves13 .92 1.66 .98 1.16" .91 .97 .94 .99 1.07 1.04 1.16" 1.26 17 Borrowings from the Federal Reserve .27 .33 .19 .12 .23 .28 .25 .29 .14 .10 .12 .17 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) what required reserves would have been in past periods had current reserve weekly statistical release. Historical data and estimates of the impact on required requirements been in effect. Break-adjusted required reserves include required reserves of changes in reserve requirements are available from the Monetary and reserves against transactions deposits and nonpersonal time and savings deposits Reserves Projections Section, Division of Monetary Affairs, Board of Governors (but not reservable nondeposit liabilities). of the Federal Reserve System, Washington, DC 20551. 9. The break-adjusted monetary base equals (1) break-adjusted total reserves 2. Figures reflect adjustments for discontinuities, or "breaks," associated with (line 6), plus (2) the (unadjusted) currency component of the money stock, plus (3) regulatory changes in reserve requirements. (See also table 1.10) (for all quarterly reporters on the "Report of Transaction Accounts, Other 3. Seasonally adjusted, break-adjusted total reserves equal seasonally Deposits and Vault Cash" and for all weekly reporters whose vault cash exceeds adjusted, break-adjusted required reserves (line 4) plus excess reserves (line 16). their required reserves) the break-adjusted difference between current vault cash 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally and the amount applied to satisfy current reserve requirements. adjusted, break-adjusted total reserves (line 1) less total borrowings of depository 10. Reflects actual reserve requirements, including those on nondeposit liabilinstitutions from the Federal Reserve (line 17). ities, with no adjustments to eliminate the effects of discontinuities associated 5. Extended credit consists of borrowing at the discount window under with changes in reserve requirements. the terms and conditions established for the extended credit program to help 11. Reserve balances with Federal Reserve Banks plus vault cash used to depository institutions deal with sustained liquidity pressures. Because there is satisfy reserve requirements. not the same need to repay such borrowing promptly as there is with traditional 12. The monetary base, not break-adjusted and not seasonally adjusted, short-term adjustment credit, the money market impact of extended credit is consists of (1) total reserves (line 11), plus (2) required clearing balances and similar to that of nonborrowed reserves. adjustments to compensate for float at Federal Reserve Banks, plus (3) the 6. The seasonally adjusted, break-adjusted monetary base consists of (1) currency component of the money stock, plus (4) (for all quarterly reporters on seasonally adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all adjusted currency component of the money stock, plus (3) (for all quarterly those weekly reporters whose vault cash exceeds their required reserves) the reporters on the "Report of Transaction Accounts, Other Deposits and Vault difference between current vault cash and the amount applied to satisfy current Cash" and for all those weekly reporters whose vault cash exceeds their required reserve requirements. Since the introduction of changes in reserve requirements reserves) the seasonally adjusted, break-adjusted difference between current vault (CRR), currency and vault cash figures have been measured over the computation cash and the amount applied to satisfy current reserve requirements. periods ending on Mondays. 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). plus excess reserves (line 16). 8. To adjust required reserves for discontinuities that are due to regulatory changes in reserve requirements, a multiplicative procedure is used to estimate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • April 1993 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES1 Billions of dollars, averages of daily figures 1992r 1993 IItteemm D 19 e 8 c 9 . D 19 e 9 c 0 . D 19 e 9 c 1 .r D 19 e 9 c 2 .r Oct. Nov. Dec. Jan. Seasonally adjusted Measures 1 Ml 794.1 826.1 899.3 1,026.6 1,005.9 1,019.1 1,026.6 1,033.3 2 M2 3,227.3 3,339.0 3,445.8 3,503.5 3,496.9 3,505.6 3,503.5 3,491.5 3 M3 4,059.8 4,114.6 4.168.1 4,173.5 4,186.2 4,188.4 4,173.5 4,144.7 4 L 4,890.6 4,965.2 4.982.2 5,059.2 5,048.5 5,065.0 5,059.2 n.a. 5 Debt 10,076.7 10,751.3 11,201.3 11,746.0 11,621.8 11,681.7 11,746.0 n.a. Ml components 6 Currency 222.6 246.8 267.2 292.4 288.0 289.8 292.4 294.8 7 Travelers checks4 7.4 8.3 7.8 8.1 8.3 8.2 8.1 8.0 8 Demand deposits5 279.0 277.1 290.5 340.9 336.0 339.5 340.9 342.0 9 Other checkable deposits6 285.1 293.9 333.8 385.2 373.7 381.6 385.2 388.5 Nontransaction components 10 In M27 2,433.2 2,512.9 2,546.6 2,476.9 2,490.9 2,486.4 2,476.9 2,458.2 11 In M38 832.5 775.6 722.3 670.0 689.3 682.9 670.0 653.3 Commercial banks 12 Savings deposits, including MMDAs 541.5 581.9 666.2 756.1 746.1 752.5 756.1 754.0 13 Small time deposits9 531.0 606.4 601.5 507.0 519.9 511.9 507.0 501.8 14 Large time deposits10, 11 398.2 374.0 341.3 290.4 296.8 292.8 290.4 282.6 Thrift institutions 15 Savings deposits, including MMDAs 349.7 338.8 376.3 429.9 424.4 427.9 429.9 430.2 16 Small time deposits 617.5 562.3 463.2 363.5 376.6 370.0 363.5 358.7 17 Large time deposits10 161.1 120.9 83.4 67.3 70.2 68.5 67.3 67.0 Money market mutual funds 18 General purpose and broker-dealer . 316.3 348.9 363.9 348.8 351.6 350.9 348.8 345.9 19 Institution-only 107.2 133.7 182.1 202.3 210.9 209.2 202.3 197.7 Debt components 20 Federal debt 2,249.5 2,493.4 2,764.8 3,068.9 3,001.4 3,027.7 3,068.9 n.a. 21 Nonfederal debt 7,827.2 8,258.0 8,436.5 8,677.2 8,620.4 8,654.1 8,677.2 n.a. Not seasonally adjusted Measures2 22 Ml 811.9 844.1 916.4 1,045.8 1,000.9 1,021.5 1,045.8 1,040.2 23 M2 3,240.0 3,351.9 3,457.9 3,517.7 3,491.1 3,508.4 3,517.7 3,497.2 24 M3 4,070.3 4,124.7 4,178.1 4,185.6 4,176.2 4,193.7 4,185.6 4,147.4 25 L 4,909.9 4,984.9 5,004.2 5,084.0 5,037.7 5,077.9 5,084.0 n.a. 26 Debt 10,063.6 10,739.9 11,191.4 11,737.4 11,599.9 11,662.7 11,737.4 n.a. Ml components 225.3 249.5 269.9 295.0 287.0 290.0 295.0 293.6 6.9 7.8 7.4 7.8 8.4 7.9 7.8 7.8 291.5 289.9 302.9 355.3 336.7 343.9 355.3 346.2 288.1 296.9 336.3 387.6 368.8 379.7 387.6 392.6 Nontransaction components 31 In M2 2,428.1 2,507.8 2,541.5 2,472.0 2,490.2 2,486.9 2,472.0 2,457.0 32 In M38 830.3 772.8 720.1 667.9 685.1 685.3 667.9 650.2 Commercial banks 543.0 580.0 663.3 752.3 744.4 751.9 752.3 749.4 529.5 606.3 602.0 507.8 521.1 512.5 507.8 503.5 397.1 373.0 340.1 289.3 296.0 292.7 289.3 280.6 Thrift institutions 347.6 337.7 374.7 427.8 423.4 427.5 427.8 427.5 616.0 562.2 463.6 364.1 377.5 370.5 364.1 360.0 162.0 120.6 83.1 67.1 70.0 68.5 67.1 66.6 Money market mutual funds 314.6 346.8 361.5 346.5 348.7 349.1 346.5 345.5 107.8 134.4 182.4 202.4 206.3 209.5 202.4 202.3 Repurchase agreements and eurodollars 77.5 74.7 76.3 73.6 75.1 75.4 73.6 71.1 42 Term 178.5 158.3 130.1 128.8 128.5 131.0 128.8 124.4 Debt components 2,247.5 2,491.3 2,765.0 3,069.8 2,998.1 3,028.3 3,069.8 n.a. 7,816.2 8,248.6 8,426.4 8,667.6 8,601.9 8,634.4 8,667.6 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A15 NOTES TO TABLE 1.21 1. Latest monthly and weekly figures are available from the Board's H.6 (508) market fund holdings of these assets. Seasonally adjusted L is computed by weekly statistical release. Historical data are available from the Money and summing U.S. savings bonds, short-term Treasury securities, commercial paper, Reserves Projection Section, Division of Monetary Affairs, Board of Governors of and bankers acceptances, each seasonally adjusted separately, and then adding the Federal Reserve System, Washington, DC 20551. this result to M3. 2. Composition of the money stock measures and debt is as follows: Debt: Debt of domestic nonfinancial sectors consists of outstanding credit Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults market debt of the U.S. government, state and local governments, and private of depository institutions; (2) travelers checks of nonbank issuers; (3) demand nonfinancial sectors. Private debt consists of corporate bonds, mortgages, condeposits at all commercial banks other than those due to depository institutions, sumer credit (including bank loans), other bank loans, commercial paper, bankers the U.S. government, and foreign banks and official institutions, less cash items in acceptances, and other debt instruments. Data are derived from the Federal the process of collection and Federal Reserve float; and (4), other checkable Reserve Board's flow of funds accounts. Debt data are based on monthly deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and averages. This sum is seasonally adjusted as a whole. automatic transfer service (ATS) accounts at depository institutions, credit union 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of share draft accounts, and demand deposits at thrift institutions. Seasonally depository institutions. adjusted Ml is computed by summing currency, travelers checks, demand 4. Outstanding amount of U.S. dollar-denominated travelers checks of nondeposits, and OCDs, each seasonally adjusted separately. bank issuers. Travelers checks issued by depository institutions are included in M2: Ml plus (1) overnight (and continuing-contract) repurchase agreements demand deposits. (RPs) issued by all depository institutions and overnight Eurodollars issued to 5. Demand deposits at commercial banks and foreign-related institutions other U.S. residents by foreign branches of U.S. banks worldwide, (2) savings (includ- than those owed to depository institutions, the U.S. government, and foreign ing MMDAs) and small time deposits (time deposits—including retail RPs—in banks and official institutions, less cash items in the process of collection and amounts of less than $100,000), and (3) balances in both taxable and tax-exempt Federal Reserve float. general purpose and broker-dealer money market funds. Excludes individual 6. Consists of NOW and ATS account balances at all depository institutions, retirement accounts (IRAs) and Keogh balances at depository institutions and credit union share draft account balances, and demand deposits at thrift institumoney market funds. Also excludes all balances held by U.S. commercial banks, tions. money market funds (general purpose and broker-dealer), foreign governments 7. Sum of (1) overnight RPs and overnight Eurodollars, (2) money market fund and commercial banks, and the U.S. government. Seasonally adjusted M2 is balances (general purpose and broker-dealer), (3) MMDAs, and (4) savings and computed by adjusting its non-Mi component as a whole and then adding this small time deposits. result to seasonally adjusted Ml. 8. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of residents, and (4) money market fund balances (institution-only), less a consoli- $100,000 or more) issued by all depository institutions, (2) term Eurodollars held dation adjustment that represents the estimated amount of overnight RPs and by U.S. residents at foreign branches of U.S. banks worldwide and at all banking Eurodollars held by institution-only money market funds. offices in the United Kingdom and Canada, and (3) balances in both taxable and 9. Small time deposits—including retail RPs—are those issued in amounts of tax-exempt, institution-only money market funds. Excludes amounts held by less than $100,000. All IRAs and Keogh accounts at commercial banks and thrift depository institutions, the U.S. government, money market funds, and foreign institutions are subtracted from small time deposits. banks and official institutions. Also excluded is the estimated amount of overnight 10. Large time deposits are those issued in amounts of $100,000 or more, RPs and Eurodollars held by institution-only money market funds. Seasonally excluding those booked at international banking facilities. adjusted M3 is computed by adjusting its non-M2 component as a whole and then 11. Large time deposits at commercial banks less those held by money market adding this result to seasonally adjusted M2. funds, depository institutions, and foreign banks and official institutions. L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury securities, commercial paper, and bankers acceptances, net of money Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • April 1993 1.22 BANK DEBITS AND DEPOSIT TURNOVER1 Debits are in billions of dollars; turnover is ratio of debits to deposits; monthly data are at annual rates 1992 BBaannkk ggrroouupp,, oorr ttyyppee ooff ccuussttoommeerr June July Aug. Sept. Oct. Nov. DEBITS TO Seasonally adjusted Demand deposits3 1 All insured banks 255,953.4 277,157.5 277,758.0 323,630.8 339,216.4 306,923.0 346,658.3 327,148.1 322,541.8 2 Major New York City banks 129,509.7 131,699.1 137,352.3 166,773.7 177,296.3 157,221.1 184,740.9 176,369.8 173,388.8 3 Other banks 126,443.7 145,458.4 140,405.7 156,857.1 161,920.1 149,702.0 161,917.4 150,778.3 149,153.0 4 Other checkable deposits4 2,918.4 3,349.0 3,645.5 4,020.0 4,078.7 3,763.9 3,942.1 3,687.7 3,618.4 5 Savings deposits including MMDAs 3,233.4 3,483.3 3,266.1 3,355.3 3,513.7 3,139.8 3,559.1 3,476.6 3,522.9 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 733.0 797.8 803.5 870.7 916.6 800.0 892.4 818.0 793.8 7 Major New York City banks 3,428.0 3,819.8 4,270.8 4,922.2 5,349.6 4,550.9 5,254.5 4,855.4 4,623.6 8 Other banks 406.1 464.9 447.9 464.3 480.6 428.8 458.3 414.6 404.4 9 Other checkable deposits4 15.2 16.5 16.2 15.4 15.6 14.2 14.7 13.5 12.9 10 Savings deposits including MMDAs 6.2 6.2 5.3 4.7 4.9 4.4 4.9 4.7 4.7 DEBITS TO Not seasonally adjusted Demand deposits3 11 All insured banks 255,975.7 277,290.5 277,715.4 333,406.4 341,278.3 315,724.4 334,831.5 335,550.6 308,354.7 12 Major New York City banks 129,582.2 131,784.7 137,307.2 173,392.8 178,555.6 162,973.3 178,998.2 182,584.2 167,578.4 13 Other banks 126,393.4 145,505.8 140,408.3 160,013.6 162,722.7 152,751.0 155,833.4 152,966.5 140,776.3 14 Other checkable deposits4 2,916.2 3,346.7 3,645.6 4,048.4 3,987.9 3,696.9 3,945.7 3,677.0 3,359.1 15 Savings deposits including MMDAs 3,233.0 3,483.0 3,267.7 3,467.1 3,523.9 3,173.5 3,374.3 3,411.5 3,264.2 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 733.4 798.2 803.4 900.4 916.2 836.5 864.2 838.3 752.1 17 Major New York City banks 3,433.6 3,825.9 4,274.3 5,174.3 5,317.6 4,870.2 5,180.1 5,025.6 4,494.4 18 Other banks 405.9 465.0 447.9 475.1 480.2 444.1 441.6 420.3 377.7 19 Other checkable deposits4 ^ 15.2 16.4 16.2 15.6 15.4 14.1 14.9 13.6 12.0 20 Savings deposits including MMDAs 6.2 6.2 5.3 4.9 4.9 4.4 4.6 4.6 4.4 1. Historical tables containing revised data for earlier periods can be obtained 2. Annual averages of monthly figures. from the Banking and Money Market Statistics Section, Division of Monetary 3. Represents accounts of individuals, partnerships, and corporations and of Affairs, Board of Governors of the Federal Reserve System, Washington, DC states and political subdivisions. 20551. 4. Accounts authorized for negotiable orders of withdrawal (NOWs) and Data in this table also appear on the Board's G.6 (406) monthly statistical accounts authorized for automatic transfer to demand deposits (ATSs). release. For ordering address, see inside front cover. 5. Money market deposit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions All 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars, averages of Wednesday figures 1992r 1993 IItteemm Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Seasonally adjusted 1 Total loans and securities1 2,855.4 2,862.7 2,874.3 2,875.3 2,882.8 2,886.9 2,902.2 2,916.5 2,925.7 2,932.8 2,938.9 2,935.3 2 U.S. government securities 570.9 579.6 590.8 600.2 610.7 619.2 632.6 639.9 647.1 651.8 657.9 657.4 3 Other securities 180.3 178.5 178.5 176.9 175.8 177.9 178.2 178.4 179.4 177.6 176.3 174.4 4 Total loans and leases1 2,104.3 2,104.5 2,104.9 2,098.2 2,096.2 2,089.8 2,091.4 2,098.2 2,099.1 2,103.4 2,104.6 2,103.6 5 Commercial and industrial ..... 613.5 610.8 609.0 607.6 604.6 602.5 601.4 601.7 600.6 600.9 598.8 601.3 6 Bankers acceptances held ... 7.0 6.8 6.5 6.7 6.3 6.5 6.5 6.3 7.3 7.5 7.1 6.9 7 Other commercial and industrial 606.5 604.0 602.6 600.9 598.4 596.0 594.9 595.4 593.3 593.4 591.7 594.4 8 U.S. addressees3 597.5 594.9 593.2 590.8 588.3 585.3 584.3 584.1 582.1 582.1 580.6 582.9 9 Non-U.S. addressees3 9.0 9.1 9.4 10.1 10.1 10.7 10.6 11.3 11.1 11.3 11.1 11.5 10 Real estate 876.7 879.1 881.8 883.3 881.8 881.5 883.1 886.7 890.6 892.2 892.1 888.7 11 Individual 363.8 362.3 360.8 359.2 359.0 358.6 357.4 357.0 355.5 355.1 355.0 357.6 12 Security 58.9 60.7 63.4 60.9 63.3 60.5 61.6 63.8 64.7 64.3 64.9 63.1 13 Nonbank financial institutions 43.0 43.6 43.2 43.3 42.4 41.5 42.0 43.7 43.9 44.8 43.7 44.8 14 Agricultural 34.1 34.3 34.3 34.3 34.6 34.9 35.3 35.2 35.1 35.1 34.9 34.5 15 State and political subdivisions 28.3 28.0 27.6 27.3 26.8 26.2 25.9 25.8 25.5 25.2 24.9 24.3 16 Foreign banks 6.9 6.6 6.7 7.0 7.5 7.7 7.2 7.9 7.3 7.0 7.0 6.8 17 Foreign official institutions 2.2 2.1 2.0 2.0 2.0 2.2 2.3 2.4 2.4 2.8 2.9 2.9 18 Lease-financing receivables 31.5 31.4 31.1 30.9 31.0 30.8 30.8 30.9 30.8 30.7 30.6 30.0 19 All other loans 45.5 45.5 45.1 42.4 43.3 43.2 44.3 43.1 42.8 45.3 49.9 49.7 Not seasonally adjusted 20 Total loans and securities1 2,857.4 2,864.9 2,875.8 2,870.7 2,882.9 2,876.1 2,894.5 2,913.9 2,924.9 2,939.4 2,948.7 2,937.4 21 U.S. government securities 574.0 584.0 592.6 599.4 608.9 615.3 631.3 638.0 644.9 654.4 656.6 657.8 22 Other securities 180.5 178.2 178.0 176.5 175.4 176.8 178.1 178.1 179.8 178.7 176.6 174.9 23 Total loans and leases1 2,102.9 2,102.6 2,105.2 2,094.8 2,098.7 2,084.0 2,085.0 2,097.9 2,100.2 2,106.3 2,115.5 2,104.7 24 Commercial and industrial ..... 612.7 614.0 612.1 609.4 606.5 601.5 597.6 598.1 598.2 601.2 601.8 599.7 25 Bankers acceptances held ... 7.3 6.9 6.3 6.6 6.2 6.3 6.3 6.2 7.2 7.8 7.4 7.1 26 Other commercial and industrial 605.4 607.2 605.8 602.7 600.3 595.2 591.4 591.9 591.0 593.4 594.4 592.7 27 U.S. addressees3 596.2 598.2 596.3 592.7 589.5 584.2 580.5 580.8 580.3 582.7 583.4 581.2 28 Non-U.S. addressees3 9.2 9.0 9.5 10.0 10.8 11.0 10.8 11.1 10.8 10.7 11.0 11.4 29 Real estate 875.1 876.7 880.7 883.4 882.0 881.6 883.7 887.5 891.4 893.6 893.4 888.4 30 Individual 363.8 359.8 358.1 357.4 357.2 356.4 356.9 358.6 355.9 355.9 359.4 361.7 31 Security 61.3 62.6 66.9 58.4 63.5 58.0 59.4 62.4 64.2 63.6 65.7 64.6 32 Nonbank financial institutions 42.8 43.2 42.6 42.8 42.9 41.3 41.8 43.1 43.5 45.1 45.7 45.0 33 Agricultural 32.8 33.0 33.5 34.0 35.1 35.8 36.5 36.7 36.1 35.2 34.7 33.6 34 State and political subdivisions 28.2 28.0 27.6 27.3 26.8 26.1 25.9 25.9 25.6 25.3 24.9 24.1 35 Foreign banks 6.7 6.4 6.4 6.8 7.3 7.8 7.0 8.1 7.6 7.3 7.4 6.9 36 Foreign official institutions 2.2 2.1 2.0 2.0 2.0 2.2 2.3 2.4 2.4 2.8 2.9 2.9 37 Lease-financing receivables .... 31.7 31.6 31.2 30.9 31.0 30.6 30.6 30.7 30.7 30.5 30.5 30.3 38 All other loans 45.8 45.2 44.1 42.5 44.4 42.6 43.2 44.5 44.6 45.7 49.1 47.5 1. Adjusted to exclude loans to commercial banks in the United States. 3. United States includes the fifty states and the District of Columbia. 2. Includes nonfinancial commercial paper held. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic NonfinancialS tatistics • April 1993 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1 Billions of dollars, monthly averages 1992r 1993 SSoouurrccee ooff ffuunnddss Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Seasonally adjusted 11 TToottaall nnoonnddeeppoossiitt ffuunnddss22 285.1 287.2 291.9 292.4 295.9 297.0 302.4 309.2 305.3 309.6 312.9 313.0 22 NNeett bbaallaanncceess dduuee ttoo rreellaatteedd ffoorreeiiggnn ooffffiicceess ...... 41.4 44.8 50.9 53.7 61.2 61.7 61.4 64.0 64.1 68.5 71.1 74.2 33 BBoorrrroowwiinnggss ffrroomm ootthheerr tthhaann ccoommmmeerrcciiaall bbaannkkss iinn UUnniitteedd SSttaatteess44 243.8 242.4 241.0 238.7 234.7 235.3 241.1 245.2 241.1 241.2 241.7 238.8 44 DDoommeessttiiccaallllyy cchhaarrtteerreedd bbaannkkss 159.7 157.3 154.6 151.8 147.6 147.2 151.5 153.4 154.5 153.7 154.3 155.1 55 FFoorreeiiggnn--rreellaatteedd bbaannkkss 84.1 85.0 86.5 86.9 87.2 88.1 89.6 91.8 86.6 87.5 87.4 83.7 Not seasonally adjusted 6 Total nondeposit funds 289.6 292.2 288.4 297.1 295.2 291.5 297.5 303.7 307.5 314.9 312.7 311.8 7 Net balances due to related foreign offices ... 43.2 45.6 47.9 55.9 59.2 58.4 57.6 61.6 65.3 70.1 75.2 76.7 8 Domestically chartered banks .1 .2 -4.6 -4.5 -6.3 -7.0 -9.3 -11.0 -12.8 -11.7 -15.1 -15.9 9 Foreign-related banks 43.1 45.4 52.6 60.4 65.6 65.4 66.9 72.6 78.1 81.8 90.3 92.6 10 Borrowings from other than commercial banks in United States4 246.3 246.6 240.5 241.2 236.0 233.1 239.9 242.1 242.3 244.8 237.5 235.1 11 Domestically chartered banks 161.5 160.2 152.7 153.3 147.4 144.1 150.4 152.2 155.7 158.1 153.4 152.1 12 Federal funds and security RP borrowings5 158.0 156.9 149.2 149.4 143.3 139.9 146.5 148.4 152.1 154.0 149.4 148.4 13 Other6 3.5 3.3 3.4 3.9 4.1 4.2 3.9 3.8 3.6 4.1 4.0 3.6 14 Foreign-related banks6 84.9 86.4 87.8 87.9 88.6 89.0 89.5 89.9 86.6 86.6 84.1 83.0 MEMO Gross large time deposits 15 Seasonally adjusted 413.7 407.2 401.5 397.5 393.3 387.7 385.8 383.2 375.7 371.3 366.6 360.2 16 Not seasonally adjusted 413.1 408.1 400.5 399.4 394.9 387.4 387.1 383.6 374.9 371.1 365.5 358.2 U.S. Treasury demand balances at commercial banks8 17 Seasonally adjusted 20.2 21.9 20.8 19.2 24.7 23.1 28.0 24.1 21.5 20.7 20.4 25.6 18 Not seasonally adjusted 25.2 20.1 17.7 21.0 25.2 19.6 22.4 28.6 21.9 16.5 19.5 33.0 1. Commercial banks are nationally and state-chartered banks in the fifty states borrowings from Federal Reserve Banks and from foreign banks, term federal and the District of Columbia, agencies and branches of foreign banks, New York funds, loan RPs, and sales of participations in pooled loans. investment companies majority owned by foreign banks, and Edge Act corpora- 5. Figures are based on averages of daily data reported weekly by approxitions owned by domestically chartered and foreign banks. mately 120 large banks and quarterly or annual data reported by other banks. Data in this table also appear in the Board's G.10 (411) release. For ordering 6. Figures are partly averages of daily data and partly averages of Wednesday address, see inside front cover. data. 2. Includes federal funds, repurchase agreements (RPs), and other borrowing 7. Time deposits in denominations of $100,000 or more. Estimated averages of from nonbanks and net 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 International Banking Facilities (IBFs). 4. Borrowings through any instrument, such as a promissory note or due bill, given for the purpose of borrowing money for the banking business. This includes Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A19 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Wednesday figures Millions of dollars 1992r Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 ALL COMMERCIAL BANKING INSTITUTIONS2 Assets 4 2 3 1 Lo I a n n O v U s e t . s S h a t n e . m r d g e o n s v e t e c s r u e n r c m i u ti e r e n i s t t i e s s e curities 3,1 6 7 1 2 9 3 6 1 6 3 2 , , , , 0 9 7 33 3 7 0 1 5 4 4 3,1 6 7 1 2 3 9 6 7 2 4 1 , , , , 5 5 4 9 3 1 9 7 5 9 9 9 3,1 6 7 1 2 3 9 6 5 1 3 1 , , , , 0 2 0 8 1 3 5 1 9 7 2 5 3,1 6 7 1 1 9 3 6 4 5 3 2 , , , , 4 1 4 3 7 6 8 0 3 8 8 4 3,1 6 7 1 1 9 3 6 5 8 5 3 , , , , 5 5 2 2 0 4 4 % 6 2 6 3,1 6 7 1 2 9 3 6 3 7 5 1 , , , , 2 7 7 5 1 0 5 0 1 3 3 7 3,1 6 7 1 0 3 9 6 5 7 8 1 , , , , 1 8 8 0 6 5 3 3 5 8 1 4 3,0 6 7 1 9 3 9 6 9 3 3 0 , , , , 0 1 9 8 8 1 4 5 5 8 4 9 3,0 6 7 1 7 3 9 6 6 0 2 1 , , , , 9 5 2 2 9 2 2 2 5 2 3 8 5 Trading account assets 42,665 39,995 38,146 36,014 35,612 35,901 33,519 37,291 36,896 6 U.S. government securities 27,832 25,930 24,576 21,569 21,030 20,619 19,881 23,947 23,233 7 Other securities 2,969 2,949 2,958 3,285 3,029 2,870 2,4% 2,5% 2,472 8 Other trading account assets 11,864 11,115 10,612 11,160 11,554 12,411 11,141 10,748 11,192 9 Total loans 2,283,274 2,293,042 2,293,821 2,283,001 2,281,352 2,290,642 2,272,774 2,267,883 2,247,403 10 Interbank loans 172,020 179,588 179,598 169,284 160,909 178,271 163,713 163,870 154,468 11 Loans excluding interbank 2,111,254 2,113,455 2,114,224 2,113,717 2,120,444 2,112,371 2,109,061 2,104,013 2,092,935 12 Commercial and industrial 602,531 599,002 601,669 601,941 604,287 599,719 597,593 599,585 600,167 13 Real estate 892,449 894,770 894,630 892,089 891,816 890,071 891,464 887,915 884,632 14 Revolving home equity 73,403 73,448 73,386 73,143 73,246 73,386 73,309 73,305 73,2% 15 Other 819,046 821,323 821,244 818,946 818,570 816,685 818,155 814,611 811,335 16 Individual 357,021 357,071 358,059 360,711 361,929 362,679 361,565 361,322 361,345 17 All other 259,253 262,612 259,866 258,975 262,412 259,901 258,439 255,191 246,791 18 Total cash assets 223,842 204,843 219,833 234,179 236,533 226,212 209,488 233,235 197,836 19 Balances with Federal Reserve Banks 28,460 25,614 26,535 35,183 29,199 36,922 26,325 28,090 24,089 20 Cash in vault 33,225 32,613 32,529 31,445 36,439 34,755 34,227 33,376 32,550 21 Demand balances at U.S. depository institutions 31,733 30,289 32,010 34,729 35,730 32,662 30,134 35,307 29,984 22 Cash items 85,881 72,575 87,121 91,864 93,335 82,686 78,784 94,736 69,934 23 Other cash assets 44,643 43,851 41,738 41,058 41,930 39,287 40,104 41,812 41,279 24 Other assets 296,598 295,191 302,200 297,291 300,678 295,722 287,150 288,191 281,492 25 Total assets 3,642,414 3,627,570 3,647,052 3,645,958 3,652,717 3,645,686 3,601,795 3,620,545 3,555,850 Liabilities 26 Total deposits 2,530,396 2,512,986 2,537,670 2,528,716 2,542,338 2,532,159 2,510,487 2,504,461 2,452,864 27 Transaction accounts 768,816 748,012 776,197 780,351 799,456 783,345 759,838 763,116 717,572 28 Demand, U.S. government 3,520 2,922 5,910 5,217 5,926 4,663 3,287 5,582 3,202 29 Demand, depository institutions 41,123 38,467 41,979 43,211 43,530 40,915 38,516 45,833 37,652 30 Other demand and all checkable deposits 724,174 706,622 728,308 731,923 750,001 737,767 718,036 711,700 676,717 31 Savings deposits (excluding checkable) 748,886 753,091 753,416 742,933 742,140 750,756 750,603 741,100 737,741 32 Small time deposits 638,246 637,441 637,619 636,105 634,767 636,765 634,436 635,101 633,294 33 Time deposits over $100,000 374,449 374,442 370,438 369,327 365,975 361,294 365,610 365,145 364,258 34 Borrowings 501,004 506,242 497,161 498,297 495,834 498,810 477,939 506,598 485,812 35 Treasury tax and loan notes 13,481 6,016 23,348 18,020 29,773 14,886 22,771 34,561 34,921 36 Other 487,523 500,226 473,813 480,277 466,061 483,924 455,168 472,037 450,891 37 Other liabilities 342,475 339,156 344,414 351,293 343,378 343,282 341,819 339,151 346,152 38 Total liabilities 3,373,875 3,358,384 3,379,245 3,378,306 3,381,549 3,374,251 3,330,245 3,350,211 3,284,828 39 Residual (assets less liabilities)3 268,539 269,186 267,807 267,652 271,168 271,436 271,550 270,334 271,022 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic NonfinancialS tatistics • April 1993 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Wednesday figures—Continued Millions of dollars 1992r 1993 AAccccoouunntt Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 DOMESTICALLY CHARTERED COMMERCIAL BANKS4 Assets 4(1 2,763,847 2,762,841 2,762,668 2,745,952 2,749,785 2,754,991 2,739,722 2,736,266 2,717,220 41 Investment securities 731,295 730,287 727,870 730,402 731,627 731,221 732,672 728,036 727,449 4? U.S. government securities 590,850 590,227 587,789 590,205 591,313 592,364 593,701 589,198 587,891 43 Other 140,445 140,059 140,081 140,197 140,314 138,857 138,971 138,838 139,558 44 Trading account assets 42,665 39,995 38,146 36,014 35,612 35,901 33,519 37,291 36,896 45 U.S. government securities 27,832 25,930 24,576 21,569 21,030 20,619 19,881 23,947 23,233 46 Other securities 2,969 2,949 2,958 3,285 3,029 2,870 2,496 2,596 2,472 47 Other trading account assets 11,864 11,115 10,612 11,160 11,554 12,411 11,141 10,748 11,192 48 1,989,888 1,992,559 1,996,652 1,979,536 1,982,545 1,987,870 1,973,531 1,970,940 1,952,874 49 144,237 147,785 151,120 138,961 137,720 148,030 137,989 136,799 130,445 50 Loans excluding interbank 1,845,651 1,844,774 1,845,532 1,840,575 1,844,826 1,839,840 1,835,542 1,834,141 1,822,430 51 Commercial and industrial 440,366 437,044 438,214 437,045 438,683 436,652 433,961 436,562 435,601 5? 839,661 841,847 841,532 839,030 839,129 838,160 839,238 835,966 832,482 53 Revolving home equity 73,403 73,448 73,386 73,143 73,246 73,386 73,309 73,305 73,296 54 Other 766,258 768,400 768,147 765,887 765,883 764,774 765,928 762,662 759,186 55 357,021 357,071 358,059 360,711 361,929 362,679 361,565 361,322 361,345 56 All other 208,602 208,812 207,727 203,789 205,085 202,348 200,778 200,291 193,001 57 196,159 177,948 193,109 207,160 210,163 200,082 182,905 205,660 170,438 58 Balances with Federal Reserve Banks 27,886 24,783 25,973 34,235 28,649 35,944 25,783 27,025 23,574 59 Cash in vault 33,190 32,579 32,490 31,407 36,402 34,717 34,191 33,336 32,514 60 Demand balances at U.S. depository institutions . 30,203 28,758 30,382 32,975 34,023 30,989 28,527 33,578 28,319 61 83,676 70,430 84,750 89,700 91,131 80,292 75,891 92,193 67,610 6? Other cash assets 21,303 21,498 19,614 18,943 20,058 18,240 18,597 19,614 18,422 63 Other assets 176,534 177,529 180,152 175,738 178,449 182,942 178,496 176,140 171,179 64 Total assets 3,136,540 3,118,318 3,135,930 3,128,850 3,138,397 3,138,015 3,101,122 3,118,067 3,058,838 Liabilities 65 2,370,795 2,351,994 2,376,536 2,367,287 2,381,434 2,375,352 2,352,008 2,345,104 2,294,577 66 758,901 738,514 765,699 770,342 789,040 773,036 749,448 752,419 708,083 67 Demand, U.S. government 3,520 2,922 5,900 5,216 5,925 4,662 3,287 5,582 3,202 68 Demand, depository institutions 38,751 36,225 39,635 40,821 41,139 38,483 36,099 43,112 35,394 69 Other demand and all checkable deposits 716,630 699,367 720,164 724,306 741,976 729,891 710,063 703,726 669,487 70 Savings deposits (excluding checkable) 744,149 748,217 748,643 738,352 737,581 746,211 746,062 736,514 733,203 71 635,748 634,919 635,111 633,618 632,289 634,284 631,958 632,627 630,820 7? Time deposits over $100,000 231,998 230,344 227,082 224,975 222,524 221,821 224,540 223,543 222,472 73 365,810 369,110 363,760 366,232 361,745 365,144 349,393 375,989 365,173 74 Treasury tax and loan notes 13,481 6,016 23,348 18,020 29,773 14,886 22,771 34,561 34,921 IS Other 352,329 363,094 340,412 348,212 331,972 350,258 326,622 341,428 330,252 76 Other liabilities 135,004 131,636 131,435 131,288 127,657 129,692 131,779 130,248 131,673 77 Total liabilities 2,871,609 2,852,740 2,871,731 2,864,807 2,870,837 2,870,188 2,833,180 2,851,341 2,791,424 78 Residual (assets less liabilities)3 264,931 265,578 264,199 264,044 267,560 267,828 267,942 266,726 267,414 1. Excludes assets and liabilities of International Banking Facilities. 3. This balancing item is not intended as a measure of equity capital for use in 2. Includes insured domestically chartered commercial banks, agencies and capital adequacy analysis. branches of foreign banks, Edge Act and Agreement corporations, and New York 4. Includes all member banks and insured nonmember banks. Loans and State foreign investment corporations. Data are estimates for the last Wednesday securities data are estimates for the last Wednesday of the month based on a of the month based on a sample of weekly reporting foreign-related and domestic sample of weekly reporting banks and quarter-end condition reports. institutions and quarter-end condition reports. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.26 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS Millions of dollars, Wednesday figures Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 ASSETS 1 Cash and balances due from depository institutions 117 104,315 116,290 126,937 126,270 119,096 109,305 124,065 2 U.S. Treasury and government securities 276, 273,052 269,717 265,790 266,081 270,738 269,585 269,192 3 Trading account 25, 22,307 21,564 18,676 18,471 18,036 17,404 21,290 4 Investment account 251, 250,745 248,153 247,114 247,610 252,702 252,181 247,902 5 Mortgage-backed securities1 83, 82,916 81,847 81,511 81,298 83,234 82,416 78,596 All others, by maturity 6 One year or less 29, 30,531 29,702 29,922 31,017 33.943 35,624 34,984 7 8 O M n o e r e y e th ar a n t h f r iv o e u g y h e a f r iv s e years 7671, 7 6 5 1 , , 6 6 5 4 3 5 7 6 5 0 , , 6 9 1 9 2 2 7 5 5 9 , , 8 8 0 7 4 7 7 6 4 0 , , 8 4 4 5 4 0 7 5 5 9 , , 8 6 2 % 9 7 6 3 0 , , 9 1 5 8 9 2 7 5 4 9 , , 6 6 5 6 8 3 9 Other securities 55 55,810 55,905 56,423 56,060 55,926 55,209 55,176 10 Trading account 2, 2,595 2,684 3,131 2,875 2,720 2,345 2,445 1 1 1 2 Inv S e ta st te m e a n n t d a p c o c l o it u ic n a t l subdivisions, by maturity . 5230 2 5 0 3 , , 4 21 8 5 6 5 2 3 0 , , 2 4 2 6 1 0 5 2 3 0 , , 2 4 9 4 1 8 5 20 3 , , 3 1 9 8 8 5 2 5 0 3 , , 4 2 4 0 3 6 5 2 2 0 , , 8 3 6 4 4 4 5 2 2 0 , , 7 3 3 4 1 3 13 One year or less 3, 3,274 3,269 3,264 3,258 3,249 3,211 3,201 14 More than one year 17, 17,212 17,191 17,184 17,139 17,194 17,133 17,142 15 Other bonds, corporate stocks, and securities , 32, 32,730 32,761 32,844 32,787 32,763 32,520 32,389 16 Other trading account assets 11, 10,857 10,349 10,887 11,280 12,166 10,895 10,501 17 Federal funds sold2 86 89,244 92,013 79,033 84,717 82,811 80,110 18 To commercial banks in the United States 55, 57,321 63,043 54,734 54,599 58,728 54,333 55,521 2 1 0 9 T T o o o n t o h n e b r a s3 n k brokers and dealers 255, 2 5 6 , , 6 2 6 6 1 1 23 5 , ,0 9 3 3 7 2 1 4 9 , , 8 4 8 1 8 2 2 4 0 , , 7 7 0 8 1 1 2 4 1 , ,6 2 9 9 3 6 23 5, , 0 4 4 3 6 2 2 4 0 , , 5 0 6 2 6 4 21 Other loans and leases, gross 981 979,646 984,443 984,143 986,437 990,449 985,587 988,844 22 Commercial and industrial 279, 276,828 278,248 277,113 278,235 277,766 275,227 277,713 23 Bankers acceptances and commercial paper .., 2, 2,500 2,440 2,227 2,046 1,885 1,859 2,190 24 All other 277, 274,328 275,808 274,886 276,189 275,881 273,368 275,523 2 2 5 6 N U o .S n . -U ad .S d . r e a s d s d ee r s e ssees 275 1 , 272 1 , , 5 8 0 2 4 3 274 1 , , 0 7 2 8 4 4 273 1 , , 2 6 0 8 3 3 274 1 , , 5 6 6 2 6 3 274 1 , , 2 6 4 3 9 2 271 1 , , 7 6 1 5 6 2 273 1 , , 7 7 7 4 8 5 27 Real estate loans 399 401,747 401,794 399,331 399,120 403,186 404,073 401,351 28 Revolving, home equity 43 43,050 43,012 42,769 42,772 43,370 43,312 43,336 29 All other 356 358.697 358,782 356,562 356,348 359,816 360,762 358,015 30 To individuals for personal expenditures 177, 177,874 180,279 181,976 182,635 185,938 185,458 185,176 31 To financial institutions 40 38,780 37,551 37,441 38,296 38,055 35,931 36,408 32 Commercial banks in the United States 15 14,929 13,879 13,839 14,514 14,377 13,814 13,686 4 4 4 4 4 3 3 3 3 3 3 3 4 0 1 2 3 3 4 5 6 7 8 9 O O LE t t T L A T T h F h S e o e e o o o S ll N r B r a r : f s f s o a o a l L o i U p t e o n t n n a s r - u h o n a a s k e b f t a r e n e n i e e i s a n r c n g s t a c s n h s n a i e r l n a a k a a n o n n n g n s a a c e f i d f d o d g i o d n n i n r v n r g s p l l g i e e a i 4 c e e n o r i n a u a a r g l n c c n l s i s e n t o t i m e d e c u a i m c s e c l r e r , c a o i a e n e v a i l u l n n s t r a s n s e e s p r b u t t r t y r a l i r v b i t e o n i n u e d s e d d 5 g t < s i u i v o o c s i n e f s t f i i c s o i o u c n n i r a s i l t i i e n s stitutions 9 1 2 4 2 2 3 6 1 1 2 2 4 4 7 2 5 2 1 3 41 , , , 9 1 2 3 2 2 3 1 6 1 1 9 2 2 2 7 4 5 4 5 4 1 , . , , , , , , , , , , 6 2 6 5 6 1 2 7 9 9 7 2 0 4 9 2 8 1 5 9 4 9 3 9 7 5 8 8 8 4 9 4 4 4 7 9 9 1 2 4 2 2 3 1 6 1 1 2 4 5 2 7 5 4 5 7 1 4 , , , , , , , , , , , , 2 6 4 5 8 2 2 1 2 4 4 6 4 4 1 2 8 4 0 2 8 5 2 8 8 1 7 4 7 7 5 4 6 4 1 8 9 1 2 3 4 2 2 6 1 1 2 7 1 4 2 5 4 5 3 6 4 1 , , , , , , , , , , , , 3 3 5 2 3 2 8 1 1 9 6 3 8 2 2 2 7 0 5 8 4 3 7 4 1 8 5 1 1 5 8 9 9 8 6 2 9 1 2 4 2 2 3 1 6 1 1 2 7 6 4 6 5 2 5 2 1 4 , , , , , , , , , , , , 6 1 4 1 6 9 4 2 6 3 6 3 2 4 4 6 5 5 9 0 0 9 2 8 3 1 1 1 9 4 4 3 6 0 0 4 9 1 2 5 2 2 3 1 7 1 1 2 2 1 6 4 3 5 4 0 1 4 , , , , , , , , , . , , 4 6 2 4 7 8 9 2 2 9 4 5 6 9 6 7 9 8 1 0 2 4 5 2 8 8 2 5 3 9 6 0 4 0 1 2 9 1 2 4 2 3 2 1 6 1 0 4 6 6 5 2 3 5 6 1 4 1 , , , , , , , , , , , , 6 1 7 7 2 5 3 3 7 9 4 3 7 8 8 0 0 3 9 9 1 3 5 5 1 1 0 1 3 3 4 6 0 8 3 8 9 1 2 5 3 2 2 1 6 1 0 2 0 6 2 5 5 4 6 2 4 1 , , , , , , , , , , , , 2 4 0 5 2 5 6 6 4 6 4 4 2 9 2 3 8 5 0 2 3 9 4 0 5 7 8 4 2 3 4 2 0 0 3 8 45 Total assets 1,651,293 1,637,969 1,656,244 1,646,753 1,649,730 1,664,547 1,641,222 1,651,626 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic NonfinancialS tatistics • April 1993 1.26 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1992 1993 AAccccoouunntt Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 LIABILITIES 46 Deposits 1,136,181 1,120,538 1,143,030 1,132,889 1,142,809 1,142,823 1,132,291 1,123,951 1,091,588 47 Demand deposits 282,192 265,679 287,073 287,876 300,030 281,350 273,228 276,669 253,220 48 Individuals, partnerships, and corporations 228,485 216,634 230,753 230,310 241,191 227,633 221,183 217,992 203,499 49 Other holders 53,707 49,044 56,320 57,566 58,839 53,717 52,045 58,677 49,721 50 States and political subdivisions 10,754 9,611 10,466 10,129 9,847 10,740 9,138 10,572 9,487 51 U.S. government 2,129 1,824 3,623 3,318 3,816 2,874 2,263 4,307 2,077 52 Depository institutions in the United States 23,526 21,674 24,084 25,133 25,721 23,885 22,403 27,015 22,118 53 Banks in foreign countries 5,927 5,578 5,876 6,096 6,036 5,628 5,348 6,090 5,194 54 Foreign governments and official institutions 907 861 619 653 558 495 483 579 765 55 Certified and officers' checks 10,464 9,497 11,652 12,236 12,861 10,095 12,410 10,113 10,079 56 Transaction balances other than demand deposits4 117,007 116,446 117,184 118,457 119,813 125,271 121,263 118,325 114,177 57 Nontransaction balances 736,981 738,414 738,774 726,557 722,965 736,202 737,800 728,956 724,191 58 Individuals, partnerships, and corporations 710,708 711,972 712,697 701,259 698,923 712,918 712,705 704,328 699,405 59 Other holders 26,273 26,442 26,077 25,297 24,043 23,285 25,095 24,629 24,786 60 States and political subdivisions 21,633 21,789 21,415 20,681 20,610 20,499 20,825 20,413 20,394 61 U.S. government 2,346 2,348 2,353 2,342 1,247 690 2,031 1,980 1,989 62 Depository institutions in the United States 1,986 1,979 1,976 1,952 1,873 1,775 1,913 1,908 2,075 63 Foreign governments, official institutions, and banks 308 326 332 322 312 320 326 328 327 64 Liabilities for borrowed money5 274,938 280,461 276,785 276,995 272,360 281,739 266,678 286,934 277,701 65 Borrowings from Federal Reserve Banks 0 0 0 0 0 40 0 2,100 200 66 Treasury tax and loan notes 11,146 4,426 19,878 14,530 24,934 12,122 18,783 29,045 29,923 67 Other liabilities for borrowed money 263,792 276,035 256,907 262,465 247,426 226699,,557777 224477,,889955 225555,,778899 224477,,557788 68 Other liabilities (including subordinated notes and debentures) 104,638 101,061 100,945 101,132 97,202 100,048 101,713 100,363 101,440 69 Total liabilities 1,515,757 1,502,061 1,520,760 1,511,016 1,512,371 1,524,610 1,500,682 1,511,247 1,470,729 70 Residual (total assets less total liabilities)7 135,536 135,909 135,483 135,736 137,359 139,937 140,540 140,379 140,561 MEMO 71 Total loans and leases, gross, adjusted, plus securities8 .. 1,341,407 1,336,358 1,335,505 1,327,702 1,330,826 1,340,891 1,335,941 1,334,617 1,325,315 12 Time deposits in amounts of $100,000 or more 121,573 120,149 117,534 115,759 113,791 113,972 116,737 115,798 114,532 IS Loans sold outright to affiliates 1,007 999 970 962 954 921 929 926 917 74 Commercial and industrial 460 457 457 456 452 454 454 453 453 75 Other 547 542 513 506 502 467 474 473 464 76 Foreign branch credit extended to U.S. residents 24,813 24,939 24,799 24,614 24,318 24,534 24,627 24,640 24,327 77 Net due to related institutions abroad -15,407 -19,739 -17,005 -16,476 -17,685 -19,937 -19,467 -16,439 -10,010 1. Includes certificates of participation, issued or guaranteed by agencies of the 9. Affiliates include a bank's own foreign branches, nonconsolidated nonbank U.S. government, in pools of residential mortgages. affiliates of the bank, the bank's holding company (if not a bank), and noncon- 2. Includes securities purchased under agreements to resell. solidated nonbank subsidiaries of the holding company. 3. Includes allocated transfer risk reserve. 10. Credit extended by foreign branches of domestically chartered weekly 4. Includes negotiable order of withdrawal accounts (NOWs), automatic trans- reporting banks to nonbank U.S. residents. Consists mainly of commercial and fer service (ATS), and telephone and preauthorized transfers of savings deposits. industrial loans, but includes an unknown amount of credit extended to other than 5. Includes borrowings only from other than directly related institutions. nonfinancial businesses. 6. Includes federal funds purchased and securities sold under agreements to NOTE. Data that formerly appeared in table 1.28, Assets and Liabilities of Large repurchase. Weekly Reporting Commercial Banks in New York City, can be obtained from the 7. This balancing item is not intended as a measure of equity capital for use in Board's H.4.2 (504) weekly statistical release. For ordering address, see inside capital-adequacy analysis. front cover. 8. Excludes loans to and federal funds transactions with commercial banks in the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A23 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS Assets and Liabilities1 Millions of dollars, Wednesday figures 1992 1993 AAccccoouunntt Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 1 Cash and balances due from depository institutions 18,367 17,815 17,671r 17,875" 1177,,332299"" 17,330 17,586 18,356 1188,,220099 ? U.S. Treasury and government agency 26,565 26,216 26,904 26,596 27,064 2266,,775599 2277,,115599 2277,,112211 2266,,559988 3 Other securities 8,242 8,257 8,172 8,318 8,618 8,583 8,322 8,342 8,193 4 Federal funds sold1 22,902 27,300 22,244 25,954 22,331 27,446 27,398 24,642 23,692 To commercial banks in the United States ... 7,081 8,734 6,995 8,111 4,940 7,860 6,392 7,046 6,062 6 To others 15,820 18,566 15,249 17,844 17,391 19,586 21,007 17,596 17,630 7 Other loans and leases, gross 163,965r 164,125r 167,227 167,695 169,255 166,171 164,084 165,030 164,360 8 Commercial and industrial 99,213r 98,995r 99,827r 100,742" 100,576" 99,406 99,256 99,352 100,018 9 Bankers acceptances and commercial 2,697 2,513 2,494 2,540 22,,444499"" 2,589 2,367 22,,552288 22,,550099 10 All other 96,516r 96,482r 97,333r 98,202" 98,127" 96,818 96,890 96,824 97,510 11 U.S. addressees 93,543r 93,418r 94,306r 95,203" 95,033" 93,771 93,695 93,649 94,098 1? 2,973r 3,065r 3,027r 2,999" 3,094" 3,046 3,195 3,175 3,412 13 Loans secured by real estate 34,540 34,632 34,701 34,669 34,249 33,826 33,913 33,877 33,964 14 To financial institutions 23,866r 23,738r 24,950" 24,567" 26,343" 25,524 24,174 25,101 24,060 15 Commercial banks in the United States.. 5,892 5,923 6,457 5,908 6,164 6,269 5,586 5,502 5,048 16 Banks in foreign countries 2,158 2,200 2,075 2,101 2,119 2,105 1,834 1,959 1,854 17 Nonbank financial institutions 15,815r 15,615r 16,417r 16,558" 18,061" 17,149 16,754 17,639 17,158 18 For purchasing and carrying securities 3,656 4,269 5,163 5,122 5,219 4,799 4,144 4,118 3,807 19 To foreign governments and official 376 366 365 337755 364 335544 335566 336600 335522 70 All other 2,315 2,124 2,221 2,221 2,503 2,261 2,242 2,223 2,159 21 Other assets (claims on nonrelated parties) .. 30,840" 30,469" 31,224 30,712 30,730 31,075 30,955 30,177 30,716 22 Total assets3 312,983 315,145 316,341r 320,171' 318,388" 314,573 310,095 311,250 307,752 73 Deposits or credit balances due to other than directly related institutions 103,964 104,91 lr 105,747" 105,565" 104,983 102,342 110033,,337744 110033,,661177 110033,,442266 24 Demand deposits 3,794 3,561r 4,ISO" 3,860" 4,079 4,024 4,068 4,224 3,569 75 Individuals, partnerships, and corporations 2,948 2,803 3,096 2,977" 3,252 3,214 22,,997766 33,,118899 22,,779922 76 Other 847 758r l,054r 883 827 810 1,092 1,036 777 27 Nontransaction accounts 100,170 101,350 101,597 101,705 100,904 98,318 99,306 99,393 99,857 28 Individuals, partnerships, and 70,872 70,850 71,241 71,315 71,043 69,719 71,403 71,074 7700,,995555 7,9 Other 29,298 30,499 30,356 30,390 29,861 28,598 27,902 28,318 28,902 30 Borrowings from other than directly 92,880 94,150 90,755 91,148 92,318 92,368 8888,,881133 9900,,668844 8833,,775566 31 Federal funds purchased 46,626 46,602 46,244 44,625 49,349 48,858 45,482 50,730 45,776 3322 From commercial banks in the 16,271 15,867 18,926 12,891 14,748 15,045 12,185 14,764 1122,,113344 33 30,354 30,734 27,319 31,733 34,601 33,813 33,297 35,966 33,642 34 Other liabilities for borrowed money 46,254 47,549 44,511 46,523 42,969 43,510 43,331 39,954 37,980 35 To commercial banks in the 9,635 9,982 10,184 10,427 10,357 10,054 1100,,334455 99,,119911 99,,331199 36 36,619 37,567 34,327 36,096 32,611 33,456 32,986 30,763 28,661 37 Other liabilities to nonrelated parties 30,847 30,708r 29,999" 30,987" 31,772 30,151 30,529 30,533 31,193 38 Total liabilities6 312,983 315,145 316,341r 320,171" 318,388" 314,573 310,095 311,250 307,752 MEMO 39 Total loans (gross) and securities, adjusted .. 208,700r 211,240" 211,095 214,545 216,164 214,830 214,985 212,586 211,733 40 Net due to related institutions abroad 43,190 44,412 46,941" 49,450" 46,254" 52,504 52,788 48,835 53,393 1. Includes securities purchased under agreements to resell. 5. Includes securities sold under agreements to repurchase. 2. Includes transactions with nonbank brokers and dealers in securities. 6. Includes net to related institutions abroad for U.S. branches and agencies of 3. Includes net due from related institutions abroad for U.S. branches and foreign banks having a net "due to" position. agencies of foreign banks having a net "due from" position. 7. Excludes loans to and federal funds transactions with commercial banks in 4. Includes other transaction deposits. the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic NonfinancialS tatistics • April 1993 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1992 IItteemm 1988 1989 1990 1991 1992 July Aug. Sept. Oct. Nov. Dec. Commercial paper (seasonally adjusted unless noted otherwise) 11 AAllll iissssuueerrss 458,464 525,831 561,142 530,300 547,480 547,268r 546,042r 549,969" 558,708r 561,909 547,480 FFiinnaanncciiaall ccoommppaanniieess11 DDeeaalleerr--ppllaacceedd ppaappeerr 22 TToottaall 159,777 183,622 215,123 214,445 227,566 226,943 231,586 233,977 231,132 231,384 227,566 33 BBaannkk--rreellaatteedd ((nnoott sseeaassoonnaallllyy aaddjjuusstteedd)) 1,248 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. DDiirreeccttllyy ppllaacceedd ppaappeerr44 44 TToottaall 194,931 210,930 199,835 183,195 172,639 179,751r 174,013r 179,969" 182,299" 180,177 172,639 55 BBaannkk--rreellaatteedd ((nnoott sseeaassoonnaallllyy aaddjjuusstteedd)) 43,155 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 66 NNoonnffiinnaanncciiaall ccoommppaanniieess55 103,756 131,279 146,184 132,660 147,275 140,574 140,443 136,023 145,277 150,348 147,275 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 66,631 62,972 54,771 43,770 38,194 37,733 37,090 37,814 37,599 37,651 38,194 Holder 8 Accepting banks 9,086 9,433 9,017 11,017 10,555 9,225 9,372 10,436 10,236 10,301 10,555 9 Own bills 8,022 8,510 7,930 9,347 9,097 7,808 7,927 9,073 8,764 9,156 9,097 10 Bills bought from other banks 1,064 924 1,087 1,670 1,458 1,417 1,446 1,363 1,472 1,145 1,458 Federal Reserve Banks 11 Foreign correspondents 1,493 1,066 918 1,739 1,276 1,269 1,851 1,803 1,204 1,289 1,276 12 Others 56,052 52,473 44,836 31,014 26,364 27,239 25,866 25,575 26,159 26,061 26,364 Basis 13 Imports into United States 14,984 15,651 13,095 12,843 12,209 11,825 11,600 12,227 12,116 12,133 12,209 14 Exports from United States 14,410 13,683 12,703 10,351 8,096 9,015 7,861 8,051 7,849 7,673 8,096 15 All other 37,237 33,638 28,973 20,577 17,890 16,893 17,628 17,536 17,633 17,846 17,890 1. Institutions engaged primarily in commercial, savings, and mortgage bank- 5. Includes public utilities and firms engaged primarily in such activities as ing; sales, personal, and mortgage financing; factoring, finance leasing, and other communications, construction, manufacturing, mining, wholesale and retail trade, business lending; insurance underwriting; and other investment activities. transportation, and services. 2. Includes all financial-company paper sold by dealers in the open market. 6. Data on bankers acceptances are gathered from approximately 100 institu- 3. Bank-related series were discontinued in January 1989. tions. The reporting group is revised every January. 4. As reported by financial companies that place their paper directly with 7. In 1977 the Federal Reserve discontinued operations in bankers acceptances investors. for its own account. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans1 Percent per year Date of change Period Av r e a r t a e g e Period Av r e a r t a e g e Period 1990— Jan. 1 10.50 1990 10.01 1991—Jan. ... 9.52 1992— Jan. ... 8 10.00 1991 8.46 Feb. .. 9.05 Feb. .. 1992 6.25 Mar. .. 9.00 Mar. .. 1991— Jan. 2 9.50 Apr. .. 9.00 Apr. .. Feb. 4 9.00 1990- 10.11 May ... 8.50 May ... May 1 8.50 Feb. 10.00 June .. 8.50 June .. Sept. 13 8.00 Mar. 10.00 July ... 8.50 July ... Nov. 6 7.50 Apr. 10.00 Aug. .. 8.50 Aug. .. Dec. 23 6.50 May . 10.00 Sept. .. 8.20 Sept. .. June 10.00 Oct. ... 8.00 Oct. ... 1992— July 2 6.00 July . 10.00 Nov. .. 7.58 Nov. .. Aug. 10.00 Dec. .. 7.21 Dec. .. Sept. 10.00 Oct. . 10.00 1993— Jan. ... Nov. 10.00 Feb. Dec. 10.00 1. Data in this table also appear in the Board's H.15 (519) weekly and G.13 (415) monthly statistical releases. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 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 1992 1993 1993, week ending IItteemm 11999900 11999911 11999922 Oct. Nov. Dec. Jan. Jan. 1 Jan. 8 Jan. 15 Jan. 22 Jan. 29 MONEY MARKET INSTRUMENTS 1 Federal funds1'2'3 8.10 5.69 3.52 3.10 3.09 2.92 3.02 2.86 3.03 2.98 3.10 2.94 6.98 5.45 3.25 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Commercial paper3,5,6 8.15 5.89 3.71 3.22 3.25 3.71 3.21 3.56 3.34 3.20 3.16 3.14 8.06 5.87 3.75 3.33 3.66 3.67 3.25 3.51 3.35 3.25 3.21 3.18 7.95 5.85 3.80 3.33 3.67 3.70 3.35 3.57 3.44 3.36 3.32 3.29 Finance paper, directly placed3,5,7 8.00 5.73 3.62 3.14 3.20 3.68 3.25 3.56 3.34 3.25 3.21 3.18 7.87 5.71 3.65 3.24 3.59 3.58 3.32 3.51 3.40 3.32 3.30 3.27 7.53 5.60 3.63 3.23 3.56 3.52 3.29 3.39 3.36 3.30 3.26 3.23 Bankers acceptances3 5,8 7.93 5.70 3.62 3.19 3.51 3.44 3.14 3.31 3.21 3.14 3.12 3.08 7.80 5.67 3.67 3.19 3.51 3.47 3.23 3.39 • 3.32 3.24 3.20 3.15 Certificates of deposit, secondary market 9 11 1-month 8.15 5.82 3.64 3.11 3.23 3.57 3.14 3.30 3.20 3.15 3.12 3.08 8.15 5.83 3.68 3.26 3.58 3.48 3.19 3.34 3.27 3.20 3.17 3.13 8.17 5.91 3.76 3.27 3.60 3.55 3.33 3.47 3.44 3.33 3.30 3.26 8.16 5.86 3.70 3.30 3.67 3.50 3.22 3.34 3.29 3.24 3.16 3.18 U.S. Treasury bills Secondary market • 7.50 5.38 3.43 2.86 3.13 3.22 3.00 3.15 3.09 3.00 2.99 2.92 7.46 5.44 3.54 3.04 3.34 3.36 3.14 3.32 3.25 3.14 3.11 3.07 7.35 5.52 3.71 3.17 3.52 3.55 3.35 3.46 3.44 3.36 3.33 3.26 Auction average '5 U 18 3-month 7.51 5.42 3.45 2.84 3.14 3.25 3.06 3.22 3.15 3.07 3.03 2.98 7.47 5.49 3.57 2.98 3.35 3.39 3.17 3.38 3.28 3.19 3.13 3.09 7.36 5.54 3.75 3.12 3.61 3.57 3.52 n.a. n.a. 3.52 n.a. n.a. U.S. TREASURY NOTES AND BONDS Constant maturities12 7.89 5.86 3.89 3.30 3.68 3.71 3.50 3.62 3.60 3.50 3.47 3.41 8.16 6.49 4.77 4.08 4.58 4.67 4.39 4.59 4.52 4.43 4.37 4.24 8.26 6.82 5.30 4.64 5.14 5.21 4.93 5.13 5.06 4.98 4.91 4.78 8.37 7.37 6.19 5.60 6.04 6.08 5.83 6.03 5.95 5.90 5.82 5.66 8.52 7.68 6.63 6.15 6.49 6.46 6.26 6.42 6.39 6.34 6.23 6.08 26 10-year 8.55 7.86 7.01 6.59 6.87 6.77 6.60 6.70 6.67 6.68 6.59 6.46 27 30-year 8.61 8.14 7.67 7.53 7.61 7.44 7.34 7.39 7.38 7.43 7.31 7.23 Composite 8.74 8.16 7.52 7.26 7.43 7.30 7.17 7.24 7.24 7.27 7.15 7.03 STATE AND LOCAL NOTES AND BONDS Moody's series13 29 Aaa 6.96 6.56 6.09 6.10 6.05 5.91 n.a. 5.94 5.85 5.97 n.a. n.a. 30 Baa 7.29 6.99 6.48 6.51 6.46 6.27 n.a. 6.30 6.19 6.33 n.a. n.a. 7.27 6.92 6.44 6.41 6.36 6.22 6.16 6.17 6.17 6.19 6.16 6.10 CORPORATE BONDS 9.77 9.23 8.55 8.41 8.51 8.35 8.24 8.31 8.29 8.30 8.22 8.14 Rating group 33 Aaa 9.32 8.77 8.14 7.99 8.10 7.98 7.91 7.90 7.92 7.96 7.90 7.84 34 Aa 9.56 9.05 8.46 8.32 8.40 8.24 8.11 8.18 8.19 8.16 8.09 8.02 35 A 9.82 9.30 8.62 8.49 8.58 8.37 8.26 8.32 8.31 8.33 8.24 8.15 36 Baa 10.36 9.80 8.98 8.84 8.96 8.81 8.67 8.75 8.74 8.73 8.65 8.55 37 A-rated, recently offered utility bonds16 .... 10.01 9.32 8.52 8.40 8.51 8.27 8.13 8.21 8.28 8.13 8.05 7.95 MEMO Dividend-price ratio1 8.96 8.17 7.46 7.22 7.43 7.45 7.25 7.44 7.30 7.34 7.37 7.39 33..6611 33..2255 22..9999 33..0077 22..9988 22..9900 22..8888 22..8877 22..8899 22..9900 22..9900 2.83 1. The daily effective federal funds rate is a weighted average of rates on 12. Yields on actively traded issues adjusted to constant maturities. Source: trades through New York brokers. U.S. Treasury. 2. Weekly figures are averages of seven calendar days ending on Wednesday 13. General obligations based on Thursday figures; Moody's Investors Service. of the current week; monthly figures include each calendar day in the month. 14. General obligations only, with twenty years to maturity, issued by twenty 3. Annualized using a 360-day year or bank interest. state and local governmental units of mixed quality. Based on figures for 4. Rate for the Federal Reserve Bank of New York. Thursday. 5. Quoted on a discount basis. 15. Daily figures from Moody's Investors Service. Based on yields to maturity 6. An average of offering rates on commercial paper placed by several leading on selected long-term bonds. dealers for firms whose bond rating is AA or the equivalent. 16. Compilation of the Federal Reserve. This series is an estimate of the yield 7. An average of offering rates on paper directly placed by finance companies. on recently offered, A-rated utility bonds with a thirty-year maturity and five 8. Representative closing yields for acceptances of the highest-rated money years of call protection. Weekly data are based on Friday quotations. center banks. 17. Standard and Poor's corporate series. Preferred stock ratio based on a 9. An average of dealer offering rates on nationally traded certificates of sample of ten issues: four public utilities, four industrials, one financial, and one deposit. transportation. Common stock ratios on the 500 stocks in the price index. 10. Bid rates for Eurodollar deposits at 11 a.m. London time. Data are for NOTE. These data also appear in the Board's H.15 (519) and G. 13 (415) releases. indication purposes only. For ordering address, see inside front cover. 11. Auction date for daily data; weekly and monthly averages computed on an issue-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • April 1993 1.36 STOCK MARKET Selected Statistics 1992 1993 IInnddiiccaattoorr 11999900 11999911 11999922 May June July Aug. Sept. Oct. Nov. Dec. Jan. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 183.66 206.35 229.00 228.55 224.68 228.17 230.07 230.13 226.97 232.84 239.47 239.67 226.06 258.16 284.26 285.17 279.54 281.90 284.44 285.76 279.70 287.80 290.77 292.11 158.80 173.97 201.02 207.88 202.02 198.36 191.31 191.61 192.30 204.63 212.35 221.00 4 Utility 90.72 92.64 99.48 98.24 97.23 101.18 103.41 102.26 101.62 101.13 103.85 105.52 133.21 150.84 179.29 175.89 174.82 180.96 180.47 178.27 181.36 189.27 196.87 203.38 6 Standard & Poor's Corporation (1941-43 = 10)' 335.01 376.20 415.75 414.81 408.27 415.05 417.93 418.48 412.50 422.84 435.64 435.40 7 American Stock Exchange (Aug. 31, 1973 = 50p 338.32 360.32 391.28 392.63 385.56 384.07 385.80 382.67 371.27 387.75 392.69 402.75 Volume of trading (thousands of shares) 156,359 179,411 202,558 182,027 195,089 194,138 174,003 191,774 204,787 208,221 222,736 266,011 1133,,115555 1122,,448866 1144,,117711 13,455 1111,,221166 1100,,772222 11,875 1111,,119988 1111,,996666 1144,,992255 1166,,552233 17,184 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers3 28,210 36,660 43,990 39,890 39,690 39,640 39,940 41,250 41,590 43,630 43,990 44,020 Free credit balances at brokers4 11 Margin accounts 8,050 8,290 8,970 7,700 7,780 7,920 8,060 8,060 8,355 8,500 8,970 9,080 12 Cash accounts 19,285 19,255 22,510 18,695 19,610 18,775 18,305 19,650 18,700 19,310 22,510 21,525 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 1133 MMaarrggiinn ssttoocckkss 70 80 65 55 65 50 1144 CCoonnvveerrttiibbllee bboonnddss 50 60 50 50 50 50 1155 SShhoorrtt ssaalleess 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance on securities other than options are the difference between the market value (100 companies. With this change the index includes 400 industrial stocks (formerly percent) and the maximum loan value of collateral as prescribed by the Board. 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1, financial. 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1, 2. On July 5,1983, the American Stock Exchange rebased its index, effectively 1971. cutting previous readings in half. On Jan. 1, 1977, the Board of Governors for the first time established in 3. Since July 1983, under the revised Regulation T, margin credit at broker- Regulation T the initial margin required for writing options on securities, setting dealers has included credit extended against stocks, convertible bonds, stocks it at 30 percent of the current market value of the stock underlying the option. On acquired through the exercise of subscription rights, corporate bonds, and Sept. 30, 1985, the Board changed the required initial margin, allowing it to be the government securities. Separate reporting of data for margin stocks, convertible same as the option maintenance margin required by the appropriate exchange or bonds, and subscription issues was discontinued in April 1984. self-regulatory organization; such maintenance margin rules must be approved by 4. Free credit balances are amounts in accounts with no unfulfilled commit- the Securities and Exchange Commission. Effective Jan. 31, 1986, the SEC ments to brokers and are subject to withdrawal by customers on demand. approved new maintenance margin rules, permitting margins to be the price of the 5. New series since June 1984. option plus 15 percent of the market value of the stock underlying the option. 6. These requirements, stated in regulations adopted by the Board of Gover- Effective June 8, 1988, margins were set to be the price of the option plus 20 nors pursuant to the Securities Exchange Act of 1934, limit the amount of credit percent of the market value of the stock underlying the option (or 15 percent in the that can be used to purchase and carry "margin securities" (as defined in the case of stock-index options). regulations) when such credit is collateralized by securities. Margin requirements Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1992 AAccccoouunntt 11999900 11999911 Feb. Mar. Apr. May June" July Aug. Sept." Oct." Nov. SAIF-insured institutions 1 Assets 1,084,821 919,979 906,142 883,407 872,026 870,334 861,517 856,390" 856,165" 847,235 846,730 840,605 2 Mortgages 633,385 551,322 541,734 529,158 524,954 521,911 516,654 512,264 512,077 508,815 502,863 4%,974 3 Mortgage-backed securities 155,228 129,461 127,766 125,272 124,763 124,225 123,282 122,385" 120,438" 119,715 120,715 120,292 4 Contra-assets to mortgage assets1 . 16,897 12,307 11,608 10,979 10,959 11,120 11,282 11,044 11,164 11,073 11,207 10,509 5 Commercial loans 24,125 17,139 16,050 15,400 15,075 14,607 14,020 13,929 13,525 13,419 13,630 13,180 6 Consumer loans 48,753 41,775 39,908 38,717 37,999 37,868 37,403 37,230 37,123" 36,732 35,938 36,019 7 Contra-assets to nonmortgage loans1.. 1,939 1,239 1,115 -1,008 980 949 944 910 932" 982 931 845 8 Cash and investment securities 146,644 120,077 121,969 119,543 116,462 120,763 119,539 120,220 124,140 120,684 126,719 127,893 9 Other2 95,522 73,751 71,637 67,387 64,711 63,030" 62,844 62,317" 60,958" 59,925 59,002 57,600 10 Liabilities and net worth . 1,084,821 919,979 906,142 883,407 872,026 870,334 861,517 856,390" 856,165" 847,235 846,730 840,605 11 Deposits 835,496 731,937 717,026 703,811 689,777 688,199 682,535 676,141 672,354 667,027 660,906 654,047 12 Borrowed money 197,353 121,923 118,554 110,031 111,262 110,126 108,943 109,036 110,109 110,022 114,123 114,354 13 FHLBB 100,391 65,842 63,138 62,628 62,268 61,439 62,760 62,359 62,225 64,105 63,065 64,742 14 Other 96,962 56,081 55,416 47,403 48,994 48,687 46,183 46,677 47,884 45,917 51,058 49,612 15 Other 21,332 17,560 21,329 18,295 18,883 19,626 17,740 18,570 20,523 18,017 19,853 20,406 16 Net worth 30,640 48,559 49,233 51,271 52,103 52,383 52,299 52,642" 53,178" 52,169 51,846 51,798 1. Contra-assets are credit-balance accounts that must be subtracted from the NOTE. Components do not sum to totals because of rounding. Data for credit corresponding gross asset categories to yield net asset levels. Contra-assets to unions and life insurance companies have been deleted from this table. Starting in mortgage assets, mortgage loans, contracts, and pass-through securities—include the December 1991 issue, data for life insurance companies are shown in a special loans in process, unearned discounts and deferred loan fees, valuation allowances table of quarterly data. for mortgages "held for sale," and specific reserves and other valuation allow- SOURCE. Office of Thrift Supevision (OTS), insured by the Savings Association ances. Contra-assets to nonmortgage loans include loans in process, unearned Insurance Fund (SAIF) and regulated by the OTS. discounts and deferred loan fees, and specific reserves and valuation allowances. 2. Includes holding of stock in Federal Home Loan Bank and finance leases plus interest. 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1992 1993 11999900 11999911 11999922"" Aug. Sept. Oct. Nov. Dec. Jan. U.S. budget1 1 Receipts, total 1,031,308 1,054,265 11,,009911,,220000"" 78,216" 118,338" 76,832" 74,633" 113,756" 112,809 7 On-budget 749,654 760,382 788,774" 55,432" 92,807" 55,056" 51,219" 89,660" 90,220 3 Off-budget 281,654 293,883 302,426 22,784 25,531 21,776 23,414 24,096 22,589 4 Outlays, total 1,251,766 1,323,757 1,381,404" 102,918" 112,918" 125,620" 107,363" 152,701" 82,996 5 On-budget 1,026,701 1,082,072 1,129,044" 79,126" 86,703" 103,780" 83,444" 116,640" 85,022 6 Off-budget 225,064 241,685 252,316 23,792 26,235 21,841 23,919 36,061 -2,025 7 Surplus or deficit (-), total -220,458 -269,492 -290,160 -24,702 5,400 -48,788" -32,730 -38,945 29,812 8 On-budget -277,047 -321,690 -340,270 -23,694 6,104 -48,724" -32,225 -26,980 24,614 9 Off-budget 56,590 52,198 50,110 -1,008 -704 -65 -505 -11,965 24,614 Source of financing (total) 10 Borrowing from the public 220,101 276,802 310,918 38,841 9,853 -1,552 61,969 21,078 -8,355 11 Operating cash (decrease, or increase (-)) ... 818 -1,329 -17,305 1,523 -22,807 39,420 -7,346 -3,175 -16,436 12 Other 1 -461 -5,981 -3,453 -15,662 7,554 10,920" -21,893 21,042 -5,021 MEMO 13 Treasury operating balance (level, end of period) 40,155 41,484 58,789 35,982 58,789 19,369 26,715 29,890 46,326 14 Federal Reserve Banks 7,638 7,928 24,586 6,232 24,586 4,413 6,985 7,492 9,572 15 Tax and loan accounts 32,517 33,556 34,203 29,749 34,203 14,956 19,729 22,399 36,754 1. In accordance with the Balanced Budget and Emergency Deficit Control Act monetary assets; accrued interest payable to the public; allocations of SDRs; of 1985, all former off-budget entries are now presented on-budget. Federal deposit funds; miscellaneous liability (including checks outstanding) and asset Financing Bank (FFB) activities are now shown as separate accounts under the accounts; seigniorage; increment on gold; net gain or loss for U.S. currency agencies that use the FFB to finance their programs. The act also moved two valuation adjustment; net gain or loss for IMF loan-valuation adjustment; and social security trust funds (federal old-age survivors insurance and federal profit on sale of gold. disability insurance) off budget. The Postal Service is included as an off-budget SOURCES. Monthly Treasury Statement of Receipts and Outlays of the U.S. item in the Monthly Treasury Statement beginning in 1990. Government (MTS) and the Budget of the U.S. Government. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the International Monetary Fund (IMF); loans to the IMF; other cash and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • April 1993 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1991 1992 1992 1993 11999911 11999922 HI H2 Hlr H2 Nov. Dec. Jan. RECEIPTS 1 All sources 1,054,265 1,091,200' 540,504 519,293r 560,647 540,849r 74,633r 113,756r 112,809 7 Individual income taxes, net 467,827 476,465 232,389 234,949 237,049 246,%lr 33,097r 51,171r 73,704 3 Withheld 404,152 408,352 193,440 210,552 198,868 215,591 33,085 48,189 36,255 4 Presidential Election Campaign Fund 32 30 31 1 19 10 0 0 0 Nonwithheld 142,693 149,342 109,405 33,2% 112,032 39,371r l,772r 3,665r 38,452 fi Refunds 79,050 81,259 70,487 8,900 73,869 8,011 1,760 683 1,003 Corporation income taxes 7 Gross receipts 113,599 117,951 58,903 54,016 61,682 58,022 2,312 23,721 3,%9 8 Refunds 15,513 17,680 7,904 8,649 9,402 7,219 833 772 758 9 Social insurance taxes and contributions, net 396,011 413,689 214,303 118866,,883399rr 224,569 192,599 32,900 31,918 29,416 10 Employment taxes and contributions 370,526 385,491 199,727 175,802 208,110 180,758 30,264 31,252 28,209 11 Self-employment taxes and contributions 25,457 24,421 22,150 3,306 20,433 3,988 0 0 -3,032 1? Unemployment insurance 20,922 23,410 12,2% 8,721r 14,070 9,397 2,270 245 844 13 Other net receipts 4,563 4,788 2,279 2,317 2,389 2,445 366 421 363 14 Excise taxes 42,430 45,570 20,703 24,429r 22,388 23,456 4,082 4,014 3,307 IS Customs deposits 15,921 17,359 7,488 8,694r 8,145 9,497 1,503 1,539 1,310 16 Estate and gift taxes 11,138 11,143 5,631 5,507r 5,701 5,733 954 959 888 17 Miscellaneous receipts 22,852 27,195 8,991 13,508 10,992 11,815 618 1,206 971 OUTLAYS 18 All types 1,323,757 l,381,404r 632,153 694,474 704,590 723,760r 107,363r 152,701r 82,996 19 National defense 272,514 298,361 122,089 147,669 147,015 155,501 20,819 30,010 19,683 70 International affairs 16,167 16,106 7,592 7,691 8,544 9,911 4,018 1,170 1,161 21 General science, space, and technology 15,946 16,409 7,4% 8,472 7,952 8,521 1,612 1,571 1,395 7? Energy 2,511 4,509 1,235 1,698 1,442 3,109 529 525 15 73 Natural resources and environment 18,708 20,017 8,324 11,130 8,617 11,617 1,801 1,540 1,372 24 Agriculture 14,864 14,997 7,684 7,418 7,527 8,881 2,139 3,428 1,206 75 Commerce and housing credit 75,639 9,514 17,992 36,534 15,565 -7,843 -2,417 -1,874 -1,832 76 Transportation 31,531 33,337 14,748 17,093 15,678 18,477 2,981 2,983 2,363 27 Community and regional development 7,432 7,411 3,552 3,783 3,902 4,540 728 774 650 28 Education, training, employment, and social services 4411,,447799 45,248 2211,,223344 2211,,111144 23,224 2200,,992222 3,882 4,393 4,360 ?9 Health 71,183 89,570 35,608 41,459 43,702 47,223 7,420 8,191 7,828 30 Social security and medicare 373,495 406,585r 190,247 193,098 205,516 232,109 33,346 59,837 10,376 31 Income security 171,618 198,073 88,778 87,805 105,928 99,272 14,188 18,689 16,225 3? Veterans benefits and services 31,344 34,133 14,326 17,425 15,597 18,561 1,743 4,148 1,641 33 Administration of justice 12,295 14,450 6,187 6,574 7,432 7,283 1,277 1,236 1,222 34 11,358 12,939 5,212 6,794 5,465 8,138 106 2,306 133 35 195,012 199,429 98,556 99,149 100,188 98,549 16,148 16,559 17,858 36 Undistributed offsetting receipts -39,356 -39,280 -18,702 -20,436 -18,228 -20,914 -2,954 -2,783 -2,660 1. Functional details do not sum to total outlays for calendar year data because 5. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. revisions to monthly totals have not been distributed among functions. Fiscal year 6. Includes interest received by trust funds. total for outlays does not correspond to calendar year data because revisions from 7. Consists of rents and royalties for the outer continental shelf and U.S. the Budget have not been fully distributed across months. government contributions for employee retirement. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. SOURCES. U.S. Department of the Treasury, Monthly Treasury Statement of 3. Old-age, disability, and hospital insurance. Receipts and Outlays of the U.S. Government, and the U.S. Office of Manage- 4. Federal employee retirement contributions and civil service retirement and ment and Budget, Budget of the U.S. Government, Fiscal Year 1993. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1991 1992 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1 Federal debt outstanding . 3,397 3,492 3,563 3,683 3,820 3,897 4,001 4,083 2 Public debt securities. 3,365 3,465 3,538 3,665 3,802 3,881 3,985 4,065 4,177 3 Held by public 2,537 2,598 2,643 2,746 2,833 2,918 2,977 3,048 n.a. 4 Held by agencies .. 828 867 895 920 969 964 1,008 1,016 n.a. 5 Agency securities .. 33 27 25 18 19 16 16 18 n.a. 7 6 H H e e l l d d b b y y a p g u e b n l c ic ie . s .. 3 0 2 2 0 6 2 0 5 1 0 8 1 0 9 1 0 6 1 0 6 1 0 8 n n . . a a . . 8 Debt subject to statutory limit. 3,282 3,377 3,450 3,569 3,707 3,784 3,891 3,973 1 9 0 P O u th b e li r c d d e e b b t t 1 securities. 3,281 0 3,377 0 3,450 0 3,569 0 3,70 0 6 3,783 0 3,890 0 3,972 0 4,085 0 MEMO 11 Statutory debt limit 4,145 4,145 4,145 4,145 4,145 4,145 4,145 4,145 4,145 1. Consists of guaranteed debt of Treasury and other federal agencies, specified SOURCES. U.S. Treasury Department, Monthly Statement of the Public Debt of participation certificates, notes to international lending organizations, and District the United States and Treasury Bulletin. of Columbia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1992 Type and holder 11998899 11999900 11999911 11999922 Q1 Q2 Q3 Q4 1 Total gross public debt 2,953.0 3,364.8 3,801.7 4,177.0 3,881.3 3,984.7 4,064.6 4,177.0 By type 2 Interest-bearing 2,931.8 3,362.0 3,798.9 4,173.9 3,878.5 3,981.8 4,061.8 4,173.9 3 Marketable 1,945.4 2,195.8 2,471.6 2,754.1 2,552.3 2,605.1 2,677.5 2,754.1 4 Bills 430.6 527.4 590.4 657.7 615.8 618.2 634.3 657.7 5 Notes 1,151.5 1,265.2 1,430.8 1,608.9 1,477.7 1,517.6 1,566.4 1,608.9 6 Bonds 348.2 388.2 435.5 472.5 443.8 454.3 461.8 472.5 7 Nonmarketable1 986.4 1,166.2 1,327.2 1,419.8 1,326.2 1,376.7 1,384.3 1,419.8 8 State and local government series 163.3 160.8 159.7 153.5 157.8 161.9 157.6 153.5 9 Foreign issues 6.8 43.5 41.9 37.4 42.0 38.7 37.0 37.4 10 Government 6.8 43.5 41.9 37.4 42.0 38.7 37.0 37.4 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes . 115.7 124.1 135.9 155.0 139.9 143.2 148.3 155.0 13 Government account series 695.6 813.8 959.2 1,043.5 956.1 1,002.5 1,011.0 1,043.5 14 Non-interest-bearing 21.2 2.8 2.8 3.1 2.8 2.9 2.8 3.1 By holder 4 15 U.S. Treasury and other federal agencies and trust funds 707.8 828.3 968.7 963.7 1,007.9 1,016.3 16 Federal Reserve Banks 228.4 259.8 281.8 267.6 276.9 296.4 17 Private investors 2,015.8 2,288.3 2,563.2 2,664.0 2,712.4 2,765.5 18 Commercial banks 164.9 171.5 233.4 256.6 267.2 270.0 19 Money market funds 14.9 45.4 80.0 84.0 79.4 79.4 20 Insurance companies 125.1 142.0 168.7 n.a. 176.9 181.3 185.0 n.a. 21 Other companies 93.4 108.9 150.8 166.0 175.0 180.8 22 State and local treasuries 487.5 490.4 520.3 521.8 528.5 530.0 Individuals 23 Savings bonds 117.7 126.2 138.1 142.0 145.4 150.3 24 Other securities 98.7 107.6 125.8 126.1 129.7 130.9 25 Foreign and international 392.9 421.7 455.0 471.2 492.9 499.0 26 Other miscellaneous investors6 520.7 674.5 691.1 719.5 713.1 740.0 1. Includes (not shown separately) securities issued to the Rural Electrification 5. Consists of investments of foreign balances and international accounts in the Administration, depository bonds, retirement plan bonds, and individual retire- United States. ment bonds. 6. Includes savings and loan associations, nonprofit institutions, credit unions, 2. Nonmarketable series denominated in dollars, and series denominated in mutual savings banks, corporate pension trust funds, dealers and brokers, certain foreign currency held by foreigners. U.S. Treasury deposit accounts, and federally sponsored agencies. 3. Held almost entirely by U.S. Treasury and other federal agencies and trust SOURCES. U.S. Treasury Department, data by type of security, Monthly funds. Statement of the Public Debt of the United States; data by holder, the Treasury 4. Data for Federal Reserve Banks and U.S. government agencies and trust Bulletin. funds are actual holdings; data for other groups are Treasury estimates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic NonfinancialS tatistics • April 1993 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1992 1992, week ending 1993, week ending nem Oct. Nov. Dec. Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 IMMEDIATE TRANSACTIONS2 By type of security U.S. Treasury securities 1 Bills 46,769" 43,954" 42,358" 39,909" 48,336 44,201 37,314 3388,,665544 4488,,118888 5522,,880077 5500,,883366 4422,,663366 Coupon securities, by maturity 2 Less than 3.5 years 4499,,554400"" 52,682" 36,143" 41,655" 43,175 36,669 39,085 21,267 32,120 45,550 51,024 58,100 3 3.5 to 7.5 years 45,744r 39,524" 28,723" 29,538" 35,628" 30,726 29,754 15,626 29,778 49,463 45,958 56,318 4 7.5 to 15 years 20,425 18,1%" 13,054" 15,279" 18,501" 12,126 12,070 7,503 13,123 19,853 20,257 21,395 5 15 years or more 14,672 13,855" 11,093" 10,000" 14,807" 10,468 10,792 88,,114433 1111,,113322 1155,,338877 1199,,115522 1188,,222200 Federal agency securities Debt, by maturity 6 Less than 3,5 years 4,824 5,451 5,635 4,960 6,356 5,431 5,674 5,229 5,824 6,884 5,018 6,526 7 3.5 to 7.5 years 718 471 552 286 901 494 502 345 700 888 792 873 8 7.5 years or more 1,040 751 827 671 775 774 827 932 11,,225522 11,,007799 11,,222255 11,,223300 Mortgage-backed 9 Pass-throughs 16,051r 17,254 14,208 13,217 19,565 14,763 13,252 8,435 14,506 26,941 22,744 16,675 10 All others 3,069" 3,551" 3,122 6,457 2,753 2,119 3,438 3,007 2,201 3,150 4,680 4,211 By type of counterparty Primary dealers and brokers 11 U.S. Treasury securities 115,221" 106,377" 80,472" 86,834" 100,047" 8811,,554422 78,631 5544,,335599 7788,,117755 111155,,003300 111155,,552255 112222,,335599 Federal agency securities 12 Debt 1,697 1,191 1,276 1,271 1,527 1,366 1,201 805 1,834 1,840 1,524 1,869 13 Mortgage-backed 8,254 9,765" 7,917 9,023 1100,,336666 77,,999955 77,,667799 44,,553322 77,,880099 1133,,008822 1122,,003344 99,,111111 Customers 14 U.S. Treasury securities 61,929" 61,832" 50,898" 49,547" 60,400" 52,648 50,384 3366,,883333 5566,,116666 6688,,002288 7711,,770011 7744,,331100 Federal agency securities 15 Debt 4,885 5,483 5,738 4,645 6,505 5,333 5,802 5,700 55,,994422 7,011 5,511 6,760 16 Mortgage-backed 10,866" 11,040" 9,413 10,651 11,952 8,887 9,011 6,910 88,,889988 17,009 15,390 11,775 FUTURES AND FORWARD TRANSACTIONS4 By type of deliverable security U.S. Treasury securities 17 Bills 3,689 3,242" 2,464" 2,462" 4,923 2,421 1,004 11,,008877 33,,118899 22,,885566 22,,334455 11,,886600 Coupon securities, by maturity 18 Less than 3.5 years 2,253 2,221" 1,637" 1,549" 1,960 1,548 1,840 1,219 1,290 2,036 2,600 2,540 19 3.5 to 7.5 years 1,309 1,969 1,179" 2,490 1,484" 1,150 995 480 903 1,475 1,758 1,614 20 7.5 to 15 years 3,050 3,548 2,336" 3,719 3,156" 2,262 2,277 1,028 1,369 3,060 2,745 3,059 21 15 years or more 10,612 8,782 6,427" 7,315 8,642" 6,455 5,984 33,,992288 55,,665533 99,,339911 1111,,222244 99,,667733 Federal agency securities Debt, by maturity 22 Less than 3.5 years 67 161 97 58 25 108 198 86 20 15 109 28 23 3.5 to 7.5 years 66 117 48 235 38 37 4 n.a 5 160 138 91 24 7.5 years or more 20 16 18 23 31 16 17 7 12 64 192 62 Mortgage-backed 25 Pass-tlyoughs 18,011" 15,801 11,895" 11,124 17,052" 15,581 9,145 3,811 15,297 18,847 17,297 15,700 26 Others3 1,613" 1,132 829 444 843 1,152 1,070 365 562 638 1,767 2,181 OPTIONS TRANSACTIONS5 By type of underlying security U.S. Treasury, coupon securities, by maturity 27 Less than 3.5 years 1,317 1,663" 1,401" 1,981" 2,640 1,192 945 478 1,058 1,735 1,628 1,817 28 3.5 to 7.5 years 837 824 378 305 717 214 313 72 1,194 732 836 545 29 7.5 to 15 years 742 817 341 493 309 313 363 227 672 676 441 5% 30 15 years or more 1,623 1,607 820 975 1,191 726 922 253 876 846 11,,443311 11,,889900 Federal agency, mortgagebacked securities 31 Pass-throughs 299 344 338 243 523 328 279 173 617 472 577 644 1. Transactions are market purchases and sales of securities as reported to the 4. Futures transactions are standardized agreements arranged on an exchange. Federal Reserve Bank of New York by the U.S. government securities dealers on Forward transactions are agreements made in the over-the-counter market that its published list of primary dealers. Averages are based on the number of trading specify delayed delivery. All futures transactions are included regardless of time days in the period. Immediate, forward, and futures transactions are reported at to delivery. Forward contracts for U.S. Treasury securities and federal agency principal value, which does not include accrued interest; options transactions are debt securities are included when the time to delivery is more than five business reported at the face value of the underlying securities. days. Forward contracts for mortgage-backed agency securities are included Dealers report cumulative transactions for each week ending Wednesday. when the time to delivery is more than thirty days. 2. Transactions for immediate delivery include purchases or sales of securities 5. Options transactions are purchases or sales of put-and-call options, whether (other than mortgage-backed agency securities) for which delivery is scheduled in arranged on an organized exchange or in the over-the-counter market, and include five business days or less and "when-issued" securities that settle on the issue options on futures contracts on U.S. Treasury and federal agency securities. date of offering. Transactions for immediate delivery of mortgage-backed agency NOTE. In tables 1.42 and 1.43, "n.a." indicates that data are not published securities include purchases and sales for which delivery is scheduled in thirty days or because of insufficient activity. less. Stripped securities are reported at market value by maturity of coupon or corpus. Data for several types of options transactions—U.S. Treasury securities, bills; 3. Includes such securities as collateralized mortgage obligations (CMOs), real Federal agency securities, debt; and mortgage-backed securities, other than estate mortgage investment conduits (REMICs), interest-only securities (IOs), pass-throughs—are no longer available because activity is insufficient. and principal-only securities (POs). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A31 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1992 1992, week ending 1993, week ending IItteemm Oct. Nov. Dec. Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Positions2 NET IMMEDIATE POSITIONS3 By type of security U.S. Treasury securities 1 Bills 11,475 17,896 15,994 29,725 21,574 19,434 14,136 5,897 9,069 12,746 7,028 Coupon securities, by maturity 2 Less than 3.5 years 804 1,755 25 3,131 2,369 -3,290 2,760 -2,284 -2,385 --44,,334433 --99,,669999 3 3.5 to 7.5 years -13,685 -12,280 -7,221 -11,515 -8,953 -8,366 -4,713 -5,630 -7,193 -8,986 -8,902 4 7.5 to 15 years -13,207 -9,567 -10,158 -9,643 -10,755 -9,477 -9,475 -10,760 -12,355 -14,007 -14,080 5 15 years or more 6,617 5,028r 7,071 5,295 7,865 6,647 6,870 7,390 7,216 5,863 8,024 Federal agency securities Debt, by maturity 6 Less than 3.5 years 6,724 6,384 4,299 6,325 4,854 4,271 4,339 3,086 4,756 33,,221144 66,,119955 7 3.5 to 7.5 years 2,955 3,119"^ 3,282r 3,180* 3,434 3,338 3,270 3,166 2,924 2,779 2,542 8 7.5 years or more 4,190 3,418 3,331 3,173 3,186 2,891 3,561 3,682 3,681 3,809 3,707 Mortgage-backed 9 Pass-throughs 32,278 27,626 24,575 15,923 25,614 31,688 26,285 17,272 23,951 39,588 39,619 10 All others 26,555r 25,617r 24,932 25,614 24,948 23,931 24,951 25,783 24,367 24,215 25,127 Other money market instruments 11 Certificates of deposit 3,501 3,006 2,743r 2,886 2,335 2,510 2,865 3,249 2,563 2,372 2,978 12 Commercial paper 6,374 6,930 7,368r 7,603 7,745 8,120 6,963 6,459 8,198 5,310 6,836 13 Bankers acceptances 790 864 758 737 633 745 737 921 766 505 638 FUTURES AND FORWARD POSITIONS5 By type of deliverable security U.S. Treasury securities 14 Bills -2,336 2,797 -1,820 2,825 -3,416 -2,250 -1,839 -1,060 -2,120 --44,,884444 --55,,994433 Coupon securities, by maturity 15 Less than 3.5 years 731 2,105 612 1,455 213 676 805 509 630 11,,999988 11,,110099 16 3.5 to 7.5 years 2,286 1,206 609 113 -475 164 653 1,953 2,593 3,153 2,394 17 7.5 to 15 years 2,882 2,614 2,138 2,908 3,005 1,207 679 3,217 3,700 4,124 2,503 18 15 years or more -4,237 -5,164 -7,258 -7,107 -8,435 -7,225 -7,320 -6,180 -6,670 -4,733 -7,642 Federal agency securities Debt, by maturity 19 Less than 3.5 years 134 1 -123 52 --2255 -48 -107 --337788 --1188 -1 --8855 20 3.5 to 7.5 years -21 91 -115 184 -42 -150 -186 -177 -42 31 109 21 7.5 years or more -1 -6 -16 22 48 -72 2 -51 -42 -55 113 Mortgage-backed 22 Pass-throughs -14,399 -7,047 -1,280 5,258 -3,089 -8,007 -2,167 6,223 -909 -14,631 -16,701 23 All others 5,757 1,911 366 -291 301 270 1,059 37 257 1,025 1,964 24 Certificates of deposit -172,555 -125,734 -71,895r -103,656 -98,120 -61,896 -60,445 -59,719 -60,181 -66,521 -65,954 Financing6 Reverse repurchase agreements 25 Overnight and continuing 214,066 212,187r 208,771r 217,381r 212,837 210,357 196,211 220099,,664411 233,811 222266,,003311 223322,,559922 26 341,487 335,351r 331,994r 315,985r 341,254 332,175 343,399 320,130 301,147 346,177 340,163 Repurchase agreements 27 Overnight and continuing 383,324 362,381r 358,179* 380,700r 367,605 384,686 331,356 339,421 380,668 373,457 401,407 28 Term 317,708 329,318r 325,323r 294,098r 330,268 314,312 364,181 307,859 280,463 321,782 323,946 Securities borrowed 29 Overnight and continuing 101,102 104,281r 99,940r 101,330* 102,144 101,411 103,225 92,882 97,859 98,389 101,843 30 Term 44,031 44,260r 46,934r 43,250* 45,754 47,141 47,816 47,689 49,658 52,757 51,220 Securities loaned 31 Overnight and continuing 4,603r 4,158r 4,274r 3,897r 3,882 4,419 4,895 4,087 3,721 3,418 4,725 32 422r 314r 603r 215r 223 224 446 1,687 211 200 359 Collateralized loans 33 Overnight and continuing 17,160 15,142r 1166,,880000** 13,348r 17,483 16,128 18,419 15,998 17,896 16,345 17,015 MEMO: Matched book7 Reverse repurchase agreements 34 Overnight and continuing 146,398 153,453r 157,388r 115599,,111100** 160,780 159,562 151,038 115555,,337744 173,522 116633,,777722 116677,,662277 35 295,545 287,013r 289,381r 271,004* 298,724 290,223 298,406 278,344 268,933 305,960 297,287 Repurchase agreements 36 Overnight and continuing 196,777 188,840* 192,187r 202,575* 194,390 205,239 173,178 190,112 212,201 217,569 227,036 37 240,478 244,397r 243,025r 221,247* 248,227 233,949 268,752 231,648 213,245 248,413 246,276 1. Data for positions and financing are obtained from reports submitted to the delivery. Forward contracts for U.S. Treasury securities and federal agency debt Federal Reserve Bank of New York by the U.S. government securities dealers on securities are included when the time to delivery is more than five business days. its published list of primary dealers. Weekly figures are close-of-business Wednes- Forward contracts for mortgage-backed agency securities are included when the day data; monthly figures are averages of weekly data. 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 that settle terminated without advance notice by either party; term agreements have a fixed on the issue date of offering. Net immediate positions of mortgage-backed agency maturity of more than one business day . securities include securities purchased or sold that have been delivered or are 7. Matched-book data reflect financial intermediation activity in which the scheduled to be delivered in thirty days or less. borrowing and lending transactions are matched. Matched-book data are included 4. Includes such securities as collateralized mortgage obligations (CMOs), real in the financing breakdowns given above. The reverse repurchase and repurchase estate mortgage investment conduits (REMICs), interest-only securities (IOs), numbers are not always equal because of the "matching" of securities of different and principal-only securities (POs). values or different types of collateralization. 5. Futures positions reflect standardized agreements arranged on an exchange. NOTE. Data for futures and forward commercial paper and bankers acceptances and Forward positions reflect agreements made in the over-the-counter market that for term financing of collateralized loans are no longer available because of insufficient Digitized for FRspAeSciEfy Rde layed delivery. All futures positions are included regardless of time to activity. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • April 1993 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1992 AAggeennccyy 11998888 11998899 11999900 11999911 July Aug. Sept. Oct. Nov. 1 Federal and federally sponsored agencies 381,498 411,805 434,668 442,772 457,369 464,773 475,606 479,978 481,050 2 Federal agencies 35,668 35,664 42,159 41,035 39,773 40,034 41,319 41,470 42,081 3 Defense Department1 8 7 7 7 7 7 7 7 7 4 Export-Import Bank ' 11,033 10,985 11,376 9,809 8,156 8,156 7,698 7,698 7,698 5 Federal Housing Administration 150 328 393 397 194 229 301 309 344 6 Government National Mortgage Association certificates of participation 0 0 0 0 0 0 0 0 0 7 Postal Service6 6,142 6,445 6,948 8,421 10,123 10,123 10,123 10,123 10,660 8 Tennessee Valley Authority 18,335 17,899 23,435 22,401 21,293 21,519 23,190 23,333 23,372 9 United States Railway Association6 0 0 0 0 0 0 0 0 0 10 Federally sponsored agencies7 345,832 375,428 392,509 401,737 417,5% 424,739 434,287 438,508 438,%9 11 Federal Home Loan Banks 135,836 136,108 117,895 107,543 107,343 108,564 110,830 112,436 114,364 12 Federal Home Loan Mortgage Corporation 22,797 26,148 30,941 30,262 33,959 34,295 36,750 34,108 30,914 13 Federal National Mortgage Association 105,459 116,064 123,403 133,937 147,377 150,280 155,232 159,764 161,308 14 Farm Credit Banks 53,127 54,864 53,590 52,199 49,241 52,137 52,734 52,510 52,728 15 Student Loan Marketing Association9 22,073 28,705 34,194 38,319 39,765 39,552 38,830 39,766 39,737 16 Financing Corporation 5,850 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation 690 847 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation 0 4,522 23,055 29,9% 29,9% 29,9% 29,9% 29,9% 29,9% MEMO 19 Federal Financing Bank debt13 142,850 134,873 179,083 185,576 177,700 174,003 164,422 159,899 156,579 Lending to federal and federally sponsored agencies 20 Export-Import Bank 11,027 10,979 11,370 9,803 8,150 8,150 7,692 7,692 7,692 21 Postal Service6 5,892 6,195 6,698 8,201 9,903 9,903 9,903 9,903 10,440 22 Student Loan Marketing Association 4,910 4,880 4,850 4,820 4,820 4,820 4,820 4,790 4,790 23 Tennessee Valley Authority 16,955 16,519 14,055 10,725 8,475 7,275 7,175 7,175 6,975 24 United States Railway Association 0 0 0 0 0 0 0 0 0 Other lending14 25 Farmers Home Administration 58,496 53,311 52,324 48,534 43,209 43,009 42,979 42,979 42,979 26 Rural Electrification Administration 19,246 19,265 18,890 18,562 18,227 18,238 18,143 18,172 18,172 27 Other 26,324 23,724 70,896 84,931 84,916 82,608 73,710 69,188 65,531 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. On-budget since Sept. 30, 1976. 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 year 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, the Department of Health, Education, and Welfare, the Department of 13. The FFB, which began operations in 1974, is authorized to purchase or sell Housing and Urban Development, the Small Business Administration, and the obligations issued, sold, or guaranteed by other federal agencies. Because FFB Veterans' Administration. incurs debt solely for the purpose of lending to other agencies, its debt is not 6. Off-budget. included in the main portion of the table in order to avoid double counting. 7. Includes outstanding noncontingent liabilities: notes, bonds, and deben- 14. Includes FFB purchases of agency assets and guaranteed loans; the latter tures. Some data are estimated. are loans guaranteed by numerous agencies, with the amounts guaranteed by any 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, one agency generally being small. The Farmers Home Administration entry shown on line 17. consists exclusively of agency assets, while the Rural Electrification Administra- 9. Before late 1982, the Association obtained financing through the Federal tion entry consists of both agency assets and guaranteed loans. Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 22. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A33 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1992 1993 TTyyppee ooff iissssuuee oorr iissssuueerr,, 11999900 11999911 11999922 oorr uussee June July Aug. Sept. Oct. Nov. Dec. Jan. 1 All issues, new and refunding1 120,339 154,402 215,191 24,084 17,386 19,774 18,698 21,092 14,133 19,577 17,580 By type of issue 2 General obligation 39,610 55,100 78,611 8,806 7,136 7,005 7,461 7,733 5,203 6,024 4,650 3 Revenue 81,295 99,302 136,580 15,278 10,250 12,769 11,237 13,359 8,930 13,553 12,930 By type of issuer 4 State 15,149 24,939 25,295 2,063 2,836 2,933 1,710 2,742 1,688 2,339 1,339 5 Special district or statutory authority 72,661 80,614 127,618 16,477 10,040 11,203 11,054 13,113 8,197 11,159 12,556 6 Municipality, county, or township 32,510 48,849 73,178 5,544 4,510 n.a. 5,934 5,237 4,248 6,079 3,685 7 Issues for new capital 103,235 116,953 120,272 14,096 7,565 11,993 10,496 13,760 8,028 8,010 4,878 By use of proceeds 8 Education 17,042 21,121 22,071 2,132 1,747 1,737 1,237 2,083 1,800 1,658 1,005 9 Transportation 11,650 13,395 17,334 2,618 571 2,130 1,977 1,364 531 831 848 10 Utilities and conservation 11,739 21,039 20,058 1,851 629 2,604 2,265 3,340 960 1,258 891 11 Social welfare 23,099 25,648 n.a. 4,266 887 767 1,869 2,365 1,070 1,121 540 12 Industrial aid 6,117 8,376 n.a. 724 91 503 1,176 367 581 339 178 13 Other purposes 34,607 30,275 n.a. 2,505 3,640 4,252 1,972 4,241 3,086 2,803 1,416 1. Par amounts of long-term issues based on date of sale. SOURCES. Securities Data Company beginning January 1993. Investment Deal- 2. Includes school districts. er's Digest for earlier data. 1.46 NEW SECURITY ISSUES U.S. Corporations Millions of dollars 1992 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, 11998899 11999900 11999911 oorr iissssuueerr Apr. May June July Aug. Sept. Oct. Nov. 1 All issues' 377,855 340,049 465,483 29,064 44,977 48,136 46,235 37,091 42,849 39,123 35,679 2 Bonds2 319,985 299,884 390,018 23,726 38,061 39,113 39,758 31,815 37,539 32,157 31,180 By type of offering 3 Public, domestic 179,714 188,848 287,125 22,352 35,089 36,085 37,833 28,561 36,185 30,249 29,000 4 Private placement, domestic 117,420 86,982 74,930 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 22,851 23,054 27,962 1,373 2,972 3,027 1,924 3,254 1,355 1,909 2,409 By industry group 6 Manufacturing 74,736 51,779 86,628 4,170 6,046 7,338 5,509 4,720 55,,997744 77,,997755 33,,446677 7 Commercial and miscellaneous 50,268 40,733 36,666 2,381 2,492 1,665 3,488 2,159 2,374 2,813 2,393 8 Transportation 10,221 12,776 13,598 140 621 899 766 393 677 290 0 9 Public utility 18,611 17,621 23,945 3,548 3,051 4,266 6,902 4,509 5,230 3,700 1,289 10 Communication 9,276 6,687 9,431 1,205 1,590 1,028 2,081 1,053 1,191 427 374 11 Real estate and financial 156,873 170,288 219,750 12,282 24,261 23,916 21,011 18,982 22,093 16,953 23,656 12 Stocks2 57,870 40,165 75,467 5,338 6,916 9,023 6,477 5,276 5,310 6,966 4,499 By type of offering 13 Public preferred 6,194 n.a. 17,408 334 1,552 2,933 2,413 1,148 1,233 2,901 11,,554400 14 Common 26,030 n.a. 47,860 5,004 5,364 6,090 4,064 4,129 4,077 4,065 2,958 15 Private placement3 25,647 16,736 10,109 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 9,308 5,649 24,154 1,586 22,,449999 3,000 857 713 307 11,,777799 228888 17 Commercial and miscellaneous 7,446 10,171 19,418 1,099 2,080 1,079 1,599 1,315 602 940 1,366 18 Transportation 1,929 369 2,439 122 176 1,064 n.a. n.a. 59 53 304 19 Public utility 3,090 416 3,474 577 826 610 564 921 595 359 150 70 Communication 1,904 3,822 475 211 12 n.a. n.a. n.a. 1,051 99 22 21 Real estate and financial 34,028 19,738 25,507 1,743 1,324 3,271 3,457 2,327 2,695 3,735 2,369 1. Figures represent gross proceeds of issues maturing in more than one year; 2. Monthly data cover only public offerings. they are the principal amount or number of units calculated by multiplying by the 3. Monthly data are not available. offering price. Figures exclude secondary offerings, employee stock plans, SOURCES. IDD Information Services, Inc., the Board of Governors of the investment companies other than closed-end, intracorporate transactions, equi- Federal Reserve System, and, before 1989, the U.S. Securities and Exchange ties sold abroad, and Yankee bonds. Stock data include ownership securities Commission. issued by limited partnerships. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • April 1993 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets Millions of dollars 1992 IItteemm11 11999911 11999922 May June July Aug. Sept. Oct. Nov.r Dec. 1 Sales of own shares2 463,645 647,055 48,127 51,457 54,915 50,627 50,039 52,214 52,019 70,618 2 Redemptions of own shares 342,547 447,140 31,409 37,457 34,384 35,223 37,862 37,134 34,126 51,993 3 Net sales 121,098 199,915 16,718 14,000 20,703 15,404 12,177 15,080 17,893 18,625 4 Assets4 808,582 1,056,310 897,211 911,218 951,806 957,145 978,507 983,151 1,019,618 1,056,310 5 Cash5 60,292 73,999 67,270 69,508 72,732 77,245 76,498 75,808 80,247 73,999 6 Other 748,290 982,311 829,941 841,710 879,074 879,900 902,009 907,343 939,371 982,311 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 assets exclude both 5. Includes all U.S. Treasury securities and other short-term debt securities. money market mutual funds and limited-maturity municipal bond funds. SOURCE. Investment Company Institute. Data based on reports of membership, 2. Includes reinvestment of dividends. Excludes reinvestment of capital gains which comprises substantially all open-end investment companies registered with distributions. the Securities and Exchange Commission. Data reflect underwritings of new 3. Excludes sales and redemptions resulting from transfers of shares into or out companies. of money market mutual funds within the same fund family. 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data at seasonally adjusted annual rates 1991 1992 AAccccoouunntt 11999900 11999911 11999922 Ql Q2 Q3 Q4 Ql Q2 Q3 04 1 Profits with inventory valuation and capital consumption adjustment 361.7 346.3 n.a. 349.6 347.3 341.2 347.1 384.0 388.4 374.1 n.a. 2 Profits before taxes 355.4 334.7 n.a. 337.6 332.3 336.7 332.3 366.1 376.8 354.1 n.a. 3 Profits tax liability 136.7 124.0 n.a. 121.3 122.9 127.0 125.0 136.4 144.1 131.8 n.a. 4 Profits after taxes 218.7 210.7 n.a. 216.3 209.4 209.6 207.4 229.7 232.7 222.2 n.a. 5 Dividends 149.3 146.5 149.4 150.6 146.2 145.1 143.9 143.6 146.6 151.1 156.2 6 Undistributed profits 69.4 64.2 n.a. 65.7 63.2 64.5 63.4 86.2 86.1 71.1 n.a. 7 Inventory valuation -14.2 3.1 -8.3 6.7 9.9 -4.8 .7 -5.4 -15.5 -9.7 -2.7 8 Capital consumption adjustment 20.5 8.4 29.3 5.3 5.1 9.3 14.1 23.3 27.0 29.7 37.3 SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.50 NONFARM BUSINESS EXPENDITURES on New Plant and Equipment Billions of dollars; quarterly data at seasonally adjusted annual rates 1991 1992 19931 IInndduussttrryy 11999911 11999922 1199993311 Q2 Q3 Q4 Ql Q2 Q3 Q41 Ql1 1 Total nonfarm business 528.39 547.39 576.55 525.02 526.59 529.87 535.72 540.91 547.53 565.40 576.07 Manufacturing 2 Durable goods industries 77.64 74.07 76.08 79.31 74.94 76.40 74.19 74.26 71.84 75.98 77.30 3 Nondurable goods industries 105.17 99.41 106.49 107.20 102.55 102.66 99.79 97.52 100.39 99.95 106.63 Nonmanufacturing 4 Mining 10.02 9.25 9.97 10.08 10.09 9.99 8.87 9.18 9.09 9.87 10.97 Transportation 5 Railroad 5.95 6.91 7.43 6.25 6.32 5.44 6.65 6.50 6.87 7.64 6.71 6 Air 10.17 9.69 8.63 9.95 9.61 10.41 8.86 9.75 10.13 10.00 8.80 7 Other 6.54 7.06 7.69 6.67 6.63 6.45 6.37 7.27 7.69 6.90 7.96 Public utilities 8 Electric 43.76 48.10 54.23 43.09 43.27 44.75 46.06 48.45 47.73 50.15 52.96 9 Gas and other 22.82 24.09 25.59 22.00 23.25 22.67 22.75 24.19 23.92 25.51 24.74 10 Commercial and other2 246.32 268.81 280.43 240.46 249.94 251.11 262.17 263.80 269.86 279.42 280.00 1. Figures are amounts anticipated by business. SOURCE. U.S. Department of Commerce, Survey of Current Business. 2. "Other" consists of construction, wholesale and retail trade, finance and insurance, personal and business services, and communication. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A35 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1991 1992 AAccccoouunntt 11998899 11999900 11999911 Q1 Q2 Q3 Q4 Ql Q2 Q3r ASSETS 1 Accounts receivable, gross2 462.9 492.9 480.3 482.9 488.5 484.7 480.3 475.7 477.0 475.8 2 Consumer 138.9 133.9 121.9 127.1 127.5 125.3 121.9 118.4 116.7 116.6 3 Business 270.2 293.5 292.6 291.7 295.2 293.2 292.6 291.6 293.9 291.1 4 Real estate 53.8 65.5 65.8 64.1 65.7 66.2 65.8 65.8 66.4 68.1 5 LESS: Reserves for unearned income 54.7 57.6 55.1 57.2 58.0 57.6 55.1 53.6 51.2 50.8 6 Reserves for losses 8.4 9.6 12.9 10.7 11.1 13.1 12.9 13.0 12.3 12.0 7 Accounts receivable, net 399.8 425.7 412.3 415.0 419.3 414.1 412.3 409.1 413.6 412.9 8 All other 102.6 113.9 149.0 118.7 122.8 136.4 149.0 145.5 139.4 146.5 9 Total assets 502.4 539.6 561.2 533.7 542.1 550.5 561.2 554.6 553.0 559.4 LIABILITIES AND CAPITAL 10 Bank loans 27.0 31.0 42.3 35.6 36.9 39.6 42.3 38.0 37.8 38.1 11 Commercial paper 160.7 165.3 159.5 155.5 156.1 156.8 159.5 154.4 147.7 153.2 Debt 12 Other short-term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13 Long-term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 14 Owed to parent 35.2 37.5 34.5 32.4 34.2 36.5 34.5 34.5 34.8 34.9 15 Not elsewhere classified 162.7 178.2 191.3 182.4 184.5 185.0 191.3 189.8 191.9 191.4 16 All other liabilities 61.5 63.9 69.0 64.3 67.1 68.8 69.0 72.0 73.4 73.7 17 Capital, surplus, and undivided profits 55.2 63.7 64.8 63.4 63.3 63.8 64.8 66.0 67.1 68.1 18 Total liabilities and capital 502.4 539.6 561.2 533.7 542.1 550.5 561.2 554.6 548.4 559.4 1. Includes finance company subsidiaries of bank holding companies but not of companies; securitized pools are not shown since they are not on the books. retailers and banks. Data are amounts carried on the balance sheets of finance 2. Before deduction for unearned income and losses. 1.52 DOMESTIC FINANCE COMPANIES1 Millions of dollars, amounts outstanding, end of period 1992 TTyyppee ooff ccrreeddiitt 11999900 11999911 11999922 July Aug. Sept. Oct. Nov. Dec. Seasonally adjusted 11 TToottaall 523,023 519,573 534,045 522,834 528,117 527,858 527,323 529,232' 534,045 22 CCoonnssuummeerr 161,070 154,786 157,623 153,588 154,729 155,618 154,501 156,593r 157,623 33 RReeaall eessttaattee 65,147 65,388 67,284 66,843 67,753 67,717 68,035 67,838 67,284 44 BBuussiinneessss 296,807 299,400 309,138 302,403 305,634 304,523 304,787 304,801 309,138 Not seasonally adjusted 5 Total 526,441 522,853 537,354 522,686 523,448 524,999 526,874 528,895' 537,354 6 Consumer 161,965 155,677 158,546 154,099 155,529 156,416 155,505 157,005r 158,546 7 Motor vehicles 75,045 63,413 57,604 60,400 60,393 59,806 59,290 58,286 57,604 8 Other consumer 58,818 58,488 59,437 56,568 56,782 56,808 57,013 58,128 59,437 9 Securitized motor vehicles4 19,837 23,166 29,775 25,392 26,852 28,204 27,823 28,964" 29,775 10 Securitized other consumer4 8,265 10,610 11,729 11,739 11,503 11,598 11,379 11,626" 11,729 11 Real estate 65,509 65,764 67,678 67,065 68,104 68,064 68,477 68,016 67,678 1? Business 298,967 301,412 311,130 301,522 299,815 300,519 302,892 303,875 311,130 n Motor vehicles 92,072 90,319 87,454 87,686 85,745 85,261 86,747 85,621 87,454 14 Retail5 26,401 22,507 19,301 21,086 20,743 20,407 20,763 19,708 19,301 15 Wholesale6 33,573 31,216 27,158 27,158 n.a. n.a. n.a. n.a. n.a. 16 Leasing 32,098 36,5% 38,191 39,443 39,889 39,506 39,536 39,020 38,191 17 Equipment 137,654 141,399 151,683 145,787 145,790 147,319 147,146 148,202 151,683 18 Retail 31,968 30, %2 32,212 32,370 32,250 31,571 31,475 31,427 32,212 19 Wholesale6 11,101 9,671 8,669 9,128 9,084 8,994 8,928 8,824 8,669 70 Leasing 94,585 100,766 110,802 104,289 104,455 106,754 106,743 107,952 110,802 71 Other business 63,774 60,887 60,403 59,099 59,013 58,493 58,898 59,269 60,403 77 Securitized business assets 5,467 8,807 11,590 8,951 9,268 9,447 10,101 10,782 11,590 73 Retail 667 576 1,118 170 158 152 634 607 1,118 74 Wholesale 3,281 5,285 5,756 4,649 5,193 5,378 5,593 5,813 5,756 25 Leasing 1,519 2,946 4,716 4,132 3,917 3,917 3,874 4,362 4,716 1. Includes finance company subsidiaries of bank holding companies but not of 5. Passenger car fleets and commercial land vehicles for which licenses are retailers and banks. Data are before deductions for unearned income and losses. required. Data in this table also appear in the Board's G.20 (422) monthly statistical release. 6. Credit arising from transactions between manufacturers and dealers, that is, For ordering address, see inside front cover. floor plan financing. 2. Includes all loans secured by liens on any type of real estate, for example, 7. Includes loans on commercial accounts receivable, factored commercial first and junior mortgages and home equity loans. accounts, and receivable dealer capital; small loans used primarily for business or 3. Includes personal cash loans, mobile home loans, and loans to purchase other farm purposes; and wholesale and lease paper for mobile homes, campers, and types of consumer goods such as appliances, apparel, general merchandise, and travel trailers. recreation vehicles. Digitized for FRA4.S OEutRst anding balances of pools upon which securities have been issued; these http://fraser.stlboaulaisncfeesd a.roer gno/ longer carried on the balance sheets of the loan originator. Federal Reserve Bank of St. Louis

A36 Domestic Nonfinancial Statistics • April 1993 1.53 MORTGAGE MARKETS Conventional Mortgages on New Homes Millions of dollars except as noted 1992 1993 IItteemm 11999900 11999911 11999922 July Aug. Sept. Oct. Nov. Dec. Jan. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 153.2 155.0 158.1 173.5 148.4 146.0 159.2 165.4 154.0 158.6 2 Amount of loan (thousands of dollars) 112.4 114.0 118.1 132.6 113.6 109.3 119.7 117.3 117.7 119.5 3 Loan-price ratio (percent) 74.8 75.0 76.6 77.5 78.7 77.0 77.3 75.3 77.7 76.8 4 Maturity (years) 27.3 26.8 25.6 26.4 24.8 25.7 25.2 24.9 26.1 25.7 5 Fees and charges (percent of loan amount) 1.93 1.71 1.60 1.19 1.62 1.52 1.42 1.54 1.31 1.49 6 Contract rate (percent per year) 9.68 9.02 7.98 7.81 7.72 7.68 7.65 7.81 7.65 7.57 Yield (percent per year) / OTS series3 10.01 9.30 8.25 8.00 8.00 7.93 7.90 8.07 7.88 7.82 8 HUD series4 10.08 9.20 8.43 8.14 8.01 7.95 8.29 8.38 8.19 7.93 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (HUD series)5 10.17 9.25 8.46 8.12 8.08 8.06 8.29 8.54 8.12 8.04 10 GNMA securities 9.51 8.59 7.77 7.63 7.28 7.31 7.53 7.90 7.57 7.39 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 113,329 122,837 142,833 142,465 142,246 144,904 149,133 153,306 158,119 159,204 12 FHA/VA-insured 21,028 21,702 22,168 22,263 22,199 22,275 22,399 22,372 22,593 22,640 13 Conventional 92,302 101,135 120,664 120,202 120,047 122,629 126,734 130,934 135,526 136,564 Mortgage transactions (during period) 14 Purchases 23,959 37,202 75,905 4,191 3,651 6,779 8,380 7,980 8,832 4,993 Mortgage commitments (during period)1 15 Issued 23,689 40,010 74,970 4,663 6,053 88,,888800 8,195 6,084 6,185 4,189 16 To sell9 5,270 7,608 10,493 807 10 114488 0 237 1,811 1,159 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)9 17 Total 20,419 24,131 29,959 28,510 29,367 31,629 32,995 32,703 33,665 n.a. 18 FHA/VA-insured 547 484 408 419 376 371 365 359 352 n.a. 19 Conventional 19,871 23,283 29,552 28,091 28,990 31,259 32,630 32,343 33,313 n.a. Mortgage transactions (during period) 20 Purchases 75,517 97,727 191,125 12,172 13,562 16,391 20,199 19,607 20,792 n.a. 21 Sales 73,817 92,478 179,208r 11,849 12,314 14,267 18,771 19,154r 19,602r 16,536 Mortgage commitments (during period)10 22 Contracted 102,401 114,031 261,637 26,488 14,212 17,132 27,380 29,717 32,453 n.a. 1. Weighted averages based on sample surveys of mortgages originated by Association (GNMA), assuming prepayment in twelve years on pools of thirtymajor institutional lender groups; compiled by the Federal Housing Finance year mortgages insured by the Federal Housing Administration or guaranteed by Board in cooperation with the Federal Deposit Insurance Corporation. the Department of Veterans Affairs carrying the prevailing ceiling rate. Monthly 2. Includes all fees, commissions, discounts, and "points" paid (by the figures are averages of Friday figures from the Wall Street Journal. borrower or the seller) to obtain a loan. 7. Includes some multifamily and nonprofit hospital loan commitments in 3. Average effective interest rates on loans closed, assuming prepayment at addition to one- to four-family loan commitments accepted in the Federal National the end of ten years; from Office of Thrift Supervision (OTS). Mortgage Association's (FNMA's) free market auction system, and through the 4. Average contract rates on new commitments for conventional first mort- FNMA-GNMA tandem plans. gages; from U.S. Department of Housing and Urban Development (HUD). 8. Does not include standby commitments issued, but includes standby 5. Average gross yields on thirty-year, minimum-downpayment, first mort- commitments converted. gages insured by the Federal Housing Administration (FHA) for immediate 9. Includes participation loans as well as whole loans. delivery in the private secondary market. Based on transactions on first day of 10. Includes conventional and government-underwritten loans. The Federal subsequent month. Large monthly movements of average yields may reflect Home Loan Mortgage Corporation's mortgage commitments and mortgage transmarket adjustments to changes in maximum permissible contract rates. actions include activity under mortgage securities swap programs, while the 6. Average net yields to investors on fully modified pass-through securities corresponding data for FNMA exclude swap activity. backed by mortgages and guaranteed by the Government National Mortgage Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A37 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1991 1992 Type of holder and property 11998888 11998899 11999900 Q3 Q4 Q1 Q2 Q3 1 All holders 3,288,064 3,574,975 3,797,727 3,904,394 3,919,465 3,966,775 3,992,878 4,008,590 By type of property 2 One- to four-family residences 2,208,192 2,435,158 2,644,652 2,755,381 2,777,876 2,831,195 2,870,724 2,900,748 3 Multifamily residences 296,585 306,762 310,311 307,846 308,648 308,398 300,509 297,840 4 Commercial 698,040 749,031 758,795 758,002 749,767 744,271 738,066 726,150 5 Farm 85,247 84,025 83,969 83,165 83,173 82,910 83,579 83,853 By type of holder 6 Major financial institutions 1,831,472 1,931,537 1,914,315 1,860,710 1,846,910 1,825,983 1,806,122 1,794,455 7 Commercial banks 674,003 767,069 844,826 870,937 876,284 880,377 884,598 886,453 8 One- to four-family 334,367 389,632 455,931 478,851 486,572 492,910 4%,518 502,935 9 Multifamily 33,912 38,876 37,015 36,398 37,424 37,710 38,314 38,761 10 Commercial 290,254 321,906 334,648 337,365 333,852 330,837 330,229 324,857 11 Farm . 15,470 16,656 17,231 18,323 18,436 18,919 19,538 19,900 12 Savings institutions3 924,606 910,254 801,628 719,679 705,367 682,338 659,624 648,082 13 One- to four-family 671,722 669,220 600,154 547,799 538,358 524,536 508,545 501,518 14 Multifamily 110,775 106,014 91,806 81,883 79,881 77,166 74,788 73,722 15 Commercial 141,433 134,370 109,168 89,595 86,741 80,278 75,947 72,508 16 Farm 676 650 500 402 388 358 345 334 17 Life insurance companies 232,863 254,214 267,861 270,094 265,258 263,269 261,900 259,920 18 One- to four-family 11,164 12,231 13,005 11,720 11,547 11,214 11,087 11,007 19 Multifamily 24,560 26,907 28,979 29,962 29,562 29,693 29,745 29,525 20 Commercial 187,549 205,472 215,121 218,179 214,105 212,865 211,913 210,293 21 Farm 9,590 9,604 10,756 10,233 10,044 9,497 9,155 9,095 22 Federal and related agencies 200,570 209,498 250,761 282,115 282,856 2%,664 297,300 295,874 23 Government National Mortgage Association 26 23 20 20 19 19 23 27 24 One- to four-family 26 23 20 20 19 19 23 27 25 Multifamily 0 0 0 0 0 0 0 0 26 Farmers Home Administration 42,018 41,176 41,439 41,566 41,713 41,791 41,628 41,671 27 One- to four-family 18,347 18,422 18,527 18,598 18,496 18,488 17,718 17,292 28 Multifamily 8,513 9,054 9,640 9,990 10,141 10,270 10,356 10,468 29 Commercial 5,343 4,443 4,690 4,829 4,905 4,%1 4,998 5,072 30 Farm 9,815 9,257 8,582 8,149 8,171 8,072 8,557 8,839 31 Federal Housing and Veterans' Administrations 5,973 6,087 8,801 10,057 10,733 11,332 11,480 11,768 32 One- to four-family 2,672 2,875 3,593 3,649 4,036 4,254 4,403 4,531 33 Multifamily 3,301 3,212 5,208 6,408 6,697 7,078 7,077 7,236 34 Resolution Trust Corporation 0 0 32,600 52,063 45,822 49,345 44,624 37,099 35 One- to four-family 0 0 15,800 21,957 14,535 15,458 15,032 12,614 36 Multifamily 0 0 8,064 14,451 15,018 16,266 13,316 11,130 37 Commercial 0 0 8,736 15,655 16,269 17,621 16,276 13,356 38 Farm 0 0 0 0 0 0 0 0 39 Federal National Mortgage Association 103,013 110,721 116,628 125,451 128,983 136,506 142,148 144,904 40 One- to four-family 95,833 102,295 106,081 113,696 117,087 124,137 129,392 131,835 41 Multifamily 7,180 8,426 10,547 11,755 11,8% 12,369 12,756 13,069 42 Federal Land Banks 32,115 29,640 29,416 29,053 28,777 28,776 28,775 28,775 43 One- to four-family 1,890 1,210 1,838 2,124 1,693 1,693 1,693 1,693 44 Farm 30,225 28,430 27,577 26,929 27,084 27,083 27,082 27,082 45 Federal Home Loan Mortgage Corporation 17,425 21,851 21,857 23,906 26,809 28,895 28,621 31,629 46 One- to four-family 15,077 18,248 19,185 21,489 24,125 26,182 26,001 29,039 47 Multifamily 2,348 3,603 2,672 2,417 2,684 2,713 2,620 2,591 48 Mortgage pools or trusts5 811,847 946,766 1,110,555 1,229,836 1,262,685 1,302,217 1,339,172 1,364,537 49 Government National Mortgage Association.... 340,527 368,367 403,613 422,500 425,295 421,977 422,922 422,255 50 One- to four-family 331,257 358,142 391,505 412,715 415,767 412,574 413,828 413,063 51 Multifamily 9,270 10,225 12,108 9,785 9,528 9,404 9,094 9,192 52 Federal Home Loan Mortgage Corporation 226,406 272,870 316,359 348,843 359,163 367,878 382,797 391,762 53 One- to four-family 219,988 266,060 308,369 341,183 351,906 360,887 376,177 385,400 54 Multifamily 6,418 6,810 7,990 7,660 7,257 6,991 6,620 6,362 55 Federal National Mortgage Association 178,250 228,232 299,833 351,917 371,984 389,853 413,226 429,935 56 One- to four-family 172,331 219,577 291,194 343,430 362,667 380,617 403,940 420,835 57 Multifamily 5,919 8,655 8,639 8,487 9,317 9,236 9,286 9,100 58 Farmers Home Administration 104 80 66 52 47 43 43 41 59 One- to four-family 26 21 17 12 11 10 9 9 60 Multifamily 0 0 0 0 0 0 0 0 61 Commercial 38 26 24 20 19 18 18 18 62 Farm 40 33 26 20 17 16 15 14 63 Private mortgage conduits 66,560 77,217 90,684 106,523 106,1% 122,465 120,184 120,545 64 One- to four-family 66,560 77,217 90,684 105,023 104,1% 119,825 120,184 120,545 65 Multifamily 0 0 0 1,500 2,000 2,640 0 0 66 Commercial 0 0 0 0 0 0 0 0 67 Farm 0 0 0 0 0 0 0 0 68 Individuals and others6 444,175 487,174 522,0% 531,734 527,013 541,911 550,284 553,724 69 One- to four-family 266,933 299,986 328,748 333,116 326,860 338,392 346,173 348,405 70 Multifamily 84,389 84,980 87,643 87,149 87,244 86,863 86,538 86,684 71 Commercial 73,423 82,814 86,408 92,360 93,876 97,690 98,687 100,047 72 Farm 19,431 19,395 19,298 19,109 19,034 18,966 18,887 18,588 1. Based on data from various institutional and governmental sources; figures 4. FmHA-guaranteed securities sold to the Federal Financing Bank were for some quarters estimated in part by the Federal Reserve. Multifamily debt reallocated from FmHA mortgage pools to FmHA mortgage holdings in 1986:4 refers 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 loans held by 5. Outstanding principal balances of mortgage-backed securities insured or bank trust departments. guaranteed by the agency indicated. 3. Includes savings banks and savings and loan associations. Beginning 1987:1, 6. Other holders include mortgage companies, real estate investment trusts, data reported by institutions insured by the Federal Savings and Loan Insurance state and local credit agencies, state and local retirement funds, noninsured Corporation include loans in process and other contra-assets (credit balance pension funds, credit unions, and finance companies. accounts that must be subtracted from the corresponding gross asset categories to yield net asset levels). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • April 1993 1.55 CONSUMER INSTALLMENT CREDIT1 Millions of dollars, amounts outstanding, end of period 1992 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999900 11999911 11999922 July Aug. Sept. Oct. Nov.r Dec. Seasonally adjusted 11 TToottaall 735,338 727,799 725,908 721,820 720,664 722,104 722,372r 723,448 725,908 22 AAuuttoommoobbiillee 284,993 263,003 259,298 257.743 256,944 257,384 256,846r 257,740 259,298 33 RReevvoollvviinngg 222,950 242,785 250,966 247,332 248,043 250,017 250,454r 250,620 250,966 44 OOtthheerr 227,395 222,012 215,643 216.744 215,677 214,703 215,071r 215,088 215,643 Not seasonally adjusted 5 Total 748,524 742,058 740,621 718,599 721,985 724,198 722,760r 725,178 740,621 By major holder 6 Commercial banks 347,087 339,565 329,896 323,899 323,866 324,046 324,697 324,529 329,896 7 Finance companies 133,863 121,901 116,482 117,002 117,175 116,650 116,304 116,414 116,482 8 Credit unions 93,057 92,254 92,199 91,778 92,270 92,698 92,228r 91,838 92,199 9 Retailers 44,822 44,030 44,952 37,219 38,791 38,778 39,299 39,539 44,952 10 Savings institutions 46,969 40,315 33,861 35,552 35,378 35,069 34,148r 34,171 33,861 11 Gasoline companies 4,822 4,362 4,365 4,506 4,542 4,499 4,452 4,365 4,365 12 Pools of securitized assets2 .. 77,904 99,631 118,866 108,643 109,963 112,458 111 ,632r 114,322 118,866 By major type of credit3 13 Automobile 285,050 263,108 259,428 258,104 259,128 260,395 259,055r 258,539 259,428 14 Commercial banks 124,913 111,912 108,598 107,722 107,978 108,355 108,068 107,675 108,598 15 Finance companies 75,045 63,413 57,037 60,400 60,393 59,806 59,290 58,286 57,037 16 Pools of securitized assets2 24,428 28,057 33,593 30,454 30,826 31,971 31,757 32,672 33,593 17 Revolving 235,056 255,895 264,493 244,661 247,051 248,692 248,526r 251,422 264,493 18 Commercial banks 133,385 137,968 132,639 127,476 126,922 127,234 127,257 128,164 132,639 19 Retailers 40,003 39,352 40,064 32,617 34,167 34,148 34,654 34,857 40,064 20 Gasoline companies 4,822 4,362 4,365 4,506 4,542 4,499 4,452 4,365 4,365 21 Pools of securitized assets2 44,335 60,139 72,695 65,791 66,985 68,252 67,699 69,415 72,695 22 Other 228,418 223,055 216,700 215,834 215,806 215,111 215,179r 215,217 216,700 23 Commercial banks 88,789 89,685 88,659 88,701 88,966 88,457 89,372 88,690 88,659 24 Finance companies 58,818 58,488 59,445 56,602 56,782 56,844 57,014 58,128 59,445 25 Retailers 4,819 4,678 4,888 4,602 4,624 4,630 4,645 4,682 4,888 26 Pools of securitized assets2 9,141 11,435 12,578 12,398 12,152 12,235 12,176r 12,235 12,578 1. The Board's series on amounts of credit covers most short- and 2. Outstanding balances of pools upon which securities have been issued; these intermediate-term credit extended to individuals that is scheduled to be repaid (or balances are no longer carried on the balance sheets of the loan originator. has the option of repayment) in two or more installments. 3. Totals include estimates for certain holders for which only consumer credit Data in this table also appear in the Board's G.19 (421) monthly statistical totals are available. release. For ordering address, see inside front cover. 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent per year except as noted 1992 IItteemm 11999900 11999911 11999922 June July Aug. Sept. Oct. Nov. Dec. INTEREST RATES Commercial banks2 1 48-month new car 11.78 11.14 9.29 n.a. n.a. 9.15 n.a. n.a. 8.60 n.a. 2 24-month personal 15.46 15.18 14.04 n.a. n.a. 13.94 n.a. n.a. 13.55 n.a. 3 120-month mobile home 14.02 13.70 12.67 n.a. n.a. 12.57 n.a. n.a. 12.36 n.a. 4 Credit card 18.17 18.23 17.78 n.a. n.a. 17.66 n.a. n.a. 17.38 n.a. Auto finance companies 5 New car 12.54 12.41 9.93 10.24 9.94 8.88 8.65 9.51 9.65 9.65 6 Used car 15.99 15.60 13.79 13.89 13.67 13.49 13.44 13.37 13.37 13.53 OTHER TERMS3 Maturity (months) 7 New car 54.6 55.1 54.0 54.4 54.4 53.6 53.3 54.1 54.1 53.6 8 Used car 46.0 47.2 48.0 48.0 48.0 47.9 47.7 47.9 47.8 48.0 Loan-to-value ratio 9 New car 87 88 89 89 89 90 90 89 89 90 10 Used car 95 96 97 97 97 97 97 97 97 97 Amount financed (dollars) 11 New car 12,071 12,494 13,592 13,369 13,570 13,745 13,889 13,885 14,043 14,408 12 Used car 8,289 8,884 9,121 9,201 9,293 9,238 8,402 9,373 9,475 9,495 1. Data in this table also appear in the Board's G.19 (421) monthly statistical 2. Data are available for only the second month of each quarter, release. For ordering address, see inside front cover. 3. At auto finance companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1991 1992 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr Ql Q2 Q3 Q4 Ql Q2 Q3 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .. 721.2 775.8 740.8 665.0 452.7 455.4 543.3 405.6 406.3 667.5 535.1 379.9 By sector and instrument 7 U.S. government 143.9 155.1 146.4 246.9 278.2 227.4 276.7 288.4 320.4 368.9 351.9 193.4 Treasury securities 142.4 137.7 144.7 238.7 292.0 251.4 282.9 317.2 316.6 380.1 351.5 184.4 4 Agency issues and mortgages 1.5 17.4 1.6 8.2 -13.8 -24.0 -6.2 -28.8 3.8 -11.2 .4 9.0 5 Private 577.3 620.7 594.4 418.2 174.4 228.0 266.6 117.2 85.9 298.6 183.2 186.5 By instrument 6 Debt capital instruments 487.2 474.1 441.8 342.3 254.6 296.1 329.9 182.0 210.6 312.9 218.4 196.4 7 Tax-exempt obligations 83.5 53.7 65.0 51.2 45.8 35.6 48.5 53.5 45.5 52.0 73.0 52.3 8 Corporate bonds 78.8 103.1 73.8 47.1 78.8 76.7 96.5 81.7 60.3 76.3 77.5 61.3 9 Mortgages 325.0 317.3 303.0 244.0 130.0 183.8 184.8 46.8 104.8 184.7 67.9 82.8 10 Home mortgages 235.3 241.8 245.3 219.4 142.2 153.0 158.1 122.4 135.1 209.6 121.6 147.2 11 Multifamily residential 24.4 16.7 16.4 3.7 -2.0 6.3 12.5 -29.4 2.7 -1.3 -31.6 -10.7 17 Commercial 71.6 60.8 42.7 21.0 -9.4 24.6 14.9 -43.8 -33.1 -22.6 -24.9 -54.7 n Farm -6.4 -2.1 -1.5 -.1 -.8 -.1 -.7 -2.5 .0 -1.1 2.7 1.1 14 Other debt instruments 90.1 146.6 152.6 75.8 -80.2 -68.0 -63.3 -64.8 -124.7 -14.4 -35.2 -10.0 15 Consumer credit 32.9 50.1 41.7 17.5 -12.5 -10.4 -7.8 -24.0 -8.0 3.1 -12.4 .4 16 Bank loans n.e.c 9.9 41.0 40.2 4.4 -33.4 -15.0 -34.5 -18.2 -66.1 -26.9 -21.5 -23.3 17 Open market paper 1.6 11.9 21.4 9.7 -18.4 -14.3 -15.9 -36.3 -7.0 12.6 -3.4 1.7 18 Other 45.7 43.6 49.3 44.2 -15.8 -28.3 -5.2 13.7 -43.6 -3.2 2.1 11.2 By borrowing sector 19 State and local government 83.0 48.9 63.2 48.3 38.5 36.0 38.6 37.6 41.9 46.1 6633..44 5500..00 20 Household 2%. 4 318.6 305.6 254.2 158.0 160.8 188.8 136.1 146.3 217.1 143.3 148.1 21 Nonfinancial business 197.8 253.1 225.6 115.6 -22.1 31.2 39.2 -56.5 -102.4 35.4 -23.4 -11.7 22 Farm -10.6 -7.5 1.6 2.5 .9 3.9 2.1 -.3 -2.2 -1.6 7.1 2.4 23 Nonfarm noncorporate 65.3 61.8 50.4 26.7 -23.6 13.2 9.8 -65.9 -51.5 -20.7 -65.6 -51.4 24 Corporate 143.1 198.8 173.6 86.4 .6 14.0 27.2 9.7 -48.7 57.7 35.2 37.4 25 Foreign net borrowing in United States 6.2 6.4 10.2 23.9 14.1 63.1 -63.2 15.6 41.0 9.9 55.9 30.1 26 Bonds 7.4 6.9 4.9 21.4 14.9 11.1 10.6 15.5 22.3 4.9 22.8 23.2 77 Bank loans n.e.c -3.6 -1.8 -.1 -2.9 3.1 8.1 -3.5 1.4 6.5 1.5 14.1 3.4 28 Open market paper 3.8 8.7 13.1 12.3 6.4 46.7 -51.9 16.0 14.9 -7.8 27.7 12.8 29 U.S. government loans -1.4 -7.5 -7.6 -6.9 -10.2 -2.8 -18.3 -17.2 -2.7 11.4 -8.8 -9.3 30 Total domestic plus foreign 727.4 782.2 750.9 688.9 466.8 518.5 480.1 421.2 447.3 677.3 591.0 410.1 Financial sectors 31 Total net borrowing by financial sectors 259.0 211.4 220.1 187.1 139.2 108.9 104.0 143.4 200.5 108.9 218.4 246.2 By instrument 32 U.S. government-related 171.8 119.8 151.0 167.4 147.7 154.6 127.4 156.3 152.7 126.8 199.5 152.9 33 Sponsored-credit-agency securities 30.2 44.9 25.2 17.1 9.2 13.1 -29.7 20.6 32.6 11.5 48.3 62.3 34 Mortgage pool securities 142.3 74.9 125.8 150.3 138.6 141.5 157.1 135.8 120.1 115.3 151.2 90.6 35 Loans from U.S. government -.8 .0 .0 -.1 .0 .0 .0 .0 -.1 .0 .0 .0 36 Private 87.2 91.7 69.1 19.7 -8.6 -45.7 -23.4 -12.9 47.8 -17.9 18.9 93.2 37 Corporate bonds 39.1 16.2 46.8 34.4 57.7 41.4 72.4 29.5 87.5 -25.1 25.5 54.5 38 Mortgages .4 .3 .0 .3 .6 .1 .9 -.2 1.5 .9 .1 .1 39 Bank loans n.e.c -3.6 .6 1.9 1.2 3.2 1.0 -2.9 10.2 4.5 8.2 3.9 5.5 40 Open market paper 26.9 54.8 31.3 8.6 -32.0 -52.5 -46.0 -16.7 -12.7 7.6 -16.3 11.8 41 Loans from Federal Home Loan Banks 24.4 19.7 -11.0 -24.7 -38.0 -35.8 -47.7 -35.7 -33.0 -9.5 5.7 21.3 By borrowing sector 42 Sponsored credit agencies 29.5 44.9 25.2 17.0 9.1 13.1 -29.7 20.6 32.5 11.5 4488..33 6622..33 43 Mortgage pools 142.3 74.9 125.8 150.3 138.6 141.5 157.1 135.8 120.1 115.3 151.2 90.6 44 Private 87.2 91.7 69.1 19.7 -8.6 -45.7 -23.4 -12.9 47.8 -17.9 18.9 93.2 45 Commercial banks 6.2 -3.0 -1.4 -1.1 -13.3 -18.4 -11.7 -9.2 -14.1 7.2 .8 1.6 46 Bank affiliates 14.3 5.2 6.2 -27.7 -2.5 -9.3 -3.5 -6.8 9.6 2.7 -8.2 2.2 47 Savings and loan associations 19.6 19.9 -14.1 -29.9 -39.5 -42.9 -48.7 -41.1 -25.1 -20.3 2.7 10.1 48 Mutual savings banks 8.1 1.9 -1.4 -.5 -3.5 2.0 -1.7 -5.5 -8.7 4.3 .3 8.3 49 Finance companies -.5 31.5 59.7 35.6 14.5 -10.3 3.4 12.2 52.9 -39.0 -20.9 34.6 50 Real estate investment trusts (REITs) .4 3.6 -1.9 -1.9 .0 .1 .1 -.9 .8 4.6 .9 -.7 51 Securitized credit obligation (SCO) issuers 39.1 32.5 22.0 45.2 35.6 33.2 38.7 38.5 32.3 22.5 43.2 37.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic NonfinancialS tatistics • April 1993 1.57—Continued 1991 1992 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998877 11998888 11998899 11999900 11999911 Q1 Q2 Q3 Q4 Ql Q2 Q3 All sectors 5522 TToottaall nneett bboorrrroowwiinngg,, aallll sseeccttoorrss 986.4 993.6 971.0 876.0 606.0 627.4 584.1 564.6 647.7 786.2 809.4 656.2 5533 UU..SS.. ggoovveerrnnmmeenntt sseeccuurriittiieess 316.4 274.9 297.3 414.4 426.0 382.0 404.1 444.8 473.2 495.7 551.4 346.4 5544 SSttaattee aanndd llooccaall oobblliiggaattiioonnss 83.5 53.7 65.0 51.2 45.8 35.6 48.5 53.5 45.5 52.0 73.0 52.3 5555 CCoorrppoorraattee aanndd ffoorreeiiggnn bboonnddss 125.2 126.3 125.5 102.9 151.4 129.2 179.5 126.6 170.1 56.0 125.9 139.0 5566 MMoorrttggaaggeess 325.4 317.5 303.0 244.3 130.6 183.9 185.8 46.5 106.2 185.6 67.9 82.9 5577 CCoonnssuummeerr ccrreeddiitt 32.9 50.1 41.7 17.5 -12.5 -10.4 -7.8 -24.0 -8.0 3.1 -12.4 .4 5588 BBaannkk llooaannss nn..ee..cc 2.7 39.9 41.9 2.8 -27.1 -5.9 -40.9 -6.7 -55.1 -17.2 -3.5 -14.3 5599 OOppeenn mmaarrkkeett ppaappeerr 32.3 75.4 65.9 30.7 -44.0 -20.2 -113.8 -37.0 -4.9 12.4 8.1 26.3 6600 OOtthheerr llooaannss 68.0 55.8 30.6 12.4 -64.2 -66.9 -71.2 -39.1 -79.3 -1.3 -1.0 23.3 External corporate equity funds raised in United States 61 Total net share issues 7.1 -118.4 -65.7 22.1 198.8 112.4 182.3 231.8 268.9 271.7 281.5 305.3 62 Mutual funds 70.2 6.1 38.5 67.9 150.5 98.1 125.6 182.5 195.9 189.8 223.3 249.2 63 All other -63.2 -124.5 -104.2 -45.8 48.3 14.3 56.7 49.3 72.9 81.9 58.2 56.2 64 Nonfinancial corporations -75.5 -129.5 -124.2 -63.0 18.3 -6.0 12.0 19.0 48.0 46.0 36.0 11.0 65 Financial corporations 14.5 4.1 2.7 9.8 -.1 -6.7 8.1 -3.8 2.0 6.0 9.7 9.2 66 Foreign shares purchased in United States -2.1 .9 17.2 7.4 30.2 27.0 36.6 34.1 22.9 29.9 12.5 36.0 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables F.2 through F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1991 1992 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998877 11998888 11998899 11999900 11999911 Ql Q2 Q3 Q4 Ql Q2 Q3 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 986.4 993.6 971.0 876.0 606.0 627.4 584.1 564.6 647.7 786.2 809.4 656.2 2 Private domestic nonfinancial sectors 237.4 226.2 209.6 203.8 21.6 49.4 190.5 -135.3 -18.2 139.2 73.5 -252.7 3 Households 180.7 198.9 179.5 172.3 -13.7 13.3 174.1 -177.9 -64.4 160.0 47.6 -276.4 4 Nonfarm noncorporate business -5.6 3.1 -.8 -1.4 -1.9 -1.8 -2.0 -1.6 -2.1 -1.9 -2.5 -1.9 Nonfinancial corporate business 18.5 5.7 12.9 6.6 20.9 -7.6 29.0 32.2 30.1 -2.9 21.4 38.0 6 State and local governments 43.9 18.6 17.9 26.2 16.3 45.4 -10.6 12.1 18.2 -16.1 7.1 -12.3 7 U.S. government -7.9 -10.6 -3.1 33.7 10.0 35.2 24.8 -2.1 -17.9 13.9 -25.1 -27.8 8 Foreign 61.8 96.3 74.1 58.4 44.7 19.1 51.4 37.3 71.0 88.4 142.5 58.4 9 Financial sectors 695.0 681.8 690.4 580.2 529.7 523.8 317.4 664.7 612.9 544.7 618.4 878.3 10 Sponsored credit agencies 27.0 37.1 -.5 16.4 14.2 27.4 -22.3 33.7 17.8 93.0 39.9 73.9 11 Mortgage pools 142.3 74.9 125.8 150.3 138.6 141.5 157.1 135.8 120.1 115.3 151.2 90.6 12 Monetary authority 24.7 10.5 -7.3 8.1 31.1 58.1 -4.0 48.1 22.3 33.2 9.8 10.8 13 Commercial banking 135.3 157.1 176.8 125.4 84.0 114.4 34.7 82.4 104.3 98.9 58.4 101.5 14 U.S. commercial banks 99.1 127.1 145.7 95.2 38.9 77.0 6.4 26.5 45.6 91.9 .5 105.2 IS Foreign banking offices 34.2 29.4 26.7 28.4 48.5 42.2 33.7 56.7 61.3 .6 58.6 -2.7 16 Bank affiliates 2.0 -.1 2.8 -2.8 -1.5 -4.7 -2.6 2.4 -1.1 6.4 -.6 -1.4 17 Banks in U.S. possession .1 .7 1.6 4.5 -1.9 -.1 -2.8 -3.3 -1.5 .0 -.1 .4 18 Private nonbank finance 365.8 402.2 395.7 279.9 261.8 182.3 152.0 364.7 348.3 204.4 359.2 601.5 19 Thrift institutions 136.9 119.0 -91.0 -151.9 -144.9 -188.3 -164.8 -176.8 -49.7 -113.3 -81.6 -21.8 20 Savings and loan associations 93.5 87.4 -93.9 -143.9 -140.9 -179.8 -144.0 -156.3 -83.3 -137.9 -92.4 -14.5 21 Mutual savings banks 25.6 15.3 -4.8 -16.5 -15.5 -11.7 -31.1 -30.8 11.5 7.6 -7.4 -17.5 22 Credit unions 17.8 16.3 7.7 8.5 11.5 3.3 10.2 10.3 22.2 17.0 18.3 10.2 23 Insurance 153.5 186.2 207.7 188.5 215.4 236.2 219.5 254.5 151.4 120.4 192.9 224.6 24 Life insurance companies 91.7 103.8 93.1 94.4 83.2 112.9 132.8 73.8 13.2 80.6 92.5 98.7 25 Other insurance companies 39.5 29.2 29.7 26.5 34.7 32.7 37.0 36.8 32.1 33.1 22.2 2.5 26 Private pension funds -4.7 18.1 36.2 16.6 60.6 42.1 .7 110.5 89.2 -22.5 51.9 88.7 27 State and local government retirement funds . 27.0 35.1 48.7 51.0 37.0 48.5 49.0 33.4 17.0 29.2 26.3 34.7 28 Finance n.e.c 75.4 96.9 278.9 243.3 191.3 134.4 97.4 287.0 246.5 197.2 247.9 398.7 29 Finance companies 38.2 49.2 69.3 41.6 -13.1 -18.5 -14.5 -5.2 -14.1 .8 -23.0 18.9 30 Mutual funds 25.8 11.9 23.8 41.4 90.3 44.0 75.3 117.1 124.8 105.3 156.1 172.3 31 Money market funds 1.8 10.7 67.1 80.9 30.1 134.2 -68.9 1.1 53.9 61.8 -20.9 -16.3 32 Real estate investment trusts (REITs) 1.0 .9 .5 -.7 -.7 -1.6 -.1 -.3 -.9 -.7 2.6 2.6 33 Brokers and dealers -30.6 -8.2 96.3 34.9 49.0 -56.9 66.8 135.8 50.5 7.5 89.8 184.0 34 Securitized credit obligation (SCOs) issuers . 39.1 32.5 22.0 45.2 35.6 33.2 38.7 38.5 32.3 22.5 43.2 37.1 RELATION OF LIABILITIES TO FINANCIAL ASSETS 35 Net flows through credit markets 986.4 993.6 971.0 876.0 606.0 627.4 584.1 564.6 647.7 786.2 809.4 656.2 Other financial sources 36 Official foreign exchange -9.7 4.0 24.8 22..00 --55..99 11..55 -4.8 --1155..55 --55..00 33..55 --66..55 22..55 37 Treasury currency and special drawing rights .5 .5 4.1 2.5 .0 -1.2 .4 .4 .5 ..11 .3 .2 38 26.0 25.3 28.8 25.7 22.0 27.9 31.4 19.4 9.2 2211..22 30.3 19.9 39 104.5 193.6 221.4 186.8 263.5 284.1 197.9 339.6 232.5 145.9 185.5 312.2 40 34.8 2.9 -16.5 34.2 -5.0 -3.0 -79.8 99.5 -36.8 48.8 27.4 120.8 41 Deposits at financial institutions 141.1 259.9 290.0 96.8 61.1 244.8 -75.4 27.3 47.8 93.2 -47.4 191.7 4? Checkable deposits and currency 4.1 43.2 6.1 44.2 75.8 76.2 7.9 104.5 114.4 89.0 93.2 202.2 43 Small time and savings deposits 76.3 120.8 96.7 59.9 16.7 97.3 -1.1 -42.4 13.0 -27.7 -88.5 -73.3 44 Large time deposits 50.6 53.6 17.6 -66.7 -60.9 15.1 -63.0 -78.1 -117.4 -81.3 -106.0 -63.5 45 24.0 21.9 90.1 70.3 41.3 193.0 -58.7 4.0 26.8 106.1 -38.3 -13.0 46 Security repurchase agreements -10.9 23.5 78.3 -23.5 -16.4 -160.7 43.1 36.3 16.0 15.5 136.7 135.4 47 -3.1 -3.1 1.1 12.6 4.6 24.0 -3.6 3.0 -5.0 -8.3 -44.5 4.0 48 70.2 6.1 38.5 67.9 150.5 98.1 125.6 182.5 195.9 189.8 223.3 249.2 49 -63.2 -124.5 -104.2 -45.8 48.3 14.3 56.7 49.3 72.9 81.9 58.2 56.2 50 -27.4 3.0 15.6 3.5 51.4 -17.5 20.1 82.4 120.7 -70.0 -4.3 73.6 5] Trade debt 57.7 89.2 60.0 44.1 10.3 -39.6 41.1 47.5 -7.7 82.6 45.5 42.1 5? Taxes payable 5.4 5.3 2.0 -.5 -9.1 -34.8 -11.5 13.0 -3.3 -4.4 14.2 -4.3 53 Noncorporate proprietors' equity -60.9 -31.2 -32.5 -39.3 -1.4 -21.5 -34.1 44.9 5.1 -24.6 12.5 1.1 54 Miscellaneous 241.2 222.3 269.9 120.5 145.0 219.6 65.0 52.3 243.2 124.5 298.9 190.0 55 Total financial sources 1,506.7 1,650.2 1,772.7 1,374.3 1,336.8 1,400.3 916.7 1,507.3 1,522.9 1,478.7 1,647.2 1,911.4 Floats not included in assets (-) 56 U.S. government checking deposits .0 1.6 8.4 3.3 -13.1 -18.8 15.6 23.9 -73.1 44..44 --1111..77 ..44 57 Other checkable deposits .4 .8 -3.2 2.5 2.0 13.3 3.0 -2.1 -6.1 -13.3 -17.5 -23.9 58 Trade credit -8.5 -.9 .6 21.5 18.3 9.8 40.5 27.1 -4.0 14.7 -12.1 -6.5 Liabilities not identified as assets (-) 59 Treasury currency -.1 -.1 --..22 ..22 --..66 --11..99 --..33 --..22 -.1 --..44 -.1 --..33 60 Interbank claims -4.0 -3.0 -4.4 1.6 26.2 55.3 20.8 28.4 .2 13.4 -15.1 -8.4 61 Security repurchase agreements -21.2 -29.8 23.9 -34.8 10.4 -115.4 76.2 36.9 44.0 -41.1 101.5 67.7 6? Taxes payable 6.7 6.3 2.3 6.5 7.4 -14.4 2.0 23.4 18.5 -18.3 29.5 11.9 63 Miscellaneous 10.0 4.4 -95.6 -13.8 -29.9 -119.9 9.3 -194.2 185.0 -78.0 -64.4 36.3 64 Totals identified to sectors as assets 1,523.4 1,670.7 1,841.0 1,387.5 1,316.1 1,592.2 749.5 1,564.2 1,358.6 1,597.2 1,637.2 1,834.3 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical 2. Excludes corporate equities and mutual fund shares, release, tables F.6 and F.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Financial Statistics • April 1993 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1991 1992 Ql Q2 Q3 Q4 Ql Q2 Q3 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 9,316.3 10,087.1 10,760.8 11,210.8 10,832.3 10,960.3 11,082.5 11,210.8 11,336.7 11,464.8 11,583.6 By lending sector and instrument 2 U.S. government 2,104.9 2,251.2 2,498.1 2,776.4 2,548.8 2,591.9 2,687.2 2,776.4 2,859.7 2,923.3 2,998.9 3 Treasury securities 2,082.3 2,227.0 2,465.8 2,757.8 2,522.4 2,567.1 2,669.6 2,757.8 2,844.0 2,907.4 2,980.7 4 Agency issues and mortgages 22.6 24.2 32.4 18.6 26.4 24.8 17.6 18.6 15.8 15.9 18.1 5 Private 7,211.4 7,835.9 8,262.6 8,434.5 8,283.5 8,368.3 8,395.3 8,434.5 8,477.0 8,541.5 8,584.8 By instrument 6 Debt capital instruments 5,119.0 5,577.9 5,936.0 6,190.6 5,997.7 6,087.5 6,138.4 6,190.6 6,256.9 6,319.4 6,373.9 7 Tax-exempt obligations 939.4 1,004.4 1,055.6 1,101.4 1,061.5 1,072.5 1,089.3 1,101.4 1,111.5 1,128.6 1,145.6 8 Corporate bonds 852.2 926.1 973.2 1,052.0 992.3 1,016.5 1,036.9 1,052.0 1,071.0 1,090.4 1,105.7 9 Mortgages 3,327.3 3,647.5 3,907.3 4,037.3 3,943.8 3,998.6 4,012.2 4,037.3 4,074.4 4,100.5 4,122.6 10 Home mortgages 2,257.5 2,515.1 2,760.0 2,902.1 2,788.9 2,836.9 2,869.5 2,902.1 2,945.5 2,985.0 3,023.2 11 Multifamily residential 286.7 304.4 305.8 303.8 307.3 310.4 303.1 303.8 303.5 295.6 292.9 12 Commercial 696.4 742.6 757.6 748.2 763.7 767.4 756.5 748.2 742.6 736.4 722.7 13 Farm 86.8 85.3 84.0 83.2 83.9 83.8 83.1 83.2 82.9 83.6 83.8 14 Other debt instruments 2,092.5 2,258.0 2,326.7 2,243.9 2,285.8 2,280.8 2,256.9 2,243.9 2,220.0 2,222.1 2,210.9 15 Consumer credit 742.1 791.8 809.3 796.7 785.3 786.7 785.9 7%.7 775.7 775.8 781.1 16 Bank loans n.e.c 710.6 760.7 758.0 724.6 748.3 742.0 734.1 724.6 712.5 709.4 699.6 17 Open market paper 85.7 107.1 116.9 98.5 120.8 119.4 107.0 98.5 110.3 111.7 108.3 18 Other 554.1 598.4 642.6 624.1 631.5 632.6 629.8 624.1 621.6 625.1 621.9 By borrowing sector 19 State and local government 752.5 815.7 864.0 902.5 870.1 878.5 891.4 902.5 911.3 925.9 942.3 20 Household 3,177.3 3,508.2 3,780.6 3,938.6 3,788.3 3,848.3 3,888.7 3,938.6 3,960.8 4,009.9 4,051.6 21 Nonfinancial business 3,281.6 3,512.0 3,618.0 3,593.3 3,625.2 3,641.5 3,615.3 3,593.3 3,604.9 3,605.8 3,590.9 22 Farm 137.6 139.2 140.5 138.8 136.8 139.6 140.4 138.8 136.3 140.2 141.7 23 Nonfarm noncorporate 1,127.1 1,177.5 1,204.2 1,180.6 1,207.1 1,210.8 1,191.0 1,180.6 1,174.9 1,160.0 1,144.0 24 Corporate 2,016.9 2,195.3 2,273.4 2,273.9 2,281.3 2,291.1 2,283.9 2,273.9 2,293.7 2,305.6 2,305.2 25 Foreign credit market debt held in United States 244.6 254.8 278.6 292.7 291.3 277.6 282.2 292.7 282.4 298.5 307.0 26 Bonds 83.1 88.0 109.4 124.2 112.1 114.8 118.6 124.2 125.4 131.1 137.0 27 Bank loans n.e.c 21.5 21.4 18.5 21.6 20.5 19.7 20.0 21.6 22.0 25.5 26.4 28 Open market paper 49.9 63.0 75.3 81.8 87.0 74.0 78.0 81.8 70.5 77.5 80.7 29 U.S. government loans 90.1 82.4 75.4 65.2 71.6 69.1 65.6 65.2 64.4 64.4 63.1 30 Total credit market debt owed by nonfinancial sectors, domestic and foreign 9,560.9 10,341.9 11,039.4 11,503.6 11,123.6 11,237.9 11,364.7 11,503.6 11,619.1 11,763.3 11,890.7 Financial sectors 31 Total credit market debt owed by financial sectors 2,082.9 2,333.0 2,524.2 2,667.8 2,546.3 2,571.4 2,608.2 2,667.8 2,686.9 2,739.9 2,802.6 By instrument 32 U.S. government-related 1,098.4 1,249.3 1,418.4 1,566.2 1,452.1 1,482.8 1,524.4 1,566.2 1,592.9 1,641.6 1,682.2 33 Sponsored credit-agency securities 348.1 373.3 393.7 402.9 397.0 389.6 394.7 402.9 405.7 417.8 433.4 34 Mortgage pool securities 745.3 871.0 1,019.9 1,158.5 1,050.3 1,088.4 1,124.8 1,158.5 1,182.4 1,219.0 1,244.0 35 Loans from U.S. government 5.0 5.0 4.9 4.8 4.9 4.9 4.9 4.8 4.8 4.8 4.8 36 Private 984.6 1,083.7 1,105.8 1,101.6 1,094.1 1,088.6 1,083.9 1,101.6 1,094.0 1,098.3 1,120.4 37 Corporate bonds 415.1 491.9 528.2 590.2 545.4 562.2 569.5 590.2 578.2 583.2 597.0 38 Mortgages 3.4 3.4 4.2 4.8 4.2 4.5 4.4 4.8 5.0 5.0 5.1 39 Bank loans n.e.c 35.6 37.5 38.6 41.8 36.5 37.0 39.0 41.8 41.6 43.7 44.5 40 Open market paper 377.7 409.1 417.7 385.7 400.9 390.1 387.0 385.7 392.9 389.5 393.7 41 Loans from Federal Home Loan Banks 152.8 141.8 117.1 79.1 107.0 94.7 83.9 79.1 76.3 76.9 80.2 By borrowing sector 42 Sponsored credit agencies 353.1 378.3 398.5 407.7 401.8 394.4 399.5 407.7 410.5 422.6 438.2 43 Mortgage pools 745.3 871.0 1,019.9 1,158.5 1,050.3 1,088.4 1,124.8 1,158.5 1,182.4 1,219.0 1,244.0 44 Private financials ectors 984.6 1,083.7 1,105.8 1,101.6 1,094.1 1,088.6 1,083.9 1,101.6 1,094.0 1,098.3 1,120.4 45 Commercial banks 78.8 77.4 76.3 63.0 68.1 65.9 64.6 63.0 60.8 61.7 63.3 46 Bank affiliates 136.2 142.5 114.8 112.3 114.4 113.3 110.6 112.3 115.0 112.7 112.3 47 Savings and loan associations 159.3 145.2 115.3 75.9 104.2 91.0 79.0 75.9 71.2 70.3 71.0 48 Mutual savings banks 18.6 17.2 16.7 13.2 16.4 16.6 15.2 13.2 13.5 14.3 16.2 49 Finance companies 444.6 504.2 539.8 557.9 539.6 540.4 543.7 557.9 547.1 541.8 550.8 50 Real estate investment trusts (REITs) 11.4 10.1 10.6 11.4 10.8 11.0 11.0 11.4 12.7 13.2 13.2 51 Securitized credit obligation (SCO) issuers... 135.7 187.1 232.3 268.0 240.6 250.3 259.9 268.0 273.6 284.4 293.7 All sectors 52 Total credit market debt, domestic and foreign.. 11,643.9 12,674.9 13,563.6 14,171.3 13,669.9 13,809.2 13,973.0 14,171.3 14,306.0 14,503.3 14,693.3 53 U.S. government securities 3,198.3 3,495.6 3,911.7 4,337.7 3,9%. 1 4,069.8 4,206.7 4,337.7 4,447.8 4,560.1 4,676.2 54 State and local obligations 939.4 1,004.4 1,055.6 1,101.4 1,061.5 1,072.5 1,089.3 1,101.4 1,111.5 1,128.6 1,145.6 55 Corporate and foreign bonds 1,350.4 1,506.0 1,610.7 1,766.4 1,649.9 1,693.5 1,725.0 1,766.4 1,774.6 1,804.7 1,839.7 56 Mortgages 3,330.7 3,650.9 3,911.5 4,042.1 3,948.1 4,003.1 4,016.7 4,042.1 4,079.4 4,105.5 4,127.6 57 Consumer credit 742.1 791.8 809.3 796.7 785.3 786.7 785.9 7%.7 775.7 775.8 781.1 58 Bank loans n.e.c 767.7 819.6 815.1 788.0 805.3 798.7 793.2 788.0 776.1 778.7 770.4 59 Open market paper 513.4 579.2 609.9 565.9 608.8 583.6 572.0 565.9 573.7 578.7 582.6 60 Other loans 801.9 827.5 839.9 773.2 814.9 801.4 784.2 773.2 767.1 771.2 770.0 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical Digitized for FrRelAeaSseE, tRab les L.2 through L.4. For ordering address, see inside front cover. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A43 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1991 1992 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998888 11998899 11999900 11999911 Ql Q2 Q3 Q4 Ql Q2 Q3 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 11,643.9 12,674.9 13,563.6 14,171.3 13,669.9 13,809.2 13,973.0 14,171.3 14,306.0 14,503.3 14,693.3 7 Private domestic nonfinancial sectors 2,185.5 2,440.5 2,644.2 2,490.8 2,634.3 2,653.8 2,648.2 2,490.8 2,496.1 2,487.1 2,456.8 Households 1,485.1 1,710.1 1,882.3 1,693.6 1,875.4 1,882.0 1,875.5 1,693.6 1,716.6 1,690.9 1,665.7 4 Nonfarm noncorporate business 57.2 56.4 55.0 53.1 53.8 53.3 52.9 53.1 51.9 51.3 50.8 .5 Nonfinancial corporate business 167.4 180.3 186.9 207.9 174.5 189.7 189.9 207.9 196.2 210.7 211.0 6 State and local governments 475.8 493.7 519.9 536.2 530.6 528.8 530.0 536.2 531.4 534.2 529.4 7 U.S. government 213.2 205.1 238.7 246.2 245.5 252.9 252.0 246.2 250.2 245.2 237.8 8 653.2 734.2 792.4 837.2 797.1 810.0 819.3 837.2 859.3 894.9 909.5 9 8,592.0 9,295.1 9,888.3 10,597.2 9,992.9 10,092.6 10,253.3 10,597.2 10,700.4 10,876.1 11,089.1 10 Sponsored credit agencies 367.7 367.2 383.6 397.7 388.5 382.7 389.5 397.7 419.9 429.0 445.6 11 Mortgage pools 745.3 871.0 1,019.9 1,158.5 1,050.3 1,088.4 1,124.8 1,158.5 1,182.4 1,219.0 1,244.0 1? Monetary authority 240.6 233.3 241.4 272.5 247.3 253.7 264.7 272.5 271.8 282.6 285.2 N Commercial banking 2,476.3 2,643.9 2,769.3 2,853.3 2,780.2 2,796.6 2,817.8 2,853.3 2,860.6 2,882.9 2,908.9 14 U.S. commercial banks 2,231.9 2,368.4 2,463.6 2,502.5 2,470.8 2,480.0 2,488.7 2,502.5 2,514.0 2,521.9 2,550.0 15 Foreign banking offices 215.6 242.3 270.8 319.2 275.6 284.4 297.5 319.2 313.3 328.2 326.6 16 Bank affiliates 13.4 16.2 13.4 11.9 12.3 11.3 11.6 11.9 13.6 13.1 12.5 17 Banks in U.S. possession 15.4 17.1 21.6 19.7 21.6 20.9 20.0 19.7 19.7 19.7 19.8 18 Private nonbank finance 4,762.1 5,179.7 5,474.1 5,915.1 5,526.7 5,571.2 5,656.5 5,915.1 5,965.8 6,062.6 6,205.3 19 Thrift institutions 1,572.0 1,484.9 1,335.5 1,190.6 1,287.8 1,248.4 1,205.1 1,190.6 1,161.8 1,143.0 1,137.5 20 Savings and loan associations 1,184.2 1,088.9 945.1 804.2 901.3 866.3 826.1 804.2 771.1 748.8 743.2 71 Mutual savings banks 240.6 241.1 227.1 211.5 224.1 216.4 208.7 211.5 213.4 211.6 207.2 7? Credit unions 147.2 154.9 163.4 174.9 162.3 165.7 170.2 174.9 177.2 182.6 187.1 n 1,932.6 2,140.3 2,329.1 2,723.8 2,392.0 2,448.8 2,511.7 2,723.8 2,750.5 2,801.0 2,856.2 74 Life insurance companies 920.0 1,013.1 1,116.5 1,199.6 1,148.5 1,183.7 1,201.4 1,199.6 1,224.3 1,249.8 1,273.5 25 Other insurance companies 287.9 317.5 344.0 378.7 352.2 361.4 370.7 378.7 387.0 392.5 393.1 26 Private pension funds 358.5 394.7 431.3 671.1 441.8 442.0 469.6 671.1 657.6 670.5 692.7 27 State and local government retirement funds. 366.2 414.9 437.4 474.3 449.5 461.7 470.1 474.3 481.6 488.2 496.9 78 1,257.5 1,554.5 1,809.4 2,000.7 1,846.9 1,874.0 1,939.7 2,000.7 2,053.6 2,118.6 2,211.6 79 Finance companies 559.2 617.1 658.7 645.6 649.4 651.7 647.4 645.6 641.0 641.6 642.5 30 Mutual funds 283.4 307.2 360.2 450.5 374.6 394.4 421.4 450.5 480.3 520.4 561.2 31 Money market funds 224.7 291.8 372.7 402.8 411.4 389.9 389.5 402.8 423.1 413.5 408.8 32 Real estate investment trusts (REITs) 7.8 8.4 7.7 7.0 7.3 7.3 7.2 7.0 6.8 7.5 8.1 33 Brokers and dealers 46.7 142.9 177.9 226.9 163.6 180.4 214.3 226.9 228.8 251.2 297.3 34 Securitized credit obligation (SCOs) issuers . 135.7 187.1 232.3 268.0 240.6 250.3 259.9 268.0 273.6 284.4 293.7 RELATION OF LIABILITIES TO FINANCIAL ASSETS 35 Total credit market debt 11,643.9 12,674.9 13,563.6 14,171.3 13,669.9 13,809.2 13,973.0 14,171.3 14,306.0 14,503.3 14,693.3 Other liabilities 36 Official foreign exchange 27.1 53.6 61.3 55.4 56.6 53.6 52.9 55.4 52.7 54.4 55.4 37 Treasury currency and special drawing rights 1199..88 2233..88 2266..33 2266..33 2266..00 2266..11 2266..22 2266..33 2266..33 2266..44 2266..55 38 Life insurance reserves 325.5 354.3 380.0 402.0 385.0 392.3 397.2 402.0 407.3 414.9 419.8 39 Pension fund reserves 2,755.0 3,210.5 3,303.0 4,235.9 3,520.6 3,555.8 3,720.8 4,235.9 4,251.2 4,304.4 4,439.7 40 Interbank claims 46.9 32.4 64.0 63.9 59.2 35.8 60.7 63.9 64.2 69.2 100.6 41 Deposits at financial institutions 4,354.7 4,644.6 4,741.4 4,802.5 4,776.4 4,765.7 4,769.5 4,802.5 4,801.4 4,797.5 4,841.7 42 Checkable deposits and currency 882.8 888.6 932.8 1,008.5 905.1 933.1 948.3 1,008.5 984.7 1,032.8 1,071.9 43 Small time and savings deposits 2,169.2 2,265.4 2,325.3 2,342.0 2,355.3 2,351.5 2,339.7 2,342.0 2,341.3 2,315.3 2,296.4 44 Large time deposits 596.9 615.4 548.7 487.9 553.1 532.6 517.1 487.9 468.8 437.5 425.5 45 Money market fund shares 338.0 428.1 498.4 539.6 551.7 532.8 533.1 539.6 571.0 557.2 553.2 46 Security repurchase agreements 325.0 403.2 379.7 363.4 348.6 354.0 368.9 363.4 376.4 406.8 445.7 47 Foreign deposits 42.8 43.9 56.6 61.2 62.6 61.7 62.4 61.2 59.1 47.9 48.9 48 Mutual fund shares 478.3 566.2 602.1 812.4 661.6 683.7 744.2 812.4 859.3 936.7 1,013.4 49 Security credit 118.3 133.9 137.4 188.9 132.5 137.5 158.1 188.9 195.1 194.1 212.4 50 Trade debt 838.4 903.9 938.0 940.8 903.5 909.4 935.3 940.8 942.6 949.4 976.2 51 Taxes payable 79.8 81.8 81.4 72.2 75.1 65.8 71.8 72.2 73.5 70.1 72.2 52 Miscellaneous 2,312.0 2,508.3 2,678.8 2,813.7 2,688.6 2,691.0 2,729.0 2,813.7 2,816.2 2,870.5 2,929.0 53 Total liabilities 22,999.5 25,188.3 26,577.2 28,585.4 26,954.9 27,125.9 27,638.6 28,585.4 28,795.8 29,190.9 29,780.2 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 40.0 40.3 41.3 41.6 40.7 40.7 41.1 41.6 41.3 41.5 23.2 55 Corporate equities 3,141.6 3,819.7 3,506.6 4,630.0 4,047.2 4,104.7 4,338.5 4,630.0 4,739.7 4,678.8 4,832.4 56 Household equity in noncorporate business 2,373.1 2,524.9 2,449.4 2,372.5 2,478.4 2,509.4 2,495.9 2,372.5 2,381.4 2,362.6 2,335.6 Floats not included in assets (-) 57 U.S. government checking deposits 5.9 6.1 15.0 3.8 5.2 8.3 19.8 3.8 .9 1.4 4.1 58 Other checkable deposits 29.6 26.5 28.9 30.9 26.7 29.9 23.6 30.9 22.0 20.1 8.3 59 Trade credit -164.3 -159.7 -148.0 -134.1 -157.9 -157.7 -154.2 -134.1 -133.3 -148.6 -154.3 Liabilities not identified as assets (-) 60 Treasury currency -4.1 -4.3 --44..11 -4.8 -4.6 -4.7 -4.7 -4.8 -4.9 -4.9 -5.0 61 Interbank claims -28.5 -31.0 -32.0 -4.2 -15.5 -9.9 -4.7 -4.2 -1.8 -4.0 -7.4 62 Security repurchase agreements -12.4 11.5 -23.3 -12.9 -39.6 -25.8 -10.6 -12.9 -10.1 11.0 32.9 63 Taxes payable 21.4 20.6 21.8 18.8 21.4 11.7 17.5 18.8 16.6 12.4 9.4 64 Miscellaneous -134.6 -253.3 -249.7 -451.6 -262.4 -244.5 -303.2 -451.6 -441.1 -441.2 -467.8 65 Totals identified to sectors as assets 28,841.1 31,956.8 32,966.0 36,183.5 33,947.9 34,173.4 34,930.5 36,183.5 36,510.0 36,827.5 37,551.1 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical 2. Excludes corporate equities and mutual fund shares, release, tables L.6 through L.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • April 1993 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, 1987=100 except as noted 1992 1993 MMeeaassuurree 11999900 11999911 11999922 May June July Aug. Sept. Oct. Nov/ Dec. Jan. 1 Industrial production1 109.2 107.1 108.7 108.9 108.5 109.4 109.1 108.9 109.7 110.3 110.5 111.0 Market groupings 2 Products, total 110.1 108.1 109.5r 109.7 109.0 109.6 109.8 109.6 110.7 111.3 lll.^ 112.5 3 Final, total 110.9 109.6 ni.r 111.4 110.5 111.0 111.5 111.2 112.4 113.2 114.6 4 Consumer goods 107.3 107.5 110.4r 110.8 109.6 110.4 110.8 110.7 111.9 112.6 113.2r 114.1 5 Equipment 115.5 112.2 111.9" 112.3 111.6 111.8 112.5 111.9 113.0 114.0 114.7r 115.2 6 Intermediate 107.7 103.4 104.6r 104.4 104.4 105.1 104.4 104.5 105.5r 105.5 105^ 106.2 7 Materials 107.8 105.5 107.4r 107.7 107.6 109.0 108.1 107.9 108.2 108.6 108.4r 108.5 Industry groupings 8 Manufacturing 109.9 107.4 109.7 109.9 109.6 110.2 110.1 109.8 110.6 111.2 111.7 112.4 9 Capacity utilization, manufacturing (percent) 82.3 78.2 77.8 78.2 77.8 78.1 77.9 77.5 77.9 78.2 78.4 78.7 10 Construction contracts3 95.3 89.7r 92.8 86.0 90.0 89.0 90.0 89.0 104.0 92.0 90.0 n.a. 11 Nonagricultural employment, total4 107.4r 106.0 106.1 106.2 106.1 106.3 106.2 106.2 106.2 106.3 106.4 106.5 12 Goods-producing, total 101.0 96.4 94.8 95.3 95.0 94.9 94.6 94.3 94.2 94.2 94.1r 94.1 13 Manufacturing, total 100.5 97.0 95.6 96.1 95.9 95.9 95.4 95.2 94.9 95.0 94.91 95.1 14 Manufacturing, production worker.... 100.1 96.1 95.2 95.7 95.4 95.5 94.9 94.6 94.3 94.6 94.7 95.1 15 Service-producing 109.5 109.0 109.7 109.6 109.6 109.9 109.9 110.0 110.1 110.2 110.3 110.5 16 Personal income, total 122.7 127.0 133.0 132.4 132.5 132.8 133.0 133.6 135.2 135.1 136.4 n.a. 17 Wages and salary disbursements 121.3 124.4 129.0 128.6 128.5 128.7 129.6 129.5 130.5r 131.1 132.1 n.a. 18 Manufacturing 113.5 113.6 115.4 115.5 115.1 115.5 115.3 115.3 116.5r 116.0 117.7 n.a. 19 Disposable personal income 122.9 128.0 134.7 134.2 134.4 134.5 134.6 135.2 136.91 136.6 138.0 n.a. 20 Retail sales 118.7 119.8 125.6 124.1 124.0 125.4 125.5 126.5 129.2 129.0 130. lr 130.5 Prices7 21 Consumer (1982-84=100) 130.7 136.2 140.3 139.7 140.2 140.5 140.9 141.3 141.8 142.0 141.9 142.6 22 Producer finished goods (1982=100) 119.2 121.7 123.2 123.2 123.9 123.7 123.6 123.3 124.3 123.9 123.8 124.0 1. A major revision of the industrial production index and the capacity 6. Based on data from U.S. Bureau of the Census, Survey of Current Business. utilization rates was released in April 1990. See "Industrial Production: 1989 7. Based on data not seasonally adjusted. Seasonally adjusted data for changes Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April in the price indexes can be obtained from the Bureau of Labor Statistics, U.S. 1990), pp. 187-204. Department of Labor, Monthly Labor Review. 2. Ratio of index of production to index of capacity. Based on data from the NOTE. Basic data (not indexes) for series mentioned in notes 4, 5,and 6, and Federal Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other indexes for series mentioned in notes 3 and 7 can also be found in the Survey of sources. Current Business. 3. Index of dollar value of total construction contracts, including residential, Figures for industrial production for the latest month are preliminary, and many nonresidential, and heavy engineering, from McGraw-Hill Information Systems figures for the three months preceding the latest month have been revised. See Co., F.W. Dodge Division. "Recent Developments in Industrial Capacity and Utilization," Federal Reserve 4. Based on data from U.S. Department of Labor, Employment and Earnings. Bulletin, vol. 76 (June 1990), pp. 411-35. Series covers employees only, excluding personnel in the armed forces. 5. Based on data from U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted except as noted 1992 1993 CCaatteeggoorryy 11999900 11999911 11999922 June July Aug. Sept. Oct. Nov. Dec. Jan. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 190,216 191,883 193,542 193,431 193,588 193,749 193,893 194,051 194,210 194,379 194,514 2 Labor force (including Armed Forces)1 126,954 127,421 128,948 129,274 129,316 129,363 129,220 128,986 129,259 129,461 128,953 3 Civilian labor force 112244,,778877 112255,,330033 112266,,998822 127,298 127,350 112277,,440044 112277,,227744 112277,,006666 112277,,336655 112277,,559911 112277,,008833 Employment 4 Nonagricultural industries 114,728 114,644 114,391 114,266 114,515 114,562 114,503 114,518 114,855 115,049 114,879 5 Agriculture 3,186 3,233 3,207 3,244 3,207 3,218 3,221 3,169 3,209 3,262 3,191 Unemployment 6 Number 6,874 8,426 9,384 9,788 9,628 9,624 9,550 9,379 9,301 9,280 9,013 7 Rate (percent of civilian labor force) .... 5.5 6.7 7.4 7.7 7.6 7.6 7.5 7.4 7.3 7.3 7.1 8 Not in labor force 63,262 64,462 64,594 64,157 64,272 64,386 64,673 65,065 64,951 64,918 65,561 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 109,782r 108,310 108,434 108,423 108,594 108,485 108,497 108,571 108,646r 108,736r 108,842 10 Manufacturing 19,117 18,455 18,192 18,236 18,242 18,145 18,102 18,046 18,068r 18,061r 18,095 11 Mining 710 691 635 634 633 626 620 623 622 6191 615 12 Contract construction 5,133 4,685 4,594 4,600 4,584 4,591 4,574 4,601 4,590r 4,581r 4,544 13 Transportation and public utilities 5,808 5,772 5,741 5,745 5,742 5,729 5,738 5,731 5,732r 5,740r 5,764 14 Trade 25,877 25,328 25,120 25,144 25,156 25,070 25,079 25,115 25,092r 25,127r 25,232 15 Finance 6,729 6,678 6,672 6,672 6,660 6,661 6,669 6,680 6,669 6,677 6,685 16 Service 28,130 28,323 28,903 28,854 28,971 28,981 29,065 29,152 29,188r 29,23lr 29,212 17 Government 18,304 18,380 18,578 18,538 18,606 18,682 18,650 18,623 18,685r 18,700r 18,695 1. Persons sixteen years of age and older. Monthly figures are based on sample pay for, the pay period that includes the twelfth day of the month; excludes data collected during the calendar week that contains the twelfth day; annual data proprietors, self-employed persons, household and unpaid family workers, and are averages of monthly figures. By definition, seasonality does not exist in members of the armed forces. Data are adjusted to the March 1984 benchmark, population figures. and only seasonally adjusted data are available at this time. 2. Includes self-employed, unpaid family, and domestic service workers. SOURCE. Based on data from U.S. Department of Labor, Employment and 3. Includes all full- and part-time employees who worked during, or received Earnings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • April 1993 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1992 1992 1992 Ql Q2 Q3 Q4r Ql Q2 Q3 Q4 Ql Q2 Q3 Q4r Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent) 1 Total industry 107.1 108.S 109.1 110.2 137.0 137.7 138.4 139.1 78.2 78.8 78.8 79.2 2 Manufacturing 108.0 109.5 110.0 111.2 139.7 140.6 141.4 142.2 77.3 77.9 77.8 78.2 3 Primary processing 104.0 105.4 106.4 107.1 129.3 129.6 129.9 130.3 80.5 81.3 81.9 82.2 4 Advanced processing 109.9 111.4 111.7 113.1 144.6 145.6 146.7 147.7 76.0 76.5 76.2 76.6 5 Durable goods 106.6 108.4 108.8 110.1 143.7 144.4 145.2 146.0 74.2 75.0 74.9 75.4 6 Lumber and products 98.5 96.7 98.5 101.5 125.9 126.1 126.3 126.5 78.2 76.7 78.0 80.3 7 Primary metals 102.2 101.7 104.0 104.0 129.1 128.3 127.5 126.7 79.2 79.2 81.5 82.1 8 Iron and steel 103.8 101.6 104.6 105.9 134.1 132.7 131.2 129.8 77.4 76.6 79.7 81.6 9 Nonferrous 100.0 101.7 103.0 101.3 122.1 122.2 122.3 122.4 81.9 83.3 84.3 82.7 10 Nonelectrical machinery 122.1 125.7 128.8 131.9 164.3 165.9 167.4 168.9 74.3 75.8 76.9 78.1 11 Electrical machinery 110.5 111.8 112.6 113.0 147.9 149.1 150.4 151.6 74.7 75.0 74.9 74.5 12 Motor vehicles and parts 91.7 100.5 98.1 103.5 136.2 136.7 137.2 137.7 67.3 73.5 71.5 75.1 13 Aerospace and miscellaneous transportation equipment . 99.3 96.8 94.9 93.3 140.4 140.9 141.5 142.1 70.8 68.7 67.1 65.7 14 Nondurable goods 109.8 110.9 111.6 112.5 134.8 135.6 136.5 137.4 81.5 81.7 81.8 81.9 15 Textile mill products 104.3 106.2 106.6 107.1 118.8 119.2 119.7 120.2 87.9 89.0 89.1 89.1 16 Paper and products 105.8 106.7 108.2 107.5 119.3 119.9 120.5 121.1 88.7 89.0 89.8 88.8 17 Chemicals and products 113.6 116.8 118.0 119.6 143.4 144.3 145.1 146.0 79.2 81.0 81.3 81.9 18 Plastics materials 124.4 129.7 132.4 148.7 150.5 152.2 83.7 86.2 87.0 19 Petroleum products 107.7 109.2 106.9 110.3 121.4 121.5 121.6 121.7 88.7 89.9 87.9 90.6 20 Mining 97.9 98.9 99.2 98.9 114.7 114.7 114.8 114.8 85.3 86.2 86.5 86.2 21 Utilities 107.0 107.4 109.4 110.5 129.5 129.8 130.1 130.4 82.6 82.7 84.1 84.8 22 Electric 109.7 110.3 113.2 113.4 125.6 126.0 126.4 126.8 87.3 87.6 89.5 89.5 Previous cycle2 Latest cycle3 1992 1992 1993 High Low High Low Jan. June July Aug. Sept. Oct/ Nov/ Dec/ Jan." Capacity utilization rate (percent) 1 Total industry 89.2 72.6 87.3 71.8 78.0 78.6 79.1 78.8 78.6 79.0 79.3 79.3 79.5 2 Manufacturing 88.9 70.8 87.3 70.0 77.0 77.8 78.1 77.9 77.5 77.9 78.2 78.4 78.7 3 Primary processing 92.2 68.9 89.7 66.8 80.2 81.4 82.7 81.7 81.3 81.9 82.3 82.4 82.5 4 Advanced processing 87.5 72.0 86.3 71.4 75.7 76.3 76.2 76.3 76.0 76.3 76.6 76.8 77.2 5 Durable goods 88.8 68.5 86.9 65.0 73.8 75.0 75.2 75.2 74.4 75.1 75.4 75.7 76.1 6 Lumber and products 90.1 62.2 87.6 60.9 77.4 75.6 79.1 78.3 76.6 79.7 80.6 80.5 80.5 7 Primary metals 100.6 66.2 102.4 46.8 79.2 79.7 82.6 81.8 80.1 82.0 83.0 81.2 82.4 8 Iron and steel 105.8 66.6 110.4 38.3 78.1 77.0 80.8 79.5 78.8 81.6 82.5 80.7 82.1 9 Nonferrous 92.9 61.3 90.5 62.2 81.0 83.9 85.4 85.2 82.2 82.7 83.7 81.8 82.8 10 Nonelectrical machinery 96.4 74.5 92.1 64.9 74.1 76.0 76.6 77.3 76.9 77.4 78.2 78.5 79.0 11 Electrical machinery 87.8 63.8 89.4 71.1 74.6 75.0 75.1 75.1 74.3 74.5 74.9 74.1 74.0 12 Motor vehicles and parts .... 93.4 51.1 93.0 44.5 64.0 73.3 71.3 72.5 70.8 73.6 74.1 77.7 81.3 13 Aerospace and miscellaneous transportation equipment. 77.0 66.6 81.1 66.9 71.2 68.2 67.7 67.0 66.4 66.3 65.4 65.3 64.4 14 Nondurable goods 87.9 71.8 87.0 76.9 81.4 81.6 82.0 81.6 81.7 81.7 82.0 82.1 82.2 15 Textile mill products 92.0 60.4 91.7 73.8 86.9 88.2 89.6 88.7 88.9 88.4 89.2 89.6 90.1 16 Paper and products 96.9 69.0 94.2 82.0 89.9 89.3 91.1 88.2 90.0 87.8 88.9 89.6 88.8 17 Chemicals and products 87.9 69.9 85.1 70.1 78.7 81.3 81.5 81.1 81.4 81.4 82.0 82.3 82.5 18 Plastics materials 102.0 50.6 90.9 63.4 83.1 85.9 89.8 86.0 85.1 82.8 84.1 19 Petroleum products 96.7 81.1 89.5 68.2 87.8 89.6 89.8 85.8 88.3 91.5 91.0 89.4 90.5 20 Mining 94.4 88.4 96.6 80.6 85.3 85.4 87.6 86.1 85.6 86.1 86.9 85.6 85.9 21 Utilities 95.6 82.5 88.3 76.2 82.6 82.1 84.1 83.6 84.6 85.0 85.3 84.0 82.8 22 Electric 99.0 82.7 88.3 78.7 87.1 87.0 89.5 89.2 89.9 89.8 90.0 88.7 87.4 1. Data in this table also appear in the Board's G.17 (419) monthly statistical 2. Monthly high, 1973; monthly low, 1975. release. For ordering address, see inside front cover. For a detailed description of 3. Monthly highs, 1978 through 1980; monthly lows, 1982. the series, see "Recent Developments in Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pp. 411-35. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1987 1992 1993 1992 GGrroouupp por- avg. tion Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct.r Nov.r Dec.r JJaann..pp Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 108.7 106.6 107.2 107.6 108.1 108.9 108.5 109.4 109.1 108.9 109.7 110.3 110.5 111.0 7 Products 60.8 109.5 107.5 108.1 108.5 109.0 109.7 109.0 109.6 109.8 109.6 110.7 111.3 111.9 112.5 Final products 46.0 111.1 108.7 109.4 109.8 110.6 111.4 110.5 111.0 111.5 111.2 112.4 113.2 113.9 114.6 4 Consumer goods, total 26.0 110.4 108.1 108.8 109.3 110.1 110.8 109.6 110.4 110.8 110.7 111.9 112.6 113.2 114.1 5 Durable consumer goods 5.6 108.1 101.3 105.3 106.2 107.9 111.1 109.2 108.6 109.2 106.9 108.1 109.4 112.1 114.9 6 Automotive products 2.5 106.7 94.2 101.6 103.6 106.5 110.6 108.0 106.6 106.8 104.5 108.8 110.1 114.7 120.3 7 Autos and trucks 1.5 102.0 84.3 94.3 95.7 102.5 107.8 104.0 100.5 100.6 98.2 105.9 107.2 116.5 125.0 8 Autos, consumer .9 90.0 79.1 84.8 81.9 93.1 98.6 97.6 92.3 87.2 88.1 88.5 89.4 97.7 103.9 9 Trucks, consumer .6 122.1 93.0 110.2 118.8 118.3 123.3 114.8 114.3 123.1 115.1 135.1 137.1 148.1 160.3 10 Auto parts and allied goods... 1.0 113.7 109.1 112.6 115.5 112.5 114.8 114.0 115.7 116.2 114.0 113.3 114.4 112.0 113.3 11 Other 3.1 109.2 106.9 108.3 108.3 109.1 111.5 110.2 110.3 111.1 108.9 107.6 108.9 110.0 110.6 1? Appliances, A/C, and TV .8 104.7 99.6 102.9 103.5 103.4 107.4 106.2 102.3 110.6 108.5 103.8 103.8 104.2 103.0 N Carpeting and furniture .9 102.7 101.1 102.4 102.5 104.4 105.9 103.2 103.8 103.6 100.9 100.5 101.4 104.4 106.0 14 Miscellaneous home goods ... 1.4 115.8 114.7 115.0 114.7 115.2 117.3 116.9 118.8 116.1 114.2 114.3 116.5 116.7 117.8 IS Nondurable consumer goods 20.4 111.1 110.0 109.8 110.2 110.7 110.7 109.7 110.8 111.2 111.7 112.9 113.5 113.5 113.9 16 Foods and tobacco 9.1 108.5 107.3 107.4 107.8 107.6 107.7 107.2 108.6 110.1 108.9 109.8 109.8 109.6 110.0 17 Clothing 2.6 95.2 95.0 95.2 95.1 95.3 96.4 95.5 96.8 95.0 95.5 94.9 95.5 95.9 95.6 18 Chemical products 3.5 122.6 118.1 118.3 119.4 120.8 121.4 121.6 121.5 122.0 124.1 126.8 128.4 129.8 131.4 19 Paper products 2.5 124.3 126.8 124.7 124.6 125.1 124.3 121.7 121.9 121.8 124.2 124.1 126.1 126.5 127.4 70 Energy 2.7 107.5 106.8 106.4 107.0 108.9 107.2 104.8 107.4 106.2 108.1 111.5 111.9 109.7 108.7 71 Fuels .7 104.7 103.8 103.5 103.7 105.1 104.0 104.4 105.3 99.0 103.5 110.3 107.6 105.8 107.6 22 Residential utilities 2.0 108.6 108.0 107.5 108.2 110.3 108.4 105.0 108.2 108.9 109.7 112.0 113.5 111.2 109.2 ?3 Equipment 20.0 111.9 109.4 110.2 110.4 111.3 112.3 111.6 111.8 112.5 111.9 113.0 114.0 114.7 115.2 74 Business equipment 13.9 124.5 119.9 121.0 121.5 123.0 124.5 124.1 124.4 125.9 125.4 126.8 128.2 129.1 130.1 75 Information processing and related .. 5.6 141.1 134.1 134.6 136.0 137.9 139.2 140.4 141.9 143.5 143.5 145.7 147.7 148.4 149.4 76 Office and computing 1.9 176.4 160.6 162.4 164.9 168.2 170.5 174.0 178.0 182.0 184.0 187.0 190.0 192.9 195.8 77 Industrial 4.0 102.2 100.7 101.3 101.3 101.7 103.4 102.9 103.4 102.7 101.6 102.0 103.4 103.2 103.7 78 Transit 2.5 131.4 124.2 129.2 128.9 131.7 133.3 131.8 128.7 132.6 130.4 133.0 133.8 137.2 139.8 79 Autos and trucks 1.2 101.2 84.9 94.7 95.0 101.3 105.6 101.7 98.1 101.3 99.1 105.2 107.7 114.4 122.3 30 Other 1.9 114.0 113.1 112.2 112.2 113.2 115.0 111.5 112.2 114.4 115.8 115.5 115.9 117.4 117.1 31 Defense and space equipment 5.4 83.0 86.7 86.2 85.6 84.7 84.2 83.6 82.7 81.8 81.1 80.5 79.8 79.3 78.7 37 Oil and gas well drilling .6 78.3 71.8 73.9 76.2 79.2 79.2 74.6 78.6 75.0 74.4 80.2 85.2 88.5 84.7 33 Manufactured homes .2 108.8 98.4 99.7 98.7 100.7 100.3 97.1 112.0 106.1 111.2 119.9 127.1 138.0 138.2 34 Intermediate products, total 14.7 104.6 103.9 104.0 104.4 103.9 104.4 104.4 105.1 104.4 104.5 105.5 105.5 105.9 106.2 35 Construction supplies 6.0 97.4 95.5 96.0 96.7 96.5 97.8 97.2 98.6 98.5 97.1 98.5 98.5 98.6 98.9 36 Business supplies 8.7 109.5 109.9 109.6 109.7 109.0 109.0 109.4 109.7 108.5 109.6 110.4 110.4 111.0 111.3 37 39.2 107.4 105.2 105.8 106.1 106.8 107.7 107.6 109.0 108.1 107.9 108.2 108.6 108.4 108.5 38 Durable goods materials 19.4 109.9 107.0 108.1 108.3 108.7 110.4 110.2 111.2 111.1 109.9 110.9 111.4 111.6 112.3 39 Durable consumer parts 4.2 100.9 95.3 97.1 97.9 99.3 102.5 102.9 101.8 103.9 102.3 103.5 103.1 103.2 105.2 40 Equipment parts 7.3 116.1 114.1 115.2 115.1 114.7 116.2 116.2 117.5 117.0 116.4 117.2 117.7 118.2 118.3 41 Other 7.9 108.8 106.7 107.5 107.5 108.1 109.2 108.7 110.2 109.5 108.1 109.1 110.0 109.9 110.5 47 Basic metal materials 2.8 108.2 105.1 107.3 106.3 106.3 108.3 107.7 111.5 110.9 108.1 108.5 110.8 108.1 108.9 43 Nondurable goods materials 9.0 109.7 107.3 107.1 108.9 109.4 109.7 110.4 111.7 110.3 110.5 109.7 110.6 111.0 110.2 44 Textile materials 1.2 102.7 98.9 101.5 102.0 103.2 102.9 102.3 103.9 102.9 103.9 103.3 103.9 103.7 104.3 45 Pulp and paper materials 1.9 109.8 107.4 106.8 107.8 109.2 107.8 110.8 111.8 108.9 112.7 109.6 111.0 113.2 110.7 46 Chemical materials 3.8 110.4 107.6 106.6 109.3 109.9 111.2 110.9 113.4 111.9 110.9 110.2 111.1 110.7 110.2 47 Other 2.1 112.4 111.2 111.2 112.7 112.2 112.4 113.4 112.8 112.6 111.5 112.6 113.0 113.7 113.1 48 Energy materials 10.9 101.2 100.4 100.5 100.1 101.3 101.3 100.6 102.9 100.9 102.0 102.0 102.0 100.5 100.4 49 Primary energy 7.2 100.3 100.5 100.6 98.2 99.8 99.7 99.6 102.3 101.4 101.8 102.1 101.3 99.4 99.6 50 Converted fuel materials 3.7 102.9 100.2 100.4 103.8 104.1 104.3 102.6 104.1 100.0 102.5 101.7 103.5 102.6 101.9 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.3 108.9 107.3 107.6 107.9 108.3 109.0 108.6 109.6 109.3 109.2 109.8 110.4 110.4 110.6 52 Total excluding motor vehicles and parts ... 95.3 109.2 107.6 107.8 108.2 108.6 109.2 108.8 109.9 109.6 109.5 110.1 110.7 110.7 110.9 53 Total excluding office and computing machines 97.5 107.0 105.3 105.8 106.1 106.6 107.4 106.8 107.6 107.3 107.0 107.8 108.3 110088..55 110088..88 54 Consumer goods excluding autos and trucks 24.5 111.0 109.6 109.7 110.2 110.6 110.9 109.9 111.0 111.4 111.4 112.2 112.9 111133..00 113.4 55 Consumer goods excluding energy 23.3 110.8 108.3 109.1 109.6 110.3 111.2 110.1 110.7 111.3 111.0 111.9 112.7 113.6 114.7 56 Business equipment excluding autos and trucks 12.7 126.8 123.3 123.6 124.1 125.2 126.4 126.3 127.0 128.3 127.9 128.9 130.2 130.6 130.9 57 Business equipment excluding office and computing equipment 12.0 116.1 113.3 114.3 114.5 115.7 117.1 116.1 115.8 116.8 115.9 117.0 111188..22 118.8 111199..55 58 Materials excluding energy 28.4 109.8 107.1 107.8 108.5 108.9 110.2 110.3 111.3 110.8 110.1 110.5 111.2 111.4 111.6 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • April 1993 2.13—Continued 1987 1992 1993 U „ roup SIC pro- 1992 code por- avg. tion Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct.r Nov.r Dec.r Jan." Index (1987 = 100) MAJOR INDUSTRIES 1 Total index 100.0 108.7 106.6 107.2 107.6 108.1 108.9 108.5 109.4 109.1 108.9 109.7 110.3 110.5 111.0 2 Manufacturing 84.4 109.7 107.4 108.1 108.5 109.0 109.9 109.6 110.2 110.1 109.8 110.6 111.2 111.7 112.4 3 Primary processing 26.7 105.7 103.6 103.9 104.5 105.0 105.6 105.6 107.3 106.2 105.7 106.6 107.2 107.5 107.7 4 Advanced processing 57.7 111.5 109.2 110.0 110.3 110.8 111.9 111.4 111.6 112.0 111.7 112.5 113.1 113.7 114.6 5 Durable goods 47.3 108.4 105.8 107.0 107.0 107.6 109.1 108.5 109.0 109.2 108.2 109.5 110.1 110.7 111.5 6 Lumber and products ... "'24 2.0 98.7 97.4 98.8 99.2 97.2 97.4 95.4 99.8 98.9 96.7 100.8 101.9 101.9 101.9 7 Furniture and fixtures ... 25 1.4 100.3 98.7 98.1 98.6 101.1 103.3 100.3 101.0 101.7 100.5 99.6 99.5 101.3 101.9 8 Clay, glass, and stone products 32 2.5 96.2 92.8 94.6 95.0 95.6 96.7 96.6 97.1 96.4 96.1 97.7 97.4 98.7 98.6 9 Primary metals 33 3.3 102.9 102.5 102.7 101.4 100.9 102.0 102.1 105.6 104.3 102.0 104.2 105.2 102.6 104.0 10 Iron and steel 331,2 1.9 103.9 105.0 103.7 102.5 100.9 102.2 101.8 106.4 104.4 103.0 106.3 107.1 104.4 105.8 11 Raw steel .1 101.2 103.3 102.7 98.8 99.9 98.5 101.5 105.3 101.9 99.8 101.7 101.5 100.4 101.2 12 Nonferrous 333-6,9 1.4 101.5 98.9 101.2 99.9 100.9 101.8 102.5 104.4 104.2 100.5 101.2 102.5 100.2 101.3 13 Fabricated metal products 34 5.4 101.7 99.7 100.5 100.0 100.6 102.2 102.2 102.6 102.5 101.3 102.9 102.5 103.7 104.4 14 Nonelectrical machinery. 35 8.6 127.2 121.4 121.9 122.9 124.1 126.7 126.4 127.8 129.3 129.1 130.4 132.1 133.1 134.3 15 Office and computing machines 357 2.5 176.5 160.5 162.4 164.9 168.2 170.5 174.0 178.0 182.0 184.0 187.0 190.0 192.9 195.8 16 Electrical machinery .... 36 8.6 111.8 110.0 110.7 110.9 111.0 112.3 112.2 112.6 113.0 112.1 112.7 113.6 112.7 112.9 17 Transportation equipment 37 9.8 97.3 93.8 96.8 96.5 98.0 99.6 98.2 96.7 97.0 95.6 97.5 97.3 99.6 101.5 18 Motor vehicles and parts 371 4.7 98.7 87.1 93.8 94.2 98.5 102.7 100.4 97.7 99.4 97.2 101.2 102.1 107.1 112.2 19 Autos and light trucks 2.3 100.2 83.5 92.9 93.7 101.1 106.5 103.0 99.3 98.6 96.7 103.1 104.6 113.7 121.9 20 Aerospace and miscellaneous transportation equipment.. 372-6,9 5.1 96.1 99.8 99.6 98.6 97.4 96.8 96.3 95.7 94.9 94.1 94.1 93.0 92.9 91.7 21 Instruments 38 3.3 118.3 118.3 118.6 118.6 119.0 119.8 118.5 118.5 118.2 118.1 117.8 117.8 118.0 118.4 22 Miscellaneous 39 1.2 120.0 121.2 120.0 120.0 118.9 118.4 117.8 120.4 118.2 118.6 119.7 123.0 124.5 125.6 23 Nondurable goods 37.2 111.2 109.5 109.6 110.4 110.7 110.9 111.0 111.7 111.3 111.8 112.0 112.6 113.1 113.4 24 Foods "20 8.8 110.1 109.2 109.6 110.2 109.6 109.3 109.0 109.8 110.6 110.2 111.2 111.1 110.7 111.1 25 Tobacco products 21 1.0 105.5 98.8 99.4 101.3 101.0 102.5 103.6 106.6 115.9 110.5 107.6 108.4 109.8 110.5 26 Textile mill products .... 22 1.8 106.0 103.1 104.7 105.3 106.3 106.8 105.3 107.1 106.1 106.6 106.1 107.2 107.9 108.6 27 Apparel products 23 2.4 97.7 97.5 97.7 97.8 98.0 99.0 98.1 99.4 97.6 97.6 97.2 98.1 97.7 97.7 28 Paper and products 26 3.6 107.1 107.1 104.6 105.8 107.0 105.8 107.3 109.6 106.3 108.6 106.2 107.6 108.7 107.9 29 Printing and publishing .. 27 6.4 113.3 114.8 114.4 113.8 113.7 113.4 113.0 112.3 111.4 113.2 113.4 113.7 114.8 115.5 30 Chemicals and products . 28 8.6 117.2 112.7 113.4 114.8 115.8 117.0 117.5 118.0 117.6 118.3 118.7 119.7 120.5 121.0 31 Petroleum products 29 1.3 108.6 106.6 106.9 109.7 110.3 108.5 108.9 109.1 104.3 107.4 111.3 110.7 108.8 110.2 32 Rubber and plastic products 30 3.0 117.3 113.2 114.0 115.4 116.5 117.1 117.3 118.5 119.0 117.3 118.3 119.4 120.9 121.3 33 Leather and products ... 31 .3 85.5 83.0 81.4 82.9 84.1 86.2 86.2 87.1 84.8 86.4 87.0 87.5 87.4 87.4 34 Mining 7.9 98.7 97.8 98.4 97.5 99.1 99.7 98.0 100.6 98.8 98.3 98.8 99.8 98.3 98.6 35 Metal 10 .3 158.1 144.2 152.9 155.8 154.2 166.4 154.0 163.7 165.6 158.6 155.7 164.6 162.8 160.4 36 Coal 11,12 1.2 105.5 107.3 107.9 103.0 104.0 107.6 98.6 112.0 107.5 103.7 103.9 106.8 106.7 110.0 37 Oil and gas extraction 13 5.7 93.2 92.4 92.7 91.9 94.2 93.4 93.9 94.0 92.4 93.0 93.9 94.0 92.0 91.9 38 Stone and earth minerals .. 14 .7 105.9 104.8 103.5 107.4 105.9 108.0 105.6 106.2 106.4 105.2 104.9 105.9 105.8 106.6 39 Utilities 7.6 108.3 106.8 106.4 107.7 108.2 107.3 106.7 109.3 108.8 110.2 110.7 111.3 109.6 108.2 40 Electric 49L3PT 6.0 111.3 109.3 109.0 110.7 111.0 110.2 109.7 113.0 112.7 113.8 113.7 114.0 112.5 111.0 41 Gas 492,3PT 1.6 97.1 97.5 96.9 96.7 97.7 96.6 95.3 95.4 94.1 97.0 99.6 101.0 99.0 97.7 SPECIAL AGGREGATES 42 Manufacturing excluding motor vehicles and parts 79.8 110.3 108.6 108.9 109.3 109.6 110.3 110.1 110.9 110.7 110.5 111.1 111.7 112.0 112.4 43 Manufacturing excluding office and computing machines 82.0 107.7 105.8 106.5 106.8 107.2 108.1 107.6 108.2 108.0 107.6 108.3 108.8 109.3 109.9 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKETS 44 Products, total 1,734.8 1,931.9 1,869.5 1,889.7 1,902.8 1,918.7 1,935.5 1,920.1 1,936.2 1,935.9 1,937.0 1,969.8 1,983.0 1,992.9 2,016.9 45 Final 1,350.9 1,529.3 1,468.7 1,490.8 1,501.5 1,518.2 1,532.1 1,519.1 1,530.4 1,532.8 1,534.6 1,563.8 1,574.9 1,585.2 1,606.4 46 Consumer goods 833.4 907.7 877.6 890.2 896.2 905.6 912.4 901.3 909.3 905.3 907.1 928.2 932.0 934.4 948.7 47 Equipment 517.5 621.6 591.1 600.6 605.3 612.7 619.7 617.8 621.0 627.5 627.5 635.6 643.0 650.8 657.8 48 Intermediate 384.0 402.6 400.7 398.9 401.2 400.5 403.4 401.1 405.8 403.1 402.4 406.0 408.1 407.6 410.5 1. Data in this table also appear in the Board's G.17 (419) monthly statistical Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April release. For ordering address, see inside front cover. 1990), pp. 187-204. A major revision of the industrial production index and the capacity 2. Standard industrial classification, utilization rates was released in April 1990. See "Industrial Production: 1989 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1992 IItteemm 11999900 11999911 11999922 Mar. Apr. May June July Aug. Sept. Oct.r Nov.r Dec. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,111 949 1,097 1,094 1,058 1,054 1,032 1,080 1,076 1,125 1,139 1,126 1,201 2 One-family 794 754 913 907 873 879 872 879 877 913 959 955 1,044 3 Two-or-more-family 317 195 184 187 185 175 160 201 199 212 180 171 157 4 Started 1,193 1,014 1,200 l,318r l,095r l,197r l,141r l,106r 1,22? l,218r 1,226 1,226 1,285 5 One-family 895 840 1,030 1,050" 939R 1,019 994r 961r l,038r l,045r 1,079 1,089 1,133 6 Two-or-more-family 298 174 170 268r 156r 178r 147r 145r 191 173r 147 137 152 7 Under construction at end of period .. 711 606 618 657 655 653 643 628 633 639 644 641 648 8 One-family 449 434 479 482 484 484 483 476 480 487 493 497 507 9 Two-or-more-family 262 173 139 175 171 169 160 152 153 152 151 144 141 10 Completed 1,308 1,091 1,155 1,127 1,067 1,204 1,184 1,229 1,144 1,125 1,140 1,241 1,184 11 One-family 966 838 961 975 889 1,011 982 1,019 955 937 965 1,007 986 12 Two-or-more-family 342 253 193 152 178 193 202 210 189 188 175 234 198 13 Mobile homes shipped 188 171 210 197 193r 194r 194 210r 202r 217r 228 244 266 Merchant builder activity in one-family units 14 Number sold 535 507 607 555 546 554 583 616 627 671 618 617 656 15 Number for sale at end of period ... 321 283 276 277 274 272 272 271 269 268 268 270 276 Price of units sold (thousands of dollars) 16 Median 122.3 120.0 120.3 120.0 120.0 113.0 124.5 118.0 123.5 119.5r 122.0 128.9 111177..00 17 Average 149.0 147.0 144.3 144.8 145.0 146.0 146.6 137.7 145.3 142.2r 147.5 147.8 140.2 EXISTING UNITS (one-family) 18 Number sold 3,211 3,219 3,500 3,510 3,490 3,460 3,350 3,450 3,310 3,300 3,640 3,830 4,020 Price of units sold (thousands of dollars)2 19 Median 95.2 99.7 103.4 104.0 103.3 102.5 105.1 102.7 104.6 103.4 103.4 103.0 103.9 20 Average 118.3 127.4 130.7 130.2 130.6 130.6 133.7 132.2 132.2 131.0 129.4 129.0 130.4 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 442,066 400,955 425,807 421,512 427,585 427,980 426,730 425,700 419,598 429,291 430,494 434,295 434,351 22 Private 334,153 290,707 307,066 301,142 309,832 306,999 312,182 305,848 301,984 308,813 312,177 314,118 314,228 23 Residential 182,856 157,837 183,044 172,660 182,644 182,892 184,630 181,162 184,201 186,343 188,675 190,701 194,198 24 Nonresidential, total 151,297 132,870 124,022 128,482 127,188 124,107 127,552 124,686 117,783 122,470 123,502 123,417 120,030 25 Industrial buildings 23,849 22,281 20,155 23,721 21,335 21,008 20,285 20,594 17,862 19,019 18,594 19,046 18,572 26 Commercial buildings 62,866 48,482 40,231 42,108 40,712 39,643 43,310 39,988 37,010 39,333 40,003 40,537 35,915 27 Other buildings 21,591 20,797 21,573 21,479 21,409 21,993 21,991 22,228 21,518 22,068 21,648 21,582 21,942 28 Public utilities and other 42,991 41,310 42,063 41,174 43,732 41,463 41,966 41,876 41,393 42,050 43,257 42,252 43,601 29 Public 107,909 110,247 118,739 120,370 117,753 120,981 114,548 119,853 117,614 120,478 118,317 120,177 120,122 30 Military 2,664 1,837 2,490 2,548 2,329 2,668 2,503 2,372 2,438 3,172 2,299 2,705 2,604 31 Highway 31,154 29,918 32,882 30,895 31,447 32,633 31,496 32,682 33,451 34,651 32,200 34,834 32,911 32 Conservation and development... 4,607 4,958 6,092 6,197 5,818 5,767 5,889 5,772 5,382 6,364 6,698 7,093 7,848 33 Other 69,484 73,534 77,275 80,730 78,159 79,913 74,660 79,027 76,343 76,291 77,120 75,545 76,759 1. Not at annual rates. SOURCE. 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. Recent data on value of new construction may not be strictly comparable Institute and seasonally adjusted by the Census Bureau, and (2) sales and prices with data for previous periods because of changes by the Census Bureau in its of existing units, which are published by the National Association of Realtors. All estimating techniques. For a description of these changes, see Construction back and current figures are available from the originating agency. Permit Reports (C-30-76-5), issued by the Census Bureau in July 1976. authorizations are those reported to the Census Bureau from 17,000 jurisdictions beginning in 1984. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • April 1993 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted C m h o a n n t g h e s f e r a o r m li e 1 r 2 Change f ( r a o n m nu 3 a l m r o a n te t ) h s earlier Change from 1 month earlier IIInnndddeeexxx IIIttteeemmm 1992r 1992 19931 lll JJJ eeevvv aaannn eeelll ... ,,, 11999922 11999933 111999999333111 JJaann.. JJaann.. Mar. June Sept. Dec. Sept. Oct. Nov. Dec. Jan. CONSUMER PRICES2 (1982-84=100) 1 All items 2.6 3.3 3.5 2.6 2.6 3.2 .LR .4 .2 .1 .5 142.6 2 Food 1.0 1.9 2.4 -1.2 3.2 1.4 ,3r .0 .R ,3r .4 139.8 3 Energy items -6.5 3.3 -3.9 8.6 1.2 1.9 .0 .5 ,2r -,2r .5 103.4 4 All items less food and energy 3.9 3.5 4.5 2.8 2.5 3.8 .R .5 .3 ,2r .5 149.9 5 Commodities 3.3 2.7 4.1 2.5 1.8 1.5 ,OR .3 .1 -.R .5 133.6 6 Services 4.3 3.8 4.5 3.1 2.9 4.7 ,2r .5r ,4r .3 .4 159.3 PRODUCER PRICES (1982 = 100) 7 Finished goods -.4 1.8 2.0 3.3 1.3 -.3 ,2r -.R .R .2 124.0 8 Consumer foods -1.8 1.1 -.3 -.6 4.3 2.9 .4r -.R — 5 1.3r -.9 123.8 9 Consumer energy -10.0 3.1 -1.0 16.6 -3.5 -9.8 .R -I.R -2.3r .9 76.6 TO Other consumer goods 3.1 1.9 3.6 2.4 1.5 .9 .3 -.I .R .4 139.0 11 Capital equipment 2.1 1.4 3.5 .9 1.2 .3 .0 -.2 ,I .2 .3 130.4 Intermediate materials 12 Excluding foods and feeds -3.0 1.9 1.1 5.0 .7 -1.4 .R -.2r -.R -.R .3 115.5 13 Excluding energy -1.1 1.5 2.0 1.7 1.3 -.3 .R -.2 -.R .2 .3 122.9 Crude materials 14 Foods -3.3 1.4 8.4 2.7 -4.8 4.3 .R ,7R -.6 l.(f .3 105.2 15 Energy -23.8 6.5 -26.6 51.5 19.8 -20.2 5.1r -1.2r .6 -4.9 .0 79.2 16 Other -7.9 8.9 15.8 4.8 2.2 1.5 -,4r -1.2r ~.7r 2.3r 3.1 133.9 1. Not seasonally adjusted. SOURCE. Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A51 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1991 1992 Q4 Ql Q2 Q3 GROSS DOMESTIC PRODUCT 1 Total 5,522.2 5,677.5 5,945.7 5,753.3 5,840.2 5,902.2 5,978.5 By source 2 3 Pe D rs u o r n a a b l le c o g n o s o u d m s ption expenditures 3 1 . . 7 4 2 4 6 2 8 4 4 . . . 4 3 5 3 1 , , 8 4 2 8 4 5 6 7 1 . . . 1 7 5 4 1 , , 0 4 2 9 7 8 3 9 9 . . . 5 9 9 3 1 , , 9 4 2 4 5 5 2 0 1 . . . 9 4 4 4 1 , , 0 4 2 2 6 7 2 9 4 . . . 8 1 4 4 1 , , 0 4 2 5 7 7 7 7 0 . . . 1 5 6 4 1 . . 1 4 2 0 8 9 2 8 2 . . . 5 7 8 4 Nondurable goods 2,059.7 2,190.1 2,324.5 2,241.1 2,279.3 2.309.0 2,333.3 5 Services 6 Gross private domestic investment 799.5 721.1 769.7 736.1 722.4 773.2 781.6 7 Fixed investment 793.2 731.3 766.3 726.9 738.2 765.1 766.6 8 Nonresidential 577.6 541.1 548.0 528.7 531.0 550.3 549.6 9 Structures 201.1 180.1 169.0 169.7 170.1 170.3 166.1 10 Producers' durable equipment 376.5 360.9 379.0 358.9 360.8 380.0 383.5 11 Residential structures 215.6 190.3 218.2 198.2 207.2 214.8 217.0 12 Change in business inventories 6.3 -10.2 3.4 9.2 -15.8 8.1 15.0 13 Nonfarm 3.3 -10.3 1.2 14.5 -13.3 6.4 9.7 14 Net exports of goods and services -68.9 -21.8 -32.7 -16.0 -8.1 -37.1 -36.0 15 Exports 557.0 598.2 634.3 622.9 628.1 625.4 639.0 16 Imports 625.9 620.0 667.0 638.9 636.2 662.5 675.0 17 Government purchases of goods and services .. 1,043.2 1,090.5 1,114.8 1,090.3 1,103.1 1.109.1 1,124.2 18 Federal 426.4 447.3 449.1 440.8 445.0 444.8 455.2 19 State and local 616.8 643.2 665.7 649.5 658.0 664.3 669.0 By major type of product 20 Final sales, total 5,515.9 5.687.7 5,942.3 5.744.2 5,855.9 5.894.1 5.963.5 21 Goods 2,160.1 2.192.8 2,254.9 2,188.4 2,233.6 2.233.2 2,258.4 22 Durable 920.6 907.6 940.2 905.7 923.6 932.3 943.8 23 Nondurable 1,239.5 1,285.1 1,314.7 1,282.7 1,310.0 1,300.8 1.314.6 24 Services 2,846.4 3,030.3 3,197.1 3.090.3 3,142.2 3,173.4 3,217.8 25 Structures 509.4 464.7 490.3 465.5 480.1 487.6 487.3 26 Change in business inventories 6.3 -10.2 3.4 9.2 -15.8 8.1 15.0 27 Durable goods -.9 -19.3 -2.3 -8.1 -19.3 9.5 2.7 28 Nondurable goods 7.2 9.0 5.7 17.3 3.5 -1.4 12.3 29 M To E t M al O G DP in 1987 dollars 4,877.5 4,821.0 4,919.9 4,838.5 4,873.7 4,892.4 4,933.7 NATIONAL INCOME 30 Total 4,468.3 4,544.2 4,599.1 4,679.4 4,716.5 4,719.6 31 Compensation of employees 3,291.2 3,390.8 3,524.2 3,433.8 3,476.3 3,506.3 3,534.3 3 3 3 2 3 4 W G a O g o t e h v s e e r r a n n m d e s n a t la a r n ie d s government enterprises .. 2 2 , , 7 2 5 4 2 1 2 8 4 . . . 9 8 0 2 2 , ,2 8 5 6 1 4 8 2 3 . . . 2 7 5 2 2, , 3 9 5 5 1 6 3 5 2 . . . 7 9 2 2 2, , 2 8 5 9 4 4 8 5 6 . . . 6 0 4 2 2 , , 8 3 5 7 2 5 7 3 4. . . 6 6 0 2 2 , , 9 3 5 0 3 6 1 9 1 . . . 3 9 4 2 2, , 3 9 5 5 2 6 9 3 4 . . . 1 5 3 35 Supplement to wages and salaries 548.4 578.7 608.3 588.7 598.7 605.0 610.8 36 Employer contributions for social insurance 277.4 290.4 302.6 293.7 299.4 301.5 302.9 37 Other labor income 271.0 288.3 305.7 295.0 299.2 303.6 307.9 38 Proprietors' income1 ••••••. 366.9 368.0 404.2 377.9 393.6 398.4 397.4 39 Business and professional 325.2 332.2 364.6 340.0 353.6 359.9 365.9 40 Farm1 41.7 35.8 39.6 37.9 40.1 38.5 31.5 41 Rental income of persons2 -12.3 -10.4 4.7 -6.6 -4.5 3.3 6.4 42 Corporate profits1 361.7 346.3 n.a. 347.1 384.0 388.4 374.1 43 Profits before tax 355.4 334.7 n.a. 332.3 366.1 376.8 354.1 44 Inventory valuation adjustment -14.2 3.1 -8.3 .7 -5.4 -15.5 -9.7 45 Capital consumption adjustment 20.5 8.4 29.3 14.1 23.3 27.0 29.7 46 Net interest 460.7 449.5 n.a. 446.9 430.0 420.0 407.3 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. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 Domestic Nonfinancial Statistics • April 1993 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1991 1992 AAccccoouunntt 11999900 11999911 11999922 Q4 Ql Q2 Q3 Q4 PERSONAL INCOME AND SAVING 1 Total personal income 4,664.2 4,828.3 5,056.8 4,907.2 4,980.5 5,028.9 5,062.0 5,155.7 2 Wage and salary disbursements 2,742.8 2,812.2 2,917.4 2,845.0 2,877.6 2,901.3 2,923.5 2,967.3 3 Commodity-producing industries 745.6 737.4 743.1 741.5 736.8 743.1 742.4 750.0 556.1 556.9 565.6 563.9 559.9 564.7 565.5 572.3 5 Distributive industries 634.6 647.4 666.7 652.9 660.9 662.9 667.7 675.4 847.8 883.9 945.5 904.3 925.3 933.9 949.1 973.6 7 Government and government enterprises 514.8 543.6 562.2 546.4 554.6 561.4 564.3 568.4 271.0 288.3 305.7 295.0 299.2 303.6 307.9 312.2 9 Proprietors' income 366.9 368.0 404.2 377.9 393.6 398.4 397.4 427.2 10 Business and professional 325.2 332.2 364.6 340.0 353.6 359.9 365.9 379.1 11 Farm1 41.7 35.8 39.6 37.9 40.1 38.5 31.5 48.1 12 Rental income of persons2 -12.3 -10.4 4.7 -6.6 -4.5 3.3 6.4 13.5 140.3 137.0 139.3 134.3 133.9 136.6 141.0 145.8 14 Personal interest income 694.5 700.6 669.7 703.3 684.8 675.2 663.2 655.7 685.8 771.1 866.3 799.8 842.7 859.7 874.1 888.6 16 Old-age survivors, disability, and health insurance benefits ... 352.0 382.0 414.4 390.6 405.7 412.1 417.1 422.6 17 LESS: Personal contributions for social insurance 224.8 238.4 250.5 241.5 246.8 249.3 251.5 254.5 18 EQUALS: Personal income 4,664.2 4,828.3 5,056.8 4,907.2 4,980.5 5,028.9 5,062.0 5,155.7 19 LESS: Personal tax and nontax payments 621.3 618.7 627.2 622.3 619.6 617.1 628.8 643.1 20 EQUALS: Disposable personal income 4,042.9 4,209.6 4,429.6 4,284.9 4,360.9 4,411.8 4,433.2 4,512.5 21 LESS: Personal outlays 3,867.3 4,009.9 4,216.1 4,065.5 4,146.3 4,179.5 4,229.9 4,308.5 22 EQUALS: Personal saving 175.6 199.6 213.5 219.4 214.6 232.3 203.3 204.0 MEMO Per capita (1987 dollars) 19,513.0 19,077.1 19,260.9 19,066.0 19,158.5 19,181.8 1199,,228888..44 1199,,441133..44 24 Personal consumption expenditures 13,043.6 12,824.1 12,967.7 12,802.6 12,930.2 12,893.3 12,973.3 13,073.8 25 Disposable personal income 14,068.0 13,886.0 14,032.0 13,913.0 14,017.0 14,021.0 13,998.0 14,090.0 26 Saving rate (percent) 4.3 4.7 4.8 5.1 4.9 5.3 4.6 4.5 GROSS SAVING 27 Gross saving 718.0 708.2 n.a. 698.2 677.5 682.9 696.9 n.a. 28 Gross private saving 854.1 901.5 n.a. 934.8 950.1 968.1 992.1 n.a. 175.6 199.6 213.5 219.4 214.6 232.3 203.3 204.0 30 Undistributed corporate profits 75.7 75.8 n.a. 78.3 104.0 97.7 91.2 n.a. 31 Corporate inventory valuation adjustment -14.2 3.1 -8.3 .7 -5.4 -15.5 -9.7 -2.7 Capital consumption allowances 368.3 383.0 395.0 338866..33 338866..11 339911..22 440077..22 339955..55 33 Noncorporate 234.6 243.1 258.6 250.7 245.3 247.0 290.4 251.8 34 Government surplus, or deficit (-), national income and -136.1 -193.3 -281.0 -236.6 -272.6 -285.2 --229955..22 n.a. -166.2 -210.4 -295.3 -258.7 -289.2 -302.9 -304.4 n.a. 36 State and local 30.1 17.1 14.2 22.0 16.6 17.7 9.2 n.a. 37 Gross investment 723.4 730.1 721.4 714.6 706.5 713.8 732.0 733.4 38 Gross private domestic 799.5 721.1 769.7 736.1 722.4 773.2 781.6 801.5 -76.1 9.0 n.a. -21.5 -16.0 -59.4 -49.6 n.a. 40 Statistical discrepancy 5.4 21.9 n.a. 16.4 29.0 30.9 35.1 n.a. 1. With inventory valuation and capital consumption adjustments. SOURCE. U.S. Department of Commerce, Survey of Current Business. 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A53 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1991 1992 IItteemm 11998899 11999900 11999911 Q3 Q4 Ql Q2 Q3P 1 Balance on current account -101,142 -90,428 -3,682 -11,087 -7,218 -5,903 -17,802 -14,238 7 Merchandise trade balance2 -115,668 -108,853 -73,436 -20,174 -18,539 -17,222 -24,558 -26,538 3 Merchandise exports 361,697 388,705 415,962 104,151 107,851 107,946 107,464 110,812 4 Merchandise imports -477,365 -497,558 -489,398 -124,325 -126,390 -125,168 -132,022 -137,350 5 Military transactions, net -6,837 -7,818 -5,524 -995 -540 -624 -623 -548 6 Other service transactions, net 32,604 39,873 50,821 13,018 13,676 14,468 13,261 16,173 7 Investment income, net 14,366 19,287 16,429 3,076 2,458 4,474 1,930 3,551 8 U.S. government grants -10,773 -17,597 24,487 -1,986 78 -2,620 -3,085 -2,490 9 U.S. government pensions and other transfers -2,517 -2,945 -3,462 -793 -1,080 -858 -1,146 -%9 10 Private remittances and other transfers -12,316 -12,374 -12,9% -3,233 -3,271 -3,521 -3,581 -3,417 11 Change in U.S. government assets other than official reserve assets, net (increase, -) 1,271 2,304 3,397 3,180 -437 --3388 --227777 --338855 12 Change in U.S. official reserve assets (increase, -) -25,293 -2,158 5,763 3,877 1,225 -1,057 1,464 1,952 N Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -535 -192 -177 6 -23 -172 -168 -173 15 Reserve position in International Monetary Fund 471 731 -367 -114 17 111 1 -118 16 Foreign currencies -25,229 -2,697 6,307 3,986 1,232 -9% 1,631 2,243 17 Change in U.S. private assets abroad (increase, -) -90,923 -56,467 -71,379 -17,426 -44,947 -3,155 -1,150 -21,724 18 Bank-reported claims -51,255 7,469 -4,753 2,403 -23,219 15,859 10,943 -440 19 Nonbank-reported claims 11,398 -2,477 5,526 -298 1,269 4,764 3,137 20 U.S. purchases of foreign securities, net -22,070 -28,765 -45,017 -12,403 -11,305 -8,703 -8,221 -14,103 21 U.S. direct investments abroad, net -28,9% -32,694 -27,135 -7,128 -11,692 -15,075 -7,009 -7,181 27 Change in foreign official assets in United States (increase, +) ... 8,489 33,908 18,407 4,115 12,819 21,192 20,895 -7,738 23 U.S. Treasury securities 149 29,576 15,815 5,624 12,619 14,909 11,126 -323 24 Other U.S. government obligations 1,383 667 1,301 474 1,075 540 1,699 912 25 Other U.S. government liabilities 146 1,866 1,600 654 -344 % 598 875 26 Other U.S. liabilities reported by U.S. banks3 4,976 3,385 -1,668 -2,732 -914 5,534 7,547 -8,202 27 Other foreign official assets 1,835 -1,586 1,359 95 383 113 -75 -1,000 28 Change in foreign private assets in United States (increase, +)... 205,205 65,471 48,573 18,818 36,110 -2,629 26,520 25,024 29 U.S. bank-reported liabilities3 63,382 16,370 -13,677 8,508 23,465 -4,474 -551 19,945 30 U.S. nonbank-reported liabilities 5,565 4,906 -405 1,575 725 1,942 1,141 31 Foreign private purchases of U.S. Treasury securities, net . 29,618 -2,534 16,241 -1,306 1,408 -828 10,286 55,,336644 37 Foreign purchases of other U.S. securities, net 38,767 1,592 34,918 10,012 4,832 4,551 10,333 3,076 33 Foreign direct investments in United States, net 67,873 45,137 11,498 29 5,680 -3,820 5,311 -3,361 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy 2,394 47,370 -1,078 -1,478 2,447 -8,410 -29,650 17,109 36 Due to seasonal adjustment -6,137 613 4,023 410 -7,680 37 Before seasonal adjustment 2,394 47,370 -1,078 4,659 1,835 -12,433 -30,060 24,789 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -25,293 -2,158 5,763 3,877 1,225 -1,057 11,,446644 11,,995522 39 Foreign official assets in United States, excluding line 25 (increase, +) 8,343 32,042 16,807 3,461 13,163 21,0% 20,297 -8,613 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 10,738 1,707 -5,604 -4,288 1,023 2,459 --22,,112255 33,,006611 1. Seasonal factors not calculated for lines 12-16, 18-20, 22-34, and 38-40. 4. Associated primarily with military sales contracts and other transactions 2. Data are on an international accounts basis. The data differ from the Census arranged with or through foreign official agencies. basis data, shown in table 3.11, for reasons of coverage and timing. Military 5. Consists of investments in U.S. corporate stocks and in debt securities of exports are excluded from merchandise trade data and are included in line 6. private corporations and state and local governments. 3. Reporting banks include all types of depository institution as well as some SOURCE. U.S. Department of Commerce, Survey of Current Business. brokers and dealers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • April 1993 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1992 IItteemm 11999900 11999911 11999922 June Julyr Aug/ Sept/ Oct/ Nov/ Dec." 1 Exports of domestic and foreign merchandise, excluding grant-aid shipments 393,592 421,730 448,156 38,165 37,806 3355,,779999 3377,,888822 3399,,007722 3388,,118877 3399,,772288 2 General imports including merchandise for immediate consumption plus entries into bonded warehouses 495,311 487,129 532,498 44,957 45,170 44,974 46,551 46,324 45,535 46,681 3 Trade balance -101,718 -65,399 -84,341 -6,792 -7,364 -9,174 -8,669 -7,252 -7,348 -6,953 1. Government and nongovernment shipments of merchandise between foreign the United States. Since Jan. 1, 1987, merchandise trade data have been released countries and the fifty states, including the District of Columbia, Puerto Rico, the forty-five days after the end of the month; the previous month is revised to reflect U.S. Virgin Islands, and U.S. Foreign Trade Zones. Data exclude (1) shipments late documents. among the United States, Puerto Rico, the U.S. Virgin Islands, and other U.S. Data in this table differ from figures for merchandise trade shown in the U.S. affiliated insular areas, (2) shipments to U.S. Armed Forces and diplomatic balance of payments accounts (table 3.10, lines 2 to 4) primarily for reasons of missions abroad for their own use, (3) U.S. goods returned to the United States by coverage. For both exports and imports a large part of the difference is the its Armed Forces, (4) personal and household effects of travelers, and (5) treatment of military sales and purchases. The military sales to foreigners in-transit shipments. Data reflect the total arrival of merchandise from foreign (exports) and purchases from foreigners (imports) that are included in this table as countries that immediately entered consumption channels, warehouses, or U.S. merchandise trade are shifted, in the balance of payments accounts, from Foreign Trade Zones (general imports). Import data are Customs value; export "merchandise trade" into the broader category "military transactions." data are F.A.S. value. Beginning in 1990, data for U.S. exports to Canada are SOURCE. FT900, U.S. Merchandise Trade, (U.S. Department of Commerce, derived from import data compiled by Canada; similarly, in Canadian statistics, Bureau of the Census). Canadian exports to the United States are derived from import data compiled by 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1992 1993 Asset 1989 1990 1991 July Aug. Sept. Oct. Nov. Dec/ 1 Total 74,609 83,316 77,719 77,370 78,474 78,527 74,207 72,231 71,323 2 Gold stock, including Exchange Stabilization Fund1 11,059 11,058 11,057 11,059 11,059 11,059 11,060 11,059 11,056 3 Special drawing rights ' 9,951 10,989 11,240 11,702 12,193 12,111 11,561 11,495 8,503 4 Reserve position in International Monetary Fund2 9,048 9,076 9,488 9,625 9,762 9,778 9,261 8,781 11,759 5 Foreign currencies4 44,551 52,193 45,934 44,984 45,460 45,579 42,325 40,8% 40,005 1. Gold held "under earmark" at Federal Reserve Banks for foreign and 5 currencies have been used. U.S. SDR holdings and reserve positions in the IMF international accounts is not included in the gold stock of the United States; see also have been valued on this basis since July 1974. table 3.13, line 3. Gold stock is valued at $42.22 per fine troy ounce. 3. Includes allocations of SDRs by the International Monetary Fund on Jan. 1 2. Special drawing rights (SDRs) are valued according to a technique adopted of the year indicated, as follows: 1970—$867 million; 1971—$717 million; 1972— by the International Monetary Fund (IMF) in July 1974. Values are based on a $710 million; 1979—$1,139 million; 1980—$1,152 million; 1981—$1,093 million; weighted average of exchange rates for the currencies of member countries. From plus net transactions in SDRs. July 1974 through December 1980, 16 currencies were used; since January 1981, 4. Valued at current market exchange rates. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1992 1993 AAsssseett 11998899 11999900 11999911 July Aug. Sept. Oct. Nov. Dec. Jan.P 1 Deposits 589 369 968 264 297 546 415 229 205 325 Held in custody 2 U.S. Treasury securities 224,911 278,499 281,107 316,431 318,328 306,971 311,538 308,959 314,481 324,356 3 Earmarked gold3 13,456 13,387 13,303 13,261 13,261 13,241 13,201 13,192 13,686 13,077 1. Excludes deposits and U.S. Treasury securities held for international and 3. Held for foreign and international accounts and valued at $42.22 per fine regional organizations. troy ounce; not included in the gold stock of the United States. 2. Marketable U.S. Treasury bills, notes, and bonds and nonmarketable U.S. Treasury securities payable at face value in dollars or foreign currencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A55 3.14 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data1 Millions of dollars, end of period 1992 AAccccoouunntt 11998899 11999900 11999911 June July Aug. Sept. Oct. Nov. Dec. ASSETS All foreign countries 1 Total payable in any currency 545,366 556,925 548,901 564,466 537,529 544,815 544,332r 554,042r 566,519r 541,871 2 Claims on United States 198,835 188,4% 176,301 183,933 171,911 163,039 167,258 175,019 177,417R 166,782 3 Parent bank 157,092 148,837 137,509 147,626 136,287 128,267 134,019 139,058 141,526 131,609 4 Other banks in United States 17,042 13,2% 12,884 10,418 9,576 9,181 8,083 10,658 10,009 10,397 5 Nonbanks 24,701 26,363 25,908 25,889 26,048 25,591 25,156 25,303 25,882R 24,776 6 Claims on foreigners 300,575 312,449 303,934 311,990 311,578 321,631 319,115 318,901 328,417R 317,711 7 Other branches of parent bank 113,810 135,003 111,729 115,398 112,177 116,674 118,105 115,589 125,143 123,185 8 Banks 90,703 72,602 81,970 84,534 85,141 87,347 83,912 86,400 85,911 81,904 9 Public borrowers 16,456 17,555 18,652 20,162 19,645 20,423 20,485 20,783 20,378 20,727 10 Nonbank foreigners 79,606 87,289 91,583 91,8% 94,615 97,187 %,613 %,129 %,985R 91,895 11 Other assets 45,956 55,980 68,666 68,543 54,040 60,145 57,959R 60,122R 60,685 57,378 12 Total payable in U.S. dollars 382,498 379,479 363,941 369,561 349,145 340,819 346,633 363,787r 374,196r 365,429 N Claims on United States 191,184 180,174 169,662 177,638 166,507 157,405 161,302 169,323 171,912R 162,109 14 Parent bank 152,294 142,%2 133,476 144,287 133,120 124,737 130,346 136,274 138,408 128,663 15 Other banks in United States 16,386 12,513 12,025 10,016 9,135 8,876 7,476 9,335 9,281 9,807 16 Nonbanks 22,504 24,699 24,161 23,335 24,252 23,792 23,480 23,714 24,223R 23,639 17 Claims on foreigners 169,690 174,451 167,010 168,586 162,843 161,500 166,360 173,138 182,172R 183,202 18 Other branches of parent bank 82,949 95,298 78,114 76,700 72,250 70,693 72,116 76,106 83,902 83,060 19 Banks 48,3% 36,440 41,635 43,307 41,718 40,350 42,281 45,276 45,756 46,955 20 Public borrowers 10,961 12,298 13,685 13,723 13,320 13,661 13,965 13,941 13,995 14,313 21 Nonbank foreigners 27,384 30,415 33,576 34,856 35,555 36,7% 37,998 37,815 38,519* 38,874 22 Other assets 21,624 24,854 27,269 23,337 19,795 21,914 18,971 21,326R 20,112 20,118 United Kingdom 23 Total payable in any currency 161,947 184,818 175,599 171,027 159,317 165,832 161,157 168,063 168,333 165,591 24 Claims on United States 39,212 45,560 35,257 38,0% 38,763 37,511 35,891 39,558 38,358 36,403 25 Parent bank 35,847 42,413 31,931 35,343 35,542 34,593 32,929 36,413 35,027 32,889 26 Other banks in United States 1,058 792 1,267 756 1,065 744 1,067 1,400 925 1,869 27 Nonbanks 2,307 2,355 2,059 1,997 2,156 2,174 1,895 1,745 2,406 1,645 28 Claims on foreigners 107,657 115,536 109,692 104,270 105,990 108,895 106,758 109,919 113,193 111,623 29 Other branches of parent bank 37,728 46,367 35,735 36,952 35,359 37,732 37,977 40,594 45,092 46,165 30 Banks 36,159 31,604 36,394 34,783 36,777 37,711 36,1% 36,701 34,559 33,399 31 Public borrowers 3,293 3,860 3,306 2,995 3,128 3,046 3,371 3,692 3,370 3,329 32 Nonbank foreigners 30,477 33,705 34,257 29,540 30,726 30,406 29,214 28,932 30,172 28,730 33 Other assets 15,078 23,722 30,650 28,661 14,564 19,426 18,508 18,586 16,782 17,565 34 Total payable in U.S. dollars 103,208 116,762 105,974 102,737 98,828 99,610 100,449 107,342 109,479 109,449 35 Claims on United States 36,404 41,259 32,418 35,376 36,133 34,948 33,618 37,359 35,956 34,508 36 Parent bank 34,329 39,609 30,370 33,751 33,936 32,786 31,578 35,299 33,765 31,615 37 Other banks in United States 843 334 822 627 785 625 711 769 438 1,593 38 Nonbanks 1,232 1,316 1,226 998 1,412 1,537 1,329 1,291 1,753 1,300 39 Claims on foreigners 59,062 63,701 58,791 56,888 56,264 55,812 59,099 61,658 65,164 66,335 40 Other branches of parent bank 29,872 37,142 28,667 28,541 26,751 26,825 27,986 30,217 34,434 34,124 41 Banks 16,579 13,135 15,219 15,380 15,930 15,565 16,808 17,269 16,848 17,089 42 Public borrowers 2,371 3,143 2,853 2,474 2,653 2,353 2,604 2,515 2,501 2,349 43 Nonbank foreigners 10,240 10,281 12,052 10,493 10,930 11,069 11,701 11,657 11,381 12,773 44 Other assets 7,742 11,802 14,765 10,473 6,431 8,850 7,732 8,325 8,359 8,606 Bahamas and Cayman Islands 45 Total payable in any currency 176,006 162,316 168,326 168,963 153,691 144,089 145,450 153,853 155,974 147,087 46 Claims on United States 124,205 112,989 115,244 114,467 102,850 94,595 %,750 102,619 104,219 %,242 47 Parent bank 87,882 77,873 81,520 83,316 72,107 64,454 68,209 72,185 73,840 66,600 48 Other banks in United States 15,071 11,869 10,907 9,118 8,045 8,060 6,562 8,174 8,272 7,798 49 Nonbanks 21,252 23,247 22,817 22,033 22,698 22,081 21,979 22,260 22,107 21,844 50 Claims on foreigners 44,168 41,356 45,229 45,600 41,886 41,315 41,712 42,514 43,981 44,214 51 Other branches of parent bank 11,309 13,416 11,098 9,392 8,678 8,5% 7,753 7,287 8,238 7,293 52 Banks 22,611 16,310 20,174 21,548 18,837 17,570 18,412 19,680 19,947 20,917 53 Public borrowers 5,217 5,807 7,161 7,084 6,728 7,125 7,102 7,120 7,209 7,786 54 Nonbank foreigners 5,031 5,823 6,7% 7,576 7,643 8,024 8,445 8,427 8,587 8,218 55 Other assets 7,633 7,971 7,853 8,8% 8,955 8,179 6,988 8,720 7,774 6,631 56 Total payable in U.S. dollars 170,780 158,390 163,771 163,313 147,905 138,348 139,769 148,865 151,234 142,526 1. Since June 1984, reported claims held by foreign branches have been million to $150 million equivalent in total assets, the threshold now applicable to reduced by an increase in the reporting threshold for "shell" branches from $50 all reporting branches. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • April 1993 3.14 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data1—Continued Account 1989 1990 July Aug. Sept. Oct. Nov. LIABILITIES All foreign countries 57 Total payable in any currency 545,366 556,925 548,901 564,466 537,529 544,815 544,332" 554,042' 566,519" 541,871 58 Negotiable certificates of deposit (CDs) 23,500 18,060 16,284 13,040 12,758 14,246 12,389 12,056 12,342 10,032 59 To United States 197,239 189,412 198,121 204,929 192,087 179,246 185,054 188,517 187,802" 188.926 60 Parent bank 138,412 138,748 136,431 143,474 133,051 126,794 127,573 132,630 131,620" 133.927 61 Other banks in United States 11,704 7,463 13,260 14,009 11,833 10,959 12,386 12,259 13,390 12,180 62 Nonbanks 47,123 43,201 48,430 47,446 47,203 41,493 45,095 43,628 42,792" 42,819 63 To foreigners 296,850 311,668 288,254 302,376 301,943 314,910 311,556 315,654 330,314" 309,498 64 Other branches of parent bank ... 119,591 139,113 112,033 116,760 114,226 120,349 119,634 118,019 126,018" 125,144 65 Banks 76,452 58,986 63,097 65,983 65,419 68,565 68,537 70,483 74,536 62,187 66 Official institutions 16,750 14,791 15,5% 16,399 18,058 18,241 16,724 20,576 20,645 19,730 67 Nonbank foreigners 84,057 98,778 97,528 103,234 104,240 107,755 106,661 106,576 109,115 102,437 68 Other liabilities 27,777 37,785 46,242 44,121 30,741 36,413 35,333" 37,815" 36,061" 33,415 69 Total payable in U.S. dollars 3%, 613 383,522 370,561 374,506 354,666 346,377 346,239' 364,674' 372,118' 367,317 70 Negotiable CDs 19,619 14,094 11.909 8,475 8,531 8,755 7,628 6,710 7,503 6,238 71 To United States 187,286 175,654 185,286 192,792 179,395 166,377 170,757 175,548 175,655" 177,667 72 Parent bank 132,563 130,510 129,669 136,273 125,647 119,339 119,714 125,122 124,472 127,049 73 Other banks in United States 10,519 6,052 11,707 13,251 10,816 9,866 11,095 11,387 12,244 11,510 74 Nonbanks 44,204 39,092 43.910 43,268 42,932 37,172 39,948 39,039 38,939" 39,108 75 To foreigners 176,460 179,002 158,993 158,532 155,352 157,475 155,018 166,126 175,293" 171,624 76 Other branches of parent bank ... 87,636 98,128 76,601 77,604 73,699 74,037 72,947 77,353 82,957" 83,700 77 Banks 30,537 20,251 24,156 23,474 22,955 22,973 22,822 25,209 28,404 26,118 78 Official institutions 9,873 7,921 10,304 10,119 11,543 10,713 9,939 12,097 12,342 12,430 79 Nonbank foreigners 48,414 52,702 47,932 47,335 47,155 49,752 49,310 51,467 51,590 49,376 80 Other liabilities 13,248 14,772 14,373 14,707 11,388 13,770 12,836" 16,290" 13,667" 11,788 United Kingdom 81 Total payable in any currency .. 161,947 184,818 175,599 171,027 159,317 165,832 161,157 168,063 168,333 165,591 82 Negotiable CDs 20,056 14,256 11,333 7,612 7,731 8,083 7,266 6,064 5,636 4,517 83 To United States 36,036 39,928 37,720 36,660 37,164 35,527 35,885 35,399 34,532 39,172 84 Parent bank 29,726 31,806 29,834 28,201 29,104 27,695 27,528 27,427 26,471 31,196 85 Other banks in United States 1,256 1,505 1,438 1,326 1,315 1,632 1,670 1,341 1,689 1,065 86 Nonbanks 5,054 6,617 6,448 7,133 6,745 6,200 6,687 6,631 6,372 6,911 87 To foreigners 92,307 108,531 98,167 100,340 100,738 104,892 101,082 109,358 113,395 107,178 88 Other branches of parent bank 27,397 36,709 30,054 31,464 30,205 31,234 29,839 33,6% 35,560 35,983 89 Banks 29,780 25,126 25,541 25,315 25,155 26,435 25,823 28,792 30,609 25,233 90 Official institutions 8,551 8,361 9,670 10,167 11,091 10,699 9,131 11,687 11,438 12,090 91 Nonbank foreigners 26,579 38,335 32,902 33,394 34,287 36,524 36,289 35,183 35,788 33,872 92 Other liabilities 13,548 22,103 28,379 26,415 13,684 17,330 16,924 17,242 14,770 14,724 93 Total payable in U.S. dollars 108,178 116,094 108,755 101,901 97,565 99,092 95,642 104,521 105,699 107,610 94 Negotiable CDs 18,143 12,710 10,076 5,750 6,139 5,890 5,689 4,213 4,494 3,894 95 To United States 33,056 34,697 33,003 32,300 32,178 30,357 30,330 31,266 30,204 34,857 96 Parent bank 28,812 29,955 28,260 26,720 27,351 25,873 25,700 26,021 25,160 29,497 97 Other banks in United States . 1,065 1,156 1,177 1,084 857 1,088 992 866 906 709 98 Nonbanks 3,179 3,586 3,566 4,4% 3,970 3,3% 3,638 4,379 4,138 4,651 99 To foreigners 50,517 60,014 56,626 54,262 52,894 54,381 51,677 59,938 62,899 62,048 100 Other branches of parent bank 18,384 25,957 20,800 20,918 18,634 18,983 17,747 22,080 22,8% 22,026 101 Banks 12,244 9,488 11,069 9,848 9,399 9,289 9,112 10,956 13,050 12,540 102 Official institutions 5,454 4,692 7,156 7,049 7,808 6,956 6,156 8,142 8,459 8,847 103 Nonbank foreigners 14,435 19,877 17,601 16,447 17,053 19,153 18,662 18,760 18,494 18,635 104 Other liabilities 6,462 8,673 9,050 9,589 6,354 8,464 7,946 9,104 8,102 6,811 Bahamas and Cayman Islands 105 Total payable in any currency .. 176,006 162,316 168,326 168,963 153,691 144,089 145,450 153,853 155,974 147,087 106 Negotiable CDs 678 646 1,173 1,894 1,330 1,814 872 1,394 1,939 1,350 107 To United States 124,859 114,738 129,872 130,815 115,589 105,816 108,966 113,894 116,385 111,414 108 Parent bank 75,188 74,941 79,394 80,998 67,356 64,008 63,057 69,201 71,083 66,908 109 Other banks in United States . 8,883 4,526 10,231 11,708 9,641 8,522 9,779 10,281 10,942 10,443 110 Nonbanks 40,788 35,271 40,247 38,109 38,592 33,286 36,130 34,412 34,360 34,063 111 To foreigners 47,382 44,444 35,200 34,637 35,136 34,878 34,054 34,889 35,411 32,556 112 Other branches of parent bank 23,414 24,715 17,388 16,799 17,668 17,315 16,071 15,441 16,287 15,169 113 Banks 8,823 5,588 5,662 6,075 6,390 6,242 6,787 6,987 7,574 6,422 114 Official institutions 1,097 622 572 770 862 935 984 1,058 932 805 115 Nonbank foreigners 14,048 13,519 11,578 10,993 10,216 10,386 10,212 11,403 10,618 10,160 116 Other liabilities 3,087 2,488 2,081 1,617 1,636 1,581 1,558 3,676 2,239 1,767 117 Total payable in U.S. dollars 171,250 157,132 163,603 163,951 148,744 138,864 139,963 148,881 151,325 142,815 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A57 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1992 IItteemm 11999900 11999911 June July Aug. Sept. Oct. Nov/ Dec.p 1 Total1 344,529 360,530 401,950 404,162 406,671 393,758 405,385 394,876 398,398 By type 2 Liabilities reported by banks in the United States 39,880 38,396 51,462 48,879 52,078 43,675 60,853 54,038 54,549 3 U.S. Treasury bills and certificates 79,424 92,692 109,278 114,781 113,307 113,634 104,286 100,702 104,598 U.S. Treasury bonds and notes 4 Marketable 202,487 203,677 213,477 212,710 213,407 208,924 211,875 211,272 210,551 5 Nonmarketable 4,491 4,858 4,625 4,582 4,476 4,505 4,473 4,503 4,532 6 U.S. securities other than U.S. Treasury securities 18,247 20,907 23,108 23,210 23,403 23,020 23,898 24,361 24,168 By area 7 Western Europe1 167,191 168,365 191,377 194,465 196,061 186,434 194,611 184,276 188,903 8 Canada 8,671 7,460 9,302 9,876 9,990 7,027 8,111 6,381 7,870 9 Latin America and Caribbean 21,184 33,554 39,433 39,146 38,356 37,703 38,538r 38,912 39,607 10 Asia 138,096 139,465 150,207 150,043 151,785 151,667 153,555 154,493 152,150 11 Africa , 1,434 2,092 3,265 3,218 2,860 3,360 3,481 3,779 3,565 12 Other countries 7,955 9,592 8,364 7,412 7,617 7,565 7,087r 7,033 6,301 1. Includes the Bank for International Settlements. 5. Debt securities of U.S. government corporations and federally sponsored 2. Principally demand deposits, time deposits, bankers acceptances, commer- agencies, and U.S. corporate stocks and bonds. cial paper, negotiable time certificates of deposit, and borrowings under repur- 6. Includes countries in Oceania and Eastern Europe. chase agreements. SOURCE. Based on Treasury Department data and on data reported to the 3. Includes nonmarketable certificates of indebtedness (including those payable Treasury Department by banks (including Federal Reserve Banks) and securities in foreign currencies through 1974) and Treasury bills issued to official institutions dealers in the United States and on the 1984 benchmark survey of foreign portfolio of foreign countries. investment in the United States. 4. Excludes notes issued to foreign official nonreserve agencies. Includes bonds and notes payable in foreign currencies; zero coupon bonds are included at current value. 3.16 LIABILITIES TO, AND CLAIMS ON, FOREIGNERS Reported by Banks in the United States1 Payable in Foreign Currencies Millions of dollars, end of period 1991 1992r IItteemm 11998888 11998899 11999900 Dec. Mar. June Sept. 1 Banks' liabilities 74,980 67,835 70,477 75,129 68,071 70,842 85,278 2 Banks' claims 68,983 65,127 66,796 73,195 60,435 58,262 73,174 3 Deposits 25,100 20,491 29,672 26,192 23,270 23,462 29,412 4 Other claims 43,884 44,636 37,124 47,003 37,165 34,800 43,762 5 Claims of banks' domestic customers 364 3,507 6,309 3,398 2,962 4,375 3,908 1. Data on claims exclude foreign currencies held by U.S. monetary 2. Assets owned by customers of the reporting bank located in the United authorities. 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

A58 International Statistics • April 1993 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1992 11999900 11999911 11999922 June July Aug. Sept. Oct. Nov.r Dec." HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 759,634 756,066 806,132 786,700 777,058 768,819 793,159 793,149" 799,276 806,132 2 Banks' own liabilities 577,229 575,374 602,550 587,899 571,516 564,071 585,806 590,768r 600,843 602,550 3 Demand deposits 21,723 20,321 22,008 20,930 19,739 21,698 22,474 21,288 21,916 22,008 4 Time deposits 168,017 159,649 160,631 151,965 148,254 144,119 143,768 158,ISC 157,401 160,631 5 Other3 65,822 66,305 93,553 85,656 82,953 86,611 82,484 91,673r 95,552 93,553 6 Own foreign offices4 321,667 329,099 326,358 329,348 320,570 311,643 337,080 319,627r 325,974 326,358 7 Banks' custodial liabilities5 182,405 180,692 203,582 198,801 205,542 204,748 207,353 202,381r 198,433 203,582 8 U.S. Treasury bills and certificates6 96,796 110,734 127,530 128,672 135,579 135,744 134,894 127,993 122,480 127,530 9 Other negotiable and readily transferable instruments7 17,578 18,664 21,960 18,020 19,339 18,541 19,341 19,954 21,699 21,960 10 Other 68,031 51,294 54,092 52,109 50,624 50,463 53,118 54,434r 54,254 54,092 11 Nonmonetary international and regional organizations8 5,918 8,981 9,056 12,851 11,321 12,874 10,810 10,736r 9,702 9,056 12 Banks' own liabilities 4,540 6,827 6,657 10,628 8,192 9,767 8,173 7,010r 6,769 6,657 13 Demand deposits 36 43 46 40 24 21 24 73 58 46 14 Time deposits 1,050 2,714 3,328 3,788 3,008 2,630 2,527 l,908r 2,570 3,328 15 Other3. 3,455 4,070 3,283 6,800 5,160 7,116 5,622 5,029* 4,141 3,283 16 Banks' custodial liabilities5 1,378 2,154 2,399 2,223 3,129 3,107 2,637 3,726 2,933 2,399 17 U.S. Treasury bills and certificates6 364 1,730 1,908 1,687 2,602 2,654 1,991 3,085 2,371 1,908 18 Other negotiable and readily transferable instruments7 1,014 424 486 534 527 453 646 641 561 486 19 Other 0 0 5 2 0 0 0 0 1 5 20 Official institutions9 119,303 131,088 159,147 160,740 163,660 165,385 157,309 165,139 154,740 159,147 21 Banks' own liabilities 34,910 34,411 50,784 47,574 45,334 48,526 40.524 57,145 50,058 50,784 22 Demand deposits 1,924 2,626 1,279 1,630 1,372 1,676 1,761 1,723 1,492 1,279 23 Time deposits 14,359 16,504 17,267 17,570 18,129 18,098 16,238 19,703 17,901 17,267 24 Other3 18,628 15,281 32,238 28,374 25,833 28,752 22.525 35,719 30,665 32,238 25 Banks' custodial liabilities5 84,393 96,677 108,363 113,166 118,326 116,859 116,785 107,994 104,682 108,363 26 U.S. Treasury bills and certificates6 79,424 92,692 104,598 109,278 114,781 113,307 113,634 104,286 100,702 104,598 27 Other negotiable and readily transferable instruments7 4,766 3,879 3,726 3,602 3,459 3,466 2,922 3,595 3,784 3,726 28 Other 203 106 39 286 86 86 229 113 1% 39 29 Banks10 540,805 522,265 543,208 526,453 514,526 501,804 536,759 525,448r 544,301 543,208 30 Banks' own liabilities 458,470 459,335 472,091 459,987 448,210 435,147 466,796 454,496r 473,354 472,091 31 Unaffiliated foreign banks 136,802 130,236 145,733 130,639 127,640 123,504 129,716 134,869* 147,380 145,733 32 Demand deposits 10,053 8,648 10,410 9,705 8,442 9,851 10,443 9,741 10,088 10,410 33 Time deposits 88,541 82,857 90,773 80,118 77,229 73,175 74,447 86,312r 88,187 90,773 34 Other3 38,208 38,731 44,550 40,816 41,969 40,478 44,826 38,816 49,105 44,550 35 Own foreign offices4 321,667 329,099 326,358 329,348 320,570 311,643 337,080 319,627r 325,974 326,358 36 Banks' custodial liabilities5 82,335 62,930 71,117 66,466 66,316 66,657 69,963 70,952r 70,947 71,117 37 U.S. Treasury bills and certificates6 10,669 7,471 11,087 8,927 9,444 10,429 10,905 10,481 10,444 11,087 38 Other negotiable and readily transferable instruments7 5,341 5,694 7,561 6,647 7,129 6,920 7,373 7,276 7,516 7,561 39 Other 66,325 49,765 52,469 50,892 49,743 49,308 51,685 53,195r 52,987 52,469 40 Other foreigners 93,608 93,732 94,721 86,656 87,551 88,756 88,281 91,826r 90,533 94,721 41 Banks' own liabilities 79,309 74,801 73,018 69,710 69,780 70,631 70,313 72,117r 70,662 73,018 42 Demand deposits 9,711 9,004 10,273 9,555 9,901 10,150 10,246 9,751 10,278 10,273 43 Time deposits 64,067 57,574 49,263 50,489 49,888 50,216 50,556 50,257r 48,743 49,263 44 Other3 5,530 8,223 13,482 9,666 9,991 10,265 9,511 12,109 11,641 13,482 45 Banks' custodial liabilities5 14,299 18,931 21,703 16,946 17,771 18,125 17,968 19,709 19,871 21,703 46 U.S. Treasury bills and certificates6 6,339 8,841 9,937 8,780 8,752 9,354 8,364 10,141 8,963 9,937 47 Other negotiable and readily transferable instruments7 6,457 8,667 10,187 7,237 8,224 7,702 8,400 8,442 9,838 10,187 48 Other 1,503 1,423 1,579 929 795 1,069 1,204 1,126 1,070 1,579 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 7,073 7,456 9,114 7,351 6,976 7,279 7,452 7,672 7,716 9,114 1. Reporting banks include all types of depository institution, as well as some 6. Includes nonmarketable certificates of indebtedness and Treasury bills brokers and dealers. issued to official institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in 7. Principally bankers acceptances, commercial paper, and negotiable time "Other negotiable and readily transferable instruments." certificates of deposit. 3. Includes borrowing under repurchase agreements. 8. Principally the International Bank for Reconstruction and Development, the 4. For U.S. banks, includes amounts due to own foreign branches and foreign Inter-American Development Bank, and the Asian Development Bank. Excludes subsidiaries consolidated in Consolidated Report of Condition filed with bank "holdings of dollars" of the International Monetary Fund. regulatory agencies. For agencies, branches, and majority-owned subsidiaries of 9. Foreign central banks, foreign central governments, and the Bank for foreign banks, consists principally of amounts due to head office or parent foreign International Settlements. bank, and foreign branches, agencies, or wholly owned subsidiaries of head office 10. Excludes central banks, which are included in "Official institutions." or parent foreign bank. 5. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.17—Continued 1992 IItteemm 11999900 11999911 11999922 June July Aug. Sept. Oct. Nov. Dec.p AREA 1 Total, all foreigners 759,634 756,066 806,132 786,700 777,058 768,819 793,159 793,149r 799,276r 806,132 2 Foreign countries 753,716 747,085 797,076 773,849 765,737 755,945 782,349 782,413r 789,574r 797,076 3 Europe 254,452 249,097 309,037 279,569 283,144 289,388 290,344 306,499 311,821r 309,037 4 Austria 1,229 1,193 1,615 1,490 1,445 1,427 1,456 1,584 1,358 1,615 5 Belgium and Luxembourg 12,382 13,337 20,587 16,740 16,797 18,449 17,942 21,177 19,631 20,587 6 Denmark 1,399 937 3,059 1,263 1,348 1,329 1,760 1,788 1,481 3,059 7 Finland 602 1,341 1,300 843 720 976 685 949 1,144 1,300 8 France 30,946 31,808 41,371 30,132 28,900 29,456 32,153 34,876 39,%3r 41,371 9 Germany 7,485 8,619 19,014 8,068 8,%7 11,032 14,739 13,810 15,401r 19,014 10 Greece 934 765 910 1,374 998 934 1,069 872 749 910 11 Italy 17,735 13,541 10,414 10,362 10,164 10,992 12,236 11,104 12,494r 10,414 12 Netherlands 5,350 7,161 7,376 9,456 9,653 10,422 10,397 9,334 8,41 lr 7,376 13 Norway 2,357 1,866 3,319 1,359 1,421 1,341 1,851 1,577 2,014 3,319 14 Portugal 2,958 2,184 2,465 2,530 2,659 2,664 2,245 2,258 2,255 2,465 15 Spain 7,544 11,391 9,790 15,844 15,313 14,904 15,589 14,602 10,383r 9,790 16 Sweden 1,837 2,222 3,043 4,125 3,710 4,162 3,194 5,313 4,485r 3,043 17 Switzerland 36,690 37,238 39,531 35,987 39,568 40,569 39,314 il,S6T 40,791r 39,531 18 Turkey 1,169 1,598 2,666 1,580 1,789 2,021 2,087 2,524 2,360 2,666 19 United Kingdom 109,555 100,292 112,358 111,712 111,913 111,521 115,747 114,668 117,335r 112,358 20 Yugoslavia 928 622 503 555 547 554 567 577 575 503 21 Others in Western Europe 11,689 9,274 25,714 21,607 22,743 21,872 12,867 27.2281 26.6911 25,714 27. U.S.S.R 119 241 581 440 609 525 499 450 601 581 23 Other Eastern Europe12 1,545 3,467 3,421 4,102 3,880 4,238 3,947 3,941 3,699 3,421 24 Canada 20,349 21,605 22,177 20,358 22,350 20,410 22,668 21,378 22,052 22,177 25 Latin America and Caribbean 332,997 345,529 312,763 339,161 325,397 310,989 315,512 309,%3r 309,7 llr 312,763 26 Argentina 7,365 7,753 9,475 9,698 10,041 9,397 9,065 9,387 8,715 9,475 77 Bahamas 107,386 100,622 82,176 101,822 92,546 82,571 76,295 85,899r 86,159r 82,176 78 Bermuda 2,822 3,178 7,079 3,598 4,848 4,782 4,275 5,889 6,552r 7,079 79 Brazil 5,834 5,704 5,581 5,397 5,311 5,283 5,393 5,828 5,235r 5,581 30 British West Indies 147,321 163,620 148,871 156,525 151,591 148,164 159,703 143,240r 143,005r 148,871 31 Chile 3,145 3,283 3,030 3,701 3,605 3,393 3,440 3,253 2,925 3,030 37 Colombia 4,492 4,661 4,580 4,721 4,686 4,711 4,792 4,767 4,677 4,580 33 Cuba 11 2 3 3 12 9 33 10 11 3 34 Ecuador 1,379 1,232 987 1,137 1,074 1,214 1,073 1,026 1,016 987 35 Guatemala 1,541 1,594 1,375 1,447 1,420 1,432 1,416 1,376 1,323 1,375 36 Jamaica 257 231 371 309 271 272 309 274 271 371 37 Mexico 16,650 19,957 19,429 19,491 19,642 20,046 19,650 19,226 19,543r 19,429 38 Netherlands Antilles 7,357 5,592 5,208 5,313 5,085 4,825 4,751 4,708 6,101 5,208 39 Panama 4,574 4,695 3,982 4,286 4,457 4,302 4,595 4,115 3,975r 3,982 40 Peru 1,294 1,249 1,056 1,156 1,131 1,123 1,143 1,124 l,026r 1,056 41 Uruguay 2,520 2,096 1,954 2,169 2,163 2,182 2,019 2,087 2,092 1,954 47 Venezuela 12,271 13,181 11,370 11,448 11,080 10,802 11,101 11,504r ll,003r 11,370 43 Other 6,779 6,879 6,236 6,940 6,434 6,481 6,459 6,250 6,082r 6,236 44 136,844 120,462 143,077 124,553 124,905 125,215 144,145 134,327r 136,103r 143,077 China 45 People's Republic of China 2,421 2,626 4,327 2,378 2,292 2,508 2,480 2,582 22,,555500 44,,332277 46 Republic of China (Taiwan) 11,246 11,491 7,221 9,985 10,277 10,362 9,430 8,617 8,721r 7,221 47 Hong Kong 12,754 14,269 18,365 16,980 16,840 17,775 17,991 17,513r 16,330r 18,365 48 1,233 2,418 1,369 1,715 1,567 1,480 1,372 1,234 1,213 1,369 49 1,238 1,463 1,465 1,387 1,256 958 1,507 1,249 1,232 1,465 50 2,767 2,015 3,746 2,976 2,850 2,620 2,613 2,208 3,691 3,746 51 67,076 47,069 58,208 44,269 45,826 45,683 64,651 56,070 55,374 58,208 57 Korea (South) 2,287 2,587 3,336 2,839 3,288 3,644 3,672 3,531 3,685 3,336 53 1,585 2,449 2,266 1,813 1,994 1,920 2,028 2,275 2,222 2,266 54 Thailand 1,443 2,252 5,565 4,586 4,017 4,624 4,517 5,082 5,797 5,565 55 Middle Eastern oil-exporting countries 15,829 15,752 21,445 18,983 19,828 18,938 19,977 19,040 20,266 21,445 56 Other 16,965 16,071 15,764 16,642 14,870 14,703 13,907 14,926 15,022 15,764 57 4,630 4,825 5,852 5,810 5,516 5,314 5,592 5,843 6,062r 5,852 58 Egypt 1,425 1,621 2,472 2,540 2,324 2,143 2,243 2,598 2,601r 2,472 59 Morocco 104 79 76 87 85 93 100 98 93 76 60 South Africa 228 228 189 248 269 275 190 240 214 189 61 53 31 19 29 17 24 14 24 23 19 67 Oil-exporting countries 1,110 1,082 1,344 1,232 1,211 1,090 1,339 1,201 1,402 1,344 63 Other 1,710 1,784 1,752 1,674 1,610 1,689 1,706 1,682 1,729 1,752 64 4,444 5,567 4,170 4,398 4,425 4,629 4,088 4,403 3,825 4,170 65 Australia 3,807 4,464 3,047 3,192 3,066 3,322 2,927 2,987 2,654 3,047 66 Other 637 1,103 1,123 1,206 1,359 1,307 1,161 1,416 1,171 1,123 67 Nonmonetary international and regional organizations 5,918 8,981 9,056 12,851 11,321 12,874 10,810 10,736r 9,702* 9,056 68 International 4,390 6,485 7,136 9,7% 7,402 9,651 7,714 7,689r 6,542r 7,136 69 Latin American regional16 1,048 1,181 1,419 2,436 2,699 2,319 2,289 2,139 2,257 1,419 70 Other regional17 479 1,315 501 619 1,220 904 807 908 903 501 11. Includes the Bank for International Settlements and Eastern European 15. Principally the International Bank for Reconstruction and Development. countries not listed in line 23. Excludes "holdings of dollars" of the International Monetary Fund. 12. Comprises Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 17. Asian, African, Middle Eastern, and European regional organizations, United Arab Emirates (Trucial States). except the Bank for International Settlements, which is included in "Other 14. Comprises Algeria, Gabon, Libya, and Nigeria. Western Europe." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • April 1993 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 1992 AArreeaa aanndd ccoouunnttrryy 11999900 11999911 11999922 June July Aug. Sept. Oct. Nov.* Dec." 1 Total, all foreigners 511,543 514,339 495,312 511,801 502,941 479,705 485,349 493,411r 491,083 495,312 2 Foreign countries 506,750 508,056 490,168 505,807 499,520 475,316 481,178 490,939r 488,202 490,168 3 Europe 113,093 114,310 124,052 126,187 124,453 119,126 117,235 126,109* 122,128 124,052 4 Austria 362 327 340 433 647 606 341 373 440 340 5 Belgium and Luxembourg 5,473 6,158 6,384 6,166 6,475 6,344 7,524 6,971 6,427 6,384 6 Denmark 497 686 707 1,436 951 901 1,007 825 1,056 707 7 Finland 1,047 1,907 1,414 1,516 1,269 1,081 1,299 817 1,230 1,414 8 France 14,468 15,112 14,847 14,440 14,154 13,011 15,004 16,081 15,698 14,847 9 Germany 3,343 3,371 4,229 3,311 3,870 4,707 4,074 5,628 5,327 4,229 10 Greece 727 553 717 506 590 619 606 601 598 717 11 Italy 6,052 8,242 9,050 10,621 10,508 9,876 9,487 9,754 9,443 9,050 12 Netherlands 1,761 2,546 2,490 2,272 2,042 2,075 1,980 2,334 3,006 2,490 13 Norway 782 669 356 722 731 707 639 666 435 356 14 Portugal 292 344 325 367 382 387 383 327 330 325 15 Spain 2,668 1,881 2,801 3,880 3,730 2,590 3,304 4,630 3,504 2,801 16 Sweden 2,094 2,335 4,982 6,720 5,967 6,567 5,494 6,698 5,786 4,982 17 Switzerland 4,202 4,540 4,670 3,974 3,683 3,934 3,112 3,698 3,590 4,670 18 Turkey 1,405 1,063 962 988 1,174 1,002 986 1,177 950 962 19 United Kingdom 65,151 60,395 63,889 63,917 62,800 58,861 56,456 60,191r 58,921 63,889 20 Yugoslavia 1,142 825 573 697 693 678 674 668 661 573 21 Others in Western Europe 597 789 1,716 771 1,227 1,356 1,216 964 1,019 1,716 22 U.S.S.R 530 1,970 3,148 3,035 3,153 3,280 3,199 3,190 3,174 3,148 23 Other Eastern Europe 499 597 452 415 407 544 450 516 533 452 24 Canada 16,091 15,113 14,131 16,370 17,429 15,151 15,902 16,826 15,830 14,131 25 Latin America and Caribbean 231,506 246,137 213,344 243,472 234,066 217,582 210,329 213,340* 217,450 213,344 26 Argentina 6,967 5,869 4,878 5,396 5,614 4,789 4,560 4,568 4,601 4,878 27 Bahamas 76,525 87,138 60,560 83,101 74,806 62,615 58,502 64,848r 66,461 60,560 28 Bermuda 4,056 2,270 6,046 4,951 6,099 6,302 3,567 2,798 6,023 6,046 29 Brazil 17,995 11,894 10,818 12,020 12,186 12,286 11,308 11,558 11,583 10,818 30 British West Indies 88,565 107,846 97,023 106,631 104,133 99,775 99,294 96,741r 95,443 97,023 31 Chile 3,271 2,805 3,435 3,228 3,118 3,220 3,320 3,340 3,298 3,435 32 Colombia 2,587 2,425 2,750 2,304 2,398 2,322 2,475 2,595 2,698 2,750 33 Cuba 0 0 2 0 0 0 0 5 0 2 34 Ecuador 1,387 1,053 882 936 950 949 920 936 926 882 35 Guatemala 191 228 262 175 167 189 237 277 255 262 36 Jamaica 238 158 186 150 151 150 160 147 162 186 37 Mexico 14,851 16,567 15,043 16,464 16,341 16,564 17,313 16,666 16,492 15,043 38 Netherlands Antilles 7,998 1,207 1,379 920 941 966 1,045 1,080 1,529 1,379 39 Panama 1,471 1,560 4,481 2,208 2,025 2,053 1,945 1,988 2,087 4,481 40 Peru 663 739 730 720 708 708 732 721 723 730 41 Uruguay 786 599 936 765 749 799 921 882 877 936 42 Venezuela 2,571 2,516 2,528 2,216 2,360 2,585 2,654 2,702 2,880 2,528 43 Other 1,384 1,263 1,405 1,287 1,320 1,310 1,376 1,488 1,412 1,405 44 138,722 125,262 131,383 112,365 115,933 116,509 130,614 127,228r 126,114 131,383 China 45 People's Republic of China 620 747 1,409 685 642 696 636 978r 624 1,409 46 Republic of China (Taiwan) 1,952 2,087 2,046 1,778 1,965 1,983 2,054 1,848 1,653 2,046 47 Hong Kong 10,648 9,617 9,645 8,272 9,103 8,015 10,087 9,127r 9,268 9,645 48 India 655 441 529 458 512 528 499 500 539 529 49 Indonesia 933 952 1,165 1,085 1,090 1,108 1,089 1,112 1,135 1,165 50 Israel 774 860 820 891 901 920 800 826 937 820 51 Japan 90,699 84,807 78,265 69,231 71,120 71,469 83,201 80,091r 77,666 78,265 52 Korea (South) 5,766 6,048 6,175 5,910 6,063 6,201 6,247 6,113 6,288 6,175 53 Philippines 1,247 1,910 2,145 1,648 1,635 1,775 1,852 2,181r 2,034 2,145 54 Thailand 1,573 1,713 1,860 1,767 1,716 1,691 1,795 1,764 1,873 1,860 55 Middle Eastern oil-exporting countries 10,749 8,284 18,589 14,505 14,323 14,783 14,613 15,488 16,858 18,589 56 Other 13,106 7,796 8,735 6,135 6,863 7,340 7,741 7,200* 7,239 8,735 57 Africa 5,445 4,928 4,281 4,548 4,452 4,455 4,333 4,303 4,233 4,281 58 Egypt 380 294 194 256 261 243 256 229 214 194 59 Morocco 513 575 439 527 4% 483 467 452 443 439 60 South Africa 1,525 1,235 1,041 1,070 1,047 1,066 1,055 1,036 1,063 1,041 6 6 1 2 Z O a il i - r e e x porting countries < 1,48 1 6 6 1,298 4 1,003 4 1,15 4 9 1,15 4 7 1,13 4 0 1,067 4 1,05 4 6 1,02 4 9 1,00 4 3 63 Other 1,525 1,522 1,600 1,532 1,487 1,529 1,484 1,526 1,480 1,600 64 Other 1,892 2,306 2,977 2,865 3,187 2,493 2,765 3,133 2,447 2,977 65 Australia 1,413 1,665 2,264 1,727 1,937 1,463 1,765 1,951 1,601 2,264 66 Other 479 641 713 1,138 1,250 1,030 1,000 1,182 846 713 67 Nonmonetary international and regional organizations6 44,,779933 6,283 5,144 5,994 3,421 4,389 4,171 2,472 2,881 5,144 1. Reporting banks include all types of depository institutions, as well as some 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and brokers and dealers. United Arab Emirates (Trucial States). 2. Includes the Bank for International Settlements and Eastern European 5. Comprises Algeria, Gabon, Libya, and Nigeria. countries not listed in line 23. 6. Excludes the Bank for International Settlements, which is included in 3. Comprises Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. "Other Western Europe." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A61 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1992 June July Aug. Sept. Oct.r Nov.r Dec." 1 Total 579,044 579,683 565,321 552,135 2 Banks' claims 511,543 514,339 495,312 511,801 502,941 479,705 485,349 493,411 491,083 495,312 3 Foreign public borrowers 41,900 37,126 31,468 35,950 32,940 32,263 31,426 32,062 30,851 31,468 4 Own foreign offices2 304,315 318,800 298,853 314,599 302,061 287,523 297,590 297,682 291,386 298,853 5 Unaffiliated foreign banks 117,272 116,602 110,272 111,971 113,963 105,987 105,796 112,508 113,815 110,272 6 Deposits 65,253 69,018 61,288 63,521 62,897 56,294 54,316 60,876 62,194 61,288 7 Other 52,019 47,584 48,984 48,450 51,066 49,693 51,480 51,632 51,621 48,984 8 All other foreigners 48,056 41,811 54,719 49,281 53,977 53,932 50,537 51,159 55,031 54,719 9 Claims of banks' domestic customers3... 67,501 65,344 53,520 66,786 10 Deposits 14,375 15,280 17,098 15,348 11 Negotiable and readily transferable instruments4 41,333 37,125 24,114 38,258 12 Outstanding collections and other claims 11,792 12,939 12,308 13,180 MEMO 13 Customer liability on acceptances 13,628 8,974 7,584 8,505 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 44,638 39,111 n.a. 33,440 34,712 33,223 34,091r 34,152 32,918 n.a. 1. For banks' claims, data are monthly ; for claims of banks' domestic custom- foreign bank, and foreign branches, agencies, or wholly owned subsidiaries of ers, data are quarterly. head office or parent foreign bank. Reporting banks include all types of depository institution, as well as some 3. Assets held by reporting banks for the account of their domestic customers. brokers and dealers. 4. Principally negotiable time certificates of deposit and bankers acceptances. 2. For U.S. banks, includes amounts due from own foreign branches and 5. Includes demand and time deposits and negotiable and nonnegotiable foreign subsidiaries consolidated in Consolidated Report of Condition filed with certificates of deposit denominated in U.S. dollars issued by banks abroad. For bank regulatory agencies. For agencies, branches, and majority-owned subsidiar- description of changes in data reported by nonbanks, see Federal Reserve ies of foreign banks, consists principally of amounts due from head office or parent Bulletin, vol. 65 (July 1979), 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 1991 1992 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa 11998888rr 11998899rr 11999900rr Dec. Mar. June Sept.r 1 Total 233,184 238,123 206,903 195,302 194,455 196,874 187,422 By borrower 2 Maturity of one year or less2 172,634 178,346 165,985 162,573 161,456 162,402 155,135 3 Foreign public borrowers 26,562 23,916 19,305 21,050 20,231 20,492 17,837 4 All other foreigners 146,072 154,430 146,680 141,523 141,225 141,910 137,298 5 Maturity of more than one year 60,550 59,776 40,918 32,729 32,999 34,472 32,287 6 Foreign public borrowers 35,291 36,014 22,269 15,859 16,189 15,147 13,303 7 All other foreigners 25,259 23,762 18,649 16,870 16,810 19,325 18,984 By area Maturity of one year or less 8 Europe 55,909 53,913 49,184 51,835 52,790 54,955 55,842 9 Canada 6,282 5,910 5,450 6,444 6,907 7,935 5,973 10 Latin America and Caribbean 57,991 53,003 49,782 43,597 48,582 49,138 45,300 11 46,224 57,755 53,258 51,059 43,645 41,412 40,754 12 Africa 3,337 3,225 3,040 2,549 2,486 2,142 2,195 13 All other3 2,891 4,541 5,272 7,089 7,046 6,820 5,071 Maturity of more than one year2 14 Europe 4,666 4,121 3,859 3,878 4,360 6,793 6,663 15 Canada 1,922 2,353 3,290 3,595 3,284 3,153 3,243 16 Latin America and Caribbean 47,547 45,816 25,774 18,277 18,196 16,915 15,160 17 3,613 4,172 5,165 4,459 4,729 5,007 4,848 18 Africa 2,301 2,630 2,374 2,335 2,191 2,341 2,095 19 All other3 501 684 456 185 239 263 278 1. Reporting banks include all kinds of depository institutions besides commer- 2. Maturity is time remaining 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

A62 International Statistics • April 1993 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks1 Billions of dollars, end of period 1990 1991 1992 AArreeaa oorr ccoouunnttrryy 11998888 11998899 Sept. Dec. Mar. June Sept. Dec. Mar. June Sept. 1 Total 346.2 338.8 331.5 317.8 325.3 320.4 335.7 341.5 347.6 355.2 345.3R 2 G-10 countries and Switzerland 152.7 152.9 143.6 132.1 129.9 129.8 134.0 137.2 130.5 135.6 136. r 3 Belgium and Luxembourg 9.0 6.3 6.5 5.9 6.2 6.1 5.8 6.0 5.3 6.2 6.2 4 France 10.5 11.7 11.1 10.4 9.7 10.5 11.1 11.0 10.0 11.9 15.4R 5 Germany 10.3 10.5 11.1 10.6 8.8 8.3 9.7 8.3 8.4 8.7 10.9 6 Italy 6.8 7.4 4.4 5.0 4.0 3.6 4.5 5.6 5.4 8.0 6.4 7 Netherlands 2.7 3.1 3.8 3.0 3.3 3.3 3.0 4.7 4.3 3.3 3.7 8 Sweden 1.8 2.0 2.3 2.2 2.0 2.5 2.1 1.9 2.0 1.9 2.2 9 Switzerland 5.4 7.1 5.6 4.4 3.7 3.3 3.9 3.4 3.2 4.6 5.0 10 United Kingdom 66.2 67.2 62.6 60.8 62.3 59.5 64.9 68.5 64.8 65.9 61.4r 11 Canada 5.0 5.4 5.0 5.9 6.8 8.2 5.8 5.8 6.5 6.7 6.7 12 Japan 34.9 32.2 31.3 23.9 23.2 24.6 23.2 22.2 20.7 18.3 18.3 13 Other industrialized countries 21.0 20.7 23.0 22.6 23.1 21.1 21.8 22.7 21.2 25.5 24.9 14 Austria 1.5 1.5 1.6 1.4 1.4 1.1 1.0 .6 .8 .8 .7 15 Denmark 1.1 1.1 1.1 1.1 .9 1.2 .9 .9 .8 1.3 1.5 16 Finland 1.1 1.0 .8 .7 1.0 .8 .6 .7 .8 .8 1.0 17 Greece 1.8 2.5 2.8 2.7 2.5 2.4 2.3 2.6 2.3 2.8 3.0 18 Norway 1.8 1.4 1.6 1.6 1.5 1.5 1.4 1.4 1.5 1.7 1.6 19 Portugal .4 .4 .6 .6 .6 .6 .5 .6 .5 .5 .5 20 Spain 6.2 7.1 8.4 8.3 9.0 7.1 8.3 8.3 7.7 10.1 9.8 21 Turkey 1.5 1.2 1.6 1.7 1.7 1.9 1.6 1.4 1.2 1.5 1.5 22 Other Western Europe 1.3 .7 .7 .9 .8 .9 1.0 1.6 1.3 1.9 1.4 23 South Africa 2.4 2.0 1.9 1.8 1.8 1.8 1.6 1.9 1.8 1.7 1.7 24 Australia 1.8 1.6 2.0 1.8 1.9 2.0 2.4 2.7 2.3 2.3 2.3 25 OPEC2 16.6 17.1 14.2 12.8 17.1 14.0 15.6 14.6 15.8 16.2 15.9 26 Ecuador 1.7 1.3 1.1 1.0 .9 .9 .8 .7 .7 .7 .7 27 Venezuela 7.9 7.0 6.0 5.0 5.1 5.3 5.6 5.4 5.4 5.3 5.4 28 Indonesia 1.7 2.0 2.3 2.7 2.8 2.6 2.8 2.8 3.0 3.0 3.0 29 Middle East countries 3.4 5.0 3.1 2.5 6.6 3.7 5.0 4.2 5.3 5.9 5.4 30 African countries 1.9 1.7 1.7 1.7 1.6 1.5 1.5 1.5 1.4 1.4 1.4 31 Non-OPEC developing countries 85.3 77.5 67.1 65.4 66.4 65.0 65.0 64.3 70.6 68.9 73.2r Latin America 32 Argentina 9.0 6.3 5.0 5.0 4.7 4.6 4.5 4.8 5.0 5.1 6.2 33 Brazil 22.4 19.0 15.4 14.4 13.9 11.6 10.5 9.6 10.8 10.6 10.8 34 Chile 5.6 4.6 3.6 3.5 3.6 3.6 3.7 3.6 3.9 4.0 4.2 35 Colombia 2.1 1.8 1.8 1.8 1.7 1.6 1.6 1.7 1.6 1.6 1.7 36 Mexico 18.8 17.7 12.8 13.0 13.7 14.3 16.2 15.5 18.2 16.6 17.1r 37 Peru .8 .6 .5 .5 .5 .5 .4 .4 .4 .4 .5 38 Other 2.6 2.8 2.4 2.3 2.2 2.0 1.9 2.1 2.2 2.2 2.5 Asia China 39 Peoples Republic of China .3 .3 .2 .2 .4 .6 .4 .3 .3 .3 .3 40 Republic of China (Taiwan) 3.7 4.5 4.0 3.5 3.6 4.1 4.1 4.1 4.8 4.6 5.0 41 India 2.1 3.1 3.6 3.3 3.5 3.0 2.8 3.0 3.6 3.8 3.6 42 Israel 1.2 .7 .6 .5 .5 .5 .5 .5 .4 .4 .4 43 Korea (South) 6.1 5.9 6.2 6.2 6.8 6.9 6.5 6.8 6.9 6.9 7.4 44 Malaysia 1.6 1.7 1.8 1.9 2.0 2.1 2.3 2.3 2.5 2.7 3.0 45 Philippines 4.5 4.1 3.9 3.8 3.7 3.7 3.6 3.7 3.6 3.0 3.3 46 Thailand 1.1 1.3 1.5 1.5 1.6 1.7 1.9 1.7 1.7 1.9 2.2 47 Other Asia3 .9 1.0 1.6 1.7 2.1 2.3 2.3 2.4 2.7 3.1 3.3 Africa 48 Egypt .4 .4 .4 .4 .4 .4 .4 .4 .3 .5 .3 49 Morocco .9 .9 .9 .8 .8 .7 .7 .7 .7 .7 .6 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 1.1 1.0 .8 1.0 .8 .8 .8 .7 .7 .6 .9 52 Eastern Europe 3.6 3.5 2.7 2.3 2.1 2.1 1.8 2.4 2.9 3.0 3.1 53 U.S.S.R .7 .7 .4 .2 .3 .4 .4 .9 1.4 1.7 1.8 54 Yugoslavia 1.8 1.6 1.3 1.2 1.0 1.0 .8 .9 .8 .7 .7 55 Other 1.1 1.3 1.1 .9 .8 .7 .7 .7 .6 .6 .7 56 Offshore banking centers 44.2 36.6 42.6 42.5 50.0 48.3 52.7 52.0 58.5 56.9 53.5r 57 Bahamas 11.0 5.5 8.9 2.8 8.3 6.8 6.7 11.9 14.0 12.0 8.1R 58 Bermuda .9 1.7 4.5 4.4 4.4 4.2 7.1 2.3 3.9 5.1 3.8 59 Cayman Islands and other British West Indies 12.9 9.0 9.3 11.5 14.1 14.9 13.8 15.8 17.4 18.0 16. lr 60 Netherlands Antilles 1.0 2.3 2.2 7.9 1.1 1.4 3.9 1.2 1.0 .8 .9" 61 Panama 2.5 1.4 1.5 1.4 1.5 1.3 1.3 1.3 1.3 1.4 L.SP 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 9.6 9.7 8.7 7.7 11.6 12.4 12.1 12.2 12.2 13.0 15.2r 64 Singapore 6.1 7.0 7.5 6.6 8.9 7.2 7.7 7.1 8.5 6.4 7.3r 65 Other .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated6 22.6 30.3 38.1 39.8 36.4 39.9 44.6 48.2 48.0 49.1 38.3 1. The banking offices covered by these data are the U.S. offices and foreign $150 million equivalent in total assets, the threshold now applicable to all branches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks. reporting branches. Offices not covered include (1) U.S. agencies and branches of foreign banks, and 2. Organization of Petroleum Exporting Countries, shown individually; other (2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are members of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, adjusted to exclude the claims on foreign branches held by a U.S. office or another Saudi Arabia, and United Arab Emirates); and Bahrain and Oman (not formally foreign branch of the same banking institution. The data in this table combine members of OPEC). foreign branch claims in table 3.14 (the sum of lines 7 through 10) with the claims 3. Excludes Liberia. of U.S. offices in table 3.18 (excluding those held by agencies and branches of 4. Includes Canal Zone beginning December 1979. foreign banks and those constituting claims on own foreign branches). 5. Foreign branch claims only. Since June 1984, reported claims held by foreign branches have been reduced 6. Includes New Zealand, Liberia, and international and regional by an increase in the reporting threshold for "shell" branches from $50 million to organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A63 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1991 1992 Type and area or country 11998888rr 11998899** 11999900** June Sept. Dec. Mar. June Sept. 1 Total 32,952 38,764 46,169 41,774 43,256 43,244 44,170 44,231 45,001 2 Payable in dollars 27,335 33,973 40,912 37,258 38,520 37,852 38,719 37,536 36,571 3 Payable in foreign currencies 5,617 4,791 5,257 4,516 4,736 5,392 5,451 6,695 8,430 By type 4 Financial liabilities 14,507 17,879 21,192 19,562 21,690 21,981 22,339 22,043 23,336 5 Payable in dollars 10,608 14,035 17,105 16,202 17,985 17,869 18,111 16,799 16,500 6 Payable in foreign currencies 3,900 3,844 4,087 3,360 3,705 4,112 4,228 5,244 6,836 7 Commercial liabilities 18,445 20,885 24,977 22,212 21,566 21,263 21,831 22,188 21,665 8 Trade payables 6,505 8,070 10,683 8,569 8,313 8,310 8,914 9,516 9,407 9 Advance receipts and other liabilities ... 11,940 12,815 14,294 13,644 13,253 12,953 12,917 12,672 12,258 10 Payable in dollars 16,727 19,938 23,807 21,056 20,535 19,983 20,608 20,737 20,071 11 Payable in foreign currencies 1,717 947 1,170 1,157 1,031 1,280 1,223 1,451 1,594 By area or country Financial liabilities 12 Europe 9,962 11,660 11,086 10,503 12,343 12,002 12,539 13,091 14,083 13 Belgium and Luxembourg 289 340 394 355 397 217 174 194 256 14 France 359 258 975 937 2,164 2,106 1,997 2,324 2,830 15 Germany 699 464 621 658 682 682 666 836 956 16 Netherlands 880 941 1,081 1,026 1,050 1,056 1,025 979 951 17 Switzerland 1,033 541 545 513 497 408 355 490 525 18 United Kingdom 6,533 8,818 6,455 6,018 6,610 6,513 7,415 7,392 7,723 19 Canada 388 610 229 293 305 267 283 337 320 20 Latin America and Caribbean 839 1,357 4,153 3,808 3,883 4,307 4,047 3,308 3,257 21 Bahamas 184 157 371 375 314 537 396 343 192 22 Bermuda 0 17 0 12 0 114 114 114 115 23 Brazil 0 0 0 0 6 6 8 10 18 24 British West Indies 645 724 3,160 2,816 2,961 3,047 2,915 2,167 2,231 25 Mexico 1 6 5 6 6 7 7 8 12 26 Venezuela 0 0 4 4 4 4 4 4 5 27 Asia 3,312 4,151 5,313 4,947 5,155 5,347 5,375 5,218 5,586 28 Japan 2,563 3,299 4,077 3,771 4,006 4,108 4,113 4,122 4,553 29 Middle East oil-exporting countries2 .. 3 2 5 4 19 13 13 10 17 30 Africa 2 2 2 9 3 6 7 0 5 0 0 0 7 2 4 6 0 0 31 Oil-exporting countries3 4 100 409 2 1 52 88 89 85 32 All other4 Commercial liabilities 7,319 9,071 10,310 8,607 8,084 7,808 7,491 7,144 6,714 33 Europe 158 175 275 245 225 248 256 240 173 34 Belgium and Luxembourg 455 877 1,218 1,185 992 830 671 659 688 35 France 1,699 1,392 1,270 1,040 911 944 878 702 744 36 Germany 587 710 844 729 751 709 574 605 601 37 Netherlands 417 693 775 580 492 488 482 400 369 38 Switzerland 2,079 2,620 2,792 2,289 2,217 2,310 2,444 2,404 2,262 39 United Kingdom 40 Canada 1,217 1,124 1,261 1,208 1,011 990 1,094 1,077 1,055 41 Latin America and Caribbean 1,090 1,224 1,672 1,619 1,512 1,352 1,701 1,803 1,518 42 Bahamas 49 41 12 5 14 3 13 8 3 43 Bermuda 286 308 538 504 450 310 493 409 338 44 Brazil 95 100 145 180 211 219 230 212 115 45 British West Indies 34 27 30 49 46 107 108 73 85 46 Mexico 217 323 475 358 291 304 375 475 322 47 Venezuela 114 164 130 119 102 94 168 279 147 48 Asia 6,915 7,550 9,483 8,752 8,855 9,330 9,889 10,439 10,988 49 Japan 3,094 2,914 3,651 3,411 3,363 3,720 3,548 3,537 3,899 50 Middle Eastern oil-exporting countries' 1,385 1,632 2,016 1,657 1,780 1,498 1,591 1,778 1,813 51 Africa 576 886 844 596 836 713 644 775 674 52 Oil-exporting countries 202 339 422 226 357 327 253 389 337 53 Other4 1,328 1,030 1,406 1,431 1,268 1,070 1,012 950 716 1. For a description of the changes in the international statistics tables, see 3. Comprises Algeria, Gabon, Libya, and Nigeria. Federal Reserve Bulletin, vol. 65, (July 1979), p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 5. Revisions include a reclassification of transactions, which also affects the United Arab Emirates (Trucial States). totals for Asia and the grand totals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • April 1993 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1991 1992 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998888rr 11998899rr 11999900rr June Sept. Dec. Mar. June Sept.p 1 Total 33,805 33,173 35,348 37,101 38,315 42,635 42,203 41,884 38,607r 2 Payable in dollars 31,425 30,773 32,760 35,014 35,952 40,068 39,563 38,915 35,689"^ 3 Payable in foreign currencies 2,381 2,400 2,589 2,087 2,363 2,567 2,640 2,969 2,918 By type 4 Financial claims 21,640 19,297 19,874 20,881 22,536 25,463 25,355 24,640 21,347 5 Deposits 15,643 12,353 13,577 12,544 16,188 17,218 16,964 15,116 12,535 6 Payable in dollars 14,544 11,364 12,552 11,758 15,182 16,343 15,803 13,829 11,477 7 Payable in foreign currencies 1,099 989 1,025 786 1,006 875 1,161 1,287 1,058 8 Other financial claims 5,997 6,944 6,297 8,337 6,348 8,245 8,391 9,524 8,812 9 Payable in dollars 5,220 6,190 5,280 7,632 5,611 77,,336655 7,644 8,799 7,780 10 Payable in foreign currencies 777 754 1,017 704 737 888800 747 725 1,032 11 Commercial claims 12,166 13,876 15,475 16,220 15,779 17,172 16,848 17,244 17,260r 12 Trade receivables 11,091 12,253 13,657 14,120 13,429 14,447 14,243 14,743 14,528 13 Advance payments and other claims 1,075 1,624 1,817 2,100 2,350 2,725 2,605 2,501 2,732r 14 Payable in dollars 11,660 13,219 14,927 15,623 15,159 16,360 16,116 16,287 1166,,443322rr 15 Payable in foreign currencies 505 657 548 597 620 812 732 957 882288 By area or country Financial claims 16 Europe 10,278 8,463 9,645 11,873 13,129 13,546 14,207 13,207 11,229 17 Belgium and Luxembourg 18 28 76 74 76 13 12 25 16 18 France 203 153 371 271 255 312 277 786 809 19 Germany 120 152 367 298 434 342 290 381 321 20 Netherlands 348 238 265 429 420 385 727 732 766 21 Switzerland 217 153 357 433 580 591 682 779 602 22 United Kingdom 9,039 7,496 7,971 10,222 10,997 11,251 11,631 8,773 7,707 23 Canada 2,325 1,904 2,934 2,015 2,163 2,679 2,755 2,534 2,256 24 Latin America and Caribbean 8,160 8,020 6,201 5,926 6,289 7,932 7,070 7,260 6,523 25 Bahamas 1,846 1,890 1,090 457 652 758 415 523 1,099 26 Bermuda 19 7 3 4 19 8 12 12 65 27 Brazil 47 224 68 127 137 192 191 181 135 28 British West Indies 5,763 5,486 4,635 4,957 5,106 6,384 5,912 6,018 4,792 29 Mexico 151 94 177 161 176 321 318 343 222 30 Venezuela 21 20 25 29 32 40 34 32 26 31 Asia 623 590 860 742 614 957 966 1,280 995 32 Japan 354 213 523 398 277 385 380 712 481 33 Middle East oil-exporting countries2 5 8 8 4 3 5 3 4 4 34 Africa 106 140 37 64 61 57 60 57 66 35 Oil-exporting countries3 10 12 0 1 1 1 0 0 1 36 All other4 148 180 195 261 280 292 297 302 278 Commercial claims 37 Europe 5,181 6,209 7,044 7,464 6,884 7,950 7,894 8,137 7,786r 38 Belgium and Luxembourg 189 242 212 220 190 192 181 255 170 39 France 672 964 1,240 1,402 1,330 1,544 1,562 1,563 l,738r 40 Germany 669 696 807 958 858 943 936 908 885 41 Netherlands 212 479 555 707 641 643 646 666 588 42 Switzerland 344 313 301 296 258 295 328 399 294r 43 United Kingdom 1,324 1,575 1,775 1,817 1,807 2,088 2,086 2,173 l,974r 44 Canada 983 1,091 1,074 1,241 1,232 1,174 1,176 1,131 1,168 45 Latin America and Caribbean 2,241 2,184 2,375 2,433 22,,449944 2,591 2,572 2,672 3,139 46 Bahamas 36 58 14 16 88 11 11 9 7 47 Bermuda 230 323 246 247 255 263 272 291 245 48 Brazil 299 297 326 309 385 418 364 438 395 49 British West Indies 22 36 40 43 37 41 45 32 43 50 Mexico 461 508 661 710 741 829 892 847 968 51 Venezuela 227 147 192 195 196 202 206 251 300 52 Asia 2,993 3,570 4,127 4,201 4,282 4,563 4,351 4,462 4,310 53 Japan 946 1,199 1,460 1,645 1,808 1,869 1,780 1,786 1,797 54 Middle Eastern oil-exporting countries2 453 518 460 501 4% 621 635 609 512 55 Africa 435 429 488 428 431 418 418 422 427 56 Oil-exporting countries3 122 108 67 63 80 95 75 73 66 57 Other4 333 393 367 454 456 476 437 420 43ff 1. For a description of the changes in the international statistics tables, see 3. Comprises Algeria, Gabon, Libya, and Nigeria. Federal Reserve Bulletin, vol. 65, (July 1979), p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Holdings and Transactions A65 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1992 Transaction and area or country 1991 1992 J D a e n c . . - June July Aug. Sept. Oct.r Nov.r Dec.p U.S. corporate securities STOCKS 1 Foreign purchases 211,207 221,251 221,251 16,525 18,547 13,174 13,884 18,830 17,885 22,616 2 Foreign sales 200,116 226,422 226,422 17,537 18,769 14,841 17,034 18,179 16,598 20,305 3 Net purchases or sales (-) 11,091 -5,171 -5,171 -1,012 -222 -1,667 -3,150 651 1,287 2,311 4 Foreign countries 10,522 -5,204 -5,204 -1,170 -239 -1,622 -3,059 654 1,284 2,287 5 Europe 53 -4,963 -4,963 -1,184 -965 -1,089 -1,683 75 371 1,476 6 France 9 -1,334 -1,334 -148 10 -46 -234 -92 -50 -157 7 Germany -63 -69 -69 -4 -14 -26 -112 -52 47 157 8 Netherlands -227 -284 -284 -217 -14 -54 -107 -24 -4 186 9 Switzerland -131 131 131 -10 -55 -150 -189 -124 -40 209 10 United Kingdom -352 -3,298 -3,298 -691 -742 -652 -869 362 361 701 11 Canada 3,845 1,402 1,402 74 130 -59 -278 -227 43 173 12 Latin America and Caribbean 2,177 2,210 2,210 -109 -24 -24 -90 236 649 422 13 Middle East1 -134 -88 -88 51 4 -14 136 -57 -219 70 14 Other Asia 4,255 -3,944 -3,944 141 370 -442 -1,064 767 373 122 15 Japan 1,179 -3.598 -3,598 35 172 -301 -97 184 220 215 16 Africa 153 10 10 -1 -7 -1 14 -21 -18 -7 17 Other countries 174 169 169 -142 253 7 -94 -119 85 31 18 Nonmonetary international and regional organizations 568 33 33 158 17 -45 -91 -3 3 24 BONDS2 19 Foreign purchases 153,096 214,779 214,779 16,691 18,343 19,785 17,160 19,315 18,082 19,242 20 Foreign sales 125,637 175,342 175,342 12,407 16,311 16,620 14,452 15,224 16,317 15,582 21 Net purchases or sales (-) 27,459 39,437 39,437 4,284 2,032 3,165 2,708 4,091 1,765 3,660 22 Foreign countries 27,590 38,321 38,321 4,205 2,153 3,150 2,573 4,045 1,600 3,115 23 Europe 13,112 18,070 18,070 1,420 1,029 1,516 1,818 1,993 -491 1,948 24 France 847 1,221 1,221 364 161 -5 155 -4 -7 217 25 Germany 1,577 2,496 2,496 11 -37 -13 387 -34 -113 850 26 Netherlands 482 531 531 64 177 22 58 133 144 48 27 Switzerland 656 -514 -514 -53 -13 -94 -51 -23 -260 104 28 United Kingdom 8,931 12,990 12,990 847 760 1,447 1,319 1,568 -312 920 29 Canada 1,623 236 236 -111 67 -100 48 198 281 -38 30 Latin America and Caribbean 2,672 8,833 8,833 619 676 878 548 842 540 513 31 Middle East1 1,787 3,461 3,461 376 239 284 -5 273 515 655 32 Other Asia 8,459 7,736 7,736 1,904 231 593 171 790 692 76 33 Japan 5,767 -259 -259 740 -710 -1,229 -590 467 266 -34 34 Africa 52 58 58 -6 22 1 -7 -50 -5 7 35 Other countries -116 -73 -73 3 -111 -22 0 -1 68 -46 36 Nonmonetary international and regional organizations -131 1,116 1,116 79 -121 15 135 46 165 545 Foreign securities 37 Stocks, net purchases or sales (-)3 -31,967 -32,073 -32,073 68 -3,244 -2,959 -2,854 -4,269 -3,590 -4,358 38 Foreign purchases 120,598 149,742 149,742 14,638 13,496 9,759 13,580 12,420 11,633 12,720 39 Foreign sales 152,565 181,815 181,815 14,570 16,740 12,718 16,434 16,689 15,223 17,078 40 Bonds, net purchases or sales (-) -14,828 -19,075 -19,075 -1,681 -4,280 275 —) ,561 -2,352 -1,036 -2,890 41 Foreign purchases 330,311 482,745 482,745 40,332 43,301 45,938 45,747 49,108 51,611 38,217 42 Foreign sales 345,139 501,820 501,820 42,013 47,581 45,663 47,308 51,460 52,647 41,107 43 Net purchases or sales (—), of stocks and bonds -46,795 -51,148 -51,148 -1,613 -7,524 -2,684 -4,415 -6,621 -4,626 -7,248 44 Foreign countries -46,711 -54,684 -54,684 -1,997 -8,383 -2,771 -4,436 -6,648 -4,714 -7,387 45 Europe -34,452 -38,863 -38,863 -1,494 -5,333 -1,244 -3,282 -6,862 -5,215 -4,932 46 Canada -7,004 -6,643 -6,643 -852 -2,212 207 -136 -1,014 570 -1,235 47 Latin America and Caribbean 759 -1,816 -1,816 -560 1,631 -430 308 1,091 -1,671 526 48 -7,350 -6,223 -6,223 374 -2,461 -1,376 -1,667 727 1,568 -1,357 49 Africa -9 -57 -57 7 14 11 -14 -2 42 -11 50 Other countries 1,345 -1,082 -1,082 528 -22 61 355 -588 -8 -378 51 Nonmonetary international and regional organizations -84 3,536 3,536 384 859 87 21 27 88 139 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, 3. In a July 1989 merger, the former stockholders of a U.S. company received Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). $5,453 million in shares of the new combined U.K. company. This transaction is 2. Includes state and local government securities and securities of U.S. not reflected in the data. government agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. corporations organized to finance direct investments abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 International Statistics • April 1993 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1992 Country or area 1991 1992 J D a e n c . . - June July Aug. Sept. Oct.r Nov.r Dec." Transactions, net purchases or sales (-) during period1 1 Estimated total 19,865 38,955 38,955 14,444 -1,862 6,458 -5,995 3,576 17,654 -392 2 Foreign countries 19,687 37,602 37,602 11,754 -2,286 6,785 -6,204 4,381 17,667 -594 3 Europe 8,663 19,619 19,619 3,828 -2,445 3,450 -4,655 4,701 7,290 3,099 4 Belgium and Luxembourg 523 1,981 1,981 -49 331 80 -25 232 370 -32 5 Germany -4,725 2,076 2,076 824 -829 255 900 -8 -1,584 898 6 Netherlands -3,735 -2,923 -2,923 227 -1,046 367 -239 -40 1,827 -804 7 Sweden -663 -804 -804 372 -26 -1,289 -843 202 668 -344 8 Switzerland 1,007 481 481 -111 -703 -87 292 769 1,334 213 9 United Kingdom 6,218 24,220 24,220 1,664 212 3,681 16 4,098 7,215 2,833 10 Other Western Europe 10,024 -6,066 -6,066 701 -581 428 -4,761 -551 -2,758 331 11 Eastern Europe 13 654 654 200 197 15 5 -1 218 4 12 Canada -3,019 557 557 47 2,520 900 -4,281 458 -1,087 -104 13 Latin America and Caribbean 10,285 -3,223 -3,223 3,585 -2,869 -1,563 -1,479 -1,915 7,270 -4,519 14 Venezuela 10 539 539 -149 216 60 31 155 27 11 15 Other Latin America and Caribbean 4,179 -1,957 -1,957 1,791 -589 -758 -2,537 -3,233 2,385 415 16 Netherlands Antilles 6,097 -1,805 -1,805 1,943 -2,496 -865 1,027 1,163 4,858 -4,945 17 Asia 3,367 23,195 23,195 4,129 1,783 4,112 4,004 1,416 4,000 857 18 Japan -4,081 9,484 9,484 1,638 2,221 1,887 2,448 -339 3,383 1,868 19 Africa 689 1,103 1,103 92 149 56 59 -37 119 0 20 Other -298 -3,649 -3,649 73 -1,424 -170 148 -242 75 73 21 Nonmonetary international and regional organizations 178 1,353 1,353 2,690 424 -327 209 -805 -13 202 22 International -358 1,018 1,018 2,421 365 -133 -31 -903 -38 76 23 Latin American regional -72 533 533 127 -68 -75 201 219 -31 97 MEMO 24 Foreign countries 19,687 37,602 37,602 11,754 -2,286 6,785 -6,204 4,381 17,667 -594 25 Official institutions 1,190 6,874 6,874 5,408 -767 697 -4,483 2,951 -603 -721 26 Other foreign 18,496 30,728 30,728 6,346 -1,519 6,088 -1,721 1,430 18,270 127 Oil-exporting countries 27 Middle East2 -6,822 4,323 4,323 947 856 1,093 750 -271 407 511 28 239 11 11 -56 0 0 4 0 0 0 1. Official and private transactions in marketable U.S. Treasury securities 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and having an original maturity of more than one year. Data are based on monthly United Arab Emirates (Trucial States). transactions reports. Excludes nonmarketable U.S. Treasury bonds and notes 3. Comprises Algeria, Gabon, Libya, and Nigeria. held by official institutions of foreign countries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interest and Exchange Rates A67 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS1 Percent per year Rate on Feb. 28, 1993 Rate on Feb. 28, 1993 Rate on Feb. 28, 1993 Country Country Country Percent e M ffe o c n t t i h ve Percent e M ffe o c n t t i h ve e M ffe o c n t t i h ve Austria.. 7.5 Feb. 1993 Germany... 8.0 Feb. 1993 Norway 17.0 Nov. 1992 Belgium . 7.5 Oct. 1992 Italy 11.5 Feb. 1993 Switzerland 5.5 Jan. 1993 Canada.. 6.09 Feb. 1993 Japan 2.5 Feb. 1993 United Kingdom 12.0 Sept. 1992 Denmark 10.5 Feb. 1993 Netherlands 7.5 Jan. 1993 France2.. 9.0 Dec. 1992 1. Rates shown are mainly those at which the central bank either discounts or 2. Since Feb. 1981, the rate has been that at which the Bank of France makes advances against eligible commercial paper or government securities for discounts Treasury bills for seven to ten days. commercial banks or brokers. For countries with more than one rate applicable to such discounts or advances, the rate shown is the one at which it is understood that the central bank transacts the largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES1 Averages of daily figures, percent per year 1992 1993 TTyyppee oorr ccoouunnttrryy 11999900 11999911 11999922 Aug. Sept. Oct. Nov. Dec. Jan. Feb. 8.16 5.86 3.70 3.33 3.15 3.30 3.67 3.50 3.22 3.12 14.73 11.47 9.56 10.27 9.86 8.23 7.16 7.11 6.88 6.10 13.00 9.07 6.76 5.15 5.33 7.57 7.63 7.93 7.03 6.38 8.41 9.15 9.42 9.79 9.37 8.85 8.84 8.93 8.50 8.29 8.71 8.01 7.67 8.09 7.20 6.28 6.44 6.13 5.52 5.34 8.57 9.19 9.25 9.73 9.23 8.63 8.66 8.55 8.00 7.98 10.20 9.49 10.14 10.27 10.51 10.82 9.58 10.75 11.69 11.70 8 Italy 12.11 12.04 13.91 15.27 17.54 15.52 14.38 13.60 12.56 11.43 9.70 9.30 9.31 9.71 9.44 8.70 8.64 8.65 8.19 8.75 7.75 7.33 4.39 3.87 3.89 3.85 3.77 3.76 3.70 3.27 1. Rates are for three-month interbank loans, with the following exceptions: Canada, finance company paper; Belgium, three-month Treasury bills; and Japan, CD rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 International Statistics • April 1993 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1992 1993 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999900 11999911 11999922 Sept. Oct. Nov. Dec. Jan. Feb. 1 Australia/dollar^ 78.069 77.872 73.521 72.255 71.481 68.984 68.974 67.297 68.294 2 Austria/schilling 11.331 11.686 10.992 10.214 10.436 11.168 11.130 11.368 11.556 3 Belgium/franc 33.424 34.195 32.148 29.917 30.581 32.661 32.545 33.239 33.841 4 Canada/dollar 1.1668 1.1460 1.2085 1.2225 1.2453 1.2674 1.2725 1.2779 1.2602 S China, P.R./yuan 4.7921 5.3337 5.5206 5.5048 5.5486 5.6134 5.8106 5.77% 5.7874 6 Denmark/krone 6.1899 6.4038 6.0372 5.6203 5.7278 6.1166 6.1206 6.2319 6.3019 7 Finland/markka 3.8300 4.0521 4.4865 4.4764 4.7096 5.0615 5.1444 5.4242 5.8534 8 France/franc 5.4467 5.6468 5.2935 4.9378 5.0370 5.3706 5.3974 5.4751 5.5594 9 Germany/deutsche mark 1.6166 1.6610 1.5618 1.4514 1.4851 1.5875 1.5822 1.6144 1.6414 10 Greece/drachma 158.59 182.63 190.81 182.70 192.50 206.48 209.48 215.97 220.60 11 Hong Kong/dollar 7.7899 7.7712 7.7402 7.7298 7.7298 7.7348 7.7416 7.7376 7.7335 12 India/rupee 17.492 22.712 28.156 28.476 28.477 28.474 28.979 29.043 30.042 13 Ireland/pound2 165.76 161.39 170.42 181.90 177.19 166.17 166.71 163.37 148.11 14 Italy/lira 1,198.27 1,241.28 1,232.17 1,176.21 1,309.64 1,364.45 1,412.38 1,491.07 1,550.43 15 Japan/yen 145.00 134.59 126.78 122.60 121.17 123.88 124.04 124.99 120.76 16 Malaysia/ringgit 2.7057 2.7503 2.5463 2.5029 2.5044 2.5227 2.5710 2.5985 2.6295 17 Netherlands/guilder 1.8215 1.8720 1.7587 1.6348 1.6717 1.7862 1.7788 1.8155 1.8473 18 New Zealand/dollar2 59.619 57.832 53.792 54.112 53.943 51.9% 51.570 51.270 51.603 19 Norway /krone 6.2541 6.4912 6.2142 5.8116 6.0562 6.4714 6.6804 6.8721 6.9779 20 Portugal/escudo 142.70 144.77 135.07 127.86 132.33 141.71 142.05 145.36 149.89 21 Singapore/dollar 1.8134 1 7283 1.6294 1.5988 1.6081 1.6338 1.6397 1.6527 1.6463 22 South Africa/rand 2.5885 2.7633 2.8524 2.8037 2.8923 2.9959 3.0140 3.0713 3.1313 23 South Korea/won 710.64 736.73 784.58 788.76 786.79 787.09 791.75 794.87 799.25 24 Spain/peseta 101.96 104.01 102.38 98.19 105.74 113.83 112.95 114.62 117.51 25 Sri Lanka/rupee 40.078 41.200 44.013 44.159 44.276 44.404 45.046 46.307 46.351 26 Sweden/krona 5.9231 6.0521 5.8258 5.3685 5.6006 6.2528 6.8903 7.2536 7.5566 27 Switzerland/franc 1.3901 1.4356 1.4064 1.2780 1.3176 1.4291 1.4219 1.4774 1.5178 28 Taiwan/dollar 26.918 26.759 25.160 25.227 25.278 25.405 25.452 25.452 25.837 29 Thailand/baht 25.609 25.528 25.411 25.209 25.253 25.462 25.488 25.523 25.508 30 United Kingdom/pound 178.41 176.74 176.63 184.65 165.29 152.68 155.10 153.25 143.95 MEMO 31 United States/dollar3 89.09 89.84 86.61 81.98 85.03 90.04 90.50 92.36 93.82 1. Averages of certified noon buying rates in New York for cable transfers. the 1972-76 average world trade of that country divided by the average world Data in this table also appear in the Board's G.5 (405) monthly statistical release. trade of all ten countries combined. Series revised as of August 1978 (see Federal For ordering address, see inside front cover. Reserve Bulletin, vol. 64, August 1978, p. 700). 2. Value in U.S. cents. 3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten industrial countries. The weight for each of the ten countries is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest BULLETIN Reference Issue Page Anticipated schedule of release dates for periodic releases December 1992 A78 SPECIAL TABLES—Quarterly Data Published Irregularly, with Latest BULLETIN Reference Title and Date Issue Page Assets and liabilities of commercial banks December 31, 1991 May 1992 A70 March 31, 1992 August 1992 A70 June 30, 1992 November 1992 A70 September 30, 1992 February 1993 A70 Terms of lending at commercial banks February 1992 September 1992 A74 May 1992 September 1992 A78 August 1992 November 1992 A76 November 1992 February 1993 A76 Assets and liabilities of U.S. branches and agencies of foreign banks December 31, 1991 May 1992 A76 March 31, 1992 September 1992 A82 June 30, 1992 November 1992 A80 September 30, 1992 February 1993 A80 Pro forma balance sheet and income statements for priced service operations June 30, 1991 November 1991 A80 September 30, 1991 January 1992 A70 March 30, 1992 August 1992 A80 June 30, 1992 October 1992 A70 Assets and liabilities of life insurance companies June 30, 1991 December 1991 A79 September 30, 1991 May 1992 A81 December 31, 1991 August 1992 A83 September 30, 1992 March 1993 A71 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Index to Statistical Tables References are to pages A3-A68 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 21, 22 Turnover, 16 Assets and liabilities (See also Foreigners) Depository institutions Banks, by classes, 19-22 Reserve requirements, 9 Domestic finance companies, 35 Reserves and related items, 4, 5, 6, 13 Federal Reserve Banks, 11 Deposits (See also specific types) Financial institutions, 27 Banks, by classes, 4, 19-22, 23 Foreign banks, U.S. branches and agencies, 23 Federal Reserve Banks, 5,11 Automobiles Turnover, 16 Consumer installment credit, 38 Discount rates at Reserve Banks and at foreign central banks and Production, 47,48 foreign countries (See Interest rates) Discounts and advances by Reserve Banks (See Loans) BANKERS acceptances, 10, 24, 25 Dividends, corporate, 34 Bankers balances, 19-22. (See also Foreigners) Bonds (See also U.S. government securities) EMPLOYMENT, 45 New issues, 34 Eurodollars, 25 Rates, 25 Branch banks, 23, 55 Business activity, nonfinancial, 44 FARM mortgage loans, 37 Business expenditures on new plant and equipment, 34 Federal agency obligations, 5, 10, 11, 12, 30, 31 Business loans (See Commercial and industrial loans) Federal credit agencies, 32 Federal finance CAPACITY utilization, 46 Debt subject to statutory limitation, and types and ownership Capital accounts of gross debt, 29 Banks, by classes, 19 Receipts and outlays, 27, 28 Federal Reserve Banks, 11 Treasury financing of surplus, or deficit, 27 Central banks, discount rates, 67 Treasury operating balance, 27 Certificates of deposit, 25 Federal Financing Bank, 27, 32 Commercial and industrial loans Federal funds, 7, 18, 21, 22, 23, 25, 27 Commercial banks, 17, 21 Federal Home Loan Banks, 32 Weekly reporting banks, 21-23 Federal Home Loan Mortgage Corporation, 32, 36, 37 Commercial banks Federal Housing Administration, 32, 36, 37 Assets and liabilities, 19-22 Federal Land Banks, 37 Commercial and industrial loans, 17, 19,20, 21, 22, 23 Federal National Mortgage Association, 32, 36, 37 Consumer loans held, by type and terms, 38 Federal Reserve Banks Loans sold outright, 21 Condition statement, 11 Nondeposit funds, 18 Discount rates (See Interest rates) Real estate mortgages held, by holder and property, 37 U.S. government securities held, 5, 11, 12, 29 Time and savings deposits, 4 Federal Reserve credit, 5, 6, 11, 12 Commercial paper, 24, 25, 35 Federal Reserve notes, 11 Condition statements (See Assets and liabilities) Federally sponsored credit agencies, 32 Construction, 44, 49 Finance companies Consumer installment credit, 38 Assets and liabilities, 35 Consumer prices, 44, 46 Business credit, 35 Consumption expenditures, 52, 53 Loans, 38 Corporations Paper, 24, 25 Nonfinancial, assets and liabilities, 34 Financial institutions Profits and their distribution, 34 Loans to, 21, 22, 23 Security issues, 33, 65 Selected assets and liabilities, 27 Cost of living (See Consumer prices) Float, 51 Credit unions, 38 Flow of funds, 39,41, 42, 43 Currency in circulation, 5, 14 Foreign banks, assets and liabilities of U.S. branches and Customer credit, stock market, 26 agencies, 22, 23 Foreign currency operations, 11 DEBITS to deposit accounts, 16 Foreign deposits in U.S. banks, 5, 11, 21, 22 Debt (See specific types of debt or securities) Foreign exchange rates, 68 Demand deposits Foreign trade, 54 Banks, by classes, 19-23 Foreigners Ownership by individuals, partnerships, and Claims on, 55, 57, 60, 61, 62, 64 corporations, 23 Liabilities to, 22, 54, 55, 57, 58, 63, 65, 66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 GOLD Real estate loans—Continued Certificate account, 11 Terms, yields, and activity, 36 Stock, 5, 54 Type of holder and property mortgaged, 37 Government National Mortgage Association, 32, 36, 37 Repurchase agreements, 7, 18, 21, 22, 23 Gross domestic product, 51 Reserve requirements, 9 Reserves HOUSING, new and existing units, 49 Commercial banks, 19 Depository institutions, 4, 5, 6, 13 INCOME, personal and national, 44, 51, 52 Federal Reserve Banks, 11 Industrial production, 44, 47 U.S. reserve assets, 54 Installment loans, 38 Residential mortgage loans, 36 Insurance companies, 29, 37 Retail credit and retail sales, 38, 39, 44 Interest rates Bonds, 25 SAVING Consumer installment credit, 38 Flow of funds, 39,41,42, 43 Federal Reserve Banks, 8 National income accounts, 51 Foreign central banks and foreign countries, 67 Savings and loan associations, 37, 38, 39. (See also SAIF-insured Money and capital markets, 25 institutions) Mortgages, 36 Savings Association Insurance Funds (SAIF) insured institutions, 27 Prime rate, 24 Savings banks, 27, 37, 38 International capital transactions of United States, 53-67 Savings deposits (See Time and savings deposits) International organizations, 57, 58, 60, 63, 64 Securities (See also specific types) Inventories, 51 Federal and federally sponsored credit agencies, 32 Investment companies, issues and assets, 34 Foreign transactions, 65 Investments (See also specific types) Life insurance companies, 70 Banks, by classes, 19, 20, 21, 22, 23,27 New issues, 33 Commercial banks, 4, 17, 19-22 Prices, 26 Federal Reserve Banks, 11, 12 Special drawing rights, 5, 11, 53, 54 Financial institutions, 37 State and local governments Deposits, 21, 22 LABOR force, 45 Holdings of U.S. government securities, 29 Life insurance companies (See Insurance companies) New security issues, 33 Loans (See also specific types) Ownership of securities issued by, 21, 22 Banks, by classes, 19-22 Rates on securities, 25 Commercial banks, 4, 17, 19-22 Stock market, selected statistics, 26 Federal Reserve Banks, 5, 6, 8, 11, 12 Stocks (See also Securities) Financial institutions, 27, 37 New issues, 33 Insured or guaranteed by United States, 36, 37 Prices, 26 MANUFACTURING Student Loan Marketing Association, 32 Capacity utilization, 46 Production, 46, 48 TAX receipts, federal, 28 Margin requirements, 26 Thrift institutions, 4. (See also Credit unions and Savings and Member banks (See also Depository institutions) loan associations) Federal funds and repurchase agreements, 7 Time and savings deposits, 4, 14, 18, 19, 20, 21, 22, 23 Reserve requirements, 9 Trade, foreign, 54 Mining production, 48 Treasury cash, Treasury currency, 5 Mobile homes shipped, 49 Treasury deposits, 5, 11, 27 Monetary and credit aggregates, 4, 13 Treasury operating balance, 27 Money and capital market rates, 25 Money stock measures and components, 4, 14 UNEMPLOYMENT, 45 Mortgages (See Real estate loans) U.S. government balances Mutual funds, 34 Commercial bank holdings, 19, 20, 21, 22 Treasury deposits at Reserve Banks, 5, 11, 27 Mutual savings banks (See Thrift institutions) U.S. government securities Bank holdings, 19-22, 23, 29 NATIONAL defense outlays, 28 Dealer transactions, positions, and financing, 31 National income, 51 Federal Reserve Bank holdings, 5, 11, 12, 29 Foreign and international holdings and OPEN market transactions, 10 transactions, 11, 29, 66 Open market transactions, 10 PERSONAL income, 52 Outstanding, by type and holder, 27, 29 Prices Rates, 24 Consumer and producer, 44, 50 U.S. international transactions, 53-67 Stock market, 26 Utilities, production, 48 Prime rate, 24 Producer prices, 44, 50 Production, 44, 47 VETERANS Administration, 36, 37 Profits, corporate, 34 WEEKLY reporting banks, 21-23 REAL estate loans Wholesale (producer) prices, 44, 50 Banks, by classes, 17, 21, 22, 37 Financial institutions, 27 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman WAYNE D. ANGELL DAVID W. MULLINS, JR., Vice Chairman EDWARD W. KELLEY, JR. 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 THEODORE E. ALLISON, Assistant to the Board for Federal CHARLES J. SIEGMAN, Senior Associate Director Reserve System Affairs DALE W. HENDERSON, Associate Director LYNN S. FOX, Special Assistant to the Board DAVID H. HOWARD, Senior Adviser WINTHROP P. HAMBLEY, Special Assistant to the Board DONALD B. ADAMS, Assistant Director BOB STAHLY MOORE ,Special Assistant to the Board PETER HOOPER III, Assistant Director DIANE E. WERNEKE, Special Assistant to the Board KAREN H. JOHNSON, Assistant Director RALPH W. SMITH, JR., Assistant Director LEGAL DIVISION DIVISION OF RESEARCH AND STATISTICS J. VIRGIL MATTINGLY, JR., General Counsel SCOTT G. ALVAREZ, Associate General Counsel MICHAEL J. PRELL, Director RICHARD M. ASHTON, Associate General Counsel EDWARD C. ETTIN, Deputy Director OLIVER IRELAND, Associate General Counsel WILLIAM R. JONES, Associate Director KATHLEEN M. O'DAY, Associate General Counsel THOMAS D. SIMPSON, Associate Director MARYELLEN A. BROWN, Assistant to the General Counsel LAWRENCE SLIFMAN, Associate Director DAVID J. STOCKTON, Associate Director OFFICE OF THE SECRETARY MARTHA BETHEA, Deputy Associate Director PETER A. TINSLEY, Deputy Associate Director WILLIAM W. WILES, Secretary JENNIFER J. JOHNSON, Associate Secretary MYRON L. KWAST, Assistant Director PATRICK M. PARKINSON, Assistant Director BARBARA R. LOWREY, Associate Secretary MARTHA S. SCANLON, Assistant Director ELLEN MALAND, Assistant Secretary JOYCE K. ZICKLER, Assistant Director DIVISION OF BANKING JOHN J. MINGO, Adviser LEVON H. GARABEDIAN, Assistant Director SUPERVISION AND REGULATION (Administration) RICHARD SPILLENKOTHEN, Director STEPHEN C. SCHEMERING, Deputy Director DIVISION OF MONETARY AFFAIRS DON E. KLINE, Associate Director WILLIAM A. RYBACK, Associate Director DONALD L. KOHN, Director FREDERICK M. STRUBLE, Associate Director DAVID E. LINDSEY, Deputy Director HERBERT A. BIERN, Deputy Associate Director BRIAN F. MADIGAN, Assistant Director ROGER T. COLE, Deputy Associate Director RICHARD D. PORTER, Assistant Director JAMES I. GARNER, Deputy Associate Director NORMAND R.V. BERNARD, Special Assistant to the Board HOWARD A. AMER, Assistant Director DIVISION OF CONSUMER GERALD A. EDWARDS, JR., Assistant Director JAMES D. GOETZINGER, Assistant Director AND COMMUNITY AFFAIRS STEPHEN M. HOFFMAN, JR., Assistant Director GRIFFITH L. GARWOOD, Director LAURA M. HOMER, Assistant Director GLENN E. LONEY, Associate Director JAMES V. HOUPT, Assistant Director DOLORES S. SMITH, Associate Director JACK P. JENNINGS, Assistant Director MAUREEN P. ENGLISH, Assistant Director MICHAEL G. MARTINSON, Assistant Director IRENE SHAWN MCNULTY, Assistant Director RHOGER H PUGH, Assistant Director SIDNEY M. SUSSAN, Assistant Director MOLLY S. WASSOM, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 JOHN P. LAWARE SUSAN M. PHILLIPS LAWRENCE B. LINDSEY OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PAYMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director WILLIAM SCHNEIDER, Special Assignment: DAVID L. ROBINSON, Deputy Director (Finance and Project Director, National Information Center Control) PORTIA W. THOMPSON, Equal Employment Opportunity CHARLES W. BENNETT, Assistant Director Programs Officer JACK DENNIS, JR., Assistant Director EARL G. HAMILTON, Assistant Director DIVISION OF HUMAN RESOURCES JEFFREY C. MARQUARDT, Assistant Director MANAGEMENT JOHN H. PARRISH, Assistant Director LOUISE L. ROSEMAN, Assistant Director DAVID L. SHANNON, Director JOHN R. WEIS, Associate Director FLORENCE M. YOUNG, Assistant Director ANTHONY V. DIGIOIA, Assistant Director OFFICE OF THE INSPECTOR GENERAL JOSEPH H. HAYES, JR., Assistant Director FRED HOROWITZ, Assistant Director BRENT L. BOWEN, Inspector General DONALD L. ROBINSON, Assistant Inspector General OFFICE OF THE CONTROLLER BARRY R. SNYDER, Assistant Inspector General 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 DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director BRUCE M. BEARDSLEY, Deputy Director MARIANNE M. EMERSON, Assistant Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director EDWARD T. MULRENIN, Assistant Director DAY W. RADEBAUGH, JR., Assistant Director ELIZABETH B. RIGGS, Assistant Director RICHARD C. STEVENS, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 Federal Reserve Bulletin • April 1993 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman E. GERALD CORRIGAN, Vice Chairman WAYNE D. ANGELL EDWARD W. KELLEY, JR. DAVID W. MULLINS, JR. EDWARD G. BOEHNE JOHN P. LAWARE SUSAN M. PHILLIPS SILAS KEEHN LAWRENCE B. LINDSEY GARY H. STERN ROBERT D. MCTEER, JR. ALTERNATE MEMBERS J. ALFRED BROADDUS, JR. JERRY L. JORDAN ROBERT T. PARRY ROBERT P. FORRESTAL JAMES H. OLTMAN STAFF DONALD L. KOHN, Secretary and Economist RICHARD W. LANG, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary DAVID E. LINDSEY, Associate Economist JOSEPH R. COYNE, Assistant Secretary LARRY J. PROMISEL, Associate Economist GARY P. GILLUM, Assistant Secretary ARTHUR J. ROLNICK, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel HARVEY ROSENBLUM, Associate Economist ERNEST T. PATRIKIS, Deputy General Counsel KARL A. SCHELD, Associate Economist MICHAEL J. PRELL, Economist CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist THOMAS D. SIMPSON, Associate Economist RICHARD G. DAVIS, Associate Economist LAWRENCE SLIFMAN, Associate Economist WILLIAM J. MCDONOUGH, Manager of the System Open Market Account MARGARET L. GREENE, Deputy Manager for Foreign Operations JOAN E. LOVETT, Deputy Manager for Domestic Operations FEDERAL ADVISORY COUNCIL E. B. ROBINSON, JR., President JOHN B. MCCOY, Vice President MARSHALL N. CARTER, First District EUGENE A. MILLER, Seventh District CHARLES S. SANFORD, JR., Second District ANDREW B. CRAIG, III, Eighth District ANTHONY P. TERRACCIANO, Third District JOHN F. GRUNDHOFER, Ninth District JOHN B. MCCOY, Fourth District DAVID A. RISMILLER, Tenth District EDWARD E. CRUTCHFIELD, JR., Fifth District CHARLES R. HRDLICKA, Eleventh District E.B. ROBINSON, JR., Sixth District RICHARD M. ROSENBERG, 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 CONSUMER ADVISORY COUNCIL DENNY D. DUMLER, Denver, Colorado, Chairman JEAN POGGE, Chicago, Illinois, Vice Chairman BARRY A. ABBOTT, San Francisco, California BONNIE GUITON, Charlottesville, Virginia JOHN R. ADAMS, Philadelphia, Pennsylvania JOYCE HARRIS, Madison, Wisconsin JOHN A. BAKER, Atlanta, Georgia GARY S. HATTEM, New York, New York VERONICA E. BARELA, Denver, Colorado JULIA E. HILER, Marietta, Georgia MULUGETTA BIRRU, Pittsburgh, Pennsylvania RONALD HOMER, Boston, Massachusetts DOUGLAS D. BLANKE, St. Paul, Minnesota THOMAS L. HOUSTON, Dallas, Texas GENEVIEVE BROOKS, Bronx, New York HENRY JARAMILLO, Belen, New Mexico TOYE L. BROWN, Boston, Massachusetts EDMUND MIERZWINSKI, Washington, D.C. CATHY CLOUD, Washington, D.C. JOHN V. SKINNER, Irving, Texas MICHAEL D. EDWARDS, Yelm, Washington LOWELL N. SWANSON, Portland, Oregon MICHAEL FERRY, St. Louis, Missouri MICHAEL W. TIERNEY, Washington, D.C. NORMA L. FREIBERG, New Orleans, Louisiana GRACE W. WEINSTEIN, Englewood, New Jersey LORI GAY, Los Angeles, California JAMES L. WEST, Tijeras, New Mexico DONALD A. GLAS, Hutchinson, Minnesota ROBERT O. ZDENEK, Washington, D.C. THRIFT INSTITUTIONS ADVISORY COUNCIL DANIEL C. ARNOLD, Houston, Texas, President BEATRICE D'AGOSTINO, Somerville, New Jersey, Vice President WILLIAM A. COOPER, Minneapolis, Minnesota CHARLES JOHN KOCH, Cleveland, Ohio PAUL L. ECKERT, Davenport, Iowa ROBERT MCCARTER, New Bedford, Massachusetts GEORGE R. GLIGOREA, Sheridan, Wyoming NICHOLAS W. MITCHELL, JR., Winston-Salem, North Carolina THOMAS J. HUGHES, Merrifield, Virginia STEPHEN W. PROUGH, Irvine, California KERRY KILLINGER, Seattle, Washington THOMAS R. RICKETTS, Troy, Michigan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, Federal Reserve Regulatory Service. Looseleaf; updated at MS-138, Board of Governors of the Federal Reserve System, least monthly. (Requests must be prepaid.) Washington, DC 20551 or telephone (202) 452-3244 or FAX Consumer and Community Affairs Handbook. $75.00 per (202) 728-5886. When a charge is indicated, payment should year. accompany request and be made payable to the Board of Monetary Policy and Reserve Requirements Handbook. Governors of the Federal Reserve System. Payment from for- $75.00 per year. eign residents should be drawn on a U.S. bank. Securities Credit Transactions Handbook. $75.00 per year. The Payment System Handbook. $75.00 per year. Federal Reserve Regulatory Service. 3 vols. (Contains all four Handbooks plus substantial additional material.) THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. $200.00 per year. 1984. 120 pp. Rates for subscribers outside the United States are as follows ANNUAL REPORT. and include additional air mail costs: ANNUAL REPORT: BUDGET REVIEW, 1991-92. Federal Reserve Regulatory Service, $250.00 per year. FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or Each Handbook, $90.00 per year. $2.50 each in the United States, its possessions, Canada, THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTIand Mexico. Elsewhere, $35.00 per year or $3.00 each. COUNTRY MODEL, May 1984. 590 pp. $14.50 each. ANNUAL STATISTICAL DIGEST: period covered, release date, WELCOME TO THE FEDERAL RESERVE. March 1989. 14 pp. number of pages, and price. 1981 October 1982 239 pp. $ 6.50 INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. 440 pp. $9.00 each. 1982 December 1983 266 pp. $ 7.50 1983 October 1984 264 pp. $11.50 FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. December 1986. 264 pp. $10.00 each. 1984 October 1985 254 pp. $12.50 1985 October 1986 231 pp. $15.00 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1986 November 1987 288 pp. $15.00 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 CONSUMER EDUCATION PAMPHLETS 1980-89 March 1991 712 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1990 November 1991 185 pp. $25.00 available without charge. 1991 November 1992 215 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages Consumer Handbook to Credit Protection Laws SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF CHARTS. Weekly. $30.00 per year or $.70 each in the A Guide to Business Credit for Women, Minorities, and Small United States, its possessions, Canada, and Mexico. Else- Businesses where, $35.00 per year or $.80 each. How to File A Consumer Credit Complaint Series on the Structure of the Federal Reserve System THE FEDERAL RESERVE ACT and other statutory provisions The Board of Governors of the Federal Reserve System affecting the Federal Reserve System, as amended through The Federal Open Market Committee August 1990. 646 pp. $10.00. Federal Reserve Bank Board of Directors REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Federal Reserve Banks RESERVE SYSTEM. Organization and Advisory Committees A Consumer's Guide to Mortgage Lock-Ins ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— A Consumer's Guide to Mortgage Settlement Costs Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. A Consumer's Guide to Mortgage Refinancings Vol. II (Irregular Transactions). 1969. 116 pp. Each vol- Home Mortgages: Understanding the Process and Your Right ume $2.25; 10 or more of same volume to one address, to Fair Lending $2.00 each. Making Deposits: When Will Your Money Be Available? Introduction to Flow of Funds. 1980. 68 pp. $1.50 each; 10 or When Your Home is on the Line: What You Should Know more to one address, $1.25 each. About Home Equity Lines of Credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All STAFF STUDIES: Summaries Only Printed in the 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- Bulletin VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September Studies and papers on economic and financial subjects that are 1990. 35 pp. of general interest. Requests to obtain single copies of the full text or to be added to the mailing list for the series may be sent 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, 1980-90, by Margaret Hastings Pickering. May 1991. to Publications Services. 21pp. 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM Staff Studies 1-145 are out of print. MORTGAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, by KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, Thomas F. Brady. November 1985. 25 pp. Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) IN- Ann Taylor. March 1992. 37 pp. DEXES OF THE MONETARY AGGREGATES, by Helen T. Farr and Deborah Johnson. December 1985. 42 pp. 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF THE REPRINTS OF SELECTED Bulletin ARTICLES ECONOMIC RECOVERY TAX ACT: SOME SIMULATION RESULTS, by Flint Brayton and Peter B. Clark. December Some Bulletin articles are reprinted. The articles listed below 1985.17 pp. are those for which reprints are available. Most of the articles 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS IN reprinted do not exceed twelve pages. Limit of ten copies BANKING BEFORE AND AFTER ACQUISITION, by Stephen A. Rhoades. April 1986. 32 pp. Recent Developments in the Bankers Acceptance Market. 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 PRICING Prices, Profit Margins, and Exchange Rates. 6/86. FROM 1983 THROUGH 1985, by Patrick I. Mahoney, Alice Agricultural Banks under Stress. 7/86. P. White, Paul F. O'Brien, and Mary M. McLaughlin. Foreign Lending by Banks: A Guide to International and U.S. January 1987. 30 pp. 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 Mutual Recognition: Integration of the Financial Sector in the PROPOSED CEILINGS ON CREDIT CARD INTEREST RATES, European Community. 9/89. by Glenn B. Canner and James T. Fergus. October 1987. The Activities of Japanese Banks in the United Kingdom and in 26 pp. 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 BANKING Recent Developments in Industrial Capacity and Utilization. MARKETS, by James V. Houpt. May 1988. 47 pp. 6/90. 157. M2 PER UNIT OF POTENTIAL GNP AS AN ANCHOR FOR Developments Affecting the Profitability of Commercial Banks. THE PRICE LEVEL, by Jeffrey J. Hallman, Richard D. 7/90. Porter, and David H. Small. April 1989. 28 pp. Recent Developments in Corporate Finance. 8/90. 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- U.S. Exchange Rate Policy: Bretton Woods to Present. 11/90. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE The Transmission Channels of Monetary Policy: How Have PRODUCTS, by Mark J. Warshawsky with the assistance of They Changed? 12/90. Dietrich Earnhart. September 1989. 23 pp. Changes in Family Finances from 1983 to 1989: Evidence from 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSID- the Survey of Consumer Finances. 1/92. IARIES OF BANK HOLDING COMPANIES, by Nellie Liang U.S. International Transactions in 1991. 5/92. and Donald Savage. February 1990. 12 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Maps of the Federal Reserve System HAWAII LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city • Board of Governors of the Federal — Branch boundary Reserve System, Washington, D.C. NOTE The Federal Reserve officially identifies Districts Commonwealth of Puerto Rico and the U.S. Virgin by number and Reserve Bank city (shown on both Islands; the San Francisco Bank serves American pages) and by letter (shown on the facing page). Samoa, Guam, and the Commonwealth of the In the 12th District, the Seattle Branch serves Northern Mariana Islands. The Board of Governors Alaska, and the San Francisco Bank serves Hawaii. revised the branch boundaries of the System most The System serves commonwealths and terri- recently in December 1991. tories as follows: the New York Bank serves the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 1-A 2-B 3-C 4-D 5-E Baltimore Pittsburgh {J C/I Charlotte • Cincinnati CT M AB Buffalo • • \ KY NJ NY BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H • Nashville Birmingham. WI Ml MO• ./^Louisville MS ) GA IA Detroit • L/V IL • LA ' Jacksonville IN • Memphis a New Orleans y„ Little* > MS Rock \ Miami ATLANTA # CHICAGO ST. LOUIS 9-1 MT 1 NO • Hel<: na MN Ml 1 SD • WI MINNEAPOLIS 10-J 12-L ™ L •J Omaha* Den # v er > M • fl ALASKA / v^Seattle • — NM [— Portland Oklahoma City • OR ^ OK KANSAS CITY CA / NV 7 11-K UT 1 TX Salt Lake City NM / • • J EI Paso r AZ • Y f H • o uston • Los Angel es > San Antonio HAWAII DALLAS SAN FRANCISCO 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 Jerome H. Grossman Richard F. Syron Warren B. Rudman Cathy E. Minehan NEW YORK* 10045 Ellen V. Futter E. Gerald Corrigan Maurice R. Greenberg James H. Oltman Buffalo 14240 Herbert L. Washington James O. Aston PHILADELPHIA 19105 Jane G. Pepper Edward G. Boehne James M. Mead William H. Stone, Jr. CLEVELAND* 44101 A. William Reynolds Jerry L. Jordan To be announced Sandra Pianalto Cincinnati 45201 Marvin Rosenberg Charles A. Cerino1 Pittsburgh 15230 Robert P. Bozzone Harold J. Swart1 RICHMOND* 23219 Anne Marie Whittemore J. Alfred Broaddus, Jr. Henry J. Faison Jimmie R. Monhollon Baltimore 21203 To be announced Ronald B. Duncan1 Charlotte 28230 Anne M. Allen Walter A. Varvel1 Culpeper Communications John G. Stoides1 and Records Center 22701 ATLANTA 30303 Edwin A. Huston Robert P. Forrestal Leo Benatar Jack Guynn Donald E. Nelson1 Birmingham 35283 Donald E. Boomershine Fred R. Herr1 Jacksonville 32231 Joan D. Ruffier James D. Hawkins1 Miami 33152 R. Kirk Landon James T. Curry III Nashville 37203 James R. Tuerff Melvyn K. Purcell New Orleans 70161 Lucimarian Roberts Robert J. Musso CHICAGO* 60690 Richard G. Cline Silas Keehn Robert M. Healey William C. Conrad Detroit 48231 J. Michael Moore Roby L. Sloan1 ST. LOUIS 63166 Robert H. Quenon Thomas C. Melzer Janet McAfee Weakley James R. Bowen Little Rock 72203 Robert D. Nabholz, Jr. Karl W. Ashman Louisville 40232 John A. Williams Howard Wells Memphis 38101 Seymour B. Johnson John P. Baumgartner MINNEAPOLIS 55480 Delbert W. Johnson Gary H. Stern Gerald A. Rauenhorst Thomas E. Gainor Helena 59601 James E. Jenks John D. Johnson KANSAS CITY 64198 Burton A. Dole, Jr. Thomas M. Hoenig Herman Cain Henry R. Czerwinski Denver 80217 Barbara B. Grogan Kent M. Scott Oklahoma City 73125 Ernest L. Hollo way David J. France Omaha 68102 Sheila Griffin Harold L. Shewmaker DALLAS 75201 Leo E. Linbeck, Jr. Robert D. McTeer, Jr. Cece Smith Tony J. Salvaggio El Paso 79999 W. Thomas Beard, III Sammie C. Clay Houston 77252 Judy Ley Allen Robert Smith, III1 San Antonio 78295 Erich Wendl Thomas H. Robertson SAN FRANCISCO 94120 James A. Vohs Robert T. Parry Judith M. Runstad Patrick K. Barron Los Angeles 90051 Donald G. Phelps John F. Moore1 Portland 97208 William A. Hilliard E. Ronald Liggett1 Salt Lake City 84125 Gary G. Michael Andrea P. Wolcott Seattle 98124 George F. Russell, Jr. Gordon Werkema1 * 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 FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT PUBLICATIONS The Federal Reserve Board publishes a series of Three booklets on the mortgage process are also pamphlets covering individual credit laws and topics, available: A Consumer's Guide to Mortgage Lock-Ins, as pictured below. The series includes such subjects A Consumer's Guide to Mortgage Refinancings, and as how the Equal Credit Opportunity Act protects A Consumer's Guide to Mortgage Settlement Costs. women against discrimination in their credit dealings, These booklets were prepared in conjunction with the how to use a credit card, and how to resolve a billing Federal Home Loan Bank Board and in consultation error. with other federal agencies and trade and consumer The Board also publishes the Consumer Handbook groups. to Credit Protection Laws, a complete guide to con- Copies of consumer publications are available free sumer credit protections. This forty-four-page booklet of charge from Publications Services, mail stop 138, explains how to shop and obtain credit, how to main- Board of Governors of the Federal Reserve System, tain a good credit rating, and how to dispute unfair Washington, DC 20551. Multiple copies for classcredit transactions. room use are also available free of charge. A guide to Business A Consumer's A Coiwiimer's Credit Guide to GuMeto for Women, Mortgage Minorities, and Lock-Ins Small Businesses Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

Federal Reserve Statistical Releases Available on the Commerce Department's Economic 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 economic bulletin board, able to the public through the U.S. Department of please call (202) 482-1986. The releases transmitted Commerce's economic bulletin board. Computer to the economic bulletin board, on a regular basis, access to the releases can be obtained by sub- 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 Row of Funds Quarterly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis