Federal Reserve Bulletin, 1994-07

VOLUME 80 • NUMBER 7 • JULY 1994 FEDERAL RESERVE BULLETIN BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • S. David Frost • Griffith L. Garwood • Donald L. Kohn • J. Virgil Mattingly, Jr. • Michael J. Prell • 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 571 HOME EQUITY LENDING: EVIDENCE industrial production was 5.5 percent higher FROM RECENT SURVEYS in May than it was a year earlier. The utilization of total industrial capacity edged down Borrowing against home equity appears to 0.1 percentage point, to 83.5 percent. have leveled off after its rapid rise in the late eighties. In 1993, about one in eight home- 594 STATEMENTS TO THE CONGRESS owners had home equity credit; roughly twothirds of the loans were lines of credit and Alan Greenspan, Chairman, Board of Goverone-third were traditional home equity loans. nors, sets forth the Board's views on the im- This article describes the consumers who bor- pact of derivative instruments on our nation's row against their home equity and the lending financial system, identifies the challenges that institutions that make the loans, presents esti- derivatives pose to users and to policymakers, mates of aggregate home equity debt outstand- discusses the steps that the Federal Reserve ing, and discusses influences on growth. has taken or plans to take to meet those challenges, and concludes with the Board's assess- 584 TREASURY AND FEDERAL RESERVE ment of the need for remedial legislation FOREIGN EXCHANGE OPERATIONS relating to derivative instruments, before the Subcommittee on Telecommunications and During the February-April period, the dollar Finance of the House Committee on Energy declined 4.6 percent against the German mark, and Commerce, May 25, 1994. 6.5 percent against the Japanese yen, and 3.6 percent on a trade-weighted basis. 606 Chairman Greenspan discusses recent monetary policy and says that the intention of the Federal Reserve is to promote financial condi- 589 STAFF STUDY SUMMARY tions under which our economy can grow at In A Summary of Merger Performance Studies its greatest potential, consistent with steady, in Banking, 1980-93, and an Assessment of noninflationary expansion of employment and the "Operating Performance" and "Event incomes and that if the Federal Reserve is Study" Methodologies, the author examines successful in its current endeavors, there will thirty-nine studies published from 1980 to not be an increase in overall inflation and 1993 on the effects of bank mergers on effi- trends toward price stability will be extended, ciency, profitability, or stockholder wealth. before the Senate Committee on Banking, The review looks for general conclusions Housing, and Urban Affairs, May 27, 1994. regarding the performance effects of bank mergers and also offers a broad assessment of 610 ANNOUNCEMENTS the two methodological approaches used by the studies. Change in the discount rate and federal funds rate. 591 INDUSTRIAL PRODUCTION AND Meeting of Consumer Advisory Council. CAPACITY UTILIZATION FOR MAY 1994 Proposal to amend the Federal Reserve's risk- Industrial production rose 0.2 percent in May based capital guidelines for state member after a revised 0.1 percent increase in April. banks and bank holding companies; joint At 116.1 percent of its 1987 average, total interagency proposal of advanced rulemaking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

concerning the regulatory treatment of A1 FINANCIAL AND BUSINESS STATISTICS recourse arrangements and direct credit sub- These tables reflect data available as of stitutes; proposed amendments to Regula- May 26, 1994. tion DD. Extension of comment period on proposal to A3 GUIDE TO TABULAR PRESENTATION simplify and update Regulation E. A4 Domestic Financial Statistics Changes in Board staff. A45 Domestic Nonfinancial Statistics A53 International Statistics 612 MINUTES OF THE FEDERAL OPEN MARKET COMMITTEE MEETING A67 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES At its meeting on March 22, 1994, the Committee adopted a directive that called for a A68 INDEX TO STATISTICAL TABLES slight increase in the degree of pressure on reserve positions and that did not include a A70 BOARD OF GOVERNORS AND STAFF presumption about the likely direction of any adjustment to policy during the intermeeting All FEDERAL OPEN MARKET COMMITTEE period. Accordingly, the directive indicated AND STAFF; ADVISORY COUNCILS that, in the context of the Committee's longrun objectives for price stability and sustain- A74 FEDERAL RESERVE BOARD able economic growth, and giving careful PUBLICATIONS consideration to economic, financial, and monetary developments, slightly greater or A76 MAPS OF THE FEDERAL RESERVE slightly lesser reserve restraint might be SYSTEM acceptable during the intermeeting period. A78 FEDERAL RESERVE BANKS, BRANCHES, 623 LEGAL DEVELOPMENTS AND OFFICES Various bank holding company, bank service corporation, and bank merger orders; and pending cases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Equity Lending: Evidence from Recent Surveys Glenn B. Canner and Charles A. Luckett of the institutions. The Federal Reserve Board, for Board's Division of Research and Statistics and instance, periodically surveys households about Thomas A. Durkin of the Office of the Secretary their home equity borrowing. The regulatory agenprepared this article. cies have for several years collected data from commercial banks on amounts outstanding under Accumulated equity in homes is one of the largest home equity lines of credit, via quarterly Reports components of the wealth of U.S. households. of Condition and Income (frequently referred to as Home equity differs from many other assets in that Call Reports). The agencies recently began collectit cannot be readily used to purchase goods or ing information about outstanding balances under services or to repay debt. It is widely accepted as traditional home equity loans as well. collateral, however, and in recent years homeown- To learn more about the current status of home ers have raised substantial amounts of spendable equity lending, the Federal Reserve Board particifunds by borrowing against the equity in their pated in a special nationwide survey of househomes. holds conducted over the period November 1993 Homeowners can convert their home equity to a through March 1994. Results of this recent survey liquid form in several ways: by selling a home and give a picture of current household borrowing either purchasing a lower-priced home or renting, activity and, together with results of earlier surby refinancing an existing mortgage for an amount veys, provide a means of measuring changes in greater than the outstanding mortgage balance plus consumer behavior.1 This article presents results closing costs, or by obtaining home equity credit. from the recent household survey and data obtained Home equity credit takes either of two forms. from other sources of information on home equity One form, referred to here as a "traditional home lending. equity loan," is a closed-end loan extended for a specific period that generally requires repayment of interest and principal in equal monthly install- HOLDINGS OF HOME EQUITY LOANS ments. Such a loan typically has an interest rate that is fixed for the life of the loan. The other form, Growth of home equity credit, and of home equity a "home equity line of credit," is a revolving lines of credit in particular, gained momentum in account that permits borrowing from time to time, the mid-1980s with a boost from the Tax Reform at the homeowner's discretion, up to the amount of Act of 1986, which mandated the phaseout of fedthe credit line; it typically has a more flexible repayment schedule than a traditional home equity 1. The 1993-94 household survey (formally, the 1993-94 Surloan. Most home equity credit lines have a variable veys of Consumers), conducted by the Survey Research Center of the Universityof Michigan, is described in the appendix. Descripinterest rate that is pegged to an index such as the tions of the easier surveys appear in the following publications: prime rate. Substantial equity in homes, aggressive 1977 survey—Thomas A. Durkin and Gregory E. Elliehausen, competition among financial institutions, and revi- 1977 Consumer Credit Survey (Board of Governors of the Federal Reserve Sy9tem, 1978); 1983 survey—Robert B. Avery, sions of the tax code all have contributed to the Gregory E. Elliehausen, Glenn B. Canner, and.Thomas A. increased use of home equity credit. Gustafson, "Survey of Consumer Finances, 1983," Federal Over the past few years, considerable informa- Reserve Bulletin, vol. 70 (September 1984), pp. 679-92; 1988 survey—Glenn B. Canner, Charles A. Luckett, and Thomas A. tion about home equity lending has become avail- Durkin, "Home Equity Lending," Federal Reserve Bulletin, able through surveys of households and lending vol. 75 (May 1989), pp. 333-44. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

572 Federal Reserve Bulletin • July 1994 1. Percentage of home equity credit users citing 2. Percentage of homeowners with home equity credit, advantages of home equity credit over other types selected years, by type of credit of credit Type of credit 1977 1983 | 1988 | 1993-94 Home equity Traditional Advantage line of home Any type 5.4 6.8 11.0 12.9 credit equity loan Home equity line of credit n.a. n.a. 5.7 8.3 Traditional home equity loan .. n.a. n.a. 5.4 4.9 Low interest rate 3355 5511 Easy to get 2211 3322 MEMO Tax advantage 3311 2288 Both types n.a. n.a. .1 .3 Convenient1 5577 55 Can defer repayment of principal .. 77 ** NOTE. Data have been weighted to ensure the representativeness of the Other2 55 2266 sample. Components do not sum to totals because some homeowners had both types of home equity credit. NOTE. Data have been weighted to ensure the representativeness of the n.a. Not available. sample. Percentages sum to more than 100 percent because respondents were SOURCES. 1977 Consumer Credit Survey; 1983 Survey of Consumer allowed to cite up to two advantages for each type of credit. Finances; 1988 and 1993-94 Surveys of Consumers. * Less than 0.5 percent. 1. Includes immediate access to funds and other responses indicating that convenience was an advantage. 2. Includes ability to borrow a large amount, absence of closing costs, home equity loans. The most recent survey indiability to consolidate debts, and miscellaneous other responses. cates that 12.9 percent of all homeowners, or about SOURCE. 1993-94 Surveys of Consumers. 8.2 million households, have home equity debt: eral income tax deductions for interest paid on 8.3 percent have a home equity line of credit and nonmortgage consumer debt. This change in tax 4.9 percent have a traditional home equity loan (a law enhanced the attractiveness of using debt small proportion of households have both forms). secured by homes to fund expenditures that con- Although the use of home equity credit, as sumers previously had typically financed by con- reported in the two most recent household surveys, sumer credit: Almost one-third of the homeowners was greater in 1993 than in 1988, the extraordinary in the 1993-94 household survey who reported volume of mortgage refinancing in the past three having home equity credit cited its favorable tax years or so has no doubt curtailed its growth. Since treatment as an advantage over other types of credit the 1988 survey, interest rates on home mortgages (table 1). Attractive interest rates on home equity have fallen substantially (particularly between midcredit relative to rates on most other types of con- 1990 and October 1993). Millions of consumers sumer credit, as well as aggressive marketing and have refinanced their first mortgages, and in the price competition among creditors, have further process some have rolled the outstanding balances encouraged consumer interest in home equity on their home equity obligations into a single new credit. loan. As a consequence, the proportion of home- Before the mid-1980s, nearly all home equity owners having home equity credit at the time of the debt was of the traditional type. Since that time, 1993-94 survey is likely smaller than it would growing numbers of homeowners have preferred have been had longer-term interest rates not fallen lines of credit as the means of borrowing on their so sharply. home equity. Although relatively low interest rates and tax deductibility characterize both types of home equity borrowing, the convenience of being SOURCES OF HOME EQUITY CREDIT able to draw against a line of credit as needed has proved to be a particularly attractive feature of Many types of lending institutions extend home credit lines and undoubtedly has spurred their rela- equity credit. Today, the market is dominated by tive growth. depository institutions, especially commercial In 1977, 5.4 percent of homeowners had home banks, although savings institutions (savings banks equity debt (table 2). By 1983, the proportion had and savings and loan associations) continue to play risen only slightly, to 6.8 percent. By the second an important role (table 3). Household surveys half of 1988, however, 11.0 percent of homeown- reveal some specialization among creditors by type ing households, roughly 6.5 million in number, had of credit. In particular, finance companies continue debt secured by home equity; about equal propor- to be a major source of traditional home equity tions had home equity lines of credit and traditional loans (originating almost 30 percent of these loans), Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Equity Lending: Evidence from Recent Surveys 573 3. Percent distribution of sources of home equity credit, 1988 and 1993-94, by type of credit 1988 1993-94 SSoouurrccee Home equity lines Traditional home Home equity lines Traditional home of credit equity loans of credit equity loans Commercial banks 54 33 60 29 Savings institutions1 31 27 21 30 Credit unions 11 8 13 11 Other creditors2 4 32 7 29 Total 100 100 100 100 NOTE. Percentages are based on numbers of loans or lines of credit. Data 1. Includes savings banks and savings and loan associations. have been weighted to ensure the representativeness of the sample. In 2. Includes finance and loan companies, brokerage firms, mortgage comthis and subsequent tables, components may not sum to totals because of panies, and individuals. rounding. SOURCES. 1988 and 1993-94 Surveys of Consumers. but they provide relatively few home equity lines By comparison, 81 percent held traditional home of credit. equity loans. The larger role of finance companies in the tradi- Home equity lines of credit are more complex to tional home equity loan market can be traced to administer than are traditional home equity loans; several factors. First, finance companies (except consequently, larger banks are more likely than those affiliated with depository institutions) typi- smaller banks to offer lines of credit. Although the cally do not offer deposit services; consequently, vast majority of commercial banks with assets they are not well suited to offering credit accounts exceeding $250 million offered home equity lines (such as lines of credit) that can be accessed by of credit in 1993, only 24 percent of those with check, a basic feature of virtually all home equity assets of less than $50 million did so. The pattern is lines of credit. Second, finance companies histori- quite different for traditional home equity loans, cally have tended to serve consumers who have with most banks at all asset levels offering such somewhat lower incomes and smaller amounts of loans. home equity.2 Many lenders prefer to exercise tighter control over the credit use of such customers by granting them loans of specified amounts USERS AND USES OF HOME EQUITY CREDIT having predetermined repayment schedules. Homeowners can be grouped into one of four cate- Among depository institutions, commercial gories on the basis of their mortgage debt status— banks and savings institutions have nearly equal those without mortgage debt, those with only an shares of the market for traditional home equity loans, but commercial banks are the predominant source of home equity lines of credit, with a 60 per- 4. Percentage of U.S. commercial banks with cent market share. Responses to the two most outstanding home equity credit, 1993, recent household surveys indicate that the commer- by type of credit cial bank share of the market for home equity Assets of banks Home equity Traditional home credit lines has increased in recent years. (millions of dollars) lines of credit equity loans Although commercial banks are the predominant Less than 50 24 69 source of home equity lines of credit, not all banks 50-99 49 90 100-249 69 94 offer this type of loan. At the end of 1993, 46 per- 250-499 84 92 cent of all U.S. commercial banks held outstanding 500-999 89 95 1,000 or more 89 90 balances on home equity lines of credit (table 4). All banks 46 81 MEMO 2. According to the 1993-94 household survey, the average Lines of credit in use (percent)1 ... 53 family income of home equity borrowers at finance companies was 1. Calculated by summing the outstanding balances under home equity $46,000, compared with $59,000 at commercial banks and savings lines of credit and dividing by the sum of outstanding balances under home institutions. Finance company borrowers also typically had less equity lines of credit and the amount of unused lines of credit available to home equity than depository institution borrowers: $39,000 com- account holders. pared with $97,000. (Data not shown in tables.) SOURCE. Reports of Condition and Income, December 31,1993. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

574 Federal Reserve Bulletin • July 1994 outstanding first mortgage, those with a home The strong relationship between having a home equity line of credit, and those with a traditional equity credit line and high levels of income and home equity loan. The "average" characteristics of remaining home equity can be seen when homethe homeowners in these four categories differ, in owners are grouped by level of income and home some instances rather substantially (table 5). Home- equity (table 6). For homeowners in the two highowners who have no mortgage debt stand out est family income groups, the proportions with because they are much more likely than those who credit lines are two to nearly four times as large as do, to be headed by an older individual (in many the proportions for the three lowest income groups; cases retired). Moreover, although they typically the linkage with income is much less pronounced have substantial equity in their homes, their current for holders of traditional home equity loans. The incomes are not especially high compared with the proportion of homeowners who have a line of incomes of other homeowners. credit also increases sharply with the level of home equity, but the relationship is reversed for traditional home equity loans. Similarly, homeowners Characteristics of Households who own relatively expensive homes are more with Home Equity Credit likely to have a line of credit than are owners of less expensive homes. The relationship between Homeowners who have a home equity line of credit home value and having home equity credit appears typically own more expensive homes, have higher to be much weaker for traditional home equity incomes, and have accumulated substantially more loans: The proportion rises from the lowest-value equity in their homes than other homeowners, categories but drops off again in the higher-value including those who have traditional home equity categories. loans and those with only first mortgage debt. They The prevalence of home equity credit varies also tend to be somewhat better educated. For these somewhat by region of the country (table 6). reasons, a home equity line of credit is often char- Specifically, a smaller proportion of homeowners acterized as an "upscale" product. In 1993, the in the South have home equity credit of either type average family income for homeowners with credit than in the other three major regions of the country. line accounts was $61,234, compared with $46,162 As in 1988, the Northeast has the highest incifor those with traditional home equity loans and dence of lines of credit, although the North Central $51,756 for those with only first mortgage debt. and West regions experienced the largest percent- Differences in levels of home equity are more age increases from 1988 to 1993-94; in both substantial: The average for credit line holders was regions the proportions rose from 4 percent to more than twice that for traditional home equity 9 percent. loan users and almost twice that for homeowners Additional evidence of the regional character of with only first mortgage debt. home equity lending is the large differences among 5. Characteristics of homeowners, 1993-94, by debt status M ho ar m k e e t (d va o l l u la e r s o ) f Ho ( m d e o ll e a q r u s) i ty1 1993 f ( a d m ol i l l a y r s i ) n come AAggee22 EEdd ((mm uucc ee aa dd tt iiaa iioo nn nn 22 NNoonn aa ww nndd hh iittee HHoommeeoowwnneerr ddeebbtt ssttaattuuss ((mmeeddiiaann ggrraaddee HHiissppaanniicc yyeeaarrss)) Mean Median Mean Median Mean Median ccoommpplleetteedd)) ((ppeerrcceenntt)) No mortgage debt 90,987 65,000 90,987 65,000 33,688 24,000 63 12 12 First mortgage only 129,174 90,000 59,000 35,000 51,756 45,000 41 14 15 Home equity line of credit 165,838 139,000 109,564 76,500 61,234 50,000 51 16 8 Traditional home equity loan .. 113,282 92,500 43,302 35,000 46,162 45,000 43 13 9 MEMO All homeowners 117,725 83,000 74,499 49,000 45,603 35,000 48 13 13 NOTE. Data have been weighted to ensure the representativeness of the 2. Characteristic of head of household, sample. SOURCE. 1993-94 Surveys of Consumers. 1. Market value of home less all debts secured by home, including balances outstanding on home equity credit lines and traditional home equity loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Equity Lending: Evidence from Recent Surveys 575 6. Percentage of homeowners with home equity credit, 7. Ratio of commercial bank home equity loan balances 1993-94, by homeowner characteristics outstanding to all outstanding loans and leases, December 31, 1993, by state Traditional Homeowner Home equity home equity Either type characteristic line of credit Traditional loan State li H ne o s m o e f e c q r u e i d t i y t 1 home equity Total2 loans' Age, in years1 18-34 4 5 8 Alabama 3.1 2.2 3.8 35-44 10 8 17 1.6 7.1 7.1 45-54 11 7 17 4.5 3.8 7.0 55-64 15 4 19 Arkansas .7 2.1 2.3 65 or older 5 * 5 California 5.5 3.9 8.5 Colorado 2.6 5.1 6.6 Annual family income, in dollars Connecticut 8.5 4.5 12.4 Less than 15,000 4 3 6 Delaware 5.8 4.9 8.3 15,000-24,999 4 3 7 District of Columbia ... 4.9 2.5 6.8 25,000-34,999 6 5 11 Florida 3.1 2.3 4.6 35,000-44,999 9 5 14 Georgia 2.2 2.8 4.0 45,000-59,999 11 6 17 Hawaii 10.1 3.9 14.0 60,000 or more 15 6 20 Idaho 2.6 1.8 3.3 Home equity, in dollars2 Illinois 5.6 2.8 5.9 Less than 50,000 4 7 11 2.3 2.1 3.6 50,000-99,999 10 4 12 .9 1.8 2.0 100,000 or more 14 2 15 Kansas 1.1 1.5 1.9 Kentucky 2.0 2.0 3.1 M in ar d k o e l t l a v r a s3 lu e of home, L M o a u i i n s e ia na 7 1 . . 3 5 2 2. . 3 6 3 8. . 3 0 Less than 50,000 1 3 4 Maryland 6.2 3.4 8.6 50,000-99,999 7 6 13 Massachusetts 5.8 1.8 6.8 100,000-149,999 11 9 18 Michigan 3.4 2.4 4.9 150,000-199,999 16 3 19 Minnesota 3.2 2.7 4.4 200,000 or more 16 4 20 Mississippi 2.0 3.0 3.6 Region Missouri 2.3 1.6 2.8 West 9 4 13 Montana 1.6 1.7 2.2 North Central 9 7 15 Nebraska .9 1.5 1.7 Northeast 12 7 19 Nevada 3.1 1.6 4.2 South 6 3 8 New Hampshire 6.1 2.1 7.0 MEMO New Jersey 10.1 7.0 16.3 All homeowners 8.3 4.9 12.9 New Mexico .8 3.1 3.4 New York 6.2 3.5 7.7 North Carolina 6.3 2.7 8.6 NOTE. Data have been weighted to ensure the representativeness of the North Dakota 2.2 1.0 1.6 sample. Ohio 3.6 2.0 4.7 * Less than 0.5 percent. 1. Age of head of household. Oklahoma .8 2.0 2.2 2. Market value of home less all debts secured by home, including Oregon 2.1 2.7 4.2 Pennsylvania 4.2 6.2 9.4 balances outstanding on home equity credit lines and traditional home equity Rhode Island 6.3 11.8 17.1 loans. South Carolina 4.7 2.7 6.5 3. Estimated by respondent. South Dakota 1.2 1.1 1.5 SOURCE. 1993-94 Surveys of Consumers. Tennessee 2.9 2.5 4.0 .7 1.1 1.1 Utah 7.1 3.7 8.4 Vermont 5.6 1.2 5.5 banks, depending on the location of their headquar- Virginia 5.1 3.9 7.7 ters, in the share of their loan portfolio devoted to Washington 2.2 5.1 6.2 West Virginia 2.9 2.3 4.2 home equity lending (table 7). Among all domesti- Wisconsin 2.2 2.4 3.4 cally chartered commercial banks, outstanding bal- Wyoming .8 1.8 2.2 ances on home equity lines of credit accounted for All states 3.6 2.6 4.5 only 3.6 percent of outstanding balances on all NOTE. Data are for domestically chartered commercial banks. Banks are loans and leases at the end of 1993, and traditional assigned to states according to the location of the headquarters. 1. Includes only banks that make specified type of home equity loan. home equity loans for only 2.6 percent. However, 2. Includes only banks that make at least one type of home equity loan. the proportions varied substantially from state to SOURCE. Reports of Condition and Income, December 31, 1993. state. Banks headquartered in the New England states had relatively high ratios of total home equity loans to total loans and leases, as did banks in Amounts Borrowed several Mid-Atlantic states (see map). In the West, banks headquartered in California, Utah, Hawaii, Amounts borrowed under home equity lines of and Arizona also had relatively high ratios. credit and traditional home equity loans differ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

576 Federal Reserve Bulletin • July 1994 Share of home equity loans in loan portfolios Status of home equity debt, 1993-94, of domestically chartered commercial banks, 1993 by type of credit Percent distribution except as noted Home equity lines Traditional home Item of credit equity loans Outstanding balance, in dollars 22 1-9,999 26 42 10,000-24,999 30 40 25,000 or more 22 19 Total 100 100 MEMO2 Mean (dollars) 14,401 16,199 Median (dollars) 10,000 11,000 Percentage of credit line in use 3 1-19 12 20-49 19 50-74 36 Share, by thirds 75-100 33 H Lowest MEMO3 • Middle Mean (percent) 58 I Highest Median (percent) 62 NOTE. Data have been weighted to ensure the representativeness of the Share of loan portfolio is measured as the ratio of home equity loan sample. balances outstanding to all loans and leases for commercial banks headquar- 1. Includes respondents who reported that they had never used their tered in the state. Ratio excludes commercial banks with no outstanding account and respondents who had paid off outstanding debt. balances on home equity loans. Specific values portrayed on map are given 2. Figures for home equity lines of credit include accounts with no in column 3 of table 7. outstanding balance. SOURCE. Derived from Reports of Condition and Income, December 31, 3. Includes only those accounts with outstanding balances. 1993. SOURCE. 1993-94 Surveys of Consumers. (table 8). On average, credit line users (including homeowners surveyed in 1993-94 had no outstandthose who have no outstanding balance) owe ing balance, the proportion with no balance outless than users of traditional home equity loans, standing was down substantially from 1988 (the although both groups have similar proportions proportion in that year was two-fifths). owing relatively large amounts (outstanding bal- Three-fifths of homeowners who had no outances of $25,000 or more). In 1993-94, the mean standing balance on their line of credit when surand median amounts owed by homeowners with veyed in 1993-94 had never used their account; traditional home equity loans were $16,199 and some of these were new account holders, but many $11,000 respectively, compared with $14,401 and were not. The large number of unused accounts $10,000 respectively for users of credit lines. A suggests that many homeowners who have estabcomparison with the 1988 household survey indi- lished lines of credit have done so either to meet cates that the average balance owed on traditional anticipated specific needs at some future time or as home equity loans has fallen roughly $3,000 (mea- a standby source of funds. If some homeowners do sured in nominal dollars) since 1988, whereas the view home equity lines of credit as a standby average amount owed on home equity lines of source of funds, lending to them might be viewed credit has changed little. as relatively risky, as they could choose to borrow Most consumers who have home equity lines of only if they were experiencing financial distress. credit owe an amount well below the maximum To date, however, lenders report low delinquency allowed under their credit line. In 1993-94, the rates for home equity lines of credit. median credit line available to homeowners with lines of credit was $25,000, two and one-half times the median amount actually owed. A substantial Delinquency Rates proportion of homeowners who reported having a credit line (about one-fifth) had no balance Compared with other types of consumer lending, outstanding. Although significant numbers of home equity debt, particularly lines of credit, has Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Equity Lending: Evidence from Recent Surveys 577 had low delinquency rates over time (table 9). Such 10. Percentage of borrowers citing uses for funds experience is not surprising. Because home equity borrowed, 1993-94, by type of credit debt is typically secured by the homeowner's prin- Home equity lines Traditional home Use cipal residence, borrowers would be expected to go of credit equity loans to great lengths to make their payments. Also, Home improvement 64 38 home equity borrowers, with substantial levels of Repayment of other debts .. 45 68 Education 21 4 home equity and relatively high incomes, are typi- Real estate 12 8 Auto or truck 30 3 cally better off financially than other homeowners, and consumers in general. Finally, as is discussed Medical expenses 5 1 Business expenses 28 1 later, a large share of the funds borrowed under Vacation 6 1 Other1 1 3 home equity loans are used for home improvement, adding to the value of the home, or for other NOTE. Data have been weighted to ensure the representativeness of the sample. Percentages sum to more than 100 percent because respondents were purposes that enhance the borrower's financial cir- allowed to cite multiple uses for a single loan or drawdown and more than cumstances (for example, repayment of other debts one draw for one line of credit. 1. Includes purchase of furniture or appliance, purchase of boat or other that carry higher interest rates). recreational vehicle, payment of taxes, and personal financial investments. Rates of delinquency on home equity lines of SOURCE. 1993-94 Surveys of Consumers. credit to date have typically been only about half those on traditional home equity loans. Several Uses of Borrowed Funds factors may account for the differences. As noted, credit line borrowers, on average, have higher The 1993-94 household survey, like the 1988 surincomes and more equity in their homes than do vey, found that the principal uses for both types of traditional loan borrowers. Also, traditional loan home equity credit have been to finance home borrowers, on average, owe more than credit line improvements and to repay other debts (table 10). users. Finally, many line of credit plans have flexi- The patterns of usage diverge, however, when other ble repayment schedules that allow nominal pay- purposes of borrowing are considered: Vehicle purments in the first few years but larger payments in chases, education expenses, and business uses are subsequent periods to fully amortize the debt. relatively more important uses of credit line bor- Credit line borrowers who are in financial distress rowings than of traditional home equity loans. may be better able to meet their near-term obliga- Perhaps the most notable changes from 1988 to tions than traditional home equity borrowers, who 1993-94 were a surge in the reported business use typically face fully amortizing, fixed repayment of lines of credit and less frequent use of traditional schedules. home equity loans to purchase real estate. The decline in the reported use of traditional home equity loans to purchase real estate may indicate 9. Percentage of commercial bank consumer loans that fewer homeowners are willing to leverage their delinquent thirty days or more, 1986-93, principal residence to purchase other real property by type of loan during a period when real estate values have appre- Traditional ciated more slowly, or even declined, in many parts Home home Credit card Automobile Personal Year equity lines equity loans loans1 loans of the country. For some homeowners, declines in of credit loans home equity may have precluded their ability to 1986 .... n.a. 1.92 3.13 1.78 3.45 make other real estate purchases. 1987 .... .70 2 1.79 2.36 1.77 3.36 1988 .... .72 1.80 2.34 1.89 3.30 1989 .... .80 1.65 2.31 1.87 3.36 1990 .... .78 1.56 2.48 2.05 3.41 CONSUMER KNOWLEDGE ABOUT AND 1991 .... .88 1.81 3.21 2.18 3.29 1992 .... .78 1.79 2.98 2.27 3.43 SATISFACTION WITH HOME EQUITY CREDIT 1993 .... .72 1.62 2.73 1.90 2.79 NOTE. Rates are based on numbers of loans and are averages of monthly To learn more about their concerns, motivations, data. and behavior with respect to their home equity n.a. Not available. 1. Includes only direct lending. credit, the 1993-94 survey asked consumers a 2. Based on only final three quarters of the year. series of questions about their understanding of the SOURCE. American Bankers Association. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

578 Federal Reserve Bulletin • July 1994 11. Consumers' knowledge of and attitudes toward their missed several payments, including foreclosing on home equity credit and installment credit, 1993-94, their home, sending late-payment notices, contactby type of credit ing a collection agency, assessing late-payment Percentage of account holders within each group fees, and working out a revised payment schedule. Traditional When asked what they thought was the worst thing Consumer knowledge Home equity Installment home equity or attitude line of credit loan credit a lender could do if several payments were missed, most respondents (78 percent of credit line holders Knew or learned there was lien on home 99 98 and 87 percent of traditional home equity loan Knew or learned there borrowers) said the lender could foreclose on the was right to cancel 90 89 Searched for information1 ... 40 44 '37 loan. Thus, although virtually all home equity Obtained the information sought2 93 97 95 account holders recognized that a lien had been Recalled receiving Truth in placed on their property, not all believed that fore- Lending statement 89 85 68 Saved Truth in Lending closure and loss of the property was the most statement3 90 93 91 Found Truth in Lending severe possible outcome, perhaps indicating that statement helpful3 67 63 63 Said Truth in Lending some borrowers have substantial other resources statement affected credit available to meet obligations. decision3 8 6 12 Indicated satisfication with Another group of questions concerned efforts to account4 95 89 88 gather information before opening an account. NOTE. Data have been weighted to ensure the representativeness of the About two-fifths of home equity credit account sample. 1. Searched for information about other creditors or credit terms before holders searched for information about home equity obtaining credit. credit before opening the account, slightly more 2. Proportion of those who "searched for information." 3. Proportion of those who "recalled receiving Truth in Lending than the proportion of installment credit users. statement." Most of the information searches involved calling 4. Includes respondents who said they were "very satisfied" or "somewhat satisfied" with account. or visiting one or more institutions to ask about SOURCE. 1993-94 Surveys of Consumers. interest rates. Well over 90 percent of the searchers said they were able to get all the information they product, their shopping for credit, their knowledge were looking for, and a few more said they were of consumer protections, and their attitudes toward able to obtain at least some of the information they their home equity accounts. For comparison, simi- sought.4 Eighty-nine percent of credit line holders lar questions were asked of consumers who were recalled having received a Truth in Lending (TIL) users of other forms of installment credit but who disclosure statement, and 90 percent of that group did not have any home equity debt outstanding. had saved the statement.5 The proportion that One line of questioning focused on consumers' recalled having received a TIL statement was understanding about creditors' security interest in slightly lower for users of traditional home equity their residences. Almost all users of home equity loans, although the proportion of this group that credit (99 percent of credit line holders and 98 per- had saved the statement, at 93 percent, was slightly cent of traditional home equity loan borrowers) higher. About two-thirds of those who recalled indicated that the lender had explained, or they had having received a TIL statement said the statement already known, that their home was collateral for had been helpful to them in some way, but only the loan (table 11). About 90 percent of both groups 6 percent to 12 percent said the TIL statement had recalled the lender informing them that they had affected their decisions to use credit. the right to cancel the credit arrangement within three days, or said that they had already known about that protection.3 Consumers with home equity credit cited many 4. These questions were asked only of those who had obtained courses of action a creditor might take if they home equity credit or installment credit. The survey did not address the experience of any households that might have sought home equity credit but did not obtain it. 5. Truth in Lending disclosure statements must be provided to 3. The three-day right to cancel a home equity loan transaction, consumers by creditors in connection with credit transactions. The known as the right of rescission, is part of the Truth in Lending statements include information about key terms related to the Act. transaction, including the annual percentage rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Equity Lending: Evidence from Recent Surveys 579 A final set of questions concerned consumer years. Commercial banks, the dominant provider of satisfaction with their home equity or installment credit under home equity lines of credit, had receivcredit. Ninety-five percent of home equity credit ables of $73 billion at the end of 1993, nearly line holders were somewhat or very satisfied with double the amount for all other lenders combined the account, a bit higher than for traditional home (table 12). They are also the leading provider of equity loan and installment credit users. Of the traditional home equity loans, although their marsmall percentage of account holders who were dis- ket share is much smaller for this type of credit. satisfied, most complaints concerned the interest In an earlier article, based on less-complete instirate associated with the loan. tutional data, we estimated that debt outstanding on home equity lines of credit was about $75 billion at the end of 1988.6 Given this estimate, debt on home equity credit lines grew $35 billion over the AGGREGATE HOME EQUITY DEBT five-year period through 1993, or at an average rate Data from lending institutions, together with infor- of around 9 percent per year. The pattern of growth mation from the household survey, suggest that was far from smooth, however. Much of the outstanding home equity debt totaled about increase occurred in 1989 and 1990, with total $255 billion at the end of 1993. Borrowing against credit line debt apparently peaking at about home equity lines of credit is estimated to have $114 billion in 1991 and 1992 and then contracting totaled about $110 billion, and traditional home a small amount in 1993. equity loans, about $145 billion. Aggregate esti- The extent to which traditional home equity debt mates suggest that the growth of home equity debt has increased or contracted since 1988 is difficult slowed considerably after 1988, and that the to determine precisely. With virtually no instituamount of such debt outstanding apparently con- tional data as a basis for calculations five years ago, tracted slightly during 1992 and 1993. The follow- we estimated traditional home equity debt at the ing paragraphs summarize aggregate estimates of end of 1988 to have been within a range of home equity debt outstanding and discuss various $135 billion to $190 billion. As more detailed data factors underlying the apparent recent weakness have become available, it has become possible to (an explanation of the construction of the aggregate make more accurate estimates for subsequent years. figures is given in the box). Although our estimates from 1990 forward should still be viewed as subject to a fairly wide margin of error, it seems reasonable to conclude that this type of home equity debt also contracted a bit in recent Amounts Outstanding years, and perhaps leveled off in 1993. Comprehensive figures on home equity lending are not available for all types of lenders, although more complete data have been reported in the past few 6. Canner and others, "Home Equity Lending." 12. Estimates of aggregate home equity debt outstanding, 1988-93, by type and source of credit Billions of dollars Home equity lines of credit Traditional home equity loans YYeeaarr TToottaall Commercial Commercial Other sources All lenders Other sources All lenders banks banks 1988 ... 40 35 75 n.a. n.a. 135-190 210-265 1989 ... 51 39 90 n.a. n.a. n.a. n.a. 1990 .. 61 44 105 54 99 153 258 1991 .. 70 44 114 53 95 148 262 1992 .. 73 41 114 50 94 144 258 1993 73 37 110 49 96 145 255 NOTE. n.a. Not available. SOURCES. Reports of Condition and Income, various years; Credit Union National Association; Federal Reserve; and Surveys of Consumers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

580 Federal Reserve Bulletin • July 1994 Estimation of Aggregate Debt The procedure for constructing aggregate estimates of Debt Under Home Equity Lines of Credit home equity debt outstanding for 1993 is described here. The same approach was used to estimate debt outstand- According to Call Reports, commercial banks had ing for the preceding two years; before 1991, however, $73 billion of receivables under home equity lines of much of the source data was not available. credit at the end of 1993, and savings institutions— Commercial banks have reported receivables under mutual savings banks, federal savings banks, and savings home equity lines of credit on their quarterly Call Re- and loan associations—together had about $18 billion ports since 1987, and have provided data on holdings of outstanding (table). Credit unions held $11 billion. The traditional home equity loans since 1991. Mutual savings relative magnitudes of these figures appear roughly conbanks also report these data on Call Reports. Savings and sistent with the distribution of sources of credit lines loan associations and federal savings banks report credit reported in the household survey. line receivables on Call Reports but do not separate No direct estimate of credit line receivables is availtraditional home equity loans from first mortgage debt. able for finance companies. Total real estate debt held by Finance companies report monthly to the Federal Reserve these firms was nearly $69 billion at the end of 1993. on total real estate credit on their books, but they do not Discussions with industry members suggest that twodifferentiate first and second mortgages, nor do they thirds to three-quarters of this total, or $46 billion to distinguish residential from commercial mortgages. Esti- $50 billion, was home equity debt of households. Relamates of both types of home equity debt outstanding at tively little of the home equity lending by finance compacredit unions are available from the Credit Union nies is carried out via credit lines, a fact reflected in the National Association. Data from these institutional household survey responses: Finance companies supplied sources, supplemented by information on sources of only 6 percent of the credit lines surveyed. If the survey credit from the household survey, were used to estimate estimates of market share by type of lending institution aggregate home equity debt outstanding.1 are reasonably accurate, then finance company receivables from credit lines at the end of 1993 were about a tenth the size of commercial bank holdings, or about $7 billion to $8 billion. 1. Because the data from most institutional sources reflect Summing the totals for all types of institutions yields only home equity credit carried on their own balance sheets, an aggregate estimate of $110 billion for debt outstandreceivables that have been securitized and removed from the balance sheets of loan originators are not fully reflected in these ing on credit lines at the end of 1993. estimates. Continued on next page Influences on Growth The geographic regions of the nation where gains in home prices since 1988 have been weakest have Several factors may account for the weakness of also generally experienced the smallest increases in home equity lending in the recent past. Stagnant the proportion of households having home equity real estate values in many localities for consider- debt. The Northeast, which by most measures expeable stretches of time since 1988 have tempered the rienced a decline in average home prices between growth of equity in homes. With slower growth of 1990 and 1993, was the only region in which the home equity, fewer homeowners have become proportion of households with home equity lines of qualified for home equity credit—and those that credit did not increase over the 1988-93 period. have qualified may have become more cautious, The proportion in the Northeast, at 12 percent for perhaps because of lowered expectations about 1993, was still higher than elsewhere, but other future increases in home values. Reacting to simi- regions, particularly the North Central, narrowed lar concerns about prospective trends in home the gap considerably. The North Central region, values, lenders may have been more cautious in which apparently was least affected by the weak approving or soliciting applications for home home prices, was the only region that showed equity credit. increases in both the proportion of homeowners Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Equity Lending: Evidence from Recent Surveys 581 Estimation of Aggregate Debt—Continued Debt Under Traditional Home Equity Loans (including mutual savings banks) accounted for about 22 percent of the volume of traditional home equity loans Estimating the amount of traditional home equity debt outstanding. If so—and assuming that $145 billion is a outstanding is somewhat more difficult, because fewer reasonable approximation of the total—the savings instiinstitutions provide specific data on this type of loan, and tution share of home equity loans outstanding at the end those that do report these loans as a separate item (com- of 1993 was about $32 billion. mercial banks and credit unions) have much smaller As stated earlier, finance companies had an estimated market shares than is the case for credit line debt. Accord- $46 billion to $50 billion of home equity debt on their ing to the household survey, commercial banks and credit books at the end of 1993, about $8 billion of which was unions together account for about 40 percent of tradi- probably taken out under lines of credit. The remaining tional home equity debt outstanding. Commercial bank $40 billion or so would be traditional home equity debt, holdings reported on Call Reports totaled $49 billion at making finance companies the second largest supplier of the end of 1993, and credit unions had receivables of this type of loan. Other types of lenders—including mort- $9 billion; their combined holdings, as a 40 percent share gage bankers and individuals—also supply a significant of the market, imply a total of around $145 billion in amount of funds to users of traditional home equity traditional home equity loans outstanding. loans. The household survey suggests that close to 10 per- Savings and loan associations and federal savings cent of traditional loans outstanding comes from these banks do not report traditional home equity loans sepa- other sources, which would amount to about $15 billion rately from their other residential mortgage debt. The at the end of 1993. household survey indicates that savings institutions Estimates of aggregate home equity debt outstanding, 1993, by source Billions of dollars Type of home equity debt Com ba m n e k r s c ial ins S t a it v u i t n i g o s n s1 u C n r i e o d n it s co F m in p a a n n c i e e s Other2 All sources Home equity line of credit 73 18 11 8 * 110 Traditional home equity loan 49 32 9 40 15 145 Total 122 50 20 48 15 255 NOTE. * Amount is negligible. SOURCES. 1993-94 Surveys of Consumers; Reports of Condition and 1. Includes savings and loan associations, federal saving banks, and Income, various years; Credit Union National Association; and Federal mutual saving banks. Reserve. 2. Includes mortgage bankers, individuals, and any other source mentioned by respondents. with home equity credit lines and the proportion equity credit. Constrained spending meant simply with traditional home equity loans. that households had less need for home equity More generally, the recession that beset the econ- credit than they might otherwise have had. omy in 1990 and 1991 no doubt had a damping Movements in interest rates likely affected the effect on home equity borrowing, indirectly by use of home equity debt in several ways. For contributing to the sluggishness of home values instance, sharp declines in rates paid on deposits and directly by affecting household propensities to and other assets held by consumers may have led spend. Concerns of many consumers about job and some borrowers to liquidate assets to pay down income security, and in some cases actual income debt, particularly fixed-rate debt such as traditional reduction and job loss, deterred some consumers home equity loans. For precautionary and other from carrying out home improvement projects, pur- reasons, many people hold sizable amounts of chasing automobiles, and making other types of interest-bearing assets even though they have debt, major expenditures often financed through home but changes in relative interest rates can induce Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

582 Federal Reserve Bulletin • July 1994 balance sheet adjustments. Rather than roll over a OUTLOOK maturing certificate of deposit or Treasury note at a sharply lower rate, many people during the past Borrowing against home equity is unlikely to grow two years probably decided to sacrifice some again as explosively as it did in the mid-1980s; liquidity to retire debts on which rates had not rather, it is expected to register periods of brisk adjusted downward. expansion alternating with periods of more sub- Large declines in interest rates on originations of dued growth, roughly in line with fluctuations in consumer loans since 1991 may have prompted big-ticket expenditures. In the near term, some some households to choose a consumer loan rather pickup is likely because mortgage refinancing than home equity credit to finance certain expendi- should pose less of a constraint in coming months, tures. For example, between late 1991 and early in view of the exceptionally heavy volume of refi- 1994, the average rate on a forty-eight-month new- nancing that has already been completed and the car loan at banks dropped from KM percent to recent rise in mortgage interest rates. Over the about IV2 percent. The typical rate on a home longer term, the appeal of comparatively low interequity line of credit, indexed at IV2 percentage est rates, tax deductibility, convenience in borrowpoints over the prime rate and tax deductible, ing, and flexibility in repayment should continue to would still have been somewhat below the auto attract credit seekers to home equity lines of credit. loan rate. However, the narrower margin between Movements in home values will play a key role in rates on consumer loans and home equity lines may determining the vitality of home equity borrowing have moved some potential home equity borrowers but are difficult to predict. Moderate recovery from to decide that the lower cost of credit-line debt no the housing market doldrums of the past few years longer outweighed the risk of having a lien on the appears to be under way in many localities, but few home. Most recently, the upturn since late 1993 in observers anticipate the sort of all-out boom that market interest rates—to the extent that the rise characterized substantial parts of the 1970s and fostered expectations of further rate increases in the 1980s. future—may have made households more wary about borrowing through variable-rate lines of credit. APPENDIX: THE SURVEYS OF CONSUMERS Having perhaps the greatest impact on home equity borrowing in 1993 was the wave of refinanc- To obtain information on the prevalence of home ings of first mortgage debt prompted by the lowest equity accounts and their use by homeowners, the mortgage interest rates in more than twenty Federal Reserve Board helped develop questions years. Receivables on home equity lines at com- for inclusion in the Surveys of Consumers for the mercial banks actually declined during the second period November 1993 through March 1994, conhalf of 1993, and at year-end they were virtually ducted by the Survey Research Center of the Uniunchanged from their 1992 ending level. As mort- versity of Michigan. Survey interviews were congage rates fell throughout 1993, and especially ducted by telephone, with telephone numbers when they dropped below 7 percent (for a thirty- chosen from a cluster sample of residential numyear fixed-rate loan) in October, refinancing activ- bers. The sample was chosen to be broadly repreity soared. Homeowners with equity-backed credit sentative of the four major regions—Northeast, lines typically folded them into the new first mort- North Central, South, and West—in proportion to gage to lock in a low rate. Some refinancing home- their populations (residents of Alaska and Hawaii owners in this situation might have been able to were not included). For each telephone number obtain a new home equity credit line, given suffi- drawn, an adult from the household was randomly cient equity, but any outstanding balance probably selected as the respondent. would have been much smaller than the balance on The survey defined a household as any group of the previous line that had been refinanced into the persons living together who are related by marnew first mortgage. riage, blood, or adoption, or any individual living Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Equity Lending: Evidence from Recent Surveys 583 alone or with persons to whom the individual is not A.l. Approximate sampling errors of survey results, by related. The head of the household was defined as size of sample an individual living alone, the male of a married Percentage points couple, or the adult in a household composed of Size of sample SSuurrvveeyy rreessuullttss more than one person and only one adult; gener- ((ppeerrcceenntt)) 100 300 1,000 2,000 ally, where there was no married couple and more than one adult, the head was the person most famil- 50 10.5 6.2 3.6 2.8 30 or 70 9.6 5.7 3.3 2.5 iar with the household's finances, or the one closest 20 or 80 8.4 4.9 2.9 2.2 to age 45. Adults were persons age eighteen or 10 or 90 6.3 3.7 2.2 1.7 5 or 95 4.6 2.7 1.6 1.2 older. NOTE. Ninety-five percent confidence level, 1.96 standard errors. The survey sampled 2,537 households, 1,762 of which were homeowners; 153 homeowners reported having a home equity line of credit, 88 selected as survey respondents. Estimates of popureported having a traditional home equity loan, and lation characteristics derived from samples are sub- 5 reported having both types. The survey data have ject to errors based on the degree to which the been weighted to be representative of the popula- sample differs from the general population. tion, thereby correcting for differences among Table A.l indicates the sampling errors for proporhouseholds in the probability of their being tions derived from samples of different sizes. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

584 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report describes Treasury and Sys- THE DOLLAR RISES BRIEFLY IN EARLY tem foreign exchange operations for the period FEBRUARY from February through April 1994. It was presented by Peter R. Fisher, Senior Vice President As the period opened, many market participants and Manager for Operations for the Federal had positioned themselves for an extended dollar Reserve Bank of New York. Ladan Archin rally. This anticipated appreciation of the dollar was primarily responsible for preparation of the rested in part on the expectation that interest rate report.1 differentials would start to move more rapidly in the dollar's favor. Dealers believed that as the U.S. During the February-April period, the dollar economy strengthened, the Federal Reserve would declined 4.6 percent against the German mark, eventually tighten monetary conditions in the 6.5 percent against the Japanese yen, and 3.6 per- United States, perhaps by the end of the first quarcent on a trade-weighted basis.2 On the last busi- ter. Dealers also expected that the Bundesbank ness day of the period, April 29, the Federal would bring short-term German interest rates down Reserve Bank of New York's Foreign Exchange quickly, allowing rates in other parts of Europe to Desk entered the market to purchase $500 million fall as well. Against this backdrop, market particiagainst the German mark and $200 million against pants entered the period holding substantial longthe yen for the U.S. monetary authorities. Contem- dollar positions against the mark and the yen and poraneously, Treasury Secretary Bentsen issued a also holding large positions in European governstatement confirming the intervention. In other ment bonds. On February 4, Chairman Greenspan operations, the Desk liquidated the nonyen and announced the decision of the Federal Open Marnonmark reserves of the Federal Reserve System ket Committee (FOMC) to increase pressure on and the U.S. Treasury Department's Exchange bank reserves, a move that resulted in an increase Stabilization Fund (ESF). After the assassination of in the federal funds rate from 3.0 percent to the leading Mexican presidential candidate, U.S. 3.25 percent. The dollar spiked higher in the days monetary authorities provided a $6 billion tempo- immediately after the tightening, reaching period rary swap facility to Mexico. This facility was highs of DM1.7675 and ¥109.65 before starting to superseded on April 26, when the monetary author- drift lower. ities of the United States, Canada, and Mexico announced the creation of the North American Financial Group and the establishment of a trilat- THE DOLLAR DECLINES FIRST AGAINST THE eral foreign exchange swap facility. YEN AND THEN THE MARK As the February 11 summit meeting between President Clinton and Japanese Prime Minister Hosokawa approached, market participants increasingly expected that the two leaders would an- 1. The charts for the report are available from Publications Services, Board of Governors of the Federal Reserve System, Mail nounce some form of compromise resolution of Stop 127, Washington, DC 20551. trade issues under discussion between the two 2. The dollar's movements on a trade-weighted basis are meacountries in bilateral "framework" talks. Corresured using an index developed by the staff at the Board of Governors of the Federal Reserve System. spondingly, expectations grew that the dollar would Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

585 start to appreciate once the meeting was over, and pled with growing frustration over the Bundesmarket participants began to build up significant bank's cautious step-by-step reduction of its securilong-dollar positions. The dollar closed at ¥108.13 ties repurchase rate, spurred market participants to on Thursday, February 10. Reflecting this positive reassess their expectation of sharply lower German sentiment toward the dollar, the premium on the interest rates. These developments also encouraged dollar put options over equally out-of-the-money the view that further rate reductions by the Bundesdollar call options diminished a few days before bank would be calibrated to the Federal Reserve's the meeting. Thus, when President Clinton and rate increases to minimize the impact on the dollar- Prime Minister Hosokawa announced late in the mark exchange rate. In this environment, the afternoon on Friday, February 11, that they had second increase of 25 basis points in the federal failed to reach an agreement and were suspending funds rate resulting from the FOMC's decision, the framework talks, surprised market participants announced after its March 22 meeting, had little began to unwind their long-dollar positions. The impact on the dollar. dollar began to decline in late New York trading and continued to move lower through Asian, European, and early New York dealings on Monday, DOLLAR MOVES UP February 14. The dollar's price adjustment against AND THEN DOWN IN APRIL the yen culminated at about midday, when the dollar dropped sharply to an intraday low of In early April, the dollar moved higher against the ¥101.10. The dollar recovered by the end of the mark and the yen on a much higher-than-expected day, however, and traded above ¥103 for the bal- increase in March U.S. nonfarm payrolls and on a ance of the month. brief recovery in U.S. securities prices. The dollar As the Bundesbank's council meeting on Febru- soon came under pressure against the yen, howary 17 approached, market participants anticipated ever, when the resignation of Prime Minister that the German central bank would act to lower Hosokawa led to a widespread perception in the interest rates for the first time since early Decem- foreign exchange market that the bilateral trade ber 1993. Although the Bundesbank did reduce its talks would encounter further delays. Political discount rate 50 basis points to 5.25 percent, it uncertainty in Japan lingered, and dealers came to disappointed these expectations by leaving its key doubt whether Japan would be able to meet its money market rate, the securities repurchase rate, commitment to have a new package of marketunchanged. The dollar-mark exchange rate began opening measures in place before the Group of to trade lower in subsequent days, but sharp sell- Seven (G-7) summit in July. The political unceroffs in U.S. and European bond markets generally tainty in Japan also created a concern among dealdominated market attention during late February. ers that the Japanese government would be unable In early March, the dollar traded above the ¥105 to pass measures to stimulate domestic demand and level, gaining support from signs that Japan was that the yen would consequently appreciate over considering private and public initiatives to address the longer term as well. its trade surplus. Market participants also appeared During April, a change in market perception to take comfort in the fact that the Clinton Admin- strengthened the mark against both the dollar and istration's decision to revive "Super 301" trade the yen. With the Bundesbank easing cautiously sanction powers would not result—at least in the since mid-February, the expected trend in shortshort term—in new trade sanctions. However, in term German interest rates, as implied by several mid-March attention increasingly focused on series of Euromark futures contracts, backed up reports of the substantial foreign flows of funds sharply over the latter part of the period. The into Japanese equity and bond markets leading to surprise announcement by the Bundesbank on further strength in the yen. April 14 that it was cutting its discount and Against the mark, a slower-than-expected nar- Lombard rates 25 basis points, to 5.0 percent and rowing of short-term interest rate differentials 6.5 percent respectively, appeared to signal to marweighed on the dollar during much of March. A ket participants that further significant near-term surge in German M3 money supply growth, cou- easing was unlikely. This can be seen in the flatten- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

586 Federal Reserve Bulletin • July 1994 ing of near-term Euromark contracts around the falling nearly two pfennigs in less than an hour 5 percent level. This was followed by the third before bottoming out at a six-month low of 25 basis-point increase in the federal funds rate on DM1.6440. At the time, the dollar was trading just April 18. With market participants perceiving little below ¥102. Trading became increasingly volatile, prospect for a further narrowing in the interest with market participants reporting that dealers were differential in the short run, the mark strengthened not answering phones and that customers were against both the dollar and the yen, as the short end having trouble finding out whether their orders had of the German yield curve looked increasingly been filled. Shortly before 10:30 a.m., the Federal attractive. Reserve Bank of New York's Foreign Exchange The mark continued to rise against the dollar Desk entered the market, purchasing dollars against through the end of April, even though expected the mark for the U.S. monetary authorities. Soon interest rate differentials, as implied by futures thereafter, Treasury Secretary Lloyd Bentsen issued contracts on Eurodollar and Euromark deposits, the following statement confirming the intervenwere now moving more clearly in the dollar's tion: "U.S. monetary authorities intervened today favor. Sentiment toward the dollar became increas- in foreign exchange markets to counter disorderly ingly negative as dealers expressed growing anxi- conditions. This is in line with our previously ety that the dollar-yen exchange rate might break articulated policy which recognizes that excessive swiftly below its historical lows. This risk was volatility is counterproductive to growth. We stand reflected in options markets, where dollar put ready to continue to cooperate in foreign exchange options traded at a substantial premium over markets." equally out-of-the-money dollar call options. With Shortly before 11:30 a.m., the Desk again market participants focused on the risk that the entered the market, purchasing dollars against both dollar might decline against the yen and with the the mark and the yen. In total, U.S. monetary mark having found solid support against the yen at authorities purchased $500 million against the mark the ¥60 per mark level, the prospect for the dollar and $200 million against the yen; these amounts appreciating against the mark appeared remote. were equally divided between the Federal Reserve After the G-7 meetings the weekend of April and the ESF. 23-24, market participants were somewhat dis- After the intervention, the dollar began to gain appointed over the lack of official guidance on ground in orderly trading, reaching an intraday exchange rates, and the dollar began to move down high of 1.6635 against the mark, and 102.50 against against both the mark and the yen. At this time, a the yen. The dollar drifted lower in the afternoon, perception was growing that dollar weakness had however, and closed the period at DM1.6535 and begun to affect the U.S. bond market adversely, and ¥101.55. market participants expressed concern that a lower dollar would spark inflationary pressures and thereby diminish the value of dollar-denominated assets. Dealers increasingly focused on the parallel NORTH AMERICAN SWAP LINES movements in U.S. bond prices and the value of the dollar. On Thursday, April 28, the U.S. bond After the March 23 assassination of Luis Donaldo market recorded sharp losses, and the dollar Colosio, the presidential candidate of Mexico's approached its postwar low of ¥100.40 in thin and Institutional Revolutionary Party (PRI), U.S. monenervous trading. tary authorities established a $6.0 billion temporary bilateral swap facility for the Bank of Mexico at the request of the Mexican authorities. The facility U.S. MONETARY AUTHORITIES ENTER THE included reciprocal swap arrangements already in MARKET TO BUY DOLLARS AGAINST THE place. The assassination of Colosio had prompted MARK AND THE YEN the closing of Mexican markets on March 24 and gave rise to concerns that the reopening of the On Friday, April 29, in early New York trading, the markets on March 25 would be accompanied by dollar started to drop abruptly against the mark, market disorders that could spill over into the U.S. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 587 1. Foreign exchange holdings of U.S. monetary 3. Federal Reserve reciprocal currency arrangements authorities at period end Millions of dollars Millions of dollars Amount of Drawings Institution facility, U.S. Treasury during period Federal April 30, 1994 Item Exchange Reserve Stabilization Fund Austrian National Bank 250 0 German marks 13,615.8 8,413.7 National Bank of Belgium 1,000 JI k Japanese yen 9,375.3 12,600.3 Bank of Canada 2,000 National Bank of Denmark 250 Total 22,991.1 21,014.0 B B a a n n k k o o f f E Fr n a g n la c n e d 3 2 , , 0 0 0 0 0 0 Deutsche Bundesbank 6,000 Bank of Italy 3,000 Bank of Japan 5,000 financial markets. No drawings were made on this facility. Bank of Mexico 3,000 Netherlands Bank 500 On April 26, the monetary authorities of the Bank of Norway 250 Bank of Sweden 300 United States, Canada, and Mexico announced the Swiss National Bank 4,000 creation of the North American Financial Group to Bank for International Settlements provide a forum for more regular consultation on Dollars against Swiss francs 600 r Dollars against other authorized economic and financial developments and policies European currencies 1,250 0 in these countries. These arrangements were unre- Total 32,400 0 lated to developments in Mexico; they had been planned several months earlier in recognition of the three nations' increasingly interdependent eco- the Federal Reserve each participating up to nomic relationships. In connection with the North $3.0 billion. In addition, the Bank of Canada and American Financial Group, the monetary authori- the Bank of Mexico expanded their existing swap ties of the three countries announced the establish- agreement to C$1.0 billion. Finally, the Federal ment of the trilateral foreign exchange swap facil- Reserve and the Bank of Canada reaffirmed their ity to expand the pool of potential resources existing swap agreement in the amount of $2.0 bilavailable to the monetary authorities of each coun- lion. Each party has reciprocal privileges to draw try to maintain orderly exchange markets. The on the other's currency in amounts equivalent to United States and Mexico put in place swap agree- the amounts indicated. ments for up to $6.0 billion, with the Treasury and The Mexican peso, which opened the period at 3.1060, traded to a low of 3.3694 per dollar after 2. Net profits or losses (-) on U.S. Treasury the assassination but strengthened toward the end and Federal Reserve foreign exchange operations, of the period to close at 3.2700 pesos per dollar. based on historical cost-of-acquisition exchange rates Millions of dollars U.S. Treasury OTHER OPERATIONS Federal Exchange Period and item Reserve Stabilization Fund During the period, the Federal Reserve Bank of Valuation profits and losses on New York sold in the market all nonmark and outstanding assets and liabilities as of January 31, 1994 2,858.4 2,513.0 nonyen foreign exchange reserve holdings of the Federal Reserve and the Exchange Stabilization Realized profits and losses, January 31-April 29, 1994 , 81.71 5.62 Fund (ESF) of the U.S. Treasury. The Federal Valuation profits and losses on outstanding assets and liabilities Reserve liquidated the equivalent of $703.8 milas of April 29, 1994 4,163.4 3,804.9 lion, while the ESF liquidated the equivalent of NOTE. Data are on a value-date basis. $64.4 million. Swiss francs represented $629.0 mil- 1. This figure represents net realized profit on market sales of Swiss lion of the amount liquidated by the Federal francs, British sterling, Canadian dollars, French francs, Belgian francs, and Dutch guilders. The figure excludes intervention sales transacted on April 29, Reserve and $37.3 million of the amount liquidated which settled during the first week of May, and are thus not reflected here. by the Treasury. Swiss franc sales took place on the 2. This figure represents net realized profit on market sales of Swiss francs and British sterling. The figure excludes intervention sales transacted on following days: February 15, February 22, April 29, which settled during the first week of May and are thus not March 1, March 8, April 5, April 12, and April 26. reflected here. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

588 Federal Reserve Bulletin • July 1994 The remaining sales for the account of the Federal a preestablished schedule, reflecting the maturity of Reserve were as follows: $1.0 million of Belgian investments in the individual currencies. francs on February 25; $38.0 million of Dutch At the end of the period, the current value of the guilders on March 29; $0.3 million of Canadian foreign exchange reserve holdings of the Federal dollars on March 29; $26.9 million of British Reserve and the U.S. Treasury was $23.0 billion pounds on April 12; and $8.7 million of French and $21.0 billion respectively. These holdings are francs on April 12. The remaining sales for the invested in a variety of instruments that yield account of the Treasury was a liquidation of market-related rates of return and have a high $27.1 million of British pounds on April 26. It was degree of liquidity and credit quality. The Federal decided to eliminate these currency holdings in Reserve and the U.S. Treasury held, either directly light of the practice of the U.S. monetary authori- or under repurchase agreements, $11.7 billion and ties in recent years to conduct intervention opera- $11.3 billion respectively in foreign government tions exclusively in German marks and Japanese securities. • yen. The sales were conducted in accordance with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

589 Staff Studies The staff members of the Board of Governors of the do not necessarily indicate concurrence by the Federal Reserve System and of the Federal Reserve Board of Governors, by the Federal Reserve Banks, Banks undertake studies that cover a wide range of or by members of their staffs. economic and financial subjects. From time to time Single copies of the full text of each study are the studies that are of general interest are pub- available without charge. The titles available are lished in the Staff Studies series and summarized in shown under "Staff Studies" in the list of Federal the Federal Reserve Bulletin. The analyses and Reserve Board publications at the back of each conclusions set forth are those of the authors and Bulletin. STUDY SUMMARY A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANKING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING PERFORMANCE" AND "EVENT STUDY"METHODOLOGIES Stephen A. Rhoades Prepared as a staff study in winter 1993-94 Mergers reached record levels in the banking banking laws, set off a substantial increase in bank industry as well as in the industrial sector in the holding company formations, acquisitions, and second half of the 1980s. The general economic expansion. That activity in turn stimulated many conditions of the period and changes in the enforce- studies of the performance effects of bank holding ment of the antitrust laws regarding mergers may company affiliations and acquisitions. By 1980, have eased the way for some combinations, but however, the holding company movement had there is good reason to believe that the increased slowed, and, through the mid-1980s, bank mergers merger activity is likely to persist on its own and generated little research interest. Then another result in a restructuring of the industry. combination of legislative and marketplace devel- The effect of mergers on firm performance is the opments led to a resurgence of interest in the subject of ongoing debate, and studies of the ques- performance effects of bank mergers. tion have been growing in number. To assess the This overview is intended to determine whether, current state of knowledge, the present work exam- in the aggregate, the research since 1980 permits ines the thirty-nine studies found to have been any general conclusions regarding the performance published from 1980 to 1993 on the effects of bank effects of bank mergers. It is not intended to be a mergers on efficiency, profitability, or stockholder study-by-study critique of the research. However, wealth. The first of these studies appeared in 1983; about half of the thirty-nine studies published in most of them have been published since 1987. This the 1980-93 period used a fundamentally different recent burgeoning of research is reminiscent of the methodology than the other half: nineteen used the period around 1970. At that time, passage of the "operating performance" (or "observed perfor- 1970 amendments to the Bank Holding Company mance") approach, which observes the financial Act and liberalization of bank holding company performance of a firm following a merger; and laws by many states, particularly those with unit twenty-one were "event" studies, which measure Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

590 Federal Reserve Bulletin • July 1994 the reaction of the stock price of acquirers and Two factors seriously undermine the usefulness targets to a merger announcement (one study used of event studies relative to operating performance both methods). Hence, after presenting what, on studies. First, and least subject to debate, is that balance, appear to be the conclusions represented the financial market response to a merger by the entire body of studies in the period, the announcement, in terms of abnormal returns to present work concludes with a broad assessment of stockholders, reflects expectations about all of the the two methodological approaches. An appendix elements (not only efficiency) that may influence summarizes, in a table, the methodological details the general performance results of a merger as well and results of each study. as differences in expectations between investors Findings of the operating performance studies and bidders. are generally consistent. Almost all of these Second, event studies are based on short-term studies that find no gain in efficiency also find no movements in stock prices, which may reflect specimprovement in profitability if they include both ulation by sophisticated investors who seek shortmeasures. In contrast, the six studies that show at term trading gains by outguessing other sophistileast some indication of a performance improve- cated market players. To the extent that stock price ment do not obtain consistent efficiency and profit- changes surrounding a merger announcement ability results, or they are unique in some respect, reflect short-run trading as opposed to long-term or both. In general, despite substantial diversity investments, abnormal returns would appear to be among the nineteen operating performance studies, of limited use for assessing the performance effects the findings point strongly to a lack of improve- of mergers. ment in efficiency or profitability as a result of On balance, the problems inherent in the event bank mergers, and these findings are robust both study methodology with regard to the effects of within and across studies and over time. bank mergers appear to be substantially more trou- In contrast, some inconsistency exists in the main blesome than those inherent in the operating perforfindings of the event studies. For example, seven mance methodology; one is therefore justified in studies find that a merger announcement has a giving greater weight to the findings of the operatsignificantly negative influence on the returns to ing performance studies. Those findings indicate stockholders of the bidding firm. Seven other stud- consistently that bank mergers do not generally ies find no effect on bidder returns, three studies result in gains in efficiency or general operating find positive returns, and four find mixed effects on performance. bidder returns. The differences in findings are not Three caveats attend these findings. First, the readily explicable from differences in approach or findings do not imply that no bank mergers yield the years covered by the analysis. In contrast to the efficiency gains. Second, almost all the mergers frequently negative or neutral returns to bidders analyzed occurred before 1989, and mergers after from merger announcements, eight of nine studies that time might yield different results. And third, that analyze the merger announcement effect on the the findings by economists that bank mergers gentarget bank find a positive return to target stock- erally do not result in efficiency gains is not necesholders, and one study finds no abnormal return. sarily inconsistent with the argument by some In general, the basic findings from the event bankers that mergers lead to significant cost cutstudies of the announcement effects of mergers ting. The difference in the apparently conflicting provide generally consistent evidence that there are positions may arise from the fact that economists gains to stockholders of target firms. However, the focus on the efficiency effects of mergers, which evidence regarding returns to bidders, as well as are typically measured by an expense ratio such as that regarding the net returns to bidders and targets total expenses to total assets, whereas bankers typicombined, is too inconsistent to permit any clear cally focus on the dollar volume, or percentage, of conclusion. On balance then, evidence from the costs that will be cut. Nonetheless, from the standevent studies does not provide much support for point of public policy and the real long-term perforthe hypothesis that mergers are expected by the mance of the industry, an efficiency measure is the financial markets to improve bank performance relevant benchmark. • because of efficiency gains or other factors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

591 Industrial Production and Capacity Utilization for May 1994 Released for publication June 15 other types of business equipment and of construction supplies continued to push up overall output. Industrial production rose 0.2 percent in May after As measured with revised seasonal factors, a downwardly revised 0.1 percent increase in April. motor vehicle assemblies peaked in February at an Although the output of motor vehicles fell for the annual rate of 13.4 million units. Output decreased third consecutive month, gains in the production of to an 11.5 million unit pace in May, in part because Industrial production indexes Twelve-month percent change Twelve-month percent change 1988 1989 1990 1991 1992 1993 1994 1988 1989 1990 1991 1992 1993 1994 Capacity and industrial production Ratio scale, 1987 production =100 Ratio scale, 1987 production = 100 —— TToottaall iinndduussttrryy 140 — Manufacturing 140 Capacity _ Capacity __ 120 120 ^ - 100 100 Production Production 80 80 1 1 1 1 1 1 1 1 1 1 1 I 1 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing 90 90 Utilization Utilization ^^ 80 80 70 70 J I I I I I I I I L 1 1 1 1 1 1 1 1 1 1980 1982 1984 1986 1988 1990 1992 1994 1980 1982 1984 1986 1988 1990 1992 1994 All series are seasonally adjusted. Latest series, May. Capacity is an index of potential industrial production.. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

592 Federal Reserve Bulletin • July 1994 Industrial production and capacity utilization, May 1994 Industrial production, index, 1987=100 Percentage change Category 1994 1994' May 1993 to Feb.r Mar.1 Apr.r Mayf Feb.' Mar.' Apr.' Mayf May 1994 Total 115.0 115.7 115.9 116.1 5.5 Previous estimate 115.1 115.7 116.0 Major market groups Products, total2 114.2 114.6 114.8 115.0 .5 .3 .2 .1 5.2 Consumer goods 111.6 111.8 111.8 111.2 .6 .2 .0 -.5 3.2 Business equipment 145.0 145.3 146.1 147.4 1.5 .2 .5 .9 10.5 Construction supplies 98.9 100.1 101.8 102.8 -1.6 1.2 1.7 .9 7.1 Materials 116.2 117.5 117.4 117.8 .2 1.1 -.1 .3 6.0 Major industry groups Manufacturing 116.1 117.0 117.3 117.6 .5 .2 5.8 Durable 120.9 121.6 122.1 122.3 .4 .5 .4 8.1 Nondurable 110.1 111.5 111.4 111.7 .5 1.2 -.1 3.0 Mining 98.8 99.5 99.1 99.5 1.9 .7 -.4 2.4 Utilities 119.8 118.0 117.4 117.1 -1.7 -1.5 -.5 4.2 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1993 1994 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, MMMaaayyy 111999999333 11996677--9933 11998822 11998888--8899 tttooo May Feb.' Mar.' Apr.' MayP MMMaaayyy 111999999444 Total 81.9 71.8 84.8 81.0 83.3 83.7 83.6 83.5 2.3 Manufacturing 81.2 70.0 85.1 80.2 82.4 82.8 82.8 82.8 2.6 Advanced processing 80.6 71.4 83.3 78.8 81.2 81.4 81.3 81.2 3.2 Primary processing .. 82.2 66.8 89.1 83.5 85.3 86.2 86.4 86.6 1.2 Mining 87.4 80.6 87.0 87.2 89.3 89.9 89.6 90.0 -.7 Utilities 86.7 76.2 92.6 84.1 89.0 87.5 87.0 86.6 1.2 NOTE. Data seasonally adjusted or calculated from seasonally adjusted 2. Contains components in addition to those shown, monthly data. r Revised, 1. Change from preceding month. p Preliminary. capacity constraints hindered manufacturers in sumer nondurables showed small increases. The achieving their normal seasonal gains. Declines in output of business equipment rose nearly 1 percent motor vehicles and parts have reduced growth of as a strong gain in information processing equipthe overall index by about 0.2 percentage point per ment and increases in other categories offset the month since March. decline in transit equipment. At 116.1 percent of its 1987 average, total indus- The production of construction supplies posted trial production was 5.5 percent higher in May than another sizable increase; gains in the past three it was a year earlier. The utilization of total indus- months have pushed output well above its Decemtrial capacity edged down 0.1 percentage point, to ber level, despite losses in January and February as 83.5 percent. the severe winter weather slowed the construction When analyzed by market group, the data show industry. The production of materials advanced that the decrease in motor vehicle assemblies con- 0.3 percent in May, with significant increases in the tributed to declines in the indexes for both con- output of computer parts, semiconductors, chemisumer durable goods and transit equipment. A fall cals, and paper materials. in the output of appliances also weakened the pro- When analyzed by industry group, the data show duction of consumer durables. The output of con- that manufacturing production picked up 0.2 persumer nondurables was unchanged for the second cent, with similar gains for both durable and nonconsecutive month. Although sales of electricity to durable goods manufacturing. Excluding motor residences fell a bit, most other categories of con- vehicles and parts, manufacturing output rose Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 593 0.5 percent. Total factory utilization held steady at metals, lumber, fabricated metals products, and 82.8 percent. Utilization for primary-processing petroleum refining. Within the advancedindustries edged up, to 86.6 percent; the operating processing grouping, the biggest increases in the rate for advanced-processing industries fell back a period have come in industrial machinery and notch, to 81.2 percent. During the past twelve equipment, most notably computers, motor vehimonths, the operating rate for primary-processing cles, electrical machinery, and furniture. industries has risen about 3 percentage points and Mining output increased 0.4 percent in May as that for advanced-processing industries has gains in crude oil extraction, metal mining, and increased nearly 2Vi percentage points. The stone and earth mining more than offset a decrease primary-processing industries with the greatest in coal mining. The output from utilities edged gains in the past twelve months have been primary down. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

594 Statements to the Congress Statement by Alan Greenspan, Chairman, Board that formerly had been combined to be unbunof Governors of the Federal Reserve System, dled and transferred to those most willing to before the Subcommittee on Telecommunica- assume and manage each risk component. The tions and Finance of the Committee on Energy importance of this function has increased, as and Commerce, U.S. House of Representatives, competitive pressures have intensified in many May 25, 1994 economic sectors and as interest rates, exchange rates, and other asset prices have tended to be Thank you for this opportunity to present the quite volatile. In this environment, many finanviews of the Federal Reserve Board on the recent cial and nonfinancial businesses, federally sponreport on financial derivatives by the General sored agencies, and state and local governments Accounting Office (GAO). Derivatives activities have concluded that active management of their have important implications for the global finan- interest rate, exchange rate, and other financial cial system and the world economy. The Federal market risks is essential. They recognize that Reserve has devoted considerable resources to such risks, if left unmanaged, can jeopardize understanding these implications and to working their ability to perform their primary economic with other authorities in the United States and functions successfully. Financial derivatives, esabroad to develop appropriate public policies. pecially customized over-the-counter (OTC) de- This hearing offers an opportunity to review the rivatives, allow financial market risks to be policy actions that have already been taken and adjusted more precisely and at lower cost than is to discuss the need for further action by financial possible with other financial instruments. For regulators, central banks, or the Congress. this reason, many of these entities have come to As suggested in your letter of invitation, I shall rely on derivatives to achieve their risk managebegin by setting forth the Board's overall views ment objectives. on the impact of derivative instruments on our Although derivatives have enhanced the nation's financial system. Then I shall identify overall efficiency of financial markets and the the challenges that derivatives pose to users and economy, the Board recognizes that some deto policymakers and discuss the steps that the rivatives are complex instruments that, if not Federal Reserve has taken or plans to take to properly understood and managed, can pose meet those challenges. I shall conclude with the risks to individual users and possibly also to the Board's assessment of the need for remedial overall stability of the financial system. The legislation relating to derivative instruments. In risks to individual institutions have been underthe course of this discussion, I shall respond to scored by press reports of losses on certain the principal findings and recommendations con- derivatives contracts in the wake of the recent tained in the GAO report. sharp increases in interest rates here and abroad. Case studies of these episodes undoubtedly will offer useful insights to users of IMPACT OF DERIVATIVES ON THE derivatives and to policymakers. But it would FINANCIAL SYSTEM be wrong to draw sweeping conclusions from these events. Changes in interest rates and The Board believes that the array of derivative other market variables necessarily affect the fortunes of individual economic units. Many products that has been developed in recent years entities undoubtedly decreased their vulnerabilhas enhanced economic efficiency. The ecoity through use of derivatives, and many others nomic function of these contracts is to allow risks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

595 that elected not to use derivatives undoubtedly linkages, if a major international financial firm suffered losses. came under severe financial stress, authorities The impact of derivatives on the stability of the could face significant difficulties in containing the financial system is a subject of ongoing debate. effects on other institutions and markets. At a As I have noted, derivatives have allowed many minimum, success would require close coordinabusinesses and governments to manage their tion with relevant authorities in the home counrisks more effectively. Nonetheless, several try and abroad. plausible scenarios have been identified in which derivatives activities could be a source of systemic disturbance. CHALLENGES POSED BY DERIVATIVES First, the failure of a major derivatives dealer could impose credit losses on its counterparties The Board believes that to fully realize the that could threaten their financial health. To be benefits of derivatives aritktp prevent systemic sure, the failures of derivatives dealers that have disturbances, several important challenges must occurred in recent years have not imperiled any be met. The first, and perhaps most important, counterparties. Nonetheless, concentrations of challenge is for both dealers and end users of credit exposures to derivatives dealers, like any derivatives to implement sound risk management other concentrations of credit exposure, clearly practices. Sound risk management clearly is the constitute at least a potential source of systemic key to protecting individual firms. Perhaps less difficulties. obviously, it also is the key to addressing sys- Second, the dynamic hedging of options posi- temic risk concerns. Consider the two scenarios tions and certain other risk management tech- that were identified earlier in which derivatives niques lead market participants to buy assets could be the source of systemic problems. In the when prices are rising and sell when prices are first scenario, the failure of a derivatives dealer declining. In principle, such behavior could am- inflicts serious credit losses on its counterparties. plify market price movements. For example, This amounts to a concern that these counterparsome believe that hedging associated with "port- ties will not have prudently managed their credit folio insurance" programs contributed to the exposures to the dealer. The most effective prestock market crash in October 1987. Aside from ventive measure is sound risk management—in these unusual market movements, little statisti- this case, the consistent application of countercal evidence supports the contention that deriv- party credit limits to the dealer and the use of risk atives activities heighten volatility in cash mar- mitigation techniques, such as netting or collatkets. Nonetheless, some discount the results of eralization. In the second scenario, dynamic such studies because their concerns relate to hedging strategies used by option writers provery infrequent events. The price amplification duce selling pressures that impair market liquideffects of dynamic hedging may be significant ity and amplify price declines, and, in the event, only after large price shocks. render the dynamic hedges ineffective. Here the Even if derivatives activities are not them- underlying concern is that option writers have selves a source of systemic risk, they may help presumed a greater degree of market liquidity speed the transmission of a shock from some than in fact exists and thus have overlooked the other source to other markets and institutions. pitfalls of dynamic hedging. The best preventive Linkages among financial markets, both domes- measure is the systematic conduct of stress tests tically and internationally, have become consid- that would highlight those pitfalls and discourage erably tighter in recent years. Derivatives have excessive reliance on such vulnerable hedging contributed to this development, although other techniques. forces—the increasing importance of institu- A second important challenge is to improve the tional investors, improvements in information transparency of derivatives activities. Accountand telecommunications technology, and the re- ing, public disclosure, and regulatory reporting moval of capital controls by many countries— requirements have fallen far behind developclearly have been at work. Given these tighter ments in the marketplace. Improvements in pub- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

596 Federal Reserve Bulletin • July 1994 lie disclosure would aid derivatives participants In all of these efforts, we have worked closely in assessing the creditworthiness of their coun- and cooperatively with other regulatory authoriterparties and would allow shareholders to gauge ties and central banks. Domestically, much of the more accurately the effects of derivatives activi- work on banking regulation has been coordinated ties on public companies' risks and returns. by the Federal Financial Institutions Examina- Regulatory reporting also must be strengthened. tion Council (FFIEC) and, more recently, by the This reporting includes that to financial regula- Interagency Task Force on Bank-Related Derivtors for purposes of assessing the safety and atives Issues. Also, since Secretary Bentsen soundness of regulated institutions. It also in- asked the Presidential Working Group on Financludes reporting of data required for macropru- cial Markets to add derivatives to its agenda, this dential purposes, including reliable measures of group has served as an important forum for the size of derivatives markets and the degree to coordinating government policy toward derivawhich dealing activity in various market seg- tives. ments is concentrated. Internationally, the Federal Reserve has A third set of challenges involves ensuring that strongly supported, and frequently provided the legal and institutional infrastructure of finan- leadership for, cooperative efforts by the central cial markets can safely accommodate the growth banks and supervisory authorities of the Group of derivatives activities. The potential for legal of Ten countries. These efforts have included the enforceability problems to result in losses was Basle Supervisors Committee's work on capital forcefully brought home to derivatives dealers in requirements, the Eurocurrency Standing Com- 1991, when a British court decision to invalidate mittee's plans to develop meaningful comprehenderivatives contracts with certain local authori- sive measures of the size of the derivatives ties in the United Kingdom resulted in significant markets, and the Committee on Payment and losses to some dealers. Legislation has substan- Settlement System's work on netting and other tially reduced legal uncertainty in the United payment and settlement issues. States and several other important jurisdictions, although significant doubts about the enforceabil- Strengthening Supervision and Regulation ity of netting agreements persist in other coun- of Bank Derivatives Activities tries. With respect to the institutional infrastructure, the tightening of linkages among markets, The complexity and diversity of derivative into which derivatives have contributed, heightens struments and activities present significant chalthe importance of strengthening settlement sys- lenges to banks and supervisors alike, as the tems for primary and derivative instruments so report by the General Accounting Office (GAO) that they contain disturbances rather than trans- points out. These challenges are being actively mit them to other systems and their participants. addressed by the Federal Reserve, the other banking regulators, and the banking industry. The Federal Reserve's own efforts in this area date back to the introduction of OTC derivatives STEPS TAKEN BY THE FEDERAL RESERVE in the early 1980s, and these efforts have inten- TO RESPOND TO THE CHALLENGES sified in the last two years, as bank derivatives activities have expanded, especially at the largest The Federal Reserve has taken a series of steps banks. to strengthen the supervision and regulation of It is important to recognize that significant bank derivatives activities. As the central bank, advances in the management of market and with its overall responsibility for the soundness credit risks, including improvements both in fiand stability of the financial system, we have nancial methodology and in the design of manworked to enhance the transparency of deriva- agement information systems, lie behind the retives activities and to identify and eliminate legal cent surge in derivatives activity. These uncertainties relating to derivatives and weak- advances have made independent, highly skilled nesses in settlement systems. risk management staff members and rigorous Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 597 measurement and analysis of market and credit Earlier this year, the Federal Reserve also risks key elements of a sound risk management issued a new comprehensive trading activities approach for trading activities, and more gener- examination manual. This manual provides exally, for banking activities. The Group of Thirty tensive guidance to examiners on preparing for report, Derivatives: Principles and Practices, and conducting the examination of trading activpublished last summer, lays out these elements, ities, including examination objectives and proand banking companies in the United States and cedures, internal control questionnaires, and inabroad are aggressively pursuing the goal of depth discussions of how to evaluate all aspects comprehensive, state-of-the-art risk management of a bank's risk management systems. In this last systems. These systems will, without question, area especially, we have substantially revised greatly strengthen the banking system's resil- and expanded earlier examiner guidance to reience. flect recent advances in bank risk management Such major advances in risk management and practices. internal control also have important implications The manual also discusses at length procefor our supervisory approach to derivatives and dures for evaluating internal controls in trading other trading activities. The Federal Reserve is areas. For more than two decades, internal conswiftly moving to assess these implications and trols have been an important focus of our examincorporate them into its supervisory process. In inations of banks with significant trading activiadapting this supervisory approach, we face the ties. The procedures we have developed rest on more fundamental challenge of ensuring safe and the extensive experience of our examination sound banking practices, while preserving finan- force and include the lessons learned from intercial innovation, not only in products but, most nal control breakdowns over this long period in a important, in the risk management process itself. wide variety of trading operations. Between examinations, the Federal Reserve The Examination Process actively monitors developments in trading and derivatives activities at the major banks in these The cornerstone of our supervisory approach is markets. Supervisory staff members at each Rethe annual full-scope examination. In the past six serve Bank maintain close contact through meetmonths, the Federal Reserve has completed two ings and telephone conversations with the manimportant initiatives that we believe have sub- agement of the institutions they supervise. stantially enhanced the effectiveness of our ex- Supervisory staff members also have ready acaminations of derivatives activities and of trading cess to management reports and other data not activities generally. Last December, the Federal collected in quarterly reports of condition and Reserve issued a letter (SR-93-69) to each Re- income. During the volatile market conditions of serve Bank that set out a comprehensive exami- the first quarter, for example, this access allowed nation policy for trading activities of state mem- the Federal Reserve supervisory staff members ber banks, bank holding companies, and other to monitor the impact of market developments on banking offices under our supervisory jurisdic- bank trading activity and bank profitability. tion. The Reserve Banks were instructed to The Board endorses the principles underlying distribute this letter broadly to banks involved in the GAO's recommendations for strengthening derivatives activities. The letter highlighted, for the bank examination process. We believe that both examiners and banks, key considerations in our current coverage of risk management and evaluating the adequacy of an organization's risk internal controls in the annual full-scope examimanagement process and internal controls. Al- nation meets the GAO's principal objectives. though the statement focuses on trading activi- With the implementation of section 112 of the ties by dealers, much of its guidance is relevant Federal Deposit Insurance Corporation Improveto the derivatives activities of end users, espe- ment Act, banking companies active in derivacially its emphasis on the importance of oversight tives are further strengthening their internal conof the risk management process by senior man- trols to meet the act's specific requirements for agement and boards of directors. independent, knowledgeable audit committees Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

598 Federal Reserve Bulletin • July 1994 and internal control reporting. We believe that quacy. Last year, for example, the Basle Superwe have made significant progress in incorporat- visors issued proposals for revisions to the Basle ing the internal control assessments by the board Accord for the market risks of trading activities of directors, management, and auditors into our in debt, equity, and foreign exchange that insupervisory process, as the GAO recommends. volved fixed and relatively simple rules. Like- The Board also agrees that bank supervisors wise, efforts by U.S. banking regulators to incorshould continue to enhance the information gath- porate interest rate risk into risk-based capital ered in the examination process for trading and standards initially focused solely on simple modderivatives activities, and we believe that our els specified by the regulators. broad information-gathering power under our Although the market risks of many banking existing examination authority is an essential and instruments, including many derivatives conadequate supervisory tool. tracts, can be accurately assessed using such simple models, a considerably more sophisti- Capital Adequacy cated approach is necessary to assess more complex instruments, especially those with options The Board recognizes the key role that bank characteristics, and to aggregate different categocapital plays in protecting the deposit insurance ries of market risk. The recognition of the need fund from the market, credit, legal, and opera- for a more sophisticated approach has led banktional risks that banks assume and manage. The ing regulators in the United States and abroad to growth in bank derivatives activities is requiring carefully explore the potential for allowing banks changes in the methods that bank supervisors to use their own internal models to assess the utilize to assess capital adequacy, including need for capital to cover market risk. changes in the key risk-based capital measure. Under such an approach, regulators would As the GAO report notes, measures of the specify the magnitude of the market shocks that credit risks associated with OTC derivatives they expect banks to be able to withstand. The were part of the original Basle Accord that was banks would then use their internal models to published in 1989. Two significant enhancements simulate the effects of such shocks on the market to the current measures are under development. value of their trading portfolio. Banks would then First, the risk-reducing effects of legally enforce- be expected to maintain adequate capital to withable netting agreements would be recognized stand the declines in market value produced by under a proposal issued by the Basle Supervisors the specified market stresses. Examiners would Committee last year. Last week the Board and assess the adequacy of the models and related the Office of the Comptroller of the Currency internal controls and allow this approach only if issued for public comment a proposal to recog- the models and internal controls met or exceeded nize such netting in its risk-based capital guide- specified standards. lines, and a coordinated proposal by all the U.S. The Board believes that this type of simulation banking regulators is expected to be issued or "stress testing" approach to assessing capital shortly. Second, the Basle Committee is giving for market risk is the best means of addressing serious consideration to increasing capital concerns about the complexity of derivative accharges for credit risk on equity and commodity tivities and about the potential adverse impacts contracts and on longer-dated derivatives con- of dynamic hedging strategies on cash and extracts generally. change-traded derivatives markets. Some of the Market risks are not yet incorporated in the market shocks that regulators would specify risk-based capital measure, and the Board agrees would be instantaneous and, therefore, would with the GAO's conclusion that this significant generate large simulated losses on dynamically omission must be addressed as soon as possible. hedged options positions. The need to maintain It is important to recognize, however, that this capital to support these losses would strongly issue is as complex and difficult as it is important. discourage undue reliance on dynamic hedging. Regulators have traditionally utilized relatively Explicit in this approach is the need for regusimple, generic models to measure capital ade- lators to make difficult judgments about the mag- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 599 nitude of shocks that bank capital should be and on the effect of derivatives activities on expected to absorb. The temptation will be to interest income, interest expenses, and trading embrace the notion that bank capital must be revenues of the institution. capable of withstanding every conceivable set of Reporting of market risks will also begin to be adverse circumstances. However, it is important included in the regulatory report framework by that supervisors recognize that bank sharehold- March 1995, as the banking agencies design ers must earn a competitive rate of return on the reporting in conjunction with the implementation capital they place at risk and that unnecessarily of the domestic capital standard for interest rate high capital requirements will impede the func- risk mandated under FDICIA section 305. Data tioning of the banking system. Although the required to implement the market risk capital scenarios need to be sufficiently rigorous to pro- standards being developed by the Basle Commitvide prudential coverage in times of stress, we tee on Banking Supervision would be incorpomust recognize that even in very adverse market rated into this reporting framework as well. circumstances, banks can take steps to reduce I would stress that all of these efforts are only their risk and conserve capital. Finally, we must initial steps in a broader program of strengthenalso recognize that when market forces threaten ing public disclosure in response to major to build momentum and break loose of economic changes in the management of risks at banks and fundamentals, as they threatened to do in the in the financial system more generally. The key stock market crash in 1987, sound public policy to that program is the identification of a core set actions, and not just bank capital, are necessary of information that all major financial market to preserve financial stability. participants need to disclose so that counterparties, investors, and financial regulators can ade- Disclosure quately assess the financial condition and risk profile of those they deal with. Public disclosure is another key element in our This core set of information should not be supervisory approach. The banking agencies confined to derivatives activities but should enhave recently expanded the quarterly call reports compass all the risk activities of the bank. In in several ways to address trading and deriva- particular, the Board believes that measures of tives activities, as the GAO report points out. credit risk concentrations must aggregate expo- Relevant reporting changes implemented in sures on derivatives contracts with exposures March include revised reporting procedures to from loans and other activities. Likewise, meareflect the adoption by the banking agencies of sures of the sources of trading revenues must Financial Accounting Standards Board (FASB) recognize that derivatives positions and cash Interpretation Number 39 (FIN 39) and the col- positions are typically managed as a single portlection of information on past-due payments on folio. Requirements to report gains and losses on interest rate swaps. Under FIN 39, organizations derivatives separately from gains and losses on may offset the on-balance-sheet assets and liabil- cash instruments would produce a distorted picities of multiple derivatives contracts with a ture of the sources of trading revenues whenever single counterparty and report the net amount derivatives positions are offsetting other posionly when the right of set-off is legally enforce- tions within the portfolio. A breakdown of tradable. ing revenues by underlying markets or risk fac- The banking agencies have issued for comment tors would be useful to users of bank financial a proposal to expand derivatives reporting signif- statements, rather than a breakdown based on icantly in September 1994. The proposed en- legal definitions of the instruments used to create hancements would, among other things, collect the positions in the underlying risk factors. notional values and gross positive and gross negative fair values for exchange-traded and Accounting OTC contracts separately. The proposal also requests comment on collecting information on The development of comprehensive and consisexposures reflecting bilateral netting agreements tent accounting rules is also an important con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

600 Federal Reserve Bulletin • July 1994 cern of the Federal Reserve. As the GAO report and must satisfy itself that its counterparties are points out, there is currently no single, cohesive sufficiently able to handle the risks associated framework for accounting for derivatives and, as with the derivatives transactions. Because of the a result, banks are applying different accounting importance of these ongoing relationships, many treatment to similar transactions. Obviously, it is bank derivatives dealers have responded to the difficult for regulators or the public to properly recent reports of end-user losses in transactions evaluate the risk of an institution—other than by reviewing their existing policies and procethrough an on-site examination—without consis- dures for possible strengthening, and we are tent accounting treatment of derivatives transac- closely following those developments. tions. Accordingly, the Board joins the GAO in But the burden of being informed in the marstrongly urging the Financial Accounting Stan- ketplace, especially a wholesale marketplace, dards Board (FASB) and the industry to move must not fall only on the dealer. As I noted at the promptly toward a consistent and meaningful set outset of my testimony, derivatives increase ecoof accounting standards. The Board will continue nomic efficiency by allowing the transfer of risk to to work with the Interagency Task Force and the those willing to bear it. For the transfer of risk to Working Group to find ways to advance this goal. be effective and the efficiency to be realized, end users must retain ultimate responsibility for trans- Sales Practices actions they choose to make. In a wholesale market, sophisticated and unsophisticated end In your invitation, you requested that I address users alike must ensure that they fully understand the nature and adequacy of existing protections the risks attendant to any transaction they enter. afforded to end users of OTC derivatives from The federal banking agencies put this principle abusive practices in connection with sales of to work in our supervision of bank end users of such instruments. In OTC derivatives markets, derivatives. Before a bank engages in such transas in the wholesale banking markets, banks have actions, we expect that senior management and fundamental responsibilities to their sharehold- the board of directors will have a good underers that require them to conduct a thorough standing of the risks in derivatives transactions credit assessment of their customers. In making a and will ensure that the bank has sufficient percredit assessment for a derivatives transaction, sonnel with the required expertise, adequate our supervisory guidance indicates that banks accounting, risk reporting, and internal control should not only assess the overall financial systems to manage those transactions and the strength of a counterparty and its ability to requisite financial strength. perform on its obligation but should consider the Thus, the Board does not see the need for counterparty's ability to understand and manage legislative or regulatory protection for end users. the risks inherent in the product. Our supervi- Nonetheless, additional steps can and should be sory guidance says that if counterparties are not taken to heighten the effectiveness of existing sophisticated, the bank should provide sufficient protections in the marketplace. Much more can be information to make them aware of the risks in done to educate end users and to heighten their the transaction. When banks recommend specific awareness of the risks in derivatives and of sound transactions for unsophisticated counterparties, risk management practices. News reports of the the Board's policy guidance instructs the bank to recent losses incurred by sophisticated end users ensure that the bank has adequate information of derivatives have no doubt intensified discusregarding its counterparty on which to base its sion of these instruments between boards of direcommendation. rectors and financial management at many end A bank active in OTC derivatives contracts has users and should spur consideration of enhancea particularly strong self-interest in creating and ments to policies, controls, and reporting. Many maintaining counterparty relationships because it information resources already are available to end has a continuing exposure to the nonperformance users, and the financial industry plans additional of its counterparty for the duration of the con- educational efforts. The Group of Thirty report, in tract. Necessarily, the bank must be concerned particular, was directed at the end user as well as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 601 the dealer community, and it probably deserves concerns about the transparency of derivatives much wider reading among end users than it activities. In October 1992, the Bank for Internaappears to have received to date. tional Settlements published a Study of Recent Developments in International Interbank Rela- Improving Transparency tions (the Promisel Report) that stressed the need for greater transparency. As a follow-up to this Besides its efforts to strengthen banking supervi- study, the Eurocurrency Standing Committee of sion, the Board has supported a variety of initi- the G-10 central banks created a working group atives that seek to meet challenges faced by all to assess what data on derivatives would be dealers and end users of derivatives, banks and useful to central banks in their responsibilities for nonbanks. In particular, the Board believes that conducting monetary policy and overseeing the the most effective means of promoting sound risk stability of the financial system. The study group management by the full range of dealers and end concluded that it would be very useful to have users is by achieving improved public disclosure statistics on market size, measured both in terms of derivatives activities. Enhanced financial dis- of amounts outstanding and in terms of turnover. closure by end users of the nature and size of the Because of the global nature of derivatives marrisks being managed through derivatives transac- kets, comprehensive measures of market size tions would contribute importantly to heighten- require a coordinated international effort. In reing board and senior management involvement in sponse to a recommendation by the study group, these activities. More important, it enhances the the G-10 governors recently approved the addieffectiveness of market discipline by derivatives tion of questions on derivatives to the triennial counterparties, other creditors, and shareholders survey on foreign exchange turnover that is or constituents. planned for April 1995. The foreign exchange Along with the Securities and Exchange Com- survey is a proven vehicle for collecting data mission and other U.S. banking and financial from banks and other financial institutions. It is regulators, the Federal Reserve has been encour- conducted by central banks and monetary auaging the Financial Accounting Standards Board thorities in more than twenty-five countries, into accelerate its efforts to improve public disclo- cluding all significant financial centers. sures by U.S. companies. In mid-April, the More recently, the Eurocurrency Standing FASB released a proposal that would require Committee has formed a working group to condisclosure of additional information on the scale sider means of improving market transparency of derivatives activities, the purpose of those through enhanced public disclosure by market activities (trading or risk management), and, in participants. Work is being done to explore the the case of trading activities, the resulting net core information needs of market participants, gains or losses. In addition, the proposal encour- including shareholders, creditors, and counterages (but does not require) disclosure of quanti- parties, with the goal of contributing ideas to the tative information on interest rate risks and mar- larger public discussion of improvements in fiket risks that is consistent with the way the entity nancial disclosure. Similar efforts are being unmanages its risks. We plan to thoroughly respond dertaken in the private sector, and the Board to the FASB's request for comments on this hopes that significant progress can soon be made proposal at a later date. Many of the require- toward international agreement on a framework ments are similar to those proposed by the bank- for fuller and more meaningful financial discloing regulators for inclusion in the quarterly call sures. reports. As I noted earlier, however, the Board does not believe that isolating derivatives trading Strengthening the Legal and Institutional revenues from other trading revenues is a useful Infrastructure of Financial Markets step toward understanding the sources of revenues or the risks entailed. The Federal Reserve has also worked with au- The Board has also been actively involved in thorities in the United States and abroad to efforts by the G-10 central banks to address clearly understand the legal risks associated with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

602 Federal Reserve Bulletin • July 1994 derivatives and to reduce legal uncertainty. The recommended that trades be settled promptly (no Board has been especially concerned about the later than three business days after the trade date legal enforceability of the netting agreements for or T+3), in same-day funds, and according to the derivatives that dealers and other users increas- principle of delivery versus payment. The report ingly rely on to mitigate counterparty credit also noted the potential benefits of bilateral and exposures. The Board believes that certainty multilateral netting arrangements. with respect to enforceability is critical for finan- In the United States, the Federal Reserve has cial stability. If counterparties measure their supported the Security and Exchange Commisexposures as net when the true exposures are sion's (SEC's) adoption of a rule requiring T+3 gross, they could face losses far larger than settlement of broker-dealer transactions in corexpected and possibly larger than they could porate securities. Together with the SEC, we are readily absorb. overseeing efforts by the Depository Trust Com- In the United States, legislation and regulatory pany and the National Securities Clearing Coraction by the Federal Reserve have ensured legal poration to develop liquidity safeguards and enforceability for most derivatives contracts and other risk controls that would permit settlement counterparties. The most recent legislative ac- of corporate securities trades in same-day funds. tion was a far-reaching provision of the Federal Other significant improvements to settlement ar- Deposit Insurance Corporation Improvement rangements in recent years have been the cre- Act. This provision validated under U.S. law all ation of a book-entry, delivery-versus-payment netting contracts between and among depository system for Government National Mortgage Asinstitutions, broker-dealers, and futures commis- sociation securities (the Participants Trust Comsion merchants. Furthermore, it authorized the pany) and a multilateral trade netting system for Board to broaden the coverage to other financial U.S. government securities (the Government Seinstitutions if the Board determined that such curities Clearing Corporation). In both cases, the action would promote market efficiency or re- Federal Reserve, the SEC, and the Treasury duce systemic risk. In March this year, the Board cooperated to ensure that the system operators adopted a new regulation (Regulation EE) that employed adequate risk controls. expanded the act's coverage to include all major Internationally, the Federal Reserve has derivatives dealers, including affiliates of broker- worked with the other G-10 central banks to dealers and insurance companies. Under the address concerns about the policy implications of umbrella of the Working Group on Financial the development of cross-border and multicur- Markets, the Board is working with the other rency netting arrangements for payments and for financial regulators to identify remaining enforce- foreign exchange contracts. In November 1990, ability problems under U.S. law and to develop the Bank for International Settlements published solutions that the Working Group could recom- the Report on Netting (Lamfalussy Report). This mend to the Congress. report, which was endorsed by the G-10 gover- The stock market crash in 1987 demonstrated nors, concluded that such netting agreements quite clearly that the capacity of the financial have the potential to reduce systemic risks, prosystem to absorb shocks depends critically on vided that certain conditions are met. Regarding the robustness of payment and settlement sys- those conditions, the report set out minimum tems. Since then, financial transactions have standards for the design and operation of such grown rapidly and linkages between financial systems. To enforce the standards, it established markets have tightened, in part because of the a framework for cooperative central bank overexpansion of derivatives activities, making pay- sight of cross-border and multicurrency netting ment and settlement systems even more impor- systems. tant for financial stability. Follow-up work to the Lamfalussy Report has A 1989 study by the Group of Thirty set out been carried forward by the G-10 Committee on recommendations for strengthening arrange- Payment and Settlement Systems (CPSS), curments for securities settlements that are relevant rently chaired by President McDonough of the to financial instruments generally. The study Federal Reserve Bank of New York. The CPSS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 603 has afforded central banks the opportunity to atives is neither necessary nor desirable at this discuss emerging payment system issues and to time. In particular, the Board does not support provide systematic public policy analysis of the specific legislative recommendations that are these issues to the international financial commu- contained in the GAO report. As the Board has nity. The committee has also discussed proposals stated repeatedly, there is a pressing need to by groups of banks in Europe and North America modernize the U.S. financial system and regulato create clearing houses (multilateral netting tory structure. However, the Board believes that systems) for foreign exchange contracts. legislation directed at derivatives is no substitute The CPSS recently issued a report on Central for broader reform and, absent broader reform, Bank Payment and Settlement Services with could actually increase risks in the U.S. financial Respect to Cross-Border and Multicurrency system by creating a regulatory regime that is Transactions, which examined a range of possi- itself ineffective and that diminishes the effec-r ble central bank service options to reduce settle- tiveness of market discipline. ment risks, especially in foreign exchange transactions. Some of the same issues were examined Regulation of Nonbank Derivatives by Federal Reserve staff members in a study of Dealers the potential benefits of expanded hours of operation for the Fedwire funds transfer service. This The Board is not persuaded that public policy study concluded that longer Fedwire funds trans- considerations require regulation of nonbank defer hours could facilitate private sector efforts to rivatives dealers. The rationale for such regulareduce risk in foreign exchange settlements, such tion apparently is that the activities of such as the proposed foreign exchange clearing dealers pose risks to their counterparties or othhouses. This conclusion helped support the erwise heighten systemic risk and that federal Board's decision in February 1994 to open the intervention, possibly including a taxpayer bailfunds transfer service eight hours earlier, at 12:30 out, could be necessary to protect the financial a.m. eastern time, effective in 1997. system. However, in our judgment market forces have been effective in restraining risk-taking by such dealers. Moreover, even if one of these NEED FOR REMEDIAL LEGISLATION dealers were to fail, its failure is unlikely to threaten the safety net. Finally, absent broader The GAO report recommends that the Congress changes in the federal regulatory framework for enact legislation requiring federal regulation of nonbank financial institutions, we foresee signifthe safety and soundness of all major U.S. OTC icant difficulties in fashioning an effective reguderivatives dealers, including securities and in- latory regime for the derivatives activities of surance firm affiliates that currently are not sub- such entities. ject to such regulation. The report also urges that Market forces, reinforced by broad acceptance the Congress begin systematically addressing the of the risk management principles I have disneed to revamp and modernize the entire U.S. cussed, appear to be effectively constraining regulatory system. As part of such an effort, the risk-taking by nonbank dealers and encouraging report suggests that the Congress should debate implementation of sound risk management pracand decide whether large-scale proprietary trad- tices. Counterparties to derivatives contracts are ing of derivatives or other financial instruments generally quite sensitive to credit exposures and should be conducted only through separately often transact only with dealers they judge to be capitalized subsidiaries of bank holding compa- of the highest credit standing. Such concerns nies. about creditworthiness have prompted many of In light of the progress that the private sector the unregulated derivatives dealers to establish derivatives products companies (DPCs) that conand financial regulators have made in addressing form to capital and operating guidelines set out the challenges posed by derivatives and the furby the credit rating agencies. The Group of ther progress that it anticipates, the Board be- Thirty's report appears to have captured the lieves that remedial legislation relating to deriv- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

604 Federal Reserve Bulletin • July 1994 attention of senior managers of unregulated deal- important to recognize that this type of federal ers, many of whom participated in preparing or "intervention" does not place taxpayer funds at financing the report. Many of these firms are now risk. using the G-30 standards as a benchmark to The GAO does not discuss clearly how the evaluate their practices and, when necessary, to currently unregulated dealers should be reguimplement improvements. lated, but it appears to assume that the banking As I have discussed, the Board believes that regulators' approach to safety and soundness the effectiveness of market forces will be could readily be applied to unregulated derivastrengthened by enhancements to public disclo- tives dealers. To the contrary, the Board foresure requirements that would apply to nearly all sees significant difficulties in implementing such of the currently unregulated U.S. dealers. The an approach without more thorough regulatory Board also takes note of initiatives by the Secu- reform. Derivatives contracts and related hedge rities Industry Association and others in the positions often are booked at different legal entiderivatives industry to work with the SEC and ties. For example, the market risk associated other regulators to develop voluntary minimum with derivatives contracts booked at derivatives standards for business conduct by derivatives products companies is transferred to, and mandealers. The details of such standards have yet to aged by, other affiliates. Consequently, regulabe worked out, and such an initiative may not yet tion of the full range of risks associated with have the support of all unregulated dealers. Still, derivatives dealing would require broad authorit seems a promising means of reinforcing the ity over affiliated companies or probably authormarket forces that thus far appear to be working ity to regulate the entire firm on a consolidated well. The enactment of legislation could well basis. But such an approach would be difficult to bring this promising initiative up short. implement at those dealers that combine financial Of course, market forces and industry initia- and nonfinancial activities. In particular, design tives cannot eliminate the possibility that an of appropriate capital standards would be espeunregulated derivatives dealer could fail. Even if cially difficult for such firms. such a failure were to occur, however, it is The Congress should recognize that the enactunlikely to place taxpayers at risk. The Bank ment of legislation could create the mistaken Insurance Fund could be placed at risk if insured expectation that federal regulation will somehow commercial banks failed to prudently manage remove the risk from derivatives activities. We their counterparty credit exposures to the failed must not lose sight of the fact that risks in derivatives dealer. But our examiners are trained financial markets are regulated by private parto identify and criticize concentrations of credit ties. The relevant question that we must address exposure to a derivatives dealer or to any other is whether private market regulation is enhanced counterparty. Nor is the fund maintained for or weakened by the addition of government protection of securities customers by the Securi- regulation. For the reasons I have discussed, the ties Investor Protection Corporation (SIPC) Board fears that, in this instance, a weakening of likely to be jeopardized. Even if the failure of a private market regulation is the more likely outderivatives dealer affiliate created financial diffi- come. culties for a broker-dealer, SEC requirements to segregate customer funds and securities protect Proprietary Trading by Banks the SIPC fund. To be sure, resolving the failure of an unregu- The GAO report suggests that the Congress lated derivatives dealer would pose challenges to should review whether banks' proprietary tradfinancial regulators. The Federal Reserve and ing activities in derivatives and other financial other authorities would carefully monitor the instruments should be forced into separately effects of a failure and would work with market capitalized subsidiaries of bank holding compaparticipants to achieve an orderly wind-down of nies. The basis for this recommendation apparits activities, as they did in 1990 when the Drexel ently is a concern that such activities at some Burnham Lambert Group failed. However, it is banks have become so large and so complex that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 605 they pose unacceptable risks to the deposit in- risks. Although this effort is not yet complete, an surance fund. However, the Board does not assessment of the adequacy of capital to cover perceive the risks associated with proprietary potential trading losses already is a critical eletrading to be inherently greater than those asso- ment in our annual on-site, full-scope examinaciated with other banking activities. Indeed, the tions. If a bank were to take trading positions that same types of risks are involved—credit risks, posed a threat to its solvency, we would insist that market risks, legal risks, and operational risks. those positions be closed out promptly and that Some derivative contracts, notably options prod- the board of directors take strong measures to ucts, are quite complex, but a complex, difficult- prevent such a situation from recurring. to-manage option is embedded in every fixed-rate Recent examinations of the state member home mortgage. As is the case for home mort- banks that are most actively involved in proprigage lending or any other banking activity, etary trading activities have not revealed signifiwhether proprietary trading places the deposit cant problems arising from these activities. Alinsurance fund at risk depends on the bank's though our examination reports have cited capital, the degree of concentration in its risk certain deficiencies in specific internal controls, exposures, the strength of its risk management management is well along toward correcting systems and internal controls, and the expertise them. The risk management systems of major of its personnel, including senior management dealer banks were severely tested by the recent and risk managers as well as traders. volatility in financial markets. Although the Moreover, we believe that implementing a banks suffered losses trading in some markets, segregation of proprietary trading activities their risk controls worked. As losses developed, would be extremely difficult. Proprietary trading senior management of the banks were aware of activities are difficult to define in principle and the size of risk positions and of the losses. A certainly difficult in practice to distinguish from combination of loss limits and senior managemarket-making and other customer accommoda- ment decisions brought risk positions down. tion activities of banks. Forcing all trading activ- Moreover, because their trading positions tended ities into a subsidiary would be a radical change, to be well diversified across fixed income, foreign affecting what are by any definition traditional exchange, commodity, and equity markets in the banking functions (foreign exchange dealing, for United States and in many other countries, their example). Such a drastic change could signifi- overall trading activities most often remained cantly impair U.S. banks' competitive positions profitable. Even viewed in isolation, the losses vis-a-vis those of foreign banks. incurred in individual markets were a very small I have discussed the steps that the Federal fraction of the capital that supports these banks' Reserve and other banking regulators have al- trading activities and ensures that shareholders, ready taken to ensure that proprietary trading not taxpayers, bear the costs. activities are conducted prudently. In particular, Of course, we must be cautious about drawing the Federal Reserve has made considerable prog- inferences from this single episode of market ress in providing its examiners with the tools volatility. The banks involved are closely studynecessary to assess the effectiveness of risk man- ing their recent experience and identifying ways agement systems and internal controls for trading in which risk management systems can be activities and to identify and demand elimination strengthened further. For its part, the Federal of any material weaknesses. The Board has Reserve is reviewing these banks' experiences to placed the highest priority on efforts to revise identify ways to make further improvements to risk-based capital requirements to cover market its supervisory and regulatory program. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

606 Federal Reserve Bulletin • July 1994 Statement by Alan Greenspan, Chairman, Board economy to begin to move again in a normal of Governors of the Federal Reserve System, expansionary pattern. When I last testified bebefore the Committee on Banking, Housing, and fore you on monetary policy, in July 1993, the Urban Affairs, U.S. Senate, May 27, 1994 likelihood that the economy would soon respond more vigorously to these financial developments I appreciate the opportunity to appear before you already was evident both to the Federal Reserve to discuss recent monetary policy. and to outside analysts. Indeed, I mentioned The Federal Reserve's moves to increase that, with short-term real rates not far from zero, short-term interest rates this year are most ap- ". . . market participants anticipate that shortpropriately understood in a historical context. term real interest rates will have to rise as the In the spring of 1989, we began to ease mone- headwinds diminish if substantial inflationary imtary conditions as we observed the consequence balances are to be avoided." But lingering quesof balance sheet strains resulting from increased tions into the second half of 1993 about whether debt, along with significant weakness in the col- the economy had fully recuperated made the lateral underlying that debt. Households and appropriate timing of such action unclear. businesses became much more reluctant to bor- Since the latter part of 1993, however, the row and spend, and lenders to extend credit—a expansionary effects of the monetary policy of phenomenon often referred to as the "credit the past few years have become increasingly crunch." In an endeavor to defuse these financial apparent. Although quarter-to-quarter developstrains, we moved short-term rates lower in a ments are subject to considerable statistical long series of steps through the summer of 1992, noise, in an underlying sense real gross domestic and we held them at unusually low levels through product clearly has accelerated. Strength has the end of 1993—both absolutely and, impor- been particularly evident in interest-sensitive tantly, relative to inflation. These actions, to- sectors. Business investment has been quite rogether with those to reduce budget deficits, facil- bust, and order books for producers of durable itated a significant decline in long-term rates as equipment have expanded appreciably. Housing well. starts rose in the last three months of 1993 to Lower interest rates fostered a dramatic im- their highest level in more than four years; alprovement in the financial condition of borrow- though they have dropped back some more reers and lenders. Households rolled outstanding cently, they remain 18 percent above a year ago. mortgage and consumer loans into much-lower- Demand for motor vehicles has been strong, rate debt. Business firms were able to pay down lifting production of many types of automobiles high-cost debt by issuing bonds and stocks on and light trucks to capacity. Moreover, as ecovery favorable terms. And banks, which had cut nomic conditions have improved in other indusback on credit availability partly because of their trial countries, the growth of our merchandise own balance sheet problems, were able to exports has picked up markedly. Overall indusstrengthen their capital positions by issuing a trial capacity utilization has increased to 83 Vi substantial volume of equity shares and other percent, its highest level since the late 1980s. In capital instruments and by retaining much of excess of 2 million jobs have been created over their improved flow of earnings. Moreover, the the past twelve months, and the unemployment lower interest rates, together with expanding rate has fallen substantially. economic activity, recently have bolstered the In this more robust financial and economic commercial real estate market, stemming losses climate, expansion of money and credit has on the collateral underlying some of the largest picked up. Business loans—which had conproblem credits of banks and other intermediar- tracted over the 1990-93 period—grew at a ies and, in some cases, permitting them to find 9Vi percent annual rate in the first four months of purchasers for these assets. 1994. Bank lending to consumers also has been The sharp, sustained decline in debt-service quite brisk. The pickup in loan growth seems to charges and the restructuring of balance sheets reflect both stepped-up short-term credit dealleviated the financial distress, enabling the mands and a greater willingness on the part of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 607 banks to extend credit. Our surveys as well as of persistent, low short-term interest rates, modanecdotal reports indicate that banks have been erate growth in the economy, and gradually easing standards and terms on business loans for diminishing market concerns about future inflamore than a year, and they have become more tion, fluctuations in bond and stock prices around aggressive in seeking to extend consumer and broader trends remained quite narrow by historresidential mortgage loans. The total debt of ical standards. private borrowers and state and local govern- Thus, lured by consistently high returns in ments, which had risen at only a 2Vi percent capital markets, people exhibited increasing willannual rate over the first half of 1993, accelerated ingness to take on market risk by extending the to more than a AVi percent rate over the second maturity of their investments. In retrospect, it is half and has maintained the stronger pace during evident that all sorts of investors made this recent months. Although ongoing portfolio ad- change in strategy—from the very sophisticated justments have kept growth of M2 relatively to the much less experienced. One especially sluggish, it has been increasing a little more notable feature of the shift was the large and quickly this year than last. accelerating pace of flows into stock and bond Given the stronger economic and financial mutual funds in recent years. In 1993 alone, $281 conditions, it became evident by early 1994 that billion moved into these funds, representing the the mission of monetary policy of the past few lion's share of net investment in the U.S. bond years had been accomplished. The "headwinds" and stock markets. A significant portion of the were substantially reduced, and the expansion investments in longer-term mutual funds unappeared solid and self-sustaining. doubtedly was diverted from deposits, money Having met our objective, we confronted the market funds, and other short-term, lowerquestion of whether there was any reasonable yielding but less speculative instruments. And purpose in maintaining the stimulative level of some of those buying the funds perhaps did not interest rates held throughout 1993. The answer fully appreciate the exposure of their new investto that question was "no." Maintenance of that ments to the usual fluctuations in bond and stock degree of accommodation, history shows, would prices. To the degree that maturity extension was have posed a risk of mounting inflationary pres- built on a false sense of security and certainty, it sures that we perceived as wholly unacceptable. posed a risk to financial markets once that sense Given the resumption of more normal patterns of began to dissipate. economic activity and credit flows, a shift in Federal Reserve moves initiated in February policy stance was clearly indicated. along with a number of other developments in the The question that remained was how to imple- United States and other major industrial economent this shift. The economy looked quite ro- mies in the same period were instrumental in bust, but we were concerned about the effects on radically altering perceptions of where interest financial markets of a rapid move away from rates were going and of the risk of holding accommodation. Short-term rates had remained longer-term assets. In early February, we had unusually low for a long time, and long-term thought long-term rates would move a little rates persisted well above short-term rates. The higher temporarily as we tightened, but that resulting attractiveness of holding stocks and anticipation was in the context of expectations of bonds was further enhanced by a nearly unbro- a more moderate pace of economic activity both ken stream of capital gains as long-term rates fell, here and abroad than emerged shortly thereafter. which imparted the false impression that returns The sharp jump in rates that occurred appeared on long-term investments were not only quite primarily to reflect the dramatic rise in market high but consistently so. The recovery of the expectations of economic growth and associated stock market after the October 1987 crash, along concerns about possible future inflation preswith the successful fending off of any significant sures. The behavior of interest rate spreads beadverse consequences from that event, may also tween Treasury and private debt—or credit risk have contributed to investor complacency. premiums—in securities markets offers confirm- Moreover, in these extraordinary circumstances ing evidence; the fact that such spreads failed to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

608 Federal Reserve Bulletin • July 1994 widen even as long-term interest rates rose dra- market environment they did not anticipate, they matically suggests that the rise in long-term rates quickly disengaged not only from dollar assets was seen by market participants as a conse- but from all investments that rested on a confiquence of a strong economy—not a precursor of dent view of the future. The loss of confidence in a weak one. Given the change in economic one's ability to perceive the future does not conditions, and the market's perception of them, discriminate between investments in dollar- or longer-term rates eventually would have in- mark-denominated securities, for example. The creased significantly even had the Federal Re- process of disengaging largely resulted in sales of serve done nothing this year. stocks and bonds, with the proceeds placed in The rise in long-term rates has reflected in- short-term debt instruments whose prices tend to creased uncertainty as well as expectations of a be more stable. As a consequence, long-term stronger economy. Although generally expected, rates rose appreciably in most industrial counthe move from accommodation, interacting with tries. That the effects of decreased confidence the news on the domestic and global economy, partially overrode the differences in economic triggered a reexamination by investors of their conditions between the United States and our overly sanguine assumptions about price risk in major trading partners is evidence of the degree longer-term financial assets. As volatility and of uncertainty in financial markets. uncertainty increased, people began to reverse Because we at the Federal Reserve were contheir previous maturity extensions. They fled cerned about sharp reactions in markets that had toward more price-certain investments at the grown accustomed to an unsustainable combinashort end of the yield curve. For example, some tion of high returns and low volatility, we chose flows into bond mutual funds were reversed; a cautious approach to our policy actions, movinvestors, fearing further rate increases and ing by small amounts at first. Members of the awakening to the nature of the risk they had Federal Open Market Committee agreed that taken on, shifted funds back into shorter-term excess monetary accommodation had to be elimmoney market mutual funds and deposits. The inated expeditiously, and a rapid shift would not sales of securities by bond mutual funds likely in itself have been expected to destabilize the contributed to pressures on yields, especially in economy. We recognized, however, that our markets in which they had been important buy- shift could impart uncertainty to markets, and ers. many of us were concerned that a large immedi- Such reduced confidence about predictions of ate move in rates would create too big a dose of future interest rate movements evidently is a key uncertainty, which could destabilize the financial element in explaining one of the more unusual system, indirectly affecting the real economy. In characteristics of financial market developments light of the substantial variations in prices of in this recent period—the apparent degree of financial assets over the past few months as we coupling of bond rates in many industrial coun- adjusted our posture, our worries seem to have tries facing different cyclical situations. To be been justified. Delaying our actions would not sure, part of the rise in long-term rates in other have been constructive; unrealistic expectations countries is accounted for by brighter economic would only have become more firmly embedded, prospects, especially in continental Europe and and the inevitable adjustment in the financial to some extent in Japan, so that market partici- markets could have been far more difficult to pants now expect less monetary policy ease in contain. Through this period, many of those who those regions. had purchased long-term securities with unduly optimistic expectations about the level and fluc- But, added to this were the effects of additional tuations in yields have made the needed adjustuncertainty. In globalized financial markets, with ments. Thus, we judged at our May 17 meeting investors having increasingly diversified portfothat we could initiate a larger adjustment, withlios across currencies, uncertainty, wherever it out an undue adverse market reaction. Indeed, originates, can have similar effects on markets markets reacted quite positively, on balance, for securities denominated in a variety of currenperhaps because they saw timely action as reduccies. When investors were confronted with a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 609 ing the degree and frequency of tightening that equivocally demonstrates that monetary accommight be needed in the future. modation when the economy is strong risks a We initiated the removal of excess monetary significant acceleration of inflation. Because of accommodation without widespread indications the lags in the effects of monetary policy, inflathat inflation has picked up. To be sure, manu- tion once initiated would likely continue to rise facturers have reported paying higher prices to for a time even after monetary policy began to suppliers, and prices of basic industrial commod- tighten. Inflationary expectations would begin to ities have risen a good deal in recent months. increase, influencing patterns of wage bargaining Moreover, the behavior of the dollar on foreign and interest rates. As a result, monetary policy exchange markets over the past several months would need eventually to tighten more sharply has been a source of some concern. But wage than if a more timely and measured approach growth has remained moderate and unit labor were taken, possibly even placing the continuacosts have been well contained by marked im- tion of the economic expansion at risk. Such provements in productivity. To date, underlying go-stop policies—implying appreciable fluctuacost increases have been absorbed with little tions in inflation rates and amplified business evidence that they have yet passed through into cycle swings—surely impede long-range ecoprices for final products. nomic planning, saving, and investment and di- If we are successful in our current endeavors, minish our economy's prospects for long-run there will not be an increase in overall inflation, growth and our ability to employ our growing and trends toward price stability will be ex- labor force. tended. And to be successful, we must imple- We have attempted to avoid such an outcome ment the necessary monetary policy adjustments by taking actions this year that have substantially in advance of the potential emergence of infla- removed the degree of accommodation that had tionary pressures, so as to forestall their actual been in place last year. Our judgment was that occurrence. Shifts in the stance of monetary with the financial condition of both borrowers and policy influence the economy and inflation with a lenders greatly improved, such action would not considerable lag, as long as a year or more. The impede satisfactory economic growth but rather challenge of monetary policy is to interpret cur- would help such growth to be sustained. Clearly, rent data on the economy and financial markets uncertainties regarding the economic outlook rewith an eye to anticipating future inflationary or main, and the Federal Reserve will need to moncontractionary forces and to countering them by itor economic and financial developments to judge taking action in advance. the appropriate stance of monetary policy. Our The alternative—maintaining an accommoda- intention is to promote financial conditions under tive monetary policy until inflation actually be- which our economy can grow at its greatest pogins to pick up—would be detrimental to the best tential, consistent with steady, noninflationary interests of our nation's economy. History un- expansion of employment and incomes. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

610 Announcements CHANGE IN THE DISCOUNT RATE tion Act and on other matters on which the Board seeks its advice. The Federal Reserve announced on May 17, 1994, two actions designed to maintain favorable trends in inflation and thereby sustain the economic PROPOSED ACTIONS expansion. The Board approved an increase in the discount The Federal Reserve requested on May 18, 1994, rate from 3 percent to 3V2 percent, effective imme- public comment on a proposal that would amend diately, and the Federal Open Market Commit- the Federal Reserve's risk-based capital guidelines tee (FOMC) agreed that this increase should be for state member banks and bank holding compaallowed to show through completely into interest nies to recognize the risk-reducing benefits of netrates in reserve markets. ting arrangements. This proposal was issued jointly These actions, combined with the three adjust- with the Office of the Comptroller of the Currency, ments initiated earlier this year by the FOMC, which is seeking comment on a similar amendment substantially remove the degree of monetary to its capital guidelines for national banks. Comaccommodation that prevailed throughout 1993. As ments were requested by June 20, 1994. always, the Federal Reserve will continue to moni- The Federal Reserve Board on May 25, 1994, tor economic and financial developments to judge requested public comment on a joint interagency the appropriate stance of monetary policy. proposal of advanced rulemaking concerning the In taking the discount action, the Board regulatory treatment of recourse arrangements and approved requests submitted by the boards of direc- direct credit substitutes. Comments should be tors of eleven Federal Reserve Banks—Boston, received by July 25, 1994. New York, Philadelphia, Richmond, Atlanta, Chi- The Federal Reserve Board on May 4, 1994, cago, St. Louis, Minneapolis, Kansas City, Dallas, issued for public comment proposed amendments and San Francisco. On May 18, the Board to Regulation DD (Truth in Savings), which clarapproved an action by the board of directors of the ify that once interest is credited to an account, Federal Reserve Bank of Cleveland, increasing the it becomes part of the principal. Comments are discount rate of that bank from 3 percent to 3Vi per- requested by July 5. cent. The discount rate is the interest rate that is charged depository institutions when they borrow from their District Federal Reserve Bank. EXTENSION OF COMMENT PERIOD The Federal Reserve Board on May 17, 1994, MEETING OF THE CONSUMER ADVISORY extended for sixty days its comment period on a COUNCIL proposal to simplify and update Regulation E (Electronic Fund Transfers). In the proposal, the The Federal Reserve Board announced that the Board also requested comment on changes to Consumer Advisory Council held a meeting on the staff commentary. The public now has until Thursday, June 23. The Council's function is to August 1 to submit comments on this proposal. advise the Board on the exercise of the Board's Comments should refer to Docket Numbers R-0830 responsibilities under the Consumer Credit Protec- and R-0831. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

611 CHANGES IN BOARD STAFF The changes also included the following promotions to the official staff: The Board of Governors announced on June 9, Flint Brayton to Assistant Director, David S. 1994, the appointments of Robert deV. Frierson Jones to Assistant Director, John Rea to Assistant and Katherine H. Wheatley to the position of Assis- Director, Stephen A. Rhoades to Assistant Director, tant General Counsel in the Legal Division. Charles S. Struckmeyer to Assistant Director, Alice Patricia White to Assistant Director, and Glenn B. Mr. Frierson joined the Board's staff in 1987. He Canner to Adviser. holds an undergraduate degree and a J.D. from the University of Virginia. Mr. Brayton has been at the Board since 1976. Ms. Wheatley joined the Board's staff in 1989. He received his Ph.D. from Johns Hopkins She holds an undergraduate degree from Radcliffe University. College and a J.D. from Harvard Law School. Mr. Jones has been at the Board since 1981. He completed his Ph.D. at Harvard University. The Board also announced on June 9, 1994, the Mr. Rea joined the Board's staff in 1987. following official staff promotions in the Division He received his Ph.D. from the University of of Research and Statistics: Wisconsin. Mr. Rhoades began his career with the Board in David J. Stockton, from Associate Director to 1971. He received his Ph.D. from the University of Deputy Director; Martha Bethea, from Deputy Maryland. Associate Director to Associate Director; Myron L. Mr. Struckmeyer joined the Board's staff in Kwast, from Assistant Director to Associate 1983. He completed his Ph.D. at Yale University. Director; Patrick M. Parkinson, from Assistant Ms. White has been at the Board since 1971. She Director to Associate Director; and Martha S. Scan- received her Ph.D. from Yale University. Ion, from Assistant Director to Deputy Associate Mr. Canner joined the Board's staff in 1979. He Director. received his Ph.D. from Brown University. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

612 Minutes of the Federal Open Market Committee Meeting Held on March 22, 1994 A meeting of the Federal Open Market Committee Mr. Ettin, Deputy Director, Division of Research was held in the offices of the Board of Governors and Statistics, Board of Governors Mr. Slifman, Associate Director, Division of of the Federal Reserve System in Washing- Research and Statistics, Board of Governors ton, D.C., on Tuesday, March 22, 1994, at Mr. Madigan, Associate Director, Division of 9:00 a.m. Monetary Affairs, Board of Governors Ms. Low, Open Market Secretariat Assistant, Present: Division of Monetary Affairs, Board of Mr. Greenspan, Chairman Governors Mr. McDonough, Vice Chairman Mr. Broaddus Mr. Bennett, Ms. Browne, Messrs. T. Davis, Mr. Forrestal Dewald, Lang, Rolnick, and Scheld, Mr. Jordan Senior Vice Presidents, Federal Reserve Mr. Kelley Banks of New York, Boston, Kansas City, Mr. LaWare St. Louis, Philadelphia, Minneapolis, and Mr. Lindsey Chicago respectively Mr. Parry Ms. Phillips Mr. Cox, Vice President, Federal Reserve Bank of Dallas Messrs. Hoenig, Keehn, Melzer, and Oltman, Mr. Hilton, Manager, Open Market Operations, Alternate Members of the Federal Open Federal Reserve Bank of New York Market Committee By unanimous vote, the minutes of actions taken Messrs. Boehne, McTeer, and Stern, Presidents of the Federal Reserve Banks of Philadelphia, at the meeting of the Federal Open Market Com- Dallas, and Minneapolis respectively mittee held on February 3—4, 1994, were approved. The Manager for Foreign Operations reported on Ms. Minehan, First Vice President, Federal Reserve developments in foreign exchange markets and on Bank of Boston System transactions in foreign currencies during the period February 4, 1994, through March 21, Mr. Kohn, Secretary and Economist Mr. Bernard, Deputy Secretary 1994. By unanimous vote, the Committee ratified Mr. Coyne, Assistant Secretary these transactions. Mr. Gillum, Assistant Secretary The Manager for Domestic Operations reported Mr. Mattingly, General Counsel on developments in domestic financial markets and Mr. Prell, Economist on System open market transactions in government Mr. Truman, Economist securities and federal agency obligations during the Messrs. Beebe, J. Davis, Goodfriend, Promisel, period February 4, 1994, through March 21, 1994. Siegman, Simpson, Stockton, and By unanimous vote, the Committee ratified these Ms. Tschinkel, Associate Economists transactions. By unanimous vote, paragraph 1(a) of the Autho- Ms. Lovett, Manager for Domestic Operations, rization for Domestic Open Market Operations was System Open Market Account Mr. Fisher, Manager for Foreign Operations, amended to raise from $8 billion to $11 billion the System Open Market Account dollar limit on intermeeting changes in System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

613 Account holdings of U.S. government and federal level since the late 1970s. Production of manufacagency securities for the intermeeting period end- tured goods other than motor vehicles also was up ing with the close of business on May 17, 1994. in the two months, but the advances were smaller The Committee then turned to a discussion of the than those of late 1993. Output of utilities surged in economic and financial outlook and the implemen- January, reflecting the heating demand resulting tation of monetary policy over the intermeeting from abnormally cold temperatures, but a portion period ahead. A summary of the economic and of that gain was retraced in February. Total utilizafinancial information available at the time of the tion of industrial capacity increased in both January meeting and of the Committee's discussion is and February and was at relatively elevated levels, provided below, followed by the domestic policy judged by historical norms; operating rates in pridirective that was approved by the Committee and mary processing industries were especially high. issued to the Federal Reserve Bank of New York. Retail sales were little changed on balance over The information reviewed at this meeting indi- the first two months of the year, with sales recovercated that economic activity had expanded appre- ing in February from a large January decline. By ciably further in the early months of 1994, despite contrast, sales of motor vehicles remained quite unusually severe winter weather. Consumer spend- brisk on average over the two months, despite the ing and construction activity had been held down California earthquake and the severe weather. Soarto some extent by the adverse weather conditions, ing outlays for home heating contributed to rapid but motor vehicle production had continued at a growth of consumer spending on services in Januvery strong pace and business fixed investment ary. The unusual weather also affected housing appeared to be headed for a significant gain in the activity; starts were down considerably in January first quarter. Factory utilization rates had moved and February from the very high levels of late still higher, and labor demand seemed to have 1993, and new home sales plunged in January. grown moderately further. Outside of a surge in Sales of existing homes in January were only energy prices, increases in broad indexes of con- slightly below their high December level. sumer and producer prices remained moderate. The limited available evidence pointed to a Nonfarm payroll employment was unchanged in noticeably smaller gain in business fixed invest- January but posted a February advance comparable ment in the first quarter of 1994 after a very large to the sizable monthly increases recorded in the increase in the previous quarter. Shipments of nonfinal quarter of 1993. Employment in the service defense capital goods slowed in January, retracing industries declined slightly in January, then part of the sharp rise of the fourth quarter, but the rebounded substantially in February. Manufactur- buoyancy of orders in recent months pointed to a ing payrolls rose in January and February, but the further increase in shipments in coming months. number of jobs in construction declined in both Sales of heavy trucks were strong in January, and months, reflecting that industry's vulnerability to the backlog of orders for such vehicles remained weather disruptions. The civilian unemployment large. Nonresidential construction activity, perhaps rate, calculated on the new basis, fell to 6.5 percent owing in part to bad weather, was down in January in February; however, the Bureau of Labor Statis- after trending up over most of 1993. The largest tics cautioned that a variety of technical factors decline was in office building, which had posted might have exaggerated the decline in joblessness large increases in the preceding two months. in early 1994. Business inventories fell slightly in January, and After a sharp rise in the fourth quarter, industrial stocks were lean, especially at manufacturing firms. production increased considerably further in Janu- Inventories in manufacturing rose, retracing in Janary and February. Manufacturing output continued uary part of a large December decline; much of the to rise, despite the apparent damping effect of January increase was at producers of machinery, adverse weather on a number of industries. Assem- where stocks had fallen to very low levels relative blies of motor vehicles remained quite buoyant, to shipments. At both the wholesale and retail accounting for more than half of the increase in levels, inventories posted sizable decreases. In the manufacturing production in the first two months wholesale sector, the inventory-to-sales ratio edged of the year and reaching in February their highest down and had changed little since May of last year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

614 Federal Reserve Bulletin • July 1994 The inventory-to-sales ratio for the retail sector Immediately following the February meeting, was up slightly, reflecting weak sales in January. Chairman Greenspan announced the Committee's The nominal deficit on U.S. trade in goods decision, and open market operations were directed and services, measured on the new balance-of- toward implementing the slightly less accommodapayments basis, was slightly smaller in January tive degree of reserve pressures sought by the Comthan the average for the fourth quarter. However, mittee. The federal funds rate increased by LA perthe January deficit was substantially larger than centage point and then remained close to that of December, with exports down by more than 3»/ percent over the intermeeting period, while 4 imports. Much of the reduction in exports was in adjustment plus seasonal borrowing averaged a agricultural goods, aircraft, and gold; the drop in little less than anticipated. imports mainly reflected both lower quantities and Most other market interest rates rose considerlower prices of imported oil. The limited available ably more than the federal funds rate in frequently data suggested that economic activity in the major volatile markets. Market participants generally had foreign industrial countries picked up in early 1994 anticipated a tightening of monetary policy, but the after a mixed performance in the fourth quarter of Committee's action apparently came a little sooner 1993. than had been expected. Strong fourth-quarter eco- Producer prices of finished goods were boosted nomic data and evidence of solid growth in early in February by a surge in energy prices, especially 1994 were seen as suggesting greater credit for gasoline and heating oil, that more than offset a demands and the need for higher interest rates in further decline in food prices. Excluding the food the future to contain inflation. Heightened trade and energy components, producer prices edged tensions and unsettled market conditions abroad higher in February; for the twelve months ended in also contributed to market concerns. In these cir- February, producer prices increased by a signifi- cumstances, intermediate- and longer-term interest cantly smaller amount than in the twelve-month rates increased by appreciably more than shortperiod ended in February 1993. At the consumer term money market rates. Major indexes of stock level, higher energy prices in February were offset prices had fallen on balance since early February in by lower food prices. For items other than food and sometimes volatile trading. energy, consumer prices also rose less over the The trade-weighted value of the dollar in terms twelve months ended in February than in the pre- of the other G-10 currencies initially rose following vious twelve months. Average hourly earnings of the tightening of monetary policy on February 4. production or nonsupervisory workers increased The dollar depreciated over the balance of the more slowly in February, but for the twelve months intermeeting period, however, despite higher U.S. ended in February, the advance was about the same interest rates and the release of data indicating as that recorded for the previous twelve months. generally strong U.S. economic activity. The dollar At its meeting on February 3^4, 1994, the Com- declined against both the Japanese yen and the mittee adopted a directive that called for a slight German mark; trade frictions between the United increase in the degree of pressure on reserve posi- States and Japan and disappointment over the pace tions and that did not include a presumption about of monetary easing in Germany appeared to be the likely direction of any adjustment to policy contributing factors in the depreciation of the dolduring the intermeeting period. The directive stated lar. Bond yields in all the major foreign industrial that in the context of the Committee's long-run countries rose on average by almost as much as objectives for price stability and sustainable eco- yields on comparable U.S. bonds. nomic growth, and giving careful consideration to M2 declined somewhat and M3 was down economic, financial, and monetary developments, sharply in February. A substantial drop in mortgage slightly greater or slightly lesser reserve restraint refinancings since late 1993 that depressed demand might be acceptable during the intermeeting deposits, and to a lesser extent savings deposits, period. The reserve conditions associated with this contributed to the weakness of M2 in February. M3 directive were expected to be consistent with mod- also was affected by a precipitous decline in erate growth of M2 and M3 over the first half of institution-only money funds as investors reacted 1994. quickly following the monetary tightening to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee Meeting 615 widening spreads between returns on these funds ate economic growth, though perhaps for a time at and higher-yielding short-term instruments. Data a rate somewhat above the economy's potential. for early March pointed to some rebound in both The amount of resources that could be mobilized monetary aggregates, perhaps owing to portfolio readily to meet this demand was subject to substanreadjustments that involved sizable net redemp- tial uncertainty, but the degree of slack in the tions of bond funds and apparently weaker inflows economy clearly had diminished considerably in to stock funds. Total domestic nonfinancial debt recent quarters to relatively low levels and likely expanded at a moderate rate in recent months. would shrink further. The immediate outlook for The staff forecast prepared for this meeting sug- inflation remained favorable: Costs and prices were gested that economic expansion would slow from being contained by moderate wage increases, the very strong pace of the fourth quarter but that continuing pressures for productivity-enhancing the economy would advance in 1994 at a rate investment, and competitive prices from abroad slightly in excess of the growth of potential. Con- where slack was still quite ample; and broad measumer spending, which had tended for some time to sures of money and credit, though strengthening outpace income growth, was projected to increase over the last half of 1993, remained moderate by at a rate more in line with disposable incomes; historical standards. Nevertheless, looking ahead, spending on durable goods, in particular, was pro- members were concerned that, unless monetary jected to slow markedly as stock-adjustment policy were adjusted further from its stillmotives diminished and higher interest rates accommodative stance, pressures on resources exerted some restraint. Business fixed investment would intensify and inflation would pick up. was expected to increase less rapidly in 1994, Members assessed the outlook for economic reflecting the diminishing effect of the earlier activity and prices against the backdrop of sharp pickup in output growth and the slower growth of changes in bond and, to a lesser extent, equity corporate cash flow. Homebuilding activity was prices over the intermeeting period. Clearly, the anticipated to continue at a relatively brisk pace, tightening of reserve conditions announced on spurred by the greater cash-flow affordability of February 4 had played a role in market movements, housing and the good prospects for continued but other factors had been at work as well. Memgrowth in employment and incomes. The restraint bers variously stressed the possibility that the on output growth from federal spending cutbacks backup in interest rates had reflected much stronger and weak export demand was projected to diminish aggregate demand, added uncertainty about the somewhat. In light of the limited margins of slack course of interest rates, influences from foreign in labor and product markets that were expected exchange and foreign capital markets, changes in to prevail over the forecast horizon, little further trading strategies by wary participants, and rising reduction in the core rate of inflation was expected. inflation expectations. On balance, financial condi- In the Committee's discussion of current and tions were still seen as supportive of solid ecoprospective economic developments, members nomic expansion, and a number of members referred to widespread indications of appreciable referred in particular to the more accommodative momentum in the economic expansion and lending policies of many depository institutions; decreasing margins of unemployed labor and other however, some commented on the risk, which they producer resources. While the members continued viewed as having a low probability, that weakness to anticipate a marked slowing in economic growth and volatility in financial markets could at some from the very rapid pace of the fourth quarter, some point have a significantly inhibiting effect on busicommented that despite unusually severe winter ness and consumer confidence and spending. To weather in large parts of the country the decelera- date, business sentiment was described as quite tion in the current quarter appeared to be less than positive in most parts of the country, and although they had expected. The indications of continuing there were some exceptions—notably in strength in aggregate demand along with a still- California—members commented on numerous accommodative monetary policy suggested a much indications of improving regional economies. reduced risk that the economic expansion would A number of members observed that they stall. Indeed, members continued to expect moder- expected consumer spending to be relatively well Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

616 Federal Reserve Bulletin • July 1994 maintained, buttressed by considerable strength in industries approaching or reaching full capacity expenditures for motor vehicles and other con- utilization, prices of some materials and other busisumer durables. Reports on retail sales from vari- ness purchases coming under increasing pressure, ous parts of the country tended to support such and delivery lead times tending to lengthen at least assessments, and many contacts among retailers in some industries, efforts to build inventories were expressing optimism about the outlook for could be expected to materialize and in one view their sales. At the same time, some members the potential for such a development represented a observed that a number of factors were likely to key upside risk from current forecasts. In this conlimit the potential strength of consumer spending. nection, some members referred to scattered indica- They referred in particular to the already low sav- tions of efforts to increase inventories, notably of ing rate, relatively high consumer indebtedness, steel products. Manufacturers of motor vehicles and recent declines in the value of securities held also were in the process of rebuilding depleted by households. More importantly, however, con- inventories, though the currently stimulative imsumer confidence and spending would continue to pact of such rebuilding on overall production was depend heavily on the outlook for further growth in likely to be reversed when motor vehicle stocks employment and incomes. reached desired levels in the months ahead. Business investment expenditures remained on a The foreign trade sector was expected to remain solid uptrend as firms continued to focus on the a negative factor in the economic outlook. Howneed to control costs and improve operating effi- ever, the members anticipated some improvement ciencies in the face of vigorous competitive pres- in the economies of major foreign industrial nations sures. Members also cited some examples of which, together with some moderation in the investment spending induced by rising demands growth of domestic final demands, was likely to pressing against limitations in production capacity. slow the decline in real net exports. A few mem- While business investment had tended to be con- bers cited growing indications that last year's centrated in new, more productive equipment, non- NAFTA legislation would have quite positive residential construction also had strengthened and effects on U.S. foreign trade, though those effects anecdotal reports from numerous areas tended to were still largely in the future. confirm more positive nationwide statistics. The In the discussion of the outlook for prices and rising levels of nonresidential construction activity wages, many of the members expressed concern tended to be concentrated in commercial and indus- about the potential for a pickup in inflation if, as trial facilities and public works projects; the con- they anticipated, margins of unemployed resources struction of office buildings continued to lag but narrowed further or disappeared. The members this sector appeared to have stabilized or perhaps acknowledged that broad measures of prices relatimproved marginally after a long period of decline. ing to final purchases and of wages currently did More generally, currently positive business atti- not suggest any increase in inflation. Indeed, in the tudes augured well for further growth in overall view of at least some members, those measures still business investment, but on the negative side it was suggested on balance that the inflation trend had noted that further turbulence in financial markets retained a downward tilt thus far. In this conneccould erode confidence with adverse implications tion, some commented that the overall performance for investment spending. Residential construction of the broad measures had been somewhat better in was described as quite strong in numerous areas, recent months than they had anticipated, especially although overall housing construction had been given the very rapid expansion of the economy held down thus far this year by severe winter over the closing months of 1993 and the less than weather in numerous parts of the country. Short- expected moderation thus far this year. Developages of skilled construction workers and building ments that had been exerting a favorable effect on materials were reported in many areas. prices included above-trend growth in productivity, Despite generally rising final demands, business relatively low prices in world oil markets, and firms were continuing to maintain lean inventory strong competition in many markets from both positions in their ongoing efforts to hold down domestic and foreign firms. Moreover, the strong costs. Nonetheless, with production levels in many rise in credit usage that often had accompanied Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee Meeting 617 intensified inflation pressures in the past had yet to in reserves and narrow measures of money over an materialize. To date, the pickup in price increases extended period. While a quite accommodative had been uneven and had tended to be concentrated policy stance had been entirely appropriate earlier in some regions or industries and in the early stages in the economic recovery, when constraints such as of the production process, and a number of mem- the widespread rebuilding of balance sheets and bers reported that they saw little change in inflation business restructuring activities were strongly trends in their areas. Nonetheless, warning signs inhibiting the expansionary forces in the economy, had emerged of the prospect of greater inflation, those constraints had greatly diminished and the though perhaps not over the nearer term. These expansion clearly had gained considerable momenincluded increases in a wide range of commodity tum. In the circumstances, maintaining an accomprices and anecdotal reports from various parts of modative monetary policy could be expected the country suggesting a further rise in the number before too long to foster growing pressures on of business firms that were facing somewhat higher labor and capital resources with a resulting pickup prices of materials and other purchases and in turn in inflation. While actual inflation remained subwere able, often for the first time in recent years, to dued and credit growth was still damped, it was raise their selling prices. Price and wage pressures only a matter of time before the current monetary appeared to be especially pronounced in the con- policy induced a surge in credit extensions that struction industry, where capacity constraints had could fuel an outbreak of inflation. been encountered in many localities. Members also In these circumstances, the members concluded referred to the potential for higher prices in the that monetary policy needed to move fairly quickly food and energy sectors; low crop carryovers for toward what might be characterized as a more some grains made food prices vulnerable to unfa- neutral position. Such a policy posture could not be vorable growing conditions, should they material- defined with precision and it undoubtedly varied to ize; oil prices currently were at relative lows but some extent with changing circumstances. Nonewere likely to come under some upward pressures theless, it provided a useful conceptual approach to as world economic growth accelerated and if polit- policy in current circumstances and could be idenical developments led to disruptions in world sup- tified as a policy stance that sought to foster susplies. More fundamentally, the relatively robust tained noninflationary expansion consistent with economic expansion over the second half of 1993 the economy's potential. The members generally and the further advance in early 1994 appeared in concluded that such a policy stance was still some the view of many members to have appreciably distance away, and the key issue facing the Comdiminished the gap between actual and potential mittee was not whether but how promptly the nec- GDP and to have reduced the rate of unemploy- essary policy adjustment should be completed. ment to a level that could well be not far from the Whether further tightening beyond that point would natural rate. If this assessment proved to be correct, be needed later could not be determined at this time further economic expansion at a pace above the but would depend on the potential emergence of economy's potential would bring more industries conditions pointing to an acceleration of inflation. and the economy more generally to capacity pro- As had been the case at the February meeting, duction levels before very long and could well views differed on how much further current monegenerate growing inflation thereafter. tary policy should be adjusted at this meeting. In the Committee's discussion of policy for the Many members noted that money market interest intermeeting period ahead, all the members sup- rates would have to rise by a relatively sizable ported a further move toward a less accommoda- amount from current levels, given underlying ecotive policy stance. An initial move in that direction nomic conditions, but a majority indicated a preferhad been made in early February, but the members ence for another small move at this time. Many still viewed monetary policy as too stimulative. In were concerned about a possible overreaction in this regard, members cited the very low inflation- financial markets that had become quite sensitive adjusted interest rates in short-term debt markets as and volatile since early February. A few also placed an indicator of excessive policy accommodation, some emphasis on their expectations of a considerand one member also referred to the rapid growth able slowdown in the rate of economic growth and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

618 Federal Reserve Bulletin • July 1994 the possibility that the moderation of the expansion quency in the past when that seemed warranted by might prove to be somewhat more pronounced than intermeeting developments. Members who favored was currently projected. In this view, a degree of an asymmetric directive observed that such a direccaution was advisable to permit an assessment of tive seemed more consistent with the current thrust ongoing developments. of monetary policy toward less accommodation Members who preferred a more sizable policy and the related need to respond promptly to indicaadjustment, or perhaps a small move through open tions of accelerating inflation. These members indimarket operations that was associated with a rise in cated, however, that they could support a symmetthe discount rate, believed that the increasing risks ric directive that was associated with the prospect of greater inflation pointed to the need to move of intermeeting consultations. more promptly and decisively away from a policy At the conclusion of the Committee's policy stance that had become overly accommodative. discussion, all but two of the members indicated A stronger policy action at this point would serve that they could accept a directive that called for a to underscore the Committee's commitment to its slight increase in the degree of pressure on reserve price stability objective and would help to counter- positions and that did not include a presumption act what some members interpreted as a significant about the likely direction of any adjustment to increase in inflationary expectations since earlier in policy during the intermeeting period. Accordingly, the year. A reduction in such expectations would in the context of the Committee's long-run objecover time have beneficial implications for bond tives for price stability and sustainable economic markets and the economy. In the view of some growth, and giving careful consideration to ecomembers, continued market expectations of further nomic, financial, and monetary developments, the actions to tighten reserve conditions were them- Committee decided that slightly greater or slightly selves contributing to market instability. Some lesser reserve restraint might be acceptable during members also commented that any policy choice the intermeeting period. According to a staff analyincurred the risk of proving to be wrong, but they sis, the reserve conditions contemplated at this viewed the greatest risk at this juncture to be a meeting would be consistent with moderate growth policy that allowed inflationary pressures to gather in M2 and M3 over the first half of 1994. momentum. A policy decision that in hindsight led At the conclusion of the meeting, the Federal to the implementation of too much restraint could Reserve Bank of New York was authorized and be corrected more readily and with less damage to directed, until instructed otherwise by the Committhe economy in this view. tee, to execute transactions in the System Account In the Committee's discussion of possible inter- in accordance with the following domestic policy meeting adjustments to the degree of reserve pres- directive: sure, a majority of the members indicated a preference for retaining a symmetric directive. While the The information reviewed at this meeting suggests probability of an easing action during this period that economic activity has expanded appreciably further in the early months of 1994. Severe weather and changes was deemed to be very low, the members also did in statistical methodology distorted movements in offinot see as very likely any firming over the intercial labor market data in January and February, but it meeting period beyond that to be implemented appears that employment increased somewhat on balafter today's meeting. The Committee had ance over the two months and that unemployment fell. embarked on a course of moving away from an Industrial production also increased substantially over this period after a sharp rise in the fourth quarter. Conaccommodative stance toward one that was more sumer spending and housing activity apparently have neutral. The timing of the actions to implement this been held down to some extent by adverse weather in policy was not independent of the behavior of the January and February; retail sales were little changed on economy, of course, but it was not as dependent on balance over the two months and housing starts fell the nuances of incoming data as policy might be at considerably. Trends in contracts and orders point to a other times when the course of policy was less sizable increase in business fixed investment but at a rate well below that for the fourth quarter of 1993. The clear. Symmetry did not rule out an intermeeting nominal deficit on U.S. trade in goods and services in adjustment of policy by the Chairman on behalf of January was slightly smaller than the average in the the Committee, as had been done with some fre- fourth quarter. Increases in broad indexes of consumer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee Meeting 619 and producer prices have remained moderate in recent highly restrictive policy might be required at a later months despite a surge in energy prices. date to contain inflation. Most market interest rates have risen considerably The Committee then turned to a discussion of the since the Committee meeting on February 3-4, 1994. In desirability of making an immediate announceforeign exchange markets, the trade-weighted value of the dollar in terms of the other G-10 currencies depreci- ment of today's policy decision. All the members ated over the intermeeting period. favored prompt disclosure in principle, but some M2 declined somewhat and M3 was down sharply expressed reservations about announcing today's in February, but data for early March point to some decision immediately after the meeting. These rebound in both aggregates. Total domestic nonfinancial members preferred to consider a decision on andebt has expanded at a moderate rate in recent months. nouncements of policy actions in the context of a The Federal Open Market Committee seeks monetary broad range of disclosure issues, some of which and financial conditions that will foster price stability had yet to be fully explored. Some stressed that and promote sustainable growth in output. In furtherance they remained concerned about the inhibiting of these objectives, the Committee at its meeting in effects of some types of disclosures on the Commit- February established ranges for growth of M2 and M3 of 1 to 5 percent and 0 to 4 percent respectively, measured tee's deliberations, and one member emphasized from the fourth quarter of 1993 to the fourth quarter of that the Committee also needed to consider the 1994. The Committee anticipated that developments implications of immediate announcements of contributing to unusual velocity increases could persist changes in open market policy for the role of the during the year and that money growth within these discount rate. Several members commented that ranges would be consistent with its broad policy objectives. The monitoring range for growth of total domestic announcing a decision reached at this meeting, nonfinancial debt was set at 4 to 8 percent for the year. because it would come after a similar announce- The behavior of the monetary aggregates will continue ment following the most recent meeting in early to be evaluated in the light of progress toward price level February, would in effect set a precedent that would stability, movements in their velocities, and developtend to limit the Committee's future options. A ments in the economy and financial markets. majority of the members concluded, however, that In the implementation of policy for the immediate future, the Committee seeks to increase slightly the while the Committee was not making a formal, existing degree of pressure on reserve positions. In the binding decision on this issue at this meeting, the context of the Committee's long-run objectives for price Chairman would be authorized to release a short stability and sustainable economic growth, and giving press statement regarding today's policy decision. careful consideration to economic, financial, and mone- A useful purpose would be served in reducing or tary developments, slightly greater reserve restraint or slightly lesser reserve restraint might be acceptable in eliminating potential misinterpretation of the Comthe intermeeting period. The contemplated reserve con- mittee's policy decision and the related risk of ditions are expected to be consistent with moderate overreactions in financial markets at a time of growth in M2 and M3 over the first half of 1994. considerable uncertainty and volatility in those markets. The news of the Committee's action Votes for this action: Messrs. Greenspan, McDonwould be conveyed unambiguously to the entire ough, Forrestal, Kelley, LaWare, Lindsey, Parry, and Ms. Phillips. Votes against this action: Messrs. public at once and not filtered through the financial Broaddus and Jordan. markets' interpretation of open market operations. Moreover, the Committee would retain the option Messrs. Broaddus and Jordan dissented because of specifying the exact contents and timing of they preferred a stronger move toward a more future policy announcements, including intermeetneutral policy stance. In their view, the recent ing policy actions. Most of the members concluded sharp increases in longer-term interest rates indi- that the advantages to the public of prompt release cated clearly that inflationary expectations were today outweighed the potential disadvantages. rising and that the principal policy risk had become It was agreed that the next meeting of the Comone of remaining accommodative for too long a mittee would be held on Tuesday, May 17, 1994. period. In this environment, they believed that a This meeting adjourned at 2:05 p.m. more aggressive move would underscore the Com- At a telephone conference held on March 24, mittee's commitment to fostering sustainable 1994, the Committee approved a temporary longer-term growth and reduce the risk that a increase, from $700 million to $3.0 billion, in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

620 Federal Reserve Bulletin • July 1994 Federal Reserve System's reciprocal currency Parry, and Ms. Phillips. Vote against this action: ("swap") arrangement with the Bank of Mexico. Mr. Broaddus. Concurrently, the U.S. Treasury announced a $3 billion swap arrangement between the U.S. The enlarged foreign exchange swap arrange- Exchange Stabilization Fund and the Bank of Mex- ment with the Bank of Mexico constituted part of a ico and the Mexican Ministry of Finance. The new trilateral foreign exchange swap facility estab- System's action was effective immediately and, lished in connection with the newly formed consulsubject to certain conditions, it authorized the Bank tative group called the North American Financial of Mexico to draw on the enlarged arrangement Group and comprised of the Finance Ministers and until April 29, 1994, with full repayment of any Central Bank Governors of Canada, Mexico, and drawings to be made by July 29, 1994. the United States. The purpose of this standing A permanent increase in the System's swap facility is to expand the pool of potential resources arrangement with the Bank of Mexico had been available to the monetary authorities of each coundiscussed at the Committee's recent meeting on try to maintain orderly exchange markets. Its estab- March 22, and it had been contemplated at that lishment at this time was deemed desirable in light meeting that the Committee would vote on such an of the outlook for expanding and increasingly interincrease during April in the context of the estab- dependent economic relationships among the three lishment of a consultative mechanism involving the economies after the successful conclusion of the finance ministries and central banks of Canada, North American Free Trade Agreement. Mexico, and the United States. However, the assas- The components of the trilateral facility include sination of a major candidate for the presidency of (1) swap agreements between the United States and Mexico on the evening of March 23 had prompted Mexico for up to $6.0 billion, with the Treasury the closing of Mexican financial markets on and the Federal Reserve each participating up to March 24 and had given rise to concerns regarding $3.0 billion; (2) an expansion of the swap agreepossible financial market disorder in reaction to ment between the Bank of Canada and the Bank of unfolding political developments when those mar- Mexico to CAN$1.0 billion; and (3) a reaffirmation kets reopened. Against this background, the Com- of the existing swap agreement between the Bank mittee decided to join the U.S. Treasury in an of Canada and the Federal Reserve in the amount action that would help confirm continued U.S. sup- of $2.0 billion, with the above-noted maturity port for Mexico's economic policies at a poten- extension. tially critical time for Mexican financial markets. Mr. Broaddus dissented because he was concerned about the appropriateness of the System's Votes for this action: Messrs. Greenspan, McDon- involvement in this type of foreign currency operaough, Forrestal, Jordan, Kelley, LaWare, Lindsey, tion. In his view, the System's swap network raised Parry, and Ms. Phillips. Vote against this action: a number of broad issues that he felt the Committee Mr. Broaddus. needed to review at some point. Accordingly, he would not favor increasing any existing swap Effective April 26,1994, the Committee by nota- arrangement until such a review had taken place. tion vote approved a recommendation by Chairman At a telephone conference on April 18, Commit- Greenspan to establish an enlarged swap arrange- tee members reviewed economic and financial ment of $3 billion on a permanent basis. As is the developments since the March meeting and discase for all swap arrangements, this arrangement is cussed the desirability of taking further action to subject to periodic annual review after an initial move policy away from its still accommodative maturity date of December 15, 1995. Simulta- stance. Broad indicators of economic activity, supneously, the maturity date of the System's swap ported by widespread anecdotal evidence, pointed facility with the Bank of Canada was extended by to considerable momentum in economic activity one year to December 15, 1995. and further reductions in already limited margins of unutilized labor and other production resources. In financial markets, sharp declines in bond and stock Votes for this action: Messrs. Greenspan, McDonough, Forrestal, Jordan, Kelley, LaWare, Lindsey, prices suggested that speculative excesses had been Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee Meeting 621 reduced, and ongoing portfolio realignments proba- than to await the next regularly scheduled meeting bly were shifting long-term financial assets to in mid-May. Some members expressed the view firmer hands. As a result, financial markets now that an increase in the discount rate would provide appeared to be less likely to overreact to adverse a desirable supplement to this policy action. developments or to policy actions. In the circumstances, the members supported the Chairman's Donald L. Kohn decision to reduce the degree of accommodation in Secretary reserve markets slightly further at this time rather Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

623 Legal Developments FINAL RULE—AMENDMENT TO REGULATION H (1) Does not exceed the capital stock account of the bank; or The Board of Governors is amending 12 C.F.R. Part (2) Does not exceed 50 percent of the bank's Tier 1 208, its Regulation H (Membership of State Banking capital and the bank: Institutions in the Federal Reserve System), to allow a (i) Is well capitalized as defined in section state member bank that meets certain conditions to 208.33(b)(1) of this part; invest in its premises in an amount up to 50 percent of (ii) Received a composite CAMEL rating of "1" its Tier 1 capital without obtaining specific approval. or "2" as of its most recent examination by the The Board believes that a general approval for a state relevant Federal Reserve Bank or state regulatory member bank to invest an amount not exceeding authority; and 50 percent of its Tier 1 capital is appropriate for a bank (iii) Is not subject to any written agreement, cease that meets those conditions. This action will signifi- and desist order, capital directive, or prompt cantly reduce the number of applications to invest in corrective action directive issued by the Board or bank premises that are filed with the Board and will a Federal Reserve Bank. thereby reduce regulatory burden. Effective June 30, 1994, 12 C.F.R. Part 208 is amended as follows: ORDERS ISSUED UNDER BANK HOLDING Part 208—Membership of State Banking COMPANY ACT Institutions in the Federal Reserve System (Regulation H) Orders Issued Under Section 3 of the Bank Holding Company Act 1. The authority citation for part 208 continues to read as follows: BankAmerica Corporation Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a, San Francisco, California 371d, 461, 481-486, 601, 611, 1814, 18230), 1828(o), 1831o, 1831p-l, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 1(b), 1(g), l(i), 78b, 78o-4(c)(5), 78q, 78q-l, Order Approving Acquisition of a Bank and 78w; 31 U.S.C. 5318. 2. Section 208.22 is added to subpart A to read as BankAmerica Corporation, San Francisco, California follows: ("BankAmerica"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Section 208.22—Investment in bank premises. Act"), has applied under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire Liberty Bank, Honolulu, (a) Under Section 24A of the Federal Reserve Act, Hawaii ("Liberty"), through a merger of Liberty into state member bank investments in bank premises or in Bank of America, FSB, Portland, Oregon ("Bank of the stock, bonds, debentures, or other such obliga- America FSB"), a wholly owned subsidiary of Banktions of any corporation holding the premises of the America, with Bank of America FSB surviving the bank, and loans on the security of the stock of such merger. corporation, do not require the approval of the Board Notice of the application, affording interested perif the aggregate of all such investments and loans, sons an opportunity to submit comments, has been together with the indebtedness incurred by any such published (58 Federal Register 67,411 (1993)). The corporation that is an affiliate of the bank (as defined time for filing comments has expired, and the Board in section 2 of the Banking Act of 1933, as amended, has considered all comments received in light of the 12 U.S.C. 221a): factors set forth in section 3(c) of the BHC Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

624 Federal Reserve Bulletin • July 1994 BankAmerica, with total consolidated assets of ap- operating in Hawaii.4 Hawaiian law provides that a proximately $197.2 billion,1 is the second largest com- federal thrift whose operations are conducted princimercial banking organization in the United States and pally in Hawaii may, with the approval of the Hawaii controls banking or savings association subsidiaries in Commissioner of financial institutions (the "Commis- Alaska, Arizona, California, Idaho, Nevada, New sioner"), merge with a Hawaii financial institution if Mexico, New York, Oregon, Texas, and Washington. the merger is permitted by federal law.5 Liberty is a BankAmerica is the third largest commercial banking Hawaii financial institution,6 and Bank of America organization in Hawaii, controlling deposits of $1.6 FSB's operations are principally conducted in Hawaii billion, representing approximately 11.4 percent of for purposes of this statute.7 Furthermore, the merger total deposits in commercial banks in the state.2 Lib- is permitted under federal law because the Home erty is the seventh largest commercial banking organi- Owners' Loan Act permits Bank of America FSB, as a zation in Hawaii, controlling deposits of $265.8 mil- federal savings bank, to merge with Liberty, a deposlion, representing 1.9 percent of total deposits in itory institution insured by the Federal Deposit Insurcommercial banks in the state. Upon consummation of ance Corporation (the "FDIC"), upon obtaining prior this proposal, BankAmerica would remain the third approval of the OTS.8 largest commercial banking organization in Hawaii, The Commissioner has indicated that this proposal controlling deposits of $1.8 billion, representing ap- is authorized by section 412:3-609(c) of Hawaii's proximately 13.3 percent of total deposits in commer- banking law.9 In light of all the facts of record, the cial banks in the state. Board has determined that its approval of this proposal is not prohibited by the Douglas Amendment.10 Ap- Douglas Amendment Analysis Section 3(d) of the BHC Act ("Douglas Amendment") 4. Bank of America FSB is a federal savings association organized prohibits the Board from approving an application by a under the provisions of the Home Owners' Loan Act (12 U.S.C. § 1461 et seq.), and it operates 31 full-service branch offices in Hawaii. bank holding company to acquire control of a bank BankAmerica acquired Bank of America FSB (successor to The located outside of the state in which the operations of Benjamin Franklin Federal Savings and Loan Association) in 1990 in such bank holding company's banking subsidiaries an assisted emergency transaction pursuant to section 13(k) of the Federal Deposit Insurance Act (the "FDI Act"). 12 U.S.C. § 1823(k). were principally conducted on July 1, 1966, or the date In approving that transaction, the Office of Thrift Supervision on which such company became a bank holding com- ("OTS") granted Bank of America FSB the authority to branch into three states, one of which was Hawaii, for as long as the bank pany, whichever is later, "unless the acquisition maintained total deposits of at least $1 billion. See OTS Order No. of ... a State bank by an out-of-State bank holding 90-1659 (Sept. 7, 1990) (the "OTS Order"). Bank of America FSB company is specifically authorized by the statute laws exercised that authority in 1992 by acquiring the branch offices of HonFed Bank, a federal savings bank in Honolulu, Hawaii ("Honof the State in which such bank is located, by language Fed"). The Board concluded that the acquisition of HonFed by Bank to that effect and not merely by implication."3 For of America FSB was permitted under the branching authorization for purposes of the Douglas Amendment, on the relevant federal savings associations and was consistent with the regulatory framework of savings association acquisitions under the BHC Act. date, the banking operations of BankAmerica were See BankAmerica Corporation, 78 Federal Reserve Bulletin 707 principally conducted in California. Thus, in reviewing (1992). As noted above, Bank of America FSB currently meets the total deposit requirements in the OTS Order. whether BankAmerica may acquire a bank in a state 5. Haw. Rev. Stat. § 412:3-609(c). other than California, the Board must consider 6. Liberty is a Hawaii financial institution since it is chartered under whether the laws of the state in which the bank is Hawaiian law and authorized to accept deposits, make loans, or engage in the business of a trust company. Haw. Rev. Stat. § 412:1-109. located specifically authorize the acquisition. 7. The term "operations are principally conducted" is defined under BankAmerica would not operate Liberty as a bank Hawaiian law to mean the state where total deposits are largest. Haw. upon consummation of this transaction. Instead, Rev. Stat. § 412:1-109. The largest amount of deposits of Bank of America FSB is located in Hawaii, and the Commissioner has BankAmerica would acquire Liberty by merging Lib- determined that this "principally conducted" provision of Haw. Rev. erty into Bank of America FSB, its existing thrift Stat. § 412:3-609(c) has been satisfied. 8. 12 U.S.C. § 1467a(s). In addition, Bank of America FSB may establish additional branches in Hawaii with the prior approval of the OTS. See the OTS Order. See also 12 C.F.R. 556.5. 9. Both sections 412:3-609(c) and (d) of Hawaii's banking law permit a merger of a Hawaii financial institution with a federal savings bank with the resulting institution to be operated as a thrift. Further- 1. Asset data are as of March 31, 1994. more, section 412:3—609(d) permits financial institutions chartered or 2. All deposit data are as of June 30, 1993. licensed under the laws of another state, or whose operations are 3. 12 U.S.C. § 1842(d). Under the Douglas Amendment, the oper- conducted principally in any state other than Hawaii, to merge with a ations of a bank holding company are considered principally con- Hawaii financial institution if the resulting institution conducts its ducted in the state in which the total deposits of its banking subsid- operations principally in Hawaii. iaries were largest on the date in question. The operations of 10. If the institution resulting from the merger were to be a bank BankAmerica were principally conducted in California on April 1, rather than a thrift, it does not appear that this proposal would be 1969, the date on which it became a bank holding company. permitted under the Douglas Amendment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 625 proval of this proposal is specifically conditioned upon ("market deposits"). Liberty is the seventh largest BankAmerica and Bank of America FSB receiving all depository institution in the Honolulu banking market, required state regulatory approvals and the approval with deposits of $265.8 million, representing 2.1 perof the OTS under section 18(c) of the FDI Act cent of market deposits. Upon consummation of this (12 U.S.C. § 1828(c)). proposal, BankAmerica would remain the third largest depository institution in the Honolulu banking market, Competitive Considerations controlling deposits of $1.7 billion, representing 13.7 percent of market deposits. BankAmerica's mar- The BHC Act provides that the Board may not ap- ket share would increase from 11.6 percent to 13.7 prove a proposal submitted under section 3 of the percent, and the HHI for the market would increase by BHC Act if the proposal would result in a monopoly or 49 points to 2293.14 There are a number of depository the effect of the proposal would be substantially to institution competitors in the Honolulu banking marlessen competition in any relevant market. The Board ket, and ten depository institutions will remain in this has received comments opposing the proposal from market following consummation of this proposal. organizations in Hawaii (the "Hawaii Protestants") The Board also has considered the views of the maintaining that approval of the transaction would Justice Department on the likely competitive effects of have a substantially adverse effect on the competitive this proposal. The Justice Department has advised the environment for mortgage lending services in Ha- Board that BankAmerica's acquisition of Liberty is waii,11 and that post-merger increases in the Herfind- not likely to have a significantly adverse effect on ahl-Hirschman Index ("HHI") and the lack of miti- competition. gating factors indicate that the proposed merger would Based on all the facts of record, including the be anticompetitive. comments submitted by the Hawaii Protestants and BankAmerica and Liberty compete directly in the BankAmerica's response to those comments, the Honolulu banking market.12 BankAmerica is the third Board's previous consideration of the Honolulu banklargest depository institution13 in this market, with ing market, and the relatively small increase in market deposits of $1.5 billion, representing 11.6 percent of share and market concentration in this market as total deposits in depository institutions in the market measured by the HHI, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition in the Ho- 11. The Board has long held that the product market for evaluating nolulu banking market. bank mergers and acquisitions is the cluster of products and services offered by banking organizations, and the Supreme Court has emphasized that it is this cluster of products and services that, as a matter of Convenience and Needs Considerations trade reality, makes banking a distinct line of commerce. See First Hawaiian, Inc., 79 Federal Reserve Bulletin 966 (1993) ("First Hawaiian Order") and authorities cited therein; see also United States v. In acting on an application to acquire a depository Philadelphia National Bank, 374 U.S. 321, 357 (1963). The Board also institution as proposed in these applications, the has found that the ability of thrifts and banks to offer their products Board must consider the convenience and needs of the and services in combination distinguishes them from other institutions. First Hawaiian Order, p. 967. After considering all the facts of communities to be served, and take into account the record in light of relevant Board and judicial precedents, the Board records of the relevant depository institutions under believes that the appropriate product market in this case is the cluster of banking products and services. the Community Reinvestment Act (12 U.S.C. § 2901 Even assuming that mortgage lending constitutes a separate product et seq.) ("CRA"). The CRA requires the federal market as maintained by the Hawaii Protestants, the record does not financial supervisory agencies to encourage financial demonstrate that this proposal would result in significantly adverse competitive effects in that product market. The Board notes that a institutions to help meet the credit needs of the local number of other institutions, including finance companies, offer mort- communities in which they operate, consistent with gage products in Hawaiian banking markets. See First Hawaiian Order, p. 967. 12. The Honolulu banking market is approximated by Honolulu County, Hawaii, which is coextensive with the Island of Oahu. 13. In this context, depository institutions include commercial 14. Under the revised Department of Justice Merger Guidelines, banks, savings banks and savings associations. Market share data are 49 Federal Register 26,823 (June 29, 1984), a market in which the based on calculations in which the deposits of thrift institutions are post-merger HHI is above 1800 is considered highly concentrated. In included at 50 percent. The Board previously has indicated that thrift such markets, the Justice Department is likely to challenge a merger institutions have become, or have the potential to become, major that increases the HHI by more than 50 points. The Justice Departcompetitors of commercial banks. See WM Bancorp, 76 Federal ment has informed the Board that a bank merger or acquisition Reserve Bulletin 788 (1990); National City Corporation, 70 Federal generally will not be challenged (in the absence of other factors Reserve Bulletin 743 (1984). Thus, the Board has regularly included indicating anticompetitive effects) unless the post-merger HHI is at thrift deposits in the calculation of market share on a 50 percent least 1800 and the merger increases the HHI by more than 200 points. weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve The Justice Department has stated that the higher than normal HHI Bulletin 52 (1991). Because Bank of America FSB is controlled by a thresholds for screening bank mergers for anticompetitive effects commercial banking organization, its deposits are included at 100 implicitly recognize the competitive effect of limited-purpose lenders percent in the calculation of market share. and other non-depository financial institutions. 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626 Federal Reserve Bulletin • July 1994 the safe and sound operation of such institutions. To Record of CRA Performance accomplish this end, the CRA requires the appropriate federal supervisory authority to "assess the institu- A. CRA Performance Examinations tion's record of meeting the credit needs of its entire community, including low- and moderate-income The Agency CRA Statement provides that a CRA neighborhoods, consistent with the safe and sound examination is an important and often controlling operation of such institution," and to take that record factor in the consideration of an institution's CRA into account in its evaluation of this application.15 record, and that these reports will be given great The Board has received comments from the Hawaii weight in the applications process.18 In this case, the Protestants and an individual in California ("California Board notes that all of BankAmerica's subsidiary Protestant") (the California Protestant and the Hawaii banks evaluated for CRA performance received "out- Protestants to be referred to collectively as "Protes- standing" or "satisfactory" ratings from their primary tants") critical of the efforts of BankAmerica, its regulators during their most recent examinations. subsidiary banks, and Liberty to meet the credit and Bank of America FSB received a "satisfactory" rating banking needs of their communities. The Hawaii Prot- from its primary federal regulator, the OTS, at its most estants allege that Bank of America FSB has not recent examination for CRA performance as of Sepgenerally met the convenience and needs of minority tember 7, 1993, and Bank of America — California and low- and moderate-income individuals, and in received an "outstanding" rating from its primary particular, illegally discriminates in its efforts to meet federal regulator, the Office of the Comptroller of the the credit needs of native Hawaiians and Filipinos Currency (the "OCC"), at its most recent examination residing in its banking communities.16 The California for CRA performance as of January 28, 1994. Liberty Protestant alleges generally that Bank of America received a "satisfactory" rating from its primary fed- National Trust and Savings Association ("Bank of eral regulator, the FDIC, at its most recent examination for CRA performance as of May 27, 1992. America - California"), BankAmerica's subsidiary bank operating in California, has not met the banking and credit needs of minorities, and in particular, B. CRA Record of Performance of Bank of Hispanics, and low- and moderate-income individuals America FSB in five counties in California. In its consideration of the convenience and needs HMDA Data. The Hawaii Protestants allege that 1992 factor, the Board has carefully reviewed the entire HMDA data filed by Bank of America FSB indicate record of CRA performance of BankAmerica, its sub- that the bank's lending policies resulted in discriminasidiary banks, and Liberty; all comments received on tory treatment of individuals of Hawaiian and Filipino this application, and BankAmerica's response to those ancestry.19 The Board has carefully reviewed these comments; and all the other relevant facts of record, in comments and the 1992 data in light of the preliminary light of the CRA, the Board's regulations, and the 1993 HMDA data for the bank which represents the first Statement of the Federal Financial Supervisory Agen- full year of data accumulated under BankAmerica's cies Regarding the Community Reinvestment Act ownership of the former HonFed. These data indicate ("Agency CRA Statement").17 that the volume of loan applications received from The Board also has evaluated the CRA performance individuals within the Asian/Pacific Islander group20 record of Bank of America FSB, taking into consider- was proportional to that group's representation in the ation the fact that BankAmerica did not commence its community, and that denial rates for that group were activities in Hawaii until August 1992, and that the lower than denial rates for white applicants.21 bank's overall volume of lending decreased in 1993 due, in part, to BankAmerica's reorganization of Hon- Fed's operations and loan programs. 18. Id. at 13,745. 19. The Hawaii Protestants also allege that Bank of America FSB has "redlined" the islands of Molokai and Lanai, which have large populations of Filipinos and native Hawaiians, by excluding them from the bank's delineated lending area. The OTS reviewed these exclusions in its most recent examination and determined that they were reasonable, noting that the primary owner of land on Lanai is 15. 12 U.S.C. § 2903. converting the land to an affluent resort area, and that Molokai has a 16. The Hawaii Protestants maintain that data required to be filed by limited population to sustain a market presence. Bank of America FSB under the Home Mortgage Disclosure Act 20. Under the HMDA, separate reporting of loans made to native (12 U.S.C. § 2801 et seq.) ("HMDA") indicate that the bank's lending Hawaiians or Filipinos is not required, because these ethnic groups are policies result in discriminatory treatment of individuals of Hawaiian included in the category of Asian/Pacific Islander for reporting purposes. and Filipino ancestry, and that the outreach efforts of both Bank of 21. In 1993, the bank received 62 percent of HMDA-related loan America FSB and Liberty are targeted primarily to nonminorities. applications from Asian/Pacific Islanders (60 percent of the popula- 17. 54 Federal Register 13,742 (1989). tion), with 65 percent of the banks' HMDA-related loans originated to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 627 The Board also notes, however, that the 1993 pre- mendation is appropriate.25 Furthermore, the bank has liminary data and the OTS's most recent CRA perfor- established employee incentive programs to encourage mance examination indicate that Bank of America the origination of loans in low- and moderate-income FSB had a low level of lending to African-Americans areas and to low- and moderate-income individuals. and Hispanic applicants, and to individuals in low- and Loan Programs. Bank of America FSB intends to moderate-income areas.22 The Board is concerned expand its presence in all markets in Hawaii, and has when an institution's record indicates disparities in introduced two new loan products to assist in meeting lending to minority or low- and moderate-income the credit needs of the bank's community, including lowapplicants, and believes that all banks are obligated to and moderate-income individuals. In May 1993, the bank ensure that their lending practices are based on criteria introduced its "Neighborhood Advantage" program, that assure not only safe and sound lending, but also which offers mortgage loans with low down payments equal access to credit by creditworthy applicants and flexible underwriting criteria.26 The bank indicates regardless of race. The Board recognizes, however, that as of December 31, 1993, it had approved 39 loans that HMDA data alone provide an incomplete measure totalling approximately $5.4 million under this program. of an institution's lending in its community. The Board The bank also introduced its "BASIC" consumer also recognizes that HMDA data have limitations that loan program in the last half of 1993. Loans under this make the data an inadequate basis, absent other infor- program offer favorable financing terms and flexible mation, for conclusively determining that an institu- underwriting criteria.27 The bank indicates that as of tion has engaged in illegal discrimination in making December 31, 1993, it had approved 69 loans totalling lending decisions. $542,255 under this program. The Board notes that the most recent examination of The OTS's recent CRA performance examination of Bank of America FSB found no evidence of illegal Bank of America FSB found that the bank had estabdiscrimination or policies that discourage applicants lished a productive relationship with the Office of from pursuing credit applications. Examiners did find Hawaiian Affairs in an effort to become involved in its numerous technical violations to the recordkeeping programs for native Hawaiians. During 1992 and 1993, and notice requirements of fair lending regulations, the bank originated or booked as agent 44 mortmany of which, according to the OTS, resulted from gages totalling approximately $2.9 million under the staffing and control issues that were in the process of Department of Hawaiian Home Lands "Panaewa" being addressed through a new compliance program at project for native Hawaiians. The bank also has made the bank.23 This program includes staff training and 14 low-interest construction loans totalling approxiperiodic reviews of fair lending issues. In addition, mately $1.3 million to low- and moderate-income fam- BankAmerica intends to perform an on-site review of ilies assisting in the construction of their own homes. In the bank's CRA program within 60 days of the merger, addition, the bank has a 10 percent investment in a $55 and to monitor responses by the bank to any concerns million loan fund established by the Hawaii Community raised in OTS's recent examination.24 Reinvestment Corporation, a non-profit consortium Bank of America FSB also has initiated steps to providing financing for affordable housing projects.28 improve its lending record to minority and low- and moderate-income borrowers. For example, the bank has implemented a program whereby all residential 25. All consumer loan applications recommended for denial for mortgage applications that are recommended for de- reasons other than credit history or debt-to-income ratios also receive a second review. nial receive a second review to insure that the recom- 26. Loans can be made for a maximum loan-to-value ratio of 95 percent, and underwriting criteria allow for higher than normal debt-to-income ratios. In acknowledgement of the high cost of housing in Hawaii, the bank offers this program to individuals with up to 150 percent of median income, and individuals acquiring properties this group. The denial rate for this group was 17 percent, and the located in low- and moderate-income census tracts. BankAmerica denial rate for white applicants was 19 percent. represents that the utilization of 150 percent of median income is 22. As previously noted, the bank's overall loan volume decreased consistent with the affordability programs of the Federal National significantly in 1993 while BankAmerica was revising HonFed's oper- Mortgage Association. ations and loan programs. OTS examiners found that this decrease cut 27. The savings bank has been offering a discounted interest rate across all census tracts and involved all types of loans, and concluded under this program, and personal loans for as low as $1,000 are that this was an acceptable short-term strategy to strengthen the bank's available. Unsecured loans under the program are available to individlong-term ability to assist in addressing unmet credit needs. uals with incomes equal to 80 percent or less of median income, and 23. Examiners did not find that these violations had a dispropor- secured loans are available to individuals residing in low- and moderatetionate effect on members of protected groups. income census tracts or with incomes equal to 150 percent or less of 24. In this regard, the OTS examiners have questioned whether a median income. credit program offered by the bank's California consumer lending 28. The bank also has committed to take part in the development of division could have a disparate impact on certain groups. Bank man- the Hawaii Housing Development Corporation, a non-profit organizaagement represented that issues relating to this program, which existed tion that will focus on producing rental housing for low-income prior to the bank's acquisition of the program, would be addressed. individuals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

628 Federal Reserve Bulletin • July 1994 Bank of America FSB recently announced a com- established an advisory board to inform its board of prehensive program to enhance service to the native directors about local credit needs. This advisory board Hawaiian and Filipino communities. The program is composed of residents who are involved in local includes a four-year commitment to provide business, government and/or community activities. $150 million in residential mortgage loans for native Bank of America FSB has sponsored credit-educa- Hawaiians seeking housing on Department of Hawai- tion fairs with the International Credit Association, ian Home Lands. The bank also has appointed two and "Better Home Shows" that include information community lending specialists to develop and imple- on new affordable housing projects sponsored by the ment outreach programs for the Hawaiian and Filipino State of Hawaii. The bank also co-sponsored two communities, and has committed $100,000 over three events in 1993 relating to community-based and small years for use by nonprofit organizations that provide business lending. These events were targeted to the affordable housing for Filipinos. In a separate pro- native Hawaiian community.31 gram, the bank, through its community development division, has committed $30 million over the next two C. Record of Performance of Bank of years to Kauai County's efforts to build affordable America - California housing in Kauai in the aftermath of Hurricane Iniki.29 In September 1993, Bank of America FSB launched The Board has carefully reviewed the 1992 and preits new business banking initiative, which focuses on liminary 1993 data filed by Bank of America - Califorlending to small businesses. In connection with this nia under HMDA in light of the California Protestant's initiative, the bank established its Advantage Business allegations that the bank does not lend to minorities, Credit program which provides loans to small busi- particularly Hispanics, and low- and moderate-income nesses in the amount of $2,500 to $100,000. In addi- individuals in five counties in California.32 These data tion, the bank has committed $650,000 to a new show that Bank of America - California does make Hawaii Small Business Loan Program, which will loans to minorities and to residents of low- and modprovide loans guaranteed by the Small Business Ad- erate-income areas of San Joaquin, Stanislaus and ministration (the "SBA"). Merced Counties.33 In addition, the bank's origina- In 1992, BankAmerica established corporate-wide tions to African-Americans and Hispanics and low- CRA-related goals, committing to provide $12 billion and moderate-income census tracts, as a percentage of over a ten-year period for housing loans in low- and total originations, met or exceeded the performance of moderate-income census tracts and for lower-income its peers in 1992. Furthermore, Bank of America and minority borrowers, funding for the development and long-term financing of low-income housing, consumer loans for lower-income households, and 31. The Hawaii Protestants have alleged that the outreach efforts of government-guaranteed and conventional small busi- Liberty are targeted primarily to nonminorities. The FDIC's most ness loans.30 Bank of America FSB booked loans recent CRA performance evaluation of Liberty found that diverse ethnic groups were targeted by advertisements in local media in totalling approximately $11 million as of September various languages, including Chinese, Japanese, Korean, Tagalog and 30, 1993, representing 92 percent of its $12 million 1993 Vietnamese. The FDIC also found that the bank demonstrated a strong record of helping to meet the credit needs of its entire goal under this corporate-wide initiative. The bank community, and that mapping of loan activity indicated a reasonable plans to double that goal in 1994. penetration of all segments of the bank's community, including low- Other Aspects of CRA Performance. The OTS and moderate-income neighborhoods. 32. The California Protestant specifically alleges that Bank of found that Bank of America FSB's efforts to ascertain America - California community credit needs generally have been success- (1) has "redlined" Hispanic individuals and businesses in Staniful considering the limited time that the bank has been slaus, Merced, Madera, Tuolumne and San Joaquin counties (the "Target Counties"); in the Hawaiian market. The bank's CRA officer (2) has closed branches in downtown areas of the Target Counties communicates with a variety of community-based and that were accessible to minorities, particularly Hispanics; (3) has not provided sufficient marketing to the Hispanic communon-profit organizations, business organizations, and nity; and state governmental entities. Bank of America FSB has (4) has not provided sufficient assistance or other support to individa formal call program in place, and its employees serve uals and organizations working with the Hispanic community. 33. For example, the bank made 35 mortgage loans to Africanon the boards of organizations involved in the devel- Americans and 227 mortgage loans to Hispanics in these three opment of affordable housing in Hawaii. The bank has counties in 1992, and made 45 and 236 mortgage loans to African- Americans and Hispanics, respectively in these counties in 1993. Furthermore, in 1992 and 1993, the bank made 275 and 288 HMDArelated loans to low- and moderate-income census tracts in San 29. Loans under this program will be offered at below market rates Joaquin, Stanislaus and Merced Counties. to projects serving low- and very-low-income families. Madera and Tuolumne counties are located outside metropolitan 30. BankAmerica has allocated $8 billion of this commitment to statistical areas and, therefore, loans made to individuals in these California, and $4 billion to all other states. counties are not separately reported under HMDA. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 629 Community Development Bank generated a total of branches. The bank also has targeted advertising cam- 376 units of low- and very-low-income housing for paigns to the African-American community. residents of San Joaquin, Merced and Stanislaus coun- The bank supports the Stanislaus County Hispanic ties during the three year period ending in 1993. Chamber of Commerce's Banking Community Out- As noted above, Bank of America - California re- reach project, and Desarollo Latino Americano (forceived an "outstanding" rating from the OCC at its merly the Hispanic Task Force of Stanislaus County), 1994 examination for CRA performance, which in- a community-based non-profit organization created to cluded a fair lending examination of residential loan provide low-income housing in Stanislaus County. The files. The OCC found no evidence of illegal discrimina- bank also has contributed to Spanish-language radio tion or other practices designed to discourage credit.34 broadcasts that educate individuals in the Target Bank of America - California also offers a variety of Counties about banking services.36 credit products and services designed to meet the credit needs of low- and moderate-income and minor- Conclusion Regarding Convenience and Needs Factors ity neighborhoods within its delineated communities, including the "Neighborhood Advantage" and In considering the overall CRA performance records "BASIC" loan programs. The bank also offers a of BankAmerica, its subsidiary banks, and Liberty, low-cost checking account to lower-income custom- the Board has carefully considered the entire record, ers. The bank participates in a number of government including the public comments in this case.37 Based on sponsored credit programs by offering Farmers Home a review of the entire record of performance, including Administration loans, SB A loans, and federally in- Protestant's comments, BankAmerica's response to sured student loans.35 Furthermore, in November those comments, and relevant reports of examination, 1993, the bank introduced a loan program offering the Board concludes that convenience and needs conflexible underwriting criteria and a simplified applica- siderations, including the CRA performance records of tion process for minority and women business owners. BankAmerica, its subsidiary banks, and Liberty are In its most recent CRA examination of Bank of consistent with approval of this application.38 As dis- America - California, the OCC found that the bank had a program of ongoing, productive communications with a wide range of community-based and social 36. The California Protestant alleges that Bank of America service organizations and small business associations. California recently has closed branches in downtown areas of the In addition, the OCC indicated that the bank's mar- Target Counties that are accessible to minorities, particularly Hispanics. In the 1994 CRA examination of Bank of America - California, the keting programs are designed to reach wide segments OCC found that the bank's branch closure process included actions of the delineated community and include multilingual taken to minimize the impact on the local community. Another California-based organization has raised concerns that BankAmerica advertisements appearing in general circulation newsis not in compliance with commitments made to the Board regarding papers and magazines, as well as community and the transfer by Bank of America - California of a branch to a ethnic newspapers. In 1991, the bank introduced a community-based, non-profit organization in lieu of closure. Bank of America - California responds that no decision on the disposition of Spanish language promotional kit including posters, the branch in question has been made and that it fully intends to print advertisements, brochures and video for use in comply with commitments regarding the disposition of branches, 37. The Hawaii Protestants have alleged that the terms of this proposal were not negotiated on an arm's length basis and the legal rights and interests of account holders and borrowers were not given 34. The California Protestant alleged that the bank's appraisal proper recognition and protection. BankAmerica disputes this asserpractices discriminate against minorities and low income individuals. tion and maintains that the proposed merger was negotiated at all Bank of America - California has in place a second-review process times on an arm's length basis, and that it has fully recognized and when appraised values for homes in low- and moderate-income census addressed safety and soundness issues relative to the customers of tracts are less than the amount of financing requested, and in 1993, the Bank of America FSB and Liberty. bank hired an "appraisal ombudsperson" for Northern California to The Hawaii Protestants also have alleged that shareholders of Libindependently investigate complaints about appraisals. erty were not given full disclosure of all the ramifications of the The Board has also considered a housing discrimination complaint proposal. The Board notes that BankAmerica filed a Registration filed with the Department of Housing and Urban Development Statement with the Securities and Exchange Commission (the "SEC") ("HUD") by an individual alleging discrimination on the basis of his relating to its shares of common stock to be distributed in connection Hispanic origin. The complainant contends that he received a low with the proposed merger, and Liberty issued a Proxy Statement/ appraisal on his house when he applied for a refinancing through Bank Prospectus to its shareholders describing the terms of the merger. Both of America - California. The Board has carefully reviewed this documents are subject to SEC regulations requiring complete and complaint in light of all facts of record, including relevant examination accurate disclosure of all material terms of the merger transaction, and information. The Board notes that HUD's investigation of this com- both Bank of America FSB and Liberty would be subject to action by plaint is in its early stages, and will provide the individual with an the SEC if they failed to comply with these regulations. opportunity to fully assert his claims and obtain a remedy if his 38. Several commenters from Texas have expressed concern over allegations are proved and a remedy is appropriate. Based on all the the reduction of staff in the SBA department at BankAmerica's Texas facts of record, the Board believes that this matter does not warrant subsidiary, and the impact this will have on the availability of loans to denial of this application. minority businesses in Houston. BankAmerica responds that, while 35. During 1993, the bank made 334 small business loans totalling the bank has made some personnel and organizational changes to $27.5 million in the Target Counties. streamline its SBA lending activities, it is committed to providing the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

630 Federal Reserve Bulletin • July 1994 cussed in this order, BankAmerica plans to increase its specifically conditioned upon compliance with all of CRA-related lending in Hawaii. The Board believes the commitments made by BankAmerica in connecthat these plans, when viewed in the context of the tion with this application and with the conditions outstanding or satisfactory performance ratings for referred to in this order. This approval is further BankAmerica's subsidiary banks, support approval of subject to BankAmerica obtaining the approval of the this application. OTS under the FDI Act, and the approval of the The Board expects Bank of America FSB to imple- Commissioner under applicable state law. For purment fully its CRA initiatives and to continue to im- poses of this action, the commitments and conditions prove its CRA performance, including its housing- relied on in reaching this decision shall be deemed to related lending, in all of its delineated communities, and be conditions imposed in writing by the Board and, as to address the issues raised by the OTS in its most such, may be enforced in proceedings under applicable recent CRA performance examination. The Board will law. continue to monitor implementation by Bank of Amer- The acquisition of Liberty shall not be consumica FSB of an effective CRA program in Hawaii, and mated before the thirtieth calendar day following the will take this review into account in future applications effective date of this order, or later than three months by BankAmerica to establish a depository facility. In after the effective date of this order, unless such period this regard, the Board requires as a condition of its is extended for good cause by the Federal Reserve action in this case, that BankAmerica submit to the Bank of San Francisco acting pursuant to delegated Federal Reserve Bank of San Francisco copies of any authority. reports submitted to the OTS in connection with Bank By order of the Board of Governors, effective of America FSB's CRA performance, including the May 31, 1994. results of its lending programs and initiatives and its progress in increasing the levels of its lending to low- Voting for this action: Chairman Greenspan and Governors and moderate-income and minority individuals and Kelley, LaWare, and Phillips. Absent and not voting: Govcommunities. ernor Lindsey. JENNIFER J. JOHNSON Other Considerations Associate Secretary of the Board The financial and managerial resources and future BB&T Financial Corporation prospects of BankAmerica, Bank of America FSB, Wilson, North Carolina and Liberty, and other supervisory factors the Board must consider under section 3 of the BHC Act, are Order Approving the Acquisition of a Bank Holding consistent with approval of this proposal. Company Based on the foregoing and other facts of record, the Board has determined that the application should be, BB&T Financial Corporation, Wilson, North Carolina and hereby is, approved.39 The Board's approval is ("BB&T"), and its wholly owned subsidiary, BB&T Financial Corporation of South Carolina, Greenville, South Carolina ("BB&T-SC"), bank holding compa- Houston community with SBA loans, as well as conventional lines of nies within the meaning of the Bank Holding Company credit. In support of this assertion, BankAmerica notes that since entering the Texas market in 1991, its Texas subsidiary has introduced Act ("BHC Act"), have applied for the Board's apseveral new business products to help meet the credit needs of small proval under section 3 of the BHC Act (12 U.S.C. businesses, including the Advantage Business Credit and the § 1842) to merge with L.S.B. Bancshares, Inc. of Minority-Owned Business Enterprise/Women-Owned Business Enterprise Credit, to enhance its ability to provide financing for small South Carolina, Lexington, South Carolina ("LSB"), businesses that traditionally have not had access to credit. and thereby indirectly acquire LSB's subsidiary 39. Protestants have criticized the employment practices of Bank of banks, The Lexington State Bank, Lexington, South America - California, Bank of America FSB and Liberty. Specifically, the California Protestant believes that Bank of America - California Carolina, and The Community Bank of South Caroshould hire more Spanish speaking personnel and should be using more lina, Varnville, South Carolina.1 Hispanic businesses to perform contract services. The Hawaii Protestants have commented on the absence of minorities in decision making Notice of the application, affording interested perpositions at both Bank of America FSB and Liberty. In this regard, the sons an opportunity to submit comments, has been Board notes that because these three institutions each employ more published (59 Federal Register 13,323 (1994)). The than 50 people and act as agents to sell or redeem U.S. savings bonds and notes, they are required by Treasury Department regulations to: time for filing comments has expired, and the Board (1) file annual reports with the Equal Employment Opportunity Commission; and (2) have in place a written affirmative action compliance program which states their efforts and plans to achieve equal opportunity in 1. BB&T-SC will merge with and into LSB, with BB&T-SC the employment, hiring, promotion and separation of personnel. surviving the merger. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 631 has considered the application and all comments re- largest depository institution in that market, controlceived in light of the factors set forth in section 3(c) of ling $20.8 million in deposits, representing less than the BHC Act. 1 percent of the total deposits in depository institu- BB&T, with total deposits of $6.3 billion, controls tions in the market ("market deposits").6 LSB is the two banking subsidiaries located in North Carolina and third largest depository institution in the market, con- South Carolina. BB&T is the ninth largest bank holding trolling $456.8 million in deposits, representing 10.4 company in South Carolina, controlling total deposits percent of market deposits. Upon consummation of of $437.3 million, representing approximately 2.1 per- this proposal, BB&T would control $477.6 million in cent of total deposits in commercial banking organizadeposits, representing 10.9 percent of market deposits. tions in the state.2 LSB is the sixth largest commercial The Herfindahl-Hirschman Index ("HHI") for the banking organization in South Carolina, controlling market would increase by 10 points to 1813.7 $573.7 million in deposits, representing 2.8 percent of In light of all the facts of record, including the total deposits in commercial banks in the state. Upon number of competitors that would remain in the Coconsummation of BB&T's acquisition of LSB, BB&T lumbia market, and the small increase in market share would become the fifth largest commercial banking and market concentration as measured by the HHI, organization in South Carolina, controlling $1 billion in the Board concludes that consummation of the prodeposits, representing 4.9 percent of the total deposits posal would not have a significantly adverse effect on in commercial banks in South Carolina. competition in the Columbia banking market or any relevant banking market. Douglas Amendment The Board also concludes that the financial and managerial resources and future prospects of BB&T, Section 3(d) of the BHC Act, the Douglas Amend- LSB, and their respective subsidiaries and the other ment, prohibits the Board from approving an applica- supervisory factors the Board must consider under tion by a bank holding company to acquire control of section 3 of the BHC Act are consistent with approval any bank located outside of the bank holding com- of this proposal. In addition, the Board has determined pany's home state, unless such acquisition is "specif- that convenience and needs considerations are consisically authorized by the statute laws of the State in tent with approval of this application for the reasons which such bank is located, by language to that effect more fully discussed in the Board's approval of and not merely by implication."3 For purposes of the BB&T's acquisition of three savings-associations un- Douglas Amendment, the home state of BB&T is der section 5(d)(3) of the FDI Act and incorporated by North Carolina. reference in this order.8 The Board previously has determined that the inter- Based on the foregoing and all other facts of record, state statutes of North and South Carolina permit a the Board has determined that this application should bank holding company located in North Carolina to be, and hereby is, approved. This approval is subject acquire a banking organization in South Carolina.4 In to BB&T obtaining all necessary regulatory approvals light of the foregoing, the Board concludes that ap- for the proposed acquisition. The Board's approval of proval of the proposal is not prohibited by the Douglas this application also is conditioned upon BB&T's Amendment. Approval of this proposal is conditioned compliance with the commitments made in connection upon BB&T receiving all required state regulatory approvals. 6. In this context, depository institutions include commercial banks, savings banks, and savings associations. Market deposit data are as of Competitive, Financial, Managerial and Supervisory June 30, 1993, and are based on calculations in which the deposits of Considerations thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, major competitors of commercial banks. See WM Bancorp, BB&T and LSB compete directly in the Columbia, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 South Carolina banking market.5 BB&T is the 17th Federal Reserve Bulletin 743 (1984). 7. Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is over 1800 is considered to be concentrated. The Justice Department has informed the Board that a bank merger or 2. State deposit data are as of December 31, 1993. acquisition generally will not be challenged (in the absence of other 3. 12 U.S.C. § 1842(d). factors indicating anti-competitive effects) unless the post-merger 4. See Wachovia Corporation, 77 Federal Reserve Bulletin 1011 HHI is at least 1800 and the merger increases the HHI by 200 points. (1991); First Union Corporation, 72 Federal Reserve Bulletin 263 The Justice Department has stated that the higher than normal HHI (1986); and NCNB Corporation, 72 Federal Reserve Bulletin 57 thresholds for screening bank mergers for anti-competitive effects (1986). implicitly recognize the competitive effect of limited-purpose lenders 5. The Columbia, South Carolina, banking market is approximated and other non-depository financial entities. by the Columbia Rand McNally Area and by the remainder of 8. BB&T Financial Corporation, 80 Federal Reserve Bulletin 667 Lexington and Richland Counties, South Carolina. (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

632 Federal Reserve Bulletin • July 1994 with this application. For purposes of this action, the total deposits in commercial banking organizations in commitments and conditions relied on in reaching this the state. Upon consummation of the proposal, First decision are conditions imposed in writing by the Michigan would remain the seventh largest depository Board and, as such, may be enforced in proceedings institution in Michigan, controlling deposits of under applicable law. $1.7 billion, representing approximately 2.4 percent of This acquisition may not be consummated before total deposits in commercial banks in the state. the thirtieth calendar day after the effective date of this The bank subsidiaries of First Michigan and Old order, or later than three months after the effective State do not compete in any relevant banking market. date of this order, unless such period is extended by Based on all the facts of record, the Board concludes the Board or the Federal Reserve Bank of Richmond, that First Michigan's acquisition of Old State and its acting pursuant to delegated authority. subsidiary bank would not result in any significant By order of the Board of Governors, effective adverse effects on competition in any relevant banking May 23, 1994. market. Voting for this action: Chairman Greenspan, Governors Convenience and Needs Considerations Kelley, Lindsey, and Phillips. Absent and not voting: Governor LaWare. In acting on an application to acquire a depository institution under the BHC Act, the Board must con- JENNIFER J. JOHNSON sider the convenience and needs of the communities to Associate Secretary of the Board be served, and take into account the records of the relevant depository institutions under the Community First Michigan Bank Corporation Reinvestment Act (12 U.S.C. § 2901 et seq.) Holland, Michigan ("CRA"). The CRA requires the federal financial supervisory agencies to encourage financial institu- Order Approving the Merger of Bank Holding tions to help meet the credit needs of the local com- Companies munities in which they operate, consistent with the safe and sound operation of such institutions. To First Michigan Bank Corporation, Holland, Michigan accomplish this end, the CRA requires the appropriate ("First Michigan"), a bank holding company within federal supervisory authority to "assess the instituthe meaning of the Bank Holding Company Act tion's record of meeting the credit needs of its entire ("BHC Act"), has applied under section 3(a)(5) of the community, including low- and moderate-income BHC Act (12 U.S.C. § 1842(a)(5)) to merge with Old neighborhoods, consistent with the safe and sound State Bank Corporation ("Old State"), and thereby operation of such institution," and to take that record indirectly acquire Old State's bank subsidiary, Old into account in its evaluation of applications.3 State Bank of Fremont ("Old State Bank"), both of In connection with this application, the Board has Fremont, Michigan. received comments from the Muskegon Heights Notice of the application, affording interested per- Neighborhood Association ("Protestant") alleging sons an opportunity to submit comments, has been that First Michigan's subsidiary bank, FMB-Lumberpublished (59 Federal Register 6261 (1994)). The time man's Bank, Muskegon, Michigan ("Lumberman for filing comments has expired, and the Board has Bank"), as well as all other banks in the area, has considered the application and all comments received failed to meet the home mortgage needs of Muskegon in light of the factors set forth in section 3(c) of the Heights residents. In particular, Protestant alleges, on BHC Act. the basis of 1992 data collected under the Home First Michigan, with total assets of approximately $2.3 billion, controls 11 subsidiary banks in Michigan.1 Mortgage Disclosure Act ("HMDA"), that Lumberman Bank has demonstrated a pattern of illegally First Michigan is the seventh largest commercial bankdiscriminating against Muskegon Heights and other ing organization in Michigan, controlling deposits of low- income and minority areas of Muskegon County $1.7 billion, representing approximately 2.3 percent of by making fewer housing-related loans in these areas total deposits in commercial banking organizations in the state.2 Old State is the 92d largest commercial than in the higher-income and non-minority areas of Muskegon County. Protestant also alleges that Lumbanking organization in Michigan, controlling deposits berman Bank has not adequately marketed its lending of $50.4 million, representing less than 1 percent of the products to all segments of its community. 1. Asset data are as of September 30, 1993. 2. State deposit data are as of June 30, 1992. 3. See 12 U.S.C. § 2903. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 633 During the processing of this application, First berman Bank has achieved higher penetration rates in Michigan provided the Board with a number of com- the low- to moderate-income area of Muskegon ments from public officials, community development Heights in comparison to the other three high-income organizations, businesses, and members of the public, areas in the Muskegon MSA. The Board also notes that support Lumberman Bank's CRA efforts in that Lumberman Bank is the leading lender in low- and Muskegon Heights. These commenters noted with moderate-income and minority areas in the Muskegon approval Lumberman Bank's activities in areas such MSA. The 1992 HMDA data, however, also indicate as lending programs, community development pro- that the bank makes a larger absolute number of loans grams, employment outreach efforts, and funding for in areas in the Muskegon MSA other than Muskegon low-income and first-time homebuyers. Heights. In its consideration of the convenience and needs The Board is concerned when an institution's factor, the Board has carefully reviewed the entire record indicates disparities in lending to minority CRA performance record of First Michigan, all com- applicants and believes that all banks are obligated to ments received regarding the application and First ensure that their lending practices are based on Michigan's response to these comments, and all the criteria that assure not only safe and sound lending, other relevant facts of record, in light of the CRA, the but also assure equal access to credit by creditwor- Board's regulations, and the Statement of the Federal thy applicants regardless of race. The Board recog- Financial Supervisory Agencies Regarding the Com- nizes, however, that HMDA data alone provide an munity Reinvestment Act ("Agency CRA State- incomplete measure of an institution's lending in its ment").4 community. The Board also recognizes that HMDA data have limitations that make the data an inade- Record of CRA Performance quate basis, absent other information, for concluding that an institution has engaged in illegal discrimina- A. Evaluation of CRA Performance tion in making lending decisions. The Board notes that the 1993 Examination found The Agency CRA Statement provides that a CRA no evidence of prohibited discriminatory or other examination is an important and often controlling illegal practices at the bank and that the Lumberman factor in the consideration of an institution's CRA Bank is in compliance with applicable fair housing and record, and that these reports will be given great fair credit laws and regulations. Moreover, no pracweight in the applications process.5 In this case, the tices intended to discourage applications for the types Board notes that all of First Michigan's subsidiary of credit listed in the bank's CRA Statement or actual banks received "outstanding" or "satisfactory" rat- lending were noted. In connection with this examinaings at their most recent CRA performance examina- tion, the examiners reviewed 1991 HMDA data and tions. In particular, Lumberman Bank received a commented favorably on the bank's overall distribu- "satisfactory" rating from its primary regulator, the tion of housing-related credit extensions. Federal Deposit Insurance Corporation ("FDIC"), at Lumberman Bank also has initiated a number of its most recent CRA performance examination as of steps to assist in meeting the housing-related credit January 4, 1993 ("1993 Examination"). Old State needs in low- to moderate-income areas of Muskegon Bank also received a "satisfactory" rating from the Heights. For example, in January 1994, the bank FDIC at its most recent CRA performance examina- introduced the FMB Affordable Mortgage Program to tion as of December 7, 1992. its banking market. The loan program, which targets low- to moderate-income borrowers, offers relaxed B. Home Mortgage Disclosure Act ("HMDA") underwriting standards to assist borrowers who might Data and Lending Practices not otherwise qualify for mortgage credit and allows for a down payment as low as 5 percent, a portion of The Board has carefully reviewed the 1992 HMDA which may be borrowed or otherwise acquired from data for Lumberman Bank in light of Protestant's outside sources. comments regarding the bank's lending activities in In addition, Lumberman Bank offers low-interest Muskegon Heights and other areas included within the home-improvement loans through the Michigan State Muskegon, Michigan, Metropolitian Statistical Area Housing Authority ("MSHA") to assist low-income ("MSA"). In this regard, these data show that Lum- homeowners, and a MSHA Mortgage Credit Certificate that is designed to promote home ownership for low- and moderate-income and first-time home buyers. Lumberman Bank also has pledged $300,000 to the 4. 54 Federal Register 13,742 (1989). Muskegon Oceana Community Reinvestment Corpo- 5. Id. at 13,745. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

634 Federal Reserve Bulletin • July 1994 ration (the "Corporation"). The Corporation will Lumberman Bank was chosen to participate in a pilot sponsor a mortgage pool for the acquisition and reha- program, sponsored by the State of Michigan, to help bilitation of homes by low- and moderate-income families on public assistance move toward self-suffipersons. ciency. As part of the program, Lumberman Bank Lumberman Bank participates in numerous govern- provides direct-deposit services and financial counselment-sponsored lending programs including the Small ing in the areas of budgeting and financial management Business Administration ("SBA"), Michigan Strategic to participating families. Lumberman Bank also pro- Fund ("MSF"), and the City of Muskegon Revolving vides training to participants on the consumer and Fund. In this regard, the bank has outstanding six SBA mortgage loan application process.7 In addition, Lumloans totalling $4.6 million, and, as of December 1992, berman Bank recently contributed to the Spring Street had extended 19 MSF loans totalling over $800,000. Community Services Project, which facilitates com- Lumberman Bank also extended 12 loans totalling munity projects such as vocational training, neighborover $690,000 through the City of Muskegon Revolv- hood development, elderly care, and consumer couning Fund.6 The bank also has initiated a second review seling. The bank also works with Catholic Family program designed to ensure that all lending decisions Services in providing financial counseling to teenage are made in accordance with fair lending laws. mothers. C. Marketing and Outreach Activities E. Conclusion Regarding Convenience and Needs Factors Lumberman Bank's marketing programs are designed to ensure that all segments of its community, including The Board has carefully considered all the facts of low- and moderate-income and minority residents, are record, including the comments filed in this case, in informed of the bank's products and services. For reviewing the convenience and needs factor under the example, in January 1994, Lumberman Bank, in con- BHC Act. Based on a review of the entire record of junction with the Greater Muskegon Urban League this application, including the most recent CRA per- (the "Urban League") and the Muskegon YFCA (the formance examination of Lumberman Bank, the "YFCA"), introduced its Home Mortgage Target Pro- Board believes that the efforts of First Michigan to gram in which the bank accepts mortgage applications help meet the credit needs of all segments of the at the Muskegon and Muskegon Heights offices of the communities it serves, including low- and moderate- Urban League and the YFCA. This pilot program income neighborhoods, and all other convenience and allows the bank to familiarize low- and moderate- needs considerations, are consistent with approval of income applicants with the credit-application process. this application.8 Direct mailers advertising this service will be sent to all low- and moderate-income areas in Muskegon and Other Considerations Muskegon Heights. Lumberman Bank also markets its products through The Board also finds that the financial and managerial its officer call program and "town meetings". In this resources and future prospects of First Michigan and regard, the bank has worked closely with many area Old State, and their respective subsidiaries and the organizations to market its credit products under the bank's Turn Key Program. Pursuant to this program, 7. The bank has completed eight training sessions to date, and the bank has presented seminars at several local expects to have 50 families trained under this program by May 1994. churches regarding the process of applying for a 8. Protestant has requested that the Board hold a public meeting or mortgage. hearing on these applications. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a D. Community Development Activities timely written recommendation of denial of the application. In this case, the Board has not received such a recommendation. Generally, under its rules, the Board may, in its discretion, hold a Lumberman Bank participates in a number of commu- public meeting or hearing on an application to clarify factual issues nity development activities and projects. For example, related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The Board has carefully considered Protestant's request. In the Board's view, the protestant has had ample opportunity to present written submissions, and the protestant has submitted substantial written comments that 6. In addition, Lumberman Bank participates in the Michigan have been considered by the Board. In light of the foregoing and all the Economic Growth Alliance ("M.E.G.A.") Micro-Loan Program, facts of record, the Board has determined that a public meeting or which is designed to assist unemployed or displaced workers starting hearing is not necessary to clarify the factual record on these a small business. The bank also participates in M.E.G.A.'s L.E.A.P. applications, or otherwise warranted in this case. Accordingly, the Program, which allows lenders to advise small businesses on all stages request for a public meeting or hearing on these applications is hereby of business development including start-up, financing, and relocation. denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 635 other supervisory factors the Board must consider for filing comments has expired, and the Board has under section 3 of the BHC Act are consistent with considered the application and all comments received approval of this proposal. in light of the factors set forth in section 3(c) of the Based on the foregoing and all the facts of record, BHC Act. the Board has determined that this application should United Community, which controls four subsidiary be, and hereby is, approved. The Board's approval is banks in Georgia and North Carolina, is the 15th specifically conditioned upon compliance with all the largest commercial banking organization in Georgia, commitments made by First Michigan in connection controlling $251.1 million in deposits, representing less with this application. For purposes of this action, the than 1 percent of the total deposits in commercial commitments and conditions relied on in reaching this banking organizations in the state.2 Bank is the 75th decision shall be deemed to be conditions imposed in largest commercial bank in Georgia, controlling writing by the Board and, as such, may be enforced in $69.2 million in deposits, representing less than 1 proceedings under applicable law. percent of the total deposits in commercial banking This transaction shall not be consummated before organizations in the state. Upon consummation of this the thirtieth calendar day following the effective date transaction, United Community would become the of this order, or later than three months after the 12th largest commercial banking organization in Georeffective date of this order, unless such period is gia, controlling $320.3 million in deposits, representing extended for good cause by the Board or the Federal less than 1 percent of the total deposits in commercial Reserve Bank of Chicago, acting pursuant to delegated banking organizations in the state. United Community authority. and Bank do not compete directly in any relevant By order of the Board of Governors, effective banking market. Based on all the facts of record, the May 9, 1994. Board concludes that this proposal would not result in any significantly adverse effects on competition in any relevant banking market. Voting for this action: Governors Kelley, LaWare, Lindsey, and Phillips. Absent and not voting: Chairman The Board has received several comments objecting Greenspan. to this proposal on the basis that shareholder value in Bank has diminished and that Bank has not been WILLIAM W. WILES effectively operated by its board of directors and Secretary of the Board management.3 These commenters also suggest that alternative purchasers for Bank should have been United Community Banks, Inc. solicited. The Board has carefully reviewed these Blairsville, Georgia comments in light of the factors required to be considered under the BHC Act. Order Approving Acquisition of a Controlling In considering the financial factors in this case, the Interest in a Bank Board has reviewed the financial condition of Bank, and considered United Community's proposal to pro- United Community Banks, Inc., Blairsville, Georgia vide substantial new capital to Bank. Bank is subject ("United Community"), a bank holding company to a formal agreement with state and federal banking within the meaning of the Bank Holding Company Act regulators to raise capital to address financial prob- (BHC Act"), has applied for the Board's approval lems Bank has encountered in recent years. To satisfy under section 3(a)(3) of the BHC Act (12 U.S.C. the requirements of this agreement, management of § 1842(a)(3)) to acquire up to 51 percent of the voting Bank offered existing shareholders of Bank the opporshares of White County Bank, Cleveland, Georgia tunity to buy additional shares of Bank, and then ("Bank").1 offered the subject debenture to a number of bank Notice of the application, affording interested persons an opportunity to submit comments, has been published (59 Federal Register 7998 (1994)). The time 2. Deposit data are as of June 30, 1993. 3. In addition to these allegations, one commenter alleges that 1. United Community proposes to acquire a debenture of the bank Bank's management has engaged in insider transactions to the detriholding company parent of Bank, White County Bancshares, Inc., ment of Bank. Another commenter believes that Bank's policies of Cleveland, Georgia ("WCB"). This debenture is convertible into protecting confidential loan and credit information are deficient. The approximately 51 percent of Bank's outstanding voting shares, and Board has carefully reviewed these comments in light of the most United Community projects that conversion will require up to two recent examinations by Bank's primary regulator, the Federal Deposit years to complete. Insurance Corporation. On the basis of all facts of record, including Existing shareholders of WCB were first offered the opportunity to the examiners' assessment of managerial resources and compliance purchase additional shares of WCB in lieu of WCB's entering into this with applicable laws and procedures, the Board does not believe that debenture arrangement with United Community. these comments warrant denial of this application. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

636 Federal Reserve Bulletin • July 1994 holding companies.4 United Community's proposal By order of the Board of Governors, effective should permit Bank to restore its capital to the levels May 9, 1994. required by these regulators.5 In considering the managerial factors in this case, the record indicates that Voting for this action: Governors Kelley, La Ware, Lindmanagement of Bank has taken positive steps to sey, and Phillips. Absent and not voting: Chairman address identified weaknesses, including hiring new Greenspan. personnel and devising a plan for improving the financial condition of Bank. The Board also notes that WILLIAM W. WILES Secretary of the Board United Community has an established record of improving the financial condition of acquired troubled NBT Northwest Bancorp institutions and monitoring the performance of its subsidiary banks.6 Tukwila, Washington In this light, and based on all facts of record, Order Approving the Formation of a Bank Holding including the comments filed in this case, the Board Company concludes that the financial and managerial resources and future prospects of United Community, its subsid- NBT Northwest Bancorp, Tukwila, Washington iaries, and Bank, are consistent with approval of this ("NBT Northwest"), has applied under section 3(a)(1) proposal.7 Considerations relating to the convenience of the Bank Holding Company Act (12 U.S.C. and needs of the communities to be served and other § 1842(a)(1) et seq.) ("BHC Act"), to become a bank supervisory factors the Board must consider under holding company by acquiring all the voting shares of section 3 of the BHC Act also are consistent with the National Bank of Tukwila, Tukwila, Washington approval of this proposal. ("Tukwila Bank").1 Notice of the application, afford- Based on the foregoing and all the facts of record, ing interested persons an opportunity to submit comthe Board has determined that the application should ments, has been published (59 Federal Register 11,606 be, and hereby is, approved. The Board's approval is (1994)). The time for filing comments has expired, and specifically conditioned upon compliance with all the the Board has considered the application and all commitments made by United Community in conneccomments received in light of the factors set forth in tion with this application. For purposes of this action, section 3(c) of the BHC Act. the commitments and conditions relied on by the NBT Northwest is a nonoperating company formed Board in reaching this decision both are deemed to be for the purpose of acquiring Tukwila Bank. Tukwila conditions imposed in writing by the Board in connec- Bank is the 68th largest commercial banking institution tion with its findings and decision, and, as such, may in Washington, controlling deposits of $25.5 million, be enforced in proceedings under applicable law. representing less than 1 percent of total deposits in The purchase of the debenture of WCB shall not be commercial banking institutions in the state.2 Tukwila consummated before the thirtieth calendar day follow- Bank operates in the Seattle banking market,3 controling the effective date of this order, or later than three ling less than 1 percent of the total deposits in commonths after the effective date of this order, unless mercial banking organizations in this market. Based on such period is extended for good cause by the Board or all the facts of record, the Board believes that consumby the Federal Reserve Bank of Atlanta, acting purmation of the proposal would not result in any signifsuant to delegated authority. icantly adverse effects on competition or the concentration of banking resources in any relevant banking market. Accordingly, the Board concludes that competitive considerations are consistent with approval. 4. Bank management has represented that two bank holding com- The Board also concludes that the financial and panies expressed interest in purchasing this debenture, including managerial resources and future prospects of NBT United Community, and Bank management decided to sell the debenture to United Community because of United Community's strong financial condition and outstanding record of bank management. 5. The Georgia Department of Banking and Finance has approved this proposal. 1. NBT Northwest proposes to merge Tukwila Bank with Tukwila 6. One commenter maintains that a subsidiary bank of United Interim National Bank, Tukwila, Washington ("Interim Bank"), a Community assumed the accounting responsibilities of Bank prior to newly chartered national bank and wholly owned subsidiary of NBT regulatory approval of this proposal. The record indicates that United Northwest, with Interim Bank surviving the merger and operating Community provides (on a fee basis) data processing services to Bank, under the name of National Bank of Tukwila. On April 25, 1994, as well as to other unaffiliated banks, but has not acquired any of Tukwila Bank's primary regulator, the Office of the Comptroller of the Bank's operations or departments, or otherwise engaged in any Currency ("OCC"), approved this proposal. conduct that would constitute prior control of Bank. 2. Market and deposit data are as of June 30, 1993. 7. See, e.g., Western Bancshares, Inc. v. Board of Governors, 480 3. The Seattle, Washington, banking market is approximated by the F.2d 749 (10th Cir. 1973). Seattle Rand-McNally Metropolitan Area. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 637 Northwest and Tukwila Bank, and the convenience Notice of the application, affording interested perand needs and other supervisory factors that the Board sons an opportunity to submit comments, has been is required to consider under section 3 of the BHC published (58 Federal Register 60,858 (1993)). The Act, are consistent with approval of this proposal.4 time for filing comments has expired, and the Board Based on the foregoing and all the facts of record, has considered the application and all comments rethe Board has determined that this application should ceived in light of the factors set forth in section 3(c) of be, and hereby is, approved. The Board's approval is the BHC Act. specifically conditioned upon compliance with all the UBB is a company formed for the purpose of commitments made by NBT Northwest in connection becoming a bank holding company by acquiring Bank, with this application. For purposes of this action, the a state member "bankers' bank" chartered under commitments and conditions relied on in reaching this Minnesota law, which will perform correspondent decision shall be deemed to be conditions imposed in services for other depository institutions.1 Bankers' writing by the Board and, as such, may be enforced in banks are "banks" within the meaning of the BHC Act proceedings under applicable law. and national and state member banks may hold stock This transaction should not be consummated before of these institutions or their parent holding compathe thirtieth calendar day following the effective date of nies.2 Bank will be engaged exclusively in providing this order, or later than three months after the effective services for other depository institutions and their date of this order, unless such period is extended for officers, directors and employees. These correspongood cause by the Federal Reserve Bank of San Fran- dent services include discounting bills, notes and other cisco, acting pursuant to delegated authority. evidences of debt and receiving deposits from and By order of the Board of Governors, effective through banks. Bank will compete only with other May 31, 1994. banks that offer similar services to banks. Based on all facts of record, the Board has determined that con- Voting for this action: Chairman Greenspan and Governors summation of this proposal would not have a signifi- Kelley, LaWare, and Phillips. Absent and not voting: Gov- cant adverse effect on competition or banking reernor Lindsey. sources in any relevant banking market. JENNIFER J. JOHNSON The financial and managerial resources of UBB and Associate Secretary of the Board Bank are consistent with approval, in view of the nature of the activities of a bankers' bank, and the United Bankers' Bancorporation prospects of each are consistent with approval. Fac- Bloomington, Minnesota tors relating to the convenience and needs of the community to be served and other supervisory factors Order Approving the Formation of a Bank Holding the Board must consider under section 3 of the BHC Company Act also are consistent with approval. Based on the foregoing and other facts of record, the United Bankers' Bancorporation, Bloomington, Min- Board has determined that the application should be, nesota ("UBB"), has applied under section 3(a)(1) of and hereby is, approved. The Board's approval is the Bank Holding Company Act ("BHC Act") specifically conditioned upon compliance with all con- (12 U.S.C. § 1842(a)(1)) to become a bank holding ditions imposed in connection with this approval, company by acquiring at least 85 percent of United including the condition that the activities of Bank are Bankers' Bank, Bloomington, Minnesota ("Bank"). conducted in accordance with the limitations imposed on bankers' banks under applicable law, and all commitments made by UBB and Bank in connection with 4. The Board has carefully reviewed comments from NBT Bancorp, Norwich, New York ("Protestant"), a registered bank holding company, maintaining that investors and customers will be confused by the similarity between the names of Protestant and NBT Northwest. NBT Northwest has provided specific notice in its stock offering 1. The Federal Reserve Act also imposes reserve requirements on circular disclaiming any relationship with Protestant. The Securities bankers' banks under certain circumstances. See section 19(b)(9) of and Exchange Commission ("SEC") has reviewed similar comments the Federal Reserve Act (12 U.S.C. § 461(b)(9)), as implemented by from Protestant and determined that this issue presented no substan- the Board's Interpretation on Bankers' Banks, 12 C.F.R. 204.121. In tive violation of the Securities and Exchange Act of 1934 (15 U.S.C. this case, Bank has complied with the System's reserve requirements § 78a et seq.). In addition, the Washington Supervisor of Banking has as a condition of its approval for membership. indicated that Protestant's comments do not raise an issue under state 2. Section 24(Seventh) of the National Bank Act (12 U.S.C. law. Based on these and all facts of record, in light of the significant § 24(Seventh)), as amended by the Depository Institutions Deregulageographic separation between these companies' relevant banking tion and Monetary Control Act of 1980 (P.L. 96-221) and the Garn-St markets, and the relatively small amount of public trading in NBT Germain Depository Institutions Act of 1982 (P.L. 97-320). State Northwest's stock, and the written disclaimer provided by NBT member banks may invest in stock subject to the same limitations as Northwest, the Board does not believe that Protestant's comments national banks. 12 U.S.C. § 335. UBB will be owned by national and warrant denial of this application. state member banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

638 Federal Reserve Bulletin • July 1994 the application. For purposes of this action, the con- (2) Providing foreign exchange advisory and transditions and commitments relied on in reaching this actional services as permitted under section decision shall be deemed to be conditions imposed in 225.25(b)(17) of Regulation Y; and writing by the Board and, as such, may be enforced in (3) Acting as a commodities trading advisor with proceedings under applicable law. respect to financial futures and options on futures as This transaction shall not be consummated before the permitted under section 225.25(b)(19) of Regulathirtieth day following the effective date of this order, or tion Y. later than three months after the effective date of this order, unless such period is extended for good cause by In connection with this proposal, Applicant also seeks the Board or by the Federal Reserve Bank of Minne- authority to acquire a nonvoting, non-controlling limapolis, acting pursuant to delegated authority. ited partnership interest in N&B. By order of the Board of Governors, effective Notice of the application, affording interested per- May 11, 1994. sons an opportunity to submit comments on the proposal, has been published (58 Federal Register 13,782 Voting for this action: Chairman Greenspan and Governors (1993)). The time for filing comments has expired, and Kelley, La Ware, Lindsey, and Phillips. the Board has considered the application and all comments received in light of the factors set forth in WILLIAM W. WILES section 4(c)(8) of the BHC Act. Secretary of the Board Applicant, with total consolidated assets equivalent to approximately $284 billion, is the 13th largest bank Orders Issued Under Section 4 of the Bank in the world, and the third largest banking organization Holding Company Act in France.2 In the United States, Applicant controls a bank in California; operates branches in New York Banque Nationale de Paris and Chicago; and maintains agencies in Los Angeles, Paris, France San Francisco, Miami, and Houston.3 Applicant would hold its limited partnership interest in Company Order Approving an Application to Engage in through its existing New York Article 12 Corpora- Various Investment Advisory and Related Activities tion,4 French-American Banking Corporation, and Through a Joint Venture would form a special purpose subsidiary, US JV Based Holdings Inc., to hold its general partnership interest Banque Nationale de Paris, Paris, France ("Appli- in Company. cant"), a bank holding company within the meaning of N&B is registered with the Securities and Exchange the Bank Holding Company Act ("BHC Act"), has Commission as a broker-dealer under the Securities applied under section 4(c)(8) of the BHC Act Exchange Act of 1934 (15 U.S.C. § 78a et seq.), and as (12 U.S.C. § 1843(c)(8)), and section 225.23 of the an investment adviser under the Investment Advisers Board's Regulation Y (12 C.F.R. 225.23), to acquire a Act of 1940 (15 U.S.C. § 80b-l et seq.) ("Investment 50 percent voting equity interest in a de novo joint Advisers Act") with offices in New York, Chicago, venture company ("Company") that would engage in and San Francisco. N&B engages in activities involva variety of investment advisory activities, including ing bank-ineligible securities that are not generally discretionary management services. The remaining permissible for bank holding companies.5 N&B would 50 percent voting equity interest in Company would be hold its limited partnership interest in Company diheld by Neuberger & Berman, L.P., New York, New rectly, and would form a special purpose subsidiary, York ("N&B"), a registered broker-dealer that under- Neuberger & Berman Global Asset Management Inc., writes and deals in securities. to hold its general partnership interest in Company. Specifically, Company would engage in the following activities: (1) Acting as investment or financial advisor, including the discretionary purchase and sale of securities 2. Data are as of June 30, 1993. on behalf of an institutional customer, as permitted 3. Applicant's subsidiary bank is Bank of the West, San Francisco, under sections 225.25(b)(4)(ii), (iii) and (iv) of Reg- California, a state-chartered non-member bank. 4. See N.Y. Banking Law § 508 et seq. (Consol. 1990) (investment ulation Y;1 companies). 5. The term "bank-ineligible securities" refers to all types of debt and equity securities that a bank may not underwrite or deal in directly under the Glass-Steagall Act. See 12 U.S.C. §§ 24(7) and 335. N&B's securities activities include underwriting and dealing in bank-ineligible securities, the management and distribution of mutual funds, risk 1. See also 12 C.F.R. 225.25(b)(15), note 17. arbitrage, over-the-counter market making, and option sales. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 639 Company would engage only in activities permissi- those the Board has relied upon in prior joint venture ble for bank holding companies under the Board's cases intended to separate the activities of a bank Regulation Y and would provide these services only to holding company and the joint venture from the iminstitutional customers as that term is defined in Reg- permissible activities of a securities co-venturer.10 ulation Y.6 Applicant anticipates that Company would These include a commitment that Applicant and register with the Securities and Exchange Commission N&B will conduct their business on an arm's-length, as an investment adviser under the Investment Advis- non-preferential basis with no solicitation of business ers Act, and with the Commodity Futures Trading for, nor referral of customers to, each other. In addi- Commission as a commodities trading advisor under tion, Applicant will not make any investments in or the Commodity Exchange Act (7 U.S.C. § 1 et seq.). loans to N&B or any N&B partner, except as pro- Applicant and N&B have entered into a joint venture posed in this application, without prior Board aparrangement overseas, BNP-N&B Global Asset Man- proval. Other commitments relate specifically to agement S.A., Paris, France ("French Joint Ven- N&B's impermissible activities such as Applicant's ture"), that engages in activities similar to those in commitment not to engage in the public sale or distriwhich Company would engage.7 bution of N&B securities, including shares of any The Board has previously determined, by regula- N&B mutual fund, and not to purchase for its own tion, that the investment advisory, discretionary man- account any of the mutual funds N&B distributes or agement and other activities proposed for Company from N&B any securities as to which N&B is acting as are closely related to banking within the meaning of underwriter or dealer.11 Applicant also will not extend section 4 of the BHC Act. Applicant has committed credit to a N&B mutual fund nor accept a N&B mutual that Company will conduct these activities pursuant to fund as collateral for a loan to purchase shares of a the conditions and limitations specified in the Board's N&B mutual fund. Applicant will not extend credit to regulations. In every case under section 4 of the BHC Company or customers of Company on favorable Act, the Board also must determine whether the terms.12 Moreover, Company will not act as an investperformance of the proposed activities by the appli- ment adviser to a N&B mutual fund, solicit N&B cant can reasonably be expected to produce benefits to mutual fund customers or have access to lists of such the public that outweigh the possible adverse effects. customers. In prior cases, the Board has expressed concern that Company's proposed investment advisory and disjoint ventures not lead to a matrix of relationships cretionary investment management services would between co-venturers that could break down the le- include recommending and the discretionary purchase gally mandated separation of banking and commerce.8 and sale of bank-ineligible securities that N&B under- The Board has stated that this concern is particularly writes or deals in, and recommending shares of mutual acute where the joint venture involves a relationship funds and insurance company investment funds13 (colbetween a bank holding company and a securities firm, lectively, "N&B Funds") that N&B or its affiliates and the potential exists for the mingling of permissible manage or distribute. and impermissible securities activities.9 In this case, In its 1984 AmRo decision, the Board permitted a Applicant would engage in the proposed activities in a joint venture between a banking organization and a manner consistent with previously approved joint ven- mutual fund advisor and distributor to provide investture proposals, except to the extent discussed below, ment advice subject to limitations on advice relating to and has made a number of commitments similar to those mutual funds and the use of common employees of the mutual fund co-venturer. In Chuo Trust, the joint venture did not propose to recommend the mu- 6. See 12 C.F.R. 225.2(g). tual funds of the co-venturer. 7. The French Joint Venture, formerly BNP Investment Management S.A., is registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act. Company would retain the French Joint Venture as a sub-adviser on 10. A complete list of these commitments is set forth in the appendix occasion, and vice versa. In addition, Applicant, N&B, and their to this order. respective affiliates may independently contract sub-advisory services 11. In addition, no U.S. branch, agency or subsidiary of Applicant with Company, as they currently do with the French Joint Venture. will engage in the public sale or distribution of, nor purchase, directly Finally, Applicant and Company would continue to engage the other or indirectly, for their own account any security as to which N&B is as a sub-adviser from time to time. Applicant has committed that all acting as underwriter. such transactions would be conducted on an arm's-length, non- 12. In this regard, transactions between Applicant's U.S. bank or exclusive, and non-preferential basis. thrift subsidiaries and Company are subject to the limitations imposed 8. See, e.g., The Maybaco Company and Equitable Bancorpora- under sections 23A and 23B of the Federal Reserve Act (12 U.S.C. tion, 69 Federal Reserve Bulletin 375 (1983). § 371c and 371c-l), and Company, as a subsidiary of Applicant, will 9. See Amsterdam-Rotterdam Bank, N.V., 70 Federal Reserve observe the anti-tying restrictions imposed by the Bank Holding Bulletin 835 (1984) C'AmRo"); The Chuo Trust and Banking Com- Company Act Amendments of 1970 (12 U.S.C. § 1971-1978). pany, Limited, 78 Federal Reserve Bulletin 446 (1992) ("Chuo 13. The insurance company investment funds are invested primarily Trust"). in variable rate annuities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

640 Federal Reserve Bulletin • July 1994 The Board believes that the types of commitments Company is engaging in investment advisory and made in these cases should be re-examined in light of discretionary investment management activities that significant developments with respect to the securities involve the N&B Funds. activities of bank affiliates. In this regard, the Board In view of these commitments to comply with the has allowed bank holding company subsidiaries to section 20 limitations and the limitations in the Board's provide investment advisory and discretionary man- interpretive rule on investment advisory activities, the agement services with respect to securities underwrit- Board believes that Applicant should be permitted to ten or dealt in by an affiliated section 20 subsidiary recommend and make discretionary purchases of subject to certain conditions to prevent conflicts of bank-ineligible securities underwritten and dealt in by interests and unsafe banking practices.14 These condi- N&B.18 tions include disclosure of the relationship between N&B would also have certain common officers and the investment adviser and the section 20 subsidiary employees with Company. The Board has permitted a and limitations on the purchase of bank-ineligible joint venture to have common employees who were securities in a fiduciary capacity. Applicant has com- involved in strategic planning for the co-venturer's mitted that Company's investment advisory activities mutual fund but has required that the joint venture involving securities underwritten or dealt in by N&B refrain from recommending that mutual fund to its would comply with the same safeguards that apply customers.19 In this case, Company's proposed activwhen banks recommend securities underwritten or ities with respect to securities underwritten and dealt marketed by their section 20 affiliates.15 in by N&B will be conducted under the limitations In addition, the Board has recently amended its discussed above. In addition, Applicant has commitinterpretive rule on investment advisory activities to ted that no partner, officer, or employee of N&B who permit a bank holding company to recommend and is involved in the selling or marketing of the N&B broker shares of a mutual fund that is advised by an Funds or responsible for underwriting or dealing in affiliate.16 Company has committed to comply with the any bank-ineligible securities will serve concurrently terms of the Board's interpretive rule with respect to as an officer or employee of Company. Applicant has shares of the N&B Funds.17 Consistent with the also committed that the N&B dual employees will not Board's interpretive rule, Company will not purchase sell, market or recommend the shares of the N&B in its sole discretion in a fiduciary capacity any secu- Funds to Company's customers, or have any role in rities of the N&B Funds. Although Applicant's rela- marketing any security as to which N&B acts as tionship in this case with the N&B Funds is through its underwriter or dealer. Under these circumstances, the joint venture affiliation with N&B, and not as a direct Board does not believe that the proposed officer and subsidiary of a bank holding company advising a employee interlocks would cause Applicant to be mutual fund, the Board believes that the framework involved in impermissible securities activities. under the Board's interpretive rule appropriately ad- The Board has also carefully reviewed Applicant's dresses the issues raised by such an affiliation when proposed 10 to 13 percent nonvoting limited partnership interest in N&B in light of the joint venture, placing particular emphasis on the structure of the investment and its significance relative to the assets 14. Citicorp, J.P. Morgan & Co. Incorporated, and Bankers Trust New York Corporation, 73 Federal Reserve Bulletin 473, 498 (1987). and revenues of N&B. The Board notes that the 15. In particular, neither Company, nor any affiliated U.S. bank, proposed limited partnership interest complies with thrift, branch or agency shall express an opinion on the value or guidelines used by the Board in approving nonvoting advisability of the purchase or the sale of ineligible securities underwritten or dealt in by N&B unless Company or the affiliate notifies the equity investments and that the proposal is insignificustomer that N&B is underwriting, making a market, distributing or cant in terms of both N&B's total assets and revenues. dealing in the security, and that Company is affiliated with N&B. In this light, and based on all the facts of record and Company and its affiliates also would refrain from purchasing for a customer in a fiduciary capacity securities that N&B underwrites subject to Applicant's commitments, the Board does (during the period of the underwriting or selling syndicate and for a not believe that the proposed nonvoting equity investperiod of 60 days after the termination thereof) or makes a market in ment would permit Applicant to exercise a controlling unless the purchase is specifically authorized by the fiduciary instrument, by court order, or by local law. influence over the management, policies or affairs of 16. 57 Federal Register 30,387 (1992); 12 C.F.R. 225.125. See also N&B. Norwest Corporation, 76 Federal Reserve Bulletin 79 (1990). 17. Under the Board's interpretive rule, bank holding companies are required to disclose these dual roles to customers, to caution customers to read the prospectus of a mutual fund before investing in the mutual fund, and to advise customers in writing that the mutual fund's 18. As noted above, Company's commitment to comply with the shares are not deposits, are not obligations of any bank, are not Board's interpretive rule on investment adviser activities would not insured by the Federal Deposit Insurance Corporation, and are not permit Company to purchase in its sole discretion in a fiduciary endorsed or guaranteed in any way by any bank (unless such is the capacity shares of the N&B Funds. case). 19. Chuo Trust, supra. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 641 Applicant and N&B do not compete with each other under. The Board's decision is specifically conditioned in any relevant market. Accordingly, consummation of on compliance with all of the commitments made in the proposed transaction would not eliminate any this application, including the commitments discussed existing competition between Applicant and N&B. in this order, and with the conditions set forth in this In every case under section 4 of the BHC Act, the order and in the above-noted Board regulations and Board also must consider the financial condition and orders. These commitments and conditions shall both resources of the applicant and its subsidiaries and the be deemed to be conditions imposed in writing by the effect of the proposal on these resources.20 In this Board in connection with its findings and decision, case, the Board notes that Applicant meets the rele- and, as such, may be enforced in proceedings under vant risk-based capital standards established under the applicable law. Basle Accord, and has capital equivalent to that which This transaction shall not be consummated later would be required of a United States banking organi- than three months after the effective date of this order, zation. In view of these and other facts of record, the unless such period is extended for good cause by the Board has determined that the financial factors are Board or by the Federal Reserve Bank of San Franconsistent with approval of this application. The man- cisco, pursuant to delegated authority. agerial resources of Applicant also are consistent with By order of the Board of Governors, effective approval. May 12, 1994. The Board expects that the de novo entry of Applicant into the market for the proposed services in the Voting for this action: Chairman Greenspan and Governors United States would provide added convenience to Kelley, LaWare, Lindsey, and Phillips. Applicant's customers, and would increase the level of competition among existing providers of these ser- WILLIAM W. WILES Secretary of the Board vices. Accordingly, the Board has determined that performance of the proposed activities by Company Appendix can reasonably be expected to produce benefits to the public. A. Joint Venture Commitments1 For the reasons discussed above, and in reliance on all the commitments made in connection with this 1. The name of Company will not include the words application, and the conditions in this order, the Board "Neuberger & Berman". believes that the proposal is not likely to result in 2. Neither Neuberger & Berman nor a partner, officer, decreased or unfair competition, conflicts of interests, or employee of Neuberger & Berman ("N&B") will unsound banking practices, concentration of resources acquire stock in, or serve concurrently as a director, or other adverse effects, and that the balance of public officer, or employee of, Applicant or any subsidiary of interest factors that the Board is required to consider under section 4 of the BHC Act is favorable. Applicant (other than Company and the French Joint Venture). In addition, Applicant will not acquire any Based on the foregoing and all the facts of record, stock in or interest in (other than the proposed equity including the commitments discussed above and all investment), or have any directors or management commitments made in connection with the application, officials on the board or committees of, N&B (other the Board has determined to, and hereby does, apthan Company and the French Joint Venture); nor prove the application subject to all the terms and shall Applicant's name be used by N&B or N&B's conditions set forth in this order, and in the abovenoted Board regulations and orders that relate to these name by Applicant or any of its affiliates. activities. The Board's determination is also subject to 3. Applicant will apply for the Board's prior approval all of the terms and conditions set forth in the Board's to retain its investment in Company should N&B Regulation Y, including those in sections 225.4(d) and expand into a line of business other than the busi- 225.23(b), and to the Board's authority to require such nesses it currently engages in. If required by the Board modification or termination of the activities of a bank in such circumstances, Applicant will divest its investholding company or any of its subsidiaries as the ment in Company. Board finds necessary to assure compliance with, and 4. The offices of N&B and Company will have separate to prevent evasion of, the provisions of the BHC Act entrances. and the Board's regulations and orders issued there- 20. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve 1. For the purpose of these commitments, the name Neuberger & Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Berman or, as abbreviated, N&B, refers to Neuberger & Berman as Bulletin 155 (1987). well as any subsidiary or affiliate of Neuberger & Berman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

642 Federal Reserve Bulletin • July 1994 5. The names of customers of Bank of the West and of responsibility consists of, or who is involved in, sellany of Applicant's United States branches or agencies ing, marketing, distributing, underwriting or dealing in will not be furnished to N&B. any bank-ineligible securities, including the shares of 6. Applicant and its subsidiaries will not act as regis- any of the N&B Funds (or any other open-end investtrar, transfer agent or custodian for any of the N&B ment company that may be established by N&B), or mutual funds. whose responsibility consists of overseeing the corpo- 7. Applicant and its subsidiaries will not, directly or rate affairs of any of the N&B Funds, will serve indirectly, (a) engage in the public sale or distribution concurrently as an officer or employee of Company. of, or purchase for their account, any shares of the 17. Any partners, officers or employees of Company N&B Funds, or (b) whether as underwriter, dealer, or who are also partners, officers or employees of N&B in any other capacity, purchase for their account from will have no role in marketing the N&B Funds, or any N&B any securities as to which N&B is acting as other security as to which N&B acts as underwriter, or underwriter or dealer. In addition, the United States as to which N&B directly or indirectly acts as dealer, branches, agencies and subsidiaries of Applicant will and will not sell, market, or recommend shares of the not, directly or indirectly, engage in the public sale or N&B Funds to Company's customers. distribution of, or purchase for their account, any 18. The non-officer employees of Company who are security as to which N&B is acting as an underwriter. also employees of N&B will perform only clerical or 8. Neither Applicant nor any of its subsidiaries (includ- administrative functions, and will be limited in numing Company) will purchase in its sole discretion any ber. securities of the N&B Funds in a fiduciary capacity, 19. As a subsidiary of a bank holding company, extend credit to any such N&B Mutual Fund, or Company will observe the anti-tying provisions of the accept securities of any such N&B Mutual Fund as BHC Amendments of 1970 as required under section collateral for a loan which is for the purpose of 225.4(d) of the Board's Regulation Y (12 C.F.R. purchasing securities of any such N&B Mutual Fund. 225.4(d)). Company is an affiliate of Applicant's 9. Applicant and any subsidiary of Applicant will United States bank and thrift subsidiaries for purposes obtain the Board's prior approval before making fur- of sections 23A and 23B of the Federal Reserve Act. ther investments in or loans to N&B or any N&B 20. In the event that Applicant or any of its United partner, other than the investment proposed in the States nonbank subsidiaries (including Company) proapplication as approved by the Board, and will not vides either brokerage or investment advisory services nominate any general partner of N&B. to customers in the United States with respect to the 10. No United States office of Applicant nor any of shares of an investment company for which Applicant, Applicant's United States subsidiaries will take into any of its nonbank subsidiaries (including Company), account the fact that a potential borrower competes N&B or any of N&B's subsidiaries acts as an investwith Company or N&B in determining whether to ment adviser: extend credit to that borrower. (i) Applicant will instruct its officers and employ- 11. No office of Applicant nor any of Applicant's ees, and the officers and employees of such subsidiaries will extend credit directly or indirectly to United States nonbank subsidiaries, to: Company or any customer of Company on terms more (A) caution customers to read the prospectus of favorable than those afforded similar borrowers in the investment company before investing, and similar circumstances. (B) advise customers in writing that the invest- 12. Company will not solicit customers of the N&B ment company's shares: Funds and Company will not request or accept access (1) are not insured by the Federal Deposit to the customer lists of any such N&B Fund. Insurance Corporation, are not deposits, and 13. Company will not act as investment adviser to any are not obligations of, or endorsed or guaraninvestment company organized and advised by N&B teed in any way by, any bank, unless that is (or any other investment company that may in the the case; and future be so organized and advised). (2) are subject to investment risks, including 14. Company will provide advice only to "institutional possible loss of the principal invested; and customers" as that term is defined in section 225.2(g) (ii) Applicant or such United States nonbank of Regulation Y. subsidiary will disclose in writing to the customer 15. None of the dual employees of Company and N&B the appropriate entity's role as adviser to the will be engaged at N&B in bank-ineligible securities investment company, as well as the existence of activities, or activities that are impermissible for bank any fees, penalties and surrender charges with holding companies. respect to the investment company's shares; pro- 16. No partner, officer, or employee of N&B whose vided that the disclosures described in this com- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 643 mitment (ii) may be made orally so long as written has the power to exercise a controlling influence over disclosure is provided to the customer immedi- N&B and unless the situation which resulted in such a ately thereafter. finding is eliminated: 21. Neither Company nor any affiliated United States (i) Applicant's investment in N&B, including its bank, thrift, branch, or agency shall express an opin- limited partnership interest, will be promptly terion on the value or the advisability of the purchase or minated; and the sale of ineligible securities underwritten or dealt in (ii) any amounts then owing by N&B to Applicant by N&B unless Company or the affiliate notifies the in connection with such investment will be customer that N&B is underwriting, making a market, promptly paid. Applicant and N&B understand distributing or dealing in the security, and that Com- that such termination and payment will be considpany is an affiliate of N&B. ered to have been effected "promptly" if accom- 22. Neither Company nor any affiliated United States plished within two years following such Board bank, thrift, branch, agency, trust, or investment finding, provided that, prior to such termination advisor shall purchase, as a trustee or in any other and payment, Applicant and N&B will implement fiduciary capacity, for accounts over which it has measures reasonably available in light of the cirinvestment discretion ineligible securities (a) under- cumstances to further separate the parties. written by N&B as lead underwriter or syndicate 26. Applicant and its subsidiaries (except for Company member during the period of any underwriting or and the French Joint Venture) will not distribute selling syndicate, and for a period of 60 days after the prospectuses or sales literature for N&B's Funds or termination thereof, and (b) from N&B if it makes a make any such literature available to the public at any market in that security, unless, in either case, such of their offices. purchase is specifically authorized under the instru- 27. None of N&B's mutual funds will have offices in ment creating the fiduciary relationship, by court any building which is likely to be identified in the order, or by the law of the jurisdiction under which the public's mind with Applicant or its subsidiaries (exrelationship is administered. cept for Company and the French Joint Venture). 23. All business transactions between Applicant and 28. Applicant commits that the French Joint Venture N&B will be on an arm's-length, non-exclusive, and will conduct its activities in accordance with all of the non-preferential basis. Applicant will not solicit any joint venture commitments, with the exception of business for N&B or vice versa. There will be no commitments 10 and 11. advertising or marketing of each other's services. Neither Applicant nor its subsidiaries will refer cus- B. Investment Advisory Commitments tomers to N&B, and N&B will not refer customers to Applicant or its subsidiaries, in each case except for referrals to and by Company and the French Joint 1. Except as authorized by a client of Company or Venture. French Joint Venture, no confidential information 24. Applicant commits that it will waive any right to supplied by the client to Company and not to Appliselect general partners of N&B under New York law cant or a subsidiary of Applicant will be made and that the voting arrangements under the limited available to Applicant or any of its subsidiaries or partnership agreement will provide that Applicant will N&B. This commitment would not apply to informanot have the right to vote for or participate in the tion sharing between Company and French Joint selection of N&B's general partners or other manage- Venture. ment officials or vote for or direct other policies of 2. Company will disclose to each client of Company N&B; provided, however, that, consistent with exist- that Company is an affiliate of Applicant and N&B. ing Board interpretation (12 C.F.R. 225.2(p)(2)), this 3. Advice by Company to any client on an explicit fee commitment shall not affect or limit any voting rights basis will be rendered without regard to correspondent accorded to Applicant solely of the type customarily balances maintained by that client at Applicant or any provided by statute with regard to matters that would depository institution subsidiary of Applicant. significantly and adversely affect the rights or prefer- 4. Company's financial advisory activities will not ence of Applicant's limited partnership interest in encompass the performance of routine tasks or oper- N&B such as the issuance of additional amounts or ations for a client on a daily or continuous basis. classes of senior securities or other matters referenced 5. Company will not act as broker in connection with in the Board's interpretation. the purchase or sale of, and will not purchase in its 25. N&B's limited partnership agreement will provide sole discretion in a fiduciary capacity, any securities of that, in the event that the Board finds, in accordance any Neuberger & Berman Fund which invests in with section 225.31(c) of Regulation Y, that Applicant variable or fixed rate annuities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

644 Federal Reserve Bulletin • July 1994 CoreStates Financial Corp. performance of an activity meets the proper incident Philadelphia, Pennsylvania to banking test, the Board must determine whether the proposed activity may be reasonably expected to Order Approving Application to Acquire Nonbanking produce public benefits that outweigh any possible Company and Engage in Certain Investment adverse effects. Advisory Activities The Board has previously determined, by regulation, that acting as investment adviser to registered invest- CoreStates Financial Corp, Philadelphia, Pennsylvania ment companies and providing portfolio investment ("Applicant"), a bank holding company within the advice are closely related to banking.4 Applicant has meaning of the Bank Holding Company Act ("BHC committed that, except as discussed below, Company Act"), has applied for the Board's approval under will conduct these activities pursuant to the conditions section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and limitations specified in the Board's regulations.5 and section 225.23 of the Board's Regulation Y With respect to the proper incident to banking (12 C.F.R. 225.23) to acquire all of the voting shares of standard under section 4(c)(8) of the BHC Act, the Rittenhouse Financial Services, Inc., Radnor, Pennsyl- Board has authorized bank holding companies to provania ("Company"). Applicant proposes that Company vide discretionary investment management services continue serving as investment adviser to investment only to institutional customers, and only at the request companies and providing portfolio investment advice of the customer, due to the potential for adverse and management services, including discretionary in- effects arising from this activity.6 The Board's concern vestment management services, to institutional custom- about abuse and conflicts of interest, such as account ers, pursuant to sections 225.25(b)(4)(ii) and (iii) of churning or biased investment advice, is heightened Regulation Y.1 Applicant also proposes that Company when a bank holding company exercising discretion continue to provide discretionary investment manage- also provides execution services for the discretionary ment services to customers who do not qualify as account customer.7 In determining to limit discretioninstitutional customers under Regulation Y.2 ary investment management activities to institutional Notice of the application, affording interested per- customers, the Board reasoned that institutional cussons an opportunity to submit comments on the pro- tomers are generally financially sophisticated, less posal, has been published (59 Federal Register 19,722 likely in general than retail customers to place undue (1994)). The time for filing comments has expired, and reliance on investment advice, and better able to the Board has considered the application and all monitor the activities of, and potential conflicts of comments received in light of the factors set forth in interest from, a nonbank subsidiary providing discresection 4(c)(8) of the BHC Act. tionary investment management services.8 Applicant, with total consolidated assets of In this case, the Board notes that, as a registered $25.9 billion, is the 33d largest commercial banking investment adviser under the Investment Advisers organization in the United States, and operates bank Act, enforceable fiduciary responsibilities govern subsidiaries in Delaware, New Jersey and Pennsylva- Company's activities.9 In addition, Applicant has pronia.3 Applicant engages through its subsidiaries in a vided certain commitments intended to mitigate any broad range of banking and permissible nonbanking potential for abuse, conflicts of interest or customer activities. Company is registered as an investment confusion arising from the proposed activity.10 adviser under the Investment Advisers Act of 1940 (15 U.S.C. § 80b-l et seq.) ("Investment Advisers Act"). Section 4(c)(8) of the BHC Act provides that a bank 4. See 12 C.F.R. 225.25(b)(4)(ii) and (iii). holding company may, with Board approval, engage in 5. See id.; 12 C.F.R. 225.125. 6. See 12 C.F.R. 225.25(b)(15) n.17; 57 Federal Register 41,381 (1992). any activity that the Board determines to be "closely 7. See, e.g., J.P. Morgan & Co., Incorporated, 73 Federal Reserve related to banking or managing or controlling banks." Bulletin 810 (1987). The Board also must determine that the activity is a 8. See 57 Federal Register 41,381 (1992). 9. The Securities and Exchange Commission ("SEC") has deterproper incident to banking. In judging whether the mined that investment advisers are fiduciaries who owe their clients a series of fiduciary duties, including the duty of full disclosure of conflicts of interest, the duty of utmost and exclusive loyalty, the duty of best execution, and the duty to provide only suitable investment 1. Applicant proposes to effect the acquisition by organizing a advice. See 59 Federal Register 13,464 (1994) (citing regulatory first-tier subsidiary, RFS Target Corporation, and merging RFS Tar- precedent). In addition, the SEC has determined that an investment get Corporation with and into Company, with Company as the adviser's fiduciary duty to provide only suitable investment advice is surviving corporation. Applicant intends to maintain Company as a enforceable under the anti-fraud provision in section 206 of the separate and distinct entity, which will not hold itself out to the public Investment Advisers Act (15 U.S.C. § 80b-6). The SEC has sancas being affiliated with Applicant. tioned investment advisers for violating this duty and, recently, has 2. 12 C.F.R. 225.2(g). proposed to make this duty explicit in a new rule. Id. 3. Asset data are as of December 31, 1993. 10. A list of these commitments is set forth in the appendix to this order. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 645 These include a commitment that Company would produce public benefits that would outweigh possible not, without prior Board approval, execute trades for adverse effects under the proper incident to banking non-institutional discretionary account customers standard of section 4(c)(8) of the BHC Act. through Applicant, any affiliate of Applicant, or any Based on the foregoing and all the facts of record, entity currently affiliated with Company. Applicant including the commitments discussed above and all also has committed that Rittenhouse would not pur- other commitments made in connection with the apchase, for discretionary investment advisory ac- plication, the Board has determined to, and hereby counts, securities that are underwritten, dealt in, or does, approve the application.13 The Board's approval privately placed by Applicant or any of its affiliates, is specifically conditioned upon compliance with the other than obligations of the United States, unless commitments made in connection with this application directed to do so in writing by the customer prior to and with the conditions referred to in this order. The each such transaction and after disclosure of any such Board's determination also is subject to all the terms affiliated relationship involved in the transaction. In and conditions set forth in Regulation Y, including the Board's view, these commitments substantially those in section 225.4(d) and 225.23(b) of Regulaminimize the potential for adverse effects. tion Y, and to the Board's authority to require such In addition, Applicant has committed that Company modification or termination of the activities of a bank would not alter its name to one similar to that of holding company or any of its subsidiaries as the Applicant, would operate exclusively out of offices Board finds necessary to ensure compliance with, and that are not in the same building as, or otherwise to prevent evasion of, the provisions of the BHC Act geographically proximate to, any branch of Appli- and the Board's regulations and orders issued therecant's depository subsidiaries, and would not market under. For purposes of this action, these commitments Company's investment advisory services through any and conditions are deemed to be conditions imposed in such branch. Applicant also has committed that none writing by the Board in connection with its findings of Applicant's depository institution subsidiaries and decision, and, as such, may be enforced in prowould make referrals of non-institutional customers to ceedings under applicable law. Company. These commitments should minimize po- This transaction shall not be consummated later tential confusion by non-institutional customers about than three months after the effective date of this order, the nature of the products and services they are unless such period is extended for good cause by the receiving, as well as the difference between Company Board or by the Federal Reserve Bank of Philadelphia, and any CoreStates depository affiliate. acting pursuant to delegated authority. In every case involving a nonbanking acquisition By order of the Board of Governors, effective under section 4 of the BHC Act, the Board also must May 25, 1994. consider the financial condition and resources of the applicant and its subsidiaries and the effect of the Voting for this action: Action Committee composed of proposal on these resources.11 Based on all the facts of Chairman Greenspan and Governors LaWare, and Phillips. record, the Board has concluded that financial and Absent and not voting: Governors Kelley and Lindsey. managerial considerations are consistent with ap- JENNIFER J. JOHNSON proval of this proposal. Associate Secretary of the Board The Board also expects that Company's conduct of the proposed activities would enable Applicant to pro- Appendix vide added convenience and services to its customers, and would not significantly reduce the level of compe- Commitments tition among existing providers of these services.12 1. No investment transactions will be effected by Accordingly, based on all of the facts of record, includ- Company through Rittenhouse Financial Securities, ing the commitments provided by Applicant, the Board has concluded that the performance of the proposed Inc., Applicant or any affiliate of Applicant on behalf activities by Company can reasonably be expected to of discretionary investment advisory accounts maintained for customers who do not qualify as "institutional customers" as defined in the Board's Regula- 11. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Bulletin 155 (1987). 13. This approval is limited to Applicant's proposal to acquire 12. Although Company engages in investment advisory activities Company and for Company to engage in providing discretionary that are also provided by Applicant's affiliates, such activities have a investment management services subject to the terms and conditions national market with numerous alternative outlets for service. There- of this order. This order does not otherwise authorize Applicant to fore, the Board believes that the proposal is not likely to result in engage in providing discretionary investment management services to decreased or unfair competition. non-institutional customers without prior Board approval. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

646 Federal Reserve Bulletin • July 1994 tion Y (such customers hereinafter referred to, collec- (1) Acting as agent in arranging, and providing tively, as "Non-Institutional Customers" and, individ- investment advice in connection with, interest rate ually, as a "Non-Institutional Customer"). swap and currency swap transactions and certain 2. Fees charged by Company for its discretionary interest rate and currency risk-management prodinvestment advisory services to Non-Institutional ucts, such as caps, floors and collars; Customers will not be based upon the number of (2) Buying and selling, on the order of investors as account transactions executed. "riskless principal," foreign government securities 3. Company will not adopt a name v/hich is the same or issued by nations that are full members of the similar to Applicant's name, and its affiliation with Organization of Economic Cooperation and Devel- Applicant will not be advertised or promoted, unless opment; and and to the extent disclosure is required by law. (3) Acting as agent in executing, and providing 4. Company's offices will not be located in any of the investment advice in connection with, spot, forward branches of Applicant's depository institution subsid- and over-the-counter options transactions in the iaries and will not be located in the same building as, foreign exchange market. or be geographically proximate to, any of such branches. Notice of this application, affording interested per- 5. The services of Company will not be advertised, sons an opportunity to submit comments, has been promoted or otherwise marketed through any published (58 Federal Register 19,175 (1994)). The branches of Applicant's depository institution subsid- time for filing comments has expired, and the Board iaries, and no depository institution subsidiary of has considered the application and all comments re- Applicant will refer any Non-Institutional Customers ceived in light of the factors set forth in section 4(c)(8) to Company. of the BHC Act. 6. Company, Applicant and affiliates of Applicant will Applicant, with total consolidated assets equivalent not share confidential information regarding their re- to approximately $259.9 billion, is the fourth largest spective customers without the customer's consent. commercial banking organization in France.2 In the 7. Company will not purchase, for discretionary in- United States, Applicant operates branches in New vestment advisory accounts, securities for which Ap- York, New York; Chicago, Illinois; and Los Angeles, plicant or any affiliate of Applicant acts as under- California; and operates an agency in Dallas, Texas, writer, dealer, distributor, or placement agent, other and representative offices in Houston, Texas, and San than obligations of the United States, unless directed Francisco, California. to do so in writing by the customer prior to each such Company is a futures commission merchant registransaction and after disclosure of any such affiliated tered with the Commodity Futures Trading Commisrelationships involved in the particular transaction. sion ("CFTC") and a member of the National Futures Association ("NFA"), and as such, is subject to the Societe Generale recordkeeping, reporting, fiduciary standards, and Paris, France other requirements of the Commodity Exchange Act (7 U.S.C. § 1 et seq.), the CFTC, and the NFA.3 Order Approving an Application to Engage De Novo Company also intends to register as a broker-dealer in Certain Interest Rate and Currency Swap, with the Securities and Exchange Commission ' 'Riskless Principal,'' and Foreign-Exchange-Related ("SEC"), and to seek admission to the National Activities Association of Securities Dealers Inc. ("NASD"). Upon such registration with the SEC and admission to Societe Generale, Paris, France ("Applicant"), a for- the NASD, Company would be subject to the recordeign bank subject to the provisions of the Bank Hold- keeping, reporting, fiduciary standards, and other reing Company Act ("BHC Act"), has applied for the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the 2. Asset data are as of June 30, 1993. Board's Regulation Y (12 C.F.R. 225.23) to engage 3. The Board has previously authorized Company to engage in the following activities: de novo through its subsidiary, FIMAT Futures USA, (1) Executing without clearing, executing and clearing, and provid- Inc., Chicago, Illinois ("Company"),1 in the following ing investment advisory services with regard to exchange-traded nonbanking activities: derivative securities; (2) Providing securities brokerage and investment advisory services, both separately and on a combined basis, with respect to certain securities; and 1. Company is wholly owned by FIMAT International, Paris, (3) Buying and selling "bank-eligible" securities on the order of France, a wholly owned subsidiary of Applicant. Company also investors as a "riskless principal". maintains an office in New York, New York. See Societe Generale, 80 Federal Reserve Bulletin 156 (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 79 quirements of the Securities Exchange Act of 1934 Swap Activities (15 U.S.C. § 78a et seq.), the SEC, and the NASD. Applicant proposes to act as agent in arranging, and Riskless Principal Activities providing investment advice in connection with, interest rate swap and currency swap transactions and "Riskless principal" is the term used in the securities certain interest rate and currency risk-management business to refer to a transaction in which a broker- products, such as caps, floors and collars. The Board dealer, after receiving an order to buy (or sell) a has determined, by order, that these proposed activisecurity from a customer, purchases (or sells) the ties are closely related to banking and permissible for security for its own account to offset a contemporane- bank holding companies within the meaning of section ous sale to (or purchase from) the customer.4 "Risk- 4(c)(8) of the BHC Act.9 Applicant will not act as a less principal" transactions are understood in the principal or originator with respect to these instruindustry to include only transactions in the secondary ments, but will act solely as agent or broker. Applicant market. Thus, Applicant proposes that Company proposes to engage in these activities in accordance would not act as a "riskless principal" in selling with all the provisions and conditions set forth in the securities at the order of a customer that is the issuer Board's prior orders relating to the proposed swap and of the securities to be sold, or in any transaction where swap advisory activities.10 Company has a contractual agreement to 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 market. The Board previously has determined that, subject that will clearly identify all "riskless principal" transactions, and that to a number of prudential limitations that address the Company will not engage in any "riskless principal" transactions for potential for conflicts of interests, unsound banking any securities carried in its inventory. When acting as a "riskless principal", Company will only engage in transactions in the secondary practices, and other adverse effects, the proposed market, and not at the order of a customer that is the issuer of the riskless principal activities are closely related to bank- securities to be sold; will not act as "riskless principal" in any ing within the meaning of section 4(c)(8) of the BHC transaction involving a security for which it makes a market; and will Act.5 In those orders, the Board also found that not hold itself out as making a market in the securities that it buys and sells as a "riskless principal". Moreover, Company will not engage in purchasing and selling securities on the order of inves- "riskless principal" transactions on behalf of its foreign affiliates that tors as a "riskless principal" does not constitute engage in securities dealing activities outside the United States and will not act as "riskless principal" for registered investment company underwriting and dealing in securities for purposes of securities. In addition, Company will not act as a "riskless principal" section 20 of the Glass-Steagall Act (12 U.S.C. § 377), with respect to any securities of investment companies that are and that revenue derived from such activities is not advised by Applicant or any of its affiliates. 9. The Sanwa Bank, Limited, 77 Federal Reserve Bulletin 64 subject to the 10-percent revenue limitation on under- (1991); C&SISovran Corporation, 76 Federal Reserve Bulletin 857 writing and dealing in ineligible securities.6 In order to (1990); The Fuji Bank, Limited, 76 Federal Reserve Bulletin 768 address the potential for conflicts of interests, unsound (1990); The Sumitomo Bank, Limited, 75 Federal Reserve Bulletin 582 (1989). banking practices, or other adverse effects, Applicant 10. In order to minimize any possible conflicts of interests between has committed that Company will conduct its "riskless Company's role as agent or broker in swaps and related transactions and its role as advisor to potential counterparties, Applicant has principal" activities in a manner consistent with the committed that Company will disclose to each customer the fact that limitations, methods, and procedures established by Company may have an interest as a counterparty agent or broker in the Board in prior orders,7 as modified to reflect the course of action ultimately taken by the customer. Also, in any Applicant's status as a foreign bank.8 case in which an affiliate of Company has an interest in a specific transaction as a principal or intermediary, Company will advise its customer of that fact before recommending participation in that transaction. In any transaction in which Company arranges a swaps transaction between an affiliate and a third party, Company will 4. See Securities Exchange Commission Rule 10b-10. 17 C.F.R. inform the third party that it is acting on behalf of the affiliate. In 240.10(a)(8)(i). addition, Company's advisory services will be offered only to sophis- 5. See J.P. Morgan & Company Incorporated, 76 Federal Reserve ticated customers who would be unlikely to place undue reliance on Bulletin 26 (1990); Bankers Trust New York Corporation, 75 Federal investment advice received and would be better able to detect Reserve Bulletin 829 (1989). investment advice motivated by self-interest. Moreover, Company 6. Id. will not make available to Applicant or any of its subsidiaries 1. Id. confidential information received from Company's clients except with 8. See Sumitomo Bank Limited, 77 Federal Reserve Bulletin 339 the consent of the client, and disclosure will always be made to each (1991); Creditanstalt-Bankverein, 77 Federal Reserve Bulletin 183 potential client of Company that Company is an affiliate of Applicant. (1991); The Royal Bank of Scotland Group PLC, 76 Federal Reserve Advice rendered by Company on an explicit fee basis will be rendered Bulletin 866 (1990). As detailed more fully in these orders, in addition without regard to correspondent balances maintained by the customer to the commitments imposed by the Board in connection with under- of Company at Applicant or any depository subsidiary of Applicant. writing and dealing in securities, Applicant has made a number of Finally, Company's financial advisory activities shall not encompass commitments regarding the conduct of this activity. In particular, the daily or continuous performance of routine tasks or operations for a customer. Applicant has committed that Company will maintain specific records Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

648 Federal Reserve Bulletin • July 1994 Foreign Exchange Advisory and Execution Services In order to address the potential for conflicts of interests that could arise from conducting the pro- Section 225.25(b)(17) of the Board's Regulation Y posed foreign exchange activities, Applicant has comauthorizes bank holding companies to engage in for- mitted that Company would only provide such sereign exchange advisory and transactional services, vices to sophisticated institutional customers with provided the activities are conducted in a separately sufficient expertise to monitor trading activity and incorporated subsidiary that does not execute foreign prevent churning. In addition, Company will not exerexchange transactions.11 This regulation does not au- cise any investment discretion on behalf of such custhorize a foreign exchange advisory company simulta- tomers in foreign exchange-related matters, and will neously to execute transactions, because of concerns only execute a foreign exchange transaction with the regarding potential conflicts of interests that could prior authorization of the client. Finally, Company will arise from combining the functions of giving advice receive a fee for investment services it provides, but and executing transactions relating to that advice.12 will not charge its customers a fee for executing The Board has, by order, permitted an applicant in transactions in foreign exchange. limited circumstances to combine the functions of providing foreign exchange advisory services and ex- Other Considerations ecuting transactions in foreign exchange in the same subsidiary. In approving Banca Commerciale, the In every case involving a nonbanking acquisition un- Board concluded that the potential adverse effects that der section 4 of the BHC Act, the Board considers the could result from the proposal were limited because financial condition and resources of Applicant and its Banca Commerciale was conducting the proposed subsidiaries and the effect of the proposal on these foreign exchange activities as a relatively small part of resources.16 Applicant's consolidated Tier 1 and total its securities brokerage business, and would be exerisk-based capital ratios meet applicable risk-based cuting transactions in foreign exchange only for sostandards under the Basle Accord. In view of these phisticated customers, and only for purposes of hedgand other facts of record, the Board has determined ing customer positions in foreign securities.13 that the financial factors are consistent with approval Applicant proposes in this case to provide invest- of this application. Managerial resources of Applicant ment advice relating to, and execute transactions in, and its subsidiaries also are consistent with approval. foreign exchange on behalf of customers for other than Consummation of the proposal would provide added hedging purposes.14 Applicant asserts that its pro- convenience to Applicant's customers. In addition, posal, as structured, would pose no more risk to the Board also expects that the de novo entry of Company, or potential for abusing client accounts, Applicant into the market for these services would than permitting the execution of foreign exchange increase the level of competition among providers of transactions for customers' hedging needs. In this these services. Accordingly, the Board has determined regard, the Board notes that the proposed services are that the performance of the proposed activities by analogous to the full-service brokerage activities con- Company can reasonably be expected to produce ducted by bank holding companies.15 benefits to the public. Under the framework established in this and prior decisions, the Board believes that the public benefits resulting from this proposal can reasonably be ex- 11. See 12 C.F.R. 225.25(b)(17). pected to outweigh any adverse effects, such as undue 12. See Banca Commerciale Italiana S.p.A., 76 Federal Reserve Bulletin 649, (1990) ("Banca Commerciale"). concentration of resources, decreased or unfair com- 13. See id. Specifically, Banca Commerciale proposed that its petition, conflicts of interests, or unsound banking subsidiary: practices, that may result from the proposal. (1) Would provide foreign exchange services on behalf of customers as necessary to facilitate securities brokerage transactions for Based on the above, the Board has determined to, international customers and to permit these customers to hedge and hereby does, approve this application subject to foreign exchange risks related to positions in foreign securities; (2) Would not hold itself out as a foreign exchange business, except all the terms and conditions set forth in this order and in connection with its securities brokerage services; and in the above-noted Board orders that relate to these (3) Did not expect to execute foreign exchange transactions on activities. The Board's determination also is subject to behalf of its customers for investment or speculative purposes or to advise its customers with respect to foreign exchange transactions all the conditions set forth in the Board's Regulation for such purposes. Y, including those in sections 225.4(d) and 225.23(b)(3), 14. Company would not engage in any foreign exchange activities for its own account. 15. In particular, a full-service brokerage subsidiary of a bank holding company may advise a client to buy a particular security for 16. 12 C.F.R. 225.24; Fuji Bank, Limited, 75 Federal Reserve investment purposes, then purchase the security on behalf of the Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve customer. See 12 C.F.R. 225.25(b)(15). Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 649 and to the Board's authority to require modification or set forth in the Appendix to this order. Company termination of the activities of a bank holding company would not trade in the proposed derivative instruments or any of its subsidiaries as the Board finds necessary to for its own account for any purpose, and would not assure compliance with, and to prevent evasion of, the trade in the physical commodities themselves, except provisions and purposes of the BHC Act and the when necessary to assist in the orderly resolution of an Board's regulations and orders issued thereunder. The account.3 Company would provide the proposed FCM commitments and conditions relied on by the Board in services only to institutional customers and natural reaching this decision are deemed to be conditions persons whose individual net worth (or joint net worth imposed in writing by the Board in connection with its with spouse) exceeds $1 million.4 Company would not findings and decision and, as such, may be enforced in provide such services to retail brokerage customers, proceedings under applicable law. This transaction locals, or market makers. shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of New York, acting pursuant to dele- Consistent with previously approved proposals to engage in these gated authority. activities, Applicant must provide at least 20 days prior written notice to the Federal Reserve System before: By order of the Board of Governors, effective (i) Engaging in FCM activities with respect to additional ex- May 16, 1994. change-traded derivative contracts on agricultural, energy, or non-precious metal commodities (unless the Board has approved the contracts for any other bank holding company under the BHC Voting for this action: Chairman Greenspan and Governors Act) to assure that such contracts are comparable to previously Kelley, LaWare, Lindsey, and Phillips. approved contracts; or (ii) Becoming a clearing or non-clearing member of any commodities exchange that previously has been reviewed and approved JENNIFER J. JOHNSON by the Board under the BHC Act. Associate Secretary of the Board However, Applicant must obtain prior Board approval before becoming a clearing or non-clearing member of any commodities Societe Generale exchange that has not been reviewed and approved by the Board under the BHC Act. Paris, France Applicant also proposes to provide execution-only and clearingonly services to customers pursuant to customer agreements and "give-up agreements" that would afford the clearing FCM the right to Order Approving an Application to Engage in refuse to clear customer trades that the clearing FCM reasonably Futures Commission Merchant Activities deems unsuitable in light of market conditions or a customer's financial situation or objectives. These activities have been approved by the Board. See Northern Trust; J.P. Morgan & Co. Incorporated, Societe Generale, Paris, France ("Applicant"), a for- 80 Federal Reserve Bulletin 151 (1994) ("J.P. Morgan"). Company eign bank subject to the provisions of the Bank Hold- would conduct its proposed execution-only and clearing-only activities subject to the limitations, conditions and commitments relied on ing Company Act ("BHC Act"), has applied under by the Board in J.P. Morgan. In this regard, Applicant has committed section 4(c)(8) of the BHC Act (12 U.S.C. that Company will not serve as the primary or qualifying clearing firm § 1843(c)(8)) and section 225.23 of the Board's Regu- for any unaffiliated parties, and will subject its clearing-only and execution-only customers to the same credit review procedures set lation Y (12 C.F.R. 225.23), to engage through its forth in J.P. Morgan. indirect subsidiary, FIMAT Futures USA, Inc., Chi- 3. In those circumstances when a customer defaults on a contract cago, Illinois ("Company").1 In providing futures after the contract expires and Company is required to make or take delivery of the underlying commodity, or where Company exercises commission merchant ("FCM") execution, clearance, its rights to liquidate a customer's account, Company is permitted to and advisory services to customers with respect to take those actions necessary to mitigate its damages, including acting futures and options on futures on non-financial com- for its own account in retendering or redelivering the commodity, entering into an exchange-for-physical transaction, or entering into an modities.2 A complete list of the proposed contracts is offsetting transaction in the cash market, provided these or other appropriate actions are taken as soon as commercially practicable. 4. Applicant anticipates that following consummation of the proposal, a small percentage of Company's business would be conducted on behalf of managed commodity funds (or commodity pools), which 1. Company is wholly owned by FIMAT International Bank, Paris, are regulated by the Commodity Futures Trading Corporation and the France, a wholly owned subsidiary of Applicant. Company, which National Futures Association. With the exception of commodity pools also maintains an office in New York, New York, currently engages in organized abroad, owned entirely by non-U.S. persons, and that various futures commission merchant and securities-related activities. conduct substantially all of their business outside of the United States, See Societe Generale 80 Federal Reserve Bulletin 646 (1994). none of Company's managed commodity fund customers would be 2. Company may conduct the proposed FCM activities through owned or sponsored by, or otherwise affiliated with, Applicant. omnibus trading accounts established in its own name with clearing Company will not act as a commodity pool operator without prior members of exchanges on which Company would not itself be a Board approval, and Applicant will not engage in commodity pool clearing member. See Northern Trust Corporation, 79 Federal Re- operator activities of any kind inside the United States without prior serve Bulletin 723, 724 (1993) ("Northern Trust"). Applicant has Board approval. Company will apply its standard credit approval committed that, with respect to Company's omnibus account custom- procedures to its commodity pool customers. Applicant has commiters, Company will employ the same credit approval and risk manage- ted to provide the Federal Reserve System with prior notice of any material change in the characteristics of Company's customer base. ment procedures developed for its executing and clearing activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

650 Federal Reserve Bulletin • July 1994 Notice of the application, affording interested per- The Board expects that the de novo entry of Applisons an opportunity to submit comments, has been cant into the market for the proposed services would published (59 Federal Register 19,175 (1994)). The provide added convenience to Applicant's customers, time for filing comments has expired, and the Board and would increase the level of competition among has considered the application and all comments re- existing providers of these services. To address the ceived in light of the factors set forth in section 4(c)(8) potential adverse effects of the proposed activities, of the BHC Act. Applicant has committed to conduct the proposed Applicant, with total consolidated assets equivalent activities subject to the same rules and procedures to approximately $260 billion, is the fourth largest imposed by the Board on FCM activities in derivatives commercial banking organization in France.5 In the of financial commodities.9 In addition, in order to United States, Applicant operates branches in New minimize risks associated with the delivery of non- York, New York; Chicago, Illinois; and Los Angeles, financial commodities, Applicant has committed to California; an agency in Dallas, Texas; and represen- take a number of steps in the event one of Company's tative offices in Houston, Texas; and San Francisco, customers has an open position in a contract after the California. contract has expired, and the customer is unable or Company6 is an FCM registered with the Commod- unwilling to make or take delivery.10 ity Futures Trading Commission ("CFTC"), and a Based on the commitments made by Applicant member of the National Futures Association regarding its conduct of the proposed activities, the ("NFA"), and, therefore, is subject to the recordkeep- limitations on the activities noted in this order, and all ing, reporting, fiduciary standards, and other require- the facts of record, the Board has determined that the ments of the Commodity Exchange Act (7 U.S.C. § 1 performance of the proposed activities by Applicant et seq.), the CFTC, and the NFA. In addition, the could reasonably be expected to produce public ben- Board recently granted Company authority to engage efits that would outweigh the possible adverse effects in certain securities-related activities,7 and, in connec- that may result from the proposal. tion therewith, Company intends to become a broker- In every case under section 4 of the BHC Act, the dealer registered with the Securities and Exchange Board must consider the financial condition and re- Commission ("SEC"), and a member of the National sources of the applicant and its subsidiaries and the Association of Securities Dealers, Inc. ("NASD"). effect of the proposal on these resources.11 Based on Accordingly, Company will become subject to the the facts of this case, the Board concludes that finanrecordkeeping, reporting, fiduciary standards, and cial considerations are consistent with approval of this other requirements of the Securities Exchange Act of application. The managerial resources of Applicant 1934 (15 U.S.C. § 78a et seq.), the SEC, and the also are consistent with approval. NASD. Based on the foregoing and all the facts of record, The Board previously has determined that providing the Board has determined to, and hereby does, ap- FCM execution, clearance and advisory services with prove the application subject to all the terms and respect to non-financial commodity derivatives are conditions set forth in this order, and in the Board activities closely related to banking within the meaning regulations and orders that relate to these activities. of section 4 of the BHC Act, and are, therefore, The Board's determination also is subject to all the permissible activities for bank holding companies.8 In terms and conditions set forth in the Board's Regulaorder to approve this application, the Board also must tion Y, including those in sections 225.4(d) and determine that the performance of the proposed activ- 225.23(b), and to the Board's authority to require ities by Applicant can reasonably be expected to modification or termination of the activities of a bank produce benefits to the public, such as greater convenience, increased competition and gains in efficiency, that outweigh possible adverse effects, such as undue 9. See 12 C.F.R. 225.25(b)(18). Applicant also has committed that Company will not enter into any impermissible tying arrangements concentration of resources, decreased or unfair comwith any lending affiliates, and that all customer trading positions of petition, conflicts of interest, and unsound banking Company will be marked to market at least daily. practices. 10. Among the steps Applicant will take are: (1) Retendering the commodity; (2) Offsetting the customer's open position through an exchangefor-physical transaction; 5. Asset data are as of June 30, 1993. (3) Offsetting the commodity in the cash market; and 6. Company is currently a clearing member on the Chicago Board of (4) Seeking to avoid delivery through some other mechanism. See Trade and Chicago Mercantile Exchange, and Company intends to Bank of Montreal, 79 Federal Reserve Bulletin 1049, 1052 n.21 seek membership on the New York Mercantile Exchange to conduct (1993). the proposed activities. 11. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve 7. See Societe Generate, 80 Federal Reserve Bulletin 156 (1994). Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve 8. See J.P. Morgan. Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 651 holding company or any of its subsidiaries as the Gulf Coast Unleaded Gasoline Futures Board finds necessary to assure compliance with, and New York Harbor Unleaded Gasoline Futures to prevent evasion of, the provisions of the BHC Act, Options on New York Harbor Unleaded Gasoline and the Board's regulations and orders issued there- Futures under. The Board's decision is specifically conditioned Heating Oil Futures on compliance with all the commitments made by Options on Heating Oil Futures Applicant in this application, including the commit- Propane Futures ments discussed in this order and the conditions set Natural Gas Futures forth in this order and in the above noted Board Options on Natural Gas Futures regulations and orders. For purposes of this action, these commitments and conditions shall be deemed to Singapore International Monetary Exchange be conditions imposed in writing by the Board in Limited: connection with its findings and decisions, and, as such, may be enforced in proceedings under applicable High Sulphur Fuel Oil Futures law. Gas Oil Futures This transaction shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Stichting Prioriteit ABN AMRO Holding Board or by the Federal Reserve Bank of New York, Stichting Administratiekantoor ABN AMRO pursuant to delegated authority. Holding By order of the Board of Governors, effective ABN AMRO Holding N.V. May 23, 1994. ABN AMRO Bank N.V. all of Amsterdam, The Netherlands Voting for this action: Chairman Greenspan and Governors ABN AMRO North America, Inc. Kelley, Lindsey, and Phillips. Absent and not voting: Gov- Chicago, Illinois ernor La Ware. Order Approving the Acquisition of a Savings and JENNIFER J. JOHNSON Loan Holding Company Associate Secretary of the Board Stichting Prioriteit ABN AMRO Holding, Stichting Appendix Administratiekantoor ABN AMRO Holding, and ABN AMRO Holding N.V., all of Amsterdam, The Nether- Chicago Board of Trade lands, foreign banking organizations subject to the Bank Holding Company Act ("BHC Act"); and ABN Corn Futures AMRO Bank N.V., Amsterdam, The Netherlands, Options on Corn Futures and ABN AMRO North America, Inc., Chicago, Illi- Wheat Futures nois ("AMRO North America"), bank holding com- Options on Wheat Futures panies within the meaning of the BHC Act (collective- Soybean Futures ly, "Applicant"), have applied under section 4(c)(8) of Options on Soybean Futures the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) Chicago Mercantile Exchange: to acquire Cragin Financial Corp., Chicago, Illinois ("Cragin"), and thereby indirectly acquire Cragin's Live Cattle Futures savings association subsidiary, Cragin Federal Bank Options on Live Cattle Futures for Savings, Chicago, Illinois ("Cragin Federal").1 Feeder Cattle Futures Notice of the application, affording interested per- Options on Feeder Cattle Futures sons an opportunity to submit comments, has been Live Hog Futures published (58 Federal Register 57,612 (1993)). The Options on Live Hog Futures New York Mercantile Exchange: 1. Applicant would acquire Cragin by merging Cragin with and into Cragin Acquisition Company ("Company"), a Delaware corporation that is a wholly owned subsidiary of AMRO North America, with Light Sweet Crude Oil Futures Company surviving the merger. After its acquisition by Applicant, Cragin Federal would change its name to LaSalle Cragin Bank, F.S.B. Options on Light Sweet Crude Oil Futures The Office of Thrift Supervision, Cragin Financial's primary federal Sour Crude Oil Futures regulator, has not yet acted on this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

652 Federal Reserve Bulletin • July 1994 time for filing comments has expired, and the Board thrift organization in Illinois, controlling deposits of has considered the application and all comments re- $2.1 billion, representing 4.1 percent of total deposits ceived in light of the factors set forth in section 4(c)(8) in thrift institutions in the state. Upon consummation of the BHC Act. of this proposal, Applicant would remain the third The Board has determined that the operation of a largest depository organization in Illinois. Applicant savings association by a bank holding company is and Cragin compete in the Chicago, Illinois, banking closely related to banking for purposes of section market.8 After considering the competition offered by 4(c)(8) of the BHC Act. 12 C.F.R. 225.25(b)(9). In other depository institutions in this market,9 the nummaking this determination, the Board requires savings ber of competitors that would remain in the market, associations acquired by bank holding companies to the small increase in market concentration as meaconform their direct and indirect activities to those sured by the Herfindahl-Hirschman Index ("HHI"),10 permissible for bank holding companies under section and other facts of record, the Board has concluded 4 of the BHC Act and Regulation Y.2 Applicant has that consummation of the proposal would not result in committed to conform all activities of Cragin to the a significantly adverse effect on competition in the requirements of section 4 of the BHC Act and Regu- Chicago banking market or any other relevant banking lation Y.3 market. In considering an application under section 4(c)(8) of the BHC Act, the Board is required to determine that Community Reinvestment Act Considerations the applicant's ownership and operation of the acquired company "can reasonably be expected to pro- In considering an application to acquire a savings duce benefits to the public, such as greater conve- association under section 4 of the BHC Act, the Board nience, increased competition, or gains in efficiency, reviews the records of performance of the relevant that outweigh possible adverse effects, such as undue institutions under the Community Reinvestment Act concentration of resources, decreased or unfair com- (12 U.S.C. § 2901 et seq.) ("CRA").11 The CRA repetition, conflicts of interests, or unsound banking quires the Federal financial supervisory agencies to practices."4 encourage financial institutions to help meet the credit Applicant, with total consolidated assets of approx- needs of the local communities in which they operate, imately $253 billion,5 controls eight depository institutions6 in Illinois and one commercial bank in New York. Applicant is the third largest depository institu- 8. The Chicago banking market is defined as Cook, Lake, and DuPage Counties, all in Illinois. tion in Illinois, controlling deposits of $10.2 billion, 9. Market share data before consummation are based on calcularepresenting 5.5 percent of total deposits in depository tions in which the deposits of thrift institutions are included at institutions in the state.7 Cragin is the third largest 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to 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 Cragin would be controlled by a 2. Cragin engages in the sale as agent of insurance products in commercial banking organization upon consummation of this pro- Illinois under the Home Owners' Loan Act that would not be posal, these deposits are included at 100 percent in the calculation of permissible for bank holding companies under section 4 of the BHC Applicant's post-consummation share of market deposits. See Nor- Act. These activities include the sale of life, health, and property and west Corporation, 78 Federal Reserve Bulletin 452 (1992); First casualty insurance and will be transferred to a subsidiary of Appli- Banks, Inc., 76 Federal Reserve Bulletin 669, 670 n.9 (1990). cant's thrift subsidiary, LaSalle Talman Bank, F.S.B., Chicago, 10. The HHI would increase by 16 points to 569. Under the revised Illinois ("Talman"), upon consummation of the proposal. The Board Department of Justice Merger Guidelines, 49 Federal Register 26,823 has determined that Talman is a Qualified Savings Association within (June 29, 1984), a market in which the post-merger HHI is below 1000 the meaning of section 4(i)(3) of the BHC Act and is, therefore, is considered unconcentrated. The Justice Department has informed entitled to engage in these types of insurance agency activities in the Board that a bank merger or acquisition generally will not be Illinois. See Stichting Prioriteit ABN AMRO Holding, 78 Federal challenged (in the absence of other factors indicating anticompetitive Reserve Bulletin 296 (1992) ("AMROITalman"). effects) unless the post-merger HHI is at least 1800 and the merger 3. Cragin engages in real estate activities that are not permissible for increases the HHI by more than 200 points. The Justice Department bank holding companies under the BHC Act. Applicant has commit- has stated that the higher than normal HHI thresholds for screening ted that all impermissible real estate activities will be divested or bank mergers for anticompetitive effects implicitly recognize the terminated within two years of consummation of the proposal, that no competitive effect of limited-purpose lenders and other non-deposinew impermissible projects or investments will be undertaken during tory financial entities. this period, and that capital adequacy guidelines will be met excluding 11. The Board has determined that the CRA by its terms generally specified real estate investments. Applicant also has committed that does not apply to applications by bank holding companies to acquire any impermissible securities activities conducted by Cragin or its nonbanking companies under section 4(c)(8) of the BHC Act. The subsidiaries will cease on or before consummation of this proposal. Mitsui Bank, Ltd., 76 Federal Reserve Bulletin 381 (1990). The Board 4. 12 U.S.C. § 1843(c)(8). also has stated that, unlike other companies that may be acquired by 5. Asset data are as of December 31, 1993. bank holding companies under section 4(c)(8) of the BHC Act, savings 6. In this context, depository institution includes commercial banks, associations are depository institutions, as that term is defined in the savings banks, and savings associations. CRA, and thus, acquisitions of savings associations are subject to 7. State commercial bank and thrift deposit data are as of June 30, review under the express terms of the CRA. Norwest Corporation, 76 1992. Federal Reserve Bulletin 873 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 653 consistent with the safe and sound operation of such bank of AMRO North America, received a "satisfacinstitutions. To accomplish this end, the CRA requires tory" rating from its primary federal regulator, the the appropriate Federal supervisory authority to "as- Office of the Comptroller of the Currency ("OCC"), at sess the institution's record of meeting the credit its most recent CRA examination as of May 7, 1993.16 needs of its entire community, including low- and All the other AMRO North America subsidiary banks moderate-income neighborhoods, consistent with the received "outstanding" or "satisfactory" ratings from safe and sound operation of such institution," and to their primary regulators in their most recent CRA take that record into account in its evaluation of bank examinations. Cragin Federal received a "satisfactoholding company applications.12 ry" CRA rating in its most recent examination by its In connection with this application, the Board has primary regulator, the OTS, as of June 1, 1993.17 reviewed comments received from several organizations ("Protestants") alleging that Applicant and Cra- B. Applicant's CRA Performance Record gin have failed to meet the credit needs of residents of low- and moderate-income census tracts in Chicago, Lending in low- and moderate-income areas. Tal- Illinois, with predominately minority populations.13 man's most recent CRA performance examination Specifically, Protestants contend that the percentage concluded that the geographic distribution of its credit of loans made by Cragin and Talman in predominately extensions reflected a reasonable penetration in all minority census tracts is disproportionately small in segments of its delineated community, including lowlight of the number of minority residents in those and moderate-income neighborhoods.18 This examinatracts. Protestants also maintain that Talman's ascer- tion also found no evidence of any pattern or practice tainment efforts do not include groups representative of illegal discriminatory credit practices or other pracof low- and moderate-income communities in Chicago. tices designed to discourage credit applications. In addition, Protestants allege that Cragin Federal Housing-related lending data indicate that Talman does not maintain lending offices at its deposit-taking made 68.9 percent of its total loans within its delineated facilities located in low- and moderate-income areas of community in 1992. Of these loans, 21 percent were to Chicago and that its CRA service area is drawn to minority borrowers, and approximately 32 percent exclude minority areas of Chicago. were to low- or moderate-income borrowers. Data The Board has carefully reviewed the CRA perfor- submitted under the Home Mortgage Disclosure Act mance records of Applicant and Cragin and their ("HMDA") indicate that the number of loan applicasubsidiary depository institutions, the comments re- tions received from African-Americans and the number ceived and Applicant's responses to those comments, of loans made to African-Americans increased from and all other relevant facts of record in light of the 1991 to 1992,19 and the denial rate for African-Ameri- CRA, the Board's regulations, and the Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act ("Agency CRA Statement").14 16. The OCC raised LaSalle National's performance rating from its previous rating of "needs to improve." LaSalle National's progress in addressing the weaknesses in its CRA performance through the A. CRA Performance Examinations initiatives previously discussed by the Board in AMRO/Talman, supra, has been monitored through quarterly reporting by Applicant to the Federal Reserve Bank of Chicago ("Reserve Bank"). The The Agency CRA Statement provides that a CRA Board believes that these steps have satisfactorily resolved the bank's CRA performance issues, and, therefore, Applicant is no longer examination is an important and often controlling required to submit quarterly reports to the Reserve Bank. factor in the consideration of an institution's CRA 17. This examination concluded that Cragin Federal's delineated record and that these reports will be given great weight CRA community did not exclude low- and moderate-income neighborhoods and that loan origination data indicated reasonable penetrain the applications process.15 In this regard, the Board tion of all segments of its community. Examiners noted that more than notes that Talman received an "outstanding" rating one-third of the thrift's housing-related loans were made to borrowers located in low- and moderate-income zip codes, and no evidence of from its primary federal regulator, the Office of Thrift illegal discriminatory practices or practices intended to discourage Supervision ("OTS"), at its most recent examination applications were found. Although loan applications are accepted at for CRA performance as of March 1, 1993. In addition, only seven out of 26 of Cragin Federal's branch offices, each office makes loan application kits available. In addition, loan originators are LaSalle National Bank ("LaSalle National"), the lead available to meet loan applicants at any of the thrift's 27 offices or at the applicant's home. 18. The examiners noted that Talman's 1992 analysis of the geo- 12. 12 U.S.C. § 2903. graphic distribution of its credit extensions and denials focused only 13. The Board also received comments from other commenters on Cook County. opposing this application. After discussions with Applicant, these 19. The number of housing-related loans applications from Africancommenters withdrew their protests and supported the application. Americans increased by 16.2 percent from 1991 to 1992, and the 14. 54 Federal Register 13,742 (1989). number of loans made to African-Americans increased by 53 percent 15. Id. at 13,745. from 1991 to 1992. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

654 Federal Reserve Bulletin • July 1994 cans decreased from 32 to 14 percent over the same period January 1991 to February 1993. The thrift is the period. HMDA data also show that Talman makes leading lender under the various programs of the loans in low- and moderate-income census tracts with Illinois Housing Development Authority, originating ethnically diverse populations.20 In 1992, 37 percent of 467 loans totalling $36.2 million during 1991 and 1992. the housing-related loans originated by Talman in low- In addition, in the first 9 months of its participation in and moderate-income census tracts were made in pre- the Illinois State Treasurer's HomeStart program, dominantly minority census tracts and 61 percent were which is targeted to first-time home buyers and lowmade in integrated census tracts. In addition, Talman and moderate-income individuals, Talman originated made a higher percentage of its housing-related loans to 269 loans totaling $21.9 million. African-Americans and to borrowers in low- and mod- Talman also is a participant in several new lending erate-income census tracts in 1992 than lenders report- programs such as the Federal Home Loan Bank of ing HMDA data in the market in the aggregate.21 Chicago's Affordable Housing Program/Neighborhood Talman has in place steps designed to increase the Housing Services of Chicago, Inc., Program, which number of loans made to low- and moderate-income provides for the acquisition of properties from the and minority borrowers. Under its "second look" Department of Housing and Urban Development, the program, all denied loans are carefully documented to Resolution Trust Corporation, and the Veterans Adexplain the reason for the decision. A denied loan can ministration.23 Talman also has a $10 million investbe resubmitted to the underwriting department (where ment in Community Investment Corporation, a notthe denial decision is initially made) with the recom- for-profit mortgage banker engaged in the acquisition mendations of the loan officer and manager. An under- and rehabilitation of multi-unit apartment buildings writing supervisor will review the loan application file, whose tenants are primarily minority and low- and and if the loan is a marginal risk but might still qualify, moderate-income individuals. it is sent to a member of the credit committee for a final LaSalle National has made special efforts to indecision. From January to June 1993, approximately crease its lending to small businesses within its delin- 20 percent of originally denied loan applications were eated community. The bank's Business Banking Diviapproved. sion makes use of the contacts developed by the Access to Talman's lending services is provided bank's Community Development Department, which through Talman's 27 financial and mortgage offices. is responsible for ascertaining the credit needs of small Loan applications are accepted at each office.22 The businesses in its community through a variety of thrift's most recent CRA performance examination calling programs, focus groups, and market research. concluded that Talman had branch offices accessible In response to its ascertainment efforts, LaSalle Nato all segments of the institution's local community. tional developed a line of credit for businesses with Talman participates in a number of other programs under $1 million in annual sales and began to offer designed to assist in meeting credit needs for housing- bridge financing for affordable housing tax credit synrelated loans. For example, Talman was a co- dications. At the end of 1992, LaSalle National also developer of the FNMA Community Home Buyers had $100.4 million of housing rehabilitation loans Program, which began as a five city pilot program and outstanding. is now national. This program permits low down Ascertainment and community group contact. Talpayments and higher-than-normal debt-to-income ra- man' s most recent CRA performance examination tios. From January 1 through October 31, 1993, Tal- characterized its ascertainment efforts as excellent, man originated loans totalling $25.5 million under this and commended the thrift's meaningful, ongoing conprogram. Talman is also an active participant in gov- tact with a wide range of individuals, groups and ernment guaranteed loan programs. Talman originated organizations representing the local community, gov- 553 FHA/VA loans totalling $45.4 million during the ernmental units, and not-for-profit housing organizations. In Chicago, these groups include the Greater Southwest Development Corporation, Eighteenth 20. Applicant states that Talman made 35 loans totalling $2.3 million Street Development Corporation, Pilsen Neighbors in the predominantly African-American South Lawndale neighbor- Community Council, and the North River Commishood of Chicago in 1992, and made 4.6 percent of all loans in that sion. Talman also has an ongoing working relationship neighborhood from 1986-1991. 21. In 1992, Talman made 5.3 percent of all housing-related loans that were made by all lenders in the Chicago MSA, but it made 9 percent of the total number of such loans made to African- Americans in the Chicago MSA and it made 6.1 percent of the total 23. The acquired properties are rehabilitated and leased to low- and number of such loans made in low- and moderate-income census moderate-income borrowers under a lease-purchase agreement in tracts in the Chicago MSA. which borrowers acquire direct ownership in three years. Through 22. Talman also maintains a staff of 78 loan originators who actively October 1993, Talman had made over $1 million in loans under this solicit loan applications throughout its delineated community. program. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 655 with the National Training and Information Center compliance program pursuant to which each subsid- ("NTIC"), an umbrella group of community organi- iary must submit a CRA action plan describing goals zations focused on affordable housing and CRA. for training and lending. As a subsidiary of AMRO Talman worked with NTIC and FNMA to develop North America, Cragin Federal would develop such a the Community Home Buyers Program. In addition, plan, and personnel from AMRO North America and Talman assisted in the formation of Neighborhood Talman would assume oversight responsibilities for Housing Services of Chicago, Inc. ("NHS"), a not- Cragin Federal's CRA activities. for-profit partnership that addresses neighborhood The record indicates that Cragin Federal plans to preservation and low- and moderate-income housing adopt specific outreach programs currently used by needs.24 Talman to reach low- and moderate-income areas of These ascertainment efforts have identified a need Chicago, including: for more affordable housing programs for low- and (1) CRA Community Contact Program, moderate-income individuals and for first-time home (2) Community Outreach Program, and buyers. Talman has responded to these needs by (3) LaSalle Talman Home Mortgage Corporation's participating in a number of special loan programs Loan Originator Call Program in several predomisponsored by government or not-for-profit organiza- nantly minority and low- and moderate-income comtions discussed above. Talman also conducts home munities. In addition, Applicant plans to make buying and home improvement seminars in conjunc- credit products such as FHA/VA loans and hometion with community-based organizations. In addition, improvement loans available through Cragin from January 1991 to October 1992, Talman conducted Federal. Talman will also provide Cragin with assis- 11 seminars and a direct mailing of brochures (in tance in making loans under various Illinois-spon- Spanish and English language versions) to promote its sored home loan programs such as the Illinois Affordable Home Ownership Program. Housing Development Authority and State Treasur- Talman's marketing efforts were also considered er's home loan program. excellent in its most recent CRA performance examination. Talman sponsors a weekly one-hour cable C. Conclusion Regarding Convenience and television program, Chicago: Passport to the World. Needs Factor The program, which is produced and hosted by Talman' s CRA officer, is a forum for neighborhood and The Board has carefully considered all the facts of community groups to present their programs and so- record, including the comments received, in reviewing licit contributions and volunteers. Talman also adver- the convenience and needs factor under the BHC Act. tises its credit products and services during this pro- Based on a review of the entire record of performance gram. In addition, Talman advertises its credit by Applicant, Cragin, and their subsidiary depository products over television and radio stations and in the institutions, the Board believes that the efforts of print media, including community organization publi- Applicant, Cragin, and their subsidiary banks to help cations and media directed to the African-American meet the convenience and needs of all segments of the and Hispanic communities.25 communities they serve, including the credit needs of Other aspects of CRA performance. Applicant has a low- and moderate-income neighborhoods, are consisvariety of CRA policies and procedures designed to tent with approval of this proposal.26 ensure an effective CRA program at each of its depository institution subsidiaries. As noted above, all of Applicant's subsidiaries have "satisfactory" or "outstanding" CRA ratings, and the ratings of two of these 26. Protestants have requested that the Board hold a public meeting subsidiaries improved after their acquisition by Applior hearing on this application regarding the CRA records of Applicant cant. After consummation of this proposal, Applicant and Cragin. The Board's rules provide that a hearing is required under would coordinate the programs of Cragin Federal. section 4 of the BHC Act only if there are disputed issues of material fact that cannot be resolved in some other manner. In addition, the AMRO North America has an internal monitoring and Board may, in its discretion, hold a public hearing or meeting on an application to clarify factual issues related to the application, and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e), 262.25(d), and 225.23(g). The Board has carefully considered 24. A subsidiary of NHS has acquired and rehabilitated more than this request. In the Board's view, interested parties have had a 300 units of rental housing for the benefit of low- and moderate-income sufficient opportunity to present written submissions, and they have tenants. submitted detailed written comments that have been considered by 25. Of the 21 newspapers in which Talman advertises, the Chicago the Board. On the basis of all the facts of record, the Board has Defender is directed to the African-American community and Lazara determined that a public meeting or hearing is not necessary to clarify and Extra are directed to the Hispanic community. Talman also the factual record in this application or otherwise required under the advertises on three radio stations directed to the African-American Board's rules. Accordingly, the request for a public meeting or community. hearing on this application is hereby denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

656 Federal Reserve Bulletin • July 1994 Other Considerations Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act The Board concludes that the financial27 and managerial resources of Applicant and Cragin and their re- CoreStates Financial Corp spective subsidiaries are consistent with approval. In Philadelphia, Pennsylvania addition, the record does not indicate that consummation of this proposal is likely to result in any signifi- Order Approving the Merger of Bank Holding cantly adverse effects, such as undue concentration of Companies resources, decreased or unfair competition, conflicts of interest, or unsound banking practices that are not CoreStates Financial Corp, Philadelphia, Pennsylvalikely to be outweighed by the public benefits of this nia ("CoreStates"), a bank holding company within proposal. Accordingly, the Board has determined that the meaning of the Bank Holding Company Act (the the balance of public interest factors it must consider "BHC Act"), has applied under section 3 of the BHC under section 4(c)(8) of the BHC Act is favorable and Act (12 U.S.C. § 1842) to merge with Independence consistent with approval of the application. Bancorp, Inc. ("IBI"), and thereby indirectly acquire Based on the foregoing and other facts of record, the Bucks County Bank and Trust Company, both of Board has determined that the application should be, Perkasie; Cheltenham Bank, Cheltenham; Lehigh Valand hereby is, approved. The Board's approval is ley Bank, Bethlehem; and Third National Bank and specifically conditioned upon compliance with all the Trust Company of Scranton, Scranton; all of Pennsylcommitments made by Applicant in connection with vania.1 CoreStates also has applied under section this application. The Board's determination also is 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) to subject to all the conditions set forth in Regulation Y, acquire IBI's wholly owned insurance subsidiary, Inincluding those in sections 225.4(d) and 225.23(b) of dependence Life Insurance Company, Phoenix, Ari- Regulation Y, and to the Board's authority to require zona, and thereby act as a principal in reinsuring credit such modification or termination of the activities of a life, accident, and health insurance that is directly bank holding company or any of its subsidiaries as the related to extensions of credit by its bank subsidiaries Board finds necessary to ensure compliance with, and pursuant to section 225.25(b)(8)(i) of the Board's Regto prevent evasion of, the provisions of the BHC Act ulation Y. and the Board's regulations and orders issued there- Notice of the applications, affording interested perunder. For purposes of this action, these commitments sons an opportunity to submit comments, has been and conditions will be considered conditions imposed published (59 Federal Register 11,078 and 14,165 in writing by the Board and, as such, may be enforced (1994)). The time for filing comments has expired, and in proceedings under applicable law. the Board has considered the applications and all This transaction shall not be consummated later comments received in light of the factors set forth in than three months after the effective date of this order, sections 3 and 4 of the BHC Act. unless such period is extended for good cause by the CoreStates, with total deposits of approximately Board or the Federal Reserve Bank of Chicago, acting $18.4 billion, controls three banking subsidiaries in pursuant to delegated authority. Delaware, New Jersey, and Pennsylvania. CoreStates By order of the Board of Governors, effective is the third largest commercial banking organization in May 23, 1994. Pennsylvania, controlling deposits of approximately $11.8 billion, representing 8.5 percent of total deposits Voting for this action: Chairman Greenspan and Governors in commercial banks in the state.2 IBI is the 11th Kelley, Lindsey, and Phillips. Absent and not voting: Gov- largest commercial banking organization in Pennsylvaernor LaWare. nia, controlling deposits of approximately $2.2 billion, representing 1.6 percent of total deposits in commer- JENNIFER J. JOHNSON cial banks in the state. Upon consummation of this Associate Secretary of the Board proposal, CoreStates would remain the third largest commercial banking organization in Pennsylvania, with approximately $14 billion in total deposits, repre- 27. Protestants also assert that Applicant's capital levels are inconsistent with approval of this application. The Board has carefully reviewed these comments in light of Applicant's reports of examinations and other confidential financial information from the Applicant. 1. In connection with this application, CoreStates has requested The Board notes that Applicant is currently in compliance with all approval to acquire approximately 9.8 percent of IBI, upon certain capital requirements and would remain so upon consummation of this triggering events. This option will become moot upon consummation proposal. Based on all facts of record, the Board concludes that these of the merger of the bank holding companies. comments do not warrant denial of this application. 2. Deposit and market data are as of June 30, 1992. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 657 senting 10.1 percent of total deposits in commercial relating to the convenience and needs of the commubanks in the state. nities to be served also are consistent with approval.7 CoreStates also has applied for approval to acquire Competitive Considerations Independence Life Insurance Company and thereby engage as a principal in credit related insurance activ- CoreStates and IBI compete directly in the Philadel- ities. The Board previously has determined that this phia-Trenton, banking market.3 Upon consummation activity is permissible for bank holding companies of this proposal, CoreStates would remain the largest under section 4(c)(8) of the BHC Act, and under the depository institution in the market, controlling depos- Board's Regulation Y, and CoreStates will conduct its of $13.8 billion, representing 20.1 percent of total this activity in accordance with the relevant Board deposits in depository institutions in the market.4 regulations and orders. The record in this case indi- After considering the number of competitors that cates that there are numerous providers of this serwould remain in the market and the relatively small vice, and there is no evidence in the record to indicate increase in concentration as measured by the Herfin- that consummation of this proposal is likely to result in dahl-Hirschman Index ("HHI"),5 and all other facts any significantly adverse effects, such as undue conof record, the Board concludes that consummation of centration of resources, decreased or unfair competithis proposal would not result in a significantly adverse tion, conflicts of interests, or unsound banking praceffect on competition in the Philadelphia-Trenton tices that would outweigh the public benefits of this banking market or any other relevant banking market. proposal. Accordingly, the Board has determined that the balance of public interest factors it must consider under section 4(c)(8) of the BHC Act is favorable and Other Considerations consistent with approval of these applications. Based on all the facts of record, the Board concludes that financial and managerial resources and future Conclusion prospects of CoreStates, IBI and their subsidiaries and the other supervisory factors that the Board must Based on the foregoing and other facts of record, the consider under section 3 of the BHC Act are consis- Board has determined that the applications should be, tent with approval of this proposal.6 Considerations and hereby are, approved. The Board's approval is expressly conditioned upon compliance with all the commitments made by CoreStates in connection with these applications. The determination as to the non- 3. The Philadelphia-Trenton banking market is approximated by Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties banking activities is subject to all the conditions in the in Pennsylvania and Burlington, Camden, Gloucester, and Mercer Board's Regulation Y including those in sections Counties in New Jersey. 225.4(d) and 225.23(b)(3) (12 C.F.R. 225.4(d) and 4. When used in this context, depository institutions include commercial banks and savings associations. Market share data are based 225.23(b)(3)), and to the Board's authority to require on calculations in which the deposits of thrift institutions are included such modification or termination of the activities of a at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, major competi- holding company or any of its subsidiaries as the tors of commercial banks. See Midwest Financial Group, 75 Federal Board finds necessary to assure compliance with, or to Reserve Bulletin 386 (1989); National City Corporation, 70 Federal prevent evasions of, the provisions and purposes of Reserve Bulletin 743 (1984). 5. The HHI for the market is currently 890 and will increase by 73 the BHC Act and the Board's regulations and orders points to 963 as a result of this transaction. Under the revised issued thereunder. The commitments and conditions Department of Justice Merger Guidelines (49 Federal Register 26,823 relied on by the Board in reaching this decision are (June 29, 1984)), a market in which the post-merger HHI is less than 1000 is considered unconcentrated. The Justice Department has both deemed to be conditions imposed in writing by informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by 200 points. The Justice Department has stated that the higher than normal HHI thresholds for screening 7. This commenter has also raised issues regarding the effect of the bank mergers for anti-competitive effects implicitly recognize the merger of CoreStates and IBI on the local services presently offered competitive effect of limited-purpose lenders and other non-deposi- by Bucks County Bank and Trust Company ("Bank"). CoreStates has tory financial entities. stated that current management and staff of Bank will be responsible 6. The Board has carefully reviewed comments from an individual for the Bucks County branches of CoreStates after consummation of about the trading activity in IBI stock before this proposal was the proposal, and CoreStates will place the Bank's directors on announced. In this regard, the Securities Exchange Commission has CoreStates's regional advisory board. In addition, a review of the announced an investigation of IBI stock purchases by certain individ- records of performance by CoreStates banks under the Community uals immediately prior to the public announcement of the transaction. Reinvestment Act ("CRA") indicates that all the banks have received Based on all the facts of record, including the scope of the investiga- a rating of "satisfactory" or "outstanding" in meeting the credit tion and reports of examination on the managerial resources of the needs of their communities. In light of these and all facts of record, the institutions involved, the Board does not believe that this matter Board concludes that these comments do not warrant denial of this warrants denial of the applications. proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

658 Federal Reserve Bulletin • July 1994 the Board in connection with its findings and decision, Insurance Corporation. The time for filing comments and, as such, may be enforced in proceedings under has expired, and the Board has considered the appliapplicable law. cations and all the comments received in light of the The acquisition of the subsidiary banks shall not be factors set forth in the Bank Merger Act and the consummated before the thirtieth calendar day follow- Federal Reserve Act. ing the effective date of this order, and the acquisition BMJ is the 23d largest commercial banking organiof the banks and nonbanking subsidiary shall not be zation in New Jersey, controlling deposits of approxconsummated later than three months after the effec- imately $402.2 million, representing less than 1 percent tive date of this order, unless such period is extended of the total deposits in commercial banking organizafor good cause by the Board or by the Federal Reserve tions in the state.1 Mount Holly is the 51st largest Bank of Philadelphia, acting under delegated author- commercial banking organization in the state, controlity. ling deposits of approximately $127 million, represent- By order of the Board of Governors, effective ing less than 1 percent of total deposits in commercial May 23, 1994. banks in the state. B.M.J. Financial currently owns BMJ and Mount Holly, and thus this transaction Voting for this action: Chairman Greenspan, Governors represents a reorganization of B.M.J. Financial's cor- Kelley, Lindsey, and Phillips. Absent and not voting: Gov- porate structure. Based on the facts of record, the ernor La Ware. Board has determined that consummation of this proposal would not have a significantly adverse effect on JENNIFER J. JOHNSON competition or the concentration of resources in any Associate Secretary of the Board relevant market. Convenience and Needs Considerations ORDERS ISSUED UNDER BANK MERGER ACT In acting on an application under the Bank Merger Bank of Mid-Jersey Act, the Board is required to consider the convenience Bordentown, New Jersey and needs of the communities to be served, and take into account the records of the relevant depository Order Approving the Merger of Banks institutions under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA re- Bank of Mid-Jersey, Bordentown, New Jersey quires the federal financial supervisory agencies to ("BMJ"), a state member bank, has applied for the encourage financial institutions to help meet the credit Board's approval under section 18(c) of the Federal needs of the local communities in which they operate, Deposit Insurance Act (12 U.S.C. § 1828(c)) (the consistent with the safe and sound operation of such "Bank Merger Act"), to merge with Mount Holly institutions. To accomplish this end, the CRA requires State Bank, Mount Holly, New Jersey ("Mount Hol- the appropriate federal supervisory authority to "asly"). BMJ and Mount Holly are both subsidiaries of sess the institution's record of meeting the credit B.M.J. Financial Corp., Bordentown, New Jersey needs of its entire community, including low- and ("B.M.J. Financial"), a bank holding company within moderate-income neighborhoods, consistent with the the meaning of the Bank Holding Company Act safe and sound operation of such institution" and to (12 U.S.C. § 1841 et seq.). BMJ also has applied for take that record into account in its evaluation of the Board's approval to establish branches at the sites applications under the Bank Merger Act or under the of the current Mount Holly branches pursuant to Federal Reserve Act to establish domestic branches.2 section 9 of the Federal Reserve Act (12 U.S.C. In this regard, the Board has received comments § 321) and to make an additional investment in bank from New Jersey Citizens Action ("Protestant") critpremises pursuant to section 24A of the Federal Re- ical of the efforts of BMJ to meet the credit and serve Act (12 U.S.C. § 371(d)). banking needs of the communities it serves. In partic- Notice of the applications, affording interested per- ular, Protestant maintains that BMJ's performance sons an opportunity to submit comments, has been under the CRA is deficient in the following respects: given in accordance with the Bank Merger Act and the (1) Providing products and services that meet the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As credit needs of the bank's entire community; required by the Bank Merger Act, reports on the competitive effects of the merger were requested from the United States Attorney General, the Office of the 1. Data are as of June 30, 1993. Comptroller of the Currency, and the Federal Deposit 2. 12 U.S.C. § 2903. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 659 (2) Participating in local community development Lending and Community Development. BMJ has and redevelopment projects; and developed programs designed to address the special (3) Ascertaining the credit needs of, and marketing credit needs of low- and moderate-income borrowers. its products and services to, the bank's entire com- For example, in 1993, when the New Jersey Housing munity. and Mortgage Finance Agency ("NJHMFA") temporarily suspended funding for its First Time Home In its consideration of the convenience and needs Buyers and Community Home Buyers Programs, BMJ factor, the Board has carefully reviewed the entire created an in-house mortgage plan. BMJ's program record of CRA performance of BMJ and Mount Holly, currently operates in conjunction with NJHMFA proall comments received regarding this application, in- grams to offer up to 100 percent mortgage financing. In cluding the response to the comments by B.M.J. addition, BMJ has applied to be a full member of the Financial, and all the other relevant facts of record, in Trenton Home Buyer Plan ("Plan") which is a cooplight of the CRA, the Board's regulations, and the erative reinvestment effort by financial institutions Statement of the Federal Financial Supervisory Agen- located in Trenton, New Jersey. Under the Plan, the cies Regarding the Community Reinvestment Act Bank has committed $500,000 for below-market rate ("Agency CRA Statement").3 30-year fixed-rate mortgages. BMJ has committed The Board has also carefully considered the scope of $15,000 to Burlington Housing Development Corpora- BMJ's CRA-related activities, discussed in greater tion's emergency loan program, which provides emerdetail below, in light of information contained in reports gency home repairs loans to low- and moderateof examination assessing the financial and managerial income individuals in Burlington, New Jersey. The resources of the bank. The Board notes that manage- bank has also initiated a "second look" review of all denied, cancelled, or withdrawn mortgage and home ment has recently devoted substantial efforts to improvimprovement loan requests in an effort to improve its ing the financial condition of BMJ Financial's subsidhousing-related lending record. iary banks, and that these efforts have had a positive effect on the financial resources of both BMJ and BMJ also participates in local community develop- Mount Holly. The Board believes that these efforts are ment and redevelopment projects consistent with its an important consideration in assessing BMJ's overall financial resources. The 1992 CRA examination indirecord of performance under the CRA and that these cates that BMJ provided a line of credit to support a efforts will enhance the ability of BMJ to assist in housing development project for low- and moderatemeeting the credit needs of all its communities, includ- income residents in Burlington City, New Jersey. In ing low- and moderate-income areas in the future. addition, BMJ's investment department purchases local county and municipal bonds, and acts as under- Record of CRA Performance writer for banks of various governmental entities. BMJ also provides financial assistance to various civic, Examination Record. The Agency CRA Statement educational and community service organizations in provides that a CRA examination is an important and its area. often controlling factor in the consideration of an Ascertainment and Marketing. BMJ uses several institution's CRA record, and that these reports will be methods to ascertain the credit needs of its commugiven great weight in the applications process.4 In this nity. The bank's branch managers, and its mortgage regard, the Board notes that BMJ received a "satis- loan, consumer loan, and commercial loan officers are factory" rating from the Federal Reserve Bank of required to make CRA-related calls each quarter. Philadelphia at its most recent examination for CRA Through its CRA Outreach Program, BMJ has conperformance as of September 30, 1992. Mount Holly tacted numerous civic and community organizations, also received a "satisfactory" rating from its primary including the Mercer County Hispanic Association, regulator, the Federal Deposit Insurance Corporation, Mercer County Office of Housing, Neighborhood at its most recent examination for CRA performance Housing Services, Inc., and Burlington County Comas of October 10, 1993. Examiners at both banks found munity Action Program ("BCCAP").5 In conjunction no evidence of illegal discrimination or of illegal credit with BCCAP, BMJ has begun monthly seminar propractices, and also that both banks were in substantial compliance with the provisions of antidiscrimination laws and regulations. 5. Protestant has asserted that certain organizations involved in BMJ's ascertainment efforts are not effective in ascertaining credit needs. BMJ has clarified that its officers and employees actively participate in the organizations discussed in Protestant's comments, 3. 54 Federal Register 13,742 (1989). but these organizations are not linked to the bank's ascertainment 4. 54 Federal Register 13,745 (1989). efforts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

660 Federal Reserve Bulletin • July 1994 grams for prospective homebuyers. BMJ also surveys specifically conditioned upon compliance by BMJ with its customers to determine their satisfaction with its all the commitments made in connection with this products and services. application. For the purpose of this action, these BMJ currently advertises in the largest newspapers commitments and conditions are both considered conin the Trenton, New Jersey area, and also uses radio ditions imposed in writing by the Board in connection advertisements and billboards to advertise its banking with its findings and decisions, and as such, may be products. BMJ also has developed a brochure detailing enforced by proceedings under applicable law. This its specific credit programs that are targeted for low- transaction shall not be consummated before the thirand moderate-income areas. tieth calendar day following the effective date of this On the basis of all the facts of record, including order, or later than three months after the effective comments provided by Protestant, BMJ's response to date of this order, unless such period is extended for those comments, and information from relevant re- good cause by the Board or by the Federal Reserve ports of examination, the Board concludes that con- Bank of Philadelphia, acting pursuant to delegated siderations relating to the convenience and needs of authority. the community to be served are consistent with ap- By order of the Board of Governors, effective proval.6 May 24, 1994. Other Considerations Voting for this action: Chairman Greenspan and Governors Kelley, Lindsey, and Phillips. Absent and not voting: Gov- The financial and managerial resources and future ernor LaWare. prospects of BMJ and Mount Holly are consistent with JENNIFER J. JOHNSON approval. The Board notes that the merger of BMJ and Associate Secretary of the Board Mount Holly should result in a reduction of expenses for BMJ. The Board also has considered the factors it is ORDERS ISSUED UNDER FEDERAL RESERVE required to consider when reviewing applications for ACT establishing branches pursuant to section 9 of the Federal Reserve Act (12 U.S.C. § 321 et seq.) and First Virginia Bank of Tidewater finds those factors to be consistent with approval of Norfolk, Virginia the establishment of BMJ branches at the present sites of the Mount Holly branches. Order Approving Establishment of a Branch In connection with the applications to establish these branches, BMJ also has requested permission First Virginia Bank of Tidewater, Norfolk, Virginia under section 24A of the Federal Reserve Act ("Bank"), a state member bank, has applied under (12 U.S.C. § 37Id) to make an additional investment section 9 of the Federal Reserve Act (12 U.S.C. in bank premises. The Board concludes that BMJ's § 321) to establish a branch office at the Shore Plaza additional investment in bank premises is consistent Shopping Center, Route 13 By-Pass (Lankford Highwith approval. way), Exmore, Virginia, to replace an existing branch Based on the foregoing and other facts of record, the at 3305 Main Street, in Exmore. Board has determined that the applications should be, Notice of this application, affording interested perand hereby are, approved. The Board's approval is sons an opportunity to submit comments, has been published. The time for filing comments has expired, and the Board has considered the application and all 6. Protestant has requested that the Board hold a public meeting or comments received in light of the factors contained in hearing on these applications. The Board is not required to hold a the Federal Reserve Act. public hearing on these applications under the Bank Merger Act or the Federal Reserve Act. Under its rules, the Board may, in its discretion, Bank, with assets of approximately $517.4 million,1 hold a public meeting or hearing on an application to clarify factual has 41 branches, of which 37 are in the Norfolkissues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The Virginia Beach-Newport News Metropolitan Statisti- Board has carefully considered Protestant's request, and its written cal Area (the "MSA"), and four are in rural Accomack comments. In the Board's view, interested parties have had ample and Northampton Counties on the Eastern Shore of opportunity to submit and have submitted substantial written comments that have been considered by the Board. In light of the Virginia. foregoing and all the facts of record, the Board has determined that a public meeting or hearing is not necessary to clarify the factual record on these applications, or otherwise warranted in this case. Accordingly, the request for a public meeting or hearing on these applications is hereby denied. 1. Asset data are as of March 31, 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 661 In its evaluation of an application to establish a dents of substandard properties regardless of the branch, the Board is required to take into account the borrower's equity in the property. Bank also has institution's record of performance under the Com- made loans to minority-owned and other developers munity Reinvestment Act (12 U.S.C. § 2901 et seq.) to purchase and rehabilitate housing for lease to low- ("CRA").2 The CRA requires the federal financial and moderate-income families in the MSA and on the supervisory agencies to encourage financial institu- Eastern Shore. Altogether, approximately 11 percent tions to help meet the credit needs of the local of Bank's total loans extended in 1992 were made in communities in which they operate, consistent with low- and moderate-income areas in the MSA.6 In the safe and sound operation of such institutions. To addition, both Bank and an affiliated bank, First accomplish this end, the CRA requires the appropri- Virginia Bank, Falls Church, Virginia, have purate federal supervisory authority to "assess the chased Virginia Housing Development Authority institution's record of meeting the credit needs of its multifamily housing bonds that fund projects within entire community, including low- and moderate- Bank's service area. income neighborhoods, consistent with the safe and Bank assists in meeting the credit needs of small sound operation of such institution," and to take that businesses throughout its service area, including those record into account in its evaluation of branch appli- located in low- and moderate-income areas. In the cations.3 period reviewed in the 1993 Examination, Bank ex- In this light, the Board has considered comments tended 488 loans aggregating $96 million for the estabfrom an individual ("Protestant") opposing the pro- lishment, expansion, and operation of small busiposal. Protestant alleges that Bank does not ade- nesses. quately meet the credit needs of the agricultural com- Bank's Eastern Shore branches offer loans and lines munity on the Eastern Shore of Virginia, which of credit to farmers and agricultural loans. In 1992, Protestant describes as an area of poverty and few job 1993 and through April 1994, these branches made opportunities. In particular, Protestant contends that 50 installment loans aggregating $708,000 to farmers or Bank is unwilling to implement flexible terms for loans for agricultural purposes. During the same period, to young farmers in this area. The Board has carefully these branches also made or made available 103 time reviewed the entire record of Bank's CRA perfor- and demand loans and lines of credit, representing a mance in light of the Board's regulations and the total commitment of $6,532,000 to farmers or for Statement of the Federal Financial Supervisory Agen- agricultural purposes. In addition, these branches cies Regarding the Community Reinvestment Act (the made six real estate loans aggregating $306,000 to "Agency CRA Statement").4 farmers or for agricultural purposes. The Agency CRA Statement provides that a CRA Bank ascertains community credit needs and marexamination is an important and often controlling kets its products and services in several ways. For factor in the consideration of an institution's CRA example, Bank has appointed ten officers as CRA record and that these reports will be given great weight Coordinators, one in each of the eight cities and two in the applications process. The Board notes that Bank rural counties in its delineated community. These received a "satisfactory" rating from the Federal officers maintain contact with local governments, Reserve Bank of Richmond at its most recent exami- economic development groups, and housing organination for CRA performance as of August 16, 1993 (the zations to assist in identifying credit needs, and "1993 Examination"). In addition, the 1993 Examina- identify census tracts where Bank has a low penetration found that Bank is in compliance with all provi- tion and needs to concentrate its outreach efforts. In sions of antidiscrimination laws and regulations.5 addition, all branch managers and commercial/real Bank has a number of programs designed to assist estate loan officers have monthly quotas for calls on in meeting the credit needs of low- and moderate- small business customers and prospects. Directors income borrowers. For example, in conjunction with and senior officers participate in local trade and the Virginia Beach Department of Housing, Bank has development organizations. Bank markets its prodactively promoted its FHA Title I home improve- ucts and services to its entire delineated community ment loan program, which provides funding to resi- through local newspaper advertisements and mail solicitations. 2. See 12 U.S.C. §§ 2902(3)(C), 2903(2). 3. 12 U.S.C. § 2903. 6. Accomack and Northampton Counties on the Eastern Shore of 4. 54 Federal Register 13,742, 13,745 (1989). Virginia are predominantly rural. Accordingly, census tract data for 5. The 1993 Examination included a sampling of approved and low- and moderate-income areas are not available for these counties denied mortgage loans to verify Bank's equal application of its credit and Bank does not track loans made in these low- and moderatecriteria. income areas. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

662 Federal Reserve Bulletin • July 1994 Bank has also formed an Eastern Shore Advisory ORDERS ISSUED UNDER INTERNATIONAL Board, which includes local business people, members BANKING ACT of the farming community, and a representative of the Virginia Department of Agriculture. The Advisory MeesPierson N.V. Board meets quarterly with Bank officers to review the Amsterdam, The Netherlands performance of Bank and the Eastern Shore branches, including community reinvestment activities, and to Order Approving Establishment of an Agency and a provide input on how better to serve the needs of the Representative Office Eastern Shore. Bank is involved in a number of community devel- MeesPierson N.V. ("Bank"), Amsterdam, The Nethopment projects, including loans to a minority-owned erlands, a foreign bank within the meaning of the import business and construction and development International Banking Act ("IBA"), has applied under loans to a local minority church to build a youth section 7(d) of the IBA (12 U.S.C. § 3105(d)) to estabtraining center and facilities to feed the homeless. lish a state-licensed agency in New York, New York Bank also helped found the Hampton Roads Develop- and section 10(a) of the IBA (12 U.S.C. § 3107(a)) to ment Corporation to promote affordable housing in the establish a representative office in Dallas, Texas. A area, and has provided it with a $100,000 construction foreign bank must obtain the approval of the Board to line of credit in addition to donations and technical establish a branch, agency, commercial lending comassistance. pany, or representative office in the United States Based on all facts of record, including the relevant under the Foreign Bank Supervision Enhancement examination reports and information provided by Prot- Act of 1991 ("FBSEA"), which amended the IBA. estant and Bank, the Board believes that Protestant's Notice of the applications, affording interested percomments do not warrant denial of this application and sons an opportunity to submit comments, has been that Bank's record of performance under the CRA is published in newspapers of general circulation in New consistent with approval. The Board also concludes on York, New York (The New York Times, May 6, 1993), the basis of all facts of record that the factors required and Dallas, Texas (The Dallas Morning News, to be considered when approving applications for the March 16, 1993). The time for filing comments has establishment of branches, including the financial con- expired and the Board has considered all comments dition of Bank, the general character of its manage- received. ment, and the proposed exercise of corporate powers, Bank is the surviving entity of the April 1993 merger are consistent with approval and the purposes of of two Dutch banks, Bank Mees & Hope N.V. and section 9 of the Federal Reserve Act. Pierson, Heldring & Pierson N.V., both of which were Based on the foregoing and other facts of record, the wholly owned subsidiaries of ABN AMRO Bank N.V. Board has determined that this application should be, ("ABN AMRO Bank"), the largest bank in the Nethand hereby is, approved. The Board's approval is erlands. Bank had assets of $18.8 billion as of Decemspecifically conditioned upon compliance by Bank ber 31, 1993, and remains a wholly owned subsidiary with all the commitments made in connection with of ABN AMRO Bank. Bank is a merchant bank and these applications. For purposes of this action, these provides corporate banking services (including specommitments and conditions are considered condi- cialized finance to the shipping, energy, and aircraft tions imposed in writing by the Board in connection industries), trade and commodity finance, asset fiwith its findings and decisions, and, as such, may be nance, securities trading, capital management serenforced in proceedings under applicable law. vices, and private banking and trust services. This branch shall be in operation no later than one Bank operates through an extensive worldwide netyear after the effective date of this order, unless such work, with offices in approximately 20 countries in period is extended for good cause by the Board or by Europe, Asia and the Caribbean. Bank currently enthe Federal Reserve Bank of Richmond, acting pursu- gages indirectly in permissible nonbanking activities in ant to delegated authority. the United States through two wholly owned subsid- By order of the Board of Governors, effective iaries that are held through Bank's wholly owned U.S. May 31, 1994. holding company. Bank also has a representative office in New York City, which would be converted to Voting for this action: Chairman Greenspan and Governors the proposed agency. Bank would be a qualifying Kelley, LaWare, and Phillips. Absent and not voting: Gov- foreign banking organization as defined in Regulaernor Lindsey. tion K. 12 C.F.R. 211.23(b). JENNIFER J. JOHNSON Bank's parent company, ABN AMRO Bank, is in Associate Secretary of the Board turn owned by ABN AMRO Holding N.V. ("ABN Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 663 AMRO Holding").1 ABN AMRO Holding, which op- supervised and regulated in such a manner that its erates in nearly 60 countries, reported total consoli- home country supervisor receives sufficient informadated assets of $253 billion as of December 31, 1993. tion on the bank's worldwide operations, including its ABN AMRO Bank operates an extensive worldwide relationship to any affiliate, to assess the bank's overnetwork of offices, including five branches, five agen- all financial condition and its compliance with law and cies, and a representative office in the United States. regulation.3 12 C.F.R. 211.24(c)(1). In making its de- Through its U.S. holding company, ABN AMRO termination on these applications, the Board consid- North America Inc., ABN AMRO Bank owns LaSalle ered the following information. National Corporation, Chicago, Illinois, and its sub- De Nederlandsche Bank N.V. ("DNB") is the susidiary banks. In addition, ABN AMRO Bank owns pervisory authority for Dutch credit institutions and, 100 percent of European American Bank, New York, as such, is the home country supervisor of Bank and New York. ABN AMRO Bank's U.S. nonbanking ABN AMRO Bank. DNB monitors the solvency, subsidiaries engage in commercial finance, problem liquidity, profitability, and administrative and corpoasset workouts and collections, brokerage and invest- rate organization of such institutions. With respect to ment advisory services, and leasing. ABN AMRO the supervision of Bank and ABN AMRO Bank, DNB Bank is a qualifying foreign banking organization as receives information on the worldwide operations of defined in Regulation K. 12 C.F.R. 211.23(b). both Bank and ABN AMRO Bank, including domestic In order to approve an application by a foreign bank and foreign branches and affiliates, through the conto establish an agency in the United States, the IB A duct of targeted on-site examinations, as well as and Regulation K require the Board to determine that through the review of audit reports and periodic finanthe foreign bank engages directly in the business of cial reports. banking outside of the United States and has furnished DNB conducts on-site examinations of Dutch credit to the Board the information it needs to assess ade- institutions such as Bank and ABN AMRO Bank, quately the application. The Board also must deter- including their banking subsidiaries and branches, mine that the foreign bank applicant and any foreign both in the Netherlands and abroad. The scope of bank parent are subject to comprehensive supervi- on-site examinations of credit institutions, including sion or regulation on a consolidated basis by its Bank and ABN AMRO Bank, generally is determined home country supervisor. 12 U.S.C. § 3105(d)(2), according to the potential risks associated with an 12 C.F.R. 211.24(c)(1). The IBA and Regulation K institution's activities, the significance of these risks in also permit the Board to take into account additional relation to its overall operations, and the internal standards. 12 U.S.C. § 3105(d)(3)-(4)), 12 C.F.R. controls and procedures utilized in relation to these 211.24(c)(2).2 risks. DNB also reviews compliance with applicable Bank and ABN AMRO Bank engage directly in the laws and regulations during its on-site examinations. business of banking outside of the United States Bank and ABN AMRO Bank submit a variety of through their extensive banking operations in Europe, financial reports to DNB for supervisory purposes in Asia and elsewhere. Bank also has provided the Board the form prescribed by DNB regulations. Financial with the information necessary to assess the applica- statements are consolidated to include generally the tion through submissions that address the relevant operations of domestic and foreign subsidiaries and issues. companies over which significant economic or organi- Regulation K provides that a foreign bank and any zational control is exercised. The external auditors of parent foreign bank will be considered to be subject to Bank and ABN AMRO Bank must certify the accucomprehensive supervision or regulation on a consolidated basis if the Board determines that the bank is 3. 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 1. ABN AMRO Holding is owned by two foundations: Stichting and controlling its activities worldwide; Prioriteit ABN AMRO Holding ("Stichting Prioriteit") and Stichting (ii) Obtains information on the condition of the bank and its Administratiekantoor ABN AMRO Holding ("Stichting Adminis- subsidiaries and offices outside the home country through regular tratiekantoor"). These foundations have no assets, liabilities, or examination reports, audit reports, or otherwise; capital other than the preferred and priority shares of ABN AMRO (iii) Obtains information on the dealings with and relationship Holding. between the bank and its affiliates, both foreign and domestic; 2. In acting on an application to establish a representative office, the (iv) receives from the bank financial reports that are consolidated on Board is required only to take into account the standards applicable to a worldwide basis, or comparable information that permits analysis the establishment of a branch, agency or commercial lending com- of the bank's financial condition on a worldwide consolidated basis; pany. 12 U.S.C. § 3107(a)(2), 12 C.F.R. 211.24(d)(2). Because Bank (v) Evaluates prudential standards, such as capital adequacy and has applied to establish both an agency and a representative office, the risk asset exposure, on a worldwide basis. These are indicia of Board has made its findings in accordance with the stricter standards comprehensive, consolidated supervision. No single factor is essenapplicable to agency applications. tial, and other elements may inform the Board's determination. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

664 Federal Reserve Bulletin • July 1994 racy and sufficiency of the financial statements on an U.S. law. Under the IBA, the proposed state-licensed annual basis, and verify the accuracy and consistency agency may not engage in any type of activity that is of Bank's implementation of DNB guidelines. DNB not permissible for a federally licensed branch without also meets with Bank's external auditors to discuss the Board's approval. particular matters, such as asset quality, administra- Finally, with respect to access to information retive organization and internal controls. garding Bank's operations, the Board has reviewed DNB imposes certain investment and lending limits relevant provisions of Dutch law and has communion credit institutions, such as Bank and ABN AMRO cated with the appropriate government authorities. Bank, that are applicable to affiliates. The lending Bank, ABN AMRO Bank and its parent companies limits are expressed as a percentage of a bank's total have committed that they will make available to the capital and are monitored by DNB through reporting Board such information on the operations of Bank and requirements. Prior DNB approval is required for any affiliate of Bank that the Board deems necessary to various investments and changes in the structure of determine and enforce compliance with the IBA, the Dutch banks. Bank Holding Company Act of 1956, as amended, and Bank's significant domestic subsidiaries are engaged other applicable federal law. To the extent that the in banking and securities activities. Bank's securities provision of such information to the Board may be affiliates are supervised by the Securities Board of the prohibited or impeded by law, Bank, ABN AMRO Netherlands (the "Securities Board"), which obtains Bank and its parent companies have committed to information on the operations and activities of these cooperate with the Board in obtaining any necessary subsidiaries through the securities exchanges to which consents or waivers that might be required from third the subsidiaries belong as well as through on-site parties in connection with disclosure of certain necesexaminations and reports filed directly with the Secu- sary information. In light of these commitments and rities Board. Bank indicates that the Securities Board other facts of record, and subject to the condition shares information with DNB. described below, the Board concludes that Bank has Based on all the facts of record, which include the provided adequate assurances of access to any necesinformation described above, the Board concludes sary information the Board may request. that Bank and ABN AMRO Bank are subject to On the basis of all the facts of record, and subject to comprehensive supervision on a consolidated basis by the commitments made by Bank, ABN AMRO Bank their home country supervisor. and its parent companies, as well as the terms and In considering these applications, the Board also has conditions set forth in this order, the Board has taken into account the additional standards set forth in determined that Bank's applications to establish an section 7 of the IBA. 12 U.S.C. § 3105(d)(3)-(4). agency and a representative office should be, and Bank's home country supervisor, DNB, has indicated hereby are, approved. Should any restrictions on that it has no objection to the establishment by Bank of access to information on the operations or activities of the proposed agency or representative office. In addi- Bank and any of its affiliates subsequently interfere tion, subject to certain conditions, DNB has agreed to with the Board's ability to determine the safety and cooperate in providing the Board with information on soundness of Bank's U.S. operations or the compli- Bank's and ABN AMRO Bank's operations. ance by Bank or its affiliates with applicable federal The Netherlands is a signatory to the Basle risk- statutes, the Board may require termination of any of based capital standards, and Dutch risk-based capital Bank's direct or indirect activities in the United standards meet those established by the Basle Capital States. Approval of this application is also specifically Accord and the European Union. Bank's capital is in conditioned on compliance by Bank with the commitexcess of the minimum levels that would be required ments made in connection with this application, and by the Basle Capital Accord and is considered equiv- with the conditions contained in this order.4 The alent to capital that would be required of a U.S. commitments and conditions referred to above are banking organization. conditions imposed in writing by the Board in connec- Managerial and financial resources of Bank are also considered consistent with approval. Bank, which has 4. The Board's authority to approve the establishment of the a number of branches and subsidiaries outside the proposed agency parallels the continuing authority of the New York Netherlands, appears to have the experience and State Banking Department to license offices of a foreign bank. The capacity to conduct banking operations in the United Board's approval of this application does not supplant the authority of the State of New York, and its agent, the New York State Banking States through the proposed agency and to conduct the Department, to license the proposed agency of Bank in accordance business of the proposed representative office. In with any terms or conditions that the New York State Banking addition, Bank has established controls and proce- Department may impose. The prior approval of the Texas Commissioner of Banking is not dures for its U.S. offices to ensure compliance with required to establish the Dallas representative office. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 665 tion with its decision, and may be enforced in proceed- tive office in Atlanta, Georgia would help solidify its ings under 12 U.S.C. § 1818 or 12 U.S.C. § 1847 market position in the southeastern United States. against Bank, its offices and its affiliates. The proposed representative office in Atlanta would By order of the Board of Governors, effective perform loan solicitation functions similar to those May 23, 1994. performed by Bank's existing representative offices in Texas and California. These activities may include the Voting for this action: Chairman Greenspan and Governors taking of loan applications, soliciting loans, and other Kelley, Lindsey, and Phillips. Absent and not voting: Gov- activities central to the loan origination process. All ernor La Ware. credit decisions and funding of any loans originated at the proposed office, however, would occur at a li- JENNIFER J. JOHNSON censed domestic branch or agency of Bank that is Associate Secretary of the Board authorized to engage in such activities. In acting on an application to establish a representa- Societe Generale tive office, the IBA and Regulation K provide that the Paris, France Board shall take into account whether the foreign bank engages directly in the business of banking outside the Order Approving Establishment of a Representative United States, has furnished to the Board the informa- Office tion it needs to assess adequately the application, and is subject to comprehensive supervision or regulation on a Societe Generale, Paris, France ("Bank"), a foreign consolidated basis by its home country supervisor bank within the meaning of the International Banking (12 U.S.C. § 3105(d)(2); 12 C.F.R. 211.24). The Board Act ("IBA"), has applied under section 10(a) of the may also take into account additional standards as set IBA (12 U.S.C. § 3107(a)) to establish a representative forth in the IBA (12 U.S.C. § 3105(d)(3) - (4)) and office in Atlanta, Georgia. The Foreign Bank Supervi- Regulation K (12 C.F.R. 211.24(c)). sion Enhancement Act of 1991, which amended the The Board has previously stated that the standards IBA, provides that a foreign bank must obtain the that apply to the establishment of a branch or agency approval of the Board to establish a representative need not in every case apply to the establishment of a office in the United States. representative office because representative offices do Notice of the application, affording interested pernot engage in a banking business and cannot take sons an opportunity to comment, has been published deposits or make loans (see 58 Federal Register 6348, in a newspaper of general circulation in Atlanta {The 6351 (1993)). In evaluating an application to establish a Atlanta Journal and Constitution, February 21, 1994). representative office under the IBA and Regulation K, The time for filing comments has expired, and the the Board will take into account the standards that apply Board has considered the application and all comto establishment of branches and agencies, subject to ments received. the following considerations. With respect to supervi- Bank, with $254.2 billion in consolidated assets,1 is sion by home country authorities, a foreign bank that a commercial bank chartered in France. Bank ranks proposes to establish a representative office must be fifteenth among the world's largest banks in terms of subject to a significant degree of supervision by its total assets, and in France, Bank ranks fourth in terms home country supervisor. Among the factors the Board of total assets. may consider are the extent to which there is regular Bank's domestic activities include commercial review of a substantial portion of the bank's operations banking, securities activities, leasing, real estate inby the home country supervisor through examination, vestment and marketing of data processing services. review of external audits, or a comparable method, Bank has a significant presence in the United States in submission of periodic reports relating to financial the form of branches, agencies and representative offices.2 Bank's loan operations in the southern United performance, and assurance that the bank itself has a States are currently conducted through representa- system of internal monitoring and control that enables tives based in its New York branch and Texas agency. bank management to administer properly the bank's Bank believes that the establishment of a representa- operations. The home country supervisor must also have indicated that it does not object to the establishment of the representative office in the United States. A foreign bank's financial and managerial resources 1. Data are as of June 30, 1993, unless otherwise noted. will be reviewed to determine whether its financial 2. Applicant currently operates branches in New York, New York; Chicago, Illinois; and Los Angeles, California; an agency in Dallas, condition and performance demonstrate that it is ca- Texas; and representative offices in San Francisco, California and pable of complying with applicable laws and has an Houston, Texas. In addition, Bank has a number of non-bank subsidiaries engaged in permissible activities. operating record that would be consistent with the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

666 Federal Reserve Bulletin • July 1994 establishment of a representative office in the United activities, operations and profitability. If any problems States. If the financial condition of the foreign bank are detected, the Commission has the authority to significantly differs from international norms, the for- conduct more frequent examinations and to require eign bank would be evaluated to determine whether additional information from Bank at any time. such difference can be justified in the context of the Bank is required to maintain records on all of its operations of the applicant and the proposed represen- subsidiaries and operations worldwide. Bank repretative office. All foreign banks, whether operating sents that it has procedures in place to monitor and through branches, agencies or representative offices, control its worldwide activities in accordance with will be required to provide adequate assurances of regulatory requirements. Bank conducts annual interaccess to information on the operations of bank and its nal audits of its offices and subsidiaries. Based on all affiliates necessary to determine compliance with U.S. the facts of record, which include the information laws. described above, the Board concludes that factors In this case, with respect to the issue of supervision relating to the supervision of Bank by its home country by home country authorities, the Board has consid- supervisors are consistent with approval of the proered the following information. Bank is subject to the posed representative office. supervisory authority of the Bank of France, the The Board has also found that Bank engages directly Commission Bancaire ("Commission"), the French in the business of banking outside the United States Ministry of Finance, the National Credit Counsel, and through its commercial banking operations in France. the Credit Establishment Committee. The Bank of Bank has provided the Board with the information France, which has authority for, inter alia, the pro- necessary to assess the application through submisposed expansion of operations of credit institutions, sions that address the relevant issues. has indicated that it does not object to Bank's estab- The Board has also taken into account the additional lishment of the representative office. The Commis- standards set forth in section 7 of the IBA and Regusion, which has primary responsibility for supervising lation K (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. Bank, monitors its compliance with French law and 211.24(c)(2)). The Bank of France has given its conregulatory standards as well as its financial condition. sent to Bank's establishment of the proposed repre- The Commission reviews periodic financial reports sentative office. submitted by Bank and annual reports prepared by The Board has determined that financial and manaindependent auditors.3 Bank is required to file annual, gerial factors are consistent with approval of the semi-annual and quarterly financial reports with the proposed representative office. Bank appears to have Commission. Audited consolidated financial state- the experience and capacity to support the proposed ments of Bank are submitted to the Commission office and has also established controls and procedures annually. Bank's quarterly and semi-annual reports for the proposed representative office to ensure cominclude unaudited balance sheets and income state- pliance with U.S. law. ments, and basic financial statements and key financial Bank has committed that it will make available to ratios covering such areas as risk-based capital, liquid- the Board such information on the operations of Bank ity, foreign exchange, and concentration of credit. In and any of its affiliates that the Board deems necessary addition to reviewing these reports, the Commission to determine and enforce compliance with the IBA, meets regularly with Bank management. the Bank Holding Company Act of 1956, as amended, Examiners from the Bank of France perform on-site and other applicable Federal law. If the disclosure of examinations of Bank on behalf of the Commission. such information is prohibited by law, Bank has com- The examinations are performed once every five years mitted to cooperate with the Board to obtain approvals and take approximately three months to complete. A or consents that may be required for the Board to gain written report is provided to Bank, and Bank is access to information that the Board may request. The requested to forward a copy of the report to its Board has reviewed the restrictions on disclosure of statutory auditors. Bank's board of directors is re- information in France, and has communicated with quired to meet to discuss the examination's findings. certain government authorities regarding access to The examiners also meet with bank's statutory audi- information. In light of these commitments and other tors during the examination. The examination includes facts of record, and subject to the condition described review of Bank's loan portfolio, deposit composition, below, the Board concludes that Bank has provided banking services, securities and portfolio management adequate assurances of access to any necessary information the Board may request. On the basis of all the facts of record, and subject to 3. Bank's auditors are chosen from a list of firms approved by the the commitments made by Bank, as well as the terms Commission. Representatives from these firms meet frequently with the Commission to discuss general banking issues. and conditions set forth in this order, the Board has Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 667 determined that Bank's application to establish a rep- BB&T has requested the Board's approval of these resentative office should be, and hereby is, approved. transactions pursuant to section 5(d)(3) of the Federal If any restrictions on access to information on the Deposit Insurance Act (12 U.S.C. § 1815(d)(3) ("FDI operations or activities of Bank and any of its affiliates Act")), as amended by the Federal Deposit Insurance subsequently interfere with the Board's ability to Corporation Improvement Act of 1991 (Pub. L. 102— determine the compliance by Bank or its affiliates with 242, § 501, 105 Stat. 2236, 2388-2392 (1991)). applicable federal statutes, the Board may require Section 5(d)(3) of the FDI Act requires the Board to termination of any of Bank's direct or indirect activi- review any proposed merger between a SAIF member ties in the United States. Approval of this application and any BIF member if the acquiring or resulting is also specifically conditioned on compliance by Bank institution is a BIF insured subsidiary of a bank with the commitments made in connection with this holding company, and, in reviewing these proposals, application, and with the conditions contained in this to follow the procedures and consider the factors set order. The commitments and conditions referred to forth in section 18(c) of the FDI Act, (12 U.S.C. above are conditions imposed in writing by the Board § 1828(c)) (the "Bank Merger Act").2 The proposed in connection with its decision, and may be enforced in mergers also are subject to review under the Bank proceedings under 12 U.S.C. § 1818 or 12 U.S.C. Merger Act by the Federal Deposit Insurance Corpo- § 1847 against Bank, its officers, and its affiliates. ration (the "FDIC"), the primary banking regulator By order of the Board of Governors, effective for BB&T-NC, and the FDIC has approved these May 16, 1994. transactions. Notice of the applications, affording interested per- Voting for this action: Chairman Greenspan and Governors sons an opportunity to submit comments, has been Kelley, La Ware, Lindsey, and Phillips. given in accordance with the Bank Merger Act and the Board's Rules of Procedure (12 C.F.R. 262.3(b)). In JENNIFER J. JOHNSON addition, reports on the competitive effects of the Associate Secretary of the Board merger were requested from the United States Attorney General, the Office of the Comptroller of the Currency, the FDIC, and the Office of Thrift Supervi- ACTIONS TAKEN UNDER THE FEDERAL DEPOSIT sion. The time for filing comments has expired, and the INSURANCE CORPORATION IMPROVEMENT ACT Board has considered the applications and all comments received in light of the factors set forth in the By the Board Bank Merger Act and section 5(d)(3) of the FDI Act. BB&T is the fourth largest bank holding company in BB&T Financial Corporation North Carolina, controlling total deposits of $5.8 bil- Wilson, North Carolina lion, representing approximately 9.6 percent of total deposits in commercial banking organizations in the Order Approving the Merger of Savings Associations state.3 BB&T currently owns and controls Newton, With a Commercial Bank Reidsville, and Mooresville, and the proposed transaction represents a reorganization of BB&T's corpo- BB&T Financial Corporation, Wilson, North Carolina rate structure. The Federal Reserve Bank of Rich- ("BB&T"), proposes to merge its savings-association mond reviewed the competitive effects of the affiliation subsidiaries, Citizens Savings Bank, S.S.B., Inc., of these savings banks and BB&T-NC at the time that Newton, ("Newton"); Mutual Savings Bank of Rock- BB&T acquired these savings banks, and determined ingham County, Inc., S.S.B., Reidsville, ("Reids- that the competitive effects were not significantly ville"); and Citizens Savings Bank, Inc., S.S.B., adverse in any relevant market.4 The Board concludes Mooresville, ("Mooresville"); all of North Carolina, that consummation of the proposal would not have a with and into Branch Banking and Trust Company, significantly adverse effect on competition or the con- Wilson, North Carolina ("BB&T-NC"), a wholly owned state chartered bank subsidiary of BB&T.1 12 U.S.C. § 1815(d)(2)(G). Each of these steps would occur sequentially, but in effect simultaneously, so that none of the interim institutions would ever operate or conduct business with the public. 1. The proposed transaction would be completed through a series of 2. 12 U.S.C. § 1815(d)(3)(E). These factors include considerations mergers with interim institutions in accordance with North Carolina relating to competition, financial and managerial resources, future law. The first step would result in each of the state savings banks prospects of the existing and proposed institutions, and the convebecoming interim SAIF-insured, state-chartered savings and loan nience and needs of the communities to be served. 12 U.S.C. § 1828(c). associations. These interim associations would then be converted into 3. State deposit data are as of December 30, 1993. interim SAIF-insured, state-chartered commercial banks under appli- 4. 79 Federal Reserve Bulletin 985 (1993) and 80 Federal Reserve cable state and federal law. See N.C. Gen. Stat. Section 53-17.2 and Bulletin 64 (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

668 Federal Reserve Bulletin • July 1994 centration of banking resources in any relevant bank- terms. To support these and other CRA-related initiaing market. tives, BB&T has filled 15 out of 17 new positions for The Board is also required under section 5(d)(3) of full-time employees working in the area of compliance the FDI Act to consider the effect of the proposal on and CRA matters. the convenience and needs of the communities to be BB&T-NC's CRA-related initiatives include proserved, and to take into account the records of the grams to increase its lending to low- and moderaterelevant depository institutions under the Community income and minority borrowers. For example, the Reinvestment Act (12 U.S.C. § 2901 et seq.) bank has developed the Community Homeownership ("CRA"). The Board notes that all of BB&T's subsid- Incentive Program which provides home mortgages iary banks received "satisfactory" ratings from their with a flexible credit history evaluation, a higher primary regulators at their most recent CRA perfor- qualifying "debt-to-equity" ratio, reduced down paymance examinations. BB&T-NC received a "satisfac- ment requirements, lower closing costs, and no retory" rating from the FDIC at its most recent CRA quired mortgage insurance. BB&T-NC has also inperformance examination as of April 12, 1993 ("1993 vested in an apartment complex for low-income Examination").5 The 1993 Examination, however, renters in Charlotte and Durham, North Carolina. In also noted substantive but isolated instances of dispar- addition, the bank has provided assistance for the ate treatment involving three of the bank's minority creation of a $1 million loan pool with other banks to loan applicants in apparent violation of the Fair Hous- help economic development for Shelby, North Caroing Act and the Equal Credit Opportunity Act. lina. BB&T-NC is a participating lender in the city of In light of this examination, BB&T has initiated a High Point Homeownership Assistance Program, number of steps to strengthen its compliance with fair which provides loans to low- and moderate-income lending laws. For example, BB&T has implemented a first-time home buyers. Fair Lending Policy to ensure that loan applications at BB&T-NC's CRA initiatives emphasize participaall of its subsidiary banks will be processed in full tion by the board of directors and an improved method compliance with fair lending laws.6 The BB&T-NC's of market delineation. BB&T also met with outside second-level review program has been expanded to advertising agencies and marketing specialists in an include all denied and withdrawn applications for effort to increase the number of loan applications from mortgages and home loans.7 BB&T-NC also has im- minorities, especially African-Americans.9 plemented an extensive training program, which in- Based on these and all the facts of record, the Board cludes an examination in fair lending compliance, for believes that the convenience and needs considermortgage, retail, and business loans that must be ations under the CRA are consistent with approval of successfully completed before a prospective lender these applications. The Board expects BB&T-NC to has the authority to make housing-related loans.8 fully implement all its CRA-related initiatives, and, in BB&T has also adopted a new Non-Discrimination particular, the steps designed to address compliance Policy Statement which requires each officer and emwith fair lending laws. The Board will continue to ployee of the BB&T-NC to certify annually that he or monitor BB&T-NC's progress in these areas and in she has read the statement and will comply with its future applications to establish depository facilities. After considering these efforts, the FDIC determined under the Bank Merger Act that the conve- 5. BB&T's South Carolina subsidiary, Branch Banking & Trust nience and needs factors raised by these mergers are Company, Greenville, South Carolina, was rated "outstanding" by consistent with approval. On this basis, the FDIC the FDIC at its most recent examination, July 20, 1992. Newton and Mooresville received "satisfactory" ratings in their most recent approved these transactions under the Bank Merger examinations, July, 1991. Reidsville was formed in 1992, and no Act. CRA/compliance examination has been performed. 6. As part of this initiative, BB&T-NC has instituted a standardized The Board also concludes that the financial and "Quality of Assistance/Loan Counseling Contact Log" to assist in managerial resources and future prospects of BB&T ensuring consistency in credit counseling and in the amount of and its subsidiaries are consistent with approval of assistance offered to applicants. The bank's mortgage and retail divisions also use a work sheet to assist in evaluating the consistency these applications. Moreover, the record in this case in the treatment of all applicants. Adverse action notices have been shows that: centralized as a safeguard to monitor whether these forms are being (1) The transactions will not result in the transfer of completed properly and whether notification is made within the prescribed time period. Mitigating factors to be considered for appli- any federally insured depository institution's federal cants not meeting all standard underwriting criteria are now formally incorporated into the loan evaluation process. 7. This program has been in place since February 7, 1994, and is staffed with experienced lenders who have the authority to reverse an 9. These meetings resulted in the launching of a three-month media initial decision and approve a previously denied loan. campaign in February 1994, which focused on home ownership for 8. As of April 21, 1994, 1345 employees have attended one of the African-Americans. The advertisements appeared in minority-owned three training courses. newspapers in metropolitan markets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 669 deposit insurance from one federal deposit insur- Atlanta, Georgia ("SouthTrust-Georgia"), a wholly ance fund to the other; owned subsidiary of SouthTrust of Georgia, Inc. Ap- (2) Newton, Reidsville, Mooresville, and BB&T-NC plicants seek Board approval of this transaction purcurrently meet, and upon consummation of the suant to section 5(d)(3) of the Federal Deposit Insurproposed transaction will continue to meet, all ap- ance Act (12 U.S.C. § 1815(d)(3) ("FDI Act")), as plicable capital standards; and amended by the Federal Deposit Insurance Corpora- (3) Because BB&T-NC is located in North Carolina tion Improvement Act of 1991 (Pub. L. No. 102-242, and is merging with an institution located in North § 501, 105 Stat. 2236, 2388-2392 (1991)). Carolina, the proposed transaction complies with Section 5(d)(3) of the FDI Act requires the Board to the interstate banking provisions of the Bank Hold- review any proposed merger between a Savings Assoing Company Act (12 U.S.C. § 1842(d)). See ciation Insurance Fund member and any Bank Insur- 12 U.S.C. § 1815(d)(3). ance Fund ("BIF") member if the acquiring or resulting institution is a BIF insured subsidiary of a bank Based on the foregoing and all other facts of record, holding company, and, in reviewing these proposals, the Board has determined that these applications to follow the procedures and consider the factors set should be, and hereby are, approved. These approvals forth in section 18(c) of the FDI Act (12 U.S.C. are subject to BB&T-NC obtaining all necessary reg- § 1828(c) ("the Bank Merger Act")).1 The proposed ulatory approvals for the proposed merger transac- transaction also is subject to review under the Bank tions. The Board's approval of these applications also Merger Act by the Office of the Comptroller of the is conditioned upon BB&T's compliance with the Currency, SouthTrust-Georgia's primary regulator. commitments made in connection with these applica- Notice of the application, affording interested pertions. For purposes of this action, the commitments sons an opportunity to submit comments, has been and conditions relied on in reaching this decision are given in accordance with the Bank Merger Act and the conditions imposed in writing by the Board and, as Board's Rules of Procedure (12 C.F.R. 262.3(b)). such, may be enforced in proceedings under applicable Reports on the competitive effects of the merger were law. requested from the United States Attorney General, These transactions may not be consummated before the Office of the Comptroller of the Currency the thirtieth calendar day after the effective date of this ("OCC"), and the Federal Deposit Insurance Corpoorder, or later than three months after the effective ration ("FDIC"). The time for filing comments has date of this order, unless such period is extended by expired, and the Board has considered the application the Board or the Federal Reserve Bank of Richmond, and all comments received in light of the factors set acting pursuant to delegated authority. forth in the Bank Merger Act and section 5(d)(3) of the By order of the Board of Governors, effective FDI Act. May 23, 1994. SouthTrust, with consolidated assets of $14.7 billion, controls 40 banks in Alabama, Florida, Georgia, Voting for this action: Chairman Greenspan and Governors North Carolina, South Carolina, and Tennessee.2 Kelley, Lindsey, and Phillips. Absent and not voting: Gov- SouthTrust is the seventh largest depository institution ernor La Ware. in Georgia, controlling total deposits of $2.1 billion, representing approximately 3.4 percent of total depos- JENNIFER J. JOHNSON its in depository institutions in the state.3 HomeBanc Associate Secretary of the Board SouthTrust Corporation 1. 12 U.S.C. § 1815(d)(3)(E). These factors include considerations Birmingham, Alabama relating to competition, financial and managerial resources, and future prospects of the existing and proposed institutions, and the convenience and needs of the communities to be served. 12 U.S.C. § 1828(c). Order Approving Application to Acquire Branches of 2. Asset data are as of December 31, 1993. 3. Deposit data are as of June 30, 1993. In this context, depository a Savings Bank institutions include commercial banks, savings banks, and savings associations. Market share data before consummation are based on calculations in which the deposits of thrift institutions are included at SouthTrust Corporation, Birmingham, Alabama 50 percent. The Board previously has indicated that thrift institutions ("SouthTrust"), and SouthTrust of Georgia, Inc., have become, or have the potential to become, significant competitors Atlanta, Georgia (collectively, "Applicants"), pro- of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin pose to purchase certain assets and assume certain 743 (1984). Because the deposits of HomeBanc would be transferred liabilities of the seven branch offices of HomeBanc, to a commercial bank under this proposal, those deposits are included at 100 percent in the calculation of pro forma market share. See FSB, Atlanta, Georgia ("HomeBanc"), by merging Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); First these offices with SouthTrust Bank of Georgia, N.A., Banks, Inc., 76 Federal Reserve Bulletin 669 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

670 Federal Reserve Bulletin • July 1994 is the 40th largest depository institution in Georgia, Community Reinvestment Alliance, Birmingham, Alcontrolling deposits of $265.3 million, representing less abama ("Protestant"). Protestant alleges that Souththan 1 percent of total deposits in depository institu- Trust has not met the convenience and needs of lowtions in Georgia. Upon consummation of the proposed and moderate-income African-American residents in transaction, SouthTrust would remain the seventh larg- Jefferson County and Birmingham, Alabama. In light est depository institution in Georgia, controlling depos- of these comments, the Board has carefully considered its of $2.4 billion, representing 3.8 percent of total SouthTrust's record of performance under the CRA deposits in depository institutions in the state. and the programs that SouthTrust has in place to serve SouthTrust and HomeBanc compete directly in the community needs. Atlanta banking market.4 SouthTrust is the sixth larg- All of SouthTrust's subsidiary banks that have been est depository institution in that market, controlling evaluated for CRA performance received "outstanddeposits of $2.2 billion, representing approximately ing" or "satisfactory" ratings from their primary 6.7 percent of total deposits in depository institutions regulators in their most recent examinations for CRA in the market ("market deposits"). HomeBanc is the performance. SouthTrust's lead bank, SouthTrust 16th largest depository institution in the market, con- Bank of Alabama, N.A., Birmingham, Alabama trolling deposits of $265.3 million, representing less ("SouthTrust-Alabama"), which includes Birmingthan 1 percent of market deposits. Upon consumma- ham and Jefferson County in its delineated area, tion of this proposal, SouthTrust would control received a "satisfactory" rating for CRA performance $2.5 billion in deposits, representing approximately from the OCC in November 1993 (the "1993 examina- 7.5 percent of market deposits. The Herfindahl- tion").6 In addition, SouthTrust-Georgia received a Hirschman Index ("HHI") for this market would satisfactory rating from the OCC in June 1993. increase 1 point to 1178.5 Based on all the facts of The Board has carefully reviewed the data filed by record in this case, including the de minimis effect on SouthTrust-Alabama and its wholly owned subsidiarmarket concentration as measured by the HHI and the ies, SouthTrust Mortgage Corporation ("STMC") and number of competitors that would remain in the mar- SouthTrust Mobile Services ("STMS"), under the ket after consummation of the proposal, the Board Home Mortgage Disclosure Act (12 U.S.C. § 2801 concludes that consummation of this proposal would et seq.) ("HMDA") for 1992 and 1993.7 These data, not have a significantly adverse effect on competition particularly for STMC, show some improvement in or the concentration of banking resources in the At- lending to low- and moderate-income individuals and lanta banking market. The Board also concludes that African-Americans in the Birmingham Metropolitan consummation of this proposal would not have a Statistical Area ("MSA").8 However, these data also significantly adverse effect on competition in any other indicate some disparities in approvals and denials of relevant banking market. loan applications according to racial group and income status in the MSA. Convenience and Needs Considerations The Board is concerned when an institution's record indicates disparities in lending to minority applicants The Board also is required under section 5(d)(3) of the and believes that all banks are obligated to ensure that FDI Act to consider the effect of the proposal on the their lending practices are based on criteria that assure convenience and needs of the communities to be not only safe and sound lending, but also equal access served. Accordingly, the Board has reviewed the to credit by creditworthy applicants regardless of race. comments submitted to the Board by the Alabama The Board recognizes, however, that HMDA data alone provide an incomplete measure of an institution's lending in its community, and also have limita- 4. The Atlanta banking market is approximated by Bartow, Cherokee, Clayton, Cobb, Coweta, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinett, Henry, Newton, Paulding, Rockdale, and Walton Counties, plus the towns of Auburn and Winder in Barrow County, 6. The Board notes that SouthTrust-Alabama's CRA performance and the town of Flowery Branch in Hall County, all in Georgia. rating as of October 1991 was "outstanding," and that the recent 5. Under the revised Department of Justice Merger Guidelines, 49 rating reflects issues regarding the accuracy of data reported under the Federal Register 26,823 (June 29, 1984), a market in which the post- Home Mortgage Disclosure Act ("HMDA") for 1992. SouthTrustmerger HHI is between 1000 and 1800 is considered moderately Alabama has submitted corrected 1992 HMDA data and has prepared concentrated. The Justice Department has informed the Board that a a plan acceptable to the OCC for assuring the accuracy of its 1993 data bank merger or acquisition generally will not be challenged (in the and its future data submissions. absence of other factors indicating anticompetitive effects) unless the 7. STMC specializes in FHA-type loans, conventional mortgages, post-merger HHI is at least 1800 and the merger increases the HHI by and refinancing of home purchase loans. STMS provides financing for more than 200 points. The Justice Department has stated that the higher mobile homes. than normal HHI thresholds for screening bank mergers for anticom- 8. SouthTrust's delineated community comprises 82.7 percent of petitive effects implicitly recognize the competitive effect of limited- the Birmingham MSA, and includes both the City of Birmingham and purpose lenders and other non-depository financial institutions. Jefferson County, Alabama. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 671 tions that make the data an inadequate basis, absent found that SouthTrust-Alabama has developed special other information, for concluding that an institution marketing initiatives to ensure that low- and moderatehas engaged in illegal discrimination in making lending income neighborhoods are informed about credit serdecisions. vices offered by the bank. The programs include The Board notes that none of the recent CRA advertising in newspapers and on radio stations that performance examinations for SouthTrust-Alabama target the minority populations living in these commufound any evidence of illegal discrimination or illegal nities. credit practices. In addition, the OCC recently per- SouthTrust-Alabama's participation in a variety of formed a targeted fair lending review of STMC's projects that support community development activiresidential mortgage lending and found no violation of ties in providing housing for low- and moderate-income fair lending laws. The OCC examiners reviewed individuals was noted in the 1993 examination. STMC all denied conventional mortgage applications and has committed to provide $300,000 in first mortgage 75 percent of denied government-insured mortgage financing at favorable interest rates for the purchase by applications received from minorities during a 12- eligible low- and moderate-income families of housing month period. The OCC found no evidence of dispar- units being developed by the Rosedale Community ate treatment based on race or ethnicity. SouthTrust- Development Corporation. In addition, in April 1993, Alabama and STMC also have instituted a secondary STMC committed $350,000 for residential first mortreview process in which a committee reviews the file gage loans to be used in conjunction with down payof every mortgage application recommended for denial ment funding provided through the City of Birmingham to ensure that the recommendation is appropriate. to Smithfield Neighborhood, Inc.12 SouthTrust-Ala- Furthermore, the 1993 examination indicated that the bama also has provided $1 million in construction and geographic distribution of the bank's credit exten- permanent financing in connection with the rehabilitasions, applications, and denials reflected a reasonable tion of a 64-unit, multi-family housing project located in penetration of all segments of the local community, a low-income area of Birmingham.13 Subsequent to that including low- and moderate-income tracts. investment, the SouthTrust Community Reinvestment The Board notes that SouthTrust-Alabama and its Corporation, a corporation established by SouthTrustsubsidiary, STMC, have undertaken a number of steps Alabama,14 made a $1 million equity investment for to increase their lending activities in low- and land acquisition and construction of a 24-unit apartment moderate-income areas in the Birmingham MSA. For complex designed to provide housing for low- and example, in April 1993, SouthTrust-Alabama intro- moderate-income families. duced its Blueprint Loan Program in response to an Examiners also noted that as further evidence of its ascertained need for affordable home purchase and support for the community, SouthTrust-Alabama home improvement products designed to meet the joined with eight banks to form a Community Develspecific housing needs of low- and moderate-income opment Corporation to provide financial assistance to individuals. The home purchase product has low down small businesses that are considered "disadvantaged" payment requirements, and both the home purchase under the City of Birmingham's Disadvantaged Busiand home improvement products offer financing of ness Enterprise Program. SouthTrust-Alabama has closing costs and flexible underwriting criteria.9 As of committed to provide 29.8 percent of the $1.5 million October 1993, SouthTrust-Alabama has extended 44 annual budget. As of May 1993, loans totalling $3.8 Blueprint Program loans totalling over $774,000. million have been made under the program. South- SouthTrust, through STMC, also offers residential Trust-Alabama also provides loans through the Small loans with flexible lending criteria under the Birming- Business Administration ("SBA"). As of year end ham Residential Mortgage Plan.10 STMC has closed 59 1992, SouthTrust-Alabama had 154 outstanding SBA loans totalling $1.4 million under this program as of loans totalling approximately $14.5 million.15 November 1993.11 In addition, the 1993 examination The 1993 examination concluded that SouthTrust- Alabama has in place many of the elements of an 9. Low- and moderate-income neighborhoods were specifically targeted under this program through a direct mail campaign in the first quarter of 1993. 12. Loans under this program offer flexible underwriting criteria and 10. The Birmingham Mortgage Plan was initiated by SouthTrust- special financing terms. Alabama and eight other lenders in the Birmingham area who com- 13. Groundbreaking for this project occurred on October 9, 1993. mitted to provide a total of $25 million in FHA and VA loans to 14. This organization was formed on February 2, 1993, to provide low-income area residents. low-income housing in cities with SouthTrust bank subsidiaries. 11. SouthTrust-Alabama, through STMC and STMS, also offers 15. SouthTrust-Alabama is a charter member of the Alabama Small FHA and VA home mortgage loans under its own auspices. In 1992, Business Investment Company, Inc., a Minority Enterprise Small the bank and its subsidiaries originated 257 FHA and VA loans in the Investment Company with over $2 million in loans to minority-owned Birmingham MSA totalling almost $16 million. small businesses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

672 Federal Reserve Bulletin • July 1994 effective CRA program. The board of directors of interstate banking provision of the Bank Holding SouthTrust-Alabama has approved a comprehensive Company Act (12 U.S.C. § 1842(d)) if HomeBanc CRA policy that outlines goals, objectives, and levels were a state bank that SouthTrust was applying to of responsibility and accountability for management acquire directly. See 12 U.S.C. § 1815(d)(3). and employees of the bank. STMC has implemented a formal community outreach program, which includes Based on the foregoing and all the facts of record, calls on area realtors and seminars on the availability the Board has determined that this application should and use of mortgage loan products. In addition, STMC be, and hereby is, approved. The Board's approval of employs a full-time Community Development Officer this application is conditioned upon SouthTrust's comwho meets with government officials and nonprofit and pliance with the commitments made in connection neighborhood associations in an effort to create prod- with this application. This approval is further subject ucts that meet the credit needs of low- and moderate- to SouthTrust obtaining the OCC's approval for the income communities. proposed transaction. For purposes of this action, the For the foregoing reasons, and based on all the commitments and conditions relied on in reaching this facts of record in this case, including Protestant's decision are both conditions imposed in writing by the comments and SouthTrust's response to these com- Board and, as such, may be enforced in proceedings ments, the Board concludes that convenience and under applicable law. This approval is limited to the needs considerations, including the records of South- proposal presented to the Board by SouthTrust, and Trust, SouthTrust-Alabama, and SouthTrust-Geor- may not be construed as applying to any other transgia under the CRA, are consistent with approval of action. this application. This transaction may not be consummated before The Board also concludes that the financial and the thirtieth calendar day after the effective date of this managerial resources and future prospects of South- order, or later than three months after the effective Trust and HomeBanc are consistent with approval of date of this order, unless such period is extended by this application. Moreover, the record in this case the Board or the Federal Reserve Bank of Atlanta, shows that: acting pursuant to delegated authority. (1) The transaction will not result in the transfer of By order of the Board of Governors, effective any federally insured depository institution's federal May 31, 1994. deposit insurance from one federal deposit insurance fund to the other; Voting for this action: Chairman Greenspan, and Gover- (2) Applicants and SouthTrust-Georgia currently nors Kelley, LaWare, and Phillips. Absent and not voting: meet, and upon consummation of the proposed Governor Lindsey. transaction will continue to meet, all applicable capital standards; and JENNIFER J. JOHNSON (3) The proposed transaction would comply with the Associate Secretary of the Board ACTIONS TAKEN UNDER THE FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 By the Secretary 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 Acquiring Approval Bank Holding Company Thrift Bank(s) Date First Interstate Bancorp, Great American Federal First Interstate Bank May 13, 1994 Los Angeles, California Savings Association, of Washington, San Diego, California N.A., Seattle, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 673 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 Acquiring Approval Bank Holding Company Thrift Bank(s) Date Carolina First Bank, Citadel Federal Savings & Carolina First April 29, 1994 Greenville, South Carolina Loan Association, Corporation, Charleston, South Greenville, South Carolina Carolina First-Citizens Bank & Trust Edgecombe Homestead First Citizens May 4, 1994 Company, Savings Bank, Inc., SSB, BancShares, Inc., Raleigh, North Carolina Tarboro, North Carolina Raleigh, North Carolina First Union National Bank of Citizens Federal Savings First Union April 29, 1994 Florida, Association, Corporation, Jacksonville, Florida Jacksonville, Florida Charlotte, North Carolina Shawmut National Corporation, Northeast Savings, F.A., Shawmut Bank May 9, 1994 Hartford, Connecticut Hartford, Connecticut Connecticut, N.A., Hartford, Connecticut Shawmut Bank, N.A., Boston, Massachusetts 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 Union Planters Corporation, Memphis, Union Planters Bank of Middle May 31, 1994 Tennessee Tennessee, N.A., Nashville, Tennessee Union Planters Bank of Jackson, N.A. Jackson, Tennessee Union Planters Bank of East Tennessee, N.A., Knoxville, Tennessee Union Planters Bank of Chattanooga, N.A., Chattanooga, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

674 Federal Reserve Bulletin • July 1994 Section 3—Continued Applicant(s) Bank(s) ^Date^ USB AN CORP, Inc., Johnstown Savings Bank, May 9, 1994 Johnstown, Pennsylvania Johnstown, Pennsylvania Section 4 Effective Applicant(s) Bank(s) Date Signet Banking Corporation, Pioneer Financial Corporation, May 12, 1994 Richmond, Virginia Chester, Virginia 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 Bren-Mar Properties, Inc. Jack's Fork Bancorporation, Inc., St. Louis May 3, 1994 Columbia, Missouri Columbia, Missouri First Missouri Bancorporation, Inc., Columbia, Missouri First Heritage National Bank, Davis, Oklahoma Citizens Development Company, Western Bank, N.A., Minneapolis May 12, 1994 Billings, Montana Chinook, Montana Citizens State Bank, Hamilton, Montana First National Bank of Lewistown, Lewistown, Montana Citizens State Bancshares, Inc., Citizens State Bank of Cheney, Kansas City May 17, 1994 Wichita, Kansas Cheney, Kansas CNB Holdings, Inc., Community National Bank, Richmond May 13, 1994 Pulaski, Virginia Pulaski, Virginia Commercial Investment Springview Bancorporation, Kansas City May 18, 1994 Company, Inc., Springview, Nebraska Ainsworth, Nebraska Community Charter Corporation, Missouri State Bank and Trust St. Louis April 29, 1994 St. Louis, Missouri Company, St. Louis, Missouri Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 675 Reserve Effective Applicant(s) Bank(s) Bank Date Community Corporation, First National Bank of Perry St. Louis April 26, 1994 Cannelton, Indiana County, Indiana, Cannelton, Indiana Community Grain Company, Farmers National Bank, Chicago May 5, 1994 Coon Rapids, Iowa Bayard, Iowa Community Investment Services, A&P Bank Holding Company, Minneapolis April 29, 1994 Inc., North Branch, Minnesota North Branch, Minnesota Community National Bank, North Branch, Minnesota Employee Stock Ownership Plan Payne County Bancshares, Inc., Kansas City May 19, 1994 for Employees of Payne Perkins, Oklahoma County Bank, Perkins, Oklahoma Farmers State Bank of Hardtner B-K Agency, Inc., Kansas City May 12, 1994 Employee Stock Ownership Hardtner, Kansas Plan, Hardtner, Kansas First Alabama Bancshares, Inc., First Fayette Bancshares, Inc., Atlanta May 16, 1994 Birmingham, Alabama Fayette, Alabama First Bancorporation of Ohio, Peoples National Bank, Cleveland April 29, 1994 Akron, Ohio Wooster, Ohio First Community Corporation, First Community Bank of East Atlanta April 29, 1994 Rogersville, Tennessee Tennessee, Rogersville, Tennessee First National Bank of Bemidji First Bemidji Holding Company, Minneapolis May 24, 1994 Employee Stock Ownership Bemidji, Minnesota Plan, Bemidgi, Minnesota First National Bank Shares, Ltd., Urban Bancshares, Inc., Kansas City May 4, 1994 Great Bend, Kansas Kansas City, Missouri First Sleepy Eye Bancorporation, First Security Bank of Benson, Minneapolis May 6, 1994 Inc., Benson, Minnesota Sioux Falls, South Dakota Fulton Financial Corporation, Mid-Atlantic Bankcorp, Philadelphia May 12, 1994 Lancaster, Pennsylvania Hagerstown, Maryland Harrisburg Bancshares, Inc., Westside National Bank, Dallas May 2, 1994 Houston, Texas Pearland, Texas Harrisburg Bancshares (Nevada), Inc., Reno, Nevada Heritage Financial Services, Inc., Midlothian State Bank, Chicago May 24, 1994 Tinley Park, Illinois Midlothian, Illinois Hibernia Corporation, Commercial Bancshares, Inc., Atlanta May 26, 1994 New Orleans, Louisiana Abbeville, Louisiana HSB Financial Corporation, Harwood State Bank, Minneapolis May 10, 1994 Harwood, North Dakota Harwood, North Dakota Ida Grove Bancshares, Inc., P.S.B. Bancorporation, Inc., Chicago April 29, 1994 Ida Grove, Iowa West Des Moines, Iowa Jefferson County Bancshares, Plymouth Investment Company, Kansas City May 18, 1994 Inc., Plymouth, Nebraska Day kin, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

676 Federal Reserve Bulletin • July 1994 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank Date Ohio State Bancshares, Inc., The Marion Bank, Cleveland April 29, 1994 Marion, Ohio Marion, Ohio Olney Bancshares of Texas, Inc., Thirdtier, Inc., Dallas May 18, 1994 Olney, Texas Wilmington, Delaware Olney Bancshares, Inc., Olney, Texas Olney Bancorp of Delaware, Inc., Wilmington, Delaware First Coleman National Bank, Coleman, Texas Graham National Bank, Graham, Texas The First National Bank of Olney, Olney, Texas Farmers National Bank, Seymour, Texas Pipestone Bancshares, Inc., Upper Midwest Financial Minneapolis May 10, 1994 Pipestone, Minnesota Corporation, Garretson, South Dakota Raton Capital Corporation, Farmers & Stockmens Kansas City May 19, 1994 Raton, New Mexico Bancorporation, Clayton, New Mexico South wide Financial Group, Inc. The Citizens Bank and Trust of Atlanta May 18, 1994 Fayetteville, Georgia Fayette County, Fayetteville, Georgia State Financial Investments, Holroyd Insurance Agency, Kansas City May 12, 1994 Inc., Winfield, Kansas Winfield, Kansas Stockgrowers State Banc Peoples Bank, N.A., Kansas City May 18, 1994 Corporation, Coldwater, Kansas Ashland, Kansas Thirdtier, Inc., Olney Bancshares, Inc., Dallas May 18, 1994 Wilmington, Delaware Olney, Texas Olney Bancorp of Delaware, Inc., Wilmington, Delaware First Coleman National Bank, Coleman, Texas Graham National Bank, Graham, Texas The First National Bank of Olney, Olney, Texas Farmers National Bank, Seymour, Texas UJB Financial Corp., VSB Bancorp, Inc., New York May 11, 1994 Princeton, New Jersey Closter, New Jersey United Nebraska Financial United Nebraska Bank, Kansas City April 28, 1994 Company, Grand Island, Nebraska Grand Island, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 677 Section 4 Nonbanking Reserve Effective Applicant(s) Activity/Company Bank Date Community First Bankshares, Key Insurance, Inc., Minneapolis May 24, 1994 Inc., Gettysburg, South Dakota Fargo, North Dakota The Sumitomo Trust & Banking Boullioun Aviation Services, Inc., New York May 13, 1994 Co., Ltd., Bellevue, Washington Osaka,Japan The Summit Bancorporation, Lancaster Financial Ltd., Inc., New York May 18, 1994 Chatham, New Jersey Parsippany, New Jersey Sections 3 and 4 Nonbanking Reserve Effective Applicant(s) Activity/Company Bank Date Capitol Bancorp, Ltd., Financial Center Corporation, Chicago May 25, 1994 Lansing, Michigan Holland, Michigan Paragon Bank & Trust, Holland, Michigan Consolidated Bank Services, Inc., Holland, Michigan Liberty Bancorp of Georgia, The Gordon Bank, F.S.B., Atlanta April 29, 1994 Inc., Gordon, Georgia Clayton, Georgia The Gordon Bank, Gordon, Georgia APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Reserve Effective Applicant(s) Bank(s) Bank Date Chemical Bank and Trust First of America Chicago May 4, 1994 Company, Bank-MidMichigan, Midland, Michigan Bay City, Michigan First State Bank of Taos, First State Bank of Santa Fe, Kansas City May 2, 1994 Taos, New Mexico Santa Fe, New Mexico First Virginia Bank-Shenandoah First Virginia Bank of Augusta, Richmond May 24, 1994 Valley, Staunton, Virginia Woodstock, Virginia First Virginia Bank-Planters, Bridgewater, Virginia Wilmington Trust of Wilmington Trust Company, Philadelphia April 29, 1994 Pennsylvania, Wilmington, Delaware West Chester, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

678 Federal Reserve Bulletin • July 1994 PENDING CASES INVOLVING THE BOARD OF removal, prohibition, and civil money penalty order. GOVERNORS Oral argument is scheduled for June 16, 1994. Jackson v. Board of Governors, No. CV-N-93-401- This list of pending cases does not include suits ECR (D. Nev., filed June 14, 1993). Pro se action for against the Federal Reserve Banks in which the Board violation of a prisoner's civil rights. On Novemof Governors is not named a party. ber 26, 1993, the Board filed a motion to dismiss. First National Bank ofBellaire v. Board of Governors, National Title Resource Agency v. Board of Gover- No. H-93-1708 (S.D. Texas, filed June 8, 1993). nors, No. 94-2050 (8th Cir., filed April 28, 1994). Action to enjoin possible enforcement actions by Petition for review of Board's order, issued under Board of Governors and other bank regulatory agensection 4 of the Bank Holding Company Act, apcies. On March 8, 1994, the district court granted the proving the application of Norwest Corp., Minneapagencies' motion to dismiss; plaintiff's motion for olis, Minnesota, to acquire Double Eagle Financial reconsideration was filed March 22, 1994. Corp., Phoenix, Arizona, and its subsidiary, and Kubany v. Board of Governors, et al., No. 93-1428 (D. thereby engage in title insurance agency activities D.C., filed July 9, 1993). Action challenging Board and real estate settlement services (80 Federal determination under the Freedom of Information Reserve Bulletin 453 (1994)). Act. The Board's motion to dismiss was filed on Scott v. Board of Governors, No. 94-4117 (10th October 15, 1993. Cir.), filed April 28, 1994. Appeal of dismissal of action against Board and others for damages and Bennett v. Greenspan, No. 93-1813 (D. D.C., filed injunctive relief for alleged constitutional and stat- April 20, 1993). Employment discrimination action. utory violations caused by issuance of Federal Trial is scheduled to commence August 1, 1994. Reserve notes. Amann v. Prudential Home Mortgage Co., et al., No. Beckman v. Greenspan, No. CV 94-41-BCG-RWA 93-10320 WD (D. Massachusetts, filed February 12, (D. Mont., filed April 13, 1994). Action against 1993). Action for fraud and breach of contract Board and others seeking damages for alleged vio- arising out of a home mortgage. On April 17, 1993, lations of constitutional and common law rights. The the Board filed a motion to dismiss. Board's motion to dismiss was filed May 19, 1994. Adams v. Greenspan, No. 93-0167 (D. D.C., filed DLG Financial Corp. v. Board of Governors, No. January 27, 1993). Action by former employee under 94-10078 (5th Cir., filed January 20, 1994). Appeal the Civil Rights Act of 1964 and the Rehabilitation of district court dismissal of appellants' action to Act of 1973 concerning termination of employment. enjoin the Board and the Federal Reserve Bank of The Board's motion for partial summary judgment Dallas from taking certain enforcement actions, and was filed on January 4, 1994. for money damages on a variety of tort and contract CBC, Inc. v. Board of Governors, No. 93-1458 (U.S. theories. The case has been consolidated on appeal Supreme Court, filed March 17, 1994). Petition for with Board of Governors v. DLG Financial Corp., review of civil money penalty assessment against a Nos. 93-2944 and 94-20013 (5th Cir., filed Decembank holding company and three of its officers and ber 14, 1993, and December 31, 1993), an appeal of directors for failure to comply with reporting rea temporary restraining order and a preliminary quirements. On November 30, 1993, the Court of injunction obtained by the Board freezing assets of a Appeals for the 10th Circuit denied the petition for corporation and an individual pending administrareview. On March 17, 1994, CBC filed a petition for tive adjudication of civil money penalty assessments certiorari. The Solicitor General has waived oppoby the Board. Oral argument on the consolidated sition on behalf of the Board. appeal is scheduled for June 1, 1994. Richardson v. Board of Governors, et ah, No. 94- Zemel v. Board of Governors, No. 92-1056 (D. D.C., 4020 (10th Cir.), filed January 14, 1994. Appeal of filed May 4, 1992). Age Discrimination in Employdismissal of action against Board and others for ment Act case. The parties' cross-motions for sumdamages and injunctive relief for alleged constitu- mary judgment are pending. tional and statutory violations caused by issuance of Board of Governors v. Ghaith R. Pharaon, No. 91- Federal Reserve notes. The Board's brief is due CIV-6250 (S.D. New York, filed September 17, June 3, 1994. 1991). Action to freeze assets of individual pending Board of Governors v. Oppegard, No. 93-3706 (8th administrative adjudication of civil money penalty Cir., filed November 1, 1993). Appeal of district assessment by the Board. On September 17, 1991, court order ordering appellant Oppegard to comply the court issued an order temporarily restraining the with prior order requiring compliance with Board transfer or disposition of the individual's assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 679 FINAL ENFORCEMENT ORDERS ISSUED BY THE both of Anaheim, California, and Pacific Inland Mort- BOARD OF GOVERNORS gage Company, San Jose, California. Edwin M. Bergsmark Toledo, Ohio Bruno Zbinden New York, New York The Federal Reserve Board announced on May 16, 1994, the issuance of a Consent Order against Edwin The Federal Reserve Board announced on May 16, M. Bergsmark, the former Executive Vice-President 1994, the issuance of a combined Order to Cease and and General Counsel of Trustcorp, Inc., Toledo, Ohio, Desist and Order of Prohibition against Bruno Zbina former bank holding company, and of Trustcorp's den, a former officer of the New York branch of Swiss former subsidiary State member bank, the Trustcorp Bank Corporation, Basle, Switzerland. Bank, Toledo, Ohio. Mr. Bergsmark also was a director of the Trustcorp Bank. Robert F. Bruning and Robert C. Richmond WRITTEN AGREEMENTS APPROVED BY FEDERAL Pemberville, Ohio RESERVE BANKS The Federal Reserve Board announced on May 12, 1994, the issuance of a combined Order to Cease and Garfield Bank Desist and Order of Prohibition against Robert F. Montebello, California Bruning, former President of The Citizens Savings Bank Company, Pemberville, Ohio, and an Order of The Federal Reserve Board announced on May 12, Prohibition against Robert C. Richmond, a former 1994, the execution of a Written Agreement between officer of The Citizens Savings Bank Company. the Federal Reserve Bank of San Francisco and the Garfield Bank, Montebello, California. Pacific Inland Bancorp and Pacific Inland Bank Anaheim, California Pioneer Bancorp Fullerton, California Pacific Inland Mortgage Company San Jose, California The Federal Reserve Board announced on May 23, The Federal Reserve Board announced on May 12, 1994, the execution of a Written Agreement between 1994, the issuance of a Cease and Desist Order against the Federal Reserve Bank of San Francisco and Pio- Pacific Inland Bancorp, and the Pacific Inland Bank, neer Bancorp, Fullerton, California. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics CONTENTS WEEKLY REPORTING COMMERCIAL BANKS Assets and liabilities A3 Guide to Tabular Presentation A21 Large 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 A25 Prime rate charged by banks on short-term credit business loans A6 Reserves and borrowings—Depository A26 Interest rates—money and capital markets A27 Stock market—Selected statistics institutions A7 Selected borrowings in immediately available funds—Large member banks FEDERAL FINANCE POLICY INSTRUMENTS A28 Federal fiscal and financing operations A29 U.S. budget receipts and outlays A8 Federal Reserve Bank interest rates A30 Federal debt subject to statutory limitation A9 Reserve requirements of depository institutions A30 Gross public debt of U.S. Treasury—Types A10 Federal Reserve open market transactions and ownership A31 U.S. government securities dealers—Transactions FEDERAL RESERVE BANKS A32 U.S. government securities dealers—Positions and financing All Condition and Federal Reserve note statements A3 3 Federal and federally sponsored credit A12 Maturity distribution of loan and security agencies—Debt outstanding holdings MONETARY AND CREDIT AGGREGATES SECURITIES MARKETS AND CORPORATE FINANCE A13 Aggregate reserves of depository institutions and monetary base A34 New security issues—Tax-exempt state and local A14 Money stock, liquid assets, and debt measures governments and corporations A16 Deposit interest rates and amounts outstanding— A35 Open-end investment companies—Net sales commercial and BIF-insured banks and assets A17 Bank debits and deposit turnover A35 Corporate profits and their distribution A35 Nonfarm business expenditures on new plant and equipment COMMERCIAL BANKING INSTITUTIONS A36 Domestic finance companies—Assets and liabilities, and consumer, real estate, and business A18 Assets and liabilities, Wednesday figures credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • July 1994 Domestic Financial Statistics—Continued A54 U.S. reserve assets A54 Foreign official assets held at Federal Reserve REAL ESTATE Banks A55 Selected U.S. liabilities to foreign official A3 7 Mortgage markets institutions A3 8 Mortgage debt outstanding REPORTED BY BANKS IN THE UNITED STATES CONSUMER INSTALLMENT CREDIT A55 Liabilities to and claims on foreigners A39 Total outstanding A56 Liabilities to foreigners A39 Terms A58 Banks' own claims on foreigners A59 Banks' own and domestic customers' claims on foreigners FLOW OF FUNDS A59 Banks' own claims on unaffiliated foreigners A60 Claims on foreign countries—Combined A40 Funds raised in U.S. credit markets domestic offices and foreign branches A42 Summary of financial transactions A43 Summary of credit market debt outstanding A44 Summary of financial assets and liabilities REPORTED BY NONBANKING BUSINESS ENTERPRISES IN THE UNITED STATES Domestic Nonfinancial Statistics A61 Liabilities to unaffiliated foreigners A62 Claims on unaffiliated foreigners SELECTED MEASURES SECURITIES HOLDINGS AND TRANSACTIONS A45 Nonfinancial business activity—Selected measures A63 Foreign transactions in securities A45 Labor force, employment, and unemployment A64 Marketable U.S. Treasury bonds and A46 Output, capacity, and capacity utilization notes—Foreign transactions A47 Industrial production—Indexes and gross value A49 Housing and construction A50 Consumer and producer prices INTEREST AND EXCHANGE RATES A51 Gross domestic product and income A52 Personal income and saving A65 Discount rates of foreign central banks A65 Foreign short-term interest rates A66 Foreign exchange rates International Statistics A67 Guide to Statistical Releases and Special Tables SUMMARY STATISTICS A53 U.S. international transactions—Summary A54 U.S. foreign trade Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GNMA Government National Mortgage Association n.a. Not available GDP Gross domestic product n.e.c. Not elsewhere classified HUD Department of Housing and Urban p Preliminary Development r Revised (Notation appears on column heading IMF International Monetary Fund when about half of the figures in that column IO Interest only are changed.) IPCs Individuals, partnerships, and corporations * Amounts insignificant in terms of the last decimal IRA Individual retirement account place shown in the table (for example, less than MMDA Money market deposit account 500,000 when the smallest unit given is millions) MSA Metropolitan statistical area 0 Calculated to be zero NOW Negotiable order of withdrawal . . . Cell not applicable OCD Other checkable deposit ATS Automatic transfer service OPEC Organization of Petroleum Exporting Countries BIF Bank insurance fund OTS Office of Thrift Supervision CD Certificate of deposit PO Principal only CMO Collateralized mortgage obligation REIT Real estate investment trust FFB Federal Financing Bank REMIC Real estate mortgage investment conduit FHA Federal Housing Administration RP Repurchase agreement FHLBB Federal Home Loan Bank Board RTC Resolution Trust Corporation FHLMC Federal Home Loan Mortgage Corporation SAIF Savings Association Insurance Fund FmHA Farmers Home Administration SCO Securitized credit obligation FNMA Federal National Mortgage Association SDR Special drawing right FSLIC Federal Savings and Loan Insurance Corporation SIC Standard Industrial Classification G-7 Group of Seven VA Department of Veterans Affairs 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 Domestic Financial Statistics • July 1994 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted' 1993 1994 1993 1994 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q2 Q3 Q4 Ql Dec. Jan. Feb.r Mar. Apr. Reserves of depository institutions' 1 Total 10.4 12.5 14.2 3.1 3.1 2.5 3.2 -3.4 -7.4 "> Required 12.0 12.4 14.1 2.5 3.9 -5.2 9.5 ,0r -11.2 3 Nonborrowed 10.2 11.0 15.6 3.7 3.2 2.7 3.3 -3.1 -8.8 4 Monetary base3 10.1 10.6 9.8 10.2 5.7 11.7 13.4 9.3 6.2 Concepts of money, liquid assets, and debt4 S Ml 10.7 12.0 9.4 6.0 6.4 5.4 5.4 4.0r -1.3 6 M2 2.2 2.4 1.9 1.8r 2.3 2.0r -1.4 4.9r 2.7 7 M3 2.1 1.0 2.2 ,2r 3.5r 1.2r -7.5 2.8r 2.6 8 L 3.1 .9 l.5r 2.6 4.4 4.8r -2.1 1.9 n.a. 9 Debt 4.5 5.7 5.0r 5.3 7.1r 4.4r 4.4 5.8 n.a. Nontransaction components 10 In M25 -1.4 -1.7 -1.4 -.r .4 ,4r -4.6 5.4r 4.6 II In M3 only6 1.6 -6.7 3.8r -8.5r io.r -3.T -40.2 -9.4r 2.3 Time and savings deposits Commercial banks 12 Savings, including MMDAs 5.1 4.9 3.6 4.3r 4.4 7.3 1.5 -1.2r -3.8 13 Small time7 -9.2 -10.6 -7.4 -5.2 -2.6 -7.7 -4.1 -3.4r -2.1 14 Large time8'9 -.7 -7.7 -.5 ~3.4r 4.8 8.7r -24.1 -8.8r -8.0 Thrift institutions 15 Savings, including MMDAs .7 2.3 -.4 ,4r 2.0 .0 -1.4 5.3r 1.9 16 Small time7 -11.9 -14.4 -11.9 -11.2r -15.8 -9.9 -12.7 -5.4 -3.9 17 Large time8 9 -8.5 -4.5 -6.7 -9.3 -32.1 3.9 -5.8 -15.6 5.9 Monex market mutual funds 18 General purpose and broker-dealer .2 -1.8 1.2 .0 6.2 -3.4 -14.1 17.1 45.8 19 Institution-only -2.2 -10.5 8.8 -26.7 13.6 -26.2 -98.4 3.4 -2.7 Debt components4 20 10.4 9.2 5.5 7.0 13.3 2.8 4.9 9.1 n.a. 21 Nonfederal 2.4 4.5 4.8r 4.7 4.8r 4.9r 4.3 4.7 n.a. 1. Unless otherwise noted, rates of change are calculated from average tax-exempt, institution-only money market funds. Excludes amounts held by amounts outstanding during preceding month or quarter. depository institutions, the U.S. government, money market funds, and foreign 2. Figures incorporate adjustments for discontinuities, or "breaks," associ- banks and official institutions. Also excluded is the estimated amount of overnight ated with regulatory changes in reserve requirements. (See also table 1.20.) RPs and Eurodollars held by institution-only money market funds. Seasonally 3. The seasonally adjusted, break-adjusted monetary base consists of (1) adjusted M3 is computed by adjusting its non-M2 component as a whole and then seasonally adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adding this result to seasonally adjusted M2. adjusted currency component of the money stock, plus (3) (for all quarterly L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term reporters on the "Report of Transaction Accounts, Other Deposits, and Vault Treasury securities, commercial paper, and bankers acceptances, net of money Cash" and for all weekly reporters whose vault cash exceeds their required market fund holdings of these assets. Seasonally adjusted L is computed by reserves) the seasonally adjusted, break-adjusted difference between current vault summing U.S. savings bonds, short-term Treasury securities, commercial paper, cash and the amount applied to satisfy current reserve requirements. and bankers acceptances, each seasonally adjusted separately, and then adding 4. Composition of the money stock measures and debt is as follows: this result to M3. Ml: (I) currency outside the U.S. Treasury, Federal Reserve Banks, and the Debt: Debt of domestic nonfinancial sectors consists of outstanding credit vaults of depository institutions, (2) travelers checks of nonbank issuers, (3) market debt of the U.S. government, state and local governments, and private demand deposits at all commercial banks other than those owed to depository nonfinancial sectors. Private debt consists of corporate bonds, mortgages, coninstitutions, the U.S. government, and foreign banks and official institutions, less sumer credit (including bank loans), other bank loans, commercial paper, bankers cash items in the process of collection and Federal Reserve float, and (4) other acceptances, and other debt instruments. Data are derived from the Federal checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) Reserve Board's flow of funds accounts. Data on debt of domestic nonfinancial and automatic transfer service (ATS) accounts at depository institutions, credit sectors are monthly averages, derived by averaging adjacent month-end levels. union share draft accounts, and demand deposits at thrift institutions. Seasonally Growth rates for debt reflect adjustments for discontinuities over time in the levels adjusted Ml is computed by summing currency, travelers checks, demand of debt presented in other tables. deposits, and OCDs, each seasonally adjusted separately. 5. Sum of (1) overnight RPs and Eurodollars, (2) money market fund balances M2: Ml plus (1) overnight (and continuing-contract) repurchase agreements (general purpose and broker-dealer), (3) savings deposits (including MMDAs), (RPs) issued by all depository institutions and overnight Eurodollars issued to and (4) small time deposits. U.S. residents by foreign branches of U.S. banks worldwide, (2) savings (includ- 6. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. ing MMDAs) and small time deposits (time deposits—including retail RPs—in residents, and (4) money market fund balances (institution-only), less (5) a amounts of less than $100,000), and (3) balances in both taxable and tax-exempt consolidation adjustment that represents the estimated amount of overnight RPs general-purpose and broker-dealer money market funds. Excludes individual and Eurodollars held by institution-only money market funds. This sum is retirement accounts (IRAs) and Keogh balances at depository institutions and seasonally adjusted as a whole. money market funds. Also excludes all balances held by U.S. commercial banks, 7. Small time deposits—including retail RPs—are those issued in amounts of money market funds (general purpose and broker-dealer), foreign governments less than $100,000. All IRA and Keogh account balances at commercial banks and and commercial banks, and the U.S. government. Seasonally adjusted M2 is thrift institutions are subtracted from small time deposits. computed by adjusting its non-Mi component as a whole and then adding this 8. Large time deposits are those issued in amounts of $100,000 or more, result to seasonally adjusted Ml. excluding those booked at international banking facilities. M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of 9. Large time deposits at commercial banks less those held by money market $100,000 or more) issued by all depository institutions, (2) term Eurodollars held funds, depository institutions, U.S. government and foreign banks and official by U.S. residents at foreign branches of U.S. banks worldwide and at all banking institutions. offices in the United Kingdom and Canada, and (3) balances in both taxable and 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 Average of Average of daily figures for week ending on date indicated daily figures 1994 1994 Feb. Mar. Apr. Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 373,196 375,629 382,420 375,627 375,371r 375,885r 382,405 380,871 384,496 382,062 U.S. government securities- 2 Bought outright—System account .... 332,397 335,371 341,226 334,014 336,682 337,265 338,049 338,384 343,611 343,561 3 Held under repurchase agreements ... 2,565 2,721 2,452 4,494 1,293 1,145 4,924 3,975 2,366 0 Federal agency obligations 4 Bought outright 4,401 4,235 4,115 4,237 4,237 4,228 4,184 4,145 4,101 4,076 5 Held under repurchase agreements ... 214 261 99 291 236 173 171 131 143 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 56 41 61 35 24 48 115 54 35 67 8 Seasonal credit 15 24 55 18 27 37 38 42 53 74 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 1,226 585 628 269 343r 282r 1,419 452 335 400 11 Other Federal Reserve assets 32,323 32,391 33,783 32,268 32,529 32,705 33,504 33,689 33,850 33,872 12 Gold stock 11,053 11,053 11,052 11,053 11,052 11,052 11,052 11,052 11,052 11,052 13 Special drawing rights certificate account . 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 14 Treasury currency outstanding 22,200 22,265 22,327 22,260 22,274 22,288 22,302 22,316 22,330 22,344 ABSORBING RESERVE FUNDS 15 Currency in circulation 363,796 366,753 370,738 366,654 366,961 367,541 369,669 371,284 371,152 370,552 16 Treasury cash holdings 372 377 376 378 382 374 371 376 378 378 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 6,263 5,122 5,701 5,463 4,971 4,847 6,073 3,965 6,568 5,473 18 Foreign 260 189 248 171 176 185 304 209 330 213 19 Service-related balances and adjustments 6,988 6,565 6,371 6,742 6,654 6,334 6,232 6,231 6,714 6,308 20 Other 313 358 311 354 396 313 333 303 297 309 21 Other Federal Reserve liabilities and capital 9,784 10,066 10,386 10,015 9,982 9,970 10,654 10,740 10,144 10,132 22 Reserve balances with Federal Reserve Banks1 26,691 27,536r 29,685 27,181 27,193r 27,678r 30,140 29,149 30,313 30,111 End-of-month figures Wednesday figures Feb. Mar. Apr. Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 375,262 381,272r 381,576 378,908 378,934r 380,314r 383,490 378,045 384,970 382,112 U.S. government securities" 2 Bought outright—System account .... 333,404 337,260 343,079 335,800 336,824 337,620 340,054 338,513 343,454 343,160 3 Held under repurchase agreements ... 4,925 5,300 0 5,729 3,725 4,634 4,423 374 3,034 0 Federal agency obligations 4 Bought outright 4,335 4,227 4,047 4,237 4,237 4,227 4,177 4,102 4,098 4,047 5 Held under repurchase agreements .. . 160 150 0 505 550 510 200 0 0 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 34 426 151 99 24 37 12 187 60 75 8 Seasonal credit 14 37 82 19 37 37 39 43 67 83 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 382 448r 48 129 673r 244r 964 1,313 169 753 11 Other Federal Reserve assets 32,008 33,424 34,168 32,389 32,863 33,004 33,621 33,513 34,086 33,971 12 Gold stock 11,053 11,052 11,053 11,053 11,052 11,052 11,052 11,052 11,053 11,052 13 Special drawing rights certificate account . 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 14 Treasury currency outstanding 22,232 22,302 22,358 22,260 22,274 22,288 22,302 22,316 22,330 22,344 ABSORBING RESERVE FUNDS 15 Currency in circulation 364,947 369,016 370,677 367,503 367,748 369,184 371,369 372,074 371,389 371,556 16 Treasury cash holdings 365 370 378 383 375 370 375 378 378 378 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 4,886 6,181 7,965 8,193 3,952 5,562 4,308 3,904 9,166 7,543 18 Foreign 191 454 171 173 187 198 209 209 235 200 19 Service-related balances and adjustments 7,226 6,235 6,322 6,742 6,654 6,334 6,232 6,231 6,714 6,308 20 Other 373 316 312 382 513 300 318 274 305 308 21 Other Federal Reserve liabilities and capital 10,337 10,618 10,189 9,820 9,835 9,835 10,535 9,955 9,993 9,989 22 Reserve balances with Federal Reserve Banks3 28,240 29,455r 26,990 27,042 31,014r 29,889r 31,515 26,405 28,190 27,245 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 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 Financial Statistics • July 1994 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1991 1992 1993 1993 1994 Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Reserve balances with Reserve Banks" 26,659 25,368 29,374 28,297 29,018 29,374 27,817 26,922 27,396r 29,613 •> Total vault cash' 32,509 34,542 36,812 35,184 35,655 36,812 37,907 36,295 35,585 35,216 3 Applied vault cash 28,872 31,172 33,484 31,739 32,278 33,484 34,254 32,671 32,208 32,026 4 Surplus vault cash" 3,637 3,370 3,328 3,445 3,377 3,328 3,653 3,624 3,377 3,189 Total reserves6 55,532 56,540 62,858 60,036 61,296 62,858 62,072 59,593 59,605 61,639 6 Required reserves 54,553 55,385 61,795 58,947 60,195 61,795 60,624 58,454 58,638r 60,491 7 Excess reserve balances at Reserve Banks ... 979 1,155 1,063 1,089 1,101 1,063 1,448 1,140 967r 1,148 x Total borrowings at Reserve Banks8 192 124 82 285 89 82 73 70 55 124 190 E Se x a te so n n d a e l d b c o r r e r d o i w t9 ings 38 1 18 1 3 0 1 19 0 2 7 0 5 3 0 1 1 0 5 1 0 5 2 0 4 5 0 7 Biweekly averages of daily figures for weeks ending on date indicated 1994 Jan. 5 Jan. 19 Feb. 2 Feb. 16 Mar. 2 Mar. 16 Mar. 30 Apr. 13r Apr. 27 May 11 1 Reserve balances with Reserve Banks- 30,367 28,745 25,672 26,339 27,811 27,139 27,434 29,641 30,212 26,693 Total vault cash3 36,489 38,241 38,108 37,475 34,617 36,654 34,667 35,434 34,749 36,447 3 Applied vault cash4 33,279 34,691 34,152 33,651 31,282 33,105 31,440 32,268 31,598 32,980 4 Surplus vault cash' 3,210 3,550 3,957 3,824 3,335 3,549 3,227 3,167 3,151 3,467 Total reserves6 63,646 63,435 59,824 59,989 59,093 60,244 58,874 61,909 61,810 59,673 6 Required reserves 62,405 61,759 58,557 58,878 57,942 59,192 58,013r 61,012 60,353 58,880 7 Excess reserve balances at Reserve Banks ... 1,241 1,676 1,267 1,112 1,151 1,052 861r 897 1,457 793 8 Total borrowings at Reserve Banks8 142 74 45 95 45 39 68 125 114 170 9 Seasonal borrowings 16 11 18 15 15 17 32 40 64 102 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 1. Data in this table also appear in the Board's H.3 (502) weekly statistical institutions (that is, those whose vault cash exceeds their required reserves) to release. For ordering address, see inside front cover. satisfy current reserve requirements. 2. Excludes required clearing balances and adjustments to compensate for float 5. Total vault cash (line 2) less applied vault cash (line 3). and includes other off-balance-sheet "as-of" adjustments. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash 3. Total "lagged" vault cash held by depository institutions subject to reserve (line 3). requirements. Dates refer to the maintenance periods during which the vault cash 7. Total reserves (line 5) less required reserves (line 6). can be used to satisfy reserve requirements. The maintenance period for weekly 8. Also includes adjustment credit. reporters ends sixteen days after the lagged computation period during which the 9. Consists of borrowing at the discount window under the terms and condivault cash is held. Before Nov. 25, 1992, the maintenance period ended thirty days tions established for the extended credit program to help depository institutions after the lagged computation period. deal with sustained liquidity pressures. Because there is not the same need to 4. All vault cash held during the lagged computation period by "bound" repay such borrowing promptly as with traditional short-term adjustment credit, institutions (that is, those whose required reserves exceed their vault cash) plus the money market impact of extended credit is similar to that of nonborrowed the amount of vault cash applied during the maintenance period by "nonbound" reserves. 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 1994, week ending Monday SSoouurrccee aanndd mmaattuurriittyy Feb. 28 Mar. 7 Mar. 14 Mar. 21 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 67,817 72,061 70,228 66,607 64,511 72,139 71,680 69,568 63,721 2 For all other maturities 12,273 11,227 12,393 12,080 11,902 13,350 1111,,442233 12,784 13,225 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 22,806 25,708 24,179 26,751 27,318 23,688 24,751 21,512 22,305 4 For all other maturities 17,384 18,524 20,512 17,679 18,003 20,146 19,158 19,909 21,662 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 19,883 23,111 26,200 26,058 23,828 20,969 26,002 25,591 23,081 6 For all other maturities 31,065 30,796 33,244 32,636 32,874 36,030 35,477 37,190 34,276 All other customers 7 For one day or under continuing contract 30,743 30,570 30,966 30,044 30,789 28,186 31,750 31,907 29,831 8 For all other maturities 17,615 17,038 17,372 16,986 16,946 19,496 16,099 16,396 16,464 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 41,945 44,037 42,657 43,880 44,544 52,960 43,928 45,846 48,626 10 To all other specified customers2 24,834 25,409 25,143 24,335 23,888 23,638 25,634 24,176 21,753 I. 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 Financial Statistics • July 1994 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit' Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 6/ O 3/ n 9 4 Effective date Previous rate 6/ O 3/ n 9 4 Effective date Previous rate 6/ O 3/ n 9 4 Effective date Previous rate Boston 3.5 5/17/94 3.0 4.35 5/26/94 4.05 4.85 5/26/94 4.55 New York 5/17/94 5/26/94 5/26/94 Philadelphia 5/17/94 5/26/94 5/26/94 Cleveland 5/18/94 5/26/94 5/26/94 Richmond 5/17/94 5/26/94 5/26/94 Atlanta 5/17/94 5/26/94 5/26/94 Chicago 5/17/94 5/26/94 5/26/94 St. Louis 5/17/94 5/26/94 5/26/94 Minneapolis 5/17/94 5/26/94 5/26/94 Kansas City 5/17/94 5/26/94 5/26/94 Dallas 5/17/94 5/26/94 5/26/94 San Francisco ... 3.5 5/17/94 3.0 4.35 5/26/94 4.05 4.85 5/26/94 4.55 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 A le l v l e F l) . — R. B o a f n k Effective date A le l v l e F l) . — R. Ba of n k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1977 6 6 1981-—May 5 13-14 14 1986—Aug. 21 5.5-6 5.5 14 14 22 5.5 5.5 1978—Jan. 9 6-6.5 6.5 Nov. 7 13-14 13 20 6.5 6.5 6 13 13 1987—Sept. 4 5.5-6 6 MMaayy 11 6.5-7 7 Dec. 4 12 12 11 6 6 12 7 7 JJuullyy 3 7-7.25 7.25 1982--July 70 11.5-12 11.5 1988—Aug. 9 6-6.5 6.5 10 7.25 7.25 73 11.5 11.5 11 6.5 6.5 Aug. 21 7.75 7.75 Aug. 7 11-11.5 11 Sept. 22 8 8 3 11 11 1989—Feb. 24 6.5-7 7 Oct. 16 8-8.5 8.5 16 10.5 10.5 27 7 7 20 8.5 8.5 ?7 10-10.5 10 Nov. 1 8.5-9.5 9.5 30 10 10 1990—Dec. 19 6.5 6.5 3 9.5 9.5 Oct. 1? 9.5-10 9.5 13 9.5 9.5 1991—Feb. 1 6-6.5 6 1979—July 20 10 10 Nov. 77 9-9.5 9 4 6 6 AAuugg.. 17 10-10.5 10.5 ?6 9 9 Apr. 30 5.5-6 5.5 20 10.5 10.5 Dec. 14 8.5-9 9 May 2 5.5 5.5 SSeepptt.. 19 10.5-11 11 15 8.5-9 8.5 Sept. 13 5-5.5 5 21 11 11 17 8.5 8.5 17 5 5 Oct. 8 11-12 12 Nov. 6 4.5-5 4.5 10 12 12 1984-—Apr. 9 8.5-9 9 7 4.5 4.5 13 9 9 Dec. 20 3.5-4.5 3.5 1980—Feb. 15 12-13 13 Nov. 71 8.5-9 8.5 24 3.5 3.5 19 13 13 76 8.5 8.5 MMaayy 29 12-13 13 Dec. 74 8 8 1992—July 2 3-3.5 3 30 12 12 7 3 3 June 13 11-12 II 1985-—May 7704 7.5-8 7.5 16 11 11 7.5 7.5 29 10 10 1 In effect June 3, 1994 3.5 3.5 July 28 10-11 10 1986--Mar. 7-7.5 7 Sept. 26 11 II 10 7 7 Nov. 17 12 12 Apr. 71 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 Requirement TTyyppee ooff ddeeppoossiitt22 Percentage of Effective date deposits Net transaction accounts3 1 $0 million-$51.9 million 33333 1111122222/////2222211111/////9999933333 2 More than $51.9 million4 1111100000 1111122222/////2222211111/////9999933333 00000 1111122222/////2222277777/////9999900000 00000 1111122222/////2222277777/////9999900000 1. Required reserves must be held in the form of deposits with Federal Reserve automatic, or other transfers per month, of which no more than three may be Banks or vault cash. Nonmember institutions may maintain reserve balances with checks. Accounts subject to such limits are savings deposits. a Federal Reserve Bank indirectly on a pass-through basis with certain approved The Monetary Control Act of 1980 requires that the amount of transaction institutions. For previous reserve requirements, see earlier editions of the Annual accounts against which the 3 percent reserve requirement applies be modified Report or the Federal Reserve Bulletin. Under provisions of the Monetary annually by 80 percent of the percentage change in transaction accounts held by Control Act, depository institutions include commercial banks, mutual savings all depository institutions, determined as of June 30 each year. Effective Dec. 21, banks, savings and loan associations, credit unions, agencies and branches of 1993, for institutions reporting quarterly and weekly, the amount was increased foreign banks, and Edge Act corporations. from $46.8 million to $51.9 million. 2. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 4. The reserve requirement was reduced from 12 percent to 10 percent on 97-320) requires that $2 million of reservable liabilities of each depository Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institution be subject to a zero percent reserve requirement. The Board is to adjust institutions that report quarterly. the amount of reservable liabilities subject to this zero percent reserve require- 5. For institutions that report weekly, the reserve requirement on nonpersonal ment each year for the succeeding calendar year by 80 percent of the percentage time deposits with an original maturity of less than IVi years was reduced from 3 increase in the total reservable liabilities of all depository institutions, measured percent to 1 Vi percent for the maintenance period that began Dec. 13, 1990, and on an annual basis as of June 30. No corresponding adjustment is to be made in to zero for the maintenance period that began Dec. 27, 1990. The reserve the event of a decrease. On Dec. 21, 1993, the exemption was raised from $3.8 requirement on nonpersonal time deposits with an original maturity of 1 Vi years million to $4.0 million. The exemption applies in the following order: (1) net or more has been zero since Oct. 6, 1983. negotiable order of withdrawal (NOW) accounts (NOW accounts less allowable For institutions that report quarterly, the reserve requirement on nonpersonal deductions); and (2) net other transaction accounts. The exemption applies only to time deposits with an original maturity of less than 1 Vl years was reduced from 3 accounts that would be subject to a 3 percent reserve requirement. percent to zero on Jan. 17, 1991. 3. Includes all deposits against which the account holder is permitted to make 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 withdrawals by negotiable or transferable instruments, payment orders of with- percent to zero in the same manner and on the same dates as was the reserve drawal, and telephone and preauthorized transfers for the purpose of making requirement on nonpersonal time deposits with an original maturity of less than payments to third persons or others, other than money market deposit accounts 1 Vi years (see note 5). (MMDAs) and similar accounts that permit no more than six preauthorized, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Financial Statistics • July 1994 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1993 1994 TTyypp aa ee nn dd oo ff mm ttrr aa aa tt nn uu ss rr aa iitt cc yy tt iioonn 11999911 11999922 11999933 Sept. Oct. Nov. Dec. Jan. Feb. Mar. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 20,158 14,714 17,717 366 1,3% 5,911 1,394 0 1,264 900 2 Gross sales 120 1,628 0 0 0 0 0 0 0 0 3 Exchanges 277,314 308,699 332,229 31,128 25,783 27,641 33,536 28,986 28,709 33,163 4 Redemptions 1,000 1,600 468 0 468 0 0 0 0 0 Others within one year 5 Gross purchases 3,043 1,096 1,223 411 0 0 189 0 0 147 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 24,454 36,662 31,368 3,074 913 5,158 2,910 0 0 0 8 Exchanges -28,090 -30,543 -36,582 -1,861 -1,566 -7,641 -2,910 0 0 0 9 Redemptions 1,000 0 0 0 0 0 0 0 0 0 One to five years 10 Gross purchases 6,583 13,118 10,350 2,400 0 100 2,619 0 0 1,413 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -21,211 -34,478 -27,140 -3,074 -31 -4,689 -2,910 0 0 0 13 Exchanges 24,594 25,811 0 1,861 1,566 5,341 2,910 0 0 0 Five to ten years 14 Gross purchases 1,280 2,818 4,168 797 0 0 1,008 0 0 1,103 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts -2,037 -1,915 0 0 -882 -272 0 0 0 0 17 Exchanges 2,894 3,532 0 0 0 2,300 0 0 0 0 More than ten years 18 Gross purchases 375 2,333 3,457 717 0 0 826 0 0 618 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts -1,209 -269 0 0 0 -197 0 0 0 0 21 Exchanges 600 1,200 0 0 0 0 0 0 0 0 All maturities 22 Gross purchases 31,439 34,079 36,915 4,691 1,396 6,011 6,035 0 1,264 4,181 23 Gross sales 120 1,628 0 0 0 0 0 0 0 0 24 Redemptions 1,000 1,600 468 0 468 0 0 616 0 0 Matched transactions 25 Gross sales 1,570,456 1,482,467 1,475,085 124,898 115,160 109,941 137,645 132,872 124,125 155,950 26 Gross purchases 1,571,534 1,480,140 1,475,941 122,578 112,837 112,772 136,821 133,468 124,270 155,625 Repurchase agreements 27 Gross purchases 310,084 378,374 475,447 62,905 27,693 38,493 33,751 25,818 33,693 38,490 28 Gross sales 311,752 386,257 470,723 61,399 30,397 34,072 29,577 29,348 37,425 38,115 29 Net change in U.S. Treasury securities 29,729 20,642 42,027 3,878 -4,099 13,263 9,386 -3,550 -2,323 4,232 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 0 0 31 Gross sales 5 0 0 0 0 0 0 0 0 0 32 Redemptions 292 632 1,072 35 70 15 81 202 102 108 Repurchase agreements 33 Gross purchases 22,807 14,565 35,063 9,810 3,812 2,841 2,211 2,600 3,277 3,160 34 Gross sales 23,595 14,486 34,669 7,734 5,509 2,861 1,615 3,106 3,636 3,170 35 Net change in federal agency obligations -1,085 -554 -678 2,041 -1,767 -35 515 -708 -461 -118 36 Total net change in System Open Market Account 28,644 20,089 41,348 5,919 -5,866 13,228 9,901 -4,258 -2,784 4,114 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market Account; all other figures increase such holdings. 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 1994 1994 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 Feb. 28 Mar. 31 Apr. 30 Consolidated condition statement ASSETS 1 Gold certificate account 11,052 11,052 11,052 11,053 11,052 11,053 11,052 11,053 2 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 3 Coin 431 424 417 418 415 446 435 429 Loans 4 To depository institutions 75 52 230 127 158 48 463 234 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 7 Bought outright 4,227 4,177 4,102 4,098 4,047 4,335 4,227 44,,004477 8 Held under repurchase agreements 510 200 0 0 0 160 150 0 9 Total U.S. Treasury securities 342,254 344,477 338,887 346,488 343,160 338,329 342,560 343,079 10 Bought outright* 337,620 340,054 338,513 343,454 343,160 333,404 337,260 343,079 11 Bills 163,307 165,740 164,200 164,541 164,248 162,372 162,947 164,167 12 Notes 133,858 133,858 133,858 137,445 137,445 131,311 133,858 137,445 13 Bonds 40,455 40,455 40,455 41,467 41,467 39,721 40,455 41,467 14 Held under repurchase agreements 4,634 4,423 374 3,034 0 4,925 5,300 0 15 Total loans and securities 347,066 348,905 343,219 350,713 347,365 342,872 347,400 347,360 16 Items in process of collection 5,202 6,678 6,941 6,491 6,135 2,435 4,735 4,571 17 Bank premises 1,054 1,054 1,058 1,057 1,056 1,053 1,054 1,055 Other assets 18 Denominated in foreign currencies 22,640 23,313 23,225 23,098 23,115 22,769 23,297 23,149 19 All other4 9,283 9,247 9,207 9,919 9,808 8,209 9,021 9,967 20 Total assets 404,746 408,692 403,136 410,767 406,964 396,855 405,013 405,602 LIABILITIES 21 Federal Reserve notes 347,697 349,867 350,554 349,856 350,006 343,526 347,520 349,127 22 Total deposits 42,386 42,720 37,348 45,115 41,866 41,244 42,683 41,922 23 Depository institutions 36,329 37,884 32,958 35,410 33,816 35,794 35,733 33,474 24 U.S. Treasury—General account 5,562 4,308 3,904 9,166 7,543 4,886 6,181 7,965 25 Foreign—Official accounts 198 209 209 235 200 191 454 171 26 Other 300 318 274 305 308 373 316 312 27 Deferred credit items 4,829 5,570 5,279 5,803 5,104 1,748 4,192 4,363 28 Other liabilities and accrued dividends 2,625 2,659 2,705 2,749 2,705 2,514 2,684 2,763 29 Total liabilities 397,537 400,816 395,885 403,523 399,681 389,031 397,080 398,176 CAPITAL ACCOUNTS 30 Capital paid in 3,445 3,445 3,456 3,468 3,479 3,437 3,445 3,479 31 Surplus 3,401 3,401 3,401 3,401 3,401 3,401 3,401 3,401 32 Other capital accounts 364 1,030 393 375 403 985 1,088 546 33 Total liabilities and capital accounts 404,746 408,692 403,136 410,767 406,964 396,855 405,013 405,602 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 361,644 369,706 366,814 370,252 368,705 364,104 371,757 367,031 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks).... 414,413 415,238 416,838 418,201 419,232 411,834 414,534 419,336 36 LESS: Held by Federal Reserve Banks 66,716 65,370 66,284 68,345 69,226 68,308 67,014 70,209 37 FederalReservenotes.net 347,697 349,867 350,554 349,856 350,006 343,526 347,520 349,127 Collateral held against notes, net: 38 Gold certificate account 11,052 11,052 11,052 11,053 11,052 11,053 11,052 11,053 39 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 328,627 330,797 331,483 330,785 330,935 324,455 328,450 330,056 42 Total collateral 347,697 349,867 350,554 349,856 350,006 343,526 347,520 349,127 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 Financial Statistics • July 1994 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTyyppee ooff hhoollddiinngg aanndd mmaattuurriittyy 1994 1994 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 Feb. 28 Mar. 31 Apr. 29 1 Total loans 75 52 230 127 158 48 463 234 2 Within fifteen days' 71 27 196 126 148 45 445 196 3 Sixteen days to ninety days 4 25 34 1 10 3 18 38 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 342,253 344,477 338,887 346,488 343,160 333,404 337,260 343,079 10 Within fifteen days' 23,556 22,727 13,795 20,800 17,576 9,168 9,213 11,062 11 Sixteen days to ninety days 77,339 83,833 83,479 79,338 79,084 84,699 77,058 89,445 12 Ninety-one days to one year 104,689 99,588 103,285 103,561 103,711 106,001 112,661 99,783 13 One year to five years 79,435 81,093 81,093 84,250 84,250 77,654 81,093 84,250 14 Five years to ten years 24,553 24,553 24,553 24,961 24,961 23,818 24,553 24,961 15 More than ten years 32,682 32,682 32,682 33,578 33,578 32,064 32,682 33,578 16 Total federal agency obligations 4,837 4,377 4,102 4,098 4,047 4,335 4,227 4,047 17 Within fifteen days' 935 319 55 156 130 318 325 130 18 Sixteen days to ninety days 527 684 638 533 528 565 527 528 19 Ninety-one days to one year 960 960 955 955 955 954 960 955 20 One year to five years 1,913 1,913 1,853 1,853 1,833 1,921 1,913 1,833 21 Five years to ten years 477 477 477 577 577 552 477 577 22 More than ten years 25 25 25 25 25 25 25 25 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 1993 1994 IItteemm 1990 1991 1992 1993 Dec. Dec. Dec. Dec. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS1 1 Total reserves3 41.77 45.53 54.34 60.48 58.81 59.75 60.32 60.48 60.60 60.76 60.59 60.21 2 Nonborrowed reserves4 41.44 45.34 54.22 60.39 58.39 59.46 60.23 60.39 60.53 60.69 60.53 60.09 3 Nonborrowed reserves plus extended credit5. 41.47 45.34 54.22 60.39 58.39 59.46 60.23 60.39 60.53 60.69 60.53 60.09 4 Required reserves 40.11 44.55 53.19 59.41 57.72 58.66 59.22 59.41 59.16 59.62 59.62r 59.07 5 Monetary base6 293.16 317.12 350.61 385.86 378.08 381.40 384.03 385.86 389.61 393.96 397.00r 399.06 Not seasonally adjusted 6 Total reserves 43.07 46.98 56.06 62.37 58.65 59.48 60.67 62.37 62.04 59.53 59.50 61.40 7 Nonborrowed reserves 42.74 46.78 55.93 62.29 58.22 59.20 60.58 62.29 61.96 59.46 59.44 61.27 8 Nonborrowed reserves plus extended credit5.. 42.77 46.78 55.93 62.29 58.22 59.20 60.58 62.29 61.96 59.46 59.44 61.27 9 Required reserves8 41.40 46.00 54.90 61.31 57.56 58.39 59.57 61.31 60.59 58.39 58.53 60.25 10 Monetary base9 296.68 321.07 354.55 390.59 377.72 380.80 384.29 390.59 391.00 390.86 394.14r 399.73 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 59.12 55.53 56.54 62.86 59.14 60.04 61.30 62.86 62.07 59.59 59.61 61.64 12 Nonborrowed reserves 58.80 55.34 56.42 62.78 58.71 59.75 61.21 62.78 62.00 59.52 59.55 61.52 13 Nonborrowed reserves plus extended credit5.. 58.82 55.34 56.42 62.78 58.71 59.75 61.21 62.78 62.00 59.52 59.55 61.52 14 Required reserves 57.46 54.55 55.39 61.80 58.05 58.95 60.20 61.80 60.62 58.45 58.64 60.49 15 Monetary base1" 313.70 333.61 360.90 397.62 384.25 387.51 391.14 397.62 397.89 397.93 400.77r 406.29 16 Excess reserves'3 1.66 .98 1.16 1.06 1.09 1.09 1.10 1.06 1.45 1.14 ,97r 1.15 17 Borrowings from the Federal Reserve .33 .19 .12 .08 .43 .29 .09 .08 .07 .07 .06 .12 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 those weekly reporters whose vault cash adjusted, break-adjusted required reserves (line 4) plus excess reserves (line 16). exceeds their required reserves) the break-adjusted difference between current 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally vault cash 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 with traditional short- 12. The monetary base, not break-adjusted and not seasonally adjusted, term adjustment credit, the money market impact of extended credit is similar to consists of (1) total reserves (line 11), plus (2) required clearing balances and 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 Financial Statistics • July 1994 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES' Billions of dollars, averages of daily figures 1994 1990 1991 1992 1993 Dec. Dec. Dec. Dec. Jan. Feb.r Mar.r Apr. Seasonally adjusted Measures' 1 Ml 826.4 897.7 1,024.8 1,128.4 1,133.5 1,138.6 1,142.4 1,141.2 2 M2 3,353.0 3,455.3 3,509.0 3,563.1 3,569.0r 3,564.7 3,579.4 3,587.5 3 M3 4,125.7 4,180.4 4,183.0 4,225.3r 4,229.5r 4,203.1 4,212.8 4,222.1 4 L 4,974.8 4,992.9 5,057.1 5,122.8r 5,143.4r 5,134.5 5,142.6 n.a. 5 Debt 10,670.1 11,147.3 11,721.5 12,309.6r 12,354.4r 12,400.2 12,460.6 n.a. Mi components 6 Currency- 246.7 267.1 292.2 321.4 325.2r 329.2 332.4 334.7 7 Travelers checks4 7.8 7.7 8.1 7.9 7.9 7.9 8.0 8.1 8 Demand deposits 277.9 290.0 339.6 384.8 388.3r 390.3 390.0 388.9 9 Other checkable deposits6 294.0 332.8 384.9 414.3 412.0 411.2 411.9 409.4 Nontransaction components 10 In M27 2,526.6 2,557.6 2,484.3 2,434.7 2,435.5r 2,426.1 2,437.0 2,446.3 11 In M38 772.7 725.2 674.0 662.2r 660.5r 638.4 633.4 634.6 Commercial banks 12 Savings deposits, including MMDAs 582.1 665.5 754.6 785.3 790.1 791.1 790.3 787.8 13 Small time deposits9 611.3 602.9 508.7 468.5 465.5 463.9 462.6 461.8 14 Large time depositsl0- " 368.6 342.4 292.8 277.0 279.0r 273.4 271.4 269.6 Thrift institutions 15 Savings deposits, including MMDAs 338.3 375.6 429.0 430.2 430.2 429.7 431.6 432.3 16 Small time deposits9 563.2 464.5 361.8 314.3 311.7 308.4 307.0 306.0 17 Large time deposits'" 120.9 83.4 67.5 61.8 62.0 61.7 60.9 61.2 Money market mutual funds 18 General purpose and broker-dealer 355.5 370.4 352.0 348.8 347.8 343.7 348.6 361.9 19 Institution-only 135.0 181.0 201.5 197.0 192.7 176.9 177.4 177.0 Debt components 20 Federal debt 2,490.7 2,763.8 3,068.4 3,327.9 3,335.6 3,349.3 3,374.7 n.a. 21 Nonfederal debt 8,179.4 8,383.5 8,653.1 8,981.8r 9,018.8r 9,050.9 9,086.0 n.a. Not seasonally adjusted Measures' 22 Ml 843.8 916.7 1,046.7 1,153.8 1,142.8 1,124.7 1,131.9 1,153.2 23 M2 3,366.0 3,470.4 3,527.6 3,585.7 3,575.7r 3,552.6 3,577.8 3,604.8 24 4,135.5 4,191.9 4,198.2 4,244.7r 4,230.4r 4,193.9 4,212.7 4,237.7 25 L 4,997.2 5,018.0 5,087.6 5,157.5r 5,157.6r 5,126.1 5,146.4 n.a. 26 Debt 10,667.7 11,144.6 11,723.3 12,309.6r 12,340.0r 12,374.0 12,437.3 n.a. Ml components 2/ Currency3 249.5 269.9 295.0 324.9 324.0 327.3 330.7 334.4 28 Travelers checks 7.4 7.4 7.8 7.6 7.7 7.7 7.8 7.8 29 Demand deposits 289.9 303.1 355.1 402.6 393. r 380.6 380.7 390.3 30 Other checkable deposits6 297.0 336.3 388.9 418.6 417.9 409.1 412.9 420.8 Nontransaction components 31 In M27 2,522.3 2,553.7 2,480.9 2,431.9r 2,432.9r 2,427.9 2,445.8 2,451.6 32 In M38 769.5 721.6 670.5 659.0r 654.7r 641.3 635.0 632.9 Commercial banks 33 Savings deposits, including MMDAs 580.8 664.0 752.9 783.9 786.1 787.7 791.3 790.2 34 Small time deposits9 610.5 601.9 507.8 467.6 465.6 463.8 462.1 461.4 35 Large time deposits'0- 11 367.7 341.3 291.7 275.8r 276.0r 271.7 271.2 268.9 Thrift institutions 36 Savings deposits, including MMDAs 337.6 374.8 428.1 429.4 428.0 427.9 432.2 433.6 37 Small time deposits9 562.4 463.8 361.2 313.6 311.8 308.3 306.7 305.7 38 Large time deposits10 120.6 83.1 67.2 61.6 61.4 61.3 60.9 61.0 Money market mutual funds 39 General purpose and broker-dealer 353.8 368.5 350.2 347.2 348.1 349.4 357.6 367.6 40 Institution-only 134.7 180.4 200.4 195.8 196.2 186.1 180.5 176.2 Repurchase agreements and Eurodollars 41 Overnight 77.3 80.6 80.7 90.3 93.3r 90.8 95.8 93.1 42 Term 158.3 130.1 126.7 141.3r 136.2r 137.5 138.7 142.5 Debt components 43 Federal debt 2,491.3 2,765.0 3,069.8 3,329.5 3,333.0 3,345.4 3,374.4 n.a. 44 Nonfederal debt 8,176.3 8,379.7 8,653.5 8,980. r 9,007.0r 9,028.7 9,062.8 n.a. Footnotes appear on 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: (I) currency outside the U.S. Treasury, Federal Reserve Banks, and the market debt of the U.S. government, state and local governments, and private vaults of depository institutions, (2) travelers checks of nonbank issuers, (3) nonfinancial sectors. Private debt consists of corporate bonds, mortgages, condemand deposits at all commercial banks other than those owed to depository sumer credit (including bank loans), other bank loans, commercial paper, bankers institutions, the U.S. government, and foreign banks and official institutions, less acceptances, and other debt instruments. Data are derived from the Federal cash items in the process of collection and Federal Reserve float, and (4), other Reserve Board's flow of funds accounts. Debt data are based on monthly checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) averages. This sum is seasonally adjusted as a whole. and automatic transfer service (ATS) accounts at depository institutions, credit 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of union 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) savings deposits (including computed by adjusting its non-Mi component as a whole and then adding this MMDAs), and (4) small time deposits. result to seasonally adjusted M1. 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 (5) a $100,000 or more) issued by all depository institutions, (2) term Eurodollars held consolidation adjustment that represents the estimated amount of overnight RPs by U.S. residents at foreign branches of U.S. banks worldwide and at all banking and 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, U.S. government, and foreign banks and official L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term institutions. 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 NonfinancialS tatistics • July 1994 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1993 1994 em 1991 1992 Dec. Dec. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Interest rates (annual effective yields) INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts ... 3.76 2.33 2.01 1.96 1.92 1.89 1.86 1.84 1.82 1.82r 1.81 2 Savings deposits 4.30 2.88 2.55 2.51 2.49 2.48 2.46 2.46 2.43 2.43 2.45 Interest-bearing time deposits with balances of less than $100,000, by maturity J 7 to 91 days 4.18 2.90 2.66 2.63 2.63 2.64 2.65 2.65 2.68 2.76 2.87 4 92 to 182 days 4.41 3.16 2.96 2.92 2.91 2.92 2.91 2.90 2.94 3.02 3.13 5 183 days to 1 year 4.59 3.37 3.17 3.13 3.11 3.13 3.13 3.14 3.18 3.27 3.42 6 More than 1 year to 2'/i years 4.95 3.88 3.63 3.55 3.54 3.54 3.55 3.56 3.61 3.69 3.87 7 More than 2 Vl years 5.52 4.77 4.40 4.28 4.27 4.28 4.29 4.31 4.35 4.46 4.66 BIF-INSURED SAVINGS BANKS3 8 Negotiable order of withdrawal accounts ... 4.44 2.45 2.07 2.01 1.98 1.95 1.87 1.89 1.88 1.83 1.85 9 Savings deposits2 4.97 3.20 2.80 2.73 2.68 2.65 2.63 2.62 2.64 2.63 2.65 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 1 to 91 days 4.68 3.13 2.79 2.76 2.75 2.73 2.70 2.69 2.69 2.71 2.72 11 92 to 182 days 4.92 3.44 3.12 3.05 3.05 3.03 3.02 3.03 3.04 3.08 3.13 12 183 days to 1 year 4.99 3.61 3.37 3.33 3.34 3.32 3.31 3.33 3.34 3.37 3.47 IJ More than 1 year to 2Vi years 5.23 4.02 3.73 3.69 3.68 3.69 3.66 3.72 3.76 3.85 3.96 14 More than 2'/2 years 5.98 5.00 4.73 4.62 4.57 4.60 4.62 4.61 4.66 4.75 4.85 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts ... 244,637 286,541 287,675 286,056 289,813 297,329 305,223 293,806 295,573 297,496r 293,712 16 Savings deposits 652,058 738,253 761,919 758,835 765,372 770,609 766,413 771,559 776,204 779,340r 770,909 17 Personal 508,191 578,757 593,318 592,028 595,715 598,200 597,838 606,615 611,725 615,875r 610,963 18 Nonpersonal 143,867 159,496 168,601 166,807 169,657 172,408 168,575 164,944 164,479 163,465r 159,945 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 1 to 91 days 47,094 38,474 30,017 30,384 30,022 29,730 29,455 29,312 29,578 29,539r 29,447 20 92 to 182 days 158,605 127,831 109,603 108,574 108,504 109,228 110,069 109,110 109,444 107,407r 105,562 21 183 days to 1 year 209,672 163,098 155,074 152,501 149,758 147,334 146,565 144,037 143,624 144,022r 146,615 22 More than 1 year to 2l/i years 171,721 152,977 141,377 139,406 139,042 139,315 141,223 141,204 141,006 139,946r 139,166 23 More than 2V5 years 158,078 169,708 181,762 184,414 183,790 180,972 181,528 182,193 181,240 I80,973r 181,833 24 IRA/Keogh Plan deposits 147,266 147,350 145,955 145,636 144,776 145,002 143,985 143,875 143,409 142,002r 142,107 BIF-INSURED SAVINGS BANKS3 25 Negotiable order of withdrawal accounts. ... 9,624 10,871 10,468 10,471 10,548 10,852 11,151 10,796 10,870 11,078 10,913 26 Savings deposits 71,215 81,786 78,387 78,182 77,995 77,948 80,115 78,660 78,016 78,701r 78,547 27 Personal 68,638 78,695 75,153 74,978 74,737 74,664 77,035 75,445 74,756 75,444r 75,314 28 Nonpersonal 2,577 3,091 3,234 3,204 3,258 3,284 3,079 3,215 3,260 3,257 3,234 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 4,146 3,867 2,928 2,886 2,839 2,778 2,793 2,737 2,735 2,671 2,678 30 92 to 182 days 21,686 17,345 13,525 13,261 13,131 12,926 12,946 13,094 13,165 13,177 12,945 31 183 days to 1 year 29,715 21,780 18,143 17,798 17,441 17,178 17,426 17,418 17,436 17,511 17,325 32 More than 1 year to 2l/2 years 25,379 18,442 16,200 16,161 16,124 15,995 16,546 16,281 16,338 16,180r 16,289 33 More than 2 Vi years 18,665 18,845 19,331 19,610 19,657 19,645 20,464 20,630 20,939 21,110r 21,308 34 IRA/Keogh Plan accounts 23,007 21,713 19,802 19,766 19,601 19,382 19,356 19,395 19,474 19,447 19,906 1. B1F, Bank Insurance Fund. Data in this table also appear in the Board's H.6 seasonally adjusted and include IRA/Keogh deposits and foriegn currency denom- (508) Special Supplementary Table monthly statistical release. For ordering inated deposits. Data exclude retail repurchase agreements and deposits held in address, see inside front cover. Estimates are based on data collected by the U.S. branches and agencies of foreign banks. Federal Reserve System from a stratified random sample of about 460 commercial 2. Includes personal and nonpersonal money market deposits. banks and 80 savings banks on the last Wednesday of each period. Data are not 3. BIF-insured savings banks include both mutual and federal savings banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A17 1.23 BANK DEBITS AND DEPOSIT TURNOVER1 Debits are in billions of dollars; turnover is ratio of debits to deposits; monthly data are at annual rates 1993 1994 Sept. Oct. Nov. Dec. Jan.r Feb. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 277,741.7 313,251.6 334,793.7 353,605.3 329,586.5 358,503.0 367,734.8 349,711.9 371,997.3 2 Major New York City banks 137,337.2 165,484.5 171,312.0 180,532.6 168,055.5 187,022.4 189,024.1 183,246.0 200,049.3 3 Other banks 140,404.5 147,767.2 163,481.7 173,072.7 161,530.9 171,480.6 178,710.7 166,465.8 171,948.0 4 Other checkable deposits4 3,643.1 3,781.5 3,486.8 3,461.0 3,348.0 3,598.6 3,809.5 3,453.3 3,816.8 5 Savings deposits (including MMDAs) 3,206.4 3,310.6 3,507.3 3,619.2 3,403.1 3,740.5 3,933.6 3,596.6 4,058.2 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 803.7 826.0 786.5 808.5 741.7 803.0 826.9 771.7 823.6 7 Major New York City banks 4,267.1 4,794.5 4,200.6 4,178.0 3,937.7 4,352.2 4,550.0 4,268.3 4,674.4 8 Other banks 448.1 428.9 424.8 439.1 402.1 425.0 443.3 405.8 420.5 9 Other checkable deposits4 16.2 14.4 11.9 11.6 11.1 12.0 12.6 11.4 12.7 10 Savings deposits (including MMDAs) 5.2 4.7 4.6 4.7 4.4 4.8 5.1 4.6 5.2 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 277,752.4 313,416.8 334,775.6 347,783.4 336,009.2 344,140.1 380,187.5 349,807.5 345,709.2 12 Major New York City banks 137,307.2 165,595.0 171,283.5 179,869.7 172,675.6 180,990.2 194,541.0 181,971.7 187,904.4 13 Other banks 140,445.2 147,821.9 163,492.1 167,913.7 163,333.6 163,149.9 185,646.4 167,835.7 157,804.8 14 Other checkable deposits4 3,645.2 3,784.4 3,485.2 3,493.2 3,323.3 3,370.1 3,888.9 3,774.3 3,509.4 15 Savings deposits (including MMDAs)' 3,209.2 3,310.0 3,505.8 3,534.2 3,336.0 3,511.8 4,066.4 3,782.2 3,618.0 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 803.6 826.3 786.5 798.6 750.0 754.8 820.6 759.8 783.4 17 Major New York City banks 4,269.0 4,803.5 4,197.9 4,196.6 4,059.2 4,129.6 4,387.8 4,047.8 4,319.0 18 Other banks 448.1 429.0 424.9 427.7 402.8 395.9 443.1 404.0 396.7 19 Other checkable deposits4 16.2 14.4 11.9 11.8 11.2 11.2 12.7 12.2 11.7 20 Savings deposits (including MMDAs) 5.2 4.7 4.6 4.6 4.3 4.5 5.2 4.8 4.6 1. Historical tables containing revised data for earlier periods can be obtained 4. As of January 1994, other checkable deposits (OCDs) previously defined as from the Publications Section, Division of Support Services, Board of Governors automatic transfer to demand deposits (ATSs) and negotiable order of withdrawal of the Federal Reserve System, Washington, DC 20551. (NOW) accounts, were expanded to include telephone and preauthorized transfer Data in this table also appear in the Board's G.6 (406) monthly statistical accounts. This change redefined OCDs for debits data to be consistent with OCDs release. For ordering address, see inside front cover. for deposits data. 2. Annual averages of monthly figures. 5. Money market deposit accounts. 3. Represents accounts of individuals, partnerships, and corporations and of states and political subdivisions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • July 1994 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Billions of dollars Monthly averages Wednesday figures Account 1993 1993r 1994 1994r Apr/ Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr. Apr. 6 Apr. 13 Apr. 20 Apr. 27 ALL COMMERCIAL BANKING INSTITUTIONS Seasonally adjusted Assets 1 Bank credit 2,991.9 3,075.1 3,091.1 3,104.6 3,124.1 3,138.3 3,165.6 3,193.1 3,201.5 3,192.4 3,185.3 3,197.9 2 Securities in bank credit 878.8 900.0 903.1 910.9 924.8 930.1 950.0 967.6 971.7 969.8 965.0 966.0 3 U.S. government securities ... 697.2 717.1 720.3 726.7 732.3 732.3 747.7 758.9 764.4 763.9 756.4 754.4 4 Other securities 181.6 182.9 182.8 184.2 192.5 197.8 202.2 208.7 207.4 205.8 208.6 211.6 5 Loans and leases in bank credit2. 2,113.1 2,175.1 2,188.0 2,193.8 2,199.2 2,208.1 2,215.7 2,225.5 2,229.8 2,222.6 2,220.3 2,231.9 6 Commercial and industrial .... 587.8 586.0 584.4 583.6 588.7 591.0 595.7 602.3 601.2 599.1 604.4 603.3 7 Real estate 902.8 927.0 933.8 940.9 942.1 940.9 940.8 943.0 943.0 943.3 942.5 942.9 8 Revolving home equity 75.1 73.8 73.5 73.2 73.0 73.1 73.1 73.2 73.1 73.2 73.2 73.2 9 Other 827.8 853.2 860.3 867.7 869.1 867.8 867.6 869.8 869.9 870.1 869.3 869.7 10 Consumer 367.0 384.6 388.2 390.9 393.8 397.1 401.3 407.3 405.6 406.3 407.4 408.6 11 Security3 63.6 81.6 87.9 87.3 80.9 82.2 83.3 76.9 82.8 78.3 69.5 80.9 12 Other 191.8 195.8 193.7 191.0 193.8 197.0 194.7 196.1 197.3 195.6 196.4 196.2 13 Interbank loans4 147.9 151.7 154.0 153.0 153.7 153.5 145.9 146.0 139.3 147.9 134.4 161.0 14 Cash assets5 209.9 220.4 218.8 219.2 219.6 225.4 216.9 210.3 217.7 209.4 211.5 205.0 15 Other assets6 219.2 219.0 217.5 214.6 220.7 223.5 223.5 230.0 229.1 228.4 233.6 227.7 16 Total assets7 3,508.0 3,606.8 3,622.6 3,633.1 3,660.4 3,683.3 3,694.6 3,722.1 3,730.3 3,720.7 3,707.4 3,734.2 Liabilities 17 Deposits 2,494.4 2,524.2 2,533.2 2,537.9 2,537.2 2,530.9 2,515.9 2,505.5 2,509.2 2,506.4 2,496.9 2,509.3 18 Transaction 753.8 810.3 816.5 819.1 815.9 818.1 814.4 801.5 810.5 802.7 792.5 802.8 19 Nontransaction 1,740.7 1,713.9 1,716.7 1,718.8 1,721.2 1,712.8 1,701.5 1,704.1 1,698.7 1,703.7 1,704.4 1,706.6 20 Large time 364.3 346.2 347.4 349.8 348.2 339.9 331.7 334.3 327.8 332.2 337.4 337.0 21 Other 1,376.4 1,367.7 1,369.3 1,368.9 1,373.0 1,372.8 1,369.8 1,369.8 1,371.0 1,371.5 1,366.9 1,369.5 22 Borrowings 4%. 1 516.9 515.7 522.4 544.2 542.1 552.8 577.1 568.6 585.3 577.7 581.1 23 From banks in the U.S 147.3 152.6 153.3 152.5 150.1 149.5 141.5 144.7 140.5 148.8 132.0 156.9 24 From nonbanks in the U.S 348.8 364.4 362.5 370.0 394.0 392.6 411.3 432.5 428.2 436.5 445.7 424.2 25 Net due to related foreign offices 88.3 124.1 121.9 119.6 116.3 136.3 157.8 172.6 182.6 170.5 177.1 164.1 26 Other liabilities8 149.8 144.7 144.1 143.1 155.1 162.0 159.0 165.7 167.3 165.2 165.2 164.2 27 Total liabilities 3,228.7 3,309.9 3,314.9 3,323.0 3,352.7 3,371.2 3,385.6 3,421.0 3,427.7 3,427.4 3,416.9 3,418.7 28 Residual (assets less liabilities)9.... 279.2 297.0 307.6 310.2 307.7 312.1 309.1 301.1 302.5 293.3 290.5 315.5 Not seasonally adjusted Assets 29 Bank credit 2,990.7 3,077.7 3,101.9 3,120.2 3,125.1 3,136.9 3,164.4 3,191.5 3,197.7 3,191.6 3,191.2 3,187.9 30 Securities in bank credit 880.6 902.2 908.5 910.4 920.8 930.1 953.3 968.5 977.2 971.2 966.9 961.8 31 U.S. government securities ... 699.2 718.8 724.4 726.2 728.3 731.1 751.4 761.0 769.6 765.8 759.8 753.2 32 Other securities 181.3 183.4 184.1 184.2 192.4 199.0 201.9 207.5 207.6 205.3 207.1 208.6 33 Loans and leases in bank credit2. 2,110.1 2,175.6 2,193.4 2,209.9 2,204.3 2,206.8 2,211.1 2,223.0 2,220.6 2,220.5 2,224.3 2,226.1 34 Commercial and industrial .... 590.7 584.0 585.2 585.6 587.9 590.2 598.6 605.2 604.0 600.6 608.4 606.0 35 Real estate 900.3 929.5 936.3 944.1 940.6 937.4 937.0 941.0 940.2 942.8 940.5 939.8 36 Revolving home equity 74.5 74.5 74.0 73.5 73.1 72.9 72.5 72.7 72.3 72.4 72.8 73.0 37 Other 825.7 855.0 862.3 870.6 867.5 864.5 864.5 868.4 867.8 870.4 867.7 866.8 38 Consumer 364.1 384.5 388.4 395.2 398.2 398.4 398.5 404.1 400.9 402.2 404.4 406.8 39 Security3 66.0 80.4 87.8 89.3 83.2 86.8 85.5 79.6 79.7 82.8 76.6 82.4 40 Other 189.0 197.2 195.7 195.7 194.5 194.0 191.6 193.0 195.8 192.1 194.4 191.2 41 Interbank loans4 149.3 150.7 155.6 161.3 157.9 154.3 145.7 147.4 149.0 150.5 138.4 151.6 42 Cash assets5 207.2 219.7 226.3 232.5 224.6 219.9 211.6 207.7 212.8 209.3 210.4 197.7 43 Other assets6 215.7 221.4 220.3 218.6 223.1 223.0 222.0 226.4 225.8 225.0 227.7 224.4 44 Total assets7 3,502.2 3.610.6 3,645.0 3,673.9 3,673.2 3,676.4 3,686.0 3,715.8 3,728.1 3,719.2 3,710.4 3,704.5 Liabilities 45 Deposits 2,501.0 2,516.1 2,544.0 2,566.7 2,540.5 2,520.6 2,507.6 2,512.2 2,533.0 2,529.5 2,504.2 2,483.7 46 Transaction 761.8 804.4 828.1 853.6 825.5 809.0 802.8 809.8 826.8 823.3 805.4 786.4 47 Nontransaction 1,739.3 1,711.8 1,715.9 1,713.1 1,714.9 1,711.6 1,704.7 1,702.4 1,706.2 1,706.2 1,698.8 1,697.3 48 Large time 365.7 342.4 344.3 346.0 344.7 340.3 334.3 335.5 329.5 332.5 338.4 338.1 49 Other 1,373.6 1,369.4 1,371.6 1,367.1 1,370.3 1,371.3 1,370.4 1,367.0 1,376.7 1,373.7 1,360.4 1,359.2 50 Borrowings 490.0 525.2 526.6 532.4 546.0 546.4 546.9 561.9 550.7 550.2 569.8 573.7 51 From banks in the U.S 149.3 149.8 154.2 159.6 155.8 152.0 143.0 146.2 146.1 147.6 138.4 151.6 52, From nonbanks in the U.S 340.7 375.5 372.4 372.8 390.2 394.4 403.9 415.7 404.6 402.6 431.4 422.1 53 Net due to related foreign offices 86.1 124.6 124.7 126.7 124.4 139.3 162.5 171.6 170.2 167.4 170.6 178.6 54 Other liabilities8 145.0 147.4 150.0 146.6 157.3 162.1 158.8 160.1 162.7 159.6 157.7 159.2 55 Total liabilities 3,222.1 3,313.4 3,345.4 3,372.4 3,368.2 3,368.4 3,375.7 3,405.7 3,416.6 3,406.7 3,402.3 3,395.1 56 Residual (assets less liabilities)9.... 280.1 297.2 299.6 301.5 305.0 308.0 310.3 310.0 311.6 312.5 308.1 309.4 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A19 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1—Continued Billions of dollars Monthly averages Wednesday figures Account 1993 1993r 1994 1994r Apr.r Oct. Nov. Dec. Jan.r Feb.1" Mar.r Apr. Apr. 6 Apr. 13 Apr. 20 Apr. 27 DOMESTICALLY CHARTERED COMMERCIAL BANKS Seasonally adjusted Assets 57 Bank credit 2,665.1 2,738.5 2,756.1 2,771.9 2,792.7 2,801.0 2,825.8 2,841.3 2,848.3 2,841.3 2,835.0 22,,884422..88 58 Securities in bank credit 807.1 822.5 826.1 833.6 846.3 850.1 869.2 877.4 884.1 879.2 874.5 873.9 59 U.S. government securities .. 650.2 665.0 668.2 673.3 678.4 676.8 691.2 695.5 700.7 698.7 693.2 691.6 AO Other securities 156.9 157.6 158.0 160.3 167.9 173.3 177.9 181.9 183.4 180.6 181.3 182.4 61 Loans and leases in bank credit2 . 1,858.0 1,916.0 1,930.0 1,938.3 1,946.4 1,950.9 1,956.6 1,963.9 1,964.2 1,962.1 1,960.5 1,968.9 6? Commercial and industrial ... 436.6 433.8 434.2 435.6 440.4 442.5 444.3 448.2 447.1 446.8 449.4 448.5 A3 Real estate 852.9 879.7 886.8 894.7 897.3 896.4 896.9 900.4 899.9 901.0 900.2 900.3 64 Revolving home equity .... 75.0 73.8 73.5 73.2 73.0 73.1 73.1 73.2 73.1 73.2 73.2 73.2 6S Other 777.9 805.9 813.3 821.5 824.3 823.3 823.7 827.3 826.8 827.8 827.0 827.1 66 367.0 384.6 388.2 390.9 393.8 397.1 401.3 407.3 405.6 406.3 407.4 408.6 67 Security3 44.7 56.6 60.0 57.9 54.4 54.5 55.5 49.5 52.3 50.7 44.5 52.5 68 Other 156.7 161.2 160.8 159.2 160.6 160.4 158.7 158.4 159.3 157.3 158.9 158.9 A9 Interbank loans4 129.8 129.9 132.9 133.6 135.3 130.4 125.9 124.3 118.8 124.9 116.0 136.8 70 183.0 193.7 193.2 193.8 194.5 200.9 191.5 184.2 192.4 183.5 185.5 177.6 71 Other assets6 173.1 173.2 172.4 171.6 175.4 175.8 177.0 182.8 180.7 181.9 185.1 183.1 72 Total assets7 3,090.3 3,176.0 3,195.9 3,212.5 3,240.3 3,251.0 3,263.0 3,275.3 3,282.8 3,274.4 3,264.3 3,283.1 Liabilities 73 Deposits 2,339.8 2,371.6 2,378.9 2,379.4 2,381.6 2,381.4 2,375.2 2,362.1 2,368.8 2,364.2 22,,335511..44 22,,336655..00 74 Transaction 743.0 798.0 804.9 808.2 805.0 806.7 802.9 790.7 798.7 792.6 781.6 792.1 75 Nontransaction 1,596.8 1,573.7 1,574.0 1,571.2 1,576.6 1,574.7 1,572.3 1,571.4 1,570.1 1,571.7 1,569.8 1,573.0 76 Large time 223.9 211.8 210.8 208.9 210.4 208.6 207.2 207.5 204.9 206.3 208.5 209.0 77 Other 1,373.0 1,361.8 1,363.2 1,362.3 1,366.3 1,366.1 1,365.0 1,364.0 1,365.3 1,365.4 1,361.3 1,363.9 78 Borrowings 378.3 411.9 410.3 417.2 437.4 440.2 455.2 475.1 470.8 481.8 474.6 475.9 79 From banks in the U.S 107.7 120.5 121.5 121.9 119.2 120.7 115.8 116.1 114.0 122.8 103.9 123.7 80 From nonbanks in the U.S 270.6 291.4 288.9 295.3 318.2 319.6 339.4 359.0 356.7 359.0 370.7 352.2 81 Net due to related foreign offices -9.2 -6.2 -2.7 1.7 3.4 3.2 14.0 21.1 20.1 20.3 2266..55 1188..55 82 Other liabilities8 106.3 105.6 104.9 104.7 113.1 119.0 117.9 123.4 125.9 122.8 122.9 121.9 83 Total liabilities 2,815.2 2,882.9 2,891.4 2,903.0 2,935.5 2,943.9 2,962.2 2,981.7 2,985.6 2,989.2 2,975.4 2,981.4 84 Residual (assets less liabilities)9... 275.1 293.1 304.5 309.6 304.7 307.1 300.8 293.6 297.3 285.2 288.8 301.7 Not seasonally adjusted Assets 85 Bank credit 2,665.3 2,743.5 2,764.9 2,778.6 2,785.8 2,797.2 2,820.7 2,841.9 2,848.0 2,843.5 2,840.2 22,,883366..22 8A Securities in bank credit 809.6 825.3 830.2 830.9 840.0 849.4 869.9 879.6 889.3 882.5 878.0 872.1 87 U.S. government securities .. 653.3 666.7 670.8 670.6 672.3 675.6 692.8 699.1 706.5 702.8 698.3 692.2 88 Other securities 156.2 158.6 159.4 160.3 167.7 173.7 177.0 180.6 182.8 179.7 179.7 179.8 89 Loans and leases in bank credit2 . 1,855.8 1,918.2 1,934.6 1,947.7 1,945.8 1,947.8 1,950.9 1,962.3 1,958.7 1,961.0 1,962.1 1,964.2 W Commercial and industrial ... 439.2 433.3 435.0 435.6 437.9 441.7 446.2 450.9 449.4 448.0 452.8 451.3 91 Real estate 850.4 882.0 889.1 898.0 895.9 892.8 893.1 898.6 897.1 900.6 898.1 897.5 9? Revolving home equity .... 74.5 74.5 74.0 73.5 73.1 72.9 72.5 72.7 72.3 72.4 72.8 73.0 03 Other 775.9 807.5 815.2 824.6 822.8 819.9 820.5 825.9 824.8 828.1 825.3 824.5 94 Consumer 364.1 384.5 388.4 395.2 398.2 398.4 398.5 404.1 400.9 402.2 404.4 406.8 9S Security3 47.0 55.8 59.8 57.2 53.9 56.6 56.7 52.1 52.3 54.9 49.2 53.4 96 Other 155.0 162.6 162.3 161.7 159.9 158.3 156.5 156.6 159.0 155.4 157.7 155.1 97 Interbank loans4 131.8 128.4 134.6 138.9 138.4 132.6 126.5 126.3 129.1 128.9 120.6 127.2 98 Cash assets5 181.2 191.9 200.6 206.8 199.7 196.0 186.6 182.4 188.4 184.4 185.0 171.7 99 Other assets6 170.6 175.6 173.7 173.7 176.5 175.0 176.1 180.1 179.0 179.4 180.3 180.3 100 Total assets7 3,088.3 3,180.5 3,214.7 3,239.3 3,243.0 3,243.2 3,252.4 3,273.6 3,287.3 3,279.1 3,268.9 3,258.4 Liabilities 101 Deposits 2,344.9 2,369.3 2,394.0 2,411.4 2,386.6 2,370.2 2,363.7 2,367.6 2,391.8 2,387.0 22,,335588..11 22,,333377..00 10? 751.2 791.8 816.5 842.5 814.3 797.6 791.8 799.2 815.7 813.0 795.1 775.4 103 Nontransaction 1,593.7 1,577.4 1,577.5 1,569.0 1,572.2 1,572.7 1,571.9 1,568.4 1,576.0 1,574.0 1,563.0 1,561.6 104 223.1 212.9 211.3 207.5 208.8 208.7 206.6 206.8 204.6 205.8 207.5 207.9 105 Other 1,370.6 1,364.5 1,366.2 1,361.4 1,363.4 1,364.0 1,365.3 1,361.6 1,371.4 1,368.2 1,355.5 1,353.7 106 Borrowings 373.7 417.5 420.1 425.8 439.1 446.1 449.9 461.4 451.5 448.3 467.4 473.5 107 From banks in the U.S 110.5 117.7 121.3 126.7 123.9 123.9 117.2 118.5 118.3 121.9 110.7 122.2 108 From nonbanks in the U.S 263.2 299.8 298.8 299.1 315.2 322.2 332.7 342.9 333.2 326.4 356.7 351.4 109 Net due to related foreign -9.9 -6.6 -3.3 -1.8 3.0 5.4 16.0 20.6 15.9 18.7 22.5 24.8 110 Other liabilities8 102.5 108.6 109.6 107.3 114.4 118.5 117.9 118.8 550.7 550.2 569.8 573.7 111 Total liabilities 2,811.2 2,888.7 2,920.5 2,942.8 2,943.1 2,940.3 2,947.5 2,968.4 2,981.7 2,972.6 2,964.7 2,952.9 112 Residual (assets less liabilities)9... 277.1 291.8 294.2 296.5 299.9 302.9 304.8 305.2 305.6 306.5 304.1 305.5 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • July 1994 NOTES TO TABLE 1.26 1. Covers the following types of institutions in the fifty states and the District 4. Consists of federal funds sold to, reverse repurchase agreements with, and of Columbia: domestically chartered commercial banks that submit a weekly loans to commercial banks in the United States. report of condition (large domestic); other domestically chartered commercial 5. Includes vault cash, cash items in process of collection, demand balances banks (small domestic); branches and agencies of foreign banks; New York State due from depository institutions in the United States, balances due from Federal investment companies, and Edge Act and agreement corporations (foreign-related Reserve Banks, and other cash assets. institutions). Excludes international banking facilities. Data are Wednesday 6. Excludes the due-from position with related foreign offices, which is values, or pro rata averages of Wednesday values. Large domestic banks included in lines 25, 53, 81, and 109. constitute a universe; data for small domestic banks and foreign-related institu- 7. Excludes unearned income, reserves for losses on loans and leases, and tions are estimates based on weekly samples and on quarter-end condition reserves for transfer risk. Loans are reported gross of these items. reports. Data are adjusted for breaks caused by reclassifications of assets and 8. Excludes the due-to position with related foreign offices, which is included in liabilities. lines 25, 53, 81, and 109. 2. Excludes federal funds sold to, reverse repurchase agreements with, and 9. This balancing item is not intended as a measure of equity capital for use in loans to commercial banks in the United States. capital adequacy analysis. 3. Consists of reserve repurchase agreements with broker-dealers and loans to purchase and carry securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS Millions of dollars, Wednesday figures 1994 AAccccoouunntt Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 ASSETS 1 Cash and balances due from depository institutions 124,236r 107,898r 115,500r 109,986r 112,186r 113,279 108,545 110,876 101,279 ? U.S. Treasury and government securities 314,056 316,955 317,115 316,554 318,573 325,948 322,845 319,316 313,008 1 Trading account 26,601 29,208 29,948 26,217 24,755 29,031 27,778 27,129 24,357 4 Investment account 287,455 287,747 287,167 290,337 293,818 296,917 295,067 292,186 288,650 5 Mortgage-backed securities' 90,970 90,722 90,259 91,528 91,372 92,804 92,051 90,318 87,385 All others, by maturity 6 One year or less 49,925 49,525 49,234 49,605 50,975 48,993 48,288 49,409 50,401 7 One year through five years 76,778 77,161 78,156 79,733 80,349 83,142 82,957 80,758 79,559 8 More than five years 69,783 70,339 69,517 69,471 71,122 71,978 71,771 71,701 71,305 9 Other securities 88,460 88,794 89,039 84,715 87,892r 94,213 90,677 90,765 90,449 10 Trading account 1,841 1,764 1,640 1,838 1,940 1,970 1,638 1,773 1,784 II Investment account 57,469 57,572 57,562 57,423 57,847 58,000 58,311 58,075 57,771 17 State and political subdivisions, by maturity 21,518 21,679 21,650 21,624 21,748 21,701 21,796 21,819 21,842 N One year or less 4,220 4,247 4,266 4,229 4,231 4,172 4,407 4,387 4,412 14 More than one year 17,298 17,432 17,384 17,395 17,517 17,529 17,389 17,432 17,430 H Other bonds, corporate stocks, and securities 35,952 35,893 35,912 35,799 36,099 36,299 36,515 36,256 35,929 16 Other trading account assets 29,150 29,457 29,837 25,454 28,105r 34,243 30,728 30,917 30,893 17 Federal funds sold" 97,923 91,513 93,922 89,669 92,762 91,996 96,296 91,330 100,447 18 To commercial banks in the United States 58,892 52,556 58,354 56,008 61,388r 56,739 59,596 59,165 65,794 19 To nonbank brokers and dealers 32,412 32,511 30,232 27,890 25,950" 29,412 31,140 26,209 29,398 70 To others3 6,618 6,447 5,335 5,770 5,423 5,845 5,560 5,956 5,256 ?1 Other loans and leases, gross l,042,418r l,037,224r 1,041,200^ l,040,806r 1,041,609"' 1,043,921 1,043,222 1,048,448 1,047,488 ?? Commercial and industrial 284,104 283,194 286,627 285,974 287,670r 288,806 286,890 290,830 290,281 73 Bankers acceptances and commercial paper 3,122 3,174 2,951 2,608 2,663 2,688 2,858 2,972 2,882 74 All other 280,981 280,020 283,676 283,366 285,007r 286,118 284,032 287,858 287,399 75 U.S. addressees 278,969 278,007 281,696 281,318 282,991r 284,191 282,120 285,920 285,604 76 Non-U.S. addressees 2,013 2,013 1,980 2,049 2,016 1,927 1,912 1,938 1,795 77 Real estate loans 417,914r 419,213r 418,806r 417,310r 419,208r 422,239 424,571 421,970 421,099 78 Revolving, home equity 43,569 43,521 43,436 43,559 43,482 43,433 43,546 43,759 43,850 79 All other 374,346r 375,692r 375,370r 373,751r 375,726r 378,806 381,025 378,211 377,249 30 To individuals for personal expenditures 208,802r 208,193r 208,669r 209,730 209,579r 209,440 210,225 211,357 212,447 31 To financial institutions 37,539 37,223 36,436 36,065 35,517 37,167 35,775 35,871 35,948 37 Commercial banks in the United States 15,590 15,685 15,759 15,522 14,898 15,107 14,930 15,424 16,078 33 Banks in foreign countries 3,064 3,040 2,406 2,769 2,519 3,011 2,580 2,443 2,233 34 Nonbank financial institutions 18,885 18,499 18,271 17,775 18,099 19,049 18,266 18,004 17,638 35 For purchasing and carrying securities 21,946 20,872 21,064 22,988 19,836 16,491 17,565 17,216 18,286 36 To finance agricultural production 5,846 5,854 5,837 5,880 5,945 6,017 6,019 6,106 6,097 37 To states and political subdivisions 12,128 12,076 12,087 12,027 11,972 11,904 11,914 11,921 11,882 38 To foreign governments and official institutions 1,039 1,075 1,028 1,069 1,064 1,034 986 1,075 1,011 39 All other loans4 26,393 22,999 24,052 23,095 24,073 24,068 22,485 25,201 23,525 40 Lease-financing receivables 26,707 26,526 26,595 26,667 26,746 26,756 26,792 26,901 26,910 41 LESS: Unearned income 1,834 1,624 1,613 1,610 1,605 1,590 1,588 1,594 1,586 47 Loan and lease reserve 35,327 35,424 35,417 35,374 34,971 34,826 34,797 34,704 34,585 43 Other loans and leases, net l,005,258r l,000,177r I,004,170r l,003,821r l,005,033r 1,007,505 1,006,836 1,012,151 1,011,317 44 Other assets 164,780r 163,352r 165,279r 163,684r 162,158r 165,590 164,918 164,417 162,953 45 Total assets l,794,713r l,768,688r l,785,025r l,768,429r l,778,604r 1,798,529 1,790,116 1,788,854 1,779,452 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic NonfinancialS tatistics • July 1994 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1994 AAccccoouunntt Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 LIABILITIES 46 Deposits 1,153,459 l,136,360r 1,144,993 1,123,396 1,129,390 1,149,060 1,147,134 1,131,055 1,119,976 47 Demand deposits 308,249 289,264 300,543 284,299 293,288 300,862 300,322 292,226 286,899 48 Individuals, partnerships, and corporations 253,666 242,266 249,377 233,647r 243,567 250,299 252,570 243,520 236,501 49 Other holders 54,583 46,998 51,166 50,651 49,721 50,563 47,752 48,706 50,398 50 States and political subdivisions 9,095 8,236 8,868 8,853 8,734 8,468 8,763 10,032 10,148 51 U.S. government 2,830 2,162 3,733 1,585 2,073 2,169 2,255 3,420 3,061 52 Depository institutions in the United States 24,539 20,872 22,301 19,642 20,789 22,213 21,010 20,288 20,235 53 Banks in foreign countries 5,159 5,084 4,985 5,027 5,444 6,566 5,030 5,195 5,304 54 Foreign governments and official institutions 679 778 894 1,018 593 648 737 589 1,030 55 Certified and officers' checks 12,281 9,867 10,385 14,526 12,088 10,499 9,957 9,182 10,619 56 Transaction balances other than demand deposits .... 125,826 125,415 124,701 123,384 123,769 129,064 128,424 127,229 122,056 57 Nontransaction balances 719,383r 721,681 719,749 715,713 712,332 719,134 718,388 711,600 711,020 58 Individuals, partnerships, and corporations 696,453r 698,852r 697,178r 693,662r 690,993r 698,781 698,080 689,177 688,411 59 Other holders 22,93 lr 22,829r 22,57 lr 22,051r 21,339 20,353 20,308 22,423 22,609 60 States and political subdivisions 18,729 18,600 18,368 17,962 17,818 17,915 17,788 17,676 17,755 61 U.S. government 2,122r 2,105r l,996r l,887r 1,513 622 610 2,832 2,800 62 Depository institutions in the United States 1,787 1,831 1,910 1,898 1,707 1,514 1,611 1,614 1,757 63 Foreign governments, official institutions, and banks .... 292 293 298 304 301 301 300 301 299 64 Liabilities for borrowed money5 339,51 lr 326,20Ir 337,276r 345,26lr 345,776r 340,208 337,390 351,964 351,752 65 Borrowings from Federal Reserve Banks 0 0 0 0 0 0 150 0 0 66 Treasury tax and loan notes 25,981 6,036 15,315 18,585 14,291 6,466 9,166 31,776 33,420 67 Other liabilities for borrowed money6 98,722r 113,778r 108,567r 108,229r 112,716r 118,482 114,595 97,485 95,763 68 Other liabilities (including subordinated notes and debentures) 137,715r 141,269r 138,363r 135,083r 139,480r 144,361 140,534 141,006 142,801 69 Total liabilities l,630,686r l,603,830r I,620,632r l,603,740r l,614,646r 1,633,628 1,625,059 1,624,025 1,614,529 70 Residual (total assets less total liabilities)7 164,027 164,859 164,393 164,689 163,958 164,901 165,058 164,829 164,924 MEMO 71 Total loans and leases, gross, adjusted, plus securities8.. l,468,375r l,466,245r l,467,162r l,460,213r l,464,549r 1,484,231 1,478,514 1,475,269 1,469,519 72 Time deposits in amounts of $100,000 or more 97,341r 97,118 95,233 94,084 91,561 92,382 93,488 95,373 95,477 73 Loans sold outright to affiliates9 752 751 750 735 697 694 694 693 695 74 Commercial and industrial 373 373 373 368 334 329 329 329 329 75 Other 378 378 377 367 363 365 365 364 366 76 Foreign branch credit extended to U.S. residents 20,435 20,277 21,869 22,110 21,882 21,774 21,958 22,026 22,107 77 Net owed to related institutions abroad 7,031 11,076 6,453 12,682 16,17lr 10,625 13,663 17,644 19,806 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 1.28 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS Assets and Liabilities' Millions of dollars, Wednesday figures 1994 AAccccoouunntt Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 ASSETS 1 Cash and balances due from depository institutions 15,896 16,815 17,045 17,042 16,412 15,670 16,016 1166,,330099 1166,,779900 2 U.S. Treasury and government agency securities 35,844 37,562 37,150 39,154 38,776 41,128 4411,,117766 4400,,008899 3399,,992200 3 Other securities. 8,676 8,608 8,625 8,388 8,670 8,567 8,887 9,478 9,956 4 Federal funds sold 23,563 21,621 22,293 24,023 27,290 25,055 26,813 24,234 28,989 5 To commercial banks in the United States ... 6,677 3,929 4,433 5,853 7,438 5,344 6,509 4,374 8,204 6 To others" 16,885 17,692 17,861 18,170 19,852 19,711 20,304 19,860 20,785 7 Other loans and leases, gross 156,601 157,031 159,436 158,693 160,813 159,447 157,353 159,567 159,526 8 Commercial and industrial 94,189 94,894 97,476 97,456 98,505 98,704 97,613 99,407 99,039 9 Bankers acceptances and commercial paper 2,971 3,123 3,269 3,170 3,380 3,812 3,582 33,,882200 33,,779944 1100 All other 91,218 91,771 94,207 94,286 95,125 94,892 94,031 95,586 95,245 1111 U.S. addressees 87,898 88,333 90,755 90,725 91,45 lr 91,191 90,466 92,002 91,595 12 Non-U.S. addressees 3,321 3,438 3,452 3,561 3,674r 3,701 3,565 3,584 3,650 13 Loans secured by real estate 29,062 29,091 28,924 28,804 28,428 28,180 27,694 27,751 27,781 14 To financial institutions 21,298 21,320 21,779 21,564 23,251 23,931 23,608 23,341 23,649 15 Commercial banks in the United States.. 4,807 4,790 5,050 4,838 5,449 5,660 5,477 5,392 5,448 16 Banks in foreign countries 1,556 1,664 1,572 1,565 2,349 2,237 2,069 2,026 1,965 17 Nonbank financial institutions 14,935 14,865 15,157 15,161 15,453 16,034 16,063 15,922 16,237 18 For purchasing and carrying securities .... 7,605 7,341 6,914 6,407 6,121 4,233 3,819 4,577 4,446 19 To foreign governments and official institutions 612 601 579 599 545 666 881155 665566 662299 20 All other 3,834 3,784 3,764 3,864 3,963 3,733 3,804 3,836 3,982 21 Other assets (claims on nonrelated parties) .. 33,648 32,771 30,557 32,338 31,934 32,413 31,569 33,541 31,044 22 Total assets3 295,578 293,886 295,133 299,193 301,457 300,952 300,787 303,882 303,278 LIABILITIES 23 Deposits or credit balances owed to other than directly-related institutions 89,980 87,661 89,286 89,858 90,288 87,282 87,936 9911,,220000 9900,,005566 24 Demand deposits4 4,834 4,369 4,559 4,506 5,194 4,688 4,210 4,275 4,611 25 Individuals, partnerships, and corporations 3,820 3,563 3,627 3,604 3,891 3,728 33,,449988 33,,555500 33,,449977 26 Other 1,013 806 932 902 1,303 961 713 725 1,115 27 Nontransaction accounts 85,147 83,292 84,727 85,353 85,094 82,594 83,725 86,925 85,445 28 Individuals, partnerships, and corporations 59,179 57,873 58,867 59,025 58,123 55,941 56,861 5588,,999999 5588,,000044 29 Other 25,967 25,419 25,860 26,328 26,971 26,653 26,865 27,926 27,441 30 Borrowings from other than directlyrelated institutions 70,642 69,305 72,398 67,932 65,572 70,869 72,973 7722,,119922 6688,,776600 31 Federal funds purchased" 35,343 33,201 38,777 34,987 31,944 37,749 37,648 37,172 35,753 32 From commercial banks in the United States 9,689 6,581 10,800 7,344 7,015 9,435 8,093 88,,116611 88,,006688 33 From others 25,653 26,620 27,977 27,643 24,929 28,314 29,555 29,011 27,685 34 Other liabilities for borrowed money 35,299r 36,104r 33,620r 32,945r 33,628r 33,121 35,325 35,020 33,007 35 To commercial banks in the United States 5,115 5,590 6,109 6,231 5,948 6,029 5,969 55,,771188 66,,222255 36 To others 30,185 30,514 27,511 26,714 27,681 27,091 29,356 29,302 26,782 37 Other liabilities to nonrelated parties 30,320 29,289 26,595 28,172 28,801 27,876 28,479 29,303 29,268 38 Total liabilities6 295,578 293,886 295,133 299,193 301,457 300,952 300,787 303,882 303,278 MEMO 39 Total loans (gross) and securities, adjusted .. 213,199 216,102 218,020 219,567 222,662 223,194 222,243 223,602 222244,,773399 40 Net owed to related institutions abroad 83,286 88,152 86,828 93,675 99,233 96,254 92,426 90,524 98,140 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 owed to related institutions abroad for U.S. branches and 3. Includes net due from related institutions abroad for U.S. branches and agencies of 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 Nonfinancial Statistics • July 1994 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1993 1994 IItteemm 1989 1990 1991 1992 1993 Oct. Nov. Dec. Jan. Feb. Mar. Commercial paper (seasonally adjusted unless noted otherwise) 1 AH issuers 525,831 562,656 528,832 545,619 555,075 547,425 547,982 555,075 559,443r 560,352 Financial companies' Dealer-placed paper~ 2 Total 183,622 214,706 212,999 226,456 218,947 218,822 216,887 218,947 219,350r 221,649 3 Bank-related (not seasonally adjusted) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Directly placed paper4 4 Total 210,930 200,036 182,463 171,605 180,389 172,489 175,868 180,389 182,075 186,318 5 Bank-related (not seasonally adjusted)- n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6 Nonfinancial companies5 131,279 147,914 133,370 147,558 155,739 156,114 155,227 155,739 158,018r 152,385 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 62,972 54,771 43,770 38,194 32,348 33,069 31,997 32,348 31,792 30,994 31,061 B\ holder 8 Accepting banks 9,433 9,017 11,017 10,555 12,325 12,332 12,475 12,325 11,317 11,159 11,623 9 Own bills 8,510 7,930 9,347 9,097 10,611 10,886 10,853 10,611 9,860 10,149 10,653 10 Bills bought from other banks 924 1,087 1,670 1,458 1,714 1,446 1,622 1,714 1,457 1,010 969 Federal Reserve Banks7 11 Foreign correspondents 1,066 918 1,739 1,276 725 582 650 725 869 753 693 12 Others 52,473 44,836 31,014 26,364 19,298 20,155 18,872 19,298 19,605 19,082 18,746 By basis 13 Imports into United States 15,651 13,095 12,843 12,209 10,217 10,810 10,368 10,217 10,649 10,707 10,554 14 Exports from United States 13,683 12,703 10,351 8,096 7,293 7,101 7,054 7,293 7,123 6,872 6,708 15 All other 33,638 28,973 20,577 17,890 14,838 15,158 14,575 14,838 14,020 13,414 13,800 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 dollar acceptances are gathered from approximately 100 3. Series were discontinued in January 1989. institutions. 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 dollar investors. acceptances for its own account. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 1.33 PRIME RATE CHARGED BY BANKS Short-Term Business Loans1 Percent per year Date of change Av r e a r te a ge Av r e a r te a ge Av r e a r te a ge 1991—Jan. 1 10.00 2 9.50 1991 8.46 1992—Jan. ... 6.50 1993—Jan. .. 6.00 Feb. 4 9.00 1992 6.25 Feb. . 6.50 Feb. . 6.00 May 1 8.50 1993 6.00 Mar. . 6.50 Mar. . 6.00 Sept. 13 8.00 Apr. .. 6.50 Apr. . 6.00 Nov. 6 7.50 1991 9.52 May .. 6.50 May .. 6.00 Dec. 23 6.50 Feb. 9.05 June . 6.50 June . 6.00 Mar. 9.00 July .. 6.02 July .. 6.00 1992—July 2 6.00 Apr. 9.00 Aug. . 6.00 Aug. . 6.00 May . 8.50 Sept. .. 6.00 Sept. .. 6.00 1994— Mar. 24 6.25 June 8.50 Oct. ... 6.00 Oct. ... 6.00 Apr. 19 6.75 July . 8.50 Nov. . 6.00 Nov. . 6.00 May 17 7.25 Aug. 8.50 Dec. . 6.00 Dec. 6.00 Sept. 8.20 Oct. . 8.00 1994—Jan. . 6.00 Nov. 7.58 Feb. 6.00 Dec. 7.21 Mar. 6.06 Apr. 6.45 May . 6.99 1. The prime rate is one of several base rates that banks use to price short-term size, based on the most recent Call Report. Data in this table also appear in the business loans. The table shows the date on which a new rate came to be the Board's H.15 (519) weekly and G.13 (415) monthly statistical releases. For predominant one quoted by a majority of the twenty-five largest banks by asset ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic NonfinancialS tatistics • July 1994 1.35 INTEREST RATES Money and Capital Markets Averages, percent per year; figures are averages of business day data unless otherwise noted 1994 1994, week ending 11999911 11999922 11999933 Jan. Feb. Mar. Apr. Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 MONEY MARKET INSTRUMENTS 1 Federal funds12'3 5.69 3.52 3.02 3.05 3.25 3.34 3.56 3.49 3.69 3.37 3.59 3.59 2 Discount window borrowing2-4 5.45 3.25 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Commercial paper3'5'6 3 1-month 5.89 3.71 3.17 3.14 3.39 3.63 3.81 3.68 3.77 3.71 3.88 3.89 4 3-month 5.87 3.75 3.22 3.19 3.49 3.85 4.05 3.88 3.99 3.96 4.11 4.15 5 6-month 5.85 3.80 3.30 3.30 3.62 4.08 4.40 4.13 4.28 4.27 4.49 4.56 Finance paper, directly placed3'5'1 6 1-month 5.73 3.62 3.12 3.07 3.30 3.53 3.71 3.60 3.67 3.60 3.78 3.81 7 3-month 5.71 3.65 3.16 3.11 3.40 3.71 3.94 3.75 3.87 3.84 4.01 4.07 8 6-month 5.60 3.63 3.15 3.15 3.39 3.70 4.03 3.77 3.94 3.96 4.09 4.15 Bankers acceptances3,5,8 9 3-month 5.70 3.62 3.13 3.10 3.40 3.73 3.96 3.75 3.88 3.84 4.04 4.06 10 6-month 5.67 3.67 3.21 3.21 3.56 3.96 4.27 4.02 4.18 4.17 4.37 4.39 Certificates of deposit, secondary market 11 1-month 5.82 3.64 3.11 3.08 3.31 3.56 3.75 3.64 3.71 3.66 3.79 3.84 12 3-month 5.83 3.68 3.17 3.15 3.43 3.77 4.01 3.84 3.93 3.90 4.08 4.12 13 6-month 5.91 3.76 3.28 3.29 3.62 4.03 4.38 4.15 4.29 4.29 4.46 4.50 14 Eurodollar deposits, 3-month3 '0 5.86 3.70 3.18 3.15 3.43 3.75 4.00 3.80 3.90 3.89 4.09 4.14 U.S. Treasury bills Secondary market3,5 15 3-month 5.38 3.43 3.00 2.98 3.25 3.50 3.68 3.50 3.60 3.57 3.73 3.85 16 6-month 5.44 3.54 3.12 3.15 3.43 3.78 4.09 3.81 3.97 3.98 4.18 4.26 17 1-year 5.52 3.71 3.29 3.39 3.69 4.11 4.57 4.21 4.49 4.46 4.64 4.72 Auction average3 18 3-month 5.42 3.45 3.02 3.02 3.21 3.52 3.74 3.50 3.71 3.63 3.76 3.85 19 6-month 5.49 3.57 3.14 3.19 3.38 3.79 4.13 3.85 4.02 4.03 4.21 4.25 20 1-year 5.54 3.75 3.33 3.52 3.59 4.03 4.30 n.a. 4.30 n.a. n.a. n.a. U.S. TREASURY NOTES AND BONDS Constant maturities'" 21 1-year 5.86 3.89 3.43 3.54 3.87 4.32 4.82 4.46 4.71 4.70 4.90 4.99 22 2-year 6.49 4.77 4.05 4.14 4.47 5.00 5.55 5.18 5.44 5.45 5.66 5.67 23 3-year 6.82 5.30 4.44 4.48 4.83 5.40 5.99 5.62 5.92 5.91 6.09 6.08 24 5-year 7.37 6.19 5.14 5.09 5.40 5.94 6.52 6.19 6.47 6.47 6.60 6.56 25 7-year 7.68 6.63 5.54 5.43 5.72 6.28 6.80 6.53 6.81 6.78 6.85 6.77 26 10-year 7.86 7.01 5.87 5.75 5.97 6.48 6.97 6.72 6.97 6.93 7.03 6.96 27 20-year n.a. n.a. 6.29 6.39 6.57 7.00 7.40 7.18 7.41 7.39 7.44 7.34 28 30-year 8.14 7.67 6.59 6.29 6.49 6.91 7.27 7.06 7.29 7.26 7.31 7.22 Composite 8.16 7.52 6.45 6.24 6.44 6.90 7.32 7.10 7.34 7.31 7.36 7.27 29 More than 10 years (long-term) STATE AND LOCAL NOTES AND BONDS Moody's series13 6.56 6.09 5.38 5.14 5.06 5.29 n.a. 5.39 5.39 n.a. n.a. n.a. 30 Aaa 6.99 6.48 5.82 5.60 5.52 5.74 n.a. 5.83 5.83 n.a. n.a. n.a. 31 Baa 6.92 6.44 5.60 5.31 5.40 5.91 6.23 6.07 6.34 6.22 6.19 6.16 32 Bond Buyer series CORPORATE BONDS 33 Seasoned issues, all industries'5 9.23 8.55 7.54 7.25 7.39 7.78 8.17 7.95 8.21 8.16 8.21 8.11 Rating group 8.77 8.14 7.22 6.92 7.08 7.48 7.88 7.65 7.90 7.87 7.93 7.81 34 Aaa 9.05 8.46 7.40 7.12 7.29 7.69 8.08 7.86 8.11 8.06 8.11 8.01 35 Aa 9.30 8.62 7.58 7.30 7.44 7.82 8.22 8.00 8.25 8.21 8.25 8.14 36 A 9.80 8.98 7.93 7.65 7.76 8.13 8.52 8.30 8.56 8.51 8.55 8.46 37 Baa 9.32 8.52 7.46 7.24 7.45 7.82 8.20 8.04 8.22 8.25 8.18 8.27 38 A-rated, recently offered utility bonds . MEMO Dividend-price ratio17 39 Preferred stocks 8.17 7.46 6.89 6.97 7.00 7.07 7.33 7.27 7.29 7.27 7.42 7.34 40 Common stocks 3.24 2.99 2.78 2.69 2.70 2.78 2.90 2.90 2.88 2.90 2.93 2.88 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 & Poor's corporate series. Preferred stock ratio is 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 ratio is based on the 500 stocks in the price index. 10. Bid rates for Eurodollar deposits at 11:00 a.m. London time. Data are for NOTE. Some of the data in this table also appear in the Board's H.15 (519) indication purposes only. weekly and G.13 (415) monthly statistical releases. For ordering address, see 11. Auction date for daily data; weekly and monthly averages computed on an inside front cover. issue-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A27 1.36 STOCK MARKET Selected Statistics 1993 1994 IInnddiiccaattoorr 11999911 11999922 11999933 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Prices and trading volume (averages of daily figures) Common stock prices {indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 206.35 229.00 249.71 251.93 254.86 257.53 255.93 257.73 262.11 261.97 257.32 247.97 7. Industrial 258.16 284.26 300.10 298.83 300.92 306.61 310.84 313.22 320.92 322.41 318.08 304.48 3 Transportation 173.97 201.02 242.68 250.82 247.74 254.04 262.96 268.11 278.29 276.67 265.68 250.43 4 Utility 92.64 99.48 114.55 118.72 122.32 120.49 115.08 114.97 112.67 116.22 107.72 105.04 5 Finance 150.84 179.29 216.55 224.96 229.35 228.18 214.08 216.00 218.71 217.12 211.02 208.12 6 Standard & Poor's Corporation (1941-43 = 10)' 376.20 415.75 451.63 454.13 459.24 463.90 462.89 465.95 472.99 471.58 463.81 447.23 7 American Stock Exchange (Aug. 31, 1973 = 50? 360.32 391.28 438.77 444.75 454.91 472.73 472.41 465.95 481.14 476.25 465.72 437.01 Volume of trading (thousands of shares) 8 New York Stock Exchange 179,411 202,558 263,374 247,324 261,770 280,503 277,886 259,457 313,223 307,269 311,096 301,242 9 American Stock Exchange 12,486 14,171 n.a. 19,352 18,889 21,279 18,436 17,461 19,211 19,630 19,481 15,805 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers 36,660 43,990 60,310 52,760 53,700 56,690 59,760 60,310 61,250 62,020 61,960 60,700 Free credit balances at brokers' 11 Margin accounts 8,290 8,970 12,360 9,480 10,030 10,270 10,940 12,360 12,125 12,890 13,185 13,175 12 Cash accounts 19,255 22,510 27,715 21,915 23,170 22,450 23,560 27,715 26,020 25,665 26,190 24,800 Margin requirements (percent of market value and effective date)5 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance 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

A28 Domestic NonfinancialS tatistics • July 1994 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1993 1994 11999911 11999922 11999933 Nov. Dec. Jan. Feb, Mar. Apr. U.S. budget 1 Receipts, total 1,054,272 1,090,453 1,153,226 83,107 125,408 122,966 72,874 93,108 141,326 2 On-budget 760,388 788,027 841,292 58,700 99,714 94,396 46,879 64,612 104,311 3 Off-budget 293,885 302,426 311,934 24,407 25,694 28,570 25,995 28,496 37,015 4 Outlays, total 1,323,793 1,380,856 1,407,910 121,488 133,660 107,718 114,440 125,423 123,872 5 On-budget 1,082,106 1,128,518 1,141,323 96,724 121,977 83,527 88,523 100,260 100,625 6 Off-budget 241,687 252,339 266,587 24,764 11,682 24,191 25,918 25,163 23,247 7 Surplus or deficit (-), total -269,521 -290,403 -254,684 -38,381 -8,252 15,248 -41,566 -32,315 17,454 8 On-budget -321,719 -340,490 -300,031 -38,024 -22,263 10,869 -41,644 -35,648 3,686 9 Off-budget 52,198 50,087 45,347 -357 14,012 4,379 77 3,333 13,768 Source of financing (total) 10 Borrowing from the public 276,802 310,918 248,619 71,028 13,995 -6,933 31,633 26,511 -21,801 11 Operating cash (decrease, or increase (-)) ... -1,329 -17,305 6,283 -13,450 -17,413 -8,089 19,666 -6,461 -4,124 12 Other 2 -5,952 -3,210 -218 -19,197 11,670 -226 -9,733 12,265 8,471 MEMO 13 Treasury operating balance (level, end of period) 41,484 58,789 52,506 32,310 49,723 57,812 38,146 44,607 48,731 14 Federal Reserve Banks 7,928 24,586 17,289 6,334 14,809 21,541 4,886 6,181 7,965 15 Tax and loan accounts 33,556 34,203 35,217 25,977 34,914 36,271 33,259 38,426 40,766 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 has 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. U.S. Department of the Treasury, Monthly Treasury Statement of item in the Monthly Treasury Statement beginning in 1990. Receipts and Outlays of the U.S. Government and Office of Management and 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota Budget, Budget of the U.S. Government. 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

Federal Finance A29 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1992 1993 1994 11999922 11999933rr HI H2 HI H2 Feb. Mar. Apr. RECEIPTS 1 All sources 1,090,453 1,153,226 560,318 540,484 593,212 582,054 72,874 93,108 141,326 7 Individual income taxes, net 475,964 509,680 236,576 246,938 255,556 262,073 28,107 29,917 60,038 3 Withheld 408,352 430,331 198,868 215,584 209,649r 228,429 37,335 42,805 34,979 4 Presidential Election Campaign Fund 30 28 20 10 25 2 10 14 17 5 Nonwithheld 149,342 154,868 110,995 39,288 113,501r 41,765 1,151 4,434 47,201 6 Refunds 81,760 75,546 73,308 7,942 67,468 8,114 10,388 17,336 22,160 Corporation income taxes 7 Gross receipts 117,951 131,548 61,682 58,022 69,044 68,266 2,888 17,234 21,994 8 Refunds 17,680 14,027 9,403 7,219 7,198 6,514 1,294 1,660 1,408 9 Social insurance taxes and contributions. net 413,689 428,300 224,569 192,599 227,177 206,174 35,989 36,957 50,323 10 Employment taxes and contributions 385,491 396,939 208,110 180,758 208,776 192,749 32,957 3355,,997766 4477,,334488 n Self-employment taxes and contributions 24,421 20,604 20,434 3,988 16,270 4,335 1,577 1,630 13,754 12 Unemployment insurance 23,410 26,556 14,070 9,397 16,074 11,010 2,664 522 2,605 13 Other net receipts4 4,788 4,805 2,389 2,445 2,326 2,417 367 459 370 14 Excise taxes 45,569 48,057 22,389 23,456 23,398 25,994 3,249 5,285 4,050 15 Customs deposits 17,359 18,802 8,146 9,497 8,860 10,215 1,419 1,745 1,479 16 Estate and gift taxes 11,143 12,577 5,701 5,733 6,494 6,617 1,093 1,211 2,378 17 Miscellaneous receipts 26,459 18,273 10,658 11,458 9,879 9,227 1,424 2,418 2,472 OUTLAYS 18 All types l,380,856r 1,407,910 704,266 723,527 673,340 728,200r 114,440 125,423 123,872 19 National defense 298,350 291,086 147,065 155,231 140,535 146,177 21,830" 24,476 24,501 70 International affairs 16,107 16,826 8,540 9,916 6,565 10,534 948 696 1,554 21 General science, space, and technology .... 16,409 17,030 7,951 8,521 7,996 8,904 1,269 1,685 1,238 7? Energy 4,500r 4,319 1,442 3,109 2,462 1,641 159 510 316 73 Natural resources and environment 20,025 20,239 8,594 11,467 8,592 11,077 1,449 1,631 1,463 24 Agriculture 15,205 20,443 7,526 8,852 11,872 7,335 1,817 1,439 1,641 ?5 Commerce and housing credit 10,083r -22,725 15,615 -7,697 -15,112 -1,724 -4,608 -1,260 -702 76 Transportation 33,333 35,004 15,651 18,425 16,082r 20,375 2,784 2,845 2,620 27 Community and regional development 6,838 9,051 3,903 4,464 4,929 5,606 445 1,276 938 28 Education, training, employment, and social services 45,248r 50,012 23,767 21,241 24,036r 25,515 2,666 2,285 33,,669944 79 Health 89,497 99,415 44,164 47,232 49,882 52,631 8,229 10,014 8,410 30 Social security and Medicare 406,569 435,137 205,500 232,109 195,933 223,735 37,224 40,350 37,872 31 Income security 196,958r 207,257 104,537 98,382 108,046r 103,163 22,466 20,549 20,957 32 Veterans benefits and services 34,138r 35,720 15,597 18,561 16,385 19,848 3,135 2,793 3,930 33 Administration of justice 14,426 14,955 7,435 7,238 7,482r 7,448 1,105 1,760 1,230 34 General government 12,990r 13,009 5,050 8,223 5,205 6,565 782 779 -148 35 Net interest6 199,421r 198,811 100,161 98,692 99,635 99,963 15,524 16,594 17,080 36 Undistributed offsetting receipts -39,280 -37,386 -18,229 -20,628 -17,035 -20,407 -2,815 -2,999 -2,721 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, U.S. governthe Budget have not been fully distributed across months. ment contributions for employee retirement, and certain asset sales. 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 1995. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic NonfinancialS tatistics • July 1994 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1992 1993 1994 IItteemm Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 1 Federal debt outstanding 3,897 4,001 4,083 4,196 4,250 4,373 4,436 4,562 4,576 2 3 Pu H bl e ic ld d b e y b t p s u e b c l u ic r ities 2 3, , 8 9 8 1 1 8 2 3, , 9 9 8 7 5 7 4 3 , , 0 0 6 4 5 8 4 3 , , 1 1 7 2 7 9 4 3 , , 2 1 3 8 1 8 4 3 , , 3 2 5 5 2 2 4 3 , , 4 2 1 9 2 5 4 3 , , 5 3 3 8 6 2 T4 4 Held by agencies 964 1,008 1,016 1,048 1,043 1,100 1,117 1,154 1 5 Agency securities 16 16 18 19 20 21 25 27 n.a. 6 Held by public 16 16 18 19 20 21 25 27 1 7 Held by agencies 0 0 0 0 0 0 0 0 8 Debt subject to statutory limit 3,784 3,891 3,973 4,086 4,140 4,256 4,316 4,446 4,491 9 Public debt securities 3,783 3,890 3,972 4,085 4,139 4,256 4,315 4,445 4,491 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,145 4,145 4,145 4,145 4,145 4,370 4,900 4,900 4,900 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, SOURCES. U.S. Department of the Treasury, Monthly Statement of the Public specified participation certificates, notes to international lending organizations, Debt of the United States and Treasury Bulletin. and District of Columbia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1993 1994 TTyyppee aanndd hhoollddeerr 11999900 11999911 11999922 11999933 Q2 Q3 Q4 Ql 1 Total gross public debt 3,364.8 3,801.7 4,177.0 4,535.7 4,352.0 4,411.5 4,535.7 n.a. By type 2 Interest-bearing 3,362.0 3,798.9 4,173.9 4,532.3 4,349.0 4,408.6 4,532.3 4,572.6 3 Marketable 2,195.8 2,471.6 2,754.1 2,989.5 2,860.6 2,904.9 2,989.5 3,042.9 4 Bills 527.4 590.4 657.7 714.6 659.3 658.4 714.6 721.2 5 Notes 1,265.2 1,430.8 1,608.9 1,764.0 1,698.7 1,734.2 1,764.0 1,802.5 6 Bonds 388.2 435.5 472.5 495.9 487.6 497.4 495.9 504.2 7 Nonmarketable' 1,166.2 1,327.2 1,419.8 1,542.9 1,488.4 1,503.7 1,542.9 1,529.7 8 State and local government series 160.8 159.7 153.5 149.5 152.8 149.5 149.5 145.5 9 Foreign issues2 43.5 41.9 37.4 43.5 43.0 42.5 43.5 42.7 10 Government 43.5 41.9 37.4 43.5 43.0 42.5 43.5 42.7 11 Public .0 .0 .0 .0 .0 .0 .0 ,0 12 Savings bonds and notes 124.1 135.9 155.0 169.4 164.4 167.0 169.4 172.6 13 Government account series 813.8 959.2 1,043.5 1,150.0 1,097.8 1,114.3 1,150.0 1,138.4 14 Non-interest-bearing 2.8 2.8 3.1 3.4 2.9 2.9 3.4 3.3 By holder 4 15 U.S. Treasury and other federal agencies and trust funds 828.3 968.7 1,047.8 1,153.5 1,099.8 1,116.7 1,153.5 16 Federal Reserve Banks 259.8 281.8 302.5 334.2 328.2 325.7 334.2 17 Private investors 2,288.3 2,563.2 2,839.9 3,047.7 2,938.4 2,983.0 3,047.7 18 Commercial banks 171.5 233.4 294.0 316.0 306.5r 313.3r 316.0 19 Money market funds 45.4 80.0 79.4 80.5 76.2 75.2 80.5 20 Insurance companies 142.0 168.7 197.5 216.0 210.2r 215.5r 216.0 21 Other companies 108.9 150.8 192.5 213.0 206.1 215.6 213.0 n.a. 22 State and local treasuries 490.4 520.3 534.8 564.0 553.9 558.0 564.0 Individuals 23 Savings bonds 126.2 138.1 157.3 171.9 166.5 169.1 171.9 24 Other securities 107.6 125.8 131.9 137.9 136.4 136.7 137.9 25 Foreign and international 458.4 491.8 549.7 623.3 568.2 592.3 623.3 26 Other miscellaneous investors 637.7 651.3 702.4 725.0 714.3r 707.2r 725.0 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, 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

Federal Finance A31 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1994 1994, week ending IItteemm Jan. Feb. Mar. Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 IMMEDIATE TRANSACTIONS2 By type of security U.S. Treasury securities 1 Bills 51,660 53,692 54,077 53,580 53,776 50,653 46,672 63,400 64,117 46,593 5555,,000077 3388,,557700 Coupon securities, by maturity 2 Less than 3.5 years 52,525 68,772 60,771 63,646 57,132 58,004 66,157 58,870 69,629 46,897 5566,,115599 5533,,444477 3 3.5 to 7.5 years 41,483 48,599 45,280 50,142 42,912 43,675 48,436 43,769 47,199 35,305 43,142 37,946 4 7.5 to 15 years 26,382 34,565 31,297r 32,128 31,527 31,005 29,040 31,054 42,450 28,702 27,106 21,636 5 15 years or more 18,752 22,524 19,964 20,234 19,682 21,105 19,341 19,170 22,206 12,728 14,610 14,960 Federal agency securities Debt, by maturity 6 Less than 3.5 years 11,346 11,177 12,927 12,548 12,109 12,609 13,288 13,740 13,503 13,398 1133,,666633 1100,,995522 7 3.5 to 7.5 years 724r 695 664 602 730 615 740 613 572 667 413 404 8 7.5 years or more 558 525 536 509 693 392 440 601 674 530 854 487 Mortgage-backed 9 Pass-throughs 25,587 23,264r 24,765 25,878 27,178 27,923 21,108 22,319 25,199 35,887 28,898 1144,,992211 10 All others 3,661r 3,807 3,411r 4,098 3,746 3,450 2,794 3,359 3,502 3,577 3,041 2,399 By type of counterparty Primary dealers and brokers 11 U.S. Treasury securities 117,681 144,393 137,235 140,529 135,634 134,528 135,073 138,966 154,331 109,384 128,265 110077,,115500 Federal agency securities 12 Debt 1,763 1,666 2,023 2,041 2,248 1,907 1,911 1,961 2,301 2,206 22,,117766 11,,777744 13 Mortgage-backed 12,886r ll,377r 12,317r 13,855 12,146 11,650 11,879 12,896 12,735 17,002 14,977 8,402 Customers 14 U.S. Treasury securities 73,120 83,759 74,155r 79,201 69,395 69,913 74,575 77,296 91,270 60,841 67,760 5599,,440088 Federal agency securities 15 Debt 10,866r 10,731 12,104 11,618 11,283 11,709 12,557 12,993 12,448 12,389 1122,,775544 1100,,006699 16 Mortgage-backed 16,362 15,693r 15,858r 16,121 18,778 19,723 12,023 12,782 15,966 22,461 16,962 8,918 FUTURES AND FORWARD TRANSACTIONS4 By type of deliverable security U.S. Treasury securities 17 Bills 2,250 3,094 3,733r 5,586 2,581 4,386 3,547 2,865 7,797 3,246 3,701 1,899 Coupon securities, by maturity 18 Less than 3.5 years 2,232 3,197 3,399 4,162 3,546 3,059 4,444 2,265 3,288 1,747 22,,333366 22,,668800 19 3.5 to 7.5 years 1,905 2,836 2,444r 3,895 2,411 1,841 3,034 1,927 2,354 1,326 1,873 2,209 20 7.5 to 15 years 3,238 5,007 5,031 6,383 4,791 5,129 5,489 4,018 5,804 3,870 4,038 3,741 21 15 years or more 11,933 13,903 14,204r 15,534 14,095 15,945 13,061 12,808 16,078 10,396 13,279 11,295 Federal agency securities Debt, by maturity 22 Less than 3.5 years 123 237 181 220 94 100 264 269 85 90 221111 3300 23 3.5 to 7.5 years 127 211 133 194 202 186 92 36 99 255 178 6 24 7.5 years or more 70 201 80 92 99 147 28 49 37 6 33 70 Mortgage-backed 25 Pass-throughs 26,028r 24,752r 25,161r 21,282 33,885 34,079 17,339 15,597 31,634 29,053 1188,,666677 1122,,778855 26 Others3 1,891 2,198 1,522 1,289 1,032 2,030 2,281 887 1,276 983 747 1,141 OPTIONS TRANSACTIONS5 By type of underlying security U.S. Treasury, coupon securities, by maturity 27 Less than 3.5 years 2,216 3,329 3,428 2,948 3,185 3,538 3,450 3,134 6,423 3,387 22,,888844 33,,117711 28 3.5 to 7.5 years 808 899 1,253 839 1,200 1,197 1,340 1,388 1,522 735 589 912 29 7.5 to 15 years 1,262 1,613 1,297 1,262 1,118 680 1,403 1,907 1,766 1,079 711 1,041 30 15 years or more 2,086 2,554 2,096 2,113 1,684 2,724 1,919 2,081 1,933 1,510 1,539 1,610 Federal agency, mortgagebacked securities 31 Pass-throughs 954 952 801 1,341 997 899 372 600 1,390 979 514 308 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 business 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 business because of insufficient activity. days or less. Stripped securities are reported at market value by maturity of coupon or Data for several types of options transactions—U.S. Treasury securities, bills; corpus. Federal agency securities, debt; and federal agency securities, mortgage-backed, 3. Includes such securities as collateralized mortgage obligations (CMOs), real other than pass-throughs—are no longer available because activity is insufficient. estate mortgage investment conduits (REMICs), interest-only securities (IOs), and principal-only securities (POs). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic NonfinancialS tatistics • July 1994 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1994 1994, week ending IItteemm Jan. Feb. Mar. Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Positions2 NET IMMEDIATE POSITIONS3 By type of security U.S. Treasury securities 1 Bills 6,629 3,681 4,792 1,714 2,447 7,711 7,110 1,838 11,375 14,931 9,561 Coupon securities, by maturity 2 Less than 3.5 years -8,303 -9,169 — 18,921r -15,782 -15,355 -21,683 -19,226 -19,779 -22,696 -28,330 -20,993 3 3.5 to 7.5 years -20,637 -24,417 -25,482r -22,189 -26,847 -27,341 -23,722 -25,156 -24,087 -25,521 -28,030 4 7.5 to 15 years -3,361 -2,424 -4,212r -3,417 -3,685 -4,530 -2,508 -5,893 -7,414 -7,110 -7,028 5 15 years or more 8,246 5,994 2,016r 4,386 4,794 2,795 1,364 -1,151 -889 -2,258 -3,008 Federal agency securities Debt, by maturity 6 Less than 3.5 years 10,272 12,031 8,925 11,686 10,740 9,321 7,993 6,919 8,500 7,982 7,924 7 3.5 to 7.5 years 2,888 3,226 4,707 4,039 4,205 4,803 4,881 5,009 5,542 5,834 5,792 8 7.5 years or more 4,987 3,798 4,174 3,685 4,087 4,606 4,363 3,695 4,775 5,211 5,133 Mortgage-backed 9 Pass-throughs 50,003 51,071 51,257 47,180 63,827 61,349 51,511 31,442 37,717 55,359 46,279 10 All others 29,844 28,837 32,642r 32,761 32,118 30,945 29,650 37,396 35,632 33,098 33,640 Other money market instruments 11 Certificates of deposit 3,650 3,925 2,431 4,198 2,761 2,457 2,264 1,840 1,702 2,240 2,177 12 Commercial paper 6,313 7,619 5,489 8,265 5,795 5,450 5,212 4,799 4,839 4,409 5,774 13 Bankers acceptances 935 777 553 599 598 758 390 475 383 498 479 FUTURES AND FORWARD POSITIONS5 By type of deliverable security U.S. Treasury securities 14 Bills -2,569 -1,382 2,030r 1,076 1,415 1,941 2,793 2,384 1,058 3,029 3,092 Coupon securities, by maturity 15 Less than 3.5 years -1,123 -175 2,739r 3,535 2,144 2,020 3,792 2,863 2,116 868 1,995 16 3.5 to 7.5 years 1,639r 2,608r 3,115r 2,444 2,213 2,933 3,722 3,879 2,458 2,230 1,711 17 7.5 to 15 years 5,687r 8,091r 10,679r 8,801 9,247 8,750 11,494 13,719 10,982 8,847 7,178 18 15 years or more —4,17 lr -6,634r -10,013r -10,088 -10,394 -11,054 -10,941 -7,813 -8,809 -7,581 -8,150 Federal agency securities Debt, by maturity 19 Less than 3.5 years 246 3 126r -53 64 11 309 161 206 117 38 20 3.5 to 7.5 years 303 123 127 -54 318 343 -51 -50 138 176 91 21 7.5 years or more -93 438 -157r 567 395 -545 -626 -56 -173 -144 24 Mortgage-backed 22 Pass-throughs -28,772r -37,532r -39,342r -33,954r -48,048 -52,098 -40,445 -20,327 -25,255 -43,303 -34,266 23 All others 3,294 8,687 9,561r 7,424 8,774 11,900 12,590 6,053 6,314 8,012 7,984 24 Certificates of deposit -225,011 -241,652 -186,475 -237,312 -247,206 -170,162 -154,511 -164,886 -148,732 -159,956 -135,904 Financing6 Reverse repurchase agreements 25 Overnight and continuing 250,861 274,179 296,274 290,102 300,486 308,744 304,633 273,517 292,619 295,517 289,758 26 Term 401,867 409,887 398,163 379,608 395,569 400,875 400,260 406,468 361,633 400,928 402,640 Repurchase agreements 27 Overnight and continuing 461,215 483,847 479,210 492,811 489,948 497,689 488,715 438,311 467,253 483,478 472,957 28 Term 372,657 382,705 375,510 342,902 364,255 381,800 382,725 390,186 322,254 363,039 375,200 Securities borrowed 29 Overnight and continuing 143,505 147,476 151,645 150,726 149,201 152,565 152,911 152,127 151,914 156,126 153,458 30 Term 51,583 45,587 39,793 41,215 42,796 39,941 37,953 38,661 35,702 35,907 35,552 Securities loaned 31 Overnight and continuing 5,113 5,444 4,579 4,636 4,560 4,631 4,887 4,316 3,914 3,617 3,735 32 Term 167 294 348 416 339 338 369 346 201 302 132 Collateralized loans 33 Overnight and continuing 16,169 16,243 20,074 15,229 16,722 20,122 19,540 24,751 23,876 26,035 25,339 MEMO; Matched book7 Reverse repurchase agreements 34 Overnight and continuing 175,650 182,784 200,306 188,596 194,285 202,241 207,929 199,853 202,131 204,543 213,257 35 Term 361,748 359,530 348,058 332,157 351,434 350,853 348,948 350,977 309,999 349,530 348,351 Repurchase agreements 36 Overnight and continuing 238,867 240,887 244,375 249,763 249,052 247,667 245,543 234,106 241,528 255,676 253,576 37 Term 281,109 290,676 286,309 256,051 275,308 289,605 292,353 302,695 243,751 281,812 284,981 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 business 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 business 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 FspRecAifSy EdeRla yed delivery. All futures positions are included regardless of time to activity. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A33 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1993 1994 AAggeennccyy 11998899 11999900 11999911 11999922 Oct. Nov. Dec. Jan. Feb. 1 Federal and federally sponsored agencies 411,805 434,668 442,772 483,970 564,956 568,021 570,711 581,886 592,751 2 Federal agencies 35,664 42,159 41,035 41,829 43,796 44,055 45,193 44,988 44,753 3 Defense Department1 7 7 7 7 7 7 6 6 6 4 Export-Import Bank 10,985 11,376 9,809 7,208 5,801 5,801 5,315 5,315 5,315 5 Federal Housing Administration4 328 393 397 374 243 255 255 80 99 6 Government National Mortgage Association certificates of participation 0 0 0 0 0 0 0 0 0 / Postal Service6 6,445 6,948 8,421 10,660 9,732 9,732 9,732 9,732 9,732 8 Tennessee Valley Authority 17,899 23,435 22,401 23,580 28,016 28,260 29,885 29,855 29,601 9 United States Railway Association6 0 0 0 0 0 0 0 0 0 10 Federally sponsored agencies7 375,428 392,509 401,737 442,141 521,160 523,966 525,518 536,898 547,998 II Federal Home Loan Banks 136,108 117,895 107,543 114,733 133,365 139,364 141,577 139,241 137,862 12 Federal Home Loan Mortgage Corporation 26,148 30,941 30,262 29,631 63,427 56,809 49,993 61,245 70,482 13 Federal National Mortgage Association 116,064 123,403 133,937 166,300 193,925 195,165 201,112 203,013 206,493 14 Farm Credit Banks 54,864 53,590 52,199 51,910 51,759 51,861 53,123 52,621 52,839 15 Student Loan Marketing Association9 28,705 34,194 38,319 39,650 38,790 40,840 39,784 40,861 40,407 16 Financing Corporation 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation11 847 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 4,522 23,055 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt 134,873 179,083 185,576 154,994 127,348 126,490 128,187 125,182 123,304 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 10,979 11,370 9,803 7,202 5,795 5,795 5,309 5,309 5,309 21 Postal Service6 6,195 6,698 8,201 10,440 9,732 9,732 9,732 9,732 9,732 22 Student Loan Marketing Association 4,880 4,850 4,820 4,790 4,760 4,760 4,760 2,760 1,760 23 Tennessee Valley Authority 16,519 14,055 10,725 6,975 6,325 6,325 6,325 6,075 6,075 24 United States Railway Association6 0 0 0 0 0 0 0 0 0 Other lending14 25 Farmers Home Administration 53,311 52,324 48,534 42,979 38,619 38,619 38,619 38,619 38,619 26 Rural Electrification Administration 19,265 18,890 18,562 18,172 17,561 17,561 17,578 17,511 17,512 27 Other 23,724 70,896 84,931 64,436 44,556 43,698 45,864 45,176 43,667 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, whereas the Rural Electrification Admin- 9. Before late 1982, the Association obtained financing through the Federal istration 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

A34 Domestic NonfinancialS tatistics • July 1994 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1993 1994 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11999911 11999922 11999933 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. I Ail issues, new and refunding' 154,402 215,191 279,945 23,504 21,900 18,094 24,520 16,560 14,698 15,461 10,129 By type of issue 2 General obligation 55,100 78,611 90,599 5,884 7,495 6,422 6,542 4,622 4,365 7,371 3,469 3 Revenue 99,302 136,580 189,346 17,620 14,405 11,672 17,978 11,000 8,553 8,090 6,660 Bv type of issuer 4 State i 24,939 25,295 28,285 2,758 3,216 885 1,265 1,235 921 3,302 n.a. 5 Special district or statutory authority- 80,614 129,686 164,169 13,113 9,875 10,992 16,485 10,672 10,263 6,145 n.a. 6 Municipality, county, or township 48,849 60,210 84,972 7,476 8,418 4,528 6,770 4,653 3,514 6,014 n.a. 7 Issues for new capital 116,953 120,272 91,434 8,759 7,261 6,734 9,543 5,558r 8,774r 10,114 7,724 By use of proceeds 8 Education 21,121 22,071 17,098 1,886 547 1,416 1,227 1,573 2,292 1,859 2,102 9 Transportation 13,395 17,334 9,571 789 304 979 429 293 1,223 401 1,453 10 Utilities and conservation 21,039 20,058 11,802 1,255 593 687 1,454 480 243 540 707 11 Social welfare 25,648 21,796 n.a. 2,199 1,764 n.a. 2,171 825 1,660 1,670 n.a. 12 Industrial aid 8,376 5,424 6,381 329 518 673 1,272 392 1,316 470 n.a. 13 Other purposes 30,275 33,589 29,519 2,362 3,737 1,820 2,990 5,558 8,774 n.a. n.a. 1. Par amounts of long-term issues based on date of sale. SOURCES. Securities Data Company beginning January 1993; Investment 2. Includes school districts. Dealer's Digest before then. 1.46 NEW SECURITY ISSUES U.S. Corporations Millions of dollars 1993 1994 TTyyppee ooff oo ii rr ssss ii uu ssss ee uu ,, ee oo rr ffffeerriinngg,, 11999911 11999922 11999933 Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Mar. 1 All issues' 465,246 559,827r 765,721 52,955 64,495r 56,143 54,813r 44,394r 57,649 47,918r 53,623 2 Bonds2 389,822 471,502r 642,543 43,688 53,837 45,608 43,214 33,863r 51,612 39,177r 43,030 By type of offering 3 Public, domestic 286,930 378,058r 487,924r 40,447 49,132 42,645 39,525 32,282r 46,168 31,860"^ 40,492 4 Private placement, domestic3 74,930 65,853 116,240 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 27,962 27,591 38,379r 3,241 4,705 2,963 3,689 1,582 5,444 7,317r 2,538 By industry group 6 Manufacturing 86,628 82,058 88,002r 6,132 4,036 3,273 3,334 3,068 4,635 3,5ir 1,716 7 Commercial and miscellaneous 36,666 43,lllr 60,443r 2,331 2,378 6,306 3,078 2,525 2,869 2,362r 3,419 8 Transportation 13,598 9,979 10,756r 723 288 1,416 648 895 693 100 870 9 Public utility 23,944 48,055 56,272r 3,474 5,163 2,585 1,763 2,336 2,566 l,868r 1,489 10 Communication 9,431 15,394 31,950r 2,979 2,237 2,991 1,015 2,001 2,495 2,212 2,090 11 Real estate and financial 219,555 272,904r 395,121r 28,049 39,735 29,039 33,376 23,039r 38,354 29,124r 33,447 12 Stocks2 75,424 88,325 123,009 9,267 10,658r 10,535 ll,599r 10,531 5,727r 7,702r 9,099r By type of offering 13 Public preferred 17,085 21,339 20,533 3,319 1,358 2,549 1,385 650 1,592 1,318 1,969 14 Common 48,230 57,118 90,559 5,948 9,336 7,987 10,209 9,881 4,135 6,383 7,131 15 Private placement 10,109 9,867 11,917 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 24,111 22,723 22,271 1,961 2,274 2,121 2,169 2,267 4 4 4 17 Commercial and miscellaneous 19,418 20,231 25,761 1,457 2,242 1,842 3,061 1,970 T T T 18 Transportation 2,439 2,595 2,237 466 153 128 221 162 n.a. n.a. n.a. 19 Public utility 3,474 6,532 7,050 582 908 1,103 371 129 I 1 1 20 Communication 475 2,366 3,439 115 248 18 1,074 1,603 t f t 21 Real estate and financial 25,507 33,879 49,889 4,675 4,666 5,323 4,486 4,381 2,397 3,800 4,360 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., Securities Data Company, and the investment companies other than closed-end, intracorporate transactions, equi- Board of Governors of the Federal Reserve System. ties sold abroad, and Yankee bonds. Stock data include ownership securities issued by limited partnerships. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A35 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1993 1994 IItteemm 11999922 11999933 Aug. Sept. Oct. Nov. Dec. Jan. Feb.r Mar. 1 Sales of own shares2 647,055 73,032 69,938 74,490 72,865 89,775 98,679 78,032 87,373 2 Redemptions of own shares 447,140 46,382 49,270 47,168 51,306 62,764 61,829 56,235 73,864 3 Net sales3 199,915 n. a. 26,650 20,667 27,322 21,559 27,011 36,849 21,797 13,509 4 Assets4 1,056,310 1,343,920 1,370,654 1,411,628 1,416,841 1,510,047 1,572,907 1,561,705 1,501,156 5 Cash5 73,999 92,771 96,848 104,301 103,352 100,209 110,022 113,975 111,540 6 Other 982,311 1,251,149 1,273,807 1,307,327 1,303,489 1,409,838 1,462,879 1,447,730 1,389,616 1. Data on sales and redemptions exclude money market mutual funds but 4. Market value at end of period, less current liabilities. include limited-maturity municipal bond funds. Data on asset positions exclude 5. Includes all U.S. Treasury securities and other short-term debt securities. both money market mutual funds and limited-maturity municipal bond funds. SOURCE. Investment Company Institute. Data based on reports of membership, 2. Includes reinvestment of net income dividends. Excludes reinvestment of which comprises substantially all open-end investment companies registered with capital gains distributions and share issue of conversions from one fund to another the Securities and Exchange Commission. Data reflect underwritings of new in the same group. companies. 3. Excludes sales and redemptions resulting from transfers of shares into or out 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 1992 1993 1994 AAccccoouunntt 11999911 11999922 11999933rr Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql I Profits with inventory valuation and capital consumption adjustment 369.5 407.2 466.6 411.7 367.5 439.5 432.1 458.1 468.5 507.9 n.a. 2 Profits before taxes 362.3 395.4 449.4 409.5 357.9 409.9 419.8 445.6 443.8 488.4 n.a. 3 Profits tax liability 129.8 146.3 174.0 153.0 130.1 155.0 160.9 173.3 169.5 192.5 n.a. 4 Profits after taxes 232.5 249.1 275.4 256.5 227.8 254.9 258.9 272.3 274.3 295.9 n.a. 5 Dividends 137.4 150.5 169.0 146.1 155.2 162.9 167.5 168.5 169.7 170.3 171.7 6 Undistributed profits 95.2 98.6 106.4 110.4 72.7 92.0 91.4 103.9 104.6 125.6 n.a. 7 Inventory valuation 4.9 -5.3 -7.1 -13.7 -7.8 4.9 -12.7 -12.2 1.0 -4.3 -17.7 8 Capital consumption adjustment 2.2 17.1 24.3 16.0 17.4 24.7 25.1 24.7 23.8 23.9 20.6 SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.50 NONFARM BUSINESS EXPENDITURES New Plant and Equipment Billions of dollars; quarterly data at seasonally adjusted annual rates 1992 1993 1994 IInndduussttrryy 11999922 11999933 1199994411 Q3 Q4 Ql Q2 Q3 Q4 Ql Q21 1 Total nonfarm business 546.60 585.64 632.76 547.40 559.24 564.13 579.79 594.11 604.51 621.28 624.99 Manufacturing 2 Durable goods industries 73.32 81.33 89.09 72.09 73.30 79.11 80.88 81.99 83.35 91.81 87.68 3 Nondurable goods industries 100.69 97.84 103.60 100.77 103.56 95.94 96.21 100.18 99.04 99.42 101.41 Nonmanufacturing 4 Mining 8.88 10.03 10.63 8.98 8.47 8.89 9.10 11.14 10.98 10.84 11.51 Transportation 5 Railroad 6.67 6.23 6.30 6.70 7.04 6.00 6.00 5.91 7.01 5.67 5.91 6 Air 8.93 6.43 4.69 9.69 7.60 7.30 6.54 6.92 4.95 5.58 5.38 7 Other 7.04 9.22 10.27 7.52 6.97 9.17 9.04 8.88 9.78 8.81 9.27 Public utilities 8 Electric 48.22 52.26 52.96 48.17 49.57 49.92 50.51 52.74 55.88 51.14 53.66 9 Gas and other 23.99 23.46 25.32 24.01 24.50 23.59 24.04 22.88 23.33 22.55 23.94 10 Commercial and other 268.84 298.83 329.90 269.46 278.24 284.21 297.46 303.47 310.20 325.47 326.23 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

A36 Domestic NonfinancialS tatistics • July 1994 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1992 1993 AAccccoouunntt 11999911 11999922 11999933 Q2 Q3 Q4 QL Q2 Q3 Q4 ASSETS 1 Accounts receivable, gross" 480.6 482.1 476.1 476.7 473.9 482.1 469.6 469.3 467.6 476.1 2 Consumer 121.9 117.1 117.5 116.7 116.7 117.1 111.9 111.3 112.6 117.5 3 Business 292.9 296.5 290.1 293.2 288.5 296.5 289.6 290.7 287.8 290.1 4 Real estate 65.8 68.4 68.6 66.8 68.8 68.4 68.1 67.2 67.2 68.6 5 LESS: Reserves for unearned income 55.1 50.8 49.01 51.2 50.8 50.8 47.4 47.5 47.9 49.0R 6 Reserves for losses 12.9 15.8 11.0R 12.3 12.0 15.8 15.5 13.8 11.1 11. 7 Accounts receivable, net 412.6 415.5 416.1R 413.2 411.1 415.5 406.6 408.0 408.6 416.1R 8 All other 149.0 150.6 177.3R 139.4 146.5 150.6 155.0 156.6 169.7 177.3R 9 Total assets 561.6 566.1 593.4r 552.6 557.6 566.1 561.6 564.6 578.3 593.4r LIABILITIES AND CAPITAL 10 Bank loans 42.3 37.6 25.3 37.8 38.1 37.6 34.1 29.5 25.8 25.3 11 Commercial paper 159.5 156.4 159.2 147.7 153.2 156.4 149.8 144.5 149.9 159.2 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 34.5 37.8 46.1 34.8 34.9 37.8 41.9 46.4 47.9 46.1 15 Not elsewhere classified 191.3 195.3 199.9 191.9 191.4 195.3 195.1 195.8 198.1 199.9 16 All other liabilities 69.0 71.2 91.1 73.4 73.7 71.2 74.2 81.3 87.6 91.1 17 Capital, surplus, and undivided profits 64.8 67.8 71.7 67.1 68.1 67.8 66.6 67.1 68.9 71.7 18 Total liabilities and capital 561.2 566.1 593.4 552.7 559.4 566.1 561.7 564.6 578.3 593.4 1. Includes finance company subsidiaries of bank holding companies but not of 2. Before deduction for unearned income and losses, retailers and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. 1.52 DOMESTIC FINANCE COMPANIES Consumer, Real Estate, and Business Credit1 Millions of dollars, amounts outstanding, end of period 1993 1994 TTyyppee ooff ccrreeddiitt 11999911 11999922 11999933 Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted 1 Total 519,910 534,845 532,828 529,310 532,687 532,828 535,567 539,513r 545,601 2 Consumer 154,822 157,707 159,791 155,700 157,438 159,791 159,313 160,371r 159,704 3 Real estate" 65,383 68,011 68,174 67,983 68,540 68,174 69,441 69,543r 69,650 4 Business 299,705 309,127 304,863 305,627 306,709 304,863 306,813 309,599r 316,246 Not seasonally adjusted 5 Total 523,192 538,158 536,124 528,869 532,354 536,124 535,138 537,278r 545,779 6 Consumer 155,713 158,631 160,734 156,712 157,848 160,734 159,186 158,543r 158,331 7 Motor vehicles 63,415 57,605 55,274 54,324 55,337 55,274 56,509 56,963 56,431 8 Other consumer3 58,522 59,522 62,189 58,278 59,463 62,189 61,427 61,132r 62,515 9 Securitized motor vehicles4 23,166 29,775 34,659 35,212 34,301 34,659 32,924 32,280 31,439 10 Securitized other consumer4 10,610 11,729 8,611 8,898 8,747 8,611 8,325 8,168 7,946 11 Real estate* 65,760 68,410 68,577 68,425 68,718 68,577 69,385 69,446r 69,051 12 Business 301,719 311,118 306,814 303,732 305,788 306,814 306,568 309,289r 318,397 13 Motor vehicles 90,613 87,456 90,172 86,129 88,510 90,172 88,377 90,668r 95,644 14 Retail5 22,957 19,303 16,024 16,599 16,723 16,024 16,965 17,514r 19,087 15 Wholesale6 31,216 29,962 31,067 27,144 29,260 31,067 27,975 29,435 31,070 16 Leasing 36,440 38,191 43,081 42,386 42,526 43,081 43,437 43,720 45,487 17 Equipment 141,399 151,607 148,858 148,357 146,703 148,858 147,915 147,425 149,721 18 Retail 30,962 32,212 33,266 33,357 32,360 33,266 33,109 33,033 33,861 19 Wholesale6 9,671 8,669 8,007 8,091 7,802 8,007 7,996 7,972 8,281 20 Leasing 100,766 110,726 107,585 106,909 106,541 107,585 106,810 106,420 107,579 21 Other business7 60,900 57,464 51,054 53,969 53,886 51,054 50,821 5I,489r 53,596 22 Securitized business assets4 8,807 14,590 16,730 15,277 16,690 16,730 19,456 19,707 19,436 23 Retail 576 1,118 1,830 1,690 1,953 1,830 1,696 1,593 1,486 24 Wholesale 5,285 8,756 9,697 8,785 9,407 9,697 12,358 13,006 12,866 25 Leasing 2,946 4,716 5,203 4,802 5,330 5,203 5,402 5,108 5,084 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 FR4A. SOuEtsRta nding balances of pools upon which securities have been issued; these balances are no longer carried on the balance sheets of the loan originator. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A37 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1993 1994 IItteemm 11999911 11999922 11999933 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 155.0 158.1 163.1 169.2 174.4 167.9 168.1 157.9 167.8 166.1 2 Amount of loan (thousands of dollars) 114.0 118.1 123.0 128.4 134.0 128.7 127.9 124.1 131.0 127.6 3 Loan-to-price ratio (percent) 75.0 76.6 78.0 78.0 79.1 79.2 78.0 80.2 80.2 79.3 4 Maturity (years) 26.8 25.6 26.1 26.7 26.9 26.8 27.2 27.0 27.6 26.7 5 Fees and charges (percent of loan amount) 1.71 1.60 1.30 1.23 1.23 1.10 1.18 1.16 1.20 1.16 Yield (percent per year) 6 Contract rate1 9.02 7.98 7.02 6.61 6.61 6.74 6.77 6.67 6.81 7.13 7 Effective rate1,5 9.30 8.25 7.24 6.80 6.80 6.92 6.95 6.85 6.99 7.31 8 Contract rate (HUD series)4 9.20 8.43 7.37 7.05 7.38 7.26 7.13 7.54 8.31 n.a. SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 9.25 8.46 7.46 7.08 7.51 7.52 7.05 7.59 8.57 n.a. 10 GNMA securities 8.59 7.71 6.65 6.11 6.61 6.58 6.45 6.72 7.40 7.93 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 122,837 142,833 172,791 182,524 185,463 190,861 194,441 196,078 197,770 201,542 12 FHA/VA insured 21,702 22,168 22,876 22,978 23,334 23,857 23,7% 23,789 24,226 25,088 13 Conventional 101,135 120,664 149,914 159,546 162,129 167,004 170,645 172,289 173,544 176,454 Mortgage transactions (during period) 14 Purchases 37,202 75,905 92,037 8,780 8,979 12,123 7,919 5,427 5,820 6,677 Mortgage commitments (during period) 15 Issued 40,010 74,970 92,537 7,515 11,144 8,461 6,159 4,858 8,683 4,788 16 To sell8 7,608 10,493 5,097 0 0 209 664 525 136 90 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 17 Total 24,131 29,959 42,789 50,108 52,933 55,012 56,067 57,245 58,498 57,352 18 FHA/VA insured 484 408 327 321 324 321 319 318 315 n.a. 19 Conventional 23,283 29,552 42,462 49,787 52,610 54,691 55,747 56,928 59,184 n.a. Mortgage transactions (during period) 20 Purchases 99,965 191,125 229,242 18,658 27,062 29,396 22,611 17,840 15,970 14,589 21 Sales 92,478 179,208 208,723 15,985 24,028 26,607 21,253 16,719 14,486 14,175 Mortgage commitments (during period)9 22 Contracted 114,031 261,637 274,599 24,614 39,977 24,176 31,393 12,880 22,533 22,765 1. Weighted averages based on sample surveys of mortgages originated by 6. Average net yields to investors on fully modified pass-through securities major institutional lender groups for purchase of newly built homes; compiled by backed by mortgages and guaranteed by the Government National Mortgage the Federal Housing Finance Board in cooperation with the Federal Deposit Association (GNMA), assuming prepayment in twelve years on pools of thirty- Insurance Corporation. year mortgages insured by the Federal Housing Administration or guaranteed by 2. Includes all fees, commissions, discounts, and "points" paid (by the the Department of Veterans Affairs. borrower or the seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby com- 3. Average effective interest rate on loans closed for purchase of newly built mitments converted. homes, assuming prepayment at the end of ten years. 8. Includes participation loans as well as whole loans. 4. Average contract rate on new commitments for conventional first mort- 9. Includes conventional and government-underwritten loans. The Federal gages; from U.S. Department of Housing and Urban Development (HUD). Based Home Loan Mortgage Corporation's mortgage commitments and mortgage transon transactions on the first day of the subsequent month. actions include activity under mortgage securities swap programs, whereas the 5. Average gross yield on thirty-year, minimum-downpayment first mort- corresponding data for FNMA exclude swap activity. gages insured by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • July 1994 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1992 1993 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999900 11999911 11999922 Q4 Ql Q2 Q3 Q4P 1 All holders 3,761,525 3,923,371 4,042,645 4,042,645 4,059,199 4,099,591 4,155,690 4,218,693 By type of property 2 One- to four-family residences 2,615,435 2,778,803 2,953,527 2,953,527 2,975,134 3,024,789 3,085,698 3,146,381 3 Multifamily residences 309,369 306,410 294,976 294,976 294,042 291,178 290,679 292,052 4 Commercial 758,313 759,023 713,701 713,701 708,966 702,210 698,299 699,488 5 78,408 79,136 80,441 80,441 81,057 81,414 81,014 80,772 By type of holder 6 Major financial institutions 1,914,315 1,846,726 1,769,187 1,769,187 1,753,045 1,765,176 1,768,931 1,777,772 7 Commercial banks 844,826 876,100 894,513 894,513 891,755 910,989 922,492 940,547 8 One- to four-family 455,931 483,623 507,780 507,780 507,497 526,817 538,906 556,778 9 Multifamily 37,015 36,935 38,024 38,024 37,425 38,058 37,621 38,150 10 Commercial 334,648 337,095 328,826 328,826 326,853 325,519 325,124 324,749 11 Farm 17,231 18,447 19,882 19,882 19,980 20,595 20,841 20,870 12 Savings institutions3 801,628 705,367 627,972 627,972 617,163 612,458 609,584 603,559 13 One- to four-family 600,154 538,358 489,622 489,622 480,415 480,722 478,297 472,492 14 Multifamily 91,806 79,881 69,791 69,791 70,608 68,303 68,649 68,533 15 Commercial 109,168 86,741 68,235 68,235 65,808 63,111 62,318 62,214 16 Farm 500 388 324 324 332 322 320 319 17 Life insurance companies 267,861 265,258 246,702 246,702 244,128 241,729 236,855 233,667 18 One- to four-family 13,005 11,547 11,441 11,441 11,316 11,195 10,967 10,814 19 Multifamily 28,979 29,562 27,770 27,770 27,466 27,174 26,620 26,248 20 Commercial 215,121 214,105 198,269 198,269 196,100 194,012 190,061 187,403 21 Farm 10,756 10,044 9,222 9,222 9,246 9,348 9,206 9,201 22 Federal and related agencies 239,003 266,146 286,263 286,263 287,081 298,991 309,579 321,907 23 Government National Mortgage Association 20 19 30 30 45 45 43 43 24 One- to four-family 20 19 30 30 37 38 37 37 25 Multifamily 0 0 0 0 8 7 7 7 26 Farmers Home Administration4 41,439 41,713 41,695 41,695 41,529 41,446 41,424 41,386 27 One- to four-family 18,527 18,496 16,912 16,912 16,536 16,133 15,714 15,303 28 Multifamily 9,640 10,141 10,575 10,575 10,650 10,739 10,830 10,940 29 Commercial 4,690 4,905 5,158 5,158 5,187 5,250 5,347 5,406 30 Farm 8,582 8,171 9,050 9,050 9,156 9,324 9,533 9,739 31 Federal Housing and Veterans' Administrations 8,801 10,733 12,581 12,581 13,027 12,945 11,797 12,215 32 One- to four-family 3,593 4,036 5,153 5,153 5,631 5,635 4,850 5,364 33 Multifamily 5,208 6,697 7,428 7,428 7,396 7,311 6,947 6,851 34 Resolution Trust Corporation 32,600 45,822 32,045 32,045 27,331 21,973 19,925 17,284 35 One- to four-family 15,800 14,535 12,960 12,960 11,375 8,955 8,381 7,202 36 Multifamily 8,064 15,018 9,621 9,621 8,070 6,743 6,002 5,284 37 Commercial 8,736 16,269 9,464 9,464 7,886 6,275 5,543 4,797 38 Farm 0 0 0 0 0 0 0 0 39 Federal National Mortgage Association 104,870 112,283 137,584 137,584 141,192 151,513 160,721 166,642 40 One- to four-family 94,323 100,387 124,016 124,016 127,252 137,340 146,009 151,310 41 Multifamily 10,547 11,896 13,568 13,568 13,940 14,173 14,712 15,332 42 Federal Land Banks 29,416 28,767 28,664 28,664 28,536 28,592 28,810 28,860 43 One- to four-family 1,838 1,693 1,687 1,687 1,679 1,682 1,695 1,698 44 Farm 27,577 27,074 26,977 26,977 26,857 26,909 27,115 27,162 45 Federal Home Loan Mortgage Corporation 21,857 26,809 33,665 33,665 35,421 42,477 46,859 55,476 46 One- to four-family 19,185 24,125 31,032 31,032 32,831 39,905 44,315 52,929 47 Multifamily 2,672 2,684 2,633 2,633 2,589 2,572 2,544 2,547 48 Mortgage pools or trusts5 1,079,103 1,250,666 1,425,546 1,425,546 1,462,181 1,473,323 1,514,002 1,546,818 49 Government National Mortgage Association 403,613 425,295 419,516 419,516 421,514 413,166 415,076 414,066 50 One- to four-family 391,505 415,767 410,675 410,675 412,798 404,425 405,963 404,864 51 Multifamily 12,108 9,528 8,841 8,841 8,716 8,741 9,113 9,202 52 Federal Home Loan Mortgage Corporation 316,359 359,163 407,514 407,514 420,932 422,882 430,089 439,029 53 One- to four-family 308,369 351,906 401,525 401,525 415,279 417,646 425,154 434,494 54 Multifamily 7,990 7,257 5,989 5,989 5,654 5,236 4,935 4,535 55 Federal National Mortgage Association 299,833 371,984 444,979 444,979 457,316 465,220 481,880 495,525 56 One- to four-family 291,194 362,667 435,979 435,979 448,483 456,645 473,599 486,804 57 Multifamily 8,639 9,317 9,000 9,000 8,833 8,575 8,281 8,721 58 Farmers Home Administration 66 47 38 38 34 32 30 28 59 One- to four-family 17 11 8 8 7 6 6 5 60 Multifamily 0 0 0 0 0 0 0 0 61 Commercial 24 19 17 17 16 15 14 13 62 Farm 26 17 13 13 11 11 10 10 63 Private mortgage conduits 59,232 94,177 153,499 153,499 162,385 172,023 186,927 198,171 64 One- to four-family 53,335 84,000 132,000 132,000 137,000 145,000 158,000 164,000 65 Multifamily 731 3,698 6,305 6,305 6,665 7,407 7,991 8,701 66 Commercial 5,166 6,479 15,194 15,194 18,720 19,616 20,936 25,469 67 Farm 0 0 0 0 0 0 0 0 68 Individuals and others6 529,104 559,833 561,649 561,649 556,892 562,101 563,178 572,1% 69 One- to four-family 348,638 367,633 372,708 372,708 366,998 372,645 373,805 382,288 70 Multifamily 85,969 83,796 85,430 85,430 86,023 86,140 86,428 87,000 71 Commercial 80,761 93,410 88,538 88,538 88,396 88,412 88,956 89,438 72 Farm 13,737 14,994 14,973 14,973 15,474 14,904 13,990 13,471 1. Based on data from various institutional and governmental sources; figures 5. Outstanding principal balances of mortgage-backed securities insured or for some quarters estimated in part by the Federal Reserve. Multifamily debt guaranteed by the agency indicated. refers to loans on structures of five or more units. 6. Other holders include mortgage companies, real estate investment trusts, 2. Includes loans held by nondeposit trust companies but not loans held by state and local credit agencies, state and local retirement funds, noninsured bank trust departments. pension funds, credit unions, and finance companies. 3. Includes savings banks and savings and loan associations. SOURCES. Based on data from various institutional and government sources. 4. FmHA-guaranteed securities sold to the Federal Financing Bank were Separation of nonfarm mortgage debt by type of property, if not reported directly, reallocated from FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 and interpolations and extrapolations, when required, are estimated mainly by the because of accounting changes by the Farmers Home Administration. Federal Reserve. Line 64, from Inside Mortgage Securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Consumer Installment Credit A39 1.55 CONSUMER INSTALLMENT CREDIT1 Millions of dollars, amounts outstanding, end of period 1993 1994 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999911 11999922 11999933 Oct. Nov. Dec. Jan. Feb.r Mar. Seasonally adjusted 11 TToottaall 733,510 741,093 790,082 775,620 782,561 790,082 796,458 800,440 807,865 22 AAuuttoommoobbiillee 260,898 259,627 278,321 273,822 276,853 278,321 279,046 280,444 282,897 33 RReevvoollvviinngg 243,564 254,299 281,474 277,125 279,273 281,474 284,898 287,414 288,685 44 OOtthheerr 229,048 227,167 230,288 224,673 226,435 230,288 232,514 232,582 236,283 Not seasonally adjusted 5 Total 749,052 756,944 807,298 776,101 784,148 807,298 801,883 798,387 800,256 By major holder 6 Commercial banks 340,713 331,869 367,140 352,559 358,429 367,140 365,607 365,136 368,816 7 Finance companies 121,937 117,127 117,464 112,602 114,800 117,464 117,937 118,095 118,946 8 Credit unions 92,681 97,641 114,451 110,830 112,342 114,451 115,055 116,034 118,031 9 Retailers 39,832 42,079 47,382 40,310 42,047 47,382 44,986 43,164 43,088 10 Savings institutions 45,965 43,461 33,000 34,251 33,500 33,000 32,500 32,000 31,751 11 Gasoline companies 4,362 4,365 4,212 4,599 4,507 4,212 4,189 3,952 3,769 12 Pools of securitized assets 103,562 120,402 123,649 120,950 118,523 123,649 121,609 120,006 115,855 B\ major type of credit3 13 Automobile 261,219 259,964 278,690 275,882 277,060 278,690 278,265 278,733 280,351 14 Commercial banks 112,666 109,743 123,734 122,162 122,989 123,734 123,916 124,491 126,900 15 Finance companies 63,415 57,605 55,274 54,324 55,337 55,274 56,509 56,963 56,431 16 Pools of securitized assets" 28,915 33,878 36,781 37,630 36,569 36,781 34,947 34,217 33,275 17 Revolving 256,876 267,949 296,445 275,109 280,080 296,445 290,197 286,351 284,874 18 Commercial banks 138,005 132,582 148,698 137,844 142,382 148,698 144,874 143,633 145,114 19 Retailers 34,712 36,629 41,378 34,668 36,319 41,378 39,057 37,293 37,191 20 Gasoline companies 4,362 4,365 4,212 4,599 4,507 4,212 4,189 3,952 3,769 21 Pools of securitized assets" 63,595 74,243 77,416 73,556 72,357 77,416 77,280 76,581 73,612 22 Other 230,957 229,031 232,162 225,110 227,008 232,162 233,420 233,303 235,031 23 Commercial banks 90,042 89,544 94,708 92,553 93,058 94,708 96,817 97,012 96,802 24 Finance companies 58,522 59,522 62,189 58,278 59,463 62,189 61,427 61,132 62,515 25 Retailers 5,120 5,450 6,004 5,642 5,728 6,004 5,929 5,871 5,897 26 Pools of securitized assets" 11,052 12,281 9,452 9,764 9,597 9,452 9,382 9,208 8,968 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 1993 1994 IItteemm 11999911 11999922 11999933 Sept. Oct. Nov. Dec. Jan. Feb. Mar. INTEREST RATES Commercial banks' 1 48-month new car 11.14 9.29 8.09 n.a. n.a. 7.63 n.a. n.a. 7.54 n.a. 2 24-month personal 15.18 14.04 13.47 n.a. n.a. 13.22 n.a. n.a. 12.89 n.a. 3 120-month mobile home 13.70 12.67 11.87 n.a. n.a. 11.55 n.a. n.a. 11.56 n.a. 4 Credit card 18.23 17.78 16.83 n.a. n.a. 16.30 n.a. n.a. 16.06 n.a. Auto finance companies 5 New car 12.41 9.93 9.48 9.21 9.25 8.96 8.80 7.55 8.93 9.13 6 Used car 15.60 13.80 12.79 12.52 12.58 12.41 12.33 12.02 12.23 12.68 OTHER TERMS3 Maturity (months) 7 New car 55.1 54.0 54.5 54.7 55.0 54.5 54.0 52.9 54.4 54.0 8 Used car 47.2 47.9 48.8 48.8 48.2 48.4 48.3 50.0 50.3 50.1 Loan-to-value ratio 9 New car 88 89 91 91 90 91 90 91 91 92 10 Used car 96 97 98 98 98 98 98 98 99 99 Amount financed (dollars) II New car 12,494 13,584 14,332 14,348 14,650 14,839 15,097 15,330 14,904 14,821 12 Used car 8,884 9,119 9,875 9,808 9,969 10,230 10,349 10,434 10,449 10,427 1. The Board's series on amounts of credit covers most short- and intermedi- 2. Data are available for only the second month of each quarter, ate-term credit extended to individuals that is scheduled to be repaid (or has the 3. At auto finance companies, option of repayment) in two or more installments. Data in this table also appear in the Board's G.19 (421) monthly statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic NonfinancialS tatistics • July 1994 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1992 1993 11998899 11999900 Q2 Q3 Q4 Ql Q2 Q3 Q4 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .. 723.0 631.0 475.5 582.4 606.5 586.2 611.1 529.5 404.5 677.6 577.0 767.0 By sector and instrument 2 U.S. government 146.4 246.9 278.2 304.0 256.1 352.9 299.1 240.1 229.6 348.2 177.2 269.6 3 Treasury securities 144.7 238.7 292.0 303.8 248.3 352.5 290.) 237.4 226.4 344.1 160.9 261.9 4 Budget agency issues and mortgages 1.6 8.2 -13.8 .2 7.8 .4 9.0 2.7 3.2 4.1 16.2 7.7 5 Private 576.6 384.1 197.3 278.4 350.4 233.3 312.0 289.4 175.0 329.3 399.8 497.4 By instrument 6 Tax-exempt obligations 65.3 57.3 69.6 65.7 59.4 76.6 75.8 42.4 62.4 67.2 48.3 59.9 7 Corporate bonds 73.8 47.1 78.8 67.5 71.3 77.8 61.7 54.0 82.0 72.0 68.0 63.0 8 Mortgages 269.1 188.7 165.1 120.8 172.2 69.6 134.8 94.0 101.3 134.4 201.5 251.5 9 Home mortgages 212.5 177.2 166.0 176.0 192.7 111.6 203.3 172.8 121.8 174.2 226.9 247.9 10 Multifamily residential 12.0 3.4 -2.5 -11.1 -4.4 -16.9 -11.2 -27.8 -4.7 -12.4 -4.0 3.6 11 Commercial 47.3 8.9 .9 -45.5 -16.5 -25.7 -57.8 -51.5 -18.2 -28.9 -19.8 1.0 12 Farm -2.7 -.8 .7 1.3 .3 .6 .6 .5 2.5 1.4 -1.6 -1.0 13 Consumer credit 49.5 13.4 -13.1 9.3 49.0 -14.7 13.5 48.3 19.2 22.9 60.7 93.3 14 Bank loans n.e.c 36.4 4.2 -46.8 -5.6 4.7 27.7 -24.0 21.3 -39.7 31.7 7.3 19.7 15 Commercial paper 21.4 9.7 -18.4 8.6 10.0 -2.6 9.3 25.4 -27.1 33.7 23.8 9.7 16 Other loans 61.0 63.6 -37.8 12.1 -16.3 -1.0 40.8 4.1 -23.1 -32.5 -9.8 .4 By borrowing sector 17 Household 276.7 207.7 168.4 215.0 251.2 176.5 217.9 266.5 130.8 213.7 321.7 338.5 18 Nonfinancial business 236.3 121.9 -33.4 4.0 34.5 -10.1 20.6 -12.2 -27.6 46.6 26.0 93.2 19 Farm .5 1.8 2.4 1.2 2.0 3.5 -.2 -1.9 -.3 3.8 2.0 2.6 20 Nonfarm noncorporate 49.4 19.4 -24.5 -39.4 -19.3 -47.4 -37.3 -51.0 -32.7 -31.4 -23.1 9.9 21 Corporate 186.5 100.7 -11.3 42.1 51.9 33.8 58.2 40.7 5.4 74.3 47.1 80.6 22 State and local government 63.5 54.5 62.3 59.4 64.7 66.9 73.5 35.1 71.7 69.1 52.1 65.7 23 Foreign net borrowing in United States 10.2 23.9 13.9 24.2 46.5 57.7 37.8 -.6 50.3 40.1 81.8 13.8 24 Bonds 4.9 21.4 14.1 17.3 60.5 21.9 20.3 22.2 75.6 42.4 83.7 40.3 25 Bank loans n.e.c -.1 -2.9 3.1 2.3 .5 14.1 3.9 -10.3 1.6 6.5 1.0 -7.0 26 Commercial paper 13.1 12.3 6.4 5.2 -9.0 27.8 13.1 -12.1 -21.7 -.6 -1.6 -12.0 27 U.S. government and other loans -7.6 -7.0 -9.8 -.6 -5.6 -6.1 .5 -.4 -5.3 -8.2 -1.3 -7.5 28 Total domestic plus foreign 733.1 654.9 489.4 606.6 653.0 643.9 649.0 528.8 454.8 717.6 658.8 780.8 Financial sectors 29 Total net borrowing by financial sectors 213.7 193.5 150.4 216.4 239.1 211.6 304.1 174.8 146.1 131.6 386.1 292.8 By instrument 30 U.S. government-related 149.5 167.4 145.7 155.8 157.2 195.2 169.3 131.8 165.8 62.7 273.7 126.4 31 Government-sponsored enterprises securities 25.2 ' 17.1 9.2 40.3 80.6 48.3 67.7 33.6 32.2 68.8 167.8 53.4 32 Mortgage pool securities 124.3 150.3 136.6 115.6 76.6 146.9 101.6 98.4 133.5 -6.1 105.9 73.0 33 Loans from U.S. government .0 -.1 .0 .0 .0 .0 .0 -.1 .0 .0 .0 .0 34 Private 64.2 26.1 4.6 60.6 82.0 16.3 134.8 42.9 -19.6 68.9 112.4 166.3 35 Corporate bonds 37.3 40.8 56.8 65.3 69.0 64.4 81.2 79.4 55.3 55.8 97.7 67.1 36 Mortgages .5 .4 .8 .0 3.9 .1 .4 .0 .9 2.7 6.2 5.7 37 Bank loans n.e.c 6.0 1.1 17.1 -4.8 -7.9 -39.1 17.5 -19.8 -21.2 -5.9 -14.0 9.4 38 Open market paper 31.3 8.6 -32.0 -.7 -6.2 -14.8 17.5 -6.5 -73.1 -17.3 -9.7 75.5 39 Loans from Federal Home Loan Banks -11.0 -24.7 -38.0 .8 23.3 5.8 18.1 -10.1 18.6 33.5 32.3 8.6 By borrowing sector 40 Government sponsored enterprises 25.2 17.0 9.1 40.2 80.6 48.3 67.7 33.5 32.2 68.8 167.8 53.4 41 Federally related mortgage pools 124.3 150.3 136.6 115.6 76.6 146.9 101.6 98.4 133.5 -6.1 105.9 73.0 42 Private 64.2 26.1 4.6 60.6 82.0 16.3 134.8 42.9 -19.6 68.9 112.4 166.3 43 Commercial banks -1.4 -.7 -11.7 8.8 5.7 5.5 12.1 14.5 5.4 10.1 6.2 .9 44 Bank holding companies 6.2 -27.7 -2.5 2.3 7.1 -9.2 6.6 .8 21.1 1.3 -2.1 7.9 45 Funding corporations 13.8 12.5 -13.6 1.6 -10.6 29.2 -7.7 -31.1 -51.9 8.2 -13.2 14.3 46 Savings institutions -15.1 -30.2 -44.5 -6.7 11.2 -5.4 11.2 -14.4 7.9 17.7 18.4 .7 47 Credit unions .0 .0 .0 .0 .2 .0 .0 .1 .0 .3 .3 .1 48 Life insurance companies .0 .0 .0 .0 .2 .0 .2 -.2 .1 .6 -.1 .4 49 Finance companies 27.4 24.0 18.6 -3.6 -5.0 -20.1 21.2 19.9 -33.1 -38.6 16.0 35.8 50 Mortgage companies 3.0 -4.0 5.7 .1 6.0 -35.3 14.4 -6.4 -10.4 15.9 2.4 16.0 51 Real estate investment trusts (REITs) 1.3 1.0 1.6 .1 3.3 1.3 2.3 -5.1 -1.4 2.5 6.1 6.1 52 Issuers of asset-backed securities (ABSs) 28.9 51.1 51.0 58.0 64.0 50.3 74.3 64.8 42.6 50.8 78.4 84.2 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1—Continued 1992 1993 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998899 11999900 11999911 11999922 11999933 Q2 Q3 Q4 Q1 Q2 Q3 Q4 All sectors 53 Total net borrowing, all sectors 946.8 848.4 639.8 822.9 892.1 855.5 953.1 703.6 600.9 849.2 1,044.9 1,073.5 54 U.S. government securities 295.8 414.4 424.0 459.8 413.3 548.1 468.5 372.0 395.3 410.9 450.9 396.0 55 Tax-exempt securities 65.3 57.3 69.6 65.7 59.4 76.6 75.8 42.4 62.4 67.2 48.3 59.9 56 Corporate and foreign bonds 116.0 109.2 149.6 150.1 200.7 164.1 163.3 155.6 212.9 170.2 249.4 170.5 57 Mortgages 269.6 189.1 165.8 120.8 176.0 69.7 135.3 93.9 102.2 137.1 207.7 257.1 58 Consumer credit 49.5 13.4 -13.1 9.3 49.0 -14.7 13.5 48.3 19.2 22.9 60.7 93.3 59 Bank loans n.e.c 42.3 2.4 -26.6 -8.1 -2.7 2.8 -2.5 -8.8 -59.3 32.3 -5.8 22.1 60 Open market paper 65.9 30.7 -44.0 13.1 -5.1 10.3 39.9 6.8 -121.9 15.7 12.5 73.2 61 Other loans 42.4 31.8 -85.6 12.2 1.4 -1.3 59.3 -6.6 -9.9 -7.2 21.2 1.5 Funds raised through mutual funds and corporate equities 62 Total net share issues -59.6 22.2 210.6 284.0 432.4 264.1 297.7 300.3 300.7 470.7 502.1 456.0 63 Mutual funds 38.5 67.9 150.5 206.7 310.7 199.5 235.2 217.7 240.9 357.5 337.6 306.9 64 Corporate equities -98.1 -45.7 60.1 77.3 121.6 64.5 62.5 82.6 59.7 113.2 164.5 149.1 65 Nonfinancial corporations -124.2 -63.0 18.3 27.0 23.0 36.0 12.0 14.0 9.0 25.0 30.0 28.0 66 Financial corporations 8.8 9.9 11.2 19.6 33.1 17.4 15.7 21.1 18.8 34.2 37.1 42.5 67 Foreign shares purchased in United States 17.2 7.4 30.7 30.6 65.5 11.2 34.8 47.5 31.9 54.0 97.5 78.7 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

A42 Domestic Financial Statistics • July 1994 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1992 1993 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998888 11998899 11999900 11999911 11999922 Q2 Q3 Q4 Ql Q2 Q3 Q4 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 998.8 946.8 848.4 639.8 822.9 855.5 953.1 703.6 600.9 849.2 1,044.9 1,073.5 2 Private domestic nonfinancial sectors 196.1 122.6 162.8 -16.1 65.3 145.6 -105.4 87.0 -93.1 -95.8 -126.2 -14.2 3 Households 170.3 78.6 140.1 -49.7 37.0 99.8 -135.7 66.6 -88.6 -91.9 -139.6 -18.5 4 Nonfarm noncorporate business 3.1 -.7 -1.7 -4.2 -2.4 -2.7 -2.0 -1.0 -3.7 -3.0 -2.2 -1.0 5 Nonfinancial corporate business 5.7 13.6 -5.3 4.3 36.3 36.8 46.5 36.9 -12.6 6.7 40.1 10.0 6 State and local governments 17.1 31.1 29.6 33.5 -5.7 11.7 -14.1 -15.5 11.8 -7.5 -24.6 -4.7 7 U.S. government -10.6 -3.1 33.7 10.5 -12.0 -23.0 -26.7 -13.3 -24.7 -27.8 -15.2 -11.3 8 Foreign 108.6 84.4 82.1 25.6 100.8 140.8 78.1 87.8 73.2 92.6 140.8 220.8 y Financial sectors 704.8 742.9 569.9 619.8 668.8 592.1 1,006.9 542.1 645.6 880.1 1,045.5 878.2 10 Government sponsored enterprises 33.2 -4.1 16.4 14.2 69.0 38.6 73.0 71.7 14.6 134.1 157.7 59.7 II Federally related mortgage pools 74.9 124.3 150.3 136.6 115.6 146.9 101.6 98.4 133.5 -6.1 105.9 73.0 12 Monetary authority 10.5 -7.3 8.1 31.1 27.9 19.0 15.7 48.3 44.5 32.6 28.2 39.5 13 Commercial banking 156.5 177.2 125.1 84.3 94.8 72.7 148.0 73.3 86.4 153.4 131.9 201.1 14 U.S. commercial banks 126.4 146.1 94.9 39.2 69.8 13.3 123.5 66.0 100.4 142.0 147.0 219.2 15 Foreign banking offices 29.4 26.7 28.4 48.5 16.5 56.7 5.2 4.8 -12.5 -.7 -17.2 -14.5 16 Bank holding companies -.1 2.8 -2.8 -1.5 5.6 -.4 16.4 -.6 -4.3 9.5 -.4 -5.8 1/ Banks in U.S. affiliated areas .8 1.6 4.5 -1.9 2.9 3.2 3.0 3.0 2.9 2.6 2.5 2.3 18 Private nonbank finance 429.7 452.9 270.0 353.7 361.6 314.9 668.6 250.4 366.5 566.0 621.8 504.9 19 Thrift institutions 114.8 -86.6 -153.3 -123.0 -59.5 -75.7 -42.6 -15.0 -33.3 -5.2 12.2 -.1 20 Insurance 199.0 257.4 181.6 234.3 177.9 190.4 261.4 161.6 257.0 172.9 261.6 115.9 21 Life insurance companies 104.0 101.8 94.4 83.2 82.4 66.9 85.1 103.7 122.1 108.0 117.1 125.3 22 Other insurance companies 29.2 29.7 26.5 32.3 12.7 16.4 -2.8 8.3 8.9 10.6 8.6 9.7 23 Private pension funds 29.2 81.1 17.2 85.3 37.3 74.1 99.9 8.4 118.0 11.1 91.9 -62.1 24 State and local government retirement funds .... 36.6 44.7 43.5 33.5 45.5 33.0 79.2 41.2 8.0 43.2 44.0 42.9 25 Finance n.e.c 115.9 282.2 241.7 242.3 243.2 200.2 449.7 103.8 142.8 398.3 347.9 389.0 26 Finance companies 38.1 32.0 28.4 -12.1 1.7 -16.0 4.0 24.0 -34.0 -22.8 8.1 27.2 27 Mortgage companies -7.4 6.1 -8.0 11.4 .1 -38.5 28.9 -12.8 -20.8 31.7 -1.9 23.0 28 Mutual funds 11.9 23.8 41.4 90.3 123.7 123.7 156.9 119.2 130.2 193.4 168.4 160.7 29 Closed-end funds 19.8 6.3 .0 15.2 12.3 9.4 8.7 13.1 8.9 13.0 11.0 12.7 30 Money market funds 10.7 67.1 80.9 30.1 1.3 3.8 8.5 -26.1 -65.0 51.5 11.5 48.8 31 Real estate investment trusts (REITs) .9 .5 -.7 -1.0 .4 2.6 -.3 -.1 2.9 .8 1.0 1.7 32 Brokers and dealers -8.2 96.3 34.9 49.0 40.2 73.0 180.3 -90.2 79.5 66.7 69.0 4.9 33 Asset-backed securities issuers (ABSs) 35.9 27.7 49.9 49.0 55.5 50.5 72.0 59.2 42.1 49.7 81.3 87.9 34 Bank personal trusts 14.3 22.4 14.8 10.4 8.0 -8.4 -9.3 17.3 -.9 14.4 -.5 22.2 RELATION OF LIABILITIES TO FINANCIAL ASSETS 35 Net flows through credit markets 998.8 946.8 848.4 639.8 822.9 855.5 953.1 703.6 600.9 849.2 1,044.9 1,073.5 Other financial sources 36 Official foreign exchange 4.0 24.8 2.0 -5.9 -1.6 -6.5 -8.5 5.1 3.4 -4.0 1.7 -3.4 3/ Treasury currency and special drawing rights certificates .5 4.1 2.5 .0 -1.8 .3 .2 -7.7 .3 .4 .4 .7 38 Life insurance reserves 25.3 28.8 25.7 25.7 27.3 15.6 41.5 26.3 53.6 39.5 59.5 69.6 39 Pension fund reserves 140.1 309.7 158.1 358.8 227.8 208.0 291.7 267.0 325.2 223.0 296.1 123.3 40 Interbank claims 2.9 -16.5 34.2 -3.7 48.1 36.9 79.8 50.0 19.8 49.5 -19.8 46.2 41 Deposits at financial institutions 278.6 284.8 98.1 48.2 9.3 6.3 174.1 -142.7 -.4 219.6 -5.3 134.0 42 Checkable deposits and currency 43.2 6.1 44.2 75.8 122.8 110.8 200.4 93.5 25.0 232.2 96.3 126.1 43 Small time and savings deposits 121.6 100.4 59.0 16.7 -60.8 -81.8 -83.6 -37.8 -155.9 -57.3 -72.6 -36.2 44 Large time deposits 53.1 13.9 -65.7 -60.8 -80.0 -109.9 -52.9 -84.2 1.9 -17.5 -57.3 9.6 45 Money market fund shares 21.9 90.1 70.3 41.2 3.9 26.7 -22.4 -32.9 -37.7 66.5 -15.8 49.3 46 Security repurchase agreements 23.7 77.8 -24.2 -16.5 33.6 103.7 89.6 -67.1 180.3 17.6 78.7 -2.9 47 Foreign deposits 15.2 -3.6 14.6 -8.2 -10.2 -43.2 43.0 -14.2 -13.9 -21.9 -34.6 -12.0 48 Mutual fund shares 6.1 38.5 67.9 150.5 206.7 199.5 235.2 217.7 240.9 357.5 337.6 306.9 49 Corporate equities -104.7 -98.1 -45.7 60.1 77.3 64.5 62.5 82.6 59.7 113.2 164.5 149.1 50 Security credit 3.0 15.6 3.5 51.4 4.2 -4.9 82.8 5.5 39.7 38.3 77.2 80.7 51 Trade debt 89.6 59.4 32.1 -2.2 54.9 54.7 54.0 33.0 26.9 37.4 47.8 54.6 52 Taxes payable 5.3 2.0 -4.5 -8.5 7.9 6.2 6.7 10.3 7.6 2.2 4.2 5.2 53 Noncorporate proprietors' equity -24.0 -31.1 -35.5 -12.5 -5.7 15.9 -27.5 10.5 -12.5 -21.0 -6.7 -59.4 54 Investment in bank personal trusts 7.2 23.1 21.5 29.8 -7.5 20.2 -55.4 -35.2 -10.1 35.8 -23.0 40.8 55 Miscellaneous 199.2 292.1 98.2 169.9 195.7 273.5 202.6 211.8 213.4 385.1 93.5 341.9 56 Total financial sources 1,632.0 1,883.8 1,306.5 1,501.3 1,665.5 1,745.8 2,092.8 1,437.9 1,568.5 2,325.7 2,072.7 2,363.5 Floats not included in assets ( — ) 57 U.S. government checkable deposits 1.6 8.4 3.3 -13.1 .7 -9.5 4.4 -3.6 .1 6.2 -6.4 -7.7 58 Other checkable deposits .8 -3.2 2.5 2.0 1.6 2.0 -11.7 2.3 -1.8 -1.4 -5.6 -6.3 59 Trade credit -6.2 -1.9 2.5 8.1 18.5 9.5 40.2 1.2 -20.1 5.1 10.4 -.1 Liabilities not identified as assets (-) 60 Treasury currency -.1 -.2 .2 -.6 -.2 -.2 -.2 -.1 -.2 -.2 -.2 -.2 61 Interbank claims -3.0 -4.4 1.6 26.2 -4.9 -18.2 -7.8 -1.7 11.4 -5.7 -16.5 27.6 62 Security repurchase agreements -29.6 32.4 -31.5 5.2 31.1 84.1 43.5 23.4 155.2 16.5 67.7 46.8 63 Taxes payable 6.3 2.3 .5 .4 6.9 7.1 24.1 4.0 -13.2 14.1 8.3 -6.0 64 Miscellaneous 47.3 -77.8 -23.6 -32.1 -21.1 -65.9 1.2 49.3 -7.8 -36.1 -34.9 9.0 65 Total identified to sectors as assets 1,614.8 1,928.2 1,351.0 1,505.2 1,632.8 1,736.9 1,999.2 1,363.1 1,444.9 2,327.3 2,049.9 2,300.4 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

Flow of Funds A43 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1992 1993 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998899 11999900 11999911 11999922 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 10,054.3 10,692.0 11,160.6 11,747.2 11,427.2 11,580.6 11,747.2 11,824.7 11,983.4 12,128.9 12,354.4 By lending sector and instrument 7. U.S. government 2,251.2 2,498.1 2,776.4 3,080.3 2,923.3 2,998.9 3,080.3 3,140.2 3,201.2 3,247.3 33,,333366..55 Treasury securities 2,227.0 2,465.8 2,757.8 3,061.6 2,907.4 2,980.7 3,061.6 3,120.6 3,180.6 3,222.6 3,309.9 4 Budget agency issues and mortgages 24.2 32.4 18.6 18.8 15.9 18.1 18.8 19.6 20.6 24.7 26.6 5 Private 7,803.1 8,193.9 8,384.3 8,666.9 8,503.9 8,581.7 8,666.9 8,684.5 8,782.1 8,881.7 9,018.0 By instrument 6 Tax-exempt obligations 1,004.7 1,062.1 1,131.6 1,197.3 1,163.7 1,186.4 1,197.3 1,210.0 1,225.7 1,241.8 1,256.8 7 Corporate bonds 961.1 1,008.2 1,086.9 1,154.4 1,125.5 1,140.9 1,154.4 1,174.9 1,192.9 1,209.9 1,225.7 8 Mortgages 3,512.8 3,715.4 3,880.4 4,001.6 3,941.3 3,979.4 4,001.6 4,017.9 4,057.6 4,112.2 4,173.7 9 Home mortgages 2,380.5 2,580.6 2,746.6 2,922.7 2,825.6 2,880.8 2,922.7 2,944.1 2,993.8 3,054.7 3,115.4 10 Multifamily residential 304.3 305.5 303.0 291.9 301.7 298.9 291.9 290.7 287.6 286.6 287.5 11 Commercial 747.6 750.8 751.7 706.5 733.8 719.4 706.5 702.0 694.8 689.8 690.0 1? Farm 80.5 78.4 79.1 80.4 80.2 80.3 80.4 81.1 81.4 81.0 80.8 n Consumer credit 799.5 813.0 799.9 809.2 776.9 784.5 809.2 793.7 802.3 821.7 858.3 14 Bank loans n.e.c 750.8 747.8 701.0 695.6 694.0 686.2 695.6 683.0 691.8 691.6 700.3 is Commercial paper 107.1 116.9 98.5 107.1 112.0 108.2 107.1 113.9 124.0 123.2 117.8 16 Other loans 667.0 730.6 685.9 701.6 690.5 696.1 701.6 691.1 687.7 681.2 685.4 By borrowing sector 17 Household 3,371.4 3,594.8 3,762.7 3,978.0 3,837.3 3,900.1 3,978.0 3,980.6 4,044.6 44,,113322..77 44,,222299..22 18 Nonfinancial business 3,615.7 3,728.5 3,688.7 3,696.7 3,705.6 3,698.6 3,696.7 3,696.7 3,714.2 3,708.5 3,731.9 19 Farm 134.4 134.9 134.8 136.0 136.8 137.6 136.0 133.7 137.1 138.5 138.0 70 Nonfarm noncorporate 1,199.6 1,219.0 1,192.3 1,154.5 1,177.3 1,165.1 1,154.5 1,145.3 1,139.3 1,130.8 1,135.2 71 Corporate 2,281.7 2,374.6 2,361.6 2,406.1 2,391.5 2,395.8 2,406.1 2,417.8 2,437.8 2,439.2 2,458.7 22 State and local government 816.1 870.5 932.8 992.2 961.0 983.1 992.2 1,007.2 1,023.4 1,040.5 1,056.9 73 Foreign credit market debt held in United States 261.2 285.1 298.9 313.8 304.7 312.9 313.8 324.8 336.5 355.6 360.3 74 Bonds 94.1 115.4 129.5 146.9 136.2 141.3 146.9 165.8 176.4 197.3 207.4 7") Bank loans n.e.c 21.4 18.5 21.6 23.9 25.5 26.5 23.9 24.3 25.9 26.2 24.4 76 Commercial paper 63.0 75.3 81.8 77.7 77.4 80.7 77.7 72.3 72.1 71.7 68.7 27 U.S. government and other loans 82.7 75.8 66.0 65.4 65.6 64.4 65.4 62.5 62.0 60.4 59.8 78 Total credit market debt owed by nonfinancial sectors, domestic and foreign 10,315.5 10,977.1 11,459.5 12,061.0 11,732.0 11,893.5 12,061.0 12,149.5 12,319.8 12,484.5 12,714.8 Financial sectors 79 Total credit market debt owed by financial sectors 2,362.7 2,559.4 2,709.7 2,941.7 2,815.2 2,889.3 2,941.7 2,974.3 3,010.3 3,104.7 3,186.2 By instrument 30 U.S. government-related 1,247.8 1,418.4 1,564.2 1,720.0 1,641.6 1,683.5 1.720.0 1,755.8 1,774.5 1,842.2 1,877.1 31 Government-sponsored enterprises securities 373.3 393.7 402.9 443.1 417.8 434.7 443.1 451.2 468.4 510.3 523.7 32 Mortgage pool securities 869.5 1,019.9 1,156.5 1,272.0 1,219.0 1,244.0 1,272.0 1,299.8 1,301.3 1,327.1 1,348.6 33 Loans from U.S. government 5.0 4.9 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 4.8 34 Private 1,114.8 1,140.9 1,145.6 1,221.7 1,173.6 1,205.8 1,221.7 1,218.5 1,235.8 1,262.5 1,309.1 35 Corporate bonds 509.1 549.9 606.6 678.2 638.0 658.3 678.2 692.0 706.0 730.4 747.2 36 Mortgages 4.0 4.3 5.1 5.1 5.0 5.1 5.1 5.4 6.0 7.6 9.0 37 Bank loans n.e.c 50.9 52.0 69.1 64.2 63.1 67.5 64.2 56.9 55.8 52.4 56.3 38 Open market paper 409.1 417.7 385.7 394.3 390.5 394.6 394.3 379.2 375.9 373.2 393.5 39 Loans from Federal Home Loan Banks 141.8 117.1 79.1 79.9 76.9 80.2 79.9 85.0 92.1 98.9 103.1 By borrowing sector 40 Government-sponsored enterprises 378.3 398.5 407.7 447.9 422.6 439.5 447.9 456.0 473.2 515.1 552288..55 41 Federally related mortgage pools 869.5 1,019.9 1,156.5 1,272.0 1,219.0 1,244.0 1,272.0 1,299.8 1,301.3 1,327.1 1,348.6 47 Private financial'sectors 1,114.8 1,140.9 1.145.6 1,221.7 1,173.6 1,205.8 1,221.7 1,218.5 1,235.8 1,262.5 1,309.1 43 Commercial banks 77.4 76.7 65.0 73.8 66.2 69.0 73.8 73.1 76.6 77.9 79.5 44 Bank holding companies 142.5 114.8 112.3 114.6 112.7 114.4 114.6 119.9 120.2 119.7 121.6 45 Funding corporations 125.4 137.9 124.3 135.2 144.9 143.0 135.2 127.6 129.7 126.4 130.0 46 Savings institutions 169.2 139.1 94.6 87.8 87.6 89.2 87.8 90.3 93.4 96.8 99.0 47 Credit unions .0 .0 .0 .0 .0 .0 .0 .0 .1 .2 .2 48 Life insurance companies .0 .0 .0 .0 .0 .0 .0 .0 .2 .1 .2 49 Finance companies 350.4 374.4 393.0 389.4 377.4 382.7 389.4 379.1 369.8 373.9 384.4 50 Mortgage companies 11.3 7.3 13.0 13.0 11.0 14.6 13.0 10.4 14.4 15.0 19.0 51 Real estate investment trusts (REITs) 11.4 12.4 14.0 14.1 14.8 15.3 14.1 13.7 14.4 15.9 17.4 52 Issuers of asset-backed securities (ABSs).... 227.3 278.3 329.4 393.7 358.9 377.5 393.7 404.3 417.1 436.7 457.7 All sectors 53 Total credit market debt, domestic and foreign.. 12,678.2 13,536.5 14,169.3 15,002.7 14,547.1 14,782.8 15,002.7 15,123.8 15,330.1 15,589.3 15,900.9 54 U.S. government securities 3,494.1 3,911.7 4,335.7 4,795.5 4,560.1 4,677.6 4,795.5 4,891.2 4,970.9 5,084.7 5,208.8 55 Tax-exempt securities 1,004.7 1,062.1 1,131.6 1,197.3 1,163.7 1,186.4 1,197.3 1,210.0 1,225.7 1,241.8 1,256.8 56 Corporate and foreign bonds 1,564.3 1,673.5 1,823.1 1,979.5 1,899.8 1,940.6 1,979.5 2,032.7 2,075.3 2,137.6 2,180.2 57 Mortgages 3,516.8 3,719.7 3,885.5 4,006.7 3,946.3 3,984.5 4,006.7 4,023.3 4,063.7 4,119.7 4,182.7 58 Consumer credit 799.5 813.0 799.9 809.2 776.9 784.5 809.2 793.7 802.3 821.7 858.3 59 Bank loans n.e.c 823.0 818.3 791.7 783.7 782.7 780.2 783.7 764.3 773.5 770.2 781.1 60 Open market paper 579.2 609.9 565.9 579.0 579.9 583.6 579.0 565.4 572.0 568.2 580.0 61 Other loans 896.5 928.4 835.8 851.7 837.7 845.5 851.7 843.4 846.7 845.3 853.1 Digitized for FR1A. DSaEtaR in this table also appear in the Board's Z.l (780) quarterly statistical http://fraser.srteloleuasies, fetadbl.eos rLg./2 through L.4. For ordering address, see inside front cover. Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • July 1994 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1992 1993 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998899 11999900 11999911 11999922 Q2 Q3 Q4 Ql Q2 Q3 Q4 CREDIT MARKET DEBT OUTSTANDING- 1 Total credit market assets 12,678.2 13,536.5 14,169.3 15,002.7 14,547.1 14,782.8 15,002.7 15,123.8 15,330.1 15,589.3 15,900.9 2 Private domestic nonfinancial sectors 2,096.4 2,246.8 2,205.8 2,288.3 2,231.4 2,209.1 2,288.3 2,257.0 2,215.3 2,187.7 2,226.4 3 Households 1,326.8 1,454.6 1,380.0 1,434.2 1,392.5 1,369.4 1,434.2 1,412.7 1,365.9 1,341.7 1,370.0 4 Nonfarm noncorporate business 56.5 54.9 50.7 48.3 48.7 48.1 48.3 47.0 46.3 45.6 45.8 5 Nonfinancial corporate business 181.2 175.8 180.1 216.4 192.6 199.5 216.4 205.9 211.7 217.1 227.5 6 State and local governments 531.9 561.5 595.1 589.4 597.5 592.1 589.4 591.5 591.4 583.4 583.1 7 U.S. government 205.4 239.1 247.0 235.0 246.3 239.2 235.0 229.2 223.2 218.9 215.3 8 Foreign 778.7 897.5 936.2 1,031.6 995.9 1,015.5 1,031.6 1,041.3 1,064.5 1,099.7 1,154.9 9 Financial sectors 9,597.7 10,153.1 10,780.3 11,447.8 11,073.5 11,319.0 11,447.8 11,596.2 11,827.1 12,083.0 12,304.3 10 Government-sponsored enterprises 355.4 371.8 397.7 466.7 429.0 446.3 466.7 464.1 496.7 535.1 552.4 II Federally related mortgage pools 869.5 1,019.9 1,156.5 1,272.0 1,219.0 1,244.0 1,272.0 1,299.8 1,301.3 1,327.1 1,348.6 12 Monetary authority 233.3 241.4 272.5 300.4 282.6 285.2 300.4 303.6 318.2 324.2 336.7 13 Commercial banking 2,647.4 2,772.5 2,856.8 2,951.6 2,887.6 2,928.2 2,951.6 2,960.9 3,003.2 3,040.2 3,094.8 14 U.S. commercial banks 2,371.9 2,466.7 2,506.0 2,575.7 2,525.2 2,560.0 2,575.7 2,594.6 2,633.8 2,674.7 2,727.9 15 Foreign banking offices 242.3 270.8 319.2 335.8 328.2 328.9 335.8 326.7 327.1 322.3 324.5 16 Bank holding companies 16.2 13.4 11.9 17.5 13.1 17.5 17.5 16.4 18.4 18.6 17.3 17 Banks in U.S. affiliated areas 17.1 21.6 19.7 22.5 21.0 21.8 22.5 23.3 23.9 24.5 25.1 18 Private nonbank finance 5,491.9 5,747.4 6,0%.7 6,457.1 6,255.4 6,415.3 6,457.1 6,567.7 6,707.8 6,856.4 6,971.9 19 Thrift institutions 1,475.4 1,324.6 1,197.3 1,140.9 1,153.8 1,144.9 1,140.9 1,130.0 1,129.8 1,134.4 1,134.4 20 Insurance 2,320.7 2,473.7 2,708.0 2,874.9 2,789.3 2,854.5 2,874.9 2,943.9 2,992.3 3,057.5 3,076.7 21 Life insurance companies 1,022.0 1,116.5 1,199.6 1,282.0 1,243.6 1,264.7 1,282.0 1,317.3 1,349.5 1,378.6 1,400.1 22 Other insurance companies 3)7.5 344.0 376.3 389.0 387.6 386.9 389.0 391.2 393.8 396.0 398.4 23 Private pension funds 590.2 607.4 692.7 719.0 703.3 728.2 719.0 748.5 751.3 774.3 758.7 24 State and local government retirement funds... 390.9 405.9 439.4 484.9 454.8 474.6 484.9 486.9 497.7 508.7 519.5 25 Finance n.e.c 1,695.9 1,949.1 2,191.5 2,441.2 2,312.3 2,415.9 2,441.2 2,493.8 2,585.7 2,664.4 2,760.8 26 Finance companies 468.6 497.0 484.9 486.6 480.5 477.8 486.6 473.7 473.5 472.0 481.3 27 Mortgage companies 22.6 14.6 25.9 26.1 22.1 29.3 26.1 20.9 28.8 28.3 34.1 28 Mutual funds 307.2 360.2 450.5 574.2 510.2 550.2 574.2 611.4 659.9 703.6 737.4 29 Closed-end funds 37.1 37.1 52.4 64.6 59.2 61.3 64.6 66.9 70.1 72.8 76.0 30 Money market funds 291.8 372.7 402.7 404.1 412.0 408.2 404.1 404.5 403.9 400.6 415.8 31 Real estate investment trusts (REITs) 8.4 7.7 6.8 7.4 7.5 7.4 7.4 8.1 8.3 8.6 9.0 32 Brokers and dealers 142.9 177.9 226.9 267.1 244.6 289.6 267.1 287.0 303.6 320.9 322.1 33 Asset-backed securities issuers (ABSs) 219.3 269.1 318.1 379.9 347.1 365.1 379.9 390.4 402.8 423.1 445.1 34 Bank personal trusts 198.0 212.9 223.3 231.2 229.2 226.9 231.2 231.0 234.6 234.5 240.0 RELATION OF LIABILITIES TO FINANCIAL ASSETS 35 Total credit market debt 12,678.2 13,536.5 14,169.3 15,002.7 14,547.1 14,782.8 15,002.7 15,123.8 15,330.1 15,589.3 15,900.9 Other liabilities 36 Official foreign exchange 53.6 61.3 55.4 51.8 54.4 55.4 51.8 54.5 53.9 55.6 53.4 37 Treasury currency and special drawing rights certificates 23.8 26.3 26.3 24.5 26.4 26.5 24.5 24.6 24.7 24.8 25.0 38 Life insurance reserves 354.3 380.0 405.7 433.0 416.0 426.4 433.0 446.4 456.2 471.1 488.5 39 Pension fund reserves 3,356.1 3,400.3 4,056.5 4,357.8 4,115.0 4,250.0 4,357.8 4,492.2 4,555.3 4,701.7 4,775.9 40 Interbank claims 32.4 64.0 65.2 113.1 68.5 100.7 113.1 109.5 116.8 127.7 136.8 41 Deposits at financial institutions 4,736.7 4,836.8 4,885.2 4,892.1 4,870.6 4,909.3 4,892.1 4,887.8 4,930.0 4,926.1 4,979.8 42 Checkable deposits and currency 888.6 932.8 1,008.5 1,131.0 1,032.9 1,072.0 1,131.0 1,092.2 1,169.1 1,182.6 1,250.9 43 Small time and savings deposits 2,277.4 2,336.3 2,353.0 2,292.2 2,325.8 2,303.7 2,292.2 2,262.0 2,242.2 2,223.1 2,211.7 44 Large time deposits 603.4 537.7 476.9 397.2 427.5 418.4 397.2 398.3 389.9 379.7 381.3 45 Money market fund shares 428.1 498.4 539.6 543.6 556.9 552.9 543.6 556.6 549.8 547.9 559.1 46 Security repurchase agreements 396.5 372.3 355.8 389.4 393.5 417.6 389.4 443.5 448.4 470.9 457.9 47 Foreign deposits 142.8 159.4 151.3 138.8 133.9 144.6 138.8 135.3 130.5 121.9 118.9 48 Mutual fund shares 566.2 602.1 813.9 1,042.1 924.4 965.6 1,042.1 1,134.6 1,225.8 1,342.4 1,426.8 49 Security credit 133.9 137.4 188.9 217.3 193.3 214.5 217.3 225.1 234.7 254.5 276.3 50 Trade debt 904.2 936.4 926.7 978.1 945.5 965.1 978.1 975.8 984.5 1,002.8 1,020.9 51 Taxes payable 81.8 77.4 68.9 76.8 70.7 74.6 76.8 81.0 77.2 80.7 81.6 52 Investment in bank personal trusts 503.2 509.9 596.7 619.1 612.7 610.9 619.1 625.0 635.6 643.6 658.6 53 Miscellaneous 2,591.1 2,732.4 2,884.3 3,053.7 2,958.0 3,026.7 3,053.7 3,074.7 3,153.0 3,193.8 3,276.6 54 Total liabilities 26,015.5 27,300.7 29,143.0 30,862.1 29,802.8 30,408.2 30,862.1 31,255.0 31,777.7 32,413.9 33,101.1 Financial assets not included in liabilities ( + ) 55 Gold and special drawing rights 21.0 22.0 22.3 19.6 22.7 23.2 19.6 19.8 20.0 20.3 20.1 56 Corporate equities 3,812.9 3,543.7 4,869.4 5,540.6 4,837.0 4,995.4 5,540.6 5,721.3 5,741.9 6,006.6 6,120.7 57 Household equity in noncorporate business 2.508.1 2,440.6 2,344.6 2,274.5 2,340.3 2,320.3 2,274.5 2,259.2 2,260.3 2,252.2 2,221.2 Floats not included in assets (-) 58 U.S. government checkable deposits 6.1 15.0 3.8 6.8 1.4 4.0 6.8 3.4 3.5 2.2 5.7 59 Other checkable deposits 26.5 28.9 30.9 32.5 32.6 23.3 32.5 27.2 29.6 21.7 28.7 60 Trade credit -148.6 -146.0 -144.1 -128.5 -155.6 -149.6 -128.5 -138.1 -148.1 -149.3 -128.6 Liabilities not identified as assets (-) 61 Treasury currency -4.3 -4.1 -4.8 -4.9 -4.9 -4.9 -4.9 -5.0 -5.0 -5.1 -5.1 62 Interbank claims -31.0 -32.0 -4.2 -9.3 -4.0 -5.0 -9.3 -5.6 -5.7 -7.8 -4.8 63 Security repurchase agreements 13.7 -17.7 -12.5 18.6 19.6 33.1 18.6 71.8 79.5 101.6 90.2 64 Taxes payable 20.6 17.8 15.5 22.4 13.1 18.2 22.4 12.2 19.4 20.3 30.7 65 Miscellaneous -210.7 -213.4 -254.6 -254.9 -285.0 -273.2 -254.9 -300.7 -294.5 -329.7 -345.3 66 Total identified to sectors as assets 32,685.1 33,658.6 36,749.2 39,014.1 37,385.4 38,101.2 39,014.1 39,590.2 40,121.3 41,039.1 41,791.6 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 and L.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1987=100, except as noted 1993 1994 MMeeaassuurree 11999911 11999922 11999933 July Aug. Sept. Oct. Nov. Dec. Jan.r Feb.r Mar. 1 Industrial production1 104.1 106.5 110.9 111.1 111.3 111.9 112.8 114.0 114.6 115.1 115.7 116.0 Market groupings ? Products, total 103.2 105.7 110.2 110.4 110.6 111.2 112.1 113.0 113.6 111144..33 111144..77 111155..00 3 Final, total 105.3 108.0 112.7 112.7 113.1 113.8 114.6 115.4 116.2 117.4 117.7 117.9 4 Consumer goods 102.8 105.7 108.7 108.6 108.5 109.2 109.7 110.1 110.9 111.9 112.1 112.0 5 Equipment 108.9 111.2 118.5 118.6 119.8 120.4 121.8 123.1 123.9 125.3 125.9 126.5 6 Intermediate 96.8 99.0 102.6 103.3 103.0 103.5 104.3 105.4 105.7 105.1 105.3 106.1 7 Materials 105.4 107.7 111.9 112.1 112.2 112.8 113.9 115.5 116.0 116.2 117.2 117.4 Industry groupings 8 Manufacturing 103.7 106.8 111.7 111.8 112.1 112.9 114.0 115.4 115.6 111166..22 111177..11 111177..55 9 Capacity utilization, manufacturing (percent)2 77.8 78.6 80.6 80.3 80.4 80.8 81.5 82.3 82.2 8822..55 8822..99 8833..00 10 Construction contracts3 89.7 97.7 99.8r 99.0 101.0 103.0 105.0 102.0 103.0 107.0 110.0 n.a. II Nonagricultural employment, total4 106.2 106.4 108.1 108.2 108.4 108.5 108.8 109.0 109.0 109.2 109.7 109.9 1? Goods-producing, total 96.6 94.9 93.1 92.8 92.8 93.0 93.2 93.3 93.3 93.3 93.7 94.0 13 Manufacturing, total 97.1 95.8 93.7 93.3 93.2 93.2 93.4 93.4 93.5 93.6 93.7 93.7 14 Manufacturing, production workers ... 96.0 94.5 93.7 93.2 93.2 93.3 93.6 93.7 94.0 94.2 94.4 94.5 15 Service-producing 109.4 110.5 112.8 113.1 113.4 113.5 113.7 114.0 113.9 114.3 114.8 115.0 16 Personal income, total 127.6 135.3 141.7 142.9 143.1 144.1 145.0 145.9 144.7 147.3 148.2 n.a. 17 Wages and salary disbursements 124.5 131.5 136.2 138.2 138.0 138.8 139.2 139.9 141.1 141.4 142.1 n.a. 18 Manufacturing 113.7 117.8 117.8 118.6 119.1 119.1 119.9 120.7 120.8 121.8 122.0 n.a. 19 Disposable personal income 128.6 136.8 143.1 144.1 144.4 145.4 146.3 147.3 145.6 148.5 149.4 n.a. 20 Retail sales6 121.1 126.9 135.2 136.0 136.0 138.7 139.6 141.1 139.3 141.9 144.3 143.2 Prices7 71 Consumer (1982-84=100) 136.2 140.3 144.5 144.8 145.1 145.7 145.8 145.8 146.2 146.7 147.2 147.4 22 Producer finished goods (1982=100) 121.7 123.2 124.7 124.2 123.8 124.6 124.5 124.1 124.4 124.8 125.0 125.0 1. A major revision of the industrial production index and the capacity 6. Based on data from U.S. Department of Commerce, Survey of Current utilization rates was released in April 1990. See "Industrial Production: 1989 Business. Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April 7. Based on data not seasonally adjusted. Seasonally adjusted data for changes 1990), pp. 187-204. in the price indexes can be obtained from the U.S. Department of Labor, Bureau 2. Ratio of index of production to index of capacity. Based on data from the of Labor Statistics, Monthly Labor Review. Federal Reserve, DR1 McGraw-Hill, U.S. Department of Commerce, and other NOTE. Basic data (not indexes) for series mentioned in notes 4, 5,and 6, and sources. indexes for series mentioned in notes 3 and 7 can also be found in the Survey of 3. Index of dollar value of total construction contracts, including residential, Current Business. nonresidential, and heavy engineering, from McGraw-Hill Information Systems Figures for industrial production for the latest month are preliminary, and many Company, F.W. Dodge Division. figures for the three months preceding the latest month have been revised. See 4. Based on data from U.S. Department of Labor, Employment and Earnings. "Recent Developments in Industrial Capacity and Utilization," Federal Reserve Series covers employees only, excluding personnel in the armed forces. Bulletin, vol. 76 (June 1990). pp. 411-35. See also "Industrial Production Capacity 5. Based on data from U.S. Department of Commerce. Survey of Current and Capacity Utilization since 1987," Federal Reserve Bulletin, vol. 79, (June Business. 1993), pp. 590-605. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted except as noted 1993 1994 CCaatteeggoorryy 11999911 11999922 11999933 Aug. Sept. Oct. Nov. Dec. Jan.r Feb.r Mar. HOUSEHOLD SURVEY DATA1 1 Civilian labor force1 125,303 126,982 128,040 128,108 128,580 128,662 128,898 130,667 130,776 130,580 130,747 Employment 7 Nonagricultural industries3 114,644 114,391 116,232 116,475 116,920 117,218 117,565 118,639 118,867 118,611 118,880 3 Agriculture 3,233 3,207 3,074 3,093 3,021 3,114 3,096 3,331 3,391 3,426 3,459 Unemployment 4 Number 8,426 9,384 8,734 8,540 8,639 8,330 8,237 8,696 88,,551188 88,,554433 8,408 5 Rate (percent of civilian labor force) 6.7 7.4 6.8 6.7 6.7 6.5 6.4 6.7 6.5 6.5 6.4 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 108,256 108,519 110,171 110,502 110,664 110,880 111,110 111,079 111,357 111,821 112,088 7 Manufacturing 18,455 18,192 17,804 17,698 17,709 17,735 17,738 17,769 17,783 17,796 17,799 8 Mining 689 631 599 596 596 595 605 602 599 597 594 9 Contract construction 4,650 4,471 4,571 4,592 4,629 4,664 4,665 4,653 4,650 4,732 4,796 10 Transportation and public utilities 5,762 5,709 5,710 5,692 5,693 5,700 5,697 5,708 5,719 5,732 5,665 11 25,365 25,391 25,849 25,953 25,968 25,982 26,082 26,079 26,153 26,242 26,338 17 Finance 6.646 6,571 6,605 6,616 6,632 6,651 6,660 6,656 6,666 6,679 6,688 13 Service 28,336 29,053 30,193 30,433 30,534 30,649 30,709 30,683 30,853 31,079 31,225 14 Government 18.402 18,653 18,841 18,922 18,903 18,904 18,954 18,929 18,934 18,964 18,983 1. Beginning January 1994, reflects redesign of current population survey and 3. Includes all full- and part-time employees who worked during, or received population controls from the 1990 census. pay for, the pay period that includes the twelfth day of the month; excludes 2. Persons sixteen years of age and older, including Resident Armed Forces. proprietors, self-employed persons, household and unpaid family workers, and Monthly figures are based on sample data collected during the calendar week that members of the armed forces. Data are adjusted to the March 1992 benchmark, contains the twelfth day; annual data are averages of monthly figures. By and only seasonally adjusted data are available at this time. definition, seasonality does not exist in population figures. SOURCE. Based on data from U.S. Department of Labor, Employment and 2. Includes self-employed, unpaid family, and domestic service workers. Earnings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • July 1994 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1993 1994 1993 1994 1993 1994 Q2 Q3 Q4 Qir Q2 Q3 Q4 Ql Q2 Q3 Q4 Qlr Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 110.3 111.1 112.9 115.1 135.9 136.5 137.2 138.0 81.2 81.4 82.3 83.4 2 Manufacturing 111.2 111.8 114.1 116.3 138.4 139.2 140.0 140.9 80.3 80.3 81.5 82.5 3 Primary processing3 107.0 107.7 109.9 110.6 127.9 128.3 128.6 129.0 83.6 83.9 85.5 85.7 4 Advanced processing4 113.2 113.8 116.1 119.0 143.4 144.4 145.4 146.6 78.9 78.8 79.9 81.2 5 Durable goods 113.2 114.2 118.1 121.2 144.5 145.4 146.3 147.6 78.4 78.5 80.7 82.2 6 Lumber and products 98.0 100.8 104.9 104.1 114.8 115.0 115.2 115.4 85.4 87.6 91.1 90.2 7 Primary metals 105.2 106.7 109.6 108.8 123.3 123.0 122.6 122.4 85.3 86.8 89.4 88.9 8 Iron and steel 109.7 112.3 115.6 113.1 127.4 126.9 126.3 126.0 86.1 88.6 91.5 89.7 9 Nonferrous 99.0 98.9 101.4 103.1 117.6 117.6 117.6 117.5 84.1 84.1 86.2 87.7 10 Nonelectrical machinery 141.7 147.2 152.7 158.6 173.1 175.7 178.2 181.7 81.8 83.8 85.7 87.3 11 Electrical machinery 125.9 129.7 132.6 136.7 153.8 155.7 157.7 160.3 81.9 83.2 84.1 85.3 12 Motor vehicles and parts 118.1 112.0 131.7 144.7 153.4 154.8 156.1 157.8 76.9 72.3 84.4 91.7 13 Aerospace and miscellaneous transportation equipment 90.3 87.4 85.2 82.4 133.7 133.2 132.8 132.2 67.6 65.6 64.2 62.4 14 Nondurable goods 108.7 108.9 109.2 110.3 131.0 131.6 132.1 132.7 83.0 82.8 82.6 83.1 15 Textile mill products 108.4 108.0 107.7 108.7 118.8 119.4 119.9 120.5 91.3 90.5 89.8 90.2 16 Paper and products 113.2 111.7 114.2 114.3 124.3 124.8 125.3 125.8 91.1 89.6 91.2 90.9 17 Chemicals and products 117.7 118.6 118.6 120.0 145.1 145.9 146.8 147.7 81.2 81.2 80.8 81.3 18 Plastics materials 112.8 111.5 114.4 130.1 131.1 132.0 86.7 85.1 86.6 19 Petroleum products 104.0 104.0 107.7 105.0 115.8 115.7 115.6 115.4 89.8 89.9 93.2 91.0 20 Mining 97.5 96.8 97.3 98.3 111.4 111.1 110.8 110.6 87.5 87.1 87.8 88.9 21 Utilities 114.1 117.5 115.6 119.4 133.6 134.0 134.3 134.7 85.4 87.8 86.1 88.7 22 Electric 114.8 118.0 114.8 117.6 130.8 131.2 131.7 132.2 87.7 89.9 87.2 89.0 1973 1975 Previous cycle2 Latest cycle3 1993 1993 1994 High Low High Low High Low Apr. Nov. Dec. Jan.r Feb/ Mar/ Apr.p Capacity utilization rate (percent)2 1 Total industry 99.0 82.7 87.3 71.8 84.8 78.3 81.4 82.2 82.9 83.2 83.4 83.6 83.6 2 Manufacturing 99.0 82.7 87.3 70.0 85.1 76.6 80.6 81.5 82.3 82.2 82.5 82.9 83.0 3 Primary processing3 99.0 82.7 89.7 66.8 89.1 77.9 83.6 85.5 86.4 85.9 85.3 85.9 86.3 4 Advanced processing4 99.0 82.7 86.3 71.4 83.3 76.1 79.3 79.8 80.6 80.7 81.3 81.6 81.6 5 Durable goods 99.0 82.7 86.9 65.0 83.9 73.8 78.7 80.6 81.9 81.9 82.2 82.4 82.4 6 Lumber and products 99.0 82.7 87.6 60.9 93.3 76.8 85.7 91.0 91.3 91.2 89.2 90.1 90.5 7 Primary metals 99.0 82.7 102.4 46.8 92.9 74.3 85.0 89.5 92.2 90.3 88.0 88.4 89.4 8 Iron and steel 99.0 82.7 110.4 38.3 95.7 72.3 85.3 90.6 94.5 91.9 88.6 88.7 89.5 9 Nonferrous 99.0 82.7 90.5 62.2 88.9 75.9 84.6 88.0 88.9 87.9 87.2 88.0 89.3 10 Nonelectrical machinery 99.0 82.7 92.1 64.9 83.7 73.0 81.3 85.3 87.0 86.7 87.0 88.1 88.6 11 Electrical machinery 99.0 82.7 89.4 71.1 84.9 76.8 82.0 83.7 84.8 84.7 85.2 86.0 86.8 12 Motor vehicles and parts .... 99.0 82.7 93.0 44.5 84.5 57.9 79.1 84.8 88.5 90.5 94.4 90.4 87.4 13 Aerospace and miscellaneous transportation equipment. 99.0 82.7 81.1 66.9 88.3 78.1 68.6 64.5 63.7 63.0 61.9 62.2 62.2 14 Nondurable goods 99.0 82.7 87.0 76.9 86.8 80.4 83.1 82.6 82.9 82.7 82.9 83.6 83.7 15 Textile mill products 99.0 82.7 91.7 73.8 92.1 78.7 90.4 90.0 89.4 89.6 90.1 90.9 90.5 16 Paper and products 99.0 82.7 94.2 82.0 94.9 86.0 91.3 91.4 92.1 90.4 91.3 91.1 91.7 17 Chemicals and products 99.0 82.7 85.1 70.1 85.9 78.5 81.0 81.0 81.2 81.0 81.3 81.6 81.4 18 Plastics materials 99.0 82.7 90.9 63.4 97.0 75.5 87.2 85.2 90.3 87.3 88.2 19 Petroleum products 99.0 82.7 89.5 68.2 88.5 84.2 89.9 93.3 92.7 90.8 90.6 91.6 93.6 20 Mining 99.0 82.7 96.6 80.6 87.0 86.8 87.4 87.5 87.5 87.6 89.2 89.8 89.9 21 Utilities 99.0 82.7 88.3 76.2 92.6 83.4 85.8 86.4 86.2 90.6 88.8 86.6 86.0 22 Electric 99.0 82.7 88.3 78.7 94.8 87.4 87.8 87.5 87.6 90.2 89.3 87.4 87.0 1. Data in this table also appear in the Board's G.17 (419) monthly statistical 3. Primary processing includes textiles; lumber; paper; industrial chemicals; release. For ordering address, see inside front cover. For a detailed description of petroleum refining; rubber and plastics; stone, clay, and glass; and primary and the series, see "Recent Developments in Industrial Capacity and Utilization," fabricated metals. Federal Reserve Bulletin, vol. 76 (June 1990), pp. 411-35. See also "Industrial 4. Advanced processing includes food, tobacco, apparel, furniture, printing, Production Capacity and Capacity Utilization Since 1987," Federal Reserve chemical products such as drugs and toiletries, leather and products, machinery, Bulletin, vol. 79, (June 1993), pp. 590-605. transportation equipment, instruments, miscellaneous manufacturing, and ord- 2. Capacity utilization is calculated as the ratio of the Federal Reserve's nance. seasonally adjusted index of industrial production to the corresponding index of 5. Monthly highs, 1978 through 1980; monthly lows, 1982. capacity. 6. Monthly highs, 1988-89; monthly lows, 1990-91. 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 1993 1994 1993 GGrroouupp por- avg. tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan.r FFeebb..rr MMaarr..rr AApprr.."" Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 110.9 110.5 110.0 110.4 110.9 111.1 111.3 111.9 112.8 114.0 114.6 115.1 115.7 116.0 ? 60.8 110.2 109.8 109.3 109.6 110.4 110.4 110.6 111.2 112.1 113.0 113.6 114.3 114.7 115.0 Final products 46.0 112.7 112.3 111.8 112.1 112.8 112.7 113.1 113.8 114.6 115.4 116.2 117.4 117.7 117.9 4 Consumer goods, total 26.0 108.7 108.6 107.8 108.1 108.9 108.6 108.5 109.2 109.7 110.1 110.9 111.9 112.1 112.0 Durable consumer goods 5.6 110.5 110.9 109.0 107.2 108.2 107.3 108.7 112.7 115.8 118.2 119.0 122.2 119.6 118.4 6 Automotive products 2.5 111.6 112.7 110.4 106.5 104.3 103.9 106.7 113.8 120.2 124.9 127.7 134.8 127.9 124.9 7 Autos and trucks 1.5 112.2 114.3 110.1 105.0 100.3 99.2 104.1 114.9 124.9 131.5 134.6 146.2 135.9 131.0 8 Autos, consumer .9 86.1 90.2 86.5 83.5 78.2 71.8 75.4 85.2 95.4 98.8 102.0 110.6 105.7 100.8 9 Trucks, consumer .6 157.3 155.9 150.9 142.3 138.6 146.7 153.9 166.4 176.0 188.0 191.0 207.9 188.2 183.3 10 Auto parts and allied goods... 1.0 110.6 110.1 110.8 109.1 111.0 111.8 111.1 111.9 112.3 113.9 116.3 115.7 114.6 114.7 II Other 3.1 109.5 109.3 107.8 107.7 111.6 110.2 110.4 111.8 112.0 112.2 111.3 111.2 112.3 112.7 1? Appliances, A/C, and TV .8 122.9 123.1 116.6 115.5 130.6 124.9 126.4 130.4 130.7 130.5 123.7 123.2 126.0 128.8 N Carpeting and furniture .9 102.2 100.7 101.6 103.3 103.8 103.2 102.4 104.1 102.5 102.8 104.0 105.5 105.4 105.3 14 Miscellaneous home goods ... 1.4 106.7 106.9 106.7 106.1 105.8 106.4 106.4 106.3 107.5 108.0 109.1 108.0 109.0 108.3 IS Nondurable consumer goods 20.4 108.2 108.0 107.4 108.3 109.1 109.0 108.4 108.2 107.9 107.9 108.6 109.0 109.9 110.2 16 Foods and tobacco 9.1 106.1 105.9 105.9 106.2 107.0 107.0 105.9 105.9 105.2 105.8 106.1 106.9 108.8 108.3 17 Clothing 2.6 94.9 95.9 95.8 96.0 95.2 94.3 93.3 93.3 94.3 95.1 93.8 94.0 95.2 96.6 18 Chemical products 3.5 122.5 122.7 122.2 123.0 123.9 123.7 124.1 122.6 122.3 122.0 121.6 124.1 125.3 125.5 19 Paper products 2.5 103.2 103.8 103.7 104.7 103.7 103.1 103.2 104.0 103.3 102.6 102.6 102.4 102.7 104.4 ?0 Energy 2.7 113.7 110.8 107.6 111.1 114.8 115.8 115.3 114.6 115.2 113.1 119.7 116.7 114.4 114.4 ?l Fuels .7 106.6 104.9 104.9 104.7 104.0 103.8 108.0 111.3 110.6 108.6 105.1 104.3 106.8 108.5 22 Residential utilities 2.0 116.5 113.0 108.6 113.6 119.0 120.4 118.2 115.9 117.0 114.9 125.4 121.5 117.3 116.6 73 Equipment 20.0 118.5 117.7 117.7 118.0 118.5 118.6 119.8 120.4 121.8 123.1 123.9 125.3 125.9 126.5 74 Business equipment 13.9 134.6 133.1 133.5 133.9 134.6 134.8 136.3 137.7 139.7 141.8 142.9 145.1 146.0 146.7 Information processing and related .. 5.6 155.8 151.0 153.5 155.6 158.1 158.2 160.6 162.0 164.5 167.2 170.1 172.7 176.1 178.2 76 Office and computing 1.9 223.1 209.2 215.6 221.4 226.5 230.6 234.8 241.8 248.6 256.1 261.5 267.5 274.8 280.8 77 4.0 112.2 112.3 111.8 112.4 113.6 113.3 113.2 112.5 113.0 114.8 114.0 114.5 115.4 115.8 78 2.5 136.7 141.2 138.2 133.0 127.5 126.2 129.8 136.1 141.5 142.8 145.2 150.5 144.5 141.7 79 Autos and trucks 1.2 134.5 136.2 133.1 127.2 118.9 119.6 126.5 139.6 150.5 154.9 161.0 172.3 161.1 156.1 30 Other 1.9 115.6 114.0 113.2 114.8 116.2 119.1 119.1 119.4 119.3 120.8 119.4 120.8 121.3 122.7 31 Defense and space equipment 5.4 74.8 76.9 75.6 74.9 74.6 74.0 73.7 72.7 72.5 71.5 71.0 69.7 69.5 69.6 3? Oil and gas well drilling .6 82.5 75.2 78.2 81.2 83.5 87.0 89.7 86.5 82.9 82.3 82.4 87.4 88.6 89.6 33 Manufactured homes .2 118.9 112.6 110.7 111.6 115.8 115.5 120.7 123.4 130.4 141.1 145.3 139.7 143.6 34 Intermediate products, total 14.7 102.6 102.2 101.7 101.8 102.9 103.3 103.0 103.5 104.3 105.4 105.7 105.1 105.3 106.1 35 Construction supplies 6.0 96.8 94.8 95.9 95.3 96.4 97.3 97.8 98.6 99.5 101.3 100.5 98.9 100.2 100.9 36 Business supplies 8.7 106.5 107.2 105.5 106.1 107.3 107.2 106.4 106.7 107.5 108.1 109.2 109.2 108.8 109.5 37 39.2 111.9 111.4 111.1 111.7 111.7 112.1 112.2 112.8 113.9 115.5 116.0 116.2 117.2 117.4 38 Durable goods materials 19.4 115.5 114.3 114.4 114.5 115.1 115.6 116.5 117.5 119.1 121.5 122.2 122.0 123.8 124.5 39 Durable consumer parts 4.2 113.9 112.5 111.7 111.0 110.3 111.4 112.6 116.0 120.4 125.7 126.7 125.9 127.3 126.1 40 Equipment parts 7.3 123.4 121.8 122.4 123.0 123.8 124.7 126.0 127.0 127.5 128.6 130.7 132.0 134.3 136.1 41 Other 7.9 109.7 109.0 109.1 109.0 110.1 109.9 110.4 110.3 111.6 113.6 113.2 112.0 113.5 114.2 4? Basic metal materials 2.8 112.5 111.5 112.1 112.0 112.0 111.2 111.7 112.9 114.7 117.6 116.2 113.3 113.7 115.0 43 Nondurable goods materials 9.0 113.8 113.5 113.7 114.3 113.7 114.6 113.6 114.1 115.3 116.6 115.4 116.1 117.0 116.7 44 1.2 104.2 103.9 104.7 104.9 105.5 106.1 103.1 104.0 103.7 102.1 103.2 104.3 106.2 105.4 45 Pulp and paper materials 1.9 113.7 115.9 114.2 115.7 112.4 111.5 112.7 113.2 115.2 115.2 114.0 116.0 117.5 117.1 46 3.8 116.9 115.2 116.7 117.3 116.9 118.6 117.1 117.2 119.1 119.9 119.7 120.0 120.1 119.8 47 Other 2.1 113.8 113.7 112.8 112.6 113.8 114.9 114.1 115.1 114.9 120.2 115.6 115.4 116.9 117.0 48 Energy materials 10.9 103.7 104.1 102.9 104.4 103.6 103.7 103.1 103.0 103.1 103.2 104.8 105.5 105.0 104.8 49 Primary energy 7.2 99.1 100.8 101.0 100.7 98.0 98.0 98.4 98.2 97.6 97.5 97.3 100.2 99.9 100.1 50 Converted fuel materials 3.7 112.7 110.7 106.6 111.9 114.4 114.9 112.3 112.6 113.8 114.5 119.6 115.8 114.8 114.1 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.3 110.6 110.1 109.8 110.3 111.0 111.2 111.2 111.5 112.2 113.2 113.7 113.9 114.8 115.3 52 Total excluding motor vehicles and parts ... 95.3 110.4 109.9 109.6 110.2 110.9 111.1 111.1 111.3 111.8 112.7 113.2 113.4 114.3 114.8 53 Total excluding office and computing machines 97.5 108.2 108.1 107.5 107.8 108.1 108.2 108.3 108.8 109.6 110.6 111.1 111111..55 111111..99 111122..00 54 Consumer goods excluding autos and trucks 24.5 108.5 108.2 107.6 108.3 109.5 109.3 108.8 108.8 108.6 108.7 109.3 110099..66 111100..44 111100..77 55 Consumer goods excluding energy 23.3 108.2 108.3 107.8 107.7 108.2 107.8 107.7 108.6 109.0 109.8 109.9 111.4 111.8 111.7 56 Business equipment excluding autos and trucks 12.7 134.6 132.8 133.5 134.5 136.0 136.1 137.2 137.5 113388..77 140.6 114411..33 114422..88 114444..77 114455..99 57 Business equipment excluding office and computing equipment 12.0 119.7 120.3 119.6 119.2 119.2 118.7 119.8 120.2 121.3 122.5 123.0 112244..66 112244..44 112244..22 58 Materials excluding energy 28.4 115.0 114.1 114.2 114.4 114.7 115.3 115.6 116.5 118.0 120.0 120.1 120.2 121.7 122.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • July 1994 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued _ 1987 1993 1994 oup c S o I d C e 2 p po ro r- - a 1 v 9 g 9 . 3 tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr." Index (1987 = 100) MAJOR INDUSTRIES 59 Total index 100.0 110.9 110.5 110.0 110.4 110.9 111.1 111.3 111.9 112.8 114.0 114.6 115.1 115.7 116.0 60 Manufacturing 84.3 111.7 111.3 111.1 111.2 111.6 111.8 112.1 112.9 114.0 115.4 115.6 116.2 117.1 117.5 61 Primary processing 27.1 107.6 106.8 106.9 107.3 107.4 107.9 107.7 108.5 109.9 111.3 110.7 110.1 111.0 111.6 62 Advanced processing 57.1 113.7 113.5 113.1 113.0 113.6 113.6 114.2 115.0 116.0 117.4 117.9 119.2 120.0 120.3 63 Durable goods 46.5 114.3 113.5 113.2 113.0 113.7 113.9 115.0 116.2 118.0 120.1 120.4 121.2 122.0 122.5 64 Lumber and products... "'24 2.1 100.6 98.3 98.2 97.6 99.6 100.9 101.8 104.6 104.9 105.2 105.2 103.0 104.1 104.6 65 Furniture and fixtures... 25 1.5 103.3 102.4 101.5 102.7 103.5 105.2 105.2 104.8 104.2 106.3 105.4 107.3 107.8 107.6 66 Clay, glass, and stone products 32 2.4 98.7 97.8 97.9 98.2 98.8 98.4 99.9 99.7 100.5 104.6 101.1 100.6 103.1 103.4 67 Primary metals 33 3.3 106.5 105.0 105.0 105.6 105.6 107.2 107.3 106.1 109.8 113.0 110.5 107.8 108.2 109.4 68 Iron and steel 331,2 1.9 111.6 108.9 109.1 111.1 111.9 112.8 112.4 113.3 114.4 119.1 115.8 111.6 111.7 112.7 69 Raw steel .1 105.7 103.5 105.5 106.6 106.9 106.3 105.9 107.2 106.2 110.9 102.0 105.8 70 Nonferrous 333-6,9 1.4 99.5 99.5 99.2 98.1 97.0 99.4 100.3 96.2 103.5 104.5 103.3 102.4 103.4 104.9 71 Fabricated metal products 34 5.4 99.5 99.2 98.5 98.3 99.6 99.6 99.6 100.7 102.1 102.6 103.9 103.2 104.3 104.9 72 Industrial and commercial machinery and computer equipment . 35 8.5 144.1 140.1 141.6 143.3 146.1 147.1 148.4 150.3 152.0 155.7 156.3 158.1 161.4 163.7 73 Office and computing machines 357 2.3 223.1 209.2 215.6 221.4 226.5 230.6 234.8 241.8 248.6 256.1 261.5 267.5 274.8 280.8 74 Electrical machinery.... 36 6.9 127.5 125.6 125.7 126.4 128.6 129.5 130.9 131.4 132.1 134.3 134.8 136.6 138.8 140.9 75 Transportation equipment 37 9.9 104.2 105.9 104.2 101.2 98.9 98.5 100.4 104.2 108.3 110.7 111.9 114.4 111.6 109.6 76 Motor vehicles and parts 371 4.8 120.7 120.9 118.5 114.7 110.2 110.6 115.1 124.1 132.4 138.5 142.1 149.0 143.1 139.0 77 Autos and light trucks 2.2 118.4 120.9 116.4 111.2 106.0 104.0 109.2 120.8 131.7 138.4 141.8 154.0 143.6 138.2 78 Aerospace and miscellaneous transportation equipment... 372-6,9 5.1 88.7 91.7 90.7 88.6 88.3 87.2 86.7 85.5 85.7 84.5 83.4 81.9 82.0 81.9 79 Instruments 38 5.1 104.0 105.3 104.6 104.4 104.8 103.2 104.0 102.7 102.4 102.3 103.7 104.1 104.4 104.1 80 Miscellaneous 39 1.3 109.3 110.6 109.4 108.5 108.8 108.8 110.3 109.6 110.1 110.3 110.7 109.8 110.8 111.7 81 Nondurable goods 37.8 108.7 108.7 108.5 108.9 109.1 109.2 108.5 108.8 109.1 109.7 109.6 110.1 111.1 111.5 82 Foods "20 8.8 108.6 108.2 107.9 108.8 108.8 109.6 109.0 109.0 108.4 109.0 109.2 110.1 111.9 111.2 83 Tobacco products 21 1.0 91.0 92.6 94.1 89.4 97.3 90.3 85.4 86.4 83.3 84.3 88.2 87.2 88.8 90.1 84 Textile mill products.... 22 1.8 107.8 107.3 108.7 109.3 108.5 108.8 106.6 107.7 108.0 107.4 107.8 108.6 109.7 109.5 85 Apparel products 23 2.3 93.1 93.3 93.5 93.6 93.6 93.2 92.1 92.1 92.6 93.1 92.4 92.4 93.7 94.6 86 Paper and products 26 3.6 112.3 113.4 112.1 114.1 111.7 112.1 111.4 112.7 114.5 115.5 113.5 114.8 114.7 115.7 87 Printing and publishing.. 27 6.5 101.3 102.6 101.1 101.3 101.6 100.9 101.1 101.6 101.7 101.9 101.7 102.2 102.8 103.5 88 Chemicals and products. 28 8.8 117.8 117.3 117.6 118.3 118.6 118.8 118.3 117.8 118.8 119.3 119.3 120.1 120.7 120.8 89 Petroleum products 29 1.3 104.9 104.1 103.7 104.2 103.2 103.5 105.3 108.2 107.8 107.1 104.8 104.5 105.8 108.0 90 Rubber and plastic products 30 3.2 115.9 115.0 115.4 115.1 116.9 117.5 116.7 116.5 117.8 119.3 120.3 119.7 121.2 122.2 91 Leather and products .. . 31 .3 85.0 85.8 85.6 84.7 83.8 83.6 83.5 83.9 83.5 85.1 84.8 83.1 84.8 85.3 92 Mining 8.0 97.3 97.4 97.1 97.9 96.4 96.6 97.4 98.0 96.9 96.9 97.0 98.7 99.3 99.4 93 Metal "lO .3 167.6 165.7 171.2 169.7 170.4 152.9 159.4 175.8 168.5 177.3 177.8 167.3 171.1 171.5 94 Coal 11,12 1.2 103.8 104.6 102.9 106.9 100.9 98.5 104.4 104.4 101.1 104.7 104.0 114.4 120.4 120.7 95 Oil and gas extraction 13 5.8 92.2 92.7 92.1 92.6 91.6 93.3 92.6 92.6 91.8 90.9 91.0 91.8 91.2 91.4 96 Stone and earth minerals .. 14 .7 93.8 91.6 93.4 91.3 92.7 94.1 94.5 94.1 98.2 93.9 94.9 95.5 95.3 93.3 97 Utilities 7.7 116.2 114.5 112.4 115.4 118.0 118.4 116.2 114.9 116.1 115.8 121.9 119.6 116.8 116.1 98 Electric 49i,3PT 6.1 115.9 114.7 114.2 115.5 118.8 119.5 115.8 113.7 115.2 115.5 119.1 118.1 115.7 115.4 99 Gas 492,3PT 1.6 117.2 113.9 105.7 115.1 115.0 114.4 118.0 119.1 119.4 117.0 132.6 125.2 120.8 118.7 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 79.5 111.2 110.7 110.6 110.9 111.7 111.8 111.9 112.2 112.9 114.0 114.0 114.3 115.6 116.2 101 Manufacturing excluding office and computing machines 81.9 108.6 108.5 108.1 108.0 108.3 108.4 108.6 109.2 110.2 111.4 111.4 111.9 112.6 112.9 Gross value (billions of 1987 dollars, annual rates) MAJOR MARKETS 102 Products, total 1,707.0 1,886.9 1,879.5 1,868.0 1,871.8 1,878.8 1,878.2 1,886.3 1,908.8 1,928.2 1,943.9 1,955.4 1,969.5 1,969.1 1,973.0 103 Final 1,314.6 1,480.7 1,475.2 1,466.1 1,468.2 1,471.4 1,470.0 1,479.5 1,498.9 1,514.9 1,525.7 1,535.0 1,553.6 1,552.4 1,552.4 104 Consumer goods 866.6 944.1 941.8 933.6 936.1 939.2 937.3 940.2 953.1 960.2 963.7 968.7 978.6 977.6 976.3 105 Equipment 448.0 536.7 533.4 532.5 532.1 532.2 532.7 539.2 545.7 554.7 561.9 566.3 575.1 574.8 576.1 106 Intermediate 392.5 406.1 404.3 401.9 403.7 407.4 408.2 406.9 410.0 413.3 418.2 420.4 415.9 416.7 420.6 1. Data in this table also appear in the Board's G.17 (419) monthly statistical was released in May 1993. See "Industrial Production, Capacity, and Capacity release. For ordering address, see inside front cover. Utilization since 1987," Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. A revision of the industrial production index and the capacity utilization rates 2. Standard industrial classification. 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 1993 1994 IItteemm 11999911 11999922 11999933 June July Aug. Sept. Oct. Nov. Dec. Jan.r Feb.r Mar. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 949 1,095 l,199r l,122r l,169r 1,234r 1,265r l,298r 1,363r 1,474r 1,312 1,252 1,313 - 3 > Two-or-more-family 7 1 5 9 4 5 9 1 1 8 1 4 9 2 8 1 6 3 r r 9 1 2 9 6 6 r r 9 1 7 9 3 6 R r l,0 2 0 3 4 0 r r 1,0 22 3 9 6 r r 1, 2 0 2 7 8 (Y r l,1 2 3 3 2 l r r l,1 2 8 9 1 3 r r 1,0 2 7 4 1 1 1,0 1 5 9 4 8 1,0 24 6 5 8 4 1,014 1,200 1,288 1,238 1,245 1,319 1,359 1,409 1,406 1,612 1,271 1,328 1,492 5 840 1,030 1,126 1,067 1,076 1,178 1,160 1,231 1,248 1,383 1,125 1,121 1,260 6 Two-or-more-family 174 169 162 171 169 141 199 178 158 229 146 207 232 7 Under construction at end of period .. 606 612 680 649 658 662 678 686 699 713 716 723 736 8 434 473 543 518 526 534 544 551 564 574 577 580 589 9 Two-or-more-family 173 140 137 131 132 128 134 135 135 139 139 143 147 10 1,091 1,158 1,193 1,168 1,097 1,248 1,172 1,248 1,248 1,289 1,216 1,326 1,251 11 838 964 1,040 997 955 1,068 1,041 1,081 1,107 1,139 1,075 1,177 1,090 1? Two-or-more-family 253 194 153 171 142 180 131 167 141 150 141 149 161 13 Mobile homes shipped 171 210 254 238 246 247 254 260 283 308 316 301 308 Merchant builder activity in one-family units 14 507 610 666 641 647 645 738 723 766 881177rr 664400 666655 773399 15 Number for sale at end of period ... 284 266 294r 274 277 286 288 291 294 294r 297 302 304 Price of units sold (thousands 16 120.0 121.3 126.1 124.5 123.9 126.6 129.4 125.0 130.0 125.0 125.8 129.9 130.0 17 Average 147.0 144.9 147.6 145.7 143.4 150.6 150.1 146.9 152.5 146.4r 152.5 153.5 154.5 EXISTING UNITS (one-family) 18 Number sold 3,219 3,520 3,800 3,700 3,850 3,860 3,990 4,030 4,120 4,350 4,250 3,840 4,070 Price of units sold (thousands of dollars)2 19 99.7 103.6 106.5 109.2 108.4 108.8 107.2 106.6 107.1 107.4 107.9 107.2 107.6 20 Average 127.4 130.8 133.1 137.3 135.8 135.4 133.6 133.0 133.1 133.7 134.6 133.3 134.4 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 403,439 436,043 470,118 460,680 466,593 468,547 477,125 488,661 497,875 508,720 496,907 491,713 495,377 22 Private 293,536 317,256 342,953 335,028 337,909 341,351 345,572 354,506 364,512 371,444 366,146 361,313 368,467 2 2 2 2 2 2 4 3 5 7 8 6 N Re o P O C I s n n i u o t r d d h b e m e u l e s n i s r m i c d t t i r b e e a u i r u a n l t c l i i t l l i i i d a b a t l i l i u n e i b s g l u d s a i i l n n d g d i s n o gs th er 1 1 4 2 4 2 5 3 4 2 8 0 7 5 , , , , , , 1 2 4 7 8 6 3 8 8 9 3 9 9 1 2 7 7 9 1 1 2 4 4 2 8 2 0 5 1 1 7 9 , , , , , , 7 6 5 4 8 4 2 9 2 9 2 3 0 9 3 4 0 6 2 1 2 4 2 4 0 3 0 7 3 3 8 4 , , , , , , 6 6 0 1 4 8 5 9 5 6 4 0 4 2 7 1 5 5 2 1 4 2 4 0 3 1 8 3 2 0 4 9 , , , , , , 6 8 4 7 5 3 4 9 4 2 3 1 4 6 9 3 2 6 2 1 4 0 4 2 3 1 4 8 1 3 3 9 , , , , , , 6 1 5 8 2 7 3 3 2 1 7 9 1 8 4 7 8 9 2 1 2 4 4 0 2 3 2 7 6 0 5 4 , , , , , , 3 2 5 0 7 1 9 4 4 5 4 2 4 2 2 7 7 6 2 1 2 4 2 4 0 3 2 7 4 1 9 6 , , , , , , 2 9 5 4 3 0 2 9 2 8 5 4 5 4 0 7 2 6 2 1 4 1 2 4 2 3 8 5 1 4 4 8 , , , , , , 9 4 2 2 6 5 3 8 5 2 0 7 4 8 1 4 9 2 2 1 2 2 4 4 2 4 2 2 9 5 3 1 , , , , , , 7 1 5 9 9 7 9 9 5 9 6 1 7 4 6 8 7 5 2 1 4 2 2 4 2 4 8 9 1 4 8 2 , , , , , , 1 2 7 1 1 1 3 4 6 4 6 9 2 5 7 0 0 9 2 1 4 3 2 4 2 3 6 0 1 5 2 5 , , , , , , 3 1 2 4 9 9 4 9 6 0 3 5 8 0 5 7 6 6 2 1 4 4 3 2 2 3 5 1 1 2 0 0 , , , , , , 2 0 9 5 5 2 2 0 8 8 2 9 1 4 2 4 2 2 2 1 2 4 2 4 3 3 0 3 4 5 4 4 , , , , , , 3 4 6 8 1 1 6 8 6 1 4 0 7 2 2 3 3 0 29 Public 109,900 118,784 127,166 125,652 128,684 127,196 131,553 134,155 133,362 137,276 130,761 130,400 126,911 30 Military 1,837 2,502 2,448 2,234 2,493 2,583 2,492 2,315 2,237 2,310 2,759 2,464 2,235 31 Highway 32,026 34,929 37,299 37,649 37,376 35,148 39,147 40,644 41,341 40,857 40,966 38,435 38,856 3 3 2 3 O Co th n e s r e rvation and development 71 4, , 8 1 6 7 1 6 75 5 , , 4 9 3 1 5 8 81 5 , , 4 9 8 3 2 7 79 6 , , 6 10 6 3 6 83 5 , ,6 1 6 5 1 4 83 5 , , 8 6 4 2 5 0 8 6 3 , ,6 3 0 0 7 7 85 5 , , 2 9 4 5 5 1 8 5 4 , , 2 5 4 3 9 5 88 5 , ,3 7 1 9 1 8 81 5 , , 3 6 5 8 5 1 8 6 2 , , 8 6 2 7 9 2 80 5 , , 5 2 6 5 4 6 1. Not at annual rates. Institute and seasonally adjusted by the Census Bureau, and (2) sales and prices 2. Not seasonally adjusted. of existing units, which are published by the National Association of Realtors. All 3. Recent data on value of new construction may not be strictly comparable back and current figures are available from the originating agency. Permit with data for previous periods because of changes by the Bureau of the Census in authorizations are those reported to the Census Bureau from 17,000 jurisdictions its estimating techniques. For a description of these changes, see Construction beginning in 1984. Reports (C-30-76-5), issued by the Census Bureau in July 1976. SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are private, domestic shipments as reported by the Manufactured Housing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • July 1994 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier months earlier (annual rate) Change from 1 month earlier IIInnndddeeexxx IIIttteeemmm 1993 1994 1993 19941 lll MMM eeevvv aaa eee rrr lll ... ,,, 11999933 11999944 111999999444111 MMaarr.. MMaarr.. June Sept. Dec. Mar. Nov. Dec. Jan. Feb. Mar. CONSUMER PRICES2 (1982-84=100) 1 All items 3.2 2.4 2.5 2.0 3.3 2.5 .2 .0 .3 .3 .1 147.4 2 Food 1.8 2.0 2.3 2.6 4.9 -1.1 .5 -.1 -.3 .1 .1 143.4 3 Energy items 3.6 -1.1 -3.8 -4.2 1.2 4.7 -.7 -.8 1.6 .4 -.4 102.0 4 All items less food and energy 3.5 2.8 3.2 2.1 3.4 2.9 .2 .1 .3 .3 ..22 155.9 5 Commodities 2.7 .9 .9 .0 2.4 .6 .1 .0 -.1 .3 ..11 137.2 6 Services 3.8 3.7 4.1 3.5 3.7 4.2 .3 .2 .4 .4 .2 166.6 PRODUCER PRICES (1982=100) 7 Finished goods 2.5 -.4 .0 -2.5 -.3 3.9 -.1 .2 .5 .2 -.1 125.0 8 Consumer foods 3.0 .4 1.3 3.2 5.2 -.9 .6 -.3 -.4 .5 -.5 127.0 9 Consumer energy 3.8 -3.7 -5.4 -7.4 -15.6 16.6 -2.9R I.R 2.8 .0 -.1 75.4 10 Other consumer goods 2.2 -1.0 .6 -6.4 1.5 2.3 ,2r ,2r ..22 .1 -.1 138.6 11 Capital equipment 1.6 2.1 .6 2.2 .3 4.6 ,2r .8r ..11 .3 .4 133.9 Intermediate materials 12 Excluding foods and feeds 2.3 .2 .3 -1.0 -.3 2.8 -,3r .R .4 .2 .0 116.8 13 Excluding energy 1.9 1.0 .0 1.0 1.6 1.6 .2 .2 .0 .2 .2 125.3 Crude materials 14 Foods 4.6 2.4 -3.0 13.1 18.4 -4.8 l.C -1.5r 1.2 -1.0 -1.1 113.1 15 Energy 4.0 -6.4 17.5 -28.1 -22.1 18.9 2.R -6.4 9.3 -.1 73.0 16 Other 9.0 9.1 11.2 -4.5 15.4 23.4 1.2r 2.5r 2.0 .9 -.3 153.5 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, 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 1992 1993 AAccccoouunntt 11999911 11999922 11999933RR Q4 Q1 Q2 Q3 Q4R GROSS DOMESTIC PRODUCT 1 Total 5,722.9 6,038.5 6,377.9 6,261.6 6,327.6 6,395.9 6,526.5 6,609.4 By source 2 Personal consumption expenditures 3,906.4 4,139.9 4,391.8 4,296.2 4,359.9 4,419.1 4,492.0 4,549.4 3 Durable goods 457.8 497.3 537.9 515.3 531.6 541.9 562.8 577.4 4 Nondurable goods 1,257.9 1,300.9 1,350.0 1,335.3 1,344.8 1,352.4 1,367.5 1,376.1 5 Services 2,190.7 2,341.6 2,503.9 2,445.5 2,483.4 2,524.8 2,561.8 2,595.9 6 Gross private domestic investment 736.9 796.5 891.7 874.1 874.1 884.0 934.5 978.0 7 Fixed investment 745.5 789.1 876.1 839.5 861.0 876.3 927.6 943.8 8 Nonresidential 555.9 565.5 623.7 594.7 619.1 624.9 656.0 664.7 9 Structures 182.6 172.6 178.7 172.4 177.6 179.1 185.8 178.9 10 Producers' durable equipment 373.3 392.9 445.0 422.2 441.6 445.8 470.2 485.8 11 Residential structures 189.6 223.6 252.4 244.9 241.9 251.3 271.6 279.1 12 Change in business inventories -8.6 7.3 15.6 34.6 13.1 7.7 6.9 34.2 13 Nonfarm -8.6 2.3 21.1 33.0 16.8 22.6 12.0 33.7 14 Net exports of goods and services -19.6 -29.6 -63.6 -48.3 -65.1 -71.9 -69.1 -82.4 15 Exports 601.5 640.5 661.7 651.3 660.0 653.2 682.4 668.8 16 Imports 621.1 670.1 725.3 699.6 725.0 725.1 751.5 751.2 17 Government purchases of goods and services 1,099.3 1,131.8 1,158.1 1,139.7 1,158.6 1,164.8 1,169.1 1,164.4 18 Federal 445.9 448.8 443.4 442.7 447.5 443.6 440.0 434.0 19 State and local 653.4 683.0 714.6 697.0 711.1 721.2 729.2 730.3 By major type of product 20 Final sales, total 5,731.6 6,031.2 6,362.3 6,227.1 6,314.5 6,388.2 6,519.6 6,575.2 21 Goods 2,227.0 2,305.5 2,406.4 2,362.9 2,395.0 2,401.7 2,465.8 2,485.5 22 Durable 934.3 975.8 1,037.0 1,003.5 1,037.8 1,032.9 1,073.7 1,087.9 7.3 Nondurable 1,292.8 1,329.6 1,369.3 1,359.3 1,357.1 1,368.8 1,392.1 1,397.6 24 Services 3,032.7 3,221.1 3,410.5 3,341.8 3,388.1 3,437.8 3,474.3 3,516.5 25 Structures 471.9 504.7 545.5 522.4 531.5 548.7 579.5 573.1 26 Change in business inventories -8.6 7.3 15.6 34.6 13.1 7.7 6.9 34.2 27 Durable goods -12.9 2.1 10.9 15.0 2.7 14.8 11.0 30.1 28 Nondurable goods 4.3 5.3 4.7 19.5 10.4 -7.2 -4.1 4.1 MEMO 29 Total GDP in 1987 dollars 4,861.4 4,986.3 5,136.0 5,078.2 5,102.1 5,138.3 5,225.6 5,259.0 NATIONAL INCOME 30 Total 4,598.3 4,836.6 5,140.3r 5,038.9 5,104.0 5,143.2 5,275.0r n.a. 31 Compensation of employees 3,402.4 3,582.0 3,772.2 3,705.1 3,750.6 3,793.9 3,839.2 3,907.2 32 Wages and salaries 2,814.9 2,953.1 3,100.5 3,054.3 3,082.7 3,115.4 3,149.6 3,200.7 33 Government and government enterprises 545.3 567.5 589.7 584.1 586.3 592.8 595.4 602.0 34 Other 2,269.6 2,385.6 2,510.8 2,470.2 2,496.3 2,522.6 2,554.2 2,598.8 3.5 Supplement to wages and salaries 587.5 629.0 671.7 650.7 668.0 678.5 689.6 706.5 36 Employer contributions for social insurance 290.6 306.3 321.0 312.2 321.4 323.8 326.7 334.5 37 Other labor income 296.9 322.7 350.7 338.5 346.6 354.7 362.9 371.9 38 Proprietors' income1 376.4 414.3 443.2 444.1 439.4 422.5 467.0 475.6 39 Business and professional1 339.5 370.6 397.3 388.4 392.4 397.6 410.6 415.6 40 Farm1 36.8 43.7 46.0 55.7 47.0 24.8 56.4 60.0 41 Rental income of persons2 -12.8 -8.9 12.6 7.5 12.7 13.7 16.4 3.5 42 Corporate profits' 369.5 407.2 466.6R 432.1 458.1 468.5 507.9R n.a. 43 Profits before tax3 362.3 395.4 449.4R 419.8 445.6 443.8 488.4R n.a. 44 Inventory valuation adjustment 4.9 -5.3 -7.1 -12.7 -12.2 1.0 -4.3 -17.7 45 Capital consumption adjustment 2.2 17.1 24.3 25.1 24.7 23.8 23.9 20.6 46 Net interest 462.8 442.0 445.6 450.1 443.2 444.6 444.5 n.a. 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 • July 1994 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1992 1993 AAccccoouunntt 11999911 11999922 11999933RR Q4 Ql Q2 Q3 Q4R PERSONAL INCOME AND SAVING 1 Total personal income 4,850.9 5,144.9 5,388.3 5,254.7 5,373.2 5,412.7 5,512.7 5,578.1 7 Wage and salary disbursements 2,815.0 2,973.1 3,080.5 2,974.3 3,082.7 3,115.4 3,149.6 3,200.7 Commodity-producing industries 738.1 756.5 763.6 740.7 765.1 769.4 779.3 789.5 4 Manufacturing 557.2 577.6 577.3 559.7 580.3 581.5 587.8 595.8 Distributive industries 648.0 682.0 706.6 682.9 709.1 714.4 720.1 733.5 6 Service industries 883.5 967.0 1,020.6 966.6 1,022.2 1,038.8 1,054.7 1,075.8 7 Government and government enterprises 545.4 567.5 589.7 584.1 586.3 592.8 595.4 602.0 8 Other labor income 296.9 322.7 350.7 338.5 346.6 354.7 362.9 371.9 Q Proprietors' income 376.4 414.3 443.2 444.1 439.4 422.5 467.0 475.6 10 Business and professional 339.5 370.6 397.3 388.4 392.4 397.6 410.6 415.6 ii 36.8 43.7 46.0 55.7 47.0 24.8 56.4 60.0 l? Rental income of persons -12.8 -8.9 12.6 7.5 12.7 13.7 16.4 3.5 n 127.9 140.4 158.3 157.0 157.8 159.0 159.4 160.7 14 Personal interest income 715.6 694.3 695.2 695.4 693.1 695.7 696.7 700.2 is Transfer payments 769.9 858.4 912.1 894.4 905.5 918.5 929.8 944.6 16 Old-age survivors, disability, and health insurance benefits ... 382.3 413.9 438.4 433.1 435.0 439.4 446.1 457.6 17 LESS: Personal contributions for social insurance 237.8 249.3 264.3 256.6 264.5 266.8 269.2 279.1 18 EQUALS: Personal income 4,850.9 5,144.9 5,388.3 5,254.7 5,373.2 5,412.7 5,512.7 5,578.1 19 LESS: Personal tax and nontax payments 620.4 644.8 681.6 657.1 681.0 689.0 699.2 715.7 20 EQUALS: Disposable personal income 4,230.5 4,500.2 4,706.7 4,597.5 4,692.2 4,723.7 4,813.5 4,862.4 21 LESS: Personal outlays 4,029.0 4,261.5 4,516.8 4,419.7 4,483.6 4,544.0 4,620.1 4,680.4 22 EQUALS: Personal saving 201.5 238.7 189.9 177.9 208.7 179.7 193.4 182.0 MEMO Per capita (1987 dollars) 73 Gross domestic product 19,237.9 19,518.0 19,887.4 19,744.4 19,785.4 19,868.8 2200,,115500..11 2200,,223300..99 74 Personal consumption expenditures 12,895.2 13,080.9 13,371.3 13,234.2 13,311.6 13,416.2 13,522.7 13,617.3 25 Disposable personal income 13,965.0 14,219.0 14,330.0 14,163.0 14,326.0 14,341.0 14,491.0 14,554.0 26 Saving rate (percent) 4.8 5.3 4.0 3.9 4.4 3.8 4.0 3.7 GROSS SAVING 27 Gross saving 733.7 717.8 780.2r 762.0 766.7 774.3 817.8r n.a. 28 Gross private saving 929.9 986.9 L,004.8R 1,024.8 988.3 988.7 L,017.5R n.a. 79 Personal saving 201.5 238.7 189.9 177.9 208.7 179.7 193.4 182.0 30 Undistributed corporate profits 102.3 110.4 123.6R 103.7 116.3 129.3 145.LR n.a. 31 Corporate inventory valuation adjustment 4.9 -5.3 -7.1 -12.7 -12.2 1.0 -4.3 -17.7 Capital consumption allowances 37 383.2 396.6 408.8 402.2 405.2 414.0 441133..99 443322..88 33 Noncorporate 242.8 261.3 262.5 261.0 258.1 265.7 265.1 301.7 34 Government surplus, or deficit (-), national income and product accounts -196.2 -269.1 -224.6R -262.8 -221.5 -214.4 --119999..77RR n.a. 35 -203.4 -276.3 -226.4R -263.5 -222.6 -212.7 -207.0R n.a. 36 State and local 7.3 7.2 1.8R .8 1.1 -1.7 7.2R n.a. 37 Gross investment 743.3 741.4 795.4 796.5 778.7 787.6 819.0 n.a. 38 Gross private domestic 736.9 796.5 891.7 874.1 874.1 884.0 934.5 978.0 39 Net foreign 6.4 -55.1 -96.2 -77.6 -95.4 -96.4 -115.5 n.a. 40 Statistical discrepancy 9.6 23.6 15.2r 34.4 12.0 13.3 1.2r 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 1992 1993 IItteemm ccrreeddiittss oorr ddeebbiittss 11999911 11999922 11999933 Q4 Q1 Q2 Q3 Q4P 1 Balance on current account -8,324 -66,400 -109,242 -23,687 -22,375 -27,235 -28,091 -31,539 ? Merchandise trade balance -73,802 -96,138 -132,478 -25,962 -29,325 -34,398 -35,972 -32,783 3 Merchandise exports 416,937 440,138 456,766 113,992 111,480 113,067 111,935 120,284 4 Merchandise imports -490,739 -536,276 -589,244 -139,954 -140,805 -147,465 -147,907 -153,067 Military transactions, net -5,851 -2,751 -1,027 -836 -145 -226 -128 -528 6 Other service transactions, net 51,733 59,163 56,706 14,265 14,799 14,716 13,983 13,209 7 Investment income, net 13,021 6,222 66 -806 -112 -27 1,617 -1,411 8 U.S. government grants 24,073 -14,688 -14,438 -5,883 -3,242 -2,730 -3,029 -5,437 9 U.S. government pensions and other transfers -3,461 -3,735 -3,946 -846 -985 -986 -985 -989 10 Private remittances and other transfers -14,037 -14,473 -14,126 -3,619 -3,365 -3,584 -3,577 -3,600 11 Change in U.S. government assets other than official reserve assets, net (increase, —) 2,905 -1,609 -106 -737 535 -275 -180 --118866 12 Change in U.S. official reserve assets (increase. -) 5,763 3,901 -1,379 1,542 -983 822 -545 -673 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -177 2,316 -537 2,829 -140 -166 -118 -113 15 Reserve position in International Monetary Fund -367 -2,692 -44 -2,685 -228 313 -48 -80 16 Foreign currencies 6,307 4,277 -797 1,398 -615 675 -378 -480 17 Change in U.S. private assets abroad (increase, -) -68,643 -53,253 -142,388 -31,243 -12,267 -30,244 -42,674 -57,203 18 Bank-reported claims3 3,278 24,948 34,582 -3,481 28,055 5,317 8,487 -7,277 19 Nonbank-reported claims 1,932 4,551 n.a. 1,132 -4,774 443 2,982 70 U.S. purchases of foreign securities, net -44,740 -47,961 -125,377 -17,405 -26,889 -24,098 -45,794 -28,596 21 U.S. direct investments abroad, net -29,113 -34,791 -50,244 -11,489 -8,659 -11,906 -8,349 -21,330 ?? Change in foreign official assets in United States (increase, +) ... 17,564 40,684 71,225 5,931 10,929 17,699 19,237 23,360 23 U.S. Treasury securities 14,846 18,454 48,700 -7,379 1,039 5,668 19,098 22,895 24 Other U.S. government obligations 1,301 3,949 4,091 874 710 1,082 1,345 954 25 Other U.S. government liabilities 1,542 2,542 1,890 943 -395 396 1,105 784 76 Other U.S. liabilities reported by U.S. banks -1,484 16,427 13,959 11,219 8,171 9,454 -2,495 -1,171 27 Other foreign official assets 1,359 -688 2,585 274 1,404 1,099 184 -102 78 Change in foreign private assets in United States (increase, +)... 65,876 88,895 155,154 32,914 14,946 24,838 52,400 62,970 79 U.S. bank-reported liabilities3 -11,371 18,609 12,208 -1,171 -18,862 -1,381 24,941 7,510 30 U.S. nonbank-reported liabilities -699 741 n.a. -2,717 2,057 1,361 4,069 31 Foreign private purchases of U.S. Treasury securities, net . 18,826 36,893 24,328 21,232 13,599 -623 3,474 7,878 37 Foreign purchases of other U.S. securities, net 35,144 30,274 79.612 12,478 9,394 15,025 17,257 37,936 33 Foreign direct investments in United States, net 23,975 2,378 31,519 3,092 8,758 10,456 2,659 9,646 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -15,140 -12,218 26,735 15,280 9,215 14,395 -148 3,271 36 Due to seasonal adjustment 1,222 6,082 943 -7,319 292 37 Before seasonal adjustment -15,140 -12,218 26,735 14,058 3,133 13,452 7,171 2,979 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) 5,763 3,901 -1,379 1,542 -983 822 --554444 --667733 39 Foreign official assets in United States, excluding line 25 (increase, +) 16,022 38,142 69,335 4,988 11,324 17,303 18,132 22,576 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -4,882 5,857 -3,968 2,336 463 -916 -3,244 --227711 1. Seasonal factors are 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 5. 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, Bureau of Economic Analysis, brokers and dealers. Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • July 1994 3.11 U. S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1993 1994 IItteemm 11999911 11999922 11999933 Sept. Oct. Nov. Dec. Jan. Feb.r Mar.p I Goods and services, balance -27,920 -39,727 -76,761 -8,183 -8,460 -7,455 -4,148 -6,643r -9,153 -7,459 2 Merchandise -73,802 -96,138 -132,439 -12,568 -12,644 -11,351 -8,748 -ll,349r -13,516 -12,039 3 Services 45,882 56,411 55,678 4,385 4,184 3,896 4,600 4,706 4,363 4,580 4 Goods and services, exports 581,197 619,848 643,563 53,660 54,957 54,735 57,250 54,295 53,239 58,331 5 Merchandise 416,937 440,138 456,771 38,134 39,371 39,451 41,469 38,528 37,406 42,169 6 Services 164,260 179,710 186,792 15,526 15,586 15,284 15,781 15,767 15,833 16,162 7 Goods and services, imports -609,117 -659,575 -720,324 -61,843 -63,417 -62,190 -61,398 -60,938r -62,392 -65,790 8 Merchandise -490,739 -536,276 -589,210 -50,702 -52,015 -50,802 -50,217 -49,877r -50,922 -54,208 9 Services -118,378 -123,299 -131,114 -11,141 -11,402 -11,388 -11,181 -11,061 -11,470 -11,582 MEMO 10 Balance on merchandise trade, Census basis -66,723 -84,501 -115,738 -10,621 -10,897 -9,679 -7,367 -10,169 -11,990 -10,121 1. Data show monthly values consistent with quarterly figures in the U.S. SOURCE. FT900, U.S. Department of Commerce, Bureau of the Census and balance of payments accounts. Bureau of Economic Analysis. 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1993 1994 AAsssseett 11999900 11999911 11999922 Oct. Nov. Dec. Jan. Feb. Mar. Apr." 1 Total 83,316 77,719 71,323 74,550 74,042 73,442 74,243 75,766 76,809 76,565 2 Gold stock, including Exchange Stabilization Fund' 11,058 11,057 11,056 11,056 11,054 11,053 11,053 11,053 11,052 11,053 3 Special drawing rights* 10,989 11,240 8,503 9,038 9,091 9,039 9,070 9,295 9,383 9,440 4 Reserve position in International Monetary Fund" 9,076 9,488 11,759 11,908 11,827 11,818 11,906 11,974 12,135 11,899 5 Foreign currencies4 52,193 45,934 40,005 42,548 42,070 41,532 42,214 43,444 44,239 44,173 1. Gold held "under earmark" at Federal Reserve Banks for foreign and 1981, five currencies have been used. U.S. SDR holdings and reserve positions in international accounts is not included in the gold stock of the United States; see the IMF 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, sixteen currencies were used; since January 4. Valued at current market exchange rates. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1993 1994 AAsssseett 11999900 11999911 11999922 Oct. Nov. Dec. Jan. Feb. Mar. Apr.p 1 Deposits 369 968 205 390 596 386 257 190 454 171 Held in custody i 2 U.S. Treasury securities* 278,499 281,107 314,481 358,975 373,864 379,394 388,065 393,238 399,817 396,495 3 Earmarked gold3 13,387 13,303 13,118 12,464 12,381 12,327 12,302 12,238 12,145 12,104 1. Excludes deposits and U.S. Treasury securities held for international and 3. Held in foreign and international accounts and valued at $42.22 per fine troy regional organizations. 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 at face value. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A55 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1993 1994 IItteemm 11999911 11999922 Sept. Oct. Nov. Dec. Jan. Feb.r Mar.p 1 Total1 360,530 398,816 445,693 444,107 457,129 468,825 478,608r 477,817r 479,084 BY type 2 Liabilities reported by banks in the United States 38,396 54,967 70,220 65,668 67,964 69,633 78,546r 77,822r 79,269 3 U.S. Treasury bills and certificates' 92,692 104,596 139,638 140,525 144,865 150,900 146,940 143,222 148,707 U.S. Treasury bonds and notes 4 Marketable 203,677 210,553 200,346 201,965 208,188 211,825 216,109r 220,154r 215,271 5 Nonmarketable 4,858 4,532 5,542 5,579 5,615 5,652 5,689 5,725 5,762 6 U.S. securities other than U.S. Treasury securities5 20,907 24,168 29,947 30,370 30,497 30,815 31,324 30,894 30,075 BY area 7 Europe' 171,317 191,708 198,254 193,676 208,790 209,229 216,794r 210,751r 217,244 8 Canada 7,460 7,920 8,260 9,441 8,657 9,505 10,084 9,844 8,328 9 Latin America and Caribbean 33,554 40,025 54,704 54,275 50,410 57,950 57,661r 61,127r 55,124 10 Asia 139,465 152,276 177,164 178,889 182,437 185,289 187,337 189,025 191,704 11 Africa 2,092 3,565 3,888 3,665 3,650 3,894 3,681 4,043 3,559 12 Other countries6 6,640 3,320 3,421 4,159 3,183 2,956 3,049 3,025 3,123 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 1993 IItteemm 11999900 11999911 11999922 Mar. June Sept. Dec. 1 Banks' liabilities 70,477 75,129 72,796 81,091 75,206 81,205 77,627 2 Banks' claims 66,796 73,195 62,799 64,256 55,533 59,116 60,271 3 Deposits 29,672 26,192 24,240 23,142 20,464 20,930 19,379 4 Other claims 37,124 47,003 38,559 41,114 35,069 38,186 40,892 5 Claims of banks" domestic customers" 6,309 3,398 4,432 2,625 3,234 2,640 3,145 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

A56 International Statistics • July 1994 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1993 1994 IItteemm 11999911 11999922 11999933 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 756,066 810,259 906,003r 875,947 877,062 893,284 906,003r 889,604r 914,239r 947,255 7. Banks' own liabilities 575,374 606,444 620,689 615,305 610,744 616,209 620,689 608,947r 630,692r 648,343 3 Demand deposits 20,321 21,828 21,576r 25,376 22,014 25,462 21,576r 23,488r 24,217r 22,728 4 Time deposits 159,649 160,385 174,984 154,405 159,375 156,994 174,984 158,943r 159,413r 176,608 Other3 66,305 93,237 109,873 112,0% 128,942 126,845 109,873 129,423r 135,769r 112,053 6 Own foreign offices 329,099 330,994 314,256r 323,428 300,413 306,908 314,256r 297,093r 311,293r 336,954 7 Banks' custodial liabilities5 180,692 203,815 285,314r 260,642 266,318 277,075 285,314r 280,657r 283,547r 298,912 8 U.S. Treasury bills and certificates 110,734 127,644 176,430 165,151 164,365 169,729 176,430 170,694 166,977 173,133 9 Other negotiable and readily transferable instruments7 18,664 21,974 36,078 30,879 37,562 38,555 36,078 37,329 41,829 41,635 10 Other 51,294 54,197 72,806r 64,612 64,391 68,791 72,806r 72,634r 74,741r 84,144 11 Nonmonetary international and regional organizations8 8,981 9,350 10,846 11,409 10,994 12,965 10,846 10,869 6,999 77,,776688 12 Banks' own liabilities 6,827 6,951 5,550 7,995 6,790 9,091 5,550 6,855 5,624 5,323 13 Demand deposits 43 46 15 21 71 34 15 21 120 22 14 Time deposits 2,714 3,214 2,780 4,062 2,978 2,863 2,780 3,305 2,503 2,424 15 Other3 4,070 3,691 2,755 3,912 3,741 6,194 2,755 3,529 3,001 2,877 16 Banks' custodial liabilities5 2,154 2,399 5,2% 3,414 4,204 3,874 5,296 4,014 1,375 2,445 17 U.S. Treasury bills and certificates 1,730 1,908 4,275 3,199 3,566 3,201 4,275 3,497 1,321 2,097 18 Other negotiable and readily transferable instruments7 424 486 1,021 215 638 672 1,021 517 54 338 19 Other 0 5 0 0 0 1 0 0 0 10 7.0 Official institutions9 131,088 159,563 220,533 209,858 206,193 212,829 220,533 225,486r 221,044r 227,976 71 Banks' own liabilities 34,411 51,202 64,056 63,619 60,995 62,168 64,056 71,531r 67,193r 66,568 22 Demand deposits 2,626 1,302 1,601 1,951 2,121 2,089 1,601 1,631 1,406 1,757 23 Time deposits 16,504 17,939 21,634 20,825 14,885 17,188 21,634 20,237r 19,958r 23,713 24 Other3 15,281 31,961 40,821 40,843 43,989 42,891 40,821 49,663r 45,829r 41,098 25 Banks' custodial liabilities5 96,677 108,361 156,477 146,239 145,198 150,661 156,477 153,955 153,851 161,408 26 U.S. Treasury bills and certificates 92,692 104,596 150,900 139,638 140,525 144,865 150,900 146,940 143,222 148,707 27 Other negotiable and readily transferable instruments7 3,879 3,726 5,482 6,149 4,491 5,614 5,482 6,855 10,527 12,414 28 Other 106 39 95 452 182 182 95 160 102 287 29 Banks10 522,265 547,320 573,924r 558,092 553,351 562,372 573,924r 549,192r 579,543r 606,772 30 Banks' own liabilities 459,335 476,117 474,642 470,946 461,827 468,526 474,642 451,260r 479,125r 497,530 31 Unaffiliated foreign banks 130,236 145,123 160,386r 147,518 161,414 161,618 160,386r 154,167r 167,832r 160,576 32 Demand deposits 8,648 10,170 9,719r 12,809 9,948 13,369 9,719r 11,025r 11,986r 10,609 33 Time deposits 82,857 90,296 105,192 83,484 95,704 92,265 105,192 87,788r 92,301r 104,847 34 Other3 38,731 44,657 45,475 51,225 55,762 55,984 45,475 55,354 63,545r 45,120 35 Own foreign offices 329,099 330,994 314,256r 323,428 300,413 306,908 314,256r 297,093r 311,293r 336,954 36 Banks' custodial liabilities5 62,930 71,203 99,282r 87,146 91,524 93,846 99,282r 97,932r 100,418r 109,242 37 U.S. Treasury bills and certificates 7,471 11,087 10,707 11,794 10,046 10,539 10,707 9,832 11,051 10,745 38 Other negotiable and readily transferable instruments7 5,694 7,555 16,810 12,688 19,106 17,124 16,810 17,136 17,010 17,383 39 Other 49,765 52,561 71,765r 62,664 62,372 66,183 71,765r 70,964r 72,357r 81,114 40 Other foreigners 93,732 94,026 100,700 96,588 106,524 105,118 100,700 104,057 106,653r 104,739 41 Banks' own liabilities 74,801 72,174 76,441 72,745 81,132 76,424 76,441 79,301 78,750r 78,922 42 Demand deposits 9,004 10,310 10,241 10,595 9,874 9,970 10,241 10,811 10,705 10,340 43 Time deposits 57,574 48,936 45,378 46,034 45,808 44,678 45,378 47,613 44,651 45,624 44 Other3 8,223 12,928 20,822 16,116 25,450 21,776 20,822 20,877 23,394r 22,958 45 Banks' custodial liabilities5 18,931 21,852 24,259 23,843 25,392 28,694 24,259 24,756 27,903 25,817 46 U.S. Treasury bills and certificates 8,841 10,053 10,548 10,520 10,228 11,124 10,548 10,425 11,383 11,584 47 Other negotiable and readily transferable instruments7 8,667 10,207 12,765 11,827 13,327 15,145 12,765 12,821 14,238 11,500 48 Other 1,423 1,592 946 1,496 1,837 2,425 946 1,510 2,282 2,733 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 7,456 9,111 17,567 11,264 17,533 17,089 17,567 17,509 17,888 18,675 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 owed 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 owed to head office or parent International Settlements. foreign bank, and foreign branches, agencies, or wholly owned subsidiaries of 10. Excludes central banks, which are included in "Official institutions." head office 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 A57 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1993 1994 IItteemm 11999911 11999922 11999933 Sept. Oct. Nov. Dec. Jan. Feb.r Mar.p AREA 1 Total, all foreigners 756,066 810,259 906,003r 875,947 877,062 893,284 906,003r 889,604r 914,239r 947,255 2 Foreign countries 747,085 800,909 895,157r 864,538 866,068 880,319 895,157r 878,735r 907,240r 939,487 3 Europe 249,097 307,670 376,642r 340,430 357,848 369,534 376,642r 368,736r 393,522r 398,847 4 Austria 1,193 1,611 1,907 1,672 1,808 1,797 1,907 2,567 2,159 2,515 5 Belgium and Luxembourg 13,337 20,567 28,650 23,635 24,641 27,541 28,650 29,402 30,624 31,827 6 Denmark 937 3,060 4,517 3,135 5,084 4,151 4,517 5,089 4,831 3,093 7 Finland 1,341 1,299 1,872 2,347 2,712 2,250 1,872 1,843 1,737 1,495 8 France 31,808 41,411 39,705 40,622 43,034 36,638 39,705 32,244 38,429 42,009 9 Germany 8,619 18,630 26,617 22,530 22,820 27,025 26,617 27,576 30,249 31,771 10 Greece 765 913 1,530 1,378 1,366 1,704 1,530 1,361 1,481 1,425 11 Italy 13,541 10,041 11,561 11,285 10,466 10,734 11,561 10,702 12,742 12,786 1? Netherlands 7,161 7,365 16,031 11,429 13,368 14,737 16,031 17,532 17,083 17,687 13 Norway 1,866 3,314 2,975 2,901 2,796 3,199 2,975 2,533 2,350 2,429 14 Portugal 2,184 2,465 3,366 3,180 3,215 3,229 3,366 3,131 3,170 3,131 15 Russia 241 577 2,511 2,229 2,623 2,530 2,511 2,208 2,017 1,971 16 Spain 11,391 9,793 20,494 20,496 20,182 19,705 20,494 19,652 18,119 19,618 17 Sweden 2,222 2,953 2,573 3,474 2,355 2,672 2,573 2,301 2,429 1,067 18 Switzerland 37,238 39,440 41,588 41,909 43,195 42,506 41,588 40,854r 41,065r 39,043 19 Turkey 1,598 2,666 3,228 2,553 2,897 2,947 3,228 3,120 3,242 2,922 70 United Kingdom 100,292 111,805 133,788 116,267 130,941 135,712 133,788 130,778 148,083 150,528 71 Yugoslavia" 622 504 570 524 541 546 570 549 428 414 22 Other Europe and former U.S.S.R. 12,741 29,256 33,159" 28,864 23,804 29,911 33,159r 35,294r 33,290" 33,116 23 Canada 21,605 22,420 20,228 24,711 27,452 24,152 20,228 20,589 23,126 21,212 74 Latin America and Caribbean 345,529 317,228 342,78 lr 340,502 327,666 331,875 342,781r 338,524r 340,762r 356,355 75 Argentina 7,753 9,477 14,493 14,052 14,320 13,695 14,493 14,495 14,451 13,990 76 Bahamas 100,622 82,284 73,077 79,363 76,557 78,354 73,077 71,687r 72,579 77,424 77 3,178 7,079 7,875 7,239 8,021 7,287 7,875 7,794 6,750 6,181 78 5,704 5,584 5,307 5,268 5,057 5,069 5,307 5,127 5,385r 5,243 79 British West Indies 163,620 153,033 175,710r 169,550 159,434 166,637 175,710r 171,892r 170,564r 186,595 30 Chile 3,283 3,035 3,197r 3,867 3,952 3,455 3,197r 3,576 3,755 3,572 31 Colombia 4,661 4,580 3,173 3,988 3,025 3,101 3,173 3,587 3,287 3,416 37 Cuba 2 3 33 6 7 7 33 34 30 38 33 1,232 993 881 819 868 851 881 891 858 822 34 Guatemala 1,594 1,377 1,207 1,278 1,275 1,243 1,207 1,258 1,223 1,163 35 231 371 410 375 376 401 410 387 420 419 36 19,957 19,454 28,060 24,487 24,249 21,947 28,060 27,667 30,693 27,523 37 Netherlands Antilles 5,592 5,205 4,206 4,695 5,283 4,725 4,206 5,139 6,230 5,531 38 Panama 4,695 4,177 3,625 3,743 3,567 3,468 3,625 3,592 3,474 3,424 39 Peru 1,249 1,080 926 903 873 890 926 880 907 864 40 Uruguay 2,096 1,955 1,617 1,752 1,716 1,643 1,617 1,727 1,537 1,472 41 Venezuela 13,181 11,387 12,806 12,868 12,903 13,076 12,806 12,460 12,438 12,670 42 Other 6,879 6,154 6,178 6,249 6,183 6,026 6,178 6,331 6,181 6,008 43 120,462 143,540 144,653 147,672 141,363 144,476 144,653 140,0% 139,600 152,639 China 44 People's Republic of China 2,626 3,202 4,011 3,261 3,280 3,187 4,011 4,075 44,,553355 55,,229944 45 Republic of China (Taiwan) 11,491 8,408 10,634 9,969 9,804 10,960 10,634 9,960 9,506 9,306 46 Hong Kong 14,269 18,499 17,233 16,388 16,389 18,673 17,233 18,675 17,763 18,721 4477 2,418 1,399 1,113 1,288 1,251 1,425 1,113 1,436 1,127 1,658 4488 Indonesia 1,463 1,480 1,986 1,715 1,504 1,674 1,986 1,807 1,659 2,366 49 Israel 2,015 3,773 4,436 3,241 5,450 4,582 4,436 4,138 4,630 4,579 50 Japan 47,069 58,435 61,483 65,650 60,171 58,866 61,483 58,606 60,112 66,530 M Korea (South) 2,587 3,337 4,913 4,356 3,889 4,409 4,913 4,721 4,856 4,808 57 Philippines 2,449 2,275 2,035 2,735 2,192 1,902 2,035 1,912 1,820 2,542 53 Thailand 2,252 5,582 6,137 5,846 6,446 6,231 6,137 6,156 5,838 5,985 54 Middle Eastern oil-exporting countries13 15,752 21,437 15,825 17,255 14,681 15,489 15,825 13,131 11,921 13,323 55 Other 16,071 15,713 14,847 15,968 16,306 17,078 14,847 15,479 15,833 17,527 56 Africa 4,825 5,884 6,638 6,127 6,179 5,762 6,638 5,823 6,329 5,745 57 Egypt 1,621 2,472 2,209 2,457 2,220 2,089 2,209 1,961 2,060 1,658 58 Morocco 79 76 99 86 87 110 99 94 73 89 59 South Africa 228 190 451 275 367 272 451 214 294 285 60 Zaire 31 19 12 16 15 10 12 13 8 11 61 Oil-exporting countries 1,082 1,346 1,303 1,281 1,271 1,446 1,303 1,186 1,433 1,139 62 Other 1,784 1,781 2,564 2,012 2,219 1,835 2,564 2,355 2,461 2,563 63 Other 5,567 4,167 4,215r 5,096 5,560 4,520 4,215r 4,967 3,901 4,689 64 Australia 4,464 3,043 3,308 4,045 4,434 3,317 3,308 3,809 2,511 3,006 65 Other 1,103 1,124 907r 1,051 1,126 1,203 907r 1,158 1,390 1,683 66 Nonmonetary international and regional organizations 8,981 9,350 10,846 11,409 10,994 12,965 10,846 10,869 66,,999999 77,,776688 67 International 6,485 7,434 6,761 7,679 7,350 9,094 6,761 6,357 5,760 6,055 68 Latin American regional 1,181 1,415 3,218 2,448 2,539 3,050 3,218 3,402 357 332 69 Other regional 1,315 501 867 1,282 1,105 821 867 1,110 882 1,381 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank for Reconstruction and Development. 12. Includes the Bank for International Settlements. Since December 1992, Excludes "holdings of dollars" of the International Monetary Fund. includes all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, 16. Principally the Inter-American Development Bank. and Slovenia. 17. Asian, African, Middle Eastern, and European regional organizations, 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and except the Bank for International Settlements, which is included in "Other United Arab Emirates (Trucial States). Western Europe." 14. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • July 1994 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 1993 1994 AArreeaa aanndd ccoouunnttrryy 11999911 11999922 11999933 Sept. Oct. Nov. Dec. Jan. Feb. Mar." 1 Total, all foreigners 514,339 499,437 483,152r 477,188 465,861 468,770 483,152r 470,679r 477,339 481,232 2 Foreign countries 508,056 494,355 480,747r 474,809 464,618 466,569 480,747r 467,566r 475,645 479,518 3 Europe 114,310 123,377 121,036 124,259 124,593 120,650 121,036 114,390r 124,661 129,682 4 Austria 327 331 413 457 568 501 413 720r 598 489 5 Belgium and Luxembourg 6,158 6,404 6,535 6,589 5,516 5,911 6,535 5,169r 6,327 6,762 6 Denmark 686 707 382 631 1,056 1,261 382 507 600 612 7 Finland 1,907 1,418 598 594 730 606 598 699 725 570 8 France 15,112 14,723 11,490 10,974 11,516 11,622 11,490 11,705 11,033 11,484 9 Germany 3,371 4,222 7,683 7,994 7,570 6,961 7,683 7,364 7,966 8,164 10 Greece 553 717 679 629 592 684 679 653r 669 736 11 Italy 8,242 9,047 8,876 8,971 8,035 8,402 8,876 8,950 8,477 7,666 12 Netherlands 2,546 2,468 3,064 3,383 3,163 3,607 3,064 3,878 2,761 2,939 13 Norway 669 355 396 841 779 598 396 738 777 531 14 Portugal 344 325 720 787 826 787 720 805 918 936 15 Russia 1,970 3,147 2,295 2,547 2,581 2,295 2,295 2,142 2,005 1,957 16 Spain 1,881 2,755 2,763 3,652 4,747 4,388 2,763 3,299 2,688 2,668 17 Sweden 2,335 4,923 4,100 4,630 4,111 3,531 4,100 3,704 3,608 3,443 18 Switzerland 4,540 4,717 6,567 5.216 4,647 5,946 6,567 7,177 4,535 8,602 19 Turkey 1,063 962 1,287 1.418 1,638 1,790 1,287 1,118 1,627 1,559 20 United Kingdom 60,395 63,430 60,930 62.508 64,044 59,403 60,930 53,219* 66,993 68,137 21 Yugoslavia2 825 569 536 542 535 549 536 470 414 376 22 Other Europe and former U.S.S.R.3 1,386 2,157 1,722 1,8% 1,939 1,808 1,722 2,073 1,940 2,051 23 Canada 15,113 13,845 18,432 19,007 15,697 15,478 18,432 19,126 16,884 16,985 24 Latin America and Caribbean 246,137 218,078 223,967r 215,660 212,002 216,687 223,967r 226,04 lr 226,228 226,951 25 Argentina 5,869 4,958 4,425 4,715 4,390 4,518 4,425 4,569 4,459 4,633 26 Bahamas 87,138 60,835 65,045 60,906 60,350 63,242 65,045 66,411 65,439 66,023 27 Bermuda 2,270 5,935 8,032 5,550 8,915 7,565 8,032 10,234 9,969 8,322 28 Brazil 11,894 10,773 11,803 11,294 11,675 11,677 11,803 12,719 12,841 12,907 29 British West Indies 107,846 101,507 97,930r 97,409 90,041 92,621 97,930r 94,348r 95,230 99,243 30 Chile 2,805 3,397 3,614 3,832 3,857 3,728 3,614 3,546 3,763 3,659 31 Colombia 2,425 2,750 3,179 2,921 2,957 3,040 3,179 3,241 3,053 3,057 32 Cuba 0 0 0 0 0 0 0 0 2 0 33 Ecuador 1,053 884 673 701 707 704 673 679 722 702 34 Guatemala 228 262 286 244 269 286 286 316 294 288 35 Jamaica 158 162 195 183 175 186 195 180 176 162 36 Mexico 16,567 14,991 15,833 15,750 16,155 16,073 15,833 16,466r 16,827 15,974 37 Netherlands Antilles 1,207 1,379 2,367 3,155 3,310 3,048 2,367 3,115 3,093 2,406 38 Panama 1,560 4,654 2,913 2,370 2,491 2,625 2,913 2,843 2,983 2,474 39 Peru 739 730 651 617 636 620 651 693 726 748 40 Uruguay 599 936 951 926 926 918 951 793 742 530 41 Venezuela 2,516 2,525 2,904r 2,835 2,815 3,054 2,904r 2,763r 2,709 2,644 42 Other 1,263 1,400 3,166 2,252 2,333 2,782 3,166 3,125 3,200 3,179 43 125,262 131,789 110,684 109,020 105,497 110077,,554411 111100,,668844 110011,,440066rr 110011,,550011 9988,,889900 China 44 People's Republic of China 747 906 2,299 700 773 706 2,299 881 842 7% 45 Republic of China (Taiwan) 2,087 2,046 2,628 1,594 1,674 2,003 2,628 2,611 1,487 2,158 46 Hong Kong 9,617 9,642 10,864 11,155 9,640 10,449 10,864 10,224r 9,990 11,662 47 India 441 529 589 585 635 657 589 638 664 737 48 Indonesia 952 1,189 1,522 1,330 1,268 1,474 1,522 1,556 1,532 1,605 49 Israel 860 820 826 747 752 787 826 947r 798 675 50 Japan 84,807 79,172 59,576 60,163 60,283 59,934 59,576 54,164 54,583 49,838 51 Korea (South) 6,048 6,179 7,556 7,106 7,133 7,148 7,556 7,373 7,503 7,464 52 Philippines 1,910 2,145 1,408 1,143 1,168 1,265 1,408 1,132 1,183 1,307 53 Thailand 1,713 1,867 2,154 2,143 2,145 2,110 2,154 2,375r 2,543 2,651 54 Middle Eastern oil-exporting countries4 8,284 18,540 14,398 14,251 13,580 13,853 14,398 12,903 13,190 14,153 55 Other 7,7% 8,754 6,864 8,103 6,446 7,155 6,864 6,602r 7,186 5,844 56 Africa 4,928 4,279 3,819 4,023 3,919 3,799 3,819 3,746 3,770 3,690 57 Egypt 294 186 196 176 160 218 196 198 222 205 58 Morocco 575 441 444 454 433 437 444 489 521 511 59 South Africa 1,235 1,041 633 713 663 664 633 581 558 564 60 Zaire 4 4 4 3 3 4 4 4 6 4 61 Oil-exporting countries5 1,298 1,002 1,128 1,206 1,187 1,119 1,128 1,169 1,197 1,210 62 Other 1,522 1,605 1,414 1,471 1,473 1,357 1,414 1,305 1,266 1,1% 63 Other 2,306 2,987 2,809 2,840 2,910 2,414 2,809 2,857 2,601 3,320 64 Australia 1,665 2,243 2,072 2,414 2,401 1,873 2,072 2,030 1,692 1,684 65 Other 641 744 737 426 509 541 737 827 909 1,636 66 Nonmonetary international and regional organizations6 6,283 5,082 2,405 2,379 1,243 2,201 2,405 3,113 1,694 1,714 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. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 5. Comprises Algeria, Gabon, Libya, and Nigeria. 3. Includes the Bank for International Settlements. Since December 1992, 6. Excludes the Bank for International Settlements, which is included in includes all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, "Other Western Europe." and Slovenia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1993 1994 Sept. Oct. Nov. Dec. Jan.r Feb. Mar.p 1 Total 579,683 559,495 523,562r 518,469 523,562r 2 Banks' claims 514,339 499,437 483,152r 477,188 465,861 468,770 483,152r 470,679 477,339 481,232 3 Foreign public borrowers 37,126 31,367 28,814r 31,925 31,320 29,761 28,814r 30,677 26,649 25,494 4 Own foreign offices 318,800 303,991 286,848r 286,710 269,968 279,876 286,848r 275,478 273,611 287,901 5 Unaffiliated foreign banks 116,602 109,342 98,018r 96,000 91,888 92,030 98,018r 90,994 97,724 94,101 6 Deposits 69,018 61,550 46,875r 44,928 43,777 44,005 46,875r 40,662 45,813 44,068 7 Other 47,584 47,792 51,143 51,072 48,111 48,025 51,143 50,332 51,911 50,033 8 All other foreigners 41,811 54,737 69,472 62,553 72,685 67,103 69,472 73,530 79,355 73,736 9 Claims of banks' domestic customers3... 65,344 60,058 40,410 41,281 40,410 10 Deposits 15,280 15,452 9,619 9,343 9,619 11 Negotiable and readily transferable instruments4 37,125 31,474 17,155 18,475 17,155 12 Outstanding collections and other claims 12,939 13,132 13,636 13,463 13,636 MEMO 13 Customer liability on acceptances 8,974 8,655 7,871 8,190 7,871 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5.... 43,024 36,213 22,733 24,507 27,002 21,830 22,733 21,569 21,350 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 in the accounts 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 1993 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999900 11999911 11999922 Mar. June Sept. Dec. 1 Total 206,903 195,302 195,119 182,205 182,975 189,716 194,838 By borrower 2 Maturity of one year or less 165,985 162,573 163,325 151,986 154,312 162,005 166,288 3 Foreign public borrowers 19,305 21,050 17,813 21,239 17,962 21,211 17,447 4 All other foreigners 146,680 141,523 145,512 130,747 136,350 140,794 148,841 5 Maturity of more than one year 40,918 32,729 31,794 30,219 28,663 27,711 28,550 6 Foreign public borrowers 22,269 15,859 13,266 12,214 11,255 10,507 10,828 7 All other foreigners 18,649 16,870 18,528 18,005 17,408 17,204 17,722 By area Maturity of one year or less 8 Europe 49,184 51,835 53,300 54,838 54,372 57,238 56,273 9 Canada 5,450 6,444 6,091 7,874 7,893 9,833 7,564 10 Latin America and Caribbean 49,782 43,597 50,376 45,082 48,552 51,619 56,686 11 Asia 53,258 51,059 45,709 37,741 38,654 37,624 40,274 12 Africa 3,040 2,549 1,784 1,677 1,712 1,916 1,783 13 All other3 5,272 7,089 6,065 4,774 3,129 3,775 3,708 Maturity of more than one year 14 Europe 3,859 3,878 5,367 4,896 4,579 4,433 4,327 15 Canada 3,290 3,595 3,287 3,120 2,909 2,549 2,553 16 Latin America and Caribbean 25,774 18,277 15,312 14,574 13,828 13,519 13,877 17 Asia 5,165 4,459 5,038 5,063 4,808 4,732 5,412 18 Africa 2,374 2,335 2,380 2,130 2,050 2,049 1,934 19 All other3 456 185 410 436 489 429 447 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

A60 International Statistics • July 1994 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 1991 1992 1993 AArreeaa oorr ccoouunnttrryy 11998899 11999900 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec.p 1 Total 340.9 320.1 343.6 351.7 358.7 344.5 346.5 361.0 377.1 388.1 403.3 2 G-10 countries and Switzerland 152.9 132.2 137.6 130.9 135.6 136.0 132.9 142.4 150.1 153.4 160.9 3 Belgium and Luxembourg 6.3 5.9 6.0 5.3 6.2 6.2 5.6 6.1 7.0 7.1 7.4 4 France 11.7 10.4 11.0 10.0 11.9 15.3 15.3 13.5 14.0 12.3 11.7 5 Germany 10.5 10.6 8.3 8.4 8.8 10.9 9.3 9.9 10.8 12.4 12.6 6 7.4 5.0 5.6 5.4 8.0 6.4 6.5 6.7 7.9 8.7 7.6 7 Netherlands 3.1 3.0 4.7 4.3 3.3 3.7 2.8 3.6 3.7 3.7 4.7 8 Sweden 2.0 2.2 1.9 2.0 1.9 2.2 2.3 3.0 2.5 2.5 2.5 9 Switzerland 7.1 4.4 3.4 3.2 4.6 5.2 4.8 5.3 4.7 5.6 5.9 10 United Kingdom 67.2 60.9 68.5 64.7 65.6 61.0 60.8 65.7 73.5 74.7 84.4 11 Canada 5.4 5.9 5.8 6.5 6.5 6.3 6.3 8.2 8.1 9.7 6.6 12 Japan 32.3 24.0 22.6 21.1 18.7 18.9 19.3 20.4 17.9 16.9 17.4 13 Other industrialized countries 21.0 22.9 22.8 21.4 25.5 25.0 24.0 25.4 27.2 26.0 24.6 14 Austria 1.5 1.4 .6 .8 .8 .7 1.2 1.2 1.3 .6 .4 15 Denmark 1.1 1.1 .9 .8 1.3 1.5 .9 .8 1.0 1.1 1.0 16 Finland 1.0 .7 .7 .8 .8 1.0 .7 .7 .9 .6 .4 17 Greece 2.5 2.7 2.6 2.3 2.8 3.0 3.0 2.7 3.1 3.2 3.2 18 Norway 1.4 1.6 1.4 1.5 1.7 1.6 1.2 1.8 1.8 2.1 1.7 19 Portugal .4 .6 .6 .5 .5 .5 .4 .7 .9 1.0 .8 20 Spain 7.1 8.3 8.3 7.7 10.1 9.7 8.9 9.5 10.5 9.3 8.9 21 Turkey 1.2 1.7 1.4 1.2 1.5 1.5 1.3 1.4 2.1 2.1 2.1 22 Other Western Europe 1.0 1.2 1.8 1.5 2.0 1.5 1.7 2.0 1.7 2.2 2.6 23 South Africa 2.0 1.8 1.9 1.8 1.7 1.7 1.7 1.6 1.3 1.2 1.1 24 Australia 1.6 1.8 2.7 2.3 2.2 2.3 2.9 2.9 2.5 2.8 2.3 25 OPEC2 17.1 12.8 14.5 15.8 16.2 15.9 16.1 16.8 15.9 14.9 16.9 26 Ecuador 1.3 1.0 .7 .7 .7 .7 .6 .6 .6 .5 .5 27 Venezuela 7.0 5.0 5.4 5.4 5.3 5.4 5.2 5.3 5.6 5.6 5.3 28 Indonesia 2.0 2.7 2.7 3.0 3.0 3.0 3.0 3.1 3.1 2.8 3.2 29 Middle East countries 5.0 2.5 4.2 5.3 5.9 5.4 6.2 6.6 5.4 4.9 6.7 30 African countries 1.7 1.7 1.5 1.4 1.4 1.4 1.1 1.1 1.1 1.1 1.2 31 Non-OPEC developing countries 77.5 65.4 63.9 69.7 68.1 72.8 72.1 74.4 76.6 76.9 82.5 Latin America 32 Argentina 6.3 5.0 4.8 5.0 5.1 6.2 6.6 7.0 6.6 7.2 7.7 33 Brazil 19.0 14.4 9.6 10.8 10.6 10.8 10.8 11.6 12.3 11.6 12.0 34 Chile 4.6 3.5 3.6 3.9 4.0 4.2 4.4 4.6 4.6 4.7 4.7 35 Colombia 1.8 1.8 1.7 1.6 1.6 1.7 1.8 1.9 1.9 2.0 2.1 36 Mexico 17.7 13.0 15.5 17.7 16.3 17.1 16.0 16.8 16.8 17.5 17.7 37 .6 .5 .4 .4 .4 .5 .5 .4 .4 .3 .4 38 Other 2.8 2.3 2.1 2.2 2.2 2.5 2.6 2.6 2.7 2.6 3.0 Asia China 39 Peoples Republic of China .3 .2 .3 .3 .3 .3 .7 .6 1.6 .5 2.0 40 Republic of China (Taiwan) 4.5 3.5 4.1 4.8 4.6 5.0 5.2 5.3 5.9 6.4 7.3 41 India 3.1 3.3 3.0 3.6 3.8 3.6 3.2 3.1 3.1 2.9 3.2 42 Israel .7 .5 .5 .4 .4 .4 .4 .5 .4 .4 .5 43 Korea (South) 5.9 6.2 6.8 6.9 6.9 7.4 6.6 6.5 6.9 6.5 6.7 44 Malaysia 1.7 1.9 2.3 2.5 2.7 3.0 3.1 3.4 3.7 4.1 4.4 45 Philippines 4.1 3.8 3.7 3.6 3.1 3.6 3.6 3.4 2.9 2.6 3.1 46 Thailand 1.3 1.5 1.7 1.7 1.9 2.2 2.2 2.2 2.4 2.8 3.1 47 Other Asia3 1.0 1.7 2.0 2.3 2.5 2.7 2.7 2.7 2.6 3.0 2.9 Africa 48 Egypt .4 .4 .4 .3 .5 .3 .2 .2 .2 .2 .4 49 Morocco .9 .8 .7 .7 .7 .6 .6 .5 .6 .6 .6 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 1.0 1.0 .7 .7 .6 .9 1.0 .8 .9 .8 .8 52 Eastern Europe 3.5 2.3 2.4 2.9 3.0 3.1 3.1 2.9 3.2 3.0 3.0 53 Russia .7 .2 .9 1.4 1.7 1.8 1.9 1.7 1.9 1.7 1.6 54 Yugoslavia 1.6 1.2 .9 .8 .7 .7 .6 .6 .6 .6 .6 55 Other 1.3 .9 .7 .6 .6 .7 .6 .7 .7 .7 .9 56 Offshore banking centers 38.4 44.7 54.2 63.0 61.4 54.5 58.3 60.1 57.8 67.5 72.0 57 Bahamas 5.5 2.9 11.9 15.3 12.9 8.9 6.9 9.6 6.9 12.4 12.6 58 Bermuda 1.7 4.4 2.3 3.9 5.1 3.8 6.2 4.1 4.5 5.5 8.1 59 Cayman Islands and other British West Indies 9.0 11.7 15.8 18.6 19.3 16.9 21.8 17.6 15.6 15.1 16.5 60 Netherlands Antilles 2.3 7.9 1.2 1.0 .8 .7 1.1 1.6 2.5 2.8 2.3 61 Panama4 1.4 1.4 1.4 1.6 1.9 2.0 1.9 2.0 2.1 2.1 2.4 62. Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 11.3 9.7 14.4 14.0 14.9 15.2 13.8 16.7 16.9 19.1 18.7 64 Singapore 7.0 6.6 7.1 8.5 6.4 6.8 6.5 8.4 9.3 10.4 11.2 65 Other5 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .1 66 Miscellaneous and unallocated6 30.5 39.9 48.0 47.8 48.6 36.8 39.7 38.8 46.2 46.3 43.3 1. The banking offices covered by these data are the U.S. offices and foreign by an increase in the reporting threshold for "shell" branches from $50 million to branches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks. $150 million equivalent in total assets, the threshold now applicable to all Offices not covered include (1) U.S. agencies and branches of foreign banks, and reporting branches. (2) foreign subsidiaries of U.S. banks. U.S. office data include other types of 2. Organization of Petroleum Exporting Countries, shown individually; other U.S.-owned depository institutions as well as some types of brokers and dealers. members of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, To minimize duplication, the data are adjusted to exclude the claims on foreign Saudi Arabia, and United Arab Emirates); and Bahrain and Oman (not formally branches held by a U.S. office or another foreign branch of the same banking members of OPEC). institution. The data in this table combine foreign branch claims in table 3.14 (the 3. Excludes Liberia. sum of lines 7 through 10) with the claims of U.S. offices in table 3.18 (excluding 4. Includes Canal Zone. those held by agencies and branches of foreign banks and those constituting 5. Foreign branch claims only. claims on own foreign branches). 6. Includes New Zealand, Liberia, and international and regional Since June 1984, reported claims held by foreign branches have been reduced organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A61 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1992 1993 Type of liability and area or country 11999900 11999911 11999922 Sept. Dec. Mar. June Sept. Dec.p 1 Total 46,043 44,708 45,351 47,089 45,351 46,181 46,424 48,674 49,453 2 Payable in dollars 40,786 39,029 37,209 38,344 37,209 37,823 37,014 39,280 37,804 3 Payable in foreign currencies 5,257 5,679 8,142 8,745 8,142 8,358 9,410 9,394 11,649 By type 4 Financial liabilities 21,066 22,518 23,380 24,518 23,380 23,947 24,714 26,067 27,445 5 Payable in dollars 16,979 18,104 16,623 17,453 16,623 17,021 16,870 18,635 18,112 6 Payable in foreign currencies 4,087 4,414 6,757 7,065 6,757 6,926 7,844 7,432 9,333 7 Commercial liabilities 24,977 22,190 21,971 22,571 21,971 22,234 21,710 22,607 22,008 8 Trade payables 10,683 9,252 9,886 10,234 9,886 10,005 9,687 9,483 9,011 9 Advance receipts and other liabilities ... 14,294 12,938 12,085 12,337 12,085 12,229 12,023 13,124 12,997 10 Payable in dollars 23,807 20,925 20,586 20,891 20,586 20,802 20,144 20,645 19,692 11 Payable in foreign currencies 1,170 1,265 1,385 1,680 1,385 1,432 1,566 1,962 2,316 By area or country Financial liabilities 12 Europe 10,978 12,003 13,101 14,334 13,101 13,461 14,060 16,341 17,862 13 Belgium and Luxembourg 394 216 414 256 414 306 268 278 175 14 France 975 2,106 1,608 2,785 1,608 1,610 2,216 2,074 2,323 15 Germany 621 682 810 738 810 820 787 779 902 16 Netherlands 1,081 1,056 606 980 606 639 585 573 534 17 Switzerland 545 408 569 627 569 503 491 378 634 18 United Kingdom 6,357 6,528 8,424 8,146 8,424 9,029 9,058 11,669 12,690 19 Canada 229 292 516 345 516 576 492 663 859 20 Latin America and Caribbean 4,153 4,784 4,053 3,997 4,053 4,299 4,199 3,719 3,359 21 Bahamas 371 537 369 230 369 521 426 1,301 1,148 22 Bermuda 0 114 114 115 114 114 124 114 0 23 Brazil 0 6 19 18 19 18 18 18 18 24 British West Indies 3,160 3,524 2,860 2,933 2,860 2,970 2,951 1,600 1,533 25 Mexico 5 7 12 12 12 13 11 15 17 26 Venezuela 4 4 6 5 6 5 5 5 5 27 Asia 5,295 5,381 5,676 5,752 5,676 5,550 5,793 5,194 5,203 28 Japan 4,065 4,116 4,608 4,678 4,608 4,539 4,611 4,165 4,134 29 Middle East oil-exporting countries .. 5 13 19 17 19 24 19 23 23 30 Africa 2 6 6 5 6 6 130 132 133 0 4 0 0 0 0 123 124 123 31 Oil-exporting countries 409 52 28 85 28 55 40 18 29 32 All other4 Commercial liabilities 10,310 8,701 7,377 7,478 7,377 6,985 6,801 7,045 6,809 33 Europe 275 248 296 173 296 262 267 255 238 34 Belgium and Luxembourg 1,218 1,039 697 756 697 705 773 640 646 35 France 1,270 1,052 717 851 717 650 603 571 684 36 Germany 844 710 535 601 535 537 577 601 687 37 Netherlands 775 575 349 482 349 471 440 535 373 38 Switzerland 2,792 2,297 2,503 2,268 2,503 2,117 2,185 2,319 2,053 39 United Kingdom 40 Canada 1,261 1,014 1,002 1,114 1,002 1,005 941 847 881 41 Latin America and Caribbean 1,672 1,355 1,532 1,515 1,532 1,776 1,828 1,759 1,661 42 Bahamas 12 3 3 3 3 11 6 4 21 43 Bermuda 538 310 307 325 307 429 356 340 348 44 Brazil 145 219 209 121 209 236 226 214 216 45 British West Indies 30 107 33 85 33 34 16 36 26 46 Mexico 475 307 457 326 457 553 659 577 485 47 Venezuela 130 94 142 147 142 171 172 173 126 48 Asia 9,483 9,334 10,917 11,026 10,917 11,067 10,823 11,736 11,620 49 Japan 3,651 3,721 3,951 3,918 3,951 4,035 3,715 4,546 5,097 50 Middle Eastern oil-exporting countries' 2,016 1,498 1,889 1,813 1,889 1,796 1,815 1,934 1,543 51 Africa 844 715 568 675 568 675 665 641 445 52 Oil-exporting countries 422 327 309 335 309 322 378 320 153 53 Other4 1,406 1,071 575 763 575 726 652 579 592 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

A62 International Statistics • July 1994 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1992 1993 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11999900 11999911 11999922 Sept. Dec. Mar. June Sept. Dec.p 1 Total 35,348 45,262 41,894 46,271 41,894 45,784 41,470 42,003 42,552 2 Payable in dollars 32,760 42,564 39,287 43,297 39,287 42,904 38,346 38,732 39,022 3 Payable in foreign currencies 2,589 2,698 2,607 2,974 2,607 2,880 3,124 3,271 3,530 By type 4 Financial claims 19,874 27,882 23,532 28,573 23,532 26,064 21,808 23,324 23,047 5 Deposits 13,577 20,080 15,100 19,524 15,100 16,508 11,646 13,286 12,981 6 Payable in dollars 12,552 19,080 14,302 18,387 14,302 15,450 10,728 12,307 12,171 7 Payable in foreign currencies 1,025 1,000 798 1,137 798 1,058 918 979 810 8 Other financial claims 6,297 7,802 8,432 9,049 8,432 9,556 10,162 10,038 10,066 9 Payable in dollars 5,280 6,910 7,667 8,028 7,667 8,803 9,238 9,279 9,096 10 Payable in foreign currencies 1,017 892 765 1,021 765 753 924 759 970 11 Commercial claims 15,475 17,380 18,362 17,698 18,362 19,720 19,662 18,679 19,505 12 Trade receivables 13,657 14,468 15,804 14,755 15,804 17,364 17,180 15,698 16,291 13 Advance payments and other claims 1,817 2,912 2,558 2,943 2,558 2,356 2,482 2,981 3,214 14 Payable in dollars 14,927 16,574 17,318 16,882 17,318 18,651 18,380 17,146 17,755 15 Payable in foreign currencies 548 806 1,044 816 1,044 1,069 1,282 1,533 1,750 By area or country Financial claims 16 Europe 9,645 13,441 9,310 11,301 9,310 10,321 9,620 8,251 8,042 17 Belgium and Luxembourg 76 13 8 16 8 6 13 9 131 18 France 371 269 762 768 762 905 781 708 749 19 Germany 367 283 326 292 326 388 383 361 472 20 Netherlands 265 334 515 750 515 544 499 485 483 21 Switzerland 357 581 490 587 490 478 460 454 506 22 United Kingdom 7,971 11,534 6,234 8,078 6,234 6,968 6,550 5,227 4,535 23 Canada 2,934 2,642 1,709 2,281 1,709 2,007 1,781 1,593 1,810 24 Latin America and Caribbean 6,201 10,717 11,122 13,837 11,122 9,718 6,704 10,067 10,868 25 Bahamas 1,090 827 658 1,248 658 320 697 494 452 26 Bermuda 3 8 40 65 40 79 258 197 125 27 Brazil 68 351 686 589 686 592 590 590 599 28 British West Indies 4,635 9,056 9,266 11,492 9,266 8,266 4,650 8,109 8,614 29 Mexico 177 212 286 239 286 235 270 385 634 30 Venezuela 25 40 29 26 29 23 24 25 161 31 Asia 860 640 807 717 807 3,263 2,961 2,709 1,751 32 Japan 523 350 643 471 643 3,066 2,444 2,199 1,063 33 Middle East oil-exporting countries 8 5 3 4 3 3 10 5 3 34 Africa 37 57 79 71 79 128 125 88 99 35 Oil-exporting countries 0 1 9 1 9 1 1 1 1 36 All other4 195 385 505 366 505 627 617 616 477 Commercial claims 37 Europe 7,044 8,193 8,401 8,196 8,401 8,744 8,885 7,975 8,418 38 Belgium and Luxembourg 212 194 189 174 189 170 172 163 182 39 France 1,240 1,585 1,525 1,825 1,525 1,476 1,488 11,,339944 1,754 40 Germany 807 955 931 900 931 974 979 889988 953 41 Netherlands 555 645 551 589 551 730 560 399 387 42 Switzerland 301 295 362 308 362 436 442 376 417 43 United Kingdom 1,775 2,086 2,081 2,011 2,081 2,326 2,514 2,213 2,176 44 Canada 1,074 1,121 1,258 1,155 1,258 1,312 1,330 1,326 1,284 45 Latin America and Caribbean 2,375 2,655 3,024 3,225 3,024 3,431 3,414 3,023 3,145 46 Bahamas 14 13 28 12 28 18 17 20 11 47 Bermuda 246 264 255 256 255 195 239 225 173 48 Brazil 326 427 356 410 356 834 786 406 442 49 British West Indies 40 41 40 43 40 17 43 39 69 50 Mexico 661 842 920 977 920 985 898 848 925 51 Venezuela 192 203 344 307 344 341 314 282 293 52 Asia 4,127 4,591 4,764 4,328 4,764 5,360 5,113 5,439 5,689 53 Japan 1,460 1,899 1,879 1,779 1,879 2,145 1,853 2,496 2,338 54 Middle Eastern oil-exporting countries2 460 620 682 513 682 761 659 446 645 55 Africa 488 430 552 439 552 457 510 487 488 56 Oil-exporting countries 67 95 78 60 78 75 98 107 71 57 Other4 367 390 363 355 363 416 410 429 481 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 A63 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1994 1993 1994 Transaction and area or country 1992 1993 J M an ar .- . Sept. Oct. Nov. Dec. Jan. Feb. Mar.p U.S. corporate securities STOCKS 1 Foreign purchases 221,367 319,449 103,012 23,892 32,350 31,924 32,843 32,238 34,428 36,346 2 Foreign sales 226,503 297,913 96,748 23,023 27,840 28,755 28,362 28,965 30,709 37,074 3 Net purchases or sales (—) -5,136 21,536 6,264 869 4,510 3,169 4,481 3,273 3,719 -728 4 Foreign countries -5,169 21,264 6,333 951 4,598 3,099 4,457 3,273 3,786 -726 5 Europe -4,927 10,615 6,789 434 3,095 1,407 2,415 2,951 3,447 391 6 France -1,350 -103 -278 -152 198 45 61 119 190 -587 7 Germany -80 1,647 1,942 112 328 130 266 1,170 440 332 8 Netherlands -262 -603 224 69 134 -767 183 169 210 -155 9 Switzerland 168 2,986 857 -259 409 205 338 254 505 98 10 United Kingdom -3,301 4,510 2,218 570 1,709 1,470 1,078 614 1,215 389 11 Canada 1,407 -3,213 -29 -596 -300 11 -110 314 -284 -59 12 Latin America and Caribbean 2,203 5,709 1,827 139 1,245 941 1,058 948 910* -31 13 Middle East1 -88 -311 -56 10 -77 53 11 -100 -17 61 14 Other Asia -3,943 8,199 -2,583 977 602 601 965 -911 -379r -1,293 15 Japan -3,598 3,826 -1,362 1,016 349 488 681 -800 -447 -115 16 Africa 10 63 6 3 5 6 20 10 -17 13 17 Other countries 169 202 379 -16 28 80 98 61 126 192 18 Nonmonetary international and regional organizations 33 272 -69 -82 -88 70 24 0 -67 -2 BONDS2 19 Foreign purchases 214,922 283,745 77,205 24,845 27,565 28,947 28,395 24,607 22,233r 30,365 20 Foreign sales 175,842 217,481 63,476 16,294 18,938 21,545 17,427 19,418 18,309 25,749 21 Net purchases or sales (-) 39,080 66,264 13,729 8,551 8,627 7,402 10,968 5,189 3,924r 4,616 22 Foreign countries 37,964 65,726 13,627 7,865 8,488 7,375 10,901 5,205 3,893r 4,529 23 Europe 17,435 22,055 7,448 3,913 3,973 1,534 3,118 2,742 2,680r 2,026 24 France 1,203 2,346 28 13 512 110 145 53 -57 32 75 Germany 2,480 883 -75 -419 913 -231 -62 -101 90 -64 76 Netherlands 540 -290 504 219 -518 49 95 75 99 330 77 Switzerland -579 -627 364 -204 203 -80 28 176 57 131 7.8 United Kingdom 12,421 19,158 7,584 4,059 2,666 2,300 2,853 1,676 2,761 3,147 79 Canada 237 1,653 -17 249 95 54 319 23 -141 101 30 Latin America and Caribbean 9,300 16,493 4,397 846 1,727 2,650 3,681 1,638 909 1,850 31 Middle East1 3,166 3,257 137 171 375 432 383 161 -83 59 37. Other Asia 7,545 20,846 1,567 2,373 2,256 2,765 3,137 670 480 417 33 Japan -450 11,569 -421 993 1,574 1,478 2,477 -95 37 -363 34 Africa 354 1,149 -51 236 47 -2 119 -51 10 -10 35 Other countries -73 273 146 77 15 -58 144 22 38 86 36 Nonmonetary international and regional organizations 1,116 538 102 686 139 27 67 -16 31 87 Foreign securities 37 Stocks, net purchases or sales (-)3 -32,259 -63,320 -17,819 -5,236 -7,474 -6,931 -6,503 -5,860 —6,248r -5,711 38 Foreign purchases 150,051 246,011 107,714 21,475 24,740 28,408 31,135 32,432 38,374r 36,908 39 Foreign sales 182,310 309,331 125,533 26,711 32,214 35,339 37,638 38,292 44,622r 42,619 40 Bonds, net purchases or sales (-) -15,605 -61,023 -10,957 -9,903 -2,479 -54 -8,158 -9,483r -4,728r 3,254 41 Foreign purchases 513,589 839,118 288,925 80,145 76,034 87,459 79,334 84,223 85,847r 118,855 42 Foreign sales 529,194 900,141 299,882 90,048 78,513 87,513 87,492 93,706r 90,575r 115,601 43 Net purchases or sales (-), of stocks and bonds -47,864 -124,343 -28,776 -15,139 -9,953 -6,985 -14,661 -15,343' -10,976' -2,457 44 Foreign countries -51,274 -124,504 -28,664 -15,215 -10,302 -6,994 -14,691 —15,386r -10,844' -2,434 45 Europe -31,350 -81,175 -1,969 -13,217 -5,004 -4,530 -4,351 -5,512 -3,599r 7,142 46 Canada -6,893 -14,649 -4,511 -1,404 -949 709 -1,733 -2,741 -2,416r 646 47 Latin America and Caribbean -4,340 -9,549 -6,325 1,905 -1,280 -2,248 -4,566 -3,124r -327r -2,874 48 -7,923 -15,044 -15,102 -2,221 -2,002 -502 -3,555 -3,171r -4,450r -7,481 49 Africa -13 -185 -244 14 14 0 13 -60 18 -202 50 Other countries -755 -3,902 -513 -292 -1,081 -423 -499 -778 -70 335 51 Nonmonetary international and regional organizations 3,410 161 -112 76 349 9 30 43 -132 -23 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

A64 International Statistics • July 1994 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1994 1993 1994 Country or area 1992 1993 J M an ar .- . Sept. Oct. Nov. Dec. Jan. Feb. Mar.p Transactions, net purchases or sales (-) during period' 1 Estimated total 39,288 24,294 13,973 -10,890 3,925 15,203 507 l,853r 12,995r -875 2 Foreign countries 37,935 24,091 13,585 -10,748 5,055 14,584 696 1,592r 12,884r -891 3 Europe 19,625 -2,311 6,167 -5,917 3,500 -841 499 114 3,552 2,501 4 Belgium and Luxembourg 1,985 1,218 334 207 -205 22 -65 -63 128 269 5 Germany 2,076 -9,977 543 1,209 1,176 -750 571 2,327 -1,055 -729 6 Netherlands -2,959 -515 -501 137 -506 206 -189 52 418 -971 7 Sweden -804 1,421 259 53 47 141 -31 -4 229 34 8 Switzerland 488 -1,501 2,253 -209 448 573 -70 313 555 1,385 9 United Kingdom 24,184 6,266 1,423 -8,201 833 -1,900 -412 -1,888 2,455 856 10 Other Europe and former U.S.S.R. ... -5,345 777 1,856 887 1,707 867 695 -623 822 1,657 11 Canada 562 11,252 927 -1,119 -342 1,358 846 32 168r 727 12 Latin America and Caribbean -3,222 -4,692 7,806 -3,311 3,701 2,070 -4,830 3,677r 7,512 -3,383 13 Venezuela 539 389 -30 32 -102 19 56 -358r 235 93 14 Other Latin America and Caribbean -1,956 -5,925 1,772 -1,700 676 -36 -1,061 3,118 2,860 -4,206 15 Netherlands Antilles -1,805 844 6,064 -1,643 3,127 2,087 -3,825 917 4,417 730 16 Asia 23,517 20,532 -890 -574 -2,034 11,771 4,029 -2,152 1,191 71 17 Japan 9,817 17,070 -1,607 -1,809 156 5,661 649 -3,074 -1,403 2,870 18 Africa 1,103 1,156 -273 616 74 35 115 -135 -120 -18 19 Other -3,650 -1,846 -152 -443 156 191 37 56 581 -789 20 Nonmonetary international and regional organizations 1,353 203 388 -142 -1,130 619 -189 261 lllr 16 21 International 1,018 -302 517 -99 -874 855 124 455 R 61 22 Latin American regional 533 654 86 18 -23 40 -1 7 116 -37 MEMO 23 Foreign countries 37,935 24,091 13,585 -10,748 5,055 14,584 696 l,592r 12,884r -891 24 Official institutions 6,876 1,272 3,446 3,181 1,619 6,223 3,637 4,284r 4,045 -4,883 25 Other foreign 31,059 22,819 10,139 -13,929 3,436 8,361 -2,941 -2,692 8,839r 3,992 Oil-exporting countries 26 Middle East2 4,317 -8,836 -585 -980 -820 -6 84 -1,518 900 33 27 11 -5 0 0 0 0 -9 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 A65 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS1 Percent per year Rate on May 31, 1994 Rate on May 31, 1994 Rate on May 31, 1994 Country Country Country Month Month Month effective effective effective Austria . . 4.75 May 1994 Germany... 4.5 May 1994 Norway 4.75 Feb. 1994 Belgium . 4.50 May 1994 Italy 7.0 May 1994 Switzerland .... 3.5 Apr. 1994 Canada.. 6.59 May 1994 Japan 1.75 Sept. 1993 United Kingdom 12.0 Sept. 1992 Denmark 5.25 May 1994 Netherlands 4.5 May 1994 France".. 5.40 May 1994 I. Rates shown are mainly those at which the central bank either discounts or 2. Since February 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 Percent per year, averages of daily figures 1993 Type or country Dec. Jan. Feb. Mar. Apr. May 1 3 4 5 6 9 2 7 8 0 1 G J C B N U I F S E a t r e a e w a e n u p a l r n l t i r a y i g n m h t a t o n e i c z e d u d d a e e r a m o n l r y a l l K l a n a i n d r n d s s g d . o . m .. 1 1 9 9 9 5 8 9 9 7 1 2 . . . . . . . . . . 1 0 1 0 3 3 8 4 4 0 5 7 9 1 3 0 6 9 7 4 1 1 9 6 9 9 4 3 7 9 3 0 . . . . . . . . . . 3 2 7 4 3 5 6 7 9 1 1 5 6 2 9 6 7 0 1 4 1 5 5 7 4 6 3 8 8 2 0 . . . . . . . . . . 1 1 7 8 7 1 3 1 9 0 7 4 3 8 9 8 0 0 6 9 4 6 5 4 5 6 7 2 3 8 . . . . . . . . . . 2 3 3 8 4 5 9 9 5 3 0 4 1 5 4 2 3 4 6 6 4 5 5 4 5 3 6 8 7 2 . . . . . . . . . . 0 9 2 1 5 0 2 5 3 0 9 9 9 0 0 3 6 6 9 6 5 3 5 6 3 5 3 6 8 2 . . . . . . . . . . 3 1 8 1 1 3 9 7 1 8 4 2 9 5 3 8 0 6 9 8 5 3 4 5 6 2 3 5 6 8 . . . . . . . . . . 1 0 4 8 1 3 4 7 2 1 1 5 4 2 9 9 9 3 8 8 4 3 5 5 3 5 6 8 6 2 . . . . . . . . . . 4 1 2 1 2 7 9 7 1 3 5 2 3 1 6 5 9 3 0 6 4 6 5 5 3 5 2 5 8 5 . . . . . . . . . . 0 1 0 2 4 2 8 9 0 8 7 4 0 2 8 6 4 6 7 9 6 4 5 5 5 3 5 7 5 2 . . . . . . . . . . 3 5 1 0 0 1 9 5 2 7 8 1 3 4 7 7 4 2 7 6 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

A66 International Statistics • July 1994 3.28 FOREIGN EXCHANGE RATES' Currency units per dollar except as noted 1993 1994 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999911 11999922 11999933 Dec. Jan. Feb. Mar. Apr. May 1 Australia/dollar 77.872 73.521 67.993 67.364 69.608 71.611 71.087 71.565 72.433 2 Austria/schilling 11.686 10.992 11.639 12.025 12.252 12.200 11.896 11.948 11.651 3 Belgium/franc 34.195 32.148 34.581 35.694 36.206 35.768 34.862 34.979 34.108 4 Canada/dollar 1.1460 1.2085 1.2902 1.3308 1.3173 1.3424 1.3644 1.3830 1.3808 5 China, P.R./yuan 5.3337 5.5206 5.7795 5.8210 8.7219 8.7249 8.7241 8.7251 8.6859 6 Denmark/krone 6.4038 6.0372 6.4863 6.7042 6.7697 6.7668 6.6296 6.6642 6.4857 7 Finland/markka 4.0521 4.4865 5.7251 5.7602 5.7004 5.5930 5.5436 5.4997 5.4194 8 France/franc 5.6468 5.2935 5.6669 5.8477 5.9207 5.8955 5.7647 5.8170 5.6728 9 Germany/deutsche mark 1.6610 1.5618 1.6545 1.7105 1.7426 1.7355 1.6909 1.6984 1.6565 10 Greece/drachma 182.63 190.81 229.64 245.51 250.29 250.48 246.71 249.08 245.41 11 Hong Kong/dollar 7.7712 7.7402 7.7357 7.7245 7.7251 7.7353 7.7268 7.7269 7.7262 12 India/rupee 22.712 28.156 31.291 31.440 31.440 31.449 31.415 31.391 31.375 13 Ireland/pound" 161.39 170.42 146.47 141.82 143.03 141.91 143.40 143.42 147.12 14 Italy/lira 1,241.28 1,232.17 1,573.41 1,687.17 1,699.45 1,685.96 1,666.63 1,626.07 1,594.56 15 Japan/yen 134.59 126.78 111.08 109.91 111.44 106.30 105.10 103.48 103.75 16 Malaysia/ringgit 2.7503 2.5463 2.5738 2.5737 2.7160 2.7624 2.7171 2.6887 2.6169 17 Netherlands/guilder 1.8720 1.7587 1.8585 1.9162 1.9516 1.9464 1.9006 1.9074 1.8597 18 New Zealand/dollar" 57.832 53.792 54.127 55.631 56.263 57.436 57.093 56.908 58.347 19 Norway/krone 6.4912 6.2142 7.0979 7.4211 7.5064 7.4885 7.3419 7.3680 7.1789 20 Portugal/escudo 144.77 135.07 161.08 174.58 176.04 175.15 174.00 173.54 171.15 21 Singapore/dollar 1.7283 1.6294 1.6158 1.5975 1.6037 1.5873 1.5819 1.5628 1.5464 22 South Africa/rand 2.7633 2.8524 3.2729 3.3788 3.4107 3.4520 3.4586 3.5789 3.6346 23 South Korea/won 736.73 784.58 805.75 812.57 813.55 812.24 810.69 811.71 809.79 24 Spain/peseta 104.01 102.38 127.48 140.42 143.04 141.08 138.78 138.14 136.62 25 Sri Lanka/rupee 41.200 44.013 48.205 49.322 49.460 49.113 48.931 48.925 49.067 26 Sweden/krona 6.0521 5.8258 7.7956 8.3501 8.1184 7.9869 7.9156 7.8850 7.7181 27 Switzerland/franc 1.4356 1.4064 1.4781 1.4634 1.4716 1.4565 1.4292 1.4383 1.4125 28 Taiwan/dollar 26.759 25.160 26.416 26.768 26.495 26.440 26.414 26.389 26.792 29 Thailand/baht 25.528 25.411 25.333 25.460 25.543 25.382 25.325 25.268 25.212 30 United Kingdom/pound" 176.74 176.63 150.16 149.13 149.23 147.92 149.19 148.23 150.42 MEMO 31 United States/dollar1 89.84 86.61 93.18 95.73 96.54 95.79 94.35 94.39 92.79 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

A67 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 June 1994 A76 SPECIAL TABLES—Quarterly Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks March 31, 1993 August 1993 A70 June 30, 1993 November 1993 A70 September 30, 1993 February 1994 A70 December 31, 1993 May 1994 A68 Terms of lending at commercial banks May 1993 August 1993 A76 August 1993 November 1993 A76 November 1993 February 1994 A76 February 1994 May 1994 A74 Assets and liabilities of U.S. branches and agencies of foreign banks March 31, 1993 August 1993 A80 June 30, 1993 November 1993 A80 September 30, 1993 February 1994 A80 December 31, 1993 May 1994 A78 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

A68 Index to Statistical Tables References are to pages A3-A66 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 21, 22 Ownership by individuals, partnerships, and Assets and liabilities (See also Foreigners) corporations, 23 Banks, by classes, 18-22 Turnover, 17 Domestic finance companies, 36 Depository institutions Federal Reserve Banks, 11 Reserve requirements, 9 Financial institutions, 28 Reserves and related items, 4, 5, 6, 13 Foreign banks, U.S. branches and agencies, 23 Deposits (See also specific types) Automobiles Banks, by classes, 4, 18-22, 24 Consumer installment credit, 39 Federal Reserve Banks, 5, 11 Production, 47, 48 Interest rates, 16 Turnover, 17 Discount rates at Reserve Banks and at foreign central banks and BANKERS acceptances, 10, 22, 26 foreign countries (See Interest rates) Bankers balances, 18-22. (See also Foreigners) Discounts and advances by Reserve Banks (See Loans) Bonds (See also U.S. government securities) Dividends, corporate, 35 New issues, 35 Rates, 26 EMPLOYMENT, 45 Branch banks, 23 Eurodollars, 26 Business activity, nonfinancial, 45 Business expenditures on new plant and equipment, 35 FARM mortgage loans, 38 Business loans (See Commercial and industrial loans) Federal agency obligations, 5, 10, 11, 12, 31, 32 Federal credit agencies, 33 CAPACITY utilization, 46 Federal finance Capital accounts Debt subject to statutory limitation, and types and ownership Federal Reserve Banks, 11 of gross debt, 30 Central banks, discount rates, 65 Receipts and outlays, 28, 29 Certificates of deposit, 26 Treasury financing of surplus, or deficit, 28 Commercial and industrial loans Treasury operating balance, 28 Commercial banks, 21 Federal Financing Bank, 28, 33 Weekly reporting banks, 21-23 Federal funds, 7, 19, 21, 22, 23, 26, 28 Commercial banks Federal Home Loan Banks, 33 Assets and liabilities, 18-22 Federal Home Loan Mortgage Corporation, 33, 37, 38 Commercial and industrial loans, 18-23 Federal Housing Administration, 33, 37, 38 Consumer loans held, by type and terms, 39 Federal Land Banks, 38 Deposit interest rates of insured, 16 Federal National Mortgage Association, 33, 37, 38 Loans sold outright, 21 Federal Reserve Banks Real estate mortgages held, by holder and Condition statement, 11 property, 38 Discount rates (See Interest rates) Time and savings deposits, 4 U.S. government securities held, 5, 11, 12, 30 Commercial paper, 24, 26, 36 Federal Reserve credit, 5,6, 11, 12 Condition statements (See Assets and liabilities) Federal Reserve notes, 11 Construction, 45, 49 Federally sponsored credit agencies, 33 Consumer installment credit, 39 Finance companies Consumer prices, 45, 46 Assets and liabilities, 36 Consumption expenditures, 52, 53 Business credit, 36 Corporations Loans, 39 Nonfinancial, assets and liabilities, 35 Paper, 24, 26 Profits and their distribution, 35 Financial institutions, loans to, 21, 22, 23 Security issues, 34, 65 Float, 51 Cost of living (See Consumer prices) Flow of funds, 40, 42, 43, 44 Credit unions, 39 Foreign banks, assets and liabilities of U.S. branches and Currency in circulation, 5, 14 agencies, 22, 23 Customer credit, stock market, 27 Foreign currency operations, 11 Foreign deposits in U.S. banks, 5, 11, 21, 22 Foreign exchange rates, 66 DEBITS to deposit accounts, 17 Foreign trade, 54 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 55, 58, 59, 60, 62 Banks, by classes, 18-23 Liabilities to, 22, 54, 55, 56, 61, 63, 64 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 GOLD REAL estate loans Certificate account, 11 Banks, by classes, 21, 22, 38 Stock, 5, 54 Terms, yields, and activity, 37 Government National Mortgage Association, 33, 37, 38 Type of holder and property mortgaged, 38 Gross domestic product, 51 Repurchase agreements, 7, 21-23 Reserve requirements, 9 HOUSING, new and existing units, 49 Reserves Commercial banks, 18 INCOME, personal and national, 45, 51,52 Depository institutions, 4, 5, 6, 13 Industrial production, 45, 47 Federal Reserve Banks, 11 Installment loans, 39 U.S. reserve assets, 54 Insurance companies, 30, 38 Residential mortgage loans, 37 Interest rates Retail credit and retail sales, 39, 40, 45 Bonds, 26 Consumer installment credit, 39 SAVING Deposits, 16 Flow of funds, 40, 42, 43, 44 Federal Reserve Banks, 8 National income accounts, 51 Foreign central banks and foreign countries, 66 Savings and loan associations, 38, 39, 40 Money and capital markets, 26 Savings banks, 38, 39 Mortgages, 37 Savings deposits (See Time and savings deposits) Prime rate, 25 Securities (See also specific types) International capital transactions of United States, 53-65 Federal and federally sponsored credit agencies, 33 International organizations, 55, 56, 58, 61, 62 Foreign transactions, 63 Inventories, 51 New issues, 34 Investment companies, issues and assets, 35 Prices, 27 Investments (See also specific types) Special drawing rights, 5, 11, 53, 54 Banks, by classes, 18-23 State and local governments Commercial banks, 4, 18-23 Deposits, 21, 22 Federal Reserve Banks, 11, 12 Holdings of U.S. government securities, 30 Financial institutions, 38 New security issues, 34 Ownership of securities issued by, 21, 22 LABOR force, 45 Rates on securities, 26 Life insurance companies (See Insurance companies) Stock market, selected statistics, 27 Loans (See also specific types) Stocks (See also Securities) Banks, by classes, 18-23 New issues, 34 Commercial banks, 4, 18-23 Prices, 27 Federal Reserve Banks, 5, 6, 8, 11, 12 Financial institutions, 38 Student Loan Marketing Association, 33 Insured or guaranteed by United States, 37, 38 TAX receipts, federal, 29 MANUFACTURING Thrift institutions, 4. (See also Credit unions and Savings and Capacity utilization, 46 loan associations) Production, 46, 48 Time and savings deposits, 4, 14, 16, 18-23 Margin requirements, 27 Trade, foreign, 54 Member banks (See also Depository institutions) Treasury cash, Treasury currency, 5 Federal funds and repurchase agreements, 7 Treasury deposits, 5, 11, 28 Reserve requirements, 9 Treasury operating balance, 28 Mining production, 48 UNEMPLOYMENT, 45 Mobile homes shipped, 49 U.S. government balances Monetary and credit aggregates, 4, 13 Commercial bank holdings, 18-23 Money and capital market rates, 26 Treasury deposits at Reserve Banks, 5, 11, 28 Money stock measures and components, 4, 14 U.S. government securities Mortgages (See Real estate loans) Bank holdings, 18-23, 30 Mutual funds, 35 Dealer transactions, positions, and financing, 32 Mutual savings banks (See Thrift institutions) Federal Reserve Bank holdings, 5, 11, 12, 30 Foreign and international holdings and NATIONAL defense outlays, 29 transactions, 11, 30, 64 National income, 51 Open market transactions, 10 Outstanding, by type and holder, 28, 30 OPEN market transactions, 10 Rates, 25 U.S. international transactions, 53-66 PERSONAL income, 52 Utilities, production, 48 Prices Consumer and producer, 45, 50 VETERANS Administration, 37, 38 Stock market, 27 Prime rate, 25 WEEKLY reporting banks, 22-24 Producer prices, 45, 50 Wholesale (producer) prices, 45, 50 Production, 45, 47 Profits, corporate, 35 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. JOHN P. LAWARE 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, Deputy Congressional Liaison 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 DAVID J. STOCKTON, Deputy Director KATHLEEN M. O'DAY, Associate General Counsel MARTHA BETHEA, Associate Director ROBERT DEV. FRIERSON, Assistant General Counsel WILLIAM R. JONES, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel MYRON L. KWAST, Associate Director PATRICK M. PARKINSON, Associate Director OFFICE OF THE SECRETARY THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director WILLIAM W. WILES, Secretary JENNIFER J. JOHNSON, Associate Secretary MARTHA S. SCANLON, Deputy Associate Director PETER A. TINSLEY, Deputy Associate Director BARBARA R. LOWREY, Associate Secretary FLINT BRAYTON, Assistant Director DIVISION OF BANKING DAVID S. JONES, Assistant Director JOHN REA, Assistant Director SUPERVISION AND REGULATION STEPHEN A. RHOADES, Assistant Director RICHARD SPILLENKOTHEN, Director CHARLES S. STRUCKMEYER, Assistant Director STEPHEN C. SCHEMERING, Deputy Director ALICE PATRICIA WHITE, Assistant Director DON E. KLINE, Associate Director JOYCE K. ZICKLER, Assistant Director WILLIAM A. RYBACK, Associate Director JOHN J. MINGO, Senior Adviser FREDERICK M. STRUBLE, Associate Director GLENN B. CANNER, Adviser HERBERT A. BIERN, Deputy Associate Director LEVON H. GARABEDIAN, Assistant Director ROGER T. COLE, Deputy Associate Director (Administration ) JAMES I. GARNER, Deputy Associate Director HOWARD A. AMER, Assistant Director DIVISION OF MONETARY AFFAIRS GERALD A. EDWARDS, JR., Assistant Director JAMES D. GOETZINGER, Assistant Director DONALD L. KOHN, Director DAVID E. LINDSEY, Deputy Director STEPHEN M. HOFFMAN, JR., Assistant Director BRIAN F MADIGAN, Associate Director LAURA M. HOMER, Assistant Director RICHARD D. PORTER, Deputy Associate Director JAMES V. HOUPT, Assistant Director JACK P. JENNINGS, Assistant Director VINCENT R. REINHART, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board MICHAEL G. MARTINSON, Assistant Director RHOGER H PUGH, Assistant Director DIVISION OF CONSUMER SIDNEY M. SUSSAN, Assistant Director AND COMMUNITY AFFAIRS MOLLY S. WASSOM, Assistant Director WILLIAM SCHNEIDER, Project Director, GRIFFITH L. GARWOOD, Director National Information Center GLENN E. LONEY, Associate Director DOLORES S. SMITH, Associate Director MAUREEN P. ENGLISH, Assistant Director IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 LAWRENCE B. LINDSEY SUSAN M. PHILLIPS OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PAYMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director PORTIA W. THOMPSON, Equal Employment Opportunity DAVID L. ROBINSON, Deputy Director (Finance and Programs Officer Control) CHARLES W. BENNETT, Assistant Director DIVISION OF HUMAN RESOURCES JACK DENNIS, JR., Assistant Director MANAGEMENT EARL G. HAMILTON, Assistant Director JEFFREY C. MARQUARDT, Assistant Director DAVID L. SHANNON, Director JOHN H. PARRISH, Assistant Director JOHN R. WEIS, Associate Director LOUISE L. ROSEMAN, Assistant Director ANTHONY V. DIGIOIA, Assistant Director FLORENCE M. YOUNG, Assistant Director JOSEPH H. HAYES, JR., Assistant Director FRED HOROWITZ, Assistant Director OFFICE OF THE INSPECTOR GENERAL OFFICE OF THE CONTROLLER BRENT L. BOWEN, Inspector General DONALD L. ROBINSON, Assistant Inspector General GEORGE E. LIVINGSTON, Controller STEPHEN J. CLARK, Assistant Controller (Programs and BARRY R. SNYDER, Assistant Inspector General 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 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

A72 Federal Reserve Bulletin • July 1994 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman J. ALFRED BROADDUS, JR. EDWARD W. KELLEY, JR. SUSAN M. PHILLIPS ROBERT P. FORRESTAL JOHN P. LAWARE ROBERT T. PARRY JERRY L. JORDAN LAWRENCE B. LINDSEY ALTERNATE MEMBERS THOMAS M. HOENIG THOMAS C. MELZER JAMES H. OLTMAN SILAS KEEHN STAFF DONALD L. KOHN, Secretary and Economist JOHN M. DAVIS, Associate Economist NORM AND R.V. BERNARD, Deputy Secretary MARVIN S. GOODFRIEND, Associate Economist JOSEPH R. COYNE, Assistant Secretary DAVID E. LINDSEY, Associate Economist GARY P. GILLUM, Assistant Secretary LARRY J. PROMISEL, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel CHARLES J. SIEGMAN, Associate Economist ERNEST T. PATRIKIS, Deputy General Counsel THOMAS D. SIMPSON, Associate Economist MICHAEL J. PRELL, Economist DAVID J. STOCKTON, Associate Economist EDWIN M. TRUMAN, Economist SHEILA L. TSCHINKEL, Associate Economist JACK H. BEEBE, Associate Economist JOAN E. LOVETT, Manager for Domestic Operations, System Open Market Account PETER R. FISHER, Manager for Foreign Operations, System Open Market Account FEDERAL ADVISORY COUNCIL RICHARD M. ROSENBERG, President EUGENE A. MILLER, Vice President MARSHALL N. CARTER, First District EUGENE A. MILLER, Seventh District J. CARTER BACOT, Second District ANDREW B. CRAIG, III, Eighth District ANTHONY P. TERRACCIANO, Third District JOHN F. GRUNDHOFER, Ninth District FRANK V. CAHOUET, Fourth District DAVID A. RISMILLER, Tenth District RICHARD G. TILGHMAN, Fifth District CHARLES R. HRDLICKA, Eleventh District CHARLES E. RICE, Sixth District RICHARD M. ROSENBERG, Twelfth District HERBERT V. PROCHNOW, Secretary Emeritus WILLIAM J. KORSVIK, Co-Secretary JAMES ANNABLE, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 CONSUMER ADVISORY COUNCIL JEAN POGGE, Chicago, Illinois, Chairman JAMES L. WEST, Tijeras, New Mexico, Vice Chairman BARRY A. ABBOTT, San Francisco, California RONALD HOMER, Boston, Massachusetts JOHN R. ADAMS, Philadelphia, Pennsylvania THOMAS L. HOUSTON, Dallas, Texas JOHN A. BAKER, Atlanta, Georgia KATHARINE W. MCKEE, Durham, North Carolina MULUGETTA BIRRU, Pittsburgh, Pennsylvania EDMUND MIERZWINSKI, Washington, D.C. DOUGLAS D. BLANKE, St. Paul, Minnesota ANNE B. SHLAY, Philadelphia, Pennsylvania GENEVIEVE BROOKS, Bronx, New York JOHN V. SKINNER, Irving, Texas CATHY CLOUD, Washington, D.C. REGINALD J. SMITH, Kansas City, Missouri ALVIN J. COWANS, Orlando, Florida LOWELL N. SWANSON, Portland, Oregon MICHAEL D. EDWARDS, Yelm, Washington JOHN E. TAYLOR, Washington, D.C. MICHAEL FERRY, St. Louis, Missouri MICHAEL W. TIERNEY, Washington, D.C. ELIZABETH G. FLORES, Laredo, Texas LORRAINE VANETTEN, Troy, Michigan NORMA L. FREIBERG, New Orleans, Louisiana GRACE W. WEINSTEIN, Englewood, New Jersey LORI GAY, LOS Angeles, California LILY K. YAO, Honolulu, Hawaii GARY S. HATTEM, New York, New York ROBERT O. ZDENEK, Greenwich, Connecticut THRIFT INSTITUTIONS ADVISORY COUNCIL BEATRICE D'AGOSTINO, Somerville, New Jersey, President CHARLES JOHN KOCH, Cleveland, Ohio, Vice President MALCOLM E. COLLIER, Lakewood, Colorado ROBERT MCCARTER, New Bedford, Massachusetts WILLIAM A. COOPER, Minneapolis, Minnesota NICHOLAS W. MITCHELL, JR., Winston-Salem, North Carolina PAUL L. ECKERT, Davenport, Iowa STEPHEN W. PROUGH, Irvine, California GEORGE R. GLIGOREA, Sheridan, Wyoming STEPHEN D. TAYLOR, Miami, Florida KERRY KILLINGER, Seattle, Washington JOHN M. TIPPETS, DFW Airport, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated MS-127, Board of Governors of the Federal Reserve System, 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 or may be ordered $75.00 per year. via Mastercard or Visa. Payment from foreign residents should Securities Credit Transactions Handbook. $75.00 per year. be drawn on a U.S. bank. The Payment System Handbook. $75.00 per year. Federal Reserve Regulatory Service. Four 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, 1993-94. 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. INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. 1981 October 1982 239 pp. $ 6.50 440 pp. $9.00 each. 1982 December 1983 266 pp. $ 7.50 FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1983 October 1984 264 pp. $11.50 December 1986. 264 pp. $10.00 each. 1984 October 1985 254 pp. $12.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1985 October 1986 231 pp. $15.00 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 1992 December 1993 215 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages Consumer Handbook to Credit Protection Laws SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES A Guide to Business Credit for Women, Minorities, and Small OF CHARTS. Weekly. $30.00 per year or $.70 each in the Businesses United States, its possessions, Canada, and Mexico. Else- How to File A Consumer Credit Complaint where, $35.00 per year or $.80 each. Series on the Structure of the Federal Reserve System The Board of Governors of the Federal Reserve System THE FEDERAL RESERVE ACT and other statutory provisions The Federal Open Market Committee affecting the Federal Reserve System, as amended through Federal Reserve Bank Board of Directors August 1990. 646 pp. $10.00. Federal Reserve Banks REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Organization and Advisory Committees RESERVE SYSTEM. A Consumer's Guide to Mortgage Lock-Ins A Consumer's Guide to Mortgage Settlement Costs ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— A Consumer's Guide to Mortgage Refinancings Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. Home Mortgages: Understanding the Process and Your Right Vol. II (Irregular Transactions). 1969. 116 pp. Each volto Fair Lending ume $2.25; 10 or more of same volume to one address, Making Deposits: When Will Your Money Be Available? $2.00 each. Making Sense of Savings GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 When Your Home is on the Line: What You Should Know each. About Home Equity Lines of Credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 STAFF STUDIES: Only Summaries Printed in the 156. INTERNATIONAL TRENDS FOR U.S. BANKS AND BANKING MARKETS, by James V. Houpt. May 1988. 47 pp. BULLETIN 157. M2 PER UNIT OF POTENTIAL GNP AS AN ANCHOR FOR Studies and papers on economic and financial subjects that are THE PRICE LEVEL, by Jeffrey J. Hallman, Richard D. of general interest. Requests to obtain single copies of the full Porter, and David H. Small. April 1989. 28 pp. text or to be added to the mailing list for the series may be sent 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIREto Publications Services. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE PRODUCTS, by Mark J. Warshawsky with the assistance of Staff Studies 1-145 are out of print. Dietrich Earnhart. September 1989. 23 pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSID- IARIES OF BANK HOLDING COMPANIES, by Nellie Liang 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF and Donald Savage. February 1990. 12 pp. BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, by 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- Thomas F. Brady. November 1985. 25 pp. VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) IN- Gregory E. Elliehausen and John D. Wolken. September DEXES OF THE MONETARY AGGREGATES, by Helen T. Farr 1990. 35 pp. and Deborah Johnson. December 1985. 42 pp. 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF THE 1980-90, by Margaret Hastings Pickering. May 1991. ECONOMIC RECOVERY TAX ACT: SOME SIMULATION 21pp. RESULTS, by Flint Bray ton and Peter B. Clark. December 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM 1985. 17 pp. MORTGAGE LOAN RATES IN TWENTY CITIES, by Stephen 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS IN A. Rhoades. February 1992. 11 pp. BANKING BEFORE AND AFTER ACQUISITION, by Stephen 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- A. Rhoades. April 1986. 32 pp. KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, 150. STATISTICAL COST ACCOUNTING MODELS IN BANKING: Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary A REEXAMINATION AND AN APPLICATION, by John T. Ann Taylor. March 1992. 37 pp. Rose and John D. Wolken. May 1986. 13 pp. 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by 151. RESPONSES TO DEREGULATION: RETAIL DEPOSIT PRICING James T. Fergus and John L. Goodman, Jr. July 1993. FROM 1983 THROUGH 1985, by Patrick I. Mahoney, Alice 20 pp. P. White, Paul F. O'Brien, and Mary M. McLaughlin. 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF January 1987. 30 pp. MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, 152. DETERMINANTS OF CORPORATE MERGER ACTIVITY: A by Gregory E. Elliehausen and John D. Wolken. Septem- REVIEW OF THE LITERATURE, by Mark J. Warshawsky. ber 1993. 18 pp. April 1987. 18 pp. 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, 153. STOCK MARKET VOLATILITY, by Carolyn D. Davis and by Mark Carey, Stephen Prowse, John Rea, and Gregory Alice P. White. September 1987. 14 pp. Udell. January 1994. Ill pp. 154. THE EFFECTS ON CONSUMERS AND CREDITORS OF PROPOSED CEILINGS ON CREDIT CARD INTEREST RATES, by Glenn B. Canner and James T. Fergus. October 1987. REPRINTS OF BULLETIN ARTICLES 26 pp. A limited number of reprints of Bulletin articles are available. 155. THE FUNDING OF PRIVATE PENSION PLANS, by Mark J. One reprint of an article will be sent on request to Publications Warshawsky. November 1987. 25 pp. Services. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Maps of the Federal Reserve System 9 BOSTON MINNEAPOLIS! 7 • NEW YORK CHICAGO! I PHILADELPHIA CLEVELAND I SAN FRANCISCO 10 4 KANSAS CITYB SR LOUIS RICISIOND 6. ATLANTA 11 DALLAS 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

All 1-A 2-B 3-C 4-D 5_E Baltimore Pittsburgh NY VT CCTT Charlotte // NH • Cincinnati MAH Buffalo //•• \\ CT VB NNJJ NNYY BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H • Nashville TN Birmingham MO W1 Ml • J "* ^/ Louisville IA Detroit • KY n. • - 4 L/TN " Q ' Jacksonville IN • Memphis New Orleans LtalfS MS FL J Rock f Miami ATLANTA CHICAGO ST. LOUIS 9-1 1 ND • Helena 1 MM 'WSUBsH^lfsmmttt' MI / SD • Wl If^mm&a MINNEAPOLIS 10-J 12-L CO L Omaha • > MO Denver • r-L NM Oklahoma City • KANSAS CITY 11-K Salt Lake City • Los Angeles San Antonio ( HAWAII DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis