Federal Reserve Bulletin, 1995-05

VOLUME 81 • NUMBER 5 • MAY 1995 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 407 U.S. INTERNATIONAL TRANSACTIONS 424 Lawrence B. Lindsey, Member, Board of Gov- IN 1994 ernors, provides the Federal Reserve's perspectives on the status of the Community The U.S. current account deficit widened sub- Reinvestment Act (CRA) and the status of the stantially in 1994 as the balances on goods Board's CRA efforts and says that despite the and services, investment income, and transfers CRA's lack of clarity and the criticisms of it all declined. Rapid economic growth in the from all quarters, it is a government program United States relative to growth abroad conthat has entailed little bureaucracy, great local tributed significantly to a marked decline in autonomy, and virtually no federal tax dollars the balance on goods and services. The balto administer, and yet its impact can probably ance on investment income decreased as paybe measured in billions of dollars in comments on foreign direct investment capital in munity and economic development activity, the United States rebounded from very low before the Subcommittee on Financial Institulevels and as large net inflows of portfolio tions and Consumer Credit of the House Comcapital raised net portfolio payments. Last mittee on Banking and Financial Services, year's decline in net investment income March 8, 1995. pushed this balance into deficit for the first time in eighty years. 431 Chairman Greenspan addresses some of the issues surrounding the adjustment of federal programs for movements in the cost of living 419 INDUSTRIAL PRODUCTION AND and suggests that the Congress give careful CAPACITY UTILIZATION consideration to the establishment of an inde- FOR MARCH 1995 pendent national commission to set annual Industrial production fell 0.3 percent in adjustment factors for federal receipt and out- March, and the cumulative gain during Janu- lay programs, before the Senate Committee on ary and February was 0.3 percent less than Finance, March 13, 1995. previously estimated. Capacity utilization contracted 0.5 percentage point, to 84.9 per- 434 ANNOUNCEMENTS cent, a level equal to the high achieved during the 1988-89 period. Resignation of John R LaWare as a member of the Board of Governors. 422 STATEMENTS TO THE CONGRESS Issuance of final guidelines on an internal Alan Greenspan, Chairman, Board of Gover- process for appealing an adverse material nors, briefly reviews current developments in supervisory determination. monetary policy and says in the context of Issuance of final rule to Regulation E. recent foreign exchange market developments that the dollar's weakness is symptomatic of Issuance of amendments to Regulation Z and some of the underlying problems confronting revisions to its official staff commentary. the longer-term health of the economy: inade- Availability of transcripts of 1989 meetings of quate national savings, continuing large budthe Federal Open Market Committee. get deficits, and a persistent current account imbalance, before the House Committee on Start of education campaign on the sale of the Budget, March 8, 1995. mutual funds and annuities at banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

437 MINUTES OF THE FEDERAL OPEN A1 FINANCIAL AND BUSINESS STATISTICS MARKET COMMITTEE MEETING These tables reflect data available as of At its meeting on January 31-February 1, March 29, 1995. 1995, the Committee adopted without change the tentative ranges for 1995 that it had A3 GUIDE TO TABULAR PRESENTATION established in July of last year. In keeping A4 Domestic Financial Statistics with its usual procedures under the A45 Domestic Nonfinancial Statistics Humphrey-Hawkins Act, the Committee A53 International Statistics would review the ranges at midyear, or sooner if interim conditions warranted, in light of the A67 GUIDE TO STATISTICAL RELEASES AND growth and velocity behavior of the aggre- SPECIAL TABLES gates and ongoing economic and financial developments. A76 INDEX TO STATISTICAL TABLES For the intermeeting period ahead, the Committee approved a directive that called for A78 BOARD OF GOVERNORS AND STAFF increasing somewhat the degree of pressure on reserve positions, taking account of a pos- A80 FEDERAL OPEN MARKET COMMITTEE sible increase in the discount rate. The direc- AND STAFF; ADVISORY COUNCILS tive did not include any presumption about the direction of possible adjustments to policy A82 FEDERAL RESERVE BOARD during the intermeeting period. PUBLICATIONS 449 LEGAL DEVELOPMENTS A84 MAPS OF THE FEDERAL RESERVE Various bank holding company, bank service SYSTEM corporation, and bank merger orders; and pending cases. A86 FEDERAL RESERVE BANKS, BRANCHES, AND OFFICES 529 DIRECTORS OF FEDERAL RESERVE BANKS AND BRANCHES List of directors, by Federal Reserve District. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1994 Charles P. Thomas, of the Board's Division of 1. U.S. external balances, 1984-94 International Finance, prepared this article. Billions of dollars The U.S. current account deficit widened substantially in 1994 as the balances on goods and services, investment income, and transfers all declined. Rapid economic growth in the United States relative to growth abroad contributed significantly to a marked decline in the balance on goods and services; to a lesser extent, declines in U.S. price competitiveness in previous years also played a role. The balance on investment income I I 1 I I 1. . 1 I I 1 . ,1 1 decreased as payments on foreign direct investment 1984 1989 1994 capital in the United States rebounded from very NOTE. The data are quarterly at seasonally adjusted annual rates. SOURCE. Department of Commerce, Bureau of Economic Analysis, U.S. low levels and as large net inflows of portfolio international transactions accounts. capital raised net portfolio payments. Last year's decline in net investment income pushed this balance into deficit for the first time in eighty years. account and thus defines its general contour A widening of the deficit on goods transactions (chart 1). Over the past decade, however, the balmade the largest contribution to the decline of the ance on investment income has declined markedly, current account in 1994 and more than offset a and this decline is now evident in the level of the small improvement in the balance on service trans- current account. To understand this decline, it is actions, which remained positive (table 1). The useful to note the way investment income is linked overall balance on goods and services remains the to the other external balances and to the economy largest and most volatile component of the current in general. 1. U.S. external balances, 1989-94 Billions of dollars Change, 1989 1990 1991 1992 1993 1994 1993-94 Trade in goods -90 3 -78.8 -28.5 -40.4 -75.7 -106.4 -30.7 Goods, net .. -115.2 -109.0 -74.1 -96.1 -132.5 -166.4 -33.9 24.9 302 45.6 55.7 56.8 60.0 3.2 13.7 20.7 14,8 4.5 3.9 -15.2 -19.1 55.9 55.4 47.7 52.4 41.4 -11.0 -K -35.1 -40.5 -43.2 -48.5 -56.6 -8.1 -26, -33.7 6,7 -32.0 -32.1 -34.1 -2.0 17.0 42.5 1.3 .0 .0 .0 transters>net -26.1 -50.7 -35.8 -33.3 -32.1 -34.1 -2.0 Current account balance -102.8 -91.7 -6.9 -67.9 -103.9 -155.7 -51.8 MEMO: Curreenntt account balance excluding foreign -102.8 -108.7 -49.4 -69.2 -103.9 -155.7 -51.8 -' • NOTE. In this and the tables that follow, components may not sum to SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, totals because of rounding. U.S. international transactions accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

408 Federal Reserve Bulletin • May 1995 As an accounting identity, the current account usual lags, boosted the volume of imports in 1994. deficit equals the excess of national expenditure The subsequent decline in the exchange value of (including net transfers to foreigners) over national the dollar in 1994 raised prices of imports someincome. This identity, as such, cannot explain the what and increased the value of imports. fundamental forces determining income, consump- In the first quarter of 1995, the dollar depreciated tion, and investment nor the channels by which further against the currencies of Japan and many these aggregates adjust to make the identity hold. U.S. trading partners in Europe. This depreciation, The identity is useful, however, because it high- if it is sustained and not offset by rising U.S. prices, lights the fact that a current account deficit, by should lead to some increase in U.S. price competinecessity, gives rise to a financing requirement and tiveness. Any increase in U.S. price competitiveassociated capital inflows. These capital inflows, in ness, together with some slowing in U.S. consumpturn, give rise to a service burden that lowers tion and investment growth and strong growth income and, all else being equal, increases the abroad, should slow the rate by which the deficit on current account deficit in the future. goods and services widens next year. Any improve- During the past three years, rapid growth in both ment in this balance, however, will be tempered, or U.S. consumption and investment expenditures out- at least delayed, by recent events in Mexico, which paced the U.S. economy's capacity to expand pro- have severely limited that country's capacity to duction of goods and services. The widening deficit import. In addition, the further deterioration of the on goods and services is a direct measure of this U.S. net international investment position in 1994 shortfall. Traditionally, such shortfalls have been will likely lead to a widening of the deficit on financed in part by income from U.S. investments investment income this year. abroad. Over the past decade, however, this deficit (plus transfers) has greatly exceeded investment income from abroad, and the current account deficit has averaged about $100 billion a year, or MAJOR ECONOMIC INFLUENCES 2lA percent of U.S. gross domestic product (GDP). ON U.S. INTERNATIONAL TRANSACTIONS To finance this deficit the United States has borrowed from abroad: As a result, net investment The increase in the U.S. international deficit in income has declined, and in 1994 it registered a goods and services last year was slightly less than deficit instead of its traditional surplus. that recorded in 1993. Most of the increase in 1994, Thus the proximate determinants of the increase as in other recent years, reflected cyclical movein the current account deficit in 1994 were of two ments in economic activity at home and abroad types. First, there were those directly associated rather than changes in U.S. international price comwith the goods and services (trade) balance, which petitiveness. The price-adjusted foreign exchange include investment and consumption in the United value of the dollar was fairly stable between 1989 States and abroad as well as changes in exchange and the end of 1994, and this stability implies that rates and U.S. price competitiveness. Second, there changes in prices of U.S. goods have moved about were those associated with the investment income in line with changes in prices of foreign goods balance, of which the deterioration of the U.S. expressed in dollars. Thus, from 1989 to 1991, international investment position was the most when foreign economies grew much more rapidly important. than the U.S. economy, the U.S. trade deficit nar- In terms of its proximate determinants, the rowed; in contrast, from 1992 to 1993, when the decline in the trade balance last year was caused U.S. economy expanded more rapidly than those of primarily by the cyclical expansion of investment its trading partners, the deficit widened markedly. and consumption in the United States relative to Growth abroad picked up last year to an average activity abroad. Changes in exchange rates and rate near that of the United States but remained U.S. price competitiveness had a smaller, yet below its historical average. The slower widening noticeable, effect on U.S. trade. A rise in the of the U.S. trade deficit last year was broadly exchange value of the dollar during 1993 helped to consistent with these developments in growth here keep down import prices that year and, with the and abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1994 409 Relative Rates of Economic Growth services has been closely related to deviations in the GDP ratio from its trend. This relation is evi- The developments in the trade balance during the dent in the 1970s and again in the 1990s. It is less past three years are broadly consistent with the evident in the 1980s because the large swings in historical relation between relative growth rates the foreign exchange value of the dollar during that and the balance on goods and services. This rela- period (chart 2, bottom panel) continued to affect tion is most evident when the trade balance is the trade balance even after the price-adjusted dolcompared with deviations of the ratio of foreign lar returned to the level of the late 1970s. In recent GDP to U.S. GDP from its trend (chart 2, middle years, swings in the price-adjusted value of the panel). The trend line has an upward slope because dollar have been smaller, and the balance of trade foreign economies have on average grown faster has tended to move more in line with relative GDP than the U.S. economy over the past two decades. growth rates. Because of the close historical association between U.S. real GDP grew 4 percent over the four U.S. imports and U.S. GDP and between U.S. quarters of 1994 compared with an average exports and foreign GDP, the balance on goods and increase of 3Vi percent in the previous two years. This relatively rapid growth over the past three years has raised U.S. activity to a level close to its 2. Historical perspective on the U.S. external balance and potential and its trend. The economic advance its proximate determinants, 1973-94 in 1994 was driven mainly by sharp increases in Billions of 1987 dollars the real expenditures of households and businesses. U.S. real net exports of goods and services Business investment in inventories increased appreciably in 1994, reflecting a desire to build stocks in anticipation of continued strength in sales and to increase buffers against potential delays in supply. As in the two previous years, a significant portion of the rise in domestic spending in 1994 was on imports of goods and services, which increased 1 1 M 1J I 1 1 I I II I 1 1 1 i 1 II 1 1 1986:Q4*100 about 14 percent in real terms during the year. Ratio of foreign to U.S. real GDP1 Economic growth in major U.S. export markets averaged about 4Vi percent in 1994, a rate sharply higher than that recorded during the previous two years (table 2). Despite the rapid growth last year, the level of foreign activity remained low by historical standards relative to both its trend and the level of activity in the United States. Much of the foreign growth last year, especially in many developing countries, was in investment spending. This investment spending was of particular importance for U.S. exports, as capital goods have become an increasingly important component of U.S. exports. In the major foreign industrial countries, growth of real GDP rebounded sharply during 1994, significantly exceeding the pace of recovery widely I I I 1 M I I I 1 I I I Ml I t I I II 1 1225 1280 1985 1990 1994 expected at the start of the year. In the United Kingdom and Canada, where recovery was already NOTE. The data are quarterly. 1. The GDP for foreign countries is the weighted average of the foreign well established, growth continued to be vigorous, G-10 countries, other industrial countries, and selected developing countries. particularly in machinery and equipment invest- The weights are based on bilateral shares in U.S. nonagricultural merchandise exports in 1987-89. ment. In Germany, France, and other continental 2. This index comprises the G-10 countries and eight developing European countries, where activity had been slugcountries. See note to chart 3 for details. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

410 Federal Reserve Bulletin • May 1995 gish during 1993, real GDP grew at a faster rate as markedly during the second and third quarters of the year progressed, boosted by growth in invest- 1994, in part because of fiscal stimulus and easier ment outlays. Recovery was evident in Japan as monetary conditions. However, in the aftermath of well, but the pace of expansion there remained the currency crisis in Mexico, including the implesubdued relative to that of the other industrial coun- mentation of a program of monetary and fiscal tries, and investment in machinery and equipment restraint, economic activity is expected to be fell. Although most of these economies clearly had depressed this year. moved past the troughs of their recessions, considerable slack remained. As a result, consumer price inflation remained low and, in some countries, fell U.S. Price Competitiveness further. On average, in the ten major foreign industrial countries, consumer prices rose 2 percent dur- Broad measures of U.S. price competitiveness have ing the year, a rate less than that of consumer price changed little in recent years, compared with the inflation in the United States. 1980s. One such broad measure is the "real," or "CPI-adjusted," foreign exchange value of the dol- Economic growth in the major developing counlar, which is computed as the ratio of U.S. contries in 1994 continued at about the same strong sumer prices to foreign consumer prices translated pace as that in 1993. In Asia, the newly industrialinto dollars at current nominal exchange rates. izing economies grew rapidly. They benefited from Between 1980 and 1987, the real value of the dollar low domestic interest rates, fast growth in China, showed a dramatic swing, first appreciating and and recovery in the industrial countries. Although then depreciating. Since 1988, however, the value the exports of these Asian developing economies of the dollar has fluctuated in a much narrower increased rapidly in 1994, domestic demand—and range (chart 3). The smaller changes recorded in especially investment—generally was their prirecent years, combined with roughly similar trends mary source of GDP growth. Growth in China, in CPI inflation in the United States and abroad, although still quite rapid, was slower than that in have resulted in only moderate changes in U.S. 1992-93, as credit conditions were tightened furprice competitiveness. The 7 percent real appreciather and various controls were imposed to dampen tion of the dollar against the currencies of the other demand. In Mexico, growth of real GDP picked up G-10 countries in 1993 (which indicated a deterioration in U.S. price competitiveness) was reversed 2. Growth of real GDP in selected foreign economies, 1992-94 3. Nominal and real exchange value of the dollar against Percent change, fourth quarter to fourth quarter currencies of selected countries, 1980-94 1992 1993 1994| 1.6 4 A ndustJ 3.9 Canada 5.6 -.4 .9 .3 .7 3.3 Developing countries3.... 4.7 5.9 6 2 Asia 6.6 7.8 7.7 Latin America 2.3 3.6 4.3 Mexico 2.1 1.0 4.0 Other Latin America 2.4 5.9 4.5 NOTE. Aggregate measures are weighted by bilateral shares in U.S. nonagricultural merchandise exports in 1987-89. 1. Data for 1994 are partly estimated. 2. The industrial countries index includes Australia and New Zealand in addition to Canada, Japan, and Western Europe. The index for Western NOTE. The real exchange value of the dollar is calculated using weighted Europe comprises Belgium, France, Germany, the Netherlands, Sweden, nominal exchange rates adjusted with weighted consumer prices. The weights Switzerland, the United Kingdom, Austria, Denmark, Finland, Greece, in the indexes are proportional to each country's share in world exports plus Ireland, Norway, Portugal, Spain, and Turkey. imports during the years 1972-76. The countries in the G-10 index are 3. The developing countries in the index for Asia are the Peoples Repub- Belgium-Luxembourg, Canada, France, Germany, Italy, Japan, the Netherlic of China, Hong Kong, Korea, Malaysia, the Philippines, Singapore, and lands, Sweden, Switzerland, and the United Kingdom. The countries in the Taiwan. The countries in "Other Latin America" are Argentina, Brazil, and developing countries index are Brazil, Hong Kong, Korea, Malaysia, Mexico, Chile. the Philippines, Singapore, and Taiwan. The data are quarterly, except for SOURCE. Various national sources. nominal G-10 exchange rates, which are weekly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1994 411 in 1994. The depreciation of the dollar in "real" that for consumer prices both in the United States terms during 1994 was slightly smaller than the and abroad. depreciation in nominal terms, as U.S. inflation Several factors may account for the slow growth exceeded inflation in the other G-10 countries. The of traded goods prices, relative to consumer prices, dollar showed about the same degree of real depre- in recent years. First, measured productivity gains ciation during 1994 when measured with an index in manufacturing in general have been greater than that also includes the currencies of major U.S. those in services. Because manufactured goods trading partners in Latin America and East Asia. carry a larger weight in the export and import price The prices of exports and imports only loosely indexes than in the consumer price index, these followed the movements in consumer prices when greater productivity gains have dampened trade the dollar was tracing its large swing in the 1980s. prices more than consumer prices. Second, for sev- In recent years, trade prices have moved more in eral reasons, foreigners who export to the United line with consumer prices. When the dollar appreci- States may have reduced profit margins further in ated in the first half of the 1980s, foreign prices in an effort to maintain market share. By maintaining dollar terms stabilized or fell slightly, whereas U.S. market share in the United States, foreign firms prices continued to rise (chart 4). U.S. exports could keep production near efficient levels despite became expensive relative to foreign prices in low demand in their home markets. Similarly, by general, and imports became relatively inexpensive squeezing profit margins, some firms were able to compared with both U.S. consumer prices and maintain market share while waiting for production export prices. These price changes worked to widen facilities in the United States to become operathe U.S. trade deficit. When the dollar started depre- tional. Finally, there is some evidence that U.S. ciating in 1985, U.S. exports became steadily more import prices react more slowly to movements in competitive in foreign markets. However, the gap exchange rates than to changes in the homebetween U.S. import prices and U.S. consumer currency cost of production because relatively large prices narrowed only slowly, in part because for- swings in exchange rates have often proved to be eign exporters were willing to shrink their profit temporary. margins and shift production to lower-cost loca- From this longer-term perspective, it is apparent tions. Since 1988, export and import prices have that movements in exchange rates during 1993 and risen at a similar rate, and this rate has been below 1994 did not significantly alter the basic constellation of relative trade prices. By these price measures, U.S. exports appear quite competitive in 4. Developments in U.S. and foreign prices, 1975-94 foreign markets, which is consistent with the rapid growth of exports relative to foreign activity. At the same time, by these measures, U.S. import prices also appear quite competitive relative to general U.S. prices, which is again consistent with the rapid growth of imports in recent years. DEVELOPMENTS IN TRADE IN GOODS AND SERVICES Rapid growth in the United States and abroad together with small price changes produced strong growth of both exports and imports in 1994 (table 3). NOTE. The data are yearly. Strong Expansion of Exports 1. The CPI for foreign countries is the weighted average of the foreign • 'I-,,.- G-10 and eight developing countries. The weights are constant shares in U.S. ; non-oil imports for 1987-89. The value of exported goods and services rose 2. U.S. export prices (nonagricultural, excluding computers), U.S. import prices (non-oil, excluding computers). almost 9 percent last year as goods exports Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

412 Federal Reserve Bulletin • May 1995 3. U.S. international trade in goods and services, 1992-94 4. U.S. exports of goods, by importing region, 1992-94 Billions of dollars Billions of dollars 1992 1993 1994 Percent Importing region 1992 1993 1994 change, |1993-94 -40 -76 Exports of goods and 617 642 HBM 441 457 503 10 Services 177 185 195 Goods 440 457 503 Industrial countries' 263 269 293 9 44 44 47 Canada 91 101 115 14 29 29 33 41 47 52 11 Aircraft and parts 38 33 32 Weston Europe 115 111 115 4 Other capital 110 120 141 51 55 60 Developing countries2 178 188 210 12 Automotive products 47 52 57 Asia 88 96 104 8 Indust 110 112 121 Latin America 75 78 92 18 Other 12 12 12 Mexico 40 41 51 24 tfl Other Latin America .... 35 37 41 11 Imports of goods and 717 Services 128 135 1. See note 2 to table 2. Goods 536 589 669 2. See note 3 to table 2. Petroleum and products 52 51 51 SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, 32 38 46 U.S. international transactions accounts. 103 114 138 Consumer 134 146 Automotive products 102 119 101 114 Foods and other 48 55 these three countries accounted for two-thirds of the increase in shipments to Asia. Shipments to SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. international transactions accounts. Western Europe picked up only at the end of the year. While computers accounted for half of the increased 10 percent and service exports rose about increase in the quantity of exported machinery and 5 percent. Goods exports to most major regions of semiconductors another 9 percent, most of the the world increased as the pace of economic activ- remaining increase was in a wide range of ity in U.S. trading partners improved significantly. machines, such as electricity generating equip- Exports to Canada, Mexico, other countries in ment; industrial engines and pumps; and measur- Latin America, and many developing countries in ing, testing, and scientific equipment. The growth Asia grew more than 20 percent. Exports to Japan of capital goods exports was only slightly regrew 14 percent and to Western Europe, 7 percent strained by a further decline in aircraft exports. (table 4). Exports of other goods and services, which Most of the increase in export value came from accounted for roughly 70 percent of exports, grew rapid growth in the quantity of goods and services more slowly on average than capital goods in 1994. exported rather than from changes in prices. Automotive exports grew strongly; most of the rise Growth in the quantity of exports (measured in constant 1987 dollars) picked up as the year progressed and totaled 12 percent from the fourth 5. Change in the quantity of U.S. exports, 1992-94 quarter of 1993 to the fourth quarter of 1994, Percent change, fourth quarter to fourth quarter compared with 6 percent over the four quarters of Type of export 1992 1993 1994 1993 (table 5). More than half the increase in 1994 was in exports of capital goods. High levels of Total Sjft 5.8 Uj6 investment spending, especially in Asia and Services -2.0 5.0 4.8 Europe, contributed to a nearly 20 percent increase 7.6 6.1 13.9 Agricultural 9.5 -5.3 17.9 in exports of machinery. Canada, Latin America, Computers 34.8 23.1 293 Aircraft and parts -12.0 -10J0 -17.0 and Asia each accounted for one-fourth of the rise Other capital 6.8 11.0 20.2 in machinery exports. Shipments to Mexico con- Consumer 8.9 5.0 13.2 Automotive products ... 19.6 9.2 113 tributed a little more than half of the rise to Latin industrial supplies 1.0 LI 63 -7.7 H 1 23 America. Machinery exports to Korea, Malaysia, and Thailand jumped more than 30 percent in 1994; NOTE. Quantities are measured in constant 1987 dollars. SOURCE. U.S. Department of Commerce, Bureau of the Census. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1994 413 was in shipments of automotive parts to Canada for imports of goods and services last year reflected assembly into vehicles largely for sale in the United primarily the vigorous growth in real expenditures States (reflecting the surge in domestic sales during by households and businesses. In addition, the slow 1994). growth in import prices during 1993 provided some Exports of consumer goods also boosted overall further stimulus in 1994. exports in 1994. About half of the increase went The sharpest increase in imports was in capital to industrial countries, primarily Canada and West- goods, which expanded nearly 30 percent in real ern Europe; shipments to Mexico accounted for terms. Part of the rise was in imports of computers, another one-fifth of the increase. Agricultural which continued to expand sharply in response to exports bounced back last year from a decline in technological change. But imports of other capital 1993; the much-improved harvest of 1994 eased goods also grew strongly in 1994 including semisupply constraints that had been limiting shipments conductors, telecommunications equipment, elecof farm products. The quantity of exported indus- tricity generating equipment, and other industrial trial supplies other than agricultural products grew and agricultural goods. 6 percent during 1994; increases were in a wide Imports of non-oil industrial supplies grew range of categories, from metals and chemicals to 15 percent from the fourth quarter of 1993 to the textiles. Exports of services expanded 5 percent in fourth quarter of 1994, with about 30 percent of the 1994 in terms of constant dollars, with the sharpest increase attributable to metals and another 20 perincrease in royalties and license fees. cent to chemicals. Increasingly tight world commodity markets, especially for metals, caused prices of imported industrial supplies to jump Vigorous Growth of Imports 7 percent in 1994. Automotive imports increased 16 percent in The value of imported goods and services rose 1994. Two-thirds of the rise was from Canada and rapidly last year. As with exports, nearly all of the Mexico, where assembly operations of parts and increase in import value last year reflected growth vehicles for U.S. companies expanded in response in the quantity rather than higher prices of imports. to the strength of automobile sales in the United In quantity terms, imports of goods and services States. In addition, imports of cars from Japan grew even more strongly than the double-digit pace jumped in the fall as strong demand for some recorded in 1993 (table 6). Prices of imports rose models exceeded supplies in the United States; slowly (less than \Vi percent) in 1993, in part imports dropped back late in the year as supply because of the appreciation of the dollar. In 1994, pressures eased and as Toyota doubled its assembly these prices rose about 4 percent, as the dollar capacity in the United States. retraced its previous appreciation. The growth of Consumer expenditures in the United States expanded steadily throughout the year, and imports of consumer goods increased 11 percent. The strongest increases were in home entertainment 6. Change in the quantity of U.S. imports, 1992-94 products, household goods, and apparel. About Percent change, fourth quarter to fourth quarter 40 percent of the increase in imported consumer Type of import 1992 1993 1994 goods came from China; another 25 percent came from other developing countries in Asia (particu- IMtf 8.6 114 141 larly Malaysia). Mexico provided about 10 percent 1.4 8.7 33 Goods 10.1 13.1 16.1 of the increase; and Western Europe, about 20 per- Petroleum and products 12.1 iao -1.7 cent. Imports of consumer goods from Japan 48.7 38.3 36.0 OOtthheerr ccaappiittaall 9.8 14.1 23.2 declined in 1994. CCoonnssuummeerr 3.6 8.9 11.3 Automotive products 4.1 9.2 15.7 Imports of services rose 3 percent in terms of Industrial supplies 6.6 10.8 15.3 constant dollars in 1994. Small increases were Foods and other 1.5 4.3 4.9 recorded in travel, transportation, and payments of NOTE. Quantities are measured in constant 1987 dollars. royalties and fees. SOURCE. U.S. Department of Commerce, Bureau of the Census. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

414 Federal Reserve Bulletin • May 1995 Oil Imports OPEC's decision in November to roll over its production quota throughout 1995 failed to sustain The value of oil imports changed little between this run-up, and prices closed the year at $17.16 per 1993 and 1994 as an increase in the volume of oil barrel. Oil import prices mirrored the changes in imports was offset by a $1 per barrel decline in the spot prices and averaged $14.75 in 1994, about average price of imported oil. $1 below the average for 1993. Oil import prices have tended to mirror spot oil The quantity of oil imports rose from a rate of prices (West Texas intermediate) with a lag of 8.6 million barrels per day in 1993 to 8.9 million several weeks (chart 5). Spot prices fell sharply barrels per day in 1994. The increase resulted from during the fourth quarter of 1993 and began 1994 a continued decline in U.S. oil production, heavy near $15 per barrel—a five-year low. This decline stockbuilding, and gains in U.S. consumption in price reflected a surge in North Sea oil produc- (table 7). tion, which benefited from new oil field production and improved recovery techniques. Prices began to rise in the spring as OPEC curtailed production, DEVELOPMENTS IN THE refiners replenished inventories, and consumption NONTRADE CURRENT ACCOUNT increased as a result of accelerating global economic activity. Prices peaked at $19.65 per barrel The balance on nontrade items in the U.S. current in July when the height of the U.S. driving season account declined $23 billion last year to a deficit of coincided with an oil workers' strike in Nigeria. $49 billion. Nearly all of this decline was in the Prices then eased through the beginning of October balance on investment income. at which time the massing of Iraqi troops along the Kuwaiti border, together with supply disruptions in Houston, prompted a small run-up in oil prices. Investment Income and Payments i '!, • The balance on investment income declined signifi- 5. Oil prices, 1983-94 cantly from a surplus of $4 billion in 1993 to a deficit of $15 billion in 1994 (table 8). This balance Dollars per barrel is the difference between the amount that U.S. residents earn on their assets abroad (receipts) and the amount that foreigners earn on their assets in the United States (payments). U.S. residents hold many types of assets abroad, and foreign residents hold many types of assets in the United States. Year-to-year variations in the rates of return on these different assets can influence year-to-year changes in net investment income. In the long run, however, the most important determinant of net investment income is the net international invest- NOTE. The data are monthly. ment position, which reflects the financing of past SOURCE. Petroleum Intelligence Weekly, various issues, and U.S. Departcurrent account balances. Last year, changes in the ment of Commerce, Bureau of Economic Analysis. 7. U.S. oil consumption, production, and imports, selected years, 1980-94 Millions of btarreols per .day 1980 1985 1991 1992 1993 1994 G^umptioo 1177..11 1155..77 1166..77 1177..00 1177..22 1177..77 1100..88 1111..22 99..99 99..88 99..66 99..44 Imports 66..99 55..11 77..66 77..99 88..66 88..99 SOURCE. U.S. Department of Energy, Energy Information Administration. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1994 415 8. U.S. net investment income, 1991-94 6. Direct investment: position and income, 1977-94 Billions of dollars I 1 I I 1 1 1 I I II I 1 1*1 I 1 I I 1978 1982 1986 1990 1994 SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. international transactions accounts. NOTE. The position data are period averages using the current-cost measure as of year-end for the current and previous years. The year-end data for 1994 were constructed by adding the recorded direct investment capital flows during 1994 to the recorded year-end position for 1993. rates of return and the further deterioration of the SOURCE. Department of Commerce, Bureau of Economic Analysis; and the Federal Reserve Board. investment position both contributed to the decline in net investment income. The rate of return on foreign direct investment assets in the United States, which had been depressed in recent years, Direct investment payments last year were sigreturned to a more normal rate. In addition, the nificantly above their previous high. In terms of continued decline in the net portfolio position last historical rates of return on investment capital, year further reduced net portfolio income. however, last year's payments were not an aberration. In 1994 the rate of return on foreign direct investment in the United States was either 4.6 per- Net Direct Investment Income cent or 3.2 percent, depending on whether one uses a current-cost or a market-value measure for the The balance on direct investment income decreased value of direct investment assets in the United about $11 billion in 1994, to $41 billion. Receipts States. This rate of return is not unusually high on U.S. direct investment abroad increased $9 bil- when compared either with previous rates of return lion (about 15 percent) in 1994, the increase reflect- for direct investment payments or with the rate of ing faster foreign growth. Payments by foreign return received by U.S. direct investors abroad. As subsidiaries in the United States grew even faster, table 9 shows, the rate of return on foreign direct however, from a severely depressed level of $5 bil- investment assets in the United States averaged lion in 1993 to more than $25 billion in 1994. almost 8 percent in 1977-80 and 3 percent between 9. Rates of return on direct investment, 1977-94 M Percent Item 1977-80 1981-88 1989 1990 1991 1992 1993 19941 US. investment abroad Current 9.9 7.9 10.3 10.0 8.2 7.6 8.3 8.9 Market n.a. n.a. 7.4 7.6 6.8 6.2 6.5 6.5 Foreign investment in the United States Current 7.8 3.1 1.6 .6 -.7 .4 1.0 4.6 Market a.a. tut. IA .5 -.5 .3 .7 3.2 NOTE. The rates of return are calculated as follows: The numerator is 1. The year-end values of claims and liabilities that appear in the denomidirect investment receipts or payments from the U.S. transaction accounts. nators are estimates constructed by adding the recorded direct investment The denominator is the average of year-end figures for the value of direct capital flows during 1994 to the recorded year-end positions for 1993. investment for the current and previous years, SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, n.a. Not available. U.S. international transactions accounts and U.S. international investment position. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

416 Federal Reserve Bulletin • May 1995 1981 and 1988 (on a current-cost basis); moreover, Unilateral Transfers the rate of return last year was only about one-half of that on U.S. direct investment assets abroad. Net unilateral transfers to foreigners increased U.S. direct investment income has fluctuated $2 billion last year, to $34 billion. These transfers with the cycles of foreign activity and changes in include government grant and pension payments as exchange rates, but it has generally moved with the well as net private transfers to foreigners. Most of U.S. direct investment position abroad (chart 6). In the increase last year was in private transfers to contrast, U.S. direct investment payments failed to foreigners; government grants declined slightly. keep pace with the large increases in the foreign position in the United States during the 1980s. Some of that investment in the 1980s now appears International Investment Position to have been ill conceived. The growth in payments during the past three years has brought the level of The U.S. net international investment position at payments to a record high, yet payments remain the end of 1994 was roughly a negative $750 bilquite low relative to the foreign direct investment lion, or about 11 percent of U.S. GDP.1 Of this, position in the United States. the net portfolio position was about negative $1,050 billion; the net direct investment position was positive $200 billion (on a current-cost basis); Net Portfolio Income and the official gold stock was roughly $100 billion. Net investment payments were small relative The balance on portfolio income has tended to to this position because of lower rates of return on mirror the U.S. net portfolio position and has regis- direct investment assets in the United States comtered net payments since 1985 (chart 7). Net port- pared with those on U.S. direct investment assets folio payments increased $8 billion, to $56 billion, abroad (table 9). as the net position deteriorated by roughly $150 billion on an annual-average basis. The rates of return on both portfolio claims and liabilities rose during 1. This position estimate takes the investment position at year- 1994, as they generally followed the path of U.S. end 1993 (with direct investment valued on a current-cost basis and dollar interest rates. The rate of return on claims the official gold stock at its year-end 1993 market value) and adds to it the net capital inflows recorded for 1994. Official estimates of rose somewhat faster than that on liabilities, how- the investment position will be published in the June 1995 issue of ever, resulting in little change in the effective rate the Survey of Current Business. of return on the net position (chart 8). 8. Rates of return on portfolio investment, 1986-94 7. Net portfolio position and income, 1971-94 • Billions of dollars """ Billions of dolta* NOTE. The data are annual averages. the ratio of total receipts (payments) to claims (liabilities). SOURCE. Department of Commerce, Bureau of Economic Analysis; and SOURCE. Department of Commerce, Bureau of Economic Analysis; and the Federal Reserve Board. the Federal Reserve Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 1994 417 CAPITAL ACCOUNT TRANSACTIONS wholesale sources of funds, such as senior bank notes and borrowing from their own foreign offices. The large U.S. current account deficit in 1994 was From the fourth quarter of 1993 to the fourth financed by substantial net capital inflows from quarter of 1994, domestic banks raised about both private and official sources (table 10). Com- $70 billion from abroad, and branches and agencies pared with 1993, net private capital inflows of foreign banks raised about $20 billion. For doincreased sharply while net official capital inflows mestic banks, one attraction of these funding fell. The increase in net private capital inflows sources was the absence of deposit insurance precame primarily from larger net inflows through the miums on them. U.S. banks may also have found banking sector and smaller net outflows through these sources more readily available to them last U.S. purchases of foreign securities. The statistical year as their overall creditworthiness improved discrepancy in the international accounts declined along with the economy and the quality of their substantially, thus indicating that the increase in assets. Responses to a recent Federal Reserve surrecorded net capital inflows exceeded the recorded vey of senior financial officers at large commercial increase in the current account deficit. banks indicated that a bank's credit rating was a Recorded net inflows through the banking sector very important factor in the cost of wholesale swelled to more than $100 billion in 1994 from deposits raised either domestically or in Eurodollar about $50 billion in 1993. Nearly all of the net markets in 1994. According to available data, only inflow reflected borrowing from related foreign about one-quarter of the $90 billion increase in net offices to finance U.S. domestic lending. Last year's Eurodollar borrowing by banks in the United States banking environment was marked by strong loan was matched by an increase in Eurodollar holdings demand and generally rising interest rates. Banks of U.S. residents; thus foreigners were the likely were unusually sluggish in raising offering rates on source of the bulk of these funds. retail deposits, however, and instead relied on U.S. net purchases of foreign securities, particu- 10. Composition of U.S. capital flows, 1990-94 Billions of dollars Change, Item 1990 1991 1992 1993 1994 1993-94 Current account balance -92 -7 -68 -104 -156 -52 Official capital, net 34 76 43 70 44 Foreign official assets in the United States 34 17 41 72 39 -33 US. official reserve assets -2 6 4 -1 5 6 - Other U.S. government assets -2 -0 0 0 Private capital, net 18 2! 42 13 145 132 Net inflows reported by U.S. banking offices 12 9 38 51 194 53 Securities transactions, net -34 10 18 -15 31 46 Private foreign net purchases of U.S. securities .. -6 54 64 105 92 -13 Treasury securities -3 19 37 25 33 8 Corporate bonds' 12 26 31 61 56 -5 Corporate stocks -15 19 -16 U.S. net purchases of foreign securities -29 -43 -45 -120 • 59 Stocks -7 -31 -31 -61 -43 18 Bonds -21 -14 -14 -59 -18 41 Direct investment, net 22 -28 -37 MNMMI 39 Foreign direct investment in the United States... 48 26 10 21 60 39 U.S. direct investment abroad1 -26 -32 -37 -58 -58 0 Other 17 14 14 LLLL8 -6 Statistical discrepancy 40 -40 -17 21 -33 -54 1. Transactions with finance affiliates in the Netherlands Antilles have SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, been excluded from direct investment outflows and added to foreign pur- U.S. international transactions accounts. chases of U.S. securities through 1992. This adjustment was discontinued in 1993 because of the assumption that virtually all the Eurobonds issued by Netherlands Antilles affiliates before mid-1984 have already come due. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

418 Federal Reserve Bulletin • May 1995 larly bonds, fell sharply from record levels reached Increases in foreign official assets in the United in 1993. Rising interest rates on bonds denomi- States in 1994 were substantial but well below nated in dollars and many other major currencies those in 1993. In particular, the large reserve accuproduced capital losses for U.S. holders of long- mulations by certain developing countries in Latin term bonds. Transactions with the United King- America, which experienced massive private capidom, the major center for new international bond tal inflows in 1993, were not repeated in 1994. issues and Eurobond trading, shifted from large net Total recorded net capital inflows increased subpurchases in 1993 to large net sales in 1994. stantially in 1994. That increase over the 1993 The decline in U.S. net purchases of foreign inflow was the counterpart of both the larger curstocks was less precipitous. U.S. investors made rent account deficit and a sharp swing in unreheavy net purchases of stocks in Japan last year, corded transactions from a net inflow (positive) in particularly in the first half. Japan alone accounted 1993 to a net , outflow (negative) in 1994. The for about one-third of all U.S. net purchases of statistical discrepancy in the international accounts foreign stocks for the year. In developing countries, was large and negative last year despite substantial those that received the largest net equity inflows in increases in foreign holdings of U.S. currency. 1993 (Hong Kong, Mexico, Argentina, Brazil, and Increases in foreign holdings of currency, which Singapore) were less favored by U.S. investors last are not recorded in the U.S. international accounts, year, while interest picked up in a wide assortment represent an unrecorded capital inflow and tend to of other developing countries, including South make the discrepancy positive. Much of the Korea, Chile, Indonesia, China, India, and Peru. increase in net shipments of currency in 1994 was Private foreign net purchases of U.S. securities to Russia. • declined in 1994 yet remained near the record level of 1993. Net foreign purchases of U.S. corporate stocks fell from $19 billion in 1993 to $3 billion PROSPECTS FOR 1995 in 1994. The largest declines were in purchases from the United Kingdom and offshore financial Over the year ahead, the U.S. external deficit centers, providing little information on the resi- should widen by somewhat less than it did last dence of the ultimate transactor. Net purchases by year. Recent data indicate some slowing in the Japanese residents totaled about $1 billion in 1994, growth of U.S. investment and consumption. If down from $4 billion in 1993. In contrast to the sustained, this slowing should reduce the pace of decline in equities, foreign private net purchases of import growth from last year's rapid pace. In addi- U.S. bonds rose slightly last year as increased pur- tion, continued strong economic growth in many of chases of Treasury securities were only partly off- our major trading partners should support a further set by decreased purchases of corporate and agency expansion of exports. The recent decline of the bonds. dollar against the currencies of other industrial In 1994 foreign direct investment in the United countries on average, if it is sustained and not States revived, while U.S. direct investment abroad offset by a relative rise in U.S. inflation, will tend to remained at near record levels. The direct invest- stimulate U.S. exports and depress the volume of ment inflow was swelled by takeovers of U.S. imports. companies and by the revival of profits and rein- Balanced against these factors is a likely sharp vested earnings reported by affiliates of foreign reduction in U.S. exports to Mexico because of the companies in the United States. U.S. direct invest- downturn in economic activity in that country. In ment abroad continued to be strong in Western addition, the further decline in the net investment Europe, Canada, Japan, and Australia; these coun- position that occurred last year will likely widen tries accounted for 60 percent of U.S. direct invest- the deficit on the investment income balance this ment abroad in 1993 and more than 50 percent in year. • 1994. In addition, U.S. direct investment in developing countries increased. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

419 Industrial Production and Capacity Utilization for March 1995 Released for publication April 14 March decline is the first contraction in monthly production since the strike-affected decline of last Industrial production fell 0.3 percent in March, and September and the second since May 1993. Much the cumulative gain during January and February of the decrease in overall production reflected a was 0.3 percent less than previously estimated. The 2.6 percent drop at utilities, which reversed a Industrial production indexes Twelve-month percent change Twelve-month percent change 10 10 Materials Products Nondurable manufacturing 1989 1990 1991 1992 1993 1994 1995 1989 1990 1991 1992 1993 1994 1995 Capacity and industrial production Ratio scale, 1987 production = 100 Ratio scale, 1987 production = 100 Percent of capacity Percent of capacity Total industry Manufacturing Utilization 90 Utilization 90 80 80 H 70 70 J I I I L J I L J I I I I I L 1981 1983 1985 1987 1989 1991 1993 1995 1981 1983 1985 1987 1989 1991 1993 1995 All series are seasonally adjusted. Latest series, March. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

420 Federal Reserve Bulletin • May 1995 Industrial production and capacity utilization, March 1995 Industrial production, index, 1987=100 Percentage change CCCaaattteeegggooorrryyy 11999944 11999955 1994" 19951 MMaarr.. 11999944 ttoo Dec.r Jan..r Feb/ Mar.P Dec/ Jan/ Feb/ Mar.P MMaarr.. 11999955 Total 121.7 122.2 122.3 121.9 1.1 .4 .1 -3 4.5 Previous estimate 121.7 122.0 122.6 1.1 .2 .5 Major market groups Products, total2 118.7 119.3 119.3 118.8 1.0 .5 .0 -.4 3.6 Consumer goods 115.5 116.1 116.1 115.2 1.5 .5 .0 -.8 2.0 Business equipment 152.6 153.7 154.1 154.6 1.0 .7 .3 .3 8.4 Construction supplies 111.6 112.1 111.4 111.5 1.7 .5 -.7 .1 8.1 Materials 126.3 126.6 126.9 126.7 1.4 .3 .2 -.2 5.9 Major industry groups Manufacturing 124.2 124.7 124.5 124.4 1.3 .4 -.1 -.1 5.4 Durable 131.2 131.8 131.7 131.6 1.6 .5 -.1 -.1 7.1 Nondurable 116.4 116.8 116.6 116.4 .9 .4 -.2 -.1 3.5 Mining 100.1 99.8 100.3 99.8 1.9 -.3 .5 -.5 -.8 Utilities 115.2 116.0 118.9 115.9 -1.1 -.7 2.5 -2.6 -1.7 Capacity utilization, percent MEMO Capacity, percentage 1994 1995 change, Average, Low, High, Mar. 1994 1967-94 1982 1988-89 to Mar. Dec. Jan. Feb. Mar.P Mar. 1995 Total 82.0 71.8 84.9 83.7 85.5 85.6 85.4 84.9 3.0 Previous estimate 85.5 85.5 85.7 Manufacturing 81.3 70.0 85.2 82.9 85.2 85.3 84.9 84.5 3.4 Advanced processing 80.7 71.4 83.5 81.3 83.0 83.3 83.0 82.6 3.8 Primary processing . 82.5 66.8 89.0 86.8 90.8 90.3 89.7 89.5 2.3 Mining 87.4 80.6 86.5 90.2 89.8 89.6 90.0 89.5 -.1 Utilities 86.7 76.2 92.6 87.5 84.7 85.3 87.3 85.0 1.3 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. similarly sized gain in February. Also, manufactur- rables dipped 0.5 percent; a large cutback in the ing output edged down 0.1 percent in March, and residential sales of energy by electric and gas utilimining output fell 0.5 percent. At 121.9 percent of ties and smaller decreases in the production of its 1987 average, industrial production was slightly food, clothing, and paper products more than offset above its level in December and was 4.5 percent increases in the output of gasoline and distillate higher than it was a year ago. Capacity utilization fuel oil. contracted 0.5 percentage point, to 84.9 percent, a The production of business equipment grew level equal to the high achieved during the 1988-89 0.3 percent for a second consecutive month, a period. noticeable slowing from last year's average When analyzed by market group, the data show monthly pace. The strong gain of 1.3 percent in the that the overall output of consumer goods output of information processing equipment was decreased 0.8 percent. However, the output of con- largely offset by notable declines in the production sumer durable goods declined 1.9 percent, largely of transit equipment and farm equipment. The outbecause of a drop in the production of consumer put of commercial aircraft continued to slide, but light trucks and further weakness in the production most of the decrease in transit equipment was in of household furniture and various household truck production. The production of defense and appliances. The production of consumer nondu- space equipment also continued to decline and is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 421 now 8.1 percent below its March 1994 level. furniture and fixtures, motor vehicles and parts, Among intermediate products, construction sup- and miscellaneous manufactures decreased notably. plies changed little, while business supplies slipped Reflecting the recent weakness in output, the 0.3 percent. factory operating rate declined to 84.5 percent of The production index for materials dipped capacity; the most recent peaks were 85.3 percent 0.2 percent, as a decline of 1.1 percent in the output in January 1995 and 85.2 percent in 1988-89. The of energy materials more than offset an increase of utilization rate in the primary-processing industries 0.2 percent in the output of nondurable goods mate- edged down to 89.5 percent (the most recent peaks rials. The production of durable goods materials were 90.8 percent in December 1994 and 89.0 perwas unchanged. Decreases in coal production and cent in 1988-89). The utilization rate for advancedelectricity generation account for much of the con- processing industries slipped back, to 82.6 percent; traction in the output of energy materials. this rate is 0.7 percentage point below its January When analyzed by industry group, the data show 1995 peak and 0.9 percentage point below its Januthat factory output is estimated to have decreased ary 1989 peak. slightly in both February and March; it had gained The output of utilities, which had rebounded an average of 3A percent per month during the strongly in January and February from unusually October-January period. The output of nondu- mild temperatures in December, gave back in rables manufacturers edged down: The production March all of its February gain. The operating rate of petroleum products increased noticeably, while at utilities fell to 85.0 percent after having reached the production of apparel and of rubber and plastics 87.3 percent in February. Operating rates at mines was sharply down. Instruments and stone, clay, and declined to 89.5 percent, with coal mining and oil glass products were the only major industries in and gas drilling decreasing noticeably. • durable manufacturing to advance appreciably; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

422 Statements to the Congress Statement by Alan Greenspan, Chairman, Board of ity has shown some softness. Nonetheless, to date, Governors of the Federal Reserve System, before the real economy appears to have continued to the Committee on the Budget, U.S. House of Rep- grow, without seeming to develop the types of resentatives, March 8, 1995 imbalances that in the past have undermined ongoing expansions. I appreciate this opportunity to discuss the Federal The degree of the strength of the expansion this Reserve's conduct of monetary policy. Because I year is likely to depend on the same elements that presented our semiannual Monetary Policy Report contributed strongly to last year's solid perforto the Congress just two weeks ago, I will review mance: plant and equipment outlays and inventory only briefly the current outlook before focusing on investment. Although the recent newly revised some key longer-term issues bearing on macroeco- survey by the U.S. Department of Commerce of nomic policy, issues that are highly relevant to plant and equipment investment intentions of U.S. recent foreign exchange market developments.1 business points to more modest increases in capital spending than were reported for last year, there are, The weakness of the dollar against other major as yet, few indications of that degree of slowing in currencies is both unwelcome and troublesome. orders for nondefense capital goods or in contracts Dollar weakness, while very likely overdone, is or permits for private nonresidential building. Inunwelcome because it adds to potential inflation deed, backlogs of equipment orders are rising pressures in our economy. As I have emphasized relative to sales, and business profitability, a key numerous times in the past, it is important that we factor in investment plans, continues to exceed contain such pressures. Dollar weakness is also expectations. The investment plans of manufacturtroublesome because it is doubtless symptomatic of ers, whose capacity is clearly stretched, reflect this some of the underlying problems confronting the strong demand for capital goods. But planned longer-term health of the economy: inadequate spending outside of manufacturing, especially national savings, continuing large budget deficits, among utilities and service industries, is evidently and a persistent current account imbalance. softening. Of course, at this stage the lack of a historical track record for this new survey makes it very difficult to draw firm conclusions from these figures. THE CURRENT OUTLOOK Inventory investment contributed the better part Turning to the economic outlook, the data that have of 1 percentage point to overall economic growth been published thus far in 1995 have offered some last year, and while that type of boost to growth this indications that the expansion may be slowing from year seems most unlikely, there is little evidence its torrid and unsustainable pace of late 1994. that an overhang has developed that will lead to an Although hours of work lengthened in January, abrupt adjustment of production any time soon. employment growth slowed from its average of Standard inventory-sales ratios remain on the low recent quarters and the unemployment rate rose. side of historical experience; those ratios look even Moreover, recent readings on retail sales suggest a lower, compared with historical experience if one more moderate rate of increase, and housing activ- subtracts wholesale and retail markups from the published inventory investment figures to get a better handle on the underlying physical units of stocks. Moreover, even if there were a swing in 1. See "Monetary Policy Report to the Congress," Federal inventory investment, it would have a more muted Reserve Bulletin, vol. 81 (March 1995), pp. 219-43. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

423 effect on domestic production than the inventory Knowing in advance our true growth potential cycles of just a few years ago. Rough estimates obviously would be useful in setting policy because suggest that currently perhaps a quarter of the history tells us that economies that strain labor nominal value of all wholesale and retail stocks are force and capital stock limits tend to engender imported, whereas the share was markedly less as inflation instabilities that undermine growth. It is recently as the late 1970s. true, however, that in modern economies output As I indicated in my recent testimony, while levels may not be so rigidly constrained in the short there are signs that spending is slowing, the jury run as they used to be. It is possible for the remains out on whether that will be sufficient to economy to exceed "potential" for a time without contain inflation pressures. We must remember that adverse consequences by extending work hours, by the nation has entered 1995 with its resources deferring maintenance, and by forgoing longerstretched. If we are to do our part in helping the term improvements. Moreover, as world trade execonomy operate at its fullest potential over time, pands, access to foreign sources of supply augwe need to remain watchful to ensure that any ments, to a degree, the flexibility of domestic upswing in the inflation rate does not become productive facilities for goods and some services. firmly entrenched. Aggregative indicators, such as the unemployment rate and capacity utilization, may be suggestive of emerging inflation and asset-price instabilities. But these indicators cannot be determinative. GAUGING INFLATION RISKS Policymakers must monitor developments on an ongoing basis to gauge when economic potential is I remain firmly of the belief that a key ingredient in actually beginning to become strained—irrespecachieving the highest possible levels of productiv- tive of where current unemployment rates or caity, real incomes, and living standards over the long pacity utilization rates may lie. If we are endeavrun is the achievement of price stability. Thus, I see oring to fend off instability before it becomes it as crucial that we extend the period of low debilitating to economic growth, direct evidence of inflation, hopefully returning it to a downward the emerging process is essential. The Federal trend in the years ahead. The prospects in this Reserve will remain watchful of these developregard are fundamentally good, but there are rea- ments, while remaining focused on its longer-run sons for some concern, at least with respect to the goal—the eventual achievement of price stability. nearer term. These concerns relate primarily to the We can do no less if we are to maximize our fact that resource utilization rates have already opportunity for advancing the economic well-being risen to high levels by recent historical standards. of the nation. Clearly, one factor in judging the inflationary risks in the economy is the potential for expansion of our productive capacity. If "potential GDP" is growing rapidly, actual output can also continue to FISCAL POUCY grow rapidly without intensifying pressures on resources. In this regard, many commentators, my- We must recognize that the productive potential of self included, have remarked that there might well the U.S. economy will be shaped significantly by be more than a cyclical character to the evident the actions of this Congress regarding the federal improvement of U.S. competitive capabilities in budget deficit. Too much of the small pool of recent years. But it is still too soon to judge whether national saving goes toward funding the governthat improvement is a few tenths of a percentage ment. In the past few years, we as a nation have point annually or even more. It is fair to note, been able to finance our investment by tapping however, that the fact that labor and factory utili- saving from abroad. The United States has been zation rates have risen as much as they have in the running persistent and growing deficits in its curpast year or so does argue that the rate of increase rent account position vis-a-vis the rest of the world. in potential is appreciably below the 4 percent This ability to finance our domestic investment growth rate of 1994. from abroad highlights the openness of world Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

424 Federal Reserve Bulletin • May 1995 capital markets. But it would certainly be unwise would do much to eliminate any lingering suspiand probably impossible to rely on them forever. cion that the Federal Reserve would ultimately Indeed, given the recent weakness in the foreign accommodate fiscal imbalances by monetary exexchange value of the dollar, world capital markets cess. This would help to lower inflation-risk premay be sending us just that message. This suggests miums that are embedded in dollar-denominated that a key element in dealing with the dollar's assets. All told, a credible program of fiscal reweakness is to convincingly address our underlying straint that moves the government's finances to a fiscal imbalance. sounder footing almost surely will find a favorable If we are to sustain the higher levels of invest- reception in financial markets. That market reacment that are crucial to achieve healthy increases in tion, by itself, should serve as a source of stimulus productivity and to remain a viable competitor on that would help to offset, in whole or in part, the world markets, we must raise the level of domestic drag on spending that otherwise would be associsaving and reduce our reliance on foreign saving. ated with reductions in federal outlays and transfers Reliable and robust estimates of the determinants over time. of private saving have eluded economists for many years; we can only conclude that there is no sure-fire scheme that this Congress could adopt to entice our citizens to save more. But the govern- CONCLUSION ment can decide to use less private domestic saving than it does now. By trimming the deficit, those I can assure the members of this committee that we resources will likely be put to more productive at the Federal Reserve share your goal—the largest uses, leading to benefits in the form of improved possible advance in living standards in the United standards of living. States over time. That goal can be best achieved if Trimming the deficit would doubtless make the our actions ultimately allow concerns about the economy more vibrant and less reliant on foreign variability of the purchasing power of money to sources of capital over time. But there would be recede into the background. Price stability enables shorter-run benefits as well. While there is some households and firms to have the greatest freedom uncertainty about the causes of the apparent rela- possible to do what they do best—to produce, tively high real long-term rates around the world, invest, and consume efficiently. Moreover, a credthe majority of analysts agree that in the United ible program of fiscal restraint will do much to free States the current sizable federal deficits—and their up private resources for more productive purposes. projected growth over the decades ahead—play a Formidable challenges will confront policy— significant role. In part, this owes to market partic- both fiscal and monetary—in the years ahead. It is, ipants' perception of the risks to future monetary of course, unrealistic to assume that we can elimipolicy that are posed by persistent large federal nate the business cycle, human nature being what it budget deficits. While we at the Federal Reserve is. But containing inflation and thereby damping have clearly avoided it in recent years, world economic fluctuations is a reasonable goal. We at history is replete with examples of fiscal pressures the Federal Reserve look forward to working with leading to monetary excesses and then to greater the Administration and the Congress in meeting our inflation. Progress in addressing the federal deficit common challenges. • Statement by Lawrence B. Lindsey, Member, Board I appreciate the opportunity to provide the Federal of Governors of the Federal Reserve System, before Reserve's perspectives on the status of the Comthe Subcommittee on Financial Institutions and munity Reinvestment Act (CRA) and our efforts to Consumer Credit of the Committee on Banking and reform our system for assessing CRA performance. Financial Services, US. House of Representatives, Although the agencies have submitted a joint state- March 8, 1995 ment, which I believe lays out in fair and comprehensive form the history and status of our CRA Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 425 efforts, I would like to take some time to emphasize CRA DIFFICULTIES a few additional points. First, let me say that the Federal Reserve Board Some of the central issues with which the agencies fully supports this effort to reform our CRA regu- are now dealing, in fact, have been well known lations. It is, as a rule, advisable to take a close look from the beginning. In part, that is because those at regulations periodically, and the CRA was over- issues derive from the unusual content and due for such a look, even absent the President's structure of the law itself and have plagued the prompting of July 15, 1993. During the past twenty CRA implementation process in varying degrees months, I have been the Board's representative in ever since the act was passed in 1977. There are, the interagency process. This has involved not only in short, inherent, unavoidable contradictions in formal meetings and hearings but also informal any scheme to administer the CRA. Moreover, trips around the country to see how the CRA is the agencies have been charged with developing actually working in practice. Our efforts to date that process with a minimum of congressional have been an exhaustive—and at times exhaust- guidance. ing—process of finding an appropriate balance In the absence of very much legislative direction, among the sometimes conflicting objectives of the the agencies have been asked to do the following: CRA. It is no secret that CRA reform has involved a • Develop clearer, more objective criteria or longer process than any of us wanted. But I believe standards for measuring CRA performance but that the issue before us is too important to rush. The without forcing institutions to engage in governnature of the law itself and the resulting plethora of mentally mandated or sanctioned credit allocation tough issues that confront the agencies have posed activity or to compromise the safety and soundness many challenges—some foreseen, others not. I of insured institutions believe that the time we have spent on this project • Assemble sufficient information about the will, in the long run, prove to be time well spent. needs of communities and bank activities to enable We do no one any favors if we institute a set of the agencies and the public to determine whether regulations that are unworkable in the field or performance standards have been met, while minproduce bizarre anomalies as they are applied to the imizing compliance burden on the institutions and many and diverse markets with which we are protecting the confidentiality of the financial situadealing. Further, we will not be aiding the process tion of the bank's customers of extending credit in traditionally underserved • Ensure consistency in CRA evaluations while markets if we adopt regulations that cannot stand maintaining enough flexibility and judgment to the test of time and do not have broad support and consider fairly the vast differences among banks in acceptance by those involved in the process. In size, capacity, business strategies, and product mix, particular, we will be doing more harm than good if and the diversity of communities in terms of their we treat the CRA as anything other than a way of size, economic condition, programs, and resources. developing and extending profitable market opportunities for financial institutions. These goals are often contradictory. All of these In my statement for the Board, I would like to core issues involve important matters of public focus on several reasons why the process has been policy and difficult trade-offs. Let me briefly elabso difficult and taken so long. In so doing, I would orate on the inherently contradictory nature of these also like to explore some of what I believe are the objectives. Consistency and objectivity are laudmisunderstandings about the CRA, including asser- able goals. But to be implemented in a regulatory tions that the CRA process as presently constituted scheme, they require both a set of statistical data has had so little impact and is so unworkable that it and a formulaic basis for evaluating those data. The requires radical revamping. Finally, I would like to more rigid the formulas that are applied, the greater outline some of the key principles the Federal the consistency but the lower the variety of out- Reserve believes should be reflected in any CRA comes and allowance for local circumstances that is reform. permitted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

426 Federal Reserve Bulletin • May 1995 Some may argue that a sufficiently detailed set of mance; and to take their records of performance data and complex set of formulas will permit under the CRA into account when evaluating proregulators to capture the variety of local circum- posals for expansion. stances that exists. Ultimately such quantifiable Note that all of these requirements are for reguevaluations could be applied to individual loan latory action. Although the CRA says that we are to decisions. Such an approach is now a risk in such encourage banks to help meet community credit areas as fair lending, for example. But given the needs, the act does not require any specific bank public nature of the CRA disclosure process, actions. The CRA reminds banks and thrift instisuch detailed data collection and reporting in- tutions about their charter obligations, but it does volve a degree of intrusion into the affairs of a not specifically define them in a way that would bank's customers that we have tended, in this provide guidance on reinvestment questions. The country, to find objectionable. Carried to its logi- act also says that banks should "help" meet comcal conclusion, such a process would tend to re- munity credit needs, but it does not specify what place examiner judgment and personal evalua- kind of help, or how much help, is necessary or tions of character and creditworthiness with appropriate. evaluations based solely on quantifiable criteria. Further, in calling on the supervisory agencies to In my view, while such an approach may seem assess bank performance, the act does not tell us or superficially fairer than the current system, it the banks what good CRA performance is or what might ultimately reduce economic opportunity types of specific measures the regulators might use and might prove counterproductive in aiding tra- to define good performance. The CRA also requires ditionally underserved populations. that the agencies consider an institution's CRA In addition, given the complexity and diversity of performance when reviewing its applications inour financial system and the markets it serves, one volving depository facilities, but it leaves to the may suspect whether any nationally imposed set of agencies the task of determining what the conseformulas on performance, no matter how sophisti- quences of poor CRA performance will be and cated, could ever be made to work. As a result, when and how those consequences should be subjectivity and some degree of inconsistency and applied. attendant unfairness will be inherent in any CRA Even on relatively simple but important matters, enforcement process we develop. such as what constitutes an institution's commu- I believe that my colleagues and I have con- nity, whether "services" should be included in the fronted these issues head-on and are evolving a set concept of helping meet credit needs, and whether of rules that balances the maximum amount of banks should be judged on credit extended to lowflexibility in implementation with the spirit of and moderate-income persons or only to borrowers objectivity and consistency in CRA enforcement in low- and moderate-income neighborhoods, the that the President called for. However, getting to act provides little help to regulators, bankers, or that point has not been easy. community representatives. In the absence of guidance on principles, standards, or definitions in the CRA, the agencies have been forced to attempt to add much more substance NATURE OF THE LAW through regulation than is usual for the agencies, to an extent that may be unique for financial regula- As our joint statement indicates, the CRA is indeed tors. And as this committee knows, the public a highly unusual law. At first glance, the CRA's policy process requires consideration of highly mandate to us as a regulatory agency appears fairly divergent views and interests in an attempt to strike simple. Under the CRA, we have four primary a compromise acceptable to affected parties. This is duties: to encourage banks to help meet the credit not a comfortable role for the agencies. needs of their communities, including low- and It is not my purpose to suggest that the Congress moderate-income areas; to assess bank records of should rewrite the law to clarify its intent. I am performance through examinations; to produce simply attempting to describe the circumstance in publicly available evaluations of bank CRA perfor- which we have found ourselves and indicate that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 427 this too has contributed to the difficulty of the Much of this public interest is based on a realistic reform process. Moreover, there are other factors understanding of what the CRA says and how that have complicated the task. private financial institutions work. But some is not. Public pressure, at times, has brought needed correction to insensitive or recalcitrant institutions. At other times, the ability to threaten adverse publicity PUBLIC SCRUTINY AND INVOLVEMENT and delay has no doubt led to abuses in demands from particular special interest groups claiming to Although it is extremely vague, the CRA is unusual represent the public. in quite another way. Virtually every other banking The CRA has also become increasingly imporlaw and regulation involves two primary parties— tant to the management of financial institutions. the agency and the bank. The CRA, however, Many now recognize that in an era of growing compels the agencies to look beyond the bank itself competition, CRA performance may be critical to and assess the role the bank plays in its community. an institution's ability to adjust to the new banking While supervision of the safety and soundness of environment. CRA-related activities can help definancial institutions involves us in a primarily velop new markets, potentially profitable business, two-way conversation with the bank about its and can improve a bank's public image. Also, policies, practices, and financial condition, the bankers, and even some bank analysts, now recog- CRA brings a third-party to the table—the bank's nize that cleaning up the deficient CRA record of community or the public at large. an institution, both before and after consummation As the members of this committee are well of a merger or acquisition, can be a costly process. aware, the "public" is a large and amorphous Consequently, for both the public and financial group of diverse interests. Often, the voice of the institutions, concerns about CRA performance public is interpreted as belonging to the individual have intensified. This has produced a commonality or group that can marshal the greatest communica- of interest in clarifying standards. However, views tion skills. Thus, even a theoretical three-way about the appropriateness of the law, the attributes conversation about the CRA among the agencies, of good CRA performance, and the effectiveness of banks, and the public is, in practice, hard to hold the supervisory agencies have become increasingly and often can be quite contentious. divergent. One of the reasons for the increasingly contentious nature of the discussion is that the CRA has become much more prominent and important to the involved parties. Public disclosure of CRA evalu- EVOLVING VIEWS ations, which began a few years ago as a result of amendments to the act, has focused greater atten- Some may think that the current reform effort is tion on this issue. More than ever, the CRA simply directed at correcting the administration of performance of financial institutions is being dis- the law to return to what it should have been from cussed in the press and media, and virtually every the inception of the CRA in 1977. But this may be group or association with a constituency focused on too limited a view. In fact, given the increasing housing and community development has demon- intensity of interest in the CRA over the years from strated some interest in the CRA over the past few all sides, the expectations about the CRA perforyears. On the local level, elected officials, trade mance of banks have evolved considerably. unions, church groups, and civil rights groups have In the CRA's early years, a commonly held view become active in CRA protests. In those instances was that the CRA's essential purpose was geowhere governmental dollars for economic develop- graphic in nature: to help ensure that banks would ment have dwindled, communities have often not ignore the needs of low- and moderate-income turned their attention to the private sector and the areas in their communities. Today, however, there prospect that the CRA will be a strong encourage- is a widely held view among community groups ment to private financial institutions to assume a that banks can, and should, do more. This may more direct role in revitalization. involve aggressive outreach, the use of new mar- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

428 Federal Reserve Bulletin • May 1995 keting tools, and the evolution of new loan products of the CRA law itself as well as the 1990's view of designed to increase loan approvals to low- and the CRA, which is quite different from its modest moderate-income borrowers. beginnings in 1977. The current emphasis is not on simply ensuring Although the complaints about the CRA are real, that segments of communities are not ignored but to some extent I believe that many are based on on dynamic, affirmative efforts. As a result, even misunderstandings. First, I want to note here that institutions that have demonstrably increased mort- the Board is not particularly disturbed by the gage and other credit extensions in lower-income ratings distribution for state member banks, which areas, and have expanded their participation in are virtually identical to those of other regulators. community development, are not infrequently crit- Yes, more than 90 percent do pass. But CRA icized for failure to do more. I might add that we ratings are not, and frankly for several reasons regulators have, to a substantial degree, concurred should not be, as some have suggested, the result of with the evolution in thinking in this area. Our "grading on a curve." expectations of what banks should be expected to I do not mean to say that the Board or the other do to comply with the CRA are much more agencies have been infallible in assigning ratings. aggressive than they were ten or fifteen years ago. But at the Board, we have put tremendous resources behind intensive examiner training on the CRA, fair lending, and other related issues. A great deal of time and effort also have been spent, CRA COMPLAINTS especially over the past three years, in reviewing CRA evaluations to ensure that they reflect what Not surprisingly, along with these rising expecta- we believe are fair outcomes and are as compretions, many in the banking community have come hensive and consistent as we can make them. to view agency CRA efforts as increasingly burden- Moreover, through our community affairs prosome and unfair. These views have intensified even grams at Reserve Banks, the Federal Reserve Sysas the agencies have taken explicit steps to reduce tem has developed or sponsored over the past five burden, especially for small banks. years more than 650 educational conferences, sem- At the same time, community and consumer inars, and workshops for bankers and others on the groups often view agency efforts as weak and have CRA and the types of community development suggested a number of changes, including new lending and investment programs available to help disclosure provisions, to help ensure that banks and them respond to community credit needs. We supervisory agencies approach their CRA respon- believe that these programs—attended by thousibilities effectively. Further, community groups sands of bankers—have had a positive effect. say that the CRA ratings are much too high, and Finally, we have been examining each state they contend that the banking agencies are much member bank for CRA performance once every too lenient. They point to the fact that more than 90 eighteen months to two years for more than sixteen percent of the institutions do get a satisfactory or years. The cumulative effect of our training, edubetter rating. cational programs, and examinations, I believe, Both bankers and community representatives makes it highly likely that most banks generally have alleged that the evaluations of the agencies are understand their CRA obligations and should not equally comprehensive and that the CRA rat- know what needs to be done to achieve adequate ings assigned are not always the same for banks performance. that appear to have similar performance. And both And frankly, our goal—the goal of the CRA, I bankers and community groups continue to charge believe—is to encourage all institutions to have, in that the agencies appear more interested in ensuring substance, good or outstanding CRA programs. that institutions have the appropriate CRA proce- Just as we would not entertain the notion that dures and paperwork than actual lending programs bank CAMEL ratings should somehow be proporin their communities. tional—meaning that at least a certain number of All of these frustrations are real, but as I have banks should, a priori, fail their safety and soundtried to indicate they are probably natural products ness examinations—we do not believe that this Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 429 should be assumed for bank CRA performance and thrift institutions have made tremendous strides ratings. Just as we try to help banks with financial to explore new loan underwriting standards to problems solve them and return to safe and sound better accommodate the circumstances of loweroperations, we also have been helping banks with income borrowers without sacrificing safe and CRA problems improve their programs. CRA eval- sound lending principles. The Home Mortgage uations are certainly not grading on a curve. We Disclosure Act (HMDA) data for 1992 and 1993 believe that all banks could be outstanding if they show encouraging signs that the greatest percentchose to be. age of growth in home mortgages is to low-income The regulatory burden of the CRA may have and minority borrowers. been overstated somewhat by the industry. Most of More banks and thrift institutions are seeking the more vigorous complaints about regulatory and participating in public-private partnerships in burden come from community bankers who under- both urban and rural communities than ever before. standably remain concerned and pressed by the A growing number of bank-led community develcumulative effects of all of the consumer laws and opment corporations or multibank lending consorregulations passed over the past twenty-five years tia are supporting home ownership, small business besides the CRA. Cumulatively, these regulations development, and other projects benefiting lowhave been costly to all institutions and certainly and moderate-income areas. Moreover, all this has have fallen disproportionately on smaller banks. been accomplished with no significant adverse Given the CRA's vague prescriptions and the un- effect on safety and soundness. And though, as I certainty of the examination process, the CRA may have said, we support this reform effort, the record have become a stalking horse for frustration with suggests that we want to be very cautious in regulatory costs in general. avoiding unintended consequences from any pro- My point is that I think some caution is called for posed changes in the CRA. in assessing the extent of the CRA's burden, and its purported enforcement. FEDERAL RESERVE PRINCIPLES FOR CRA REFORM THE CRA'S IMPACT Finally, let me be clear about the Federal Reserve's Despite the CRA's lack of clarity and the criticisms position on a number of issues related to the CRA of the CRA from all quarters, I believe that the and the reform process. First, as indicated, in our CRA has had a significant impact on the availabil- view, the CRA has had a beneficial effect on many ity of credit in low- and moderate-income areas. In communities and institutions. On balance, we befact, I fear that the focus on the imperfections of the lieve that the law is worthy of being maintained, CRA—many of them probably unavoidable—has provided it is administered in a sensible fashion. misdirected the public debate. Far too much em- Second, one of the major risks in the reform phasis has probably been placed on the problems of process is that changes we may make to the CRA's the CRA, rather than on its strengths. Here is a regulations could result in unintended and unwargovernment program that has entailed little bureau- ranted credit allocation. I want to emphasize that cracy, great local autonomy, and virtually no fed- the Board is very concerned about this prospect. eral tax dollars to administer. Yet its impact on Let me assure this committee that the Federal communities can probably be measured in billions Reserve has no wish to produce a regulatory of dollars in community and economic develop- scheme that would result in governmentally imment activity, benefiting the most distressed parts posed credit allocation driven from Washington. of communities. But despite our best intentions, this is an undeni- The CRA has helped stimulate loans for home able risk. One of the strengths of the CRA that we mortgages, housing construction and rehabilitation, should take special care to preserve is its flexibility and small and minority business development in and responsiveness to local conditions. Under any low- and moderate-income communities. Banks scheme, banks should still be able to determine Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

430 Federal Reserve Bulletin • May 1995 how best to serve the needs of their communities. by the banks but by their customers. The detailed We must not substitute the judgment of the agen- reporting of individual loans now required under cies for the judgment of the banks. I do not believe HMDA, for example, means that applicants' inthat any other alternative would be acceptable to comes and other sensitive pieces of information are the Board, and we will not endorse any reform placed in the public domain. While the Congress approach—no matter how well intentioned—that has determined that the benefits of such reporting violates this principle. outweigh the costs in that particular instance, the Third, we must be very cautious in attempting assumption that further detailed reporting is necesany revision of the regulations, given the uncertain- sarily beneficial should be carefully scrutinized. ties involved in how an entirely new set of regula- Seventh, while we can understand the desire to tions will actually affect bank behavior. I am develop additional incentives for good CRA perparticularly concerned about the unintended conse- formance, discussion of a variety of safe harbor quences of regulation, which may actually harm proposals over the years has generally provided existing minority-owned or minority-oriented fi- protection to too many institutions whose perfornancial institutions, undermine the efforts of small mance may be barely satisfactory and too few when community-based banks or nonprofit institutions, limited to only those rated "outstanding." One or cause banks to leave markets or avoid experi- solution that the Congress may want to consider is mentation because of a fear of increased risk. to establish a new rating category of "strong Wholesale or radical change invariably ends up as satisfactory" and focus some benefits to institutions counterproductive. Underserved markets do not at that level or higher. need alternating periods of extreme policy activism Finally, we believe it especially important that followed by extreme neglect. They require steady, the commitment to safety and soundness be mainmoderate, predictable, and workable efforts. tained. Community reinvestment must be econom- In that regard, I would emphasize that the Board ically sound and ultimately engender adequate rates historically has endeavored to steer a steady course of profitability if it is to be sustained. If the CRA is on the CRA, adopting modest changes in policy to to work over the long term, economic sense, not respond reasonably to new conditions and expec- shifting views about CRA obligations, must be the tations but avoiding radical changes that could have driving force. Giving money away is not what the unfortunate consequences. We believe that ap- CRA is, or should be, about, and while some proach has been the correct one. flexibility in loan terms may at times be appropri- Fourth, any pursuit of more objectivity in the ate, we do not support anything other than safe, rating scheme must be tempered with a recognition sound, and profitable lending. of the potential adverse consequences of any mechanical system that does not allow considerable agency judgment. I think that was brought home CONCLUSION clearly in the responses by many in the banking industry to the first reform proposal, which pro- The CRA reform process has been very arduous posed a formulaic market share test as the primary and difficult and certainly has taken longer than element in a rating system. There were just too desired. But I believe that the Board, along with the many unforeseen problems with the concept. other agencies, has made a good faith effort to Fifth, any reform structure must recognize the adhere to the President's request. The Board has uniqueness of small institutions and the dispropor- devoted a tremendous amount of time and energy, tionate burden they bear from any regulation, CRA as have the Reserve Banks, to the reform process. or otherwise. I believe that any final proposal will Our work is not done, however, and we welcome accommodate a streamlined examination for this committee's interest in this process. Our task is smaller banks, though it will not exempt them from to develop a CRA regulation and evaluation protheir CRA obligations. cess that is superior to the one now in place but one Sixth, any increased data reporting must be that will not have adverse long-term consequences. justified. It is important to bear in mind that the I can assure you of the Federal Reserve's commitprimary cost of detailed data reporting is not borne ment to this goal. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 431 Statement by Alan Greenspan, Chairman, Board of services. At present, that market basket—at least at Governors of the Federal Reserve System, before the higher levels of aggregation—is fixed to spendthe Committee on Finance, U.S. Senate, March 13, ing patterns that prevailed in the period from 1982 1995 to 1984. Economic theory indicates that changes in a fixed-weight price index such as the CPI form an upper bound to changes in the cost of living, even I am pleased to appear here today to address some if all of the individual prices used in the index are of the issues surrounding the adjustment of federal measured without error. The reason is that the use programs for movements in the cost of living. For of fixed weights is appropriate only if there is no the current fiscal year, roughly 30 percent of total possibility for consumers to offset any of the federal outlays are indexed to movements in con- consequences of increased prices for some goods sumer prices, with social security, Supplemental by substituting others. While the degree of substi- Security Income, veterans' pensions, military re- tutability among products may be open to question, tirement, and civilian pensions accounting for the it is undeniable that such substitution does indeed bulk of this spending. On the tax side, indexation is occur. largely confined to the individual income tax, Other technical aspects to the construction of the which accounts for about 45 percent of federal CPI also suggest that it may overstate cost-of-living receipts. The Congress explicitly intended, in en- changes. Researchers at the Bureau of Labor Staacting the indexation of these spending and tax tistics (BLS) have found that an interaction beprograms, to insulate those affected individuals tween the use of fixed weights at the most disagfrom the consequences of increases in the cost of gregated level and the manner in which new living. The vehicle chosen for making these adjust- samples of retail outlets are linked into the index ments was the consumer price index (CPI), and the may be resulting in an overstatement of price issue at hand is whether that price index is appro- increases. In January, the Bureau implemented priate for the task. procedures that should alleviate this so-called If it is not, there are significant implications for "sample rotation bias" at grocery stores, but the the budget deficit, and there is the potential for problem likely remains for other categories. More considerable unintended transfers of wealth. As I generally, the BLS is experimenting with a geometnoted in testimony earlier this year, if annual ric weighting scheme that offers broader relief from inflation adjustments to indexed programs and this technical problem. taxes were reduced 1 percentage point—and mak- Over the postwar period, there has been a marked ing the admittedly strong assumption that there are tendency for consumers to shift purchases from no other changes in the economy—the annual level high-priced, full-service stores to lower-priced, disof the deficit would be lower by about $55 billion count retailers. The BLS uses surveys of consumer after five years, including the effects of lower debt buying patterns to keep abreast of these developlevels. The cumulative deficit reduction over this ments. On the basis of these surveys, a new sample period would be nearly $150 billion, and these of retail outlets is drawn for roughly one-fifth of savings would continue to grow in subsequent U.S. cities each year. Thus, with some lag, innovayears. tions in retailing are captured in the CPI. However, I believe that the evidence suggests that some at the time when new outlets are rotated into the adjustment to our indexing procedures is war- sample, if prices are found to be lower at the new ranted. I am certain that many of the technical establishments than at those being rotated out of the details will be elaborated in your discussions later sample, the differential is, in effect, attributed to this morning, but let me briefly outline some of the lower quality rather than to lower prices. Even conceptual issues. To begin, a review of the legis- granting that the quality of service and ambience lative history surrounding indexation does not re- may differ between the new and old outlets, preveal a full appreciation for the important distinction sumably some of the shift in shopping patterns between the CPI and a true measure of the cost of reflects the fact that consumers can purchase the living. The CPI is constructed to measure price same goods at lower prices. Consequently, some of changes for a fixed market basket of goods and the price declines associated with the growing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

432 Federal Reserve Bulletin • May 1995 importance of discount retailers may not be fully scanners documented the dramatic and swift imcaptured by our statistics. provements in quality that occurred after their In sum, the fixed-weight nature of the CPI and introduction in the early 1970s. Substantial gains other aspects of its construction point in the direc- were made in scan time, resolution, and the speed tion of an overstatement of increases in the cost of of image reconstruction. These characteristics, in living. Even if this upward bias were only a fraction turn, have a direct bearing on the comfort and of a percentage point per year, the relentless com- convenience of the patient and the quality of the pounding of such a discrepancy ultimately would diagnosis provided by the doctor. Conventional have budgetary consequences meriting serious price measures will almost surely miss much of this attention. type of quality improvement because of the enor- There are, however, reasons for suspecting that mous complexity involved in defining the output weighting and construction are not the only factors that is being consumed and measuring the correleading the CPI to overstate changes in the cost of sponding unit price of that output. living. A more difficult but, to my mind, no less Although medical care is perhaps the most strikimportant issue concerns making adequate adjust- ing example of rapid—and difficult-to-measure— ment for the improvement in the quality of goods quality improvement, similar problems occur and services over time. I would note that the BLS across a broad range of goods and services. Redoes make adjustments for quality changes in the search has found that quality improvement may not CPI. What is at issue is whether the implemented be adequately captured for goods and services procedures, or for that matter any practical proce- ranging from complicated capital equipment to dures that could be established in the foreseeable power tools to consumer appliances to the simple future, can be expected to account fully for quality consumption of household lighting. changes across the vast array of goods and services To be sure, there are offsets to unmeasured available in our economy. increases in quality. The downward adjustment In many respects, the issue of price measurement made to measured auto prices for the cost of has as its mirror image the fundamental problem of mandated pollution control devices is one example defining with precision a unit of output. If this cited in a recent study by the Congressional Budget conundrum could be resolved, not only would we Office: Although this equipment may provide a have more accurate price measures but we would benefit to society, the owner of the automobile have correspondingly better measures of output and likely captures little of the direct benefit associated productivity. But defining a unit of output is an with his or her increase in outlays. Other products exceptionally difficult task when the characteristics may be made more poorly in ways that escape of products and services are changing rapidly and detection in our price statistics. But given the along many dimensions. Under these circum- perpetual advance of knowledge and technology, stances, disentangling price change from quality these cases are surely overwhelmed by a tendency improvement presents a formidable challenge. for the quality of goods and services to rise over Nowhere are these challenges more acute than in time in a manner that is difficult to define and the area of medical care. What is the appropriate measure. Those who remember with fondness the unit of output? Should one price procedures, treat- products of yesteryear are probably suffering either ments, or cures? Should the comfort or satisfaction from fading memories or excessive sentimentality. of the patient be accounted for in price measure- The difficulties confronted in price measurement ment? The past century has witnessed astonishing are not confined to the quality advances of existing improvements in medical care. Cures and preven- products. The continual introduction of new goods tive treatments have become available for previ- and services onto the markets of our dynamic ously unbeatable diseases. Medical advances have economy creates additional challenges for price also led to new treatments that are more effective measurement. In some cases, a new good may be and that have increased the speed and comfort of similar to an improved version of an old good. In recovery. other cases, new products may deliver services to Technological innovations have been exception- consumers that effectively were not available beally rapid in the medical field. A case study of CAT fore—for example, personal computers, videocas- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 433 sette recorders, and cellular phones. New goods living adjustments when—given the problems inand services are incorporated in our price measures herent in any statistical measure of aggregate but only with a lag. This lag can create an upward prices—there is a need for the application of sound bias because new products often experience their judgment. If indexation had prevailed for only a largest price declines early in the product cycle. short period of time, the discrepancy between the The more spectacular examples involve consumer CPI and a true measure of the cost of living would electronics, such as computers and communications not have resulted in any appreciable problem. But equipment, but the entry of an enormous amount of left in place over long periods of time, as has now new products onto the markets every year makes occurred and is envisioned continuing in the future, this a more pervasive problem than is commonly the discrepancy will compound in a manner that understood. While any one product may not figure cumulates to very substantial magnitudes. prominently in household budgets, the totality of For this reason, I suggest that the Congress give new products and the often large price declines that careful consideration to the establishment of an occur before they are incorporated in our price mea- independent national commission to set annual sures suggest that this problem may not be trivial. adjustment factors for federal receipt and outlay These difficulties should not be read as a blanket programs. The members of this commission could indictment of our current statistical procedures. The review the available price statistics, taking into consumer price index is a fundamentally sound account the differences between these measures and statistical program. The BLS has, over the years, the concept of a true measure of the cost of living. made frequent and significant improvements in the In addition, periodic review would allow the dis- CPI, and further improvements should be, and are, crepancy to be adjusted for improvements in the on their agenda. Updated market baskets, experi- available statistics as well as for insights developed mentation with alternative indexing formulas, and from outside research. Careful consideration could ongoing research on the application of hedonic be given to the establishment of a special cost-ofindexes offer the possibility of better measurement living adjustment for retirement benefits to reflect in the future. the buying patterns of the affected population. The But even the implementation of improvements in replacement of a mechanical procedure by the the CPI can lead to distortions when this measure is informed judgment of experts would best ensure used directly as a cost-of-living escalator. For that the original intent of the legislation would be example, the BLS made a significant change in how fulfilled—to insulate taxpayers and recipients of it calculates the CPI in 1983, when it shifted from benefits from the effects of changes in the cost of a method in which the price index for housing was living. constructed as if each household was paying the The issue that we are discussing today demoncurrent home price and mortgage rate on its resi- strates clearly the long-lived consequences of havdence to one that is a more realistic measure of the ing allowed inflation to increase in the late 1960s cost of home occupancy. Because of the run-up in and 1970s. Had the inflation environment of the house prices and interest rates between the 1960s 1950s and early 1960s been maintained, no wideand early 1980s, the official CPI rose about 9 spread application of indexation would have percent more than indicated by the newer, superior emerged; there simply would have been no need for measure. By the time the index was changed, this it. Indexation was viewed as a way of mitigating overstatement had added substantially to the level the effects of inflation. It succeeded in many reof outlays in the large indexed federal programs. spects, but we have also seen another example of Once the additional interest outlays required to the operation of the "Law of Unintended Consefinance the cumulatively higher federal debt are quences" in the enlargement of our budget deficit. added in, a rough estimate suggests that, all else I believe that, if the Federal Reserve can maintain equal, the deficit for fiscal year 1994 would have a proper direction for monetary policy, we shall been smaller by $50 billion had the overindexing make this whole matter moot. But in the interim, not occurred. we should at least attempt to refine our indexation The fundamental problem is that we have legis- procedures so as to ensure that the distortions are lated a mechanical procedure to implement cost-of- minimized. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

434 Announcements RESIGNATION OF GOVERNOR JOHN P. LAWARE successor to my seat on the Board, every effort be made to nominate a person with that background. AS A MEMBER OF THE BOARD OF GOVERNORS Respectfully yours, John P. LaWare on March 27, 1995, submitted his John P. LaWare resignation as a member of the Board of Governors, effective April 30. The text of the letter from President Clinton Governor LaWare, who had been a member of appears below: the Board since August 15, 1988, submitted his The White House letter of resignation to President Clinton. In view of Washington his impending departure from the Board, Governor LaWare did not attend the meeting of the Federal April 5, 1955 Open Market Committee on March 28, 1995. Before becoming a member of the Board, Gov- The Honorable John P. LaWare Board of Governors of the ernor LaWare served as chairman and as a director Federal Reserve System of Shawmut National Corporation, a superregional Washington, D.C. 20551 bank holding company in New England. His banking career spanned thirty-five years, beginning in Dear John: 1953 after service in the U.S. Air Force. I have received your letter advising me of your resig- The text of his letter of resignation appears nation from the Board of Governors of the Federal below. Reserve System. As you requested, I hereby accept your resignation, effective April 30, 1995. I appreciate your dedicated work for the federal gov- March 27, 1995 ernment. Your skill and experience have been of tremendous value to the Board, helping to ensure a stable The Honorable William Jefferson Clinton monetary system and greater prosperity and opportunity The President of the United States for our fellow citizens. I will certainly keep your sugges- The White House tions in mind as we seek a worthy successor. On behalf of all who have benefited from your ser- Dear Mr. President: vice, I thank you for a job well done. Hillary joins me in extending best wishes for every future success. I hereby submit my resignation as a Member of the Board of Governors of the Federal Reserve System Sincerely, effective April 30, 1995. It has been a distinct honor and privilege to serve as a Bill Clinton Member of the Board and the Federal Open Market Committee with such distinguished colleagues and under After the announcement of Governor LaWare's the outstanding leadership of Chairman Alan Greenspan. resignation, Alan Greenspan, Chairman of the In my opinion, it has been important for the Board to Board of Governors, issued the following have an experienced banker as a Member during these past six-and-a-half years. The Board has an important statement: role vis-a-vis the banking system as a supplier of services, supervisor and regulator. The quality of Board I deeply regret, but understand, the decision of Govdeliberations and decisions on banking matters is ernor John LaWare to retire from public service. His enhanced by the direct participation of a Member with advice and counsel during his more than six and one-half personal private sector experience in banking. Therefore, years as a member of the Board have been outstanding I respectfully recommend that, in your search for a and in the best interest of the country. He has been not Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

435 only a valuable and trusted colleague but also a close ISSUANCE OF AMENDMENTS TO friend. To say he will be missed is truly an understate- REGULATION Z AND REVISIONS TO ITS ment. I wish him well in whatever future endeavors he OFFICIAL STAFF COMMENTARY undertakes. The Federal Reserve Board on March 16, 1995, issued amendments to its Regulation Z (Truth in ISSUANCE OF FINAL GUIDELINES Lending), requiring new disclosures for reverse ON AN INTERNAL PROCESS FOR APPEALING mortgages as set forth in the Home Ownership and AN ADVERSE MATERIAL SUPERVISORY Equity Protection Act of 1994. DETERMINATION A reverse mortgage transaction is a loan secured by the equity in a home. In a reverse mortgage, The Federal Reserve Board on March 24, 1995, disbursements are made to homeowners—typically issued final guidelines on an internal appeals on a monthly basis and typically to the elderly— process for institutions wishing to appeal an until the homeowner dies, moves permanently, or adverse material supervisory determination. The sells the home. The lender relies on the home's guidelines were effective immediately. future value for repayment. The Riegle Community Development and Regu- The amendments would impose disclosure latory Improvement Act of 1994 requires that the requirements about the potential cost of the trans- Board (as well as other federal banking agencies) action on creditors offering reverse mortgages and establish an independent, intra-agency appellate would impose substantive limitations on home process, which will be available to review material mortgage transactions having rates or fees above a supervisory determinations made at insured deposi- certain percentage or amount. tory institutions, such as an adverse examination On March 28, 1995, the Federal Reserve Board report. issued revisions to the official staff commentary to its Regulation Z. The rule is effective April 1, 1995; however, compliance is optional until October 1, 1995. ISSUANCE OF FINAL RULE The revisions to the commentary clarify regu- TO REGULATION E latory provisions and provide further guidance on issues of general interest, such as the treatment of The Federal Reserve Board on March 16, 1995, various fees and taxes associated with real estateissued a final rule to its Regulation E (Electronic secured loans, including charges by third parties, Fund Transfers) to give financial institutions more and a creditor's responsibilities when investigating flexibility in identifying consumer accounts on a claim of an unauthorized use of a credit card. receipts at automated teller machines (ATMs). The final rule, effective April 24,1995, no longer requires that terminal receipts uniquely identify the AVAILABILITY OF TRANSCRIPTS consumer's account or card. This change will allow OF 1989 MEETINGS OF THE institutions to truncate the number on the receipt FEDERAL OPEN MARKET COMMITTEE and will help protect consumers and financial institutions against fraudulent withdrawals of funds. The Federal Reserve on March 21, 1995, made In some fraud schemes, criminals manufacture available for public inspection transcripts of meetcounterfeit ATM cards by using valid account num- ings of the Federal Open Market Committee bers from receipts discarded by consumers at (FOMC) that were held during 1989. The package ATMs. They then withdraw funds by using the includes transcripts of eight regularly scheduled personal identification number that, without the meetings and six telephone conference calls. consumer's knowledge, they have observed the This action is in line with procedures adopted by consumer enter at the ATM. The amendments to the FOMC at its last meeting that called for the Regulation E are designed to address these public release of transcripts for an entire year with problems. a five-year lag. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

436 Federal Reserve Bulletin • May 1995 The 1989 transcripts have been lightly edited to nars for retirees and those planning for retirement. enhance readability and to redact confidential mate- The seminars will be hosted by the twelve District rial such as information pertaining to individual Federal Reserve Banks and will emphasize that foreign central banks and private business informa- mutual funds and annuities, unlike certificates of tion. deposit, are not insured by the Federal Deposit Last year, the Committee issued transcripts for Insurance Corporation or in any way guaranteed by meetings and conference calls held in 1988, 1987, the banks that sell them. and the last half of 1986. Earlier transcripts will The Federal Reserve developed the program in be made available as soon as editing can be cooperation with the American Association of completed. Retired Persons and conducted pilot seminars in the Boston area in late 1994. A short video providing basic information about START OF EDUCATION CAMPAIGN mutual funds is also under development for use by ON THE SALE OF MUTUAL FUNDS the Federal Reserve, bankers, and consumer groups AND ANNUITIES AT BANKS in their education programs. In addition, the Federal Reserve will provide banks with training on The Federal Reserve announced on March 20, the interagency guidelines governing the retail sale 1995, that it would soon begin a nationwide educa- of mutual funds and other uninsured products on tion campaign about the sale of mutual funds and bank premises. annuities at banks. Additional information about the seminar pro- The campaign, entitled "Mutual Funds: Under- gram may be obtained from the District Federal stand the Risks," will begin with a series of semi- Reserve Banks. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

437 Minutes of the Federal Open Market Committee Meeting Held on January 31-February 1,1995 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. Madigan, Associate Director, Division of of the Federal Reserve System in Washington, Monetary Affairs, Board of Governors D.C., starting on Tuesday, January 31, 1995, at Mr. Simpson, Associate Director, Division of 1:30 p.m. and continuing on Wednesday, Febru- Research and Statistics, Board of Governors ary 1, 1995, at 9:00 a.m. Mr. Winn,1 Assistant to the Board, Office of Board Members, Board of Governors Messrs. Hooper and Reinhart,1 Assistant Directors, Present: Divisions of International Finance and Mr. Greenspan, Chairman Monetary Affairs respectively, Board of Mr. McDonough, Vice Chairman Governors Mr. Blinder Mr. Rosine,1 Senior Economist, Division of Mr. Hoenig Mr. Kelley Research and Statistics, Board of Governors Mr. English,1 Economist, Division of Monetary Mr. LaWare Affairs, Board of Governors Mr. Lindsey Mr. Freeman,1 Section Chief, Division of Mr. Melzer Ms. Minehan International Finance, Board of Governors Mr. Moskow Ms. O'Day,1 Associate General Counsel, Ms. Phillips Legal Division, Board of Governors Ms. Yellen Mr. Baer,1 and Ms. Misback,1 Managing Senior Counsels, Legal Division, Board of Governors Mr. Ely,1 Senior Attorney, Legal Division, Messrs. Boehne, Jordan, McTeer, and Stern, Board of Governors Alternate Members of the Federal Open Ms. Low, Open Market Secretariat Assistant, Market Committee Division of Monetary Affairs, Board of Governors Messrs. Broaddus, Forrestal, and Parry, Presidents of the Federal Reserve Banks of Messrs. Barron and Rasdall, First Vice Presidents, Richmond, Atlanta, and San Francisco Federal Reserve Banks of San Francisco and respectively Kansas City respectively Mr. Kohn, Secretary and Economist Messrs. Beebe, Goodfriend, Lang, Rosenblum, Mr. Bernard, Deputy Secretary Sniderman, and Ms. Tschinkel, Senior Mr. Coyne, Assistant Secretary Vice Presidents, Federal Reserve Banks of Mr. Gillum, Assistant Secretary San FranCisco, Richmond, Philadelphia, Mr. Mattingly, General Counsel Dallas, Cleveland, and Atlanta respectively Mr. Patrikis, Deputy General Counsel Messrs. McNees and Miller, Vice Presidents, Mr. Prell, Economist Federal Reserve Banks of Boston and Mr. Truman, Economist Minneapolis respectively Mr. Evans and Ms. Krieger, Assistant Vice Messrs. Davis, Dewald, Lindsey, Mishkin, Presidents, Federal Reserve Banks of Chicago Promisel, Siegman, Slifman, and Stockton, and New York respectively Associate Economists Mr. Fisher, Manager, System Open Market Account 1. Attended portions of the meeting. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

438 Federal Reserve Bulletin • May 1995 In the agenda for this meeting, it was reported Lynn E. Browne, Thomas E. Davis, that advices of the election of the following mem- William G. Dewald, David E. Lindsey, Frederic S. Mishkin, Larry J. Promisel, bers and alternate members of the Federal Open Charles J. Siegman, Lawrence Slifman, Market Committee for the period commencing David J. Stockton, and Carl E. Vander Wilt, January 1, 1995, and ending December 31, 1995, Associate Economists had been received and that the named individuals had executed their oaths of office. By unanimous vote, the Federal Reserve Bank The elected members and alternate members of New York was selected to execute transactions were as follows: for the System Open Market Account until the adjournment of the first meeting of the Committee William J. McDonough, President of the Federal Reserve after December 31, 1995. Bank of New York, with James H. Oltman, First By unanimous vote, Peter R. Fisher was selected Vice President of the Federal Reserve Bank of to serve at the pleasure of the Committee as New York, as alternate; Manager, System Open Market Account, on the Cathy E. Minehan, President of the Federal Reserve Bank of Boston, with Edward G. Boehne, President understanding that his selection was subject to of the Federal Reserve Bank of Philadelphia, as being satisfactory to the Federal Reserve Bank of alternate; New York. Michael H. Moskow, President of the Federal Reserve Bank of Chicago, with Jerry L. Jordan, President of Secretary's note. Advice subsequently was received the Federal Reserve Bank of Cleveland, as that the selection of Mr. Fisher was satisfactory to the alternate; board of directors of the Federal Reserve Bank of Thomas C. Melzer, President of the Federal Reserve New York. Bank of St. Louis, with Robert D. McTeer, President of the Federal Reserve Bank of Dallas, as alternate; By unanimous vote, the minutes of the meeting Thomas M. Hoenig, President of the Federal Reserve of the Federal Open Market Committee held on Bank of Kansas City, with Gary H. Stern, President December 20, 1994, were approved. of the Federal Reserve Bank of Minneapolis, as The Manager of the System Open Market alternate. Account reported on developments in foreign exchange markets since the December meeting. By unanimous vote, the following officers of the There were no market transactions for System Federal Open Market Committee were elected to Account during this period, and thus no vote was serve until the election of their successors at the required of the Committee. first regularly scheduled meeting of the Committee The Manager also reported on developments in after December 31, 1995, with the understanding domestic financial markets and on System open that should they discontinue their official connec- market transactions in government securities and tion with the Board of Governors or with a Federal federal agency obligations during the period Reserve Bank, they would cease to have any offi- December 20, 1994, through January 31, 1995. cial connection with the Federal Open Market By unanimous vote, the Committee ratified these Committee: transactions. The Committee then turned to a discussion of the economic and financial outlook and the implemen- Alan Greenspan Chairman tation of monetary policy over the intermeeting William J. McDonough Vice Chairman period ahead. A summary of the economic and Donald L. Kohn Secretary and Economist financial information available at the time of the Normand R.V. Bernard Deputy Secretary meeting and of the Committee's discussion is pro- Joseph R. Coyne Assistant Secretary vided below, followed by the domestic policy Gary P. Gillum Assistant Secretary directive that was approved by the Committee and J. Virgil Mattingly, Jr. General Counsel issued to the Federal Reserve Bank of New York. Ernest T. Patrikis Deputy General Counsel Michael J. Prell Economist The information reviewed at this meeting sug- Edwin M. Truman Economist gested a strong further rise in economic activity Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 439 during the closing months of 1994. Although con- 1993. The regional pattern of starts activity sugsumer spending appeared to be less buoyant and gested that favorable weather accounted for little of housing demand had softened somewhat, growth in the strength in December. business investment, exports, and inventories Business fixed investment was estimated to have remained brisk. Industrial production and payroll grown at a very rapid pace in the fourth quarter, employment continued to record substantial gains. with a pickup indicated for business spending on Broad indexes of prices for consumer goods and both equipment and nonresidential structures. New services had risen moderately on average over orders for nondefense capital goods declined on recent months despite shrinking margins of unem- balance over November and December, but the ployed resources and further sizable increases in large backlog of unfilled orders, especially for comthe prices of many materials. puters, pointed to a continued strong expansion in Nonfarm payroll employment advanced consid- spending on business equipment in coming months. erably further in December after a sharp rise in Nonresidential construction activity was up consid- November. Substantial job gains were recorded in erably in November for a third straight month, with December in service industries and in the retail increases in construction widespread by type of trade sector. Hiring in manufacturing was brisk for structure. Recent data indicated that permits for a third straight month, with labor demand espe- nonresidential construction were continuing to cially strong in motor vehicles, capital goods, and trend higher and perhaps were running ahead of electronic equipment. Construction payrolls slipped construction activity. after a large increase in November. The average Business inventory investment remained brisk in workweek was unchanged in December, but fac- November; in the aggregate, the buildup was in tory overtime edged back up, matching the highest line with shipments and sales. In manufacturing, level reached in the history of this series. The stocks increased more rapidly in November, but the civilian unemployment rate declined to 5.4 percent. ratio of stocks to shipments declined further and Industrial production registered another large was at a historically low level. In wholesale trade, advance in December. Manufacturing accounted inventories rose less rapidly in November, but the for all of the gain; an upturn in mining pro- inventory-to-sales ratio increased further, although duction offset a decline in the output of utilities it remained within its range of recent years. Invenassociated with unseasonably warm weather. In tory accumulation slowed a little at the retail level, manufacturing, the output of motor vehicles and and the inventory-to-sales ratio for this sector parts surged again and further solid gains were remained near the middle of its range of recent recorded in the production of other goods. The years. large advance in industrial output in December The nominal deficit on U.S. trade in goods and boosted rates of capacity utilization above already services widened somewhat further in November, high levels. and for October and November combined the defi- Retail sales were reported to have changed little cit was well above its average rate in the third over November and December after substantial quarter. The value of exports of goods and services advances in September and October; the flattening increased more slowly in the October-November of sales reflected sharply reduced increases in out- period than in the third quarter, largely reflecting lays for non-auto consumer goods. Consumer reduced growth of exported industrial supplies. The spending on services rose moderately on balance rise in the value of imports of goods and services over November and December, with outlays for for the October-November period was led by energy services held down by unusually mild increased imports of non-oil industrial supplies and weather. Although some indicators of housing automotive, capital, and consumer goods. Availdemand had weakened, housing starts posted siz- able data for the fourth quarter of 1994 indicated able gains on balance over November and Decem- continued growth in economic activity, though ber; single-family construction remained at a rela- perhaps at a somewhat slower pace, in the major tively high level despite the rise in mortgage rates foreign industrial countries. in 1994, and multifamily construction continued its Consumer price inflation slowed a little in gradual recovery from the depressed levels of early December despite a jump in food prices that was Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

440 Federal Reserve Bulletin • May 1995 only partly offset by a decline in energy prices. heavy demands for reserves through System repur- Excluding food and energy items, consumer prices chase agreements (RPs). The federal funds rate edged up in December and rose significantly less averaged close to 5V2 percent during the intermeetin 1994 than in 1993. At the producer level, prices ing period. of finished goods also advanced more slowly in Most other market interest rates declined slightly December, with a drop in energy prices balancing on balance over the period after the December 20 a surge in food prices. Prices of finished goods meeting. Very short term interest rates fell after the other than food and energy increased modestly in first of the year, reflecting the disappearance of 1994 after being held down in 1993 by a sharp year-end premiums. More broadly, favorable news drop in the prices of tobacco products. In contrast on inflation and indications of some unexpected to prices of finished goods, price inflation at earlier slowing in the growth of final demand apparently stages of production picked up in 1994. For inter- led market participants to conclude that further mediate goods other than food and energy items, tightening of monetary policy, though still expected prices rose at a faster rate in the second half of to be substantial, would be less than previously 1994, with the pickup most clearly evident in thought and would be spread over a longer period. materials used in manufacturing. Prices of crude Yields on tax-exempt instruments declined conmaterials rose rapidly in the second half of 1994 siderably as concerns about the implications of and for the year as a whole. Increases in labor costs Orange County's problems for the financial condiremained moderate. Average hourly earnings were tion of other municipal governments abated. Strong little changed on balance over November and earnings reports for the fourth quarter boosted December, and for the year as a whole they major indexes of equity prices. advanced only slightly more than in 1993. More In foreign exchange markets, the trade-weighted broadly, hourly compensation of private industry value of the dollar in terms of the other G-10 workers increased more slowly in the fourth quar- currencies declined somewhat over the intermeetter than in any of the previous three quarters of ing period. The dollar fell substantially against the 1994, and the rise for the year was significantly less mark, which was buoyed by safe-haven inflows than in 1993. from weaker European currencies, but dropped less At its meeting on December 20, 1994, the Com- against the yen. One factor that weighed against the mittee adopted a directive that called for maintain- dollar was uncertainty about the consequences for ing the existing degree of pressure on reserve posi- the U.S. economy of the sharp depreciation of the tions and that included a bias toward the possible Mexican peso and the related economic and finanfirming of reserve conditions during the intermeet- cial problems in Mexico and other developing ing period. Accordingly, the directive stated that in economies; market participants expressed some the context of the Committee's long-run objectives concern that the crisis might constrain U.S. monefor price stability and sustainable economic growth, tary policy in the event of further domestic inflaand giving careful consideration to economic, tion pressures and that the counterpart to the large financial, and monetary developments, somewhat prospective reduction in the Mexican current greater reserve restraint would be acceptable or account deficit would lie importantly in the already slightly lesser reserve restraint might be acceptable substantial U.S. deficit. during the intermeeting period. The reserve condi- Growth of M2 and M3 strengthened in Decemtions associated with this directive were expected ber, and data for the first half of January suggested to be consistent with modest growth in the broader a further acceleration in that month. Much of the monetary aggregates over coming months. pickup in M2 in December was due to rapid expan- Open market operations during the intermeeting sion in overnight RPs and overnight Eurodollars, period were directed toward maintaining the exist- which outweighed a further contraction of liquid ing degree of pressure on reserve positions. With accounts associated in part with depositor efforts to the need for seasonal credit diminishing over the obtain higher returns by shifting funds into market period, adjustment plus seasonal borrowing trended instruments. The faster growth of M3 reflected, in lower but averaged a little above anticipated levels. addition to the acceleration of its M2 component, Near year-end, the Trading Desk accommodated bank use of large CDs and nondeposit sources of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 441 funds to finance relatively robust demands for of 1994 would become increasingly evident in credit. From the fourth quarter of 1993 to the fourth interest-sensitive sectors of the economy as the quarter of 1994, M2 grew at the lower end of the year progressed. The projected moderation in the Committee's range for 1994 and M3 in the lower growth of final demands, which probably would be half of its range. Total domestic nonfinancial debt concentrated at least initially in the housing and had continued to expand at a moderate rate in consumer durables sectors, would undoubtedly recent months, and for 1994 it was in the lower half reinforce an expected cutback in inventory investof its monitoring range. ment from its unsustainable pace in recent quarters. The staff forecast prepared for this meeting sug- A key uncertainty in the outlook was whether the gested that growth of economic activity would slowing in overall economic growth would be suffislow substantially over the next several quarters cient to relieve the current pressures on labor and and for some period thereafter would average less other producer resources, which many members than the rate of increase in the economy's potential saw as portending higher inflation, or, indeed, output. Consumer spending was projected to be whether such pressures would intensify further. well sustained for a time but to be restrained later Opinions differed to some degree with regard to by smaller gains in real incomes, the satisfaction of both the likely extent of the prospective slowing pent-up demands, and the lagged effects of higher in economic growth and the outlook for inflation. interest rates on the demand for durable goods. However, most of the members concluded that Business outlays for new equipment were expected some rise in inflation appeared probable over comto decelerate substantially in response to higher ing quarters, and they were concerned that this financing costs and slower growth of sales and upturn would not be reversed and could be profits. Homebuilding was anticipated to soften a extended in the absence of further monetary little in response to slower growth in jobs and restraint. income as well as to the increase that had occurred In keeping with the practice at meetings when in mortgage rates. Recent developments in Mexico the Committee establishes its long-run ranges for were expected to cut into exports in the near term, growth of the money and debt aggregates, the but the sustained economic growth elsewhere members of the Committee and the Federal would keep export demand on an uptrend. Reserve Bank presidents not currently serving as Although there was considerable uncertainty members had prepared individual projections of regarding the fiscal outlook, in light of the congres- economic activity, the rate of unemployment, and sional intent to cut the federal deficit the forecast inflation for the year 1995. Measured from the incorporated a somewhat greater degree of fiscal fourth quarter of 1994 to the fourth quarter of 1995, restraint than had been built into recent forecasts. their forecasts of the growth in real GDP had a In the staff's judgment, the economy currently was central tendency of 2 to 3 percent, compared with a operating beyond its long-run, noninflationary growth rate of 4 percent estimated for 1994. Most capacity, and there remained a substantial risk that of the members also anticipated that economic inflation could ratchet higher absent further mone- expansion in line with their forecasts would be tary policy actions. associated with little change in the unemployment In the Committee's discussion of current and rate, and their projections of the rate in the fourth prospective economic developments, the members quarter of 1995 were centered in a narrow range agreed that growth in economic activity could be around 5]/i percent. The high levels of resource expected to moderate considerably over the course utilization implied by these projections were of 1995, although inflation was likely to be higher viewed by most members as likely to foster somethan in 1994. They acknowledged that their cur- what greater pressure on wages and prices. Accordrent projections were subject to substantial risks. ingly, projections of the rate of inflation, as indexed The expansion continued to display appreciable by the consumer price index, had a central tenmomentum and signs of slower growth were still dency of 3 to 3VI percent for the period from the quite limited and tentative. Even so, the members fourth quarter of 1994 to the fourth quarter of 1995, remained persuaded that the lagged effects of the compared with rates of about 23A percent in both policy tightening implemented over the course 1993 and 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

442 Federal Reserve Bulletin • May 1995 In their review of regional economic develop- many consumers. In any event, the outlook for this ments, members referred to widespread evidence sector of the economy, which was critical to any of further growth in business activity, but a number significant moderation in overall economic growth, also mentioned scattered signs of some softening in was uncertain with regard to both the timing and a few areas or industries. Several emphasized, how- the extent of possible slowing. ever, that the anecdotal evidence did not currently Housing construction was cited as potentially the point to any significant moderation in the overall most important demand sector of the economy that growth of the economy. With regard to financial was likely to contribute to more moderate ecoconditions, members commented that they saw nomic growth over the year ahead. As evidenced little indication that policy tightening actions over by nationwide data through the end of 1994, singlethe past year were constraining the availability of family housing starts had held up unexpectedly credit to any observable degree. Despite higher well despite sizable increases in home mortgage interest rates, financial conditions remained broadly rates, but anecdotal reports from around the counsupportive of further economic expansion. The per- try had pointed to weakening demand for new formance of stock market prices and the relatively homes for several months and continued to do so. narrow quality spreads in debt markets attested to Against the background of current mortgage rate a considerable degree of confidence among inves- levels and the rise that had occurred in home morttors. Members also took note of the accommoda- gage indebtedness, the members continued to tive lending policies of banking institutions. Those anticipate softening demand for housing, at least in policies had encouraged rapid growth in consumer the single-family sector. The mild uptrend in the and business loans and evidently were contributing much smaller multifamily sector was likely to conto the ongoing strength of the economic expansion. tinue for some period, given low rental vacancy Some members expressed concern that a number of rates in a number of areas, and further improvebanks might have eased their lending standards ment in nonresidential construction was likely to unduly and thus assumed unwarranted risks in their offset to some extent the overall slowing in housing loan portfolios. construction. In their assessment of developments in key sec- In the capital goods sector, real business-fixed tors of the economy, members referred to the slug- investment had strengthened further in the fourth gish behavior of non-auto retail sales in November quarter, and the members believed, on the basis of and December, but they also noted that the avail- rising order backlogs and the strength of permits able information on consumer spending during for new business construction, that considerable the first few weeks of this year was inconclusive momentum had carried into this year. While the with regard to the possible emergence of a slowing growth in spending for business equipment trend. Anecdotal commentary on retail sales was undoubtedly would moderate from its extraormixed, and evidence of some decline in January dinary pace over an extended period, large business sales of motor vehicles needed to be evaluated with profits and the still relatively low user cost of caution because of the introduction of a new report- capital would tend to support appreciable further ing method. Consumer confidence was at a high growth in such investment in the context of elelevel, but some members observed that consumer vated levels of capacity utilization and ongoing indebtedness had grown rapidly and was likely to efforts, induced by strong market competition, to exert a retarding effect on consumer spending at increase productivity. Moreover, nonresidential some point. In this regard, however, it was pointed construction was now trending higher, with particuout that rising consumer incomes had kept debt lar strength evident in industrial and commercial service burdens from increasing significantly thus construction. far. On balance, the members believed that the The pace of inventory accumulation in recent growth in consumer spending probably would slow quarters was viewed as unsustainable and a decline over the forecast horizon though such spending in inventory investment was seen as likely over the might be relatively well maintained for some forecast horizon, though the precise timing and period, given the ongoing expansion in jobs and extent were impossible to predict. While slower incomes and the ready availability of financing to growth in final demand might in most circum- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 443 stances stimulate a relatively sharp adjustment in though probably not to the extent of providing inventory investment, members cited factors that substantial stimulus to the economy. One member could mute the size of that adjustment and its observed that a number of countries throughout the effects on overall GDP. These included relatively world faced the potential for important changes in low inventory-sales ratios across much of the econ- political conditions that could have adverse effects omy and little anecdotal or other evidence of unin- on their growth and trading relationships, with tended inventory accumulation. Moreover, because possible repercussions on U.S. exports. an unusually large share of the inventory buildup Members commented that the strong growth in in recent quarters appeared to involve imports, a economic activity and high levels of resource utilicutback in such investment should tend to have a zation had fostered relatively rapid increases in the smaller-than-usual impact on domestic production. prices of many raw materials and semi-finished There was no current evidence that inventory goods used in the production process, but contrary investment was slowing, and indeed recent data on to numerous forecasts these developments had not business loans at banks might suggest some accel- led thus far to a broad pickup in inflation as meaeration in inventory accumulation since the begin- sured by the prices of final goods and services. This ning of the year. Nonetheless, as more moderate favorable development might be explained in part growth in final demand began to emerge, concerns by lags in the inflation transmission process and about the availability of materials used in the pro- perhaps to some degree by various structural duction process or stocks needed to meet market changes and productivity improvements in recent demand should diminish, and business firms could years that may have raised both the level and the be expected to trim their demand for inventories, rate of increase of the economy's potential for perhaps aggressively for a time. Indeed, this sector sustained activity. Many members observed, howof the economy might well account for much of the ever, that it would not be prudent from a monetary slowing in the expansion for some period of time policy standpoint to assume that continued rapid during the year ahead. economic growth and further pressures on producer Fiscal policy was under active debate in the resources would not lead to rising inflation over the Congress, and the members viewed the outcome of quarters ahead. While competitive pressures still that debate as very uncertain. The emergence of a generally limited the extent to which business firms moderately restrictive fiscal policy might be a rea- could pass through rising costs of raw materials sonable assumption to incorporate in current fore- and other producer inputs to the prices of final casts, albeit an assumption that clearly was subject goods, the members referred to increasingly numerto a wide range of error. In any event, any progress ous examples of successful efforts to raise such toward cutting future budget deficits was likely to prices and to apparently growing business expectahave a favorable effect on domestic financial mar- tions that it would be possible to implement such kets and perhaps also on the dollar in foreign increases over the months ahead. On balance, the exchange markets. members generally were persuaded that the econ- Developments in Mexico and their possible omy had attained levels of labor and capital utilizarepercussions in other developing nations had nega- tion that implied a strong risk of rising inflation tive implications for U.S. exports, at least over the over coming quarters. short run. Indeed, some members cited anecdotal In keeping with the requirements of the Full evidence that reduced trade with Mexico had Employment and Balanced Growth Act of 1978 already emerged since late 1994. Moreover, the (the Humphrey-Hawkins Act), the Committee at effects of the earthquake in Kobe, Japan, seemed to this meeting reviewed the ranges for growth of the be disrupting trade with that nation in agricultural monetary and debt aggregates in 1995 that it had and other bulk goods and was likely to continue established on a tentative basis at its meeting in doing so over the near term. Looking beyond the July 1994. The tentative ranges included expansion months immediately ahead, the relatively robust of 1 to 5 percent for M2 and 0 to 4 percent for M3, growth projected for many industrial countries measured from the fourth quarter of 1994 to the together with the lower value of the dollar should fourth quarter of 1995. The monitoring range for boost the nation's overall external trade balance, growth of total domestic nonfinancial debt had Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

444 Federal Reserve Bulletin • May 1995 been set provisionally at 3 to 7 percent for 1995. of the Federal Reserve and perhaps reduce the The ranges for M2 and M3 were unchanged from overall cost of attaining price stability. On the other those that the Committee had used in 1994, while hand, close adherence to preset inflation targets the range for debt was 1 percentage point lower. could unduly constrain the Federal Reserve in its All the members endorsed a proposal to adopt efforts to counteract the effects of cyclical shortthe ranges that the Committee had set on a tentative falls in the performance of the economy. The membasis in July 1994. While some acceleration in the bers agreed that the discussion had been helpful in growth of the broad monetary aggregates from the outlining the issues and that the subject should be pace in 1994 could be anticipated over the year revisited. It was noted in this connection that the ahead according to a staff analysis, monetary Committee might be asked to comment during the expansion within the ranges in question appeared months ahead on specific congressional proposals to be consistent with the moderation in the expan- for inflation targeting. sion of nominal GDP that the members were pro- At the conclusion of its discussion, all the memjecting for 1995 and that they viewed as desirable bers voted to approve without change the tentative to head off increasing inflation. Moreover, the ranges for 1995 that the Committee had established ranges for the broad monetary aggregates had been in July of last year. In keeping with its usual reduced over the past decade to levels that, notably procedures under the Humphrey-Hawkins Act, the in the case of M2, should now be consistent over Committee would review its ranges at midyear, or long periods with the Committee's objectives for sooner if interim conditions warranted, in light of stable prices and maximum sustainable economic the growth and velocity behavior of the aggregates growth. This outcome would depend on the restora- and ongoing economic and financial developments. tion over time of the historical velocity patterns Accordingly, the following longer-run policy statelinking the monetary aggregates to broad measures ment for 1995 was approved for inclusion in the of economic performance, including a level veloc- domestic policy directive: ity trend for M2. It was noted in this regard that until recent years the growth of M3 had tended to The Federal Open Market Committee seeks monetary exceed that of M2—a pattern that seemed to be and financial conditions that will foster price stability re-emerging—and therefore a somewhat higher and promote sustainable growth in output. In furtherance of these objectives, the Committee at this meeting estabrange might be set for M3 than for M2. However, lished ranges for growth of M2 and M3 of 1 to 5 percent the members did not believe that a persuasive arguand 0 to 4 percent respectively, measured from the fourth ment could be made at this juncture for raising the quarter of 1994 to the fourth quarter of 1995. The M3 range, though they did not want to rule out the Committee anticipated that money growth within these option of doing so later, possibly when the ranges ranges would be consistent with its broad policy objectives. The monitoring range for growth of total domestic were reviewed at midyear. Indeed, to make the nonfinancial debt was lowered to 3 to 7 percent for the change at this point might convey a misleading year. The behavior of the monetary aggregates will conmessage regarding the Committee's policy inten- tinue to be evaluated in the light of progress toward price tions or its confidence in prospective monetary level stability, movements in their velocities, and develgrowth relationships. opments in the economy and financial markets. The Committee also considered the potential Votes for this action: Messrs. Greenspan, advantages and disadvantages of setting specific McDonough, Blinder, Hoenig, Kelley, LaWare, targets for bringing inflation down and achieving Lindsey, Melzer, Ms. Minehan, Mr. Moskow, Mses. price stability over time. Such targets might pro- Phillips and Yellen. Votes against this action: None. vide an alternative or supplemental approach to the monetary growth ranges, which had been found to In the Committee's discussion of policy for the be unreliable guides for monetary policy over the intermeeting period ahead, all the members indipast several years. The members discussed a num- cated that they could support some firming in ber of aspects of inflation targeting. On the one reserve conditions, though a few preferred to delay hand, such targeting would help to anchor the such an action pending the receipt within the next conduct of monetary policy and progress in meet- few weeks of significant new information that ing these objectives could enhance the credibility could help the Committee to evaluate whether and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 445 to what extent the economic expansion might be favorable news on inflation in the fourth quarter slowing. Most of the members were convinced, had lessened concerns about an immediate inflation however, that current monetary policy should be threat, and if the incoming information confirmed adjusted promptly to a more clearly restrictive the need for further tightening, the short delay in stance. In their view, prompt action was needed to implementing it would have only a minimal cost. counter inflationary pressures and inflationary In addition, an increase in monetary restraint would expectations in an economy that already seemed to be likely to exacerbate the problems of Mexico and be operating at, and perhaps beyond, sustainable perhaps to some extent those of Canada and would capacity levels and to be continuing to expand at a have potentially adverse implications for U.S. trade pace above its long-run potential. In these circum- with both of these key trading partners. Because stances, a delay in tightening policy would incur an the probability that incoming information would unacceptable risk of allowing further inflationary counsel against any further policy tightening was momentum to develop in the economy and would certainly less than 50 percent so that only a matter require more tightening over time than might other- of timing was likely to be involved, these members wise be needed to achieve the Committee's objec- indicated that they would join with the other memtives. Part of the risk involved a potential further bers in voting to tighten policy at this meeting. decline in the dollar at a time when there already Concerning the possible need to adjust policy was considerable concern about rising pressures on during the intermeeting period, the members were prices. Some tightening of policy at this meeting unanimously in favor of adopting a symmetric was generally anticipated in markets, and a failure directive. Given a decision to implement some to take action now was likely in the view of a tightening in monetary policy at this meeting, they number of members to raise questions about the did not believe that there should be a presumption credibility of the System's anti-inflation resolve toward possible further tightening in this period. A and to generate some unsettlement in financial mar- number of members observed that further monetary kets, notably in the foreign exchange market where restraint might not be needed if, in line with their the dollar already appeared to be vulnerable to expectations, the incoming evidence on the perforfurther weakness. In terms of balancing the policy mance of the economy suggested that the expanrisks that were involved, a prompt move would sion was moderating sufficiently for the economy provide some insurance against what these mem- to return to a growth path consistent with containbers viewed as the principal risk in current ing inflation pressures. In any event, the Commitcircumstances—that of rising inflation. The risks of tee's most difficult decision over the next several excessive tightening, while not completely absent, quarters was likely to be that of determining when were believed to be limited in light of the apparent further tightening was no longer desirable. strength and momentum of the expansion, which Prior to the end of the meeting, the members many forecasters had underestimated over the past were apprised of a disposition on the part of the year. One member expressed the view that while Board of Governors to approve an increase of monetary growth had been damped, continuing Vi percentage point in the discount rate that was restraint on the growth of the narrow monetary pending at several Federal Reserve Banks. In the aggregates was desirable to offset a previous event that such an increase was approved by the buildup in liquidity and to help ensure that infla- Board, the members agreed that open market operationary pressures would be contained. tions should be conducted so as to allow that Members who saw an advantage in postponing a increase to be reflected fully in reserve markets. decision to tighten policy commented that, in light At the conclusion of the Committee's discussion, of some scattered signs of a moderating expansion, all the members indicated that they could support a it would be helpful to wait for certain key statistics directive that called for increasing somewhat the that would become available within the next few degree of pressure on reserve positions. In the weeks to judge the extent of any moderation. Data implementation of this policy, account would be on retail sales in January might provide particular taken of a possible increase of Vi percentage point insights as to whether the softening in such sales in the discount rate that was under consideration by in November and December was persisting. The the Board of Governors. The members also agreed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

446 Federal Reserve Bulletin • May 1995 that the directive should not include any presump- The Federal Open Market Committee seeks monetary tion about possible adjustments to policy during and financial conditions that will foster price stability and promote sustainable growth in output. In furtherance the intermeeting period. Accordingly, in the conof these objectives, the Committee at this meeting estabtext of the Committee's long-run objectives for lished ranges for growth of M2 and M3 of 1 to 5 percent price stability and sustainable economic growth, and 0 to 4 percent respectively, measured from the fourth and giving careful consideration to economic, quarter of 1994 to the fourth quarter of 1995. The financial, and monetary developments, the Com- Committee anticipated that money growth within these ranges would be consistent with its broad policy objecmittee decided that somewhat greater or somewhat tives. The monitoring range for growth of total domestic lesser reserve restraint would be acceptable during nonfinancial debt was lowered to 3 to 7 percent for the the intermeeting period. According to a staff analy- year. The behavior of the monetary aggregates will consis, the reserve conditions contemplated at this tinue to be evaluated in the light of progress toward price meeting would be consistent with moderate growth level stability, movements in their velocities, and developments in the economy and financial markets. in M2 and M3 over coming months. In the implementation of policy for the immediate At the conclusion of the meeting, the Federal future, the Committee seeks to increase somewhat the Reserve Bank of New York was authorized and existing degree of pressure on reserve positions, taking directed, until instructed otherwise by the Commit- account of a possible increase in the discount rate. In the tee, to execute transactions in the System Account context of the Committee's long-run objectives for price stability and sustainable economic growth, and giving in accordance with the following domestic policy careful consideration to economic, financial, and mondirective: etary developments, somewhat greater reserve restraint or somewhat lesser reserve restraint would be acceptable The information reviewed at this meeting suggests a in the intermeeting period. The contemplated reserve strong further rise in economic activity during the clos- conditions are expected to be consistent with moderate ing months of 1994. Nonfarm payroll employment was growth in M2 and M3 over coming months. up considerably further in December after a sharp increase in November, and the civilian unemployment Votes for this action: Messrs. Greenspan, rate declined to 5.4 percent. Industrial production regis- McDonough, Blinder, Hoenig, Kelley, LaWare, tered another large advance in December and capacity Lindsey, Melzer, Ms. Minehan, Mr. Moskow, Mses. utilization continued to move up from already high lev- Phillips and Yellen. Votes against this action: None. els. Current estimates indicate little change in retail sales over November and December, while housing starts posted sizable gains on balance over the two months. Orders for nondefense capital goods point to a continued TEMPORARY INCREASE IN RECIPROCAL strong expansion in spending on business equipment; CURRENCY AGREEMENT WITH THE BANK OF permits for nonresidential construction have been trend- MEXICO AND INCREASE IN AGREEMENT TO ing appreciably higher. The nominal deficit on U.S. trade "WAREHOUSE" FOREIGN CURRENCIES in goods and services widened somewhat in October- November from its average rate in the third quarter. Prices of many materials have continued to move up On December 30, 1994, the Committee approved a rapidly, but broad indexes of prices for consumer goods temporary increase from $3 billion to %A¥i billion and services have increased moderately on average over in the System's reciprocal currency (swap) agreerecent months. ment with the Bank of Mexico and it also approved Most market interest rates have declined slightly on balance since the Committee meeting on December 20, the activation of that agreement. The Committee 1994. In foreign exchange markets, the trade-weighted approved a further temporary increase of %\Vi bilvalue of the dollar in terms of the other G-10 currencies lion and activation of that amount at this meeting, has declined somewhat over the intermeeting period. thereby raising the swap arrangement with the The Mexican peso has depreciated sharply against the Bank of Mexico to a level of $6 billion, consisting dollar. of the regular $3 billion line and a special $3 bil- Growth of M2 and M3 strengthened in December and January. From the fourth quarter of 1993 to the fourth lion line. The special $3 billion line may be drawn quarter of 1994, M2 grew at a rate at the bottom of the on until January 31, 1996. Drawings would be for Committee's range for 1994 and M3 at a rate in the three-month periods and could be renewed a maxilower half of its range for the year. Total domestic mum of three times. Once a drawing on the special nonfinancial debt has continued to expand at a moderate rate in recent months, and for the year 1994 it grew at a line is repaid, the size of the line will be reduced rate in the lower half of its monitoring range. pari passu. All drawings on the special line will Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 447 have to be repaid no later than January 31, 1997. the IMF and would be conditioned on Mexico's The terms and conditions for use of the permanent commitment to implement major changes in its $3 billion swap facility with the Bank of Mexico economic policies, including monetary policy. It remain unchanged and drawings, once repaid, will was emphasized during the Committee's discusrequire Committee action prior to subsequent use. sion that the United States had a strong interest in The Treasury has undertaken to ensure the repay- encouraging the restoration of stability in Mexico ment of any swap drawing by the Bank of Mexico for numerous reasons, including the growth of trade on the $6 billion in lines that is outstanding more between the two nations and the resulting creation than twelve months. of jobs in both countries. Moreover, Mexico's financial problems appeared to be spreading to a Votes for this action: Messrs. Greenspan, number of other nations and adversely affecting the McDonough, Blinder, Hoenig, Kelley, LaWare, Ms. dollar in the foreign exchange markets. The partici- Minehan, Mr. Moskow, Mses. Phillips and Yellen. pation of the Federal Reserve in this effort was Votes against this action: Messrs. Lindsey and Melzer. strongly endorsed by the Administration and the overall program had the support of the bipartisan The Committee also approved at this meeting an leadership in the Congress. Apart from temporary increase from $5 billion to $20 billion in the financial resources, the Federal Reserve was in a amount of eligible foreign currencies that the Sysposition to supply expertise and experience that tem is prepared to "warehouse" for the Treasury were not readily available elsewhere. On the negaand the Exchange Stabilization Fund (ESF). The tive side, the members acknowledged that there purpose of the warehousing facility, which has could be no assurances that the rescue program been in place for many years, is to supplement the would succeed, but its scale, its multinational char- U.S. dollar resources of the Treasury and the ESF acter, and the apparent willingness of Mexican for financing purchases of foreign currencies and officials to pursue the difficult policies needed to related international operations. The size of the ensure success were grounds for optimism. warehousing facility had ranged up to $15 billion Messrs. Lindsey and Melzer dissented with in past years, but it was reduced to $5 billion in respect to increases in both the swap line and the February 1992. The expansion of the warehousing warehousing arrangement with the Exchange Stabiagreement at this meeting was intended to facilitate lization Fund. They did not believe that the Com- U.S. participation in the Multilateral Program to mittee had been provided sufficient information to Restore Financial Stability in Mexico, announced assess whether developments in Mexico threatened by President Clinton on January 31, 1995, by ware- U.S. financial stability, a possible justification for housing up to $20 billion in German marks and increased central bank lending on a short-term Japanese yen held by the Treasury through the basis. Furthermore, they considered it inappropri- ESF. The Committee will review each year the ate for the Federal Reserve to participate, directly need to maintain this level of warehousing authoror indirectly, in intermediate- to long-term financity in light of the progress and needs of the ing to facilitate debt restructuring. They were con- Program. cerned that such participation in a fiscal policy matter might compromise, or appear to compro- Votes for this action: Messrs. Greenspan, McDonough, Blinder, Hoenig, Kelley, LaWare, Ms. mise, the independence of the monetary policy Minehan, Mr. Moskow, Mses. Phillips and Yellen. process. Mr. Lindsey added that the latter risks Votes against this action: Messrs. Lindsey and Melzer. were significantly enhanced given the absence of congressional authorization or more general public Members who voted to approve these proposals support for these measures. were persuaded that the nature and severity of Mexico's financial problems could not be contained without making substantial financial assis- DISCLOSURE POLICY tance available to the Government of Mexico. The financial support provided by the United States At this meeting, the Committee decided to retain would be accompanied by similar assistance from the procedures that it had followed over the past Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

448 Federal Reserve Bulletin • May 1995 year for providing greater information to the public editing process is completed. Continuing the pracabout its policy actions and discussions. It was the tice followed since the beginning of 1994, tranjudgment of the members that these procedures scripts prepared by the Committee's Secretariat strike an appropriate balance between making the will be circulated to each participant to verify his Committee's decisions and deliberations accessible or her comments, and only changes that clarify to the public as soon and as fully as feasible, while meaning, such as the correction of grammar or safeguarding the Committee's flexibility in policy- transcription errors, will be permitted. A limited making and preserving an unfettered deliberative amount of material will be withheld from the pubprocess. The procedures in question involve the licly released version of these documents, primaprompt announcement of the Committee's deci- rily to protect the confidentiality of foreign and sions and the release of minutes and transcripts of domestic sources of information that likely would FOMC meetings. be lost if the information they provide were to be The Committee will continue its practice of made public. As required by law, a complete, unreannouncing each change in the stance of monetary dacted version of the transcript of each meeting policy in a press release on the day the decision is will be turned over to the National Archives after made. This practice removes any uncertainty about thirty years have elapsed. the Committee's intentions in regard to reserve For the purpose of preparing the minutes and conditions and enables all financial market partici- transcripts, the discussions of monetary policy at pants and others to receive the information at the Committee meetings will continue to be recorded. same time. When no change is made at a meeting, The tape recorder may be turned off at the Chairthe Committee normally will announce only the man's discretion when the Committee deals with time when the meeting ended and that there are no issues unrelated to monetary policy, such as organifurther announcements. However, in some infre- zational and personnel matters. The transcripts will quent circumstances, the Committee may decide to indicate that the tape recorder has been turned off issue a statement even when no change in policy is and the minutes will provide a summary descripmade. tion of the matters that were discussed, As permit- The full substance of the Committee's delibera- ted by the National Records Act, the recordings tions relating to each policy decision will continue and unedited transcripts will be discarded after all to be reported, as is the current practice, in compre- the participants at the meeting have reviewed and hensive minutes of the meeting that are released corrected, as necessary, the transcripts prepared by two or three days following the next regularly the Secretariat. scheduled meeting. For historians and other stu- It was agreed that the next meeting of the Comdents of monetary policymaking, those minutes mittee would be held on Tuesday, March 28, 1995. will be supplemented by lightly edited transcripts The meeting adjourned at 3:20 p.m. of the discussion at each Committee meeting. For recent and future meetings, transcripts for an entire year will be released with a five-year lag; earlier transcripts dating back to March 1976 will continue Donald L. Kohn to be released on an ongoing basis as the light Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

449 Legal Developments FINAL RULE—AMENDMENT TO REGULATION E offices and "back office" facilities by state member banks. The interpretation provides that a state member The Board of Governors is amending 12 C.F.R. Part 205, bank may establish a back office facility that is not its Regulation E (Electronic Fund Transfers). The accessible to the public without such a facility being amendment eliminates the requirement that an electronic considered to be a branch. The interpretation also proterminal receipt disclose a number or code that uniquely vides that loans originated by a loan production office identifies the consumer, the consumer's account, or the may be approved at a back office location, rather than at access device. This requirement posed a significant secu- the main office or a branch of the bank, without the loan rity risk to consumers and financial institutions by mak- production office being considered to be a branch, if the ing information accessible to criminals that could be proceeds of loans originated by the loan production used to make fraudulent fund withdrawals. To address office are received by customers at locations other than a this problem, the Board adopted an interim rule effective loan production office or back office facility. This inter- December 1, 1994. The Board also sought comments on pretation is intended to provide parity between state the interim rule and is amending the rule to address the member banks and national banks with respect to the comments received. establishment of loan production offices and back office Effective April 24, 1995, 12 C.F.R. Part 205 is facilities. amended as follows: Effective April 6, 1995, 12 C.F.R. Part 208 is amended as follows: Part 205—Electronic Fund Transfers (Regulation E) Part 208—Membership of State Banking Institutions in the Federal Reserve System 1. The authority citation for Part 205 continues to read as (Regulation H) follows: 1. The authority citation for Part 208 continues to read as Authority: 12 U.S.C. 1693. follows: Authority: 12 U.S.C. 36,248(a), 248(c), 321-338a, 371d, 2. Section 205.9 is amended by revising paragraph 461, 481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, (a)(4), to read as follows: 1831p-l, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, Section 205.9—Documentation of transfers. 78q-l, and w; 31 U.S.C. 5318. (ft) ^ ^ ^ 2. In Subpart E, section 208.123 is added in numerical (4) A number or code that identifies the consumer order to read as follows: initiating the transfer, the consumer's account(s), or the access device used to initiate the transfer. The Section 208.123—Loan Production Offices and number or code need not exceed four digits or letters "Back Office" Facilities. to comply with the requirements of this paragraph. (a) Scope. The Board has considered two issues: (1) Whether a state member bank may establish a FINAL RULE—AMENDMENT TO REGULATION H "back office" facility that is not accessible to the public and is not visited by customers without such a The Board of Governors is amending 12 C.F.R. Part 208, facility being considered to be a branch of the bank; its Regulation H (Membership of State Banking Institu- and tions in the Federal Reserve System). The Board is (2) Whether a loan production office will be considissuing an interpretation of the provisions of its Regula- ered to be a branch of the bank if it takes loan tion H concerning the establishment of loan production applications and performs related functions, but the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

450 Federal Reserve Bulletin • May 1995 loans are approved at locations other than an approved the McFadden Act. The Board also has determined that branch or main office of the bank and funds are not loans originated by a loan production office may be disbursed at the loan production office. approved at a back office location, rather than at the (b) Authority. State member banks are subject to the main office or a branch of the bank, without the loan same limitations on branching as national banks. Federal production office being considered to be a branch, pro- Reserve Act, section 9, paragraph 3 (12 U.S.C. 321). vided that the proceeds of loans originated by the loan Under the McFadden Act (44 Stat. 1228), national banks production office are received by the customer at locamay establish branches within a state only at locations at tions other than a loan production office or back office which a state bank would be permitted to establish a facility. This interpretation supersedes the Board's prior branch. 12 U.S.C. 36(c). For the purposes of the McFad- interpretation, published at 12 C.F.R. 250.141, as it den Act, "branch" is defined to include "any branch applies to loan production offices. bank, branch office, branch agency, additional office, or any branch place of business ... at which deposits are received, or checks are paid, or money lent." 12 U.S.C. FINAL RULE—AMENDMENT TO REGULATION Z 36(f). Interpreting the branching restrictions of the Mc- Fadden Act, the Supreme Court has stated that the pur- The Board of Governors is amending 12 C.F.R. Part 226, pose of the McFadden Act was to maintain competitive its Regulation Z (Truth in Lending). The amendments equality between national and state banks, and that the implement changes made to the Truth in Lending Act by determination as to whether a facility was a branch must the Riegle Community Development and Regulatory be based on the convenience of the customer, rather than Improvement Act of 1994. The law imposes new discloon the technical or legal relationship between the cus- sure requirements and substantive limitations on closedtomer and the bank. In later cases addressing automated end home equity mortgage loans bearing rates or fees teller machines, the courts generally have rejected argu- above a certain percentage or amount. The amendments ments that money is lent at the time and place where a provide protection to consumers entering into these loan or line of credit is approved, and instead found that mortgages. The law also imposes new disclosure requiremoney is lent for the purposes of the McFadden Act ments to assist consumers in comparing the cost of when the customer actually receives the funds and inter- reverse mortgage transactions, which provide periodic est begins to run on the loan. See, e.g., IBAA v. Smith, advances primarily to elderly homeowners and rely prin- 534 F.2d 921 (D.C. Cir. 1976). cipally on the home's value for repayment. Effective March 22, 1995, 12 C.F.R. Part 226 is (c) Interpretation. The Board previously had determined amended as follows (compliance is optional until Octothat an office engaged in preliminary or servicing funcber 1, 1995). tions is not lending money and therefore is not a "branch" for the purposes of the McFadden Act if the loans originated by the office are approved and the funds Part 226—Truth in Lending (Regulation Z) disbursed at the main office or an approved branch of the bank. See 12 C.F.R. 250.141. Whether a loan production 1. The authority citation for Part 226 continues to read as office should be considered to be a branch if loans follows: originated by the office are approved at locations other than the main office or a branch of the bank depends on Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and whether the location where loan approval takes place 1637(c)(5). enhances the convenience to the customer and therefore provides a competitive advantage to the bank. Back 2. Section 226.1 is amended as follows: office facilities that are not accessible to the public are a. Paragraph (b) is revised; not visited by customers and do not appear to provide b. Paragraph (d)(5) is redesignated as paragraph customers of the bank with any greater level of conve- (d)(6); nience. From the point of view of a customer whose loan c. A new paragraph (d)(5) is added; and has been originated at an loan production office, there d. Redesignated paragraph (d)(6) is revised. does not appear to be any difference in the convenience based on whether the loan is approved at the back office The revisions and addition read as follows: facility or at a branch of a bank, as it is unlikely that the customer will visit either location. Based on this analy- Section 226.1—Authority, purpose, coverage, sis, the Board has concluded that a state member bank organization, enforcement and liability. may establish a back office facility without such a facility being considered to be a branch for the purposes of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 451 (b) The purpose of this regulation is to promote the Section 226.5b—Requirements for home equity informed use of consumer credit by requiring disclosures plans. about its terms and cost. The regulation gives consumers the right to cancel certain credit transactions that involve ^ * * * a lien on a consumer's principal dwelling, regulates certain credit card practices, and provides a means for (2) Terminate a plan and demand repayment of the fair and timely resolution of credit billing disputes. The entire outstanding balance in advance of the original regulation does not govern charges for consumer credit. term (except for reverse mortgage transactions that are The regulation requires a maximum interest rate to be subject to paragraph (f)(4) of this section) unless: stated in variable-rate contracts secured by the consumer's dwelling. It also imposes limitations on home equity plans that are subject to the requirements of section (4) For reverse mortgage transactions that are subject 226.5b and mortgages that are subject to the require- to section 226.33, terminate a plan and demand repayments of section 226.32. ment of the entire outstanding balance in advance of the original term except: (i) In the case of default; (d) * * * (ii) If the consumer transfers title to the property (5) Subpart E relates to mortgage transactions covered securing the note; by section 226.32 and reverse mortgage transactions. (iii) If the consumer ceases using the property se- It contains rules on disclosures, fees, and total annual curing the note as the primary dwelling; or loan cost rates. (iv) Upon the consumer's death. (6) Several appendices contain information such as the procedures for determinations about state laws, state exemptions and issuance of staff interpretations, 5. In section 226.23, footnote 48 in paragraph (a)(3) is special rules for certain kinds of credit plans, a list of revised to read as follows: enforcement agencies, and the rules for computing annual percentage rates in closed-end credit transac- Section 226.23—Right of rescission. tions and total annual loan cost rates for reverse mortgage transactions. (fl) ^ ^ ^ (3) * * *4 * * * 3. In section 226.2, footnote 3 in paragraph (a)(17)(i) is 6. In section 226.28, the first sentence of paragraph (b) is revised to read as follows: revised to read as follows: Section 226.2—Definitions and rules of Section 226.28—Effect on State laws. construction. (b) Equivalent disclosure requirements. If the Board (EI) ^ ^ determines that a disclosure required by state law (other (17)* * * than a requirement relating to the finance charge, annual ^ * * *3 * * * percentage rate, or the disclosures required under section 226.32) is substantially the same in meaning as a disclo- 4. In section 226.5b, paragraph (f)(2) introductory text is sure required under the act or this regulation, creditors in revised and a new paragraph (f)(4) is added to read as that state may make the state disclosure in lieu of the follows: federal disclosure. * * * 7. Part 226 is amended by adding a new Subpart E to read as follows: 3. A person regularly extends consumer credit only if it extended credit (other than credit subject to the requirements of section 226.32) more than 25 times (or more than five times for transactions secured by a dwelling) in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the 4. The term "material disclosures" means the required disclosures of person originates more than one credit extension that is subject to the the annual percentage rate, the finance charge, the amount financed, the requirements of section 226.32 or one or more such credit extensions total payments, the payment schedule, and the disclosures and limitathrough a mortgage broker. tions referred to in sections 226.32(c) and (d). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

452 Federal Reserve Bulletin • May 1995 Subpart E—Special Rules for Certain Home permitted to use printed forms pursuant to sec- Mortgage Transactions tion 226.23(e)(2). (2) Disclosures for reverse mortgages. The creditor Section 226.31—General rules. shall furnish the disclosures required by sec- Section 226.32—Requirements for certain closed-end tion 226.33 at least three business days prior to: home mortgages. (i) Consummation of a closed-end credit transac- Section 226.33—Requirements for reverse mortgages. tion; or (ii) The first transaction under an open-end credit plan. Subpart E—Special Rules for Certain Home (d) Basis of disclosures and use of estimates. Disclosures Mortgage Transactions shall reflect the terms of the legal obligation between the parties. If any information necessary for accurate disclosure is unknown to the creditor, the creditor shall make Section 226.31—General rules. the disclosure based on the best information reasonably available and shall state clearly that the disclosure is an (a) Relation to other subparts in this part. The require- estimate. ments and limitations of this subpart are in addition to (e) Multiple creditors; multiple consumers. If a transacand not in lieu of those contained in other subparts of tion involves more than one creditor, only one set of this part. disclosures shall be given and the creditors shall agree (b) Form of disclosures. The creditor shall make the among themselves which creditor must comply with the disclosures required by this subpart clearly and conspic- requirements that this part imposes on any or all of them. uously in writing, in a form that the consumer may keep. If there is more than one consumer, the disclosures may (c) Timing of disclosure—(1) Disclosures for certain be made to any consumer who is primarily liable on the closed-end home mortgages. The creditor shall furnish obligation. If the transaction is rescindable under secthe disclosures required by section 226.32 at least tion 226.15 or section 226.23, however, the disclosures three business days prior to consummation of a mort- shall be made to each consumer who has the right to gage transaction covered by section 226.32. rescind. (i) Change in terms. After complying with para- (f) Effect of subsequent events. If a disclosure becomes graph (c)(1) of this section and prior to consumma- inaccurate because of an event that occurs after the tion, if the creditor changes any term that makes the creditor delivers the required disclosures, the inaccuracy disclosures inaccurate, new disclosures shall be pro- is not a violation of Regulation Z (12 C.F.R. Part 226), vided in accordance with the requirements of this although new disclosures may be required for mortgages subpart. covered by section 226.32 under paragraph (c) of this (ii) Telephone disclosures. A creditor may provide section, section 226.9(c), section 226.19, or section new disclosures by telephone if the consumer ini- 226.20. tiates the change and if, at consummation: (g) Accuracy of annual percentage rate. For purposes of (A) The creditor provides new written disclo- section 226.32, the annual percentage yield shall be sures; and considered accurate if it is accurate according to the (B) The consumer and creditor sign a statement requirements and within the tolerances set forth in secthat the new disclosures were provided by tele- tion 226.22. phone at least three days prior to consummation. (iii) Consumer's waiver of waiting period before Section 226.32—Requirements for certain consummation. The consumer may, after receiving closed-end home mortgages. the disclosures required by paragraph (c)(1) of this section, modify or waive the three-day waiting pe- (a) Coverage. (1) Except as provided in paragraph (a)(2) riod between delivery of those disclosures and con- of this section, the requirements of this section apply summation if the consumer determines that the to a consumer credit transaction that is secured by the extension of credit is needed to meet a bona fide consumer's principal dwelling, and in which either: personal financial emergency. To modify or waive (i) The annual percentage rate at consummation the right, the consumer shall give the creditor a will exceed by more than 10 percentage points the dated written statement that describes the emer- yield on Treasury securities having comparable pegency, specifically modifies or waives the waiting riods of maturity to the loan maturity as of the period, and bears the signature of all the consumers fifteenth day of the month immediately preceding entitled to the waiting period. Printed forms for this the month in which the application for the extenpurpose are prohibited, except when creditors are sion of credit is received by the creditor; or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 453 (ii) The total points and fees payable by the con- lar periodic payments that when aggregated do not sumer at or before loan closing will exceed the fully amortize the outstanding principal balance, greater of 8 percent of the total loan amount, or (ii) Exception. The limitations in paragraph (d)(l)(i) $400; the $400 figure shall be adjusted annually on of this section do not apply to loans with maturities January 1 by the annual percentage change in the of less than one year, if the purpose of the loan is a Consumer Price Index that was reported on the "bridge" loan connected with the acquisition or preceding June 1. construction of a dwelling intended to become the (2) This section does not apply to the following: consumer's principal dwelling. (i) A residential mortgage transaction. (2) Negative amortization. A payment schedule with (ii) A reverse mortgage transaction subject to sec- regular periodic payments that cause the principal tion 226.33. balance to increase. (iii) An open-end credit plan subject to subpart B of (3) Advance payments. A payment schedule that conthis part. solidates more than two periodic payments and pays (b) Definitions. For purposes of this subpart, the follow- them in advance from the proceeds. ing definitions apply: (4) Increased interest rate. An increase in the interest (1) For purposes of paragraph (a)(l)(ii) of this section, rate after default. points and fees mean: (5) Rebates. A refund calculated by a method less (i) All items required to be disclosed under sec- favorable than the actuarial method (as defined by tions 226.4(a) and 226.4(b), except interest or the section 933(d) of the Housing and Community Develtime-price differential; opment Act of 1992, 15 U.S.C. 1615(d)), for rebates (ii) All compensation paid to mortgage brokers; and of interest arising from a loan acceleration due to (iii) All items required to be disclosed under section default. 226.4(c)(7) (other than amounts held for future (6) Prepayment penalties. Except as allowed under payment of taxes) unless the charge is reasonable, paragraph (d)(7) of this section, a penalty for paying the creditor receives no direct or indirect compensa- all or part of the principal before the date on which the tion in connection with the charge, and the charge is principal is due. A prepayment penalty includes comnot paid to an affiliate of the creditor. puting a refund of unearned interest by a method that (2) Affiliate means any company that controls, is con- is less favorable to the consumer than the actuarial trolled by, or is under common control with another method, as defined by section 933(d) of the Housing company, as set forth in the Bank Holding Company and Community Development Act of 1992. Act of 1956 (12 U.S.C. 1841 et seq.). (7) Prepayment penalty exception. A mortgage trans- (c) Disclosures. In addition to other disclosures required action subject to this section may provide for a preby this part, in a mortgage subject to this section the payment penalty otherwise permitted by law (includcreditor shall disclose the following: ing a refund calculated according to the rule of 78s) if: (1) Notices. The following statement: "You are not (i) The penalty can be exercised only for the first required to complete this agreement merely because five years following consummation; you have received these disclosures or have signed a (ii) The source of the prepayment funds is not a loan application. If you obtain this loan, the lender refinancing by the creditor or an affiliate of the will have a mortgage on your home. You could lose creditor; and your home, and any money you have put into it, if you (iii) At consummation, the consumer's total do not meet your obligations under the loan." monthly debts (including amounts owed under the (2) Annual percentage rate. The annual percentage mortgage) do not exceed 50 percent of the consumrate. er's monthly gross income, as verified by the con- (3) Regular payment. The amount of the regular sumer's signed financial statement, a credit report, monthly (or other periodic) payment. and payment records for employment income. (4) Variable-rate. For variable-rate transactions, a (e) Prohibited acts and practices. A creditor extending statement that the interest rate and monthly payment mortgage credit subject to this section may not: may increase, and the amount of the single maximum (1) Repayment ability. Engage in a pattern or practice monthly payment, based on the maximum interest rate of extending such credit to a consumer based on the required to be disclosed under section 226.30. consumer's collateral if, considering the consumer's (d) Limitations. A mortgage transaction subject to this current and expected income, current obligations, and section may not provide for the following terms: employment status, the consumer will be unable to (l)(i) Balloon payment. For a loan with a term of make the scheduled payments to repay the obligation. less than five years, a payment schedule with regu- (2) Home improvement contracts. Pay a contractor Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

454 Federal Reserve Bulletin • May 1995 under a home improvement contract from the pro- tion of loan terms, charges, the age of the youngest ceeds of a mortgage covered by this section, other borrower and the appraised property value. than: (4) Explanation of table. An explanation of the table of (i) By an instrument payable to the consumer or total annual loan cost rates as provided in the model jointly to the consumer and the contractor; or form found in paragraph (d) of Appendix K of this part, (ii) At the election of the consumer, through a third- (c) Projected total cost of credit. The projected total cost party escrow agent in accordance with terms estab- of credit shall reflect the following factors, as applicable: lished in a written agreement signed by the con- (1) Costs to consumer. All costs and charges to the sumer, the creditor, and the contractor prior to the consumer, including the costs of any annuity the condisbursement. sumer purchases as part of the reverse mortgage trans- (3) Notice to assignee. Sell or otherwise assign a action. mortgage subject to this section without furnishing the (2) Payments to consumer. All advances to and for the following statement to the purchaser or assignee: benefit of the consumer, including annuity payments "Notice: This is a mortgage subject to special rules that the consumer will receive from an annuity that under the federal Truth in Lending Act. Purchasers or the consumer purchases as part of the reverse mortassignees of this mortgage could be liable for all gage transaction. claims and defenses with respect to the mortgage that (3) Additional creditor compensation. Any shared apthe borrower could assert against the creditor." preciation or equity in the dwelling that the creditor is entitled by contract to receive. (4) Limitations on consumer liability. Any limitation on the consumer's liability (such as nonrecourse limits Section 226.33—Requirements for reverse and equity conservation agreements). mortgages. (5) Assumed annual appreciation rates. Each of the following assumed annual appreciation rates for the (a) Definition. For purposes of this subpart, reverse dwelling: mortgage transaction means a nonrecourse consumer (i) 0 percent. credit obligation in which: (ii) 4 percent. (1) A mortgage, deed of trust, or equivalent consen- (iii) 8 percent. sual security interest securing one or more advances is (6) Assumed loan period. created in the consumer's principal dwelling; and (i) Each of the following assumed loan periods, as (2) Any principal, interest, or shared appreciation or provided in Appendix L of this part: equity is due and payable (other than in the case of (A) Two years. default) only after: (B) The actuarial life expectancy of the consumer (i) The consumer dies; to become obligated on the reverse mortgage (ii) The dwelling is transferred; or transaction (as of that consumer's most recent (iii) The consumer ceases to occupy the dwelling as birthday). In the case of multiple consumers, the a principal dwelling. period shall be the actuarial life expectancy of (b) Content of disclosures. In addition to other disclo- the youngest consumer (as of that consumer's sures required by this part, in a reverse mortgage transac- most recent birthday). tion the creditor shall provide the following disclosures (C) The actuarial life expectancy specified by in a form substantially similar to the model form found paragraph (c)(6)(i)(B) of this section, multiplied in paragraph (d) of Appendix K of this part: by a factor of 1.4 and rounded to the nearest full (1) Notice. A statement that the consumer is not year. obligated to complete the reverse mortgage transac- (ii) At the creditor's option, the actuarial life extion merely because the consumer has received the pectancy specified by paragraph (c)(6)(i)(B) of this disclosures required by this section or has signed an section, multiplied by a factor of .5 and rounded to application for a reverse mortgage loan. the nearest full year. (2) Total annual loan cost rates. A good-faith projection of the total cost of the credit, determined in 9. In Part 226, Appendix H is amended by: accordance with paragraph (c) of this section and a. Revising the appendix heading; expressed as a table of "total annual loan cost rates," b. Revising the table of contents at the beginning of using that term, in accordance with Appendix K of the appendix; and this part. c. Adding a new H-16 Mortgage Sample in numerical (3) Itemization of pertinent information. An itemiza- order. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 455 The revisions and additions read as follows: 10. In Part 226, a new Appendix K is added to read as follows: APPENDIX H TO PART 226—CLOSED-END MODEL FORMS AND CLAUSES APPENDIX K TO PART 226—TOTAL ANNUAL LOAN H-l—Credit Sale Model Form (Section 226.18) COST RATE COMPUTATIONS FOR REVERSE H-2—Loan Model Form (Section 226.18) MORTGAGE TRANSACTIONS H-3—Amount Financed Itemization Model Form (Section 226.18(c)) (a) Introduction. Creditors are required to disclose a H-4(A)—Variable-Rate Model Clauses series of total annual loan cost rates for each reverse (Section 226.18(f)(1)) mortgage transaction. This appendix contains the equa- H-4(B)—Variable-Rate Model Clauses tions creditors must use in computing the total annual (Section 226.18(f)(2)) loan cost rate for various transactions, as well as instruc- H-4(C)—Variable-Rate Model Clauses tions, explanations, and examples for various transac- (Section 226.19(b)) tions. This appendix is modeled after Appendix J of this H-4(D)—Variable-Rate Model Clauses part (Annual Percentage Rates Computations for Closed- (Section 226.20(c)) end Credit Transactions); creditors should consult Ap- H-5—Demand Feature Model Clauses pendix J of this part for additional guidance in using the (Section 226.18(i)) formulas for reverse mortgages. H-6—Assumption Policy Model Clause (b) Instructions and equations for the total annual loan (Section 226.18(q)) cost rate. H-7—Required Deposit Model Clause (1) General rule. The total annual loan cost rate shall (Section 226.18(r)) be the nominal total annual loan cost rate determined H-8—Rescission Model Form (General) by multiplying the unit-period rate by the number of (Section 226.23) unit-periods in a year. H-9—Rescission Model Form (Refinancing) (2) Term of the transaction. For purposes of total (Section 226.23) annual loan cost disclosures, the term of a reverse H-10—Credit Sale Sample mortgage transaction is assumed to begin on the first H-l 1—Installment Loan Sample of the month in which consummation is expected to H-l2—Refinancing Sample occur. If a loan cost or any portion of a loan cost is H-l3—Mortgage with Demand Feature Sample initially incurred beginning on a date later than con- H-14—Variable-Rate Mortgage Sample summation, the term of the transaction is assumed to (Section 226.19(b)) begin on the first of the month in which that loan cost H-l5—Graduated Payment Mortgage Sample is incurred. For purposes of total annual loan cost H-16—Mortgage Sample (Section 226.32) disclosures, the term ends on each of the assumed loan periods specified in section 226.33(c)(6). (3) Definitions of time intervals. (i) A period is the interval of time between ad- H-16—MORTGAGE SAMPLE vances. (ii) A common period is any period that occurs more than once in a transaction. You are not required to complete this agreement (iii) A standard interval of time is a day, week, merely because you have received these disclosures semimonth, month, or a multiple of a week or a or have signed a loan application. If you obtain this month up to, but not exceeding, 1 year. loan, the lender will have a mortgage on your home. (iv) All months shall be considered to have an equal You could lose your home, and any money you have number of days. put into it, if you do not meet your obligations under (4) Unit-period, (i) In all transactions other than the loan. single-advance, single-payment transactions, the The annual percentage rate on your loan will be %. unit-period shall be that common period, not to Your regular [frequency] payment will be $ . exceed one year, that occurs most frequently in the [Your interest rate may increase. Increases in the interest transaction, except that: rate could increase your payment. The highest amount (A) If two or more common periods occur with your payment could increase is to $ .] equal frequency, the smaller of such common periods shall be the unit-period; or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

456 Federal Reserve Bulletin • May 1995 (B) If there is no common period in the transac- j = The number of unit-periods until the j th tion, the unit-period shall be that period which is advance. the average of all periods rounded to the nearest n = The number of unit-periods between whole standard interval of time. If the average is consummation and repayment of the debt. equally near two standard intervals of time, the P = Min (Bal, Val). This is the maximum n n n lower shall be the unit-period, amount that the creditor can be repaid at tl— (ii) In a single-advance, single-payment transaction, specified loan term. the unit-period shall be the term of the transaction, Bal = Loan balance at time of repayment, n but shall not exceed one year. including all costs and fees incurred by the (5) Number of unit-periods between two given dates. consumer (including any shared appreciation (i) The number of days between two dates shall be or shared equity amount) compounded to the number of 24-hour intervals between any point time n at the creditor's contract rate of in time on the first date to the same point in time on interest. the second date. Val = Val (1 + cr)y, where Val is the property n 0 0 (ii) If the unit-period is a month, the number of full value at consummation, a is the assumed unit-periods between two dates shall be the number annual rate of appreciation for the dwelling, of months. If the unit-period is a month, the number and y is the number of years in the assumed of unit-periods per year shall be 12. term. Val must be reduced by the amount of n (iii) If the unit-period is a semimonth or a multiple any equity reserved for the consumer by of a month not exceeding 11 months, the number of agreement between the parties, or by 7 days between two dates shall be 30 times the num- percent (or the amount or percentage ber of full months. The number of full unit-periods specified in the credit agreement), if the shall be determined by dividing the number of days amount required to be repaid is limited to by 15 in the case of a semimonthly unit-period or the net proceeds of sale. by the appropriate multiple of 30 in the case of a £ = The summation operator. multimonthly unit-period. If the unit-period is a semimonth, the number of unit-periods per year shall be 24. If the number of unit-periods is a Symbols used in the examples shown in this appendix multiple of a month, the number of unit-periods per are defined as follows: year shall be 12 divided by the number of months per unit-period. F Vn i = The future value of 1 per unit-period for jc x (iv) If the unit-period is a day, a week, or a multiple unit periods, first advance due immediately of a week, the number of full unit-periods shall be (at time = 0, which is consummation). determined by dividing the number of days between the two given dates by the number of days per unit-period. If the unit-period is a day, the number = 2(i + 0*"' = (i + C + (i + ox_1 + of unit-periods per year shall be 365. If the unit- j = 0 period is a week or a multiple of a week, the .. . (1 + 01; or number of unit-periods per year shall be 52 divided (1 + i)n - 1 by the number of weeks per unit-period. = 7 X(l+0 i (v) If the unit-period is a year, the number of full unit-periods between two dates shall be the number w = The number of unit-periods per year. of full years (each equal to 12 months). / = wi X 100 = the nominal total annual loan (6) Symbols. The symbols used to express the terms of cost rate. a transaction in the equation set forth in paragraph (b)(8) of this appendix are defined as follows: (7) General equation. The total annual loan cost rate for a reverse mortgage transaction must be determined Aj = The amount of each periodic or lump-sum by first solving the following formula, which sets advance to the consumer under the reverse forth the relationship between the advances to the mortgage transaction, consumer and the amount owed to the creditor under i = Percentage rate of the total annual loan cost the terms of the reverse mortgage agreement for the per unit-period, expressed as a decimal loan cost rate per unit-period (the loan cost rate per equivalent. unit-period is then multiplied by the number of unit- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 457 periods per year to obtain the total annual loan cost total annual loan cost rate, creditors shall assume all rate I; that is, I = wi): closing and other consumer costs are financed by the creditor. 2 V(1 +i)n~j = Pn (c) Examples of total annual loan cost rate computaj = 0 tions. (1) Lump-sum advance at consummation. (8) Solution of general equation by iteration process. Lump-sum advance to consumer at consummation: (i) The general equation in paragraph (b)(7) of this $30,000 appendix, when applied to a simple transaction for Total of consumer's loan costs financed at consummaa reverse mortgage loan of equal monthly advances tion: $4,500 of $350 each, and with a total amount owed of Contract interest rate: 11.60% $14,313.08 at an assumed repayment period of two Estimated time of repayment (based on life expectyears, takes the special form: ancy of a consumer at age 78): 10 years Appraised value of dwelling at consummation: P = 350 FV n i, or $100,000 a 24 Assumed annual dwelling appreciation rate: 4% [(1 + i )1 P n = 350 X X (1+ i)] P, 2 o = Min (109,441.32,137,662.72) 119 30,000(1 + i)n°-° + ^0(1 + O120-' = 109,441.32 Using the iteration procedures found in steps 1 through 4 of (b)(9)(i) of Appendix J of this part, the j = o total annual loan cost rate, correct to two decimals, is i = .010843293 48.53%. (ii) In using these iteration procedures, it is ex- Total annual loan cost rate (100(.010843293 X 12)) pected that calculators or computers will be pro- = 13.01% grammed to carry all available decimals throughout (2) Monthly advance beginning at consummation. the calculation and that enough iterations will be Monthly advance to consumer, beginning at consumperformed to make virtually certain that the total mation: $492.51 annual loan cost rate obtained, when rounded to Total of consumer's loan costs financed at consummatwo decimals, is correct. Total annual loan cost tion: $4,500 rates in the examples below were obtained by using Contract interest rate: 9.00% a 10-digit programmable calculator and the itera- Estimated time of repayment (based on life expecttion procedure described in Appendix J of this part. ancy of a consumer at age 78): 10 years (9) Assumption for discretionary cash advances. If the Appraised value of dwelling at consummation: consumer controls the timing of advances made after $100,000 consummation (such as in a credit line arrangement), the creditor must use the general formula in paragraph Assumed annual dwelling appreciation rate: 8% (b)(7) of this appendix. The total annual loan cost rate P = Min (107,053.63, 200,780.02) 120 shall be based on the assumption that 50 percent of the [(1 + o120 -1 principal loan amount is advanced at closing, or in the 492.51 X X (1 -I-1) = 107,053.63 case of an open-end transaction, at the time the consumer becomes obligated under the plan. Creditors i = .009061140 shall assume the advances are made at the interest rate then in effect and that no further advances are made Total annual loan cost rate (100(.009061140 X 12)) to, or repayments made by, the consumer during the = 10.87% term of the transaction or plan. (10) Assumption for variable-rate reverse mortgage (3) Lump sum advance at consummation and monthly transactions. If the interest rate for a reverse mortgage advances thereafter. transaction may increase during the loan term and the Lump sum advance to consumer at consummation: amount or timing is not known at consummation, $10,000 creditors shall base the disclosures on the initial inter- Monthly advance to consumer, beginning at consumest rate in effect at the time the disclosures are pro- mation: $725 vided. Total of consumer's loan costs financed at consumma- (11) Assumption for closing costs. In calculating the tion: $4,500 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

458 Federal Reserve Bulletin • May 1995 Contract rate of interest: 8.5% APPENDIX L TO PART 226—ASSUMED LOAN PERIODS FOR Estimated time of repayment (based on life expect- COMPUTATIONS OF TOTAL ANNUAL LOAN COST RATES ancy of a consumer at age 75): 12 years Appraised value of dwelling at consummation: Age of Loan period 1 [Optional Loan period 2 Loan period 3 youngest (in years) loan period (life expectancy) (in years) $100,000 borrower (in years)] (in years) Assumed annual dwelling appreciation rate: 8% 6 6 2 3 2 2 [ [ 1 1 1 0 ] ] 2 2 1 0 2 2 9 8 64 2 [10] 19 27 65 2 [9] 18 25 P,44 = Min (221,818.30, 234,189.82) 66 2 [9] 18 25 143 67 2 [9] 17 24 10,000(1 + J')144-0 + ^ 725(1 + 0,44_y = 221,818.30 68 2 [8] 16 22 69 2 [8] 16 22 j- o 70 2 [8] 15 21 i = .007708844 71 2 [7] 14 20 72 2 [7] 13 18 73 2 [7] 13 18 Total annual loan cost rate (100(.007708844 X 12)) 74 2 [6] 12 17 = 9.25% 75 2 [6] 12 17 76 2 [6] 11 15 77 2 [5] 10 14 (d) Reverse mortgage model form and sample form. 78 2 [5] 10 14 79 2 [5] 9 13 (1) Model form. (See page 459) 80 2 [5] 9 13 (2) Sample form. (See page 460) 81 2 [4] 8 11 82 2 [4] 8 11 83 2 [4], 7 10 11. In Part 226, a new Appendix L is added to read as 84 2 [4] 7 10 follows: 85 2 [3] 6 8 86 2 [3] 6 8 87 2 [3] 6 8 88 2 [3] 5 7 89 2 [3] 5 7 APPENDIX L TO PART 226—ASSUMED LOAN PERIODS 90 2 [3] 5 7 FOR COMPUTATIONS OF TOTAL ANNUAL LOAN COST 91 2 [2] 4 6 RATES 92 2 [2] 4 6 93 2 [2] 4 6 94 2 [2] 4 6 (a) Required tables. In calculating the total annual loan 95 and 2 [2] 3 4 over cost rates in accordance with Appendix K of this part, creditors shall assume three loan periods, as determined by the following table. (b) Loan periods. (1) Loan Period 1 is a two-year loan period. general interest, such as the treatment of various fees and (2) Loan Period 2 is the life expectancy in years of the taxes associated with real estate-secured loans and a youngest borrower to become obligated on the reverse creditor's responsibilities when investigating a claim of mortgage loan, as shown in the U.S. Decennial Life the unauthorized use of a credit card. Tables for 1979-1981 for females, rounded to the Effective April 1, 1995, 12 C.F.R. Part 226 is amended nearest whole year. as follows: (3) Loan Period 3 is the life expectancy figure in Loan Period 3, multiplied by 1.4 and rounded to the nearest Part 226—Truth in Lending (Regulation Z) full year (life expectancy figures at .5 have been rounded up to 1). 1. The authority citation for Part 226 continues to read as (4) At the creditor's option, an additional period may follows: be included, which is the life expectancy figure in Loan Period 2, multiplied by .5 and rounded to the Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and nearest full year (life expectancy figures at .5 have 1637(c)(5). been rounded up to 1). 2. In Supplement I to Part 226, under Section 226.2— Definitions and Rules of Construction, under Paragraph FINAL RULE—AMENDMENT TO REGULATION Z 2(a)(17)(i)., paragraph 8. is revised to read as follows: The Board of Governors is amending 12 C.F.R. Part 226, Supplement I—Official Staff Interpretations its Regulation Z (Truth in Lending), to clarify regulatory provisions and provide further guidance on issues of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 459 (1) MODEL FORM TOTAL ANNUAL LOAN COST RATE LOAN TERMS MONTHLY LOAN CHARGES Age of youngest borrower Servicing fee: Appraised property value: OTHER CHARGES Interest rate: Mortgage insurance: Monthly advance: Shared Appreciation: Initial draw: Line of credit: REPAYMENT LIMITS INITIAL LOAN CHARGES Closing costs: Mortgage insurance premium: Annuity cost: AAssssuummeedd Total Annual Loan Cost Rate AAnnnnuuaall 2-year [[ 1-year [ ]-year [ 1-year AApppprreecciiaattiioonn loan term loan term] loan term loan term 0% [ ] 4% t ] 8% [ ] The cost of any reverse mortgage loan depends on how long you keep the loan and how much your house appreciates in value. Generally, the longer you keep a reverse mortgage, the lower the total annual loan cost rate will be. This table shows the estimated cost of your reverse mortgage loan, expressed as an annual rate. It illustrates the cost for three [four] loan terms: 2 years, [half of life expectancy for someone your age,] that life expectancy, and 1.4 times that life expectancy. The table also shows the cost of the loan, assuming the value of your home appreciates at three different rates: 0%, 4% and 8%. The total annual loan cost rates in this table are based on the total charges associated with this loan. These charges typically include principal, interest, closing costs, mortgage insurance premiums, annuity costs, and servicing costs (but not costs when you sell the home). The rates in this table are estimates. Your actual cost may differ if, for example, the amount of your loan advances varies or the interest rate on your mortgage changes. SIGNING AN APPLICATION OR RECEIVING THESE DISCLOSURES DOES NOT REQUIRE YOU TO COMPLETE THIS LOAN Subpart A—General 8. Loans from employee savings plan. Some employee savings plans permit participants to borrow money up to $ * * * * a certain percentage of their account balances, and use a trust to administer the receipt and disbursement of funds. Section 226.2—Definitions and Rules of Unless each participant's account is an individual plan Construction. and trust, the creditor should apply the numerical tests to the plan as a whole rather than to the individual account, even if the loan amount is determined by reference to the Paragraph 2(a)(17)(i). balance in the individual account and the repayments are credited to the individual account. The person to whom Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

460 Federal Reserve Bulletin • May 1995 (2) SAMPLE FORM TOTAL ANNUAL LOAN COST RATE LOAN TERMS MONTHLY LOAN CHARGES Age of youngest borrower: 75 Servicing fee: None Appraised property value: $100,000 OTHER CHARGES Interest rate: 9% Mortgage insurance: None Monthly advance: $301.80 Shared Appreciation: None Initial draw: $1,000 Line of credit: $4,000 REPAYMENT LIMITS Net proceeds estimated at INITIAL LOAN CHARGES 93% of projected home sale Closing costs: $5,000 Mortgage insurance premium: None Annuity cost: None AAssssuummeedd Total Annual Loan Cost Rate AAnnnnuuaall 2-year [6-year 12-year 17-year AApppprreecciiaattiioonn loan term loan term] loan term loan term 0% 39.00% [14.94%] 9.86% 3.87% 4% 39.00% [14.94%] 11.03% 10.14% 8% 39.00% [14.94%] 11.03% 10.20% The cost of any reverse mortgage loan depends on how long you keep the loan and how much your house appreciates in value. Generally, the longer you keep a reverse mortgage, the lower the total annual loan cost rate will be. This table shows the estimated cost of your reverse mortgage loan, expressed as an annual rate. It illustrates the cost for three [four] loan terms: 2 years, [half of life expectancy for someone your age,] that life expectancy, and 1.4 times that life expectancy. The table also shows the cost of the loan, assuming the value of your home appreciates at three different rates: 0%, 4% and 8%. The total annual loan cost rates in this table are based on the total charges associated with this loan. These charges typically include principal, interest, closing costs, mortgage insurance premiums, annuity costs, and servicing costs (but not disposition costs—costs when you sell the home). The rates in this table are estimates. Your actual cost may differ if, for example, the amount of your loan advances varies or the interest rate on your mortgage changes. SIGNING AN APPLICATION OR RECEIVING THESE DISCLOSURES DOES NOT REQUIRE YOU TO COMPLETE THIS LOAN the obligation is originally made payable (whether the paragraphs 5., 6., and 7., a new paragraph 4. is added, plan, the trust, or the trustee) is the creditor for purposes and newly designated paragraph 7. is revised; of the act and regulation. b. Under Paragraph 4(c)(7)., paragraph 1. is revised and new paragraphs 2. and 3. are added; and c. Under (4)(e) Certain security interest charges., 3. In Supplement I to Part 226, under Section 226.4— paragraph 1. is revised. Finance Charge, the following amendments are made: The revisions and additions read as follows: a. Under 4(a) Definition., paragraphs 1. and 3. are revised, paragraphs 4., 5., and 6. are redesignated as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 461 Section 226.4—Finance Charge. can choose the third party, or the creditor retains the charge. For example: 4(a) Definition. i. The cost of required mortgage insurance, even if 1. Charges in comparable cash transactions. Charges the consumer is allowed to choose the insurer. imposed uniformly in cash and credit transactions are ii. A mortgage broker fee, to the extent that the not finance charges. In determining whether an item is a broker shares the fee with the creditor. finance charge, the creditor should compare the credit 4. Charges by settlement agents. Charges imposed on the transaction in question with a similar cash transaction. A consumer by a settlement agent (such as an attorney, creditor financing the sale of property or services may escrow agent, or title company) are finance charges only compare charges with those payable in a similar cash if the creditor requires the particular services for which transaction by the seller of the property or service. the settlement agent is charging the borrower and the i. For example, the following items are not finance charge for those services is not otherwise excluded from charges: the finance charge. For example, a fee for courier service A. Taxes, license fees, or registration fees paid charged by a settlement agent to send a document to the by both cash and credit customers. title company or some other party is not a finance B. Discounts that are available to cash and credit charge, provided that the creditor has not required the use of a courier or retained the charge. customers, such as quantity discounts. C. Discounts available to a particular group of 5. Forfeitures of interest. * * * consumers because they meet certain criteria, 6. Treatment of fees for use of automated teller masuch as being members of an organization or chines. * * * having accounts at a particular financial institu- 7. Taxes, i. Generally, a tax imposed by a state or other tion. This is the case even if an individual must governmental body solely on a creditor is a finance pay cash to obtain the discount, provided that charge if the creditor separately imposes the charge credit customers who are members of the group on the consumer. and do not qualify for the discount pay no more ii. In contrast, a tax is not a finance charge (even if than the nonmember cash customers. the tax is collected by the creditor) if applicable law D. Charges for a service policy, auto club mem- imposes the tax: bership, or policy of insurance against latent de- A. Solely on the consumer; fects offered to or required of both cash and B. On the creditor and the consumer jointly; credit customers for the same price. C. On the credit transaction, without indicating ii. In contrast, the following items are finance which party is liable for the tax; or charges: D. On the creditor, if applicable law directs or A. Inspection and handling fees for the staged authorizes the creditor to pass the tax on to the disbursement of construction loan proceeds. consumer. (For purposes of this section, if appli- B. Fees for preparing a Truth in Lending disclo- cable law is silent as to passing on the tax, the sure statement, if permitted by law (for example, law is deemed not to authorize passing it on.) the Real Estate Settlement Procedures Act pro- iii. For example, a stamp tax, property tax, intangible hibits such charges in certain transactions se- tax, or any other state or local tax imposed on the cured by real property). consumer, or on the credit transaction, is not a finance C. Charges for a required maintenance or service charge even if the tax is collected by the creditor. contract imposed only in a credit transaction. iv. In addition, a tax is not a finance charge if it is iii. If the charge in a credit transaction exceeds the excluded from the finance charge by an other provicharge imposed in a comparable cash transaction, sion of the regulation or commentary (for example, if only the difference is a finance charge. For exam- the tax is imposed uniformly in cash and credit transple: actions). A. If an escrow agent is used in both cash and credit sales of real estate and the agent's charge is $100 in a cash transaction and $150 in a credit Paragraph 4(c)(7). transaction, only $50 is a finance charge. 1. Real estate or residential mortgage transaction 2. Costs of doing business. * * * charges. The list of charges in section 226.4(c)(7) ap- 3. Charges by third parties. Charges imposed on the plies both to residential mortgage transactions (which consumer by someone other than the creditor are finance may include, for example, the purchase of a mobile charges (unless otherwise excluded) if the creditor re- home) and to other transactions secured by real estate. quires the use of a third party as a condition of or The fees are excluded from the finance charge even if incident to the extension of credit, even if the consumer the services for which the fees are imposed are per- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

462 Federal Reserve Bulletin • May 1995 formed by the creditor's employees rather than by a third statements, termination statements, and similar docparty. In addition, the cost of verifying or confirming uments relating to that obligation are not excludable information connected to the item is also excluded. For from the finance charge under this section. example, credit report fees cover not only the cost of the report, but also the cost of verifying information in the report. In all cases, charges excluded under section 4. In Supplement I to Part 226, under Section 226.5— 226.4(c)(7) must be bona fide and reasonable. General Disclosure Requirements, under 5(b)(1) Initial 2. Lump sum charges. If a lump sum charged for several disclosures., in paragraph 1., the first and second senservices includes a charge that is not excludable, a tences are revised, and a new paragraph 5. is added to portion of the total should be allocated to that service read as follows: and included in the finance charge. However, a lump sum charged for conducting or attending a closing (for example, by a lawyer or a title company) is excluded from the finance charge if the charge is primarily for Subpart B—Open-End Credit services related to items listed in section 226.4(c)(7) (for example, reviewing or completing documents), even if Section 226.5—General Disclosure Requirements. other incidental services such as explaining various documents or disbursing funds for the parties are performed. 5(a) Form of disclosures. The entire charge is excluded even if a fee for the Paragraph 5(a)(1). incidental services would be a finance charge if it were 1. Disclosure before the first transaction. The rule that imposed separately. the initial disclosure statement must be furnished "be- 3. Charges assessed during the loan term. Real estate or fore the first transaction" requires delivery of the initial residential mortgage transaction charges excluded under disclosure statement before the consumer becomes oblisection 226.4(c)(7) are those charges imposed solely in gated on the plan. For example, the initial disclosures connection with the initial decision to grant credit. This must be given before the consumer makes the first would include, for example, a fee to search for tax liens purchase (such as when a consumer opens a credit plan on the property or to determine if flood insurance is and makes purchases contemporaneously at a retail required. The exclusion does not apply to fees for ser- store), receives the first advance, or pays any fees or vices to be performed periodically during the loan term, charges under the plan other than an application fee or regardless of when the fee is collected. For example, a refundable membership fee (see below).* * * fee for one or more determinations during the loan term of the current tax lien status or flood insurance requirements is a finance charge, regardless of whether the fee 5. Balance transfers. A creditor that solicits the transfer is imposed at closing, or when the service is performed. by a consumer of outstanding balances from an existing If a creditor is uncertain about what portion of a fee to be account to a new open-end plan must comply with paid at consummation or loan closing is related to the section 226.6 before the balance transfer occurs. Card initial decision to grant credit, the entire fee may be issuers that are subject to the requirements of section treated as a finance charge. 226.5a may establish procedures that comply with both sections in a single disclosure statement. (4)(e) Certain security interest charges. 1. Examples, i. Excludable charges. Sums must be actu- 5. In Supplement I to Part 226, under Section 226.6— ally paid to public officials to be excluded from the Initial Disclosure Statement, under 6(b) Other charges., finance charge under section 226.4(e)(1). Examples paragraph 1. is revised to read as follows: are charges or other fees required for filing or recording security agreements, mortgages, continuation statements, termination statements, and similar documents, and intangible property or other Section 226.6—Initial Disclosure Statement. taxes imposed by the state solely on the creditor and payable by the consumer (if the tax must be paid to record a security agreement), 6(b) Other charges. ii. Charges not excludable. If the obligation is be- 1. General; examples of other charges. Under section tween the creditor and a third party (an assignee, for 226.6(b), significant charges related to the plan (that are example), charges or other fees for filing or recordnot finance charges) must also be disclosed. For examing security agreements, mortgages, continuation ple: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 463 i. Late payment and over-the-credit-limit charges. The procedures involved in investigating claims may ii. Fees for providing documentary evidence of differ, but actions such as the following represent steps transactions requested under section 226.13 (billing that a card issuer may take, as appropriate, in conducting error resolution). a reasonable investigation: iii. Charges imposed in connection with real estate i. Reviewing the types or amounts of purchases transactions such as title, appraisal, and credit re- made in relation to the cardholder's previous purport fees (see section 226.4(c)(7)). chasing pattern. iv. A tax imposed on the credit transaction by a ii. Reviewing where the purchases were delivered state or other governmental body, such as a docu- in relation to the cardholder's residence or place of mentary stamp tax on cash advances (see the com- business. mentary to section 226.4(a)). iii. Reviewing where the purchases were made in v. A membership or participation fee for a package relation to where the cardholder resides or has of services that includes an open-end credit feature, normally shopped. unless the fee is required whether or not the open- iv. Comparing any signature on credit slips for the end credit feature is included. For example, a mem- purchases to the signature of the cardholder or an bership fee to join a credit union is not an "other authorized user in the card issuer's records, includcharge," even if membership is required to apply ing other credit slips. for credit. v. Requesting documentation to assist in the verifivi. Automated teller machine (ATM) charges de- cation of the claim. scribed in comment 4(a)-5 that are not finance vi. Requesting a written, signed statement from the charges. cardholder or authorized user. vii. Charges imposed for the termination of an vii. Requesting a copy of a police report, if one was open-end credit plan. filed. viii. Requesting information regarding the cardholder's knowledge of the person who allegedly 6. In Supplement I to Part 226, under Section 226.12— used the card or of that person's authority to do so. Special Credit Card Provisions, under 12(b) Liability of cardholder for unauthorized use., new paragraphs 2. and 3. are added to read as follows: 7. In Supplement I to Part 226, under Section 226.15— Right of Rescission, the following amendments are made: a. Under Paragraph 15(a)(1)., paragraph 5. is revised; Section 226.12—Special Credit Card Provisions. b. Under Paragraph 15(a)(1)., paragraph 6. is revised; and c. Under Paragraph 15(d)(2)., in paragraph 1., the 12(b) Liability of cardholder for unauthorized use. third sentence is revised. 2. Imposing liability. A card issuer is not required to The additions and revisions read as follows: impose liability on a cardholder for the unauthorized use of a credit card; if the card issuer does not seek to impose liability, the issuer need not conduct any investigation of the cardholder's claim. Section 226.15—Right of Rescission. 3. Reasonable investigation. If a card issuer seeks to impose liability when a claim of unauthorized use is made by a cardholder, the card issuer must conduct a Paragraph 15(a)(1). reasonable investigation of the claim. In conducting its investigation, the card issuer may reasonably request the cardholder's cooperation. The card issuer may not auto- 5. Principal dwelling. A consumer can only have one matically deny a claim based solely on the cardholder's principal dwelling at a time. (See comment 15(a)(l)-6.) failure or refusal to comply with a particular request; A vacation or other second home would not be a princihowever, if the card issuer otherwise has no knowledge pal dwelling. A transaction secured by a second home of facts confirming the unauthorized use, the lack of (such as a vacation home) that is not currently being information resulting from the cardholder's failure or used as the consumer's principal dwelling is not rescindrefusal to comply with a particular request may lead the able, even if the consumer intends to reside there in the card issuer reasonably to terminate the investigation. future. When a consumer buys or builds a new dwelling Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

464 Federal Reserve Bulletin • May 1995 that will become the consumer's principal dwelling 1. Balloon payment. In some programs, a balloon paywithin one year or upon completion of construction, the ment will occur if only the minimum payments under the new dwelling is considered the principal dwelling if it plan are made. If an advertisement for such a program secures the open-end credit line. In that case, the transac- contains any statement about a minimum periodic paytion secured by the new dwelling is a residential mort- ment, the advertisement must also state that a balloon gage transaction and is not rescindable. For example, if a payment will result (not merely that a balloon payment consumer whose principal dwelling is currently A builds "may" result). (See comment 5b(d)(5)(ii)-3 for guidance B, to be occupied by the consumer upon completion of on items not required to be stated in the advertisement, construction, an advance on an open-end line to finance and on situations in which the balloon payment require- B and secured by B is a residential mortgage transaction. ment does not apply.) Dwelling, as defined in section 226.2, includes structures that are classified as personalty under state law. For example, a transaction secured by a mobile home, trailer, 9. In Supplement I to Part 226, under Section 226.17— or houseboat used as the consumer's principal dwelling General Disclosure Requirements, the following amendmay be rescindable. ments are made: 6. Special rule for principal dwelling. Notwithstanding a. Under Paragraph 17(a)(1)., paragraph 5. is revised; the general rule that consumers may have only one b. Under Paragraph 17(c)(4)., a new paragraph 4. is principal dwelling, when the consumer is acquiring or added; and constructing a new principal dwelling, a credit plan or c. Under 17(f) Early disclosures., paragraph 1. is extension that is subject to Regulation Z and is secured revised. by the equity in the consumer's current principal dwelling is subject to the right of rescission regardless of the The revisions and additions read as follows: purpose of that loan (for example, an advance to be used as a bridge loan). For example, if a consumer whose principal dwelling is currently A builds B, to be occupied by the consumer upon completion of construction, a Subpart C—Closed-end Credit loan to finance B and secured by A is subject to the right of rescission. Moreover, a loan secured by both A and B Section 226.17—General Disclosure is, likewise, rescindable. Requirements. Paragraph 17(a)(1). Paragraph 15(d)(2). 1. Refunds to consumer. * * * "Any amount" includes finance charges already accrued, as well as other charges 5. Directly related. The segregated disclosures may, at such as broker fees, application and commitment fees, or the creditor's option, include any information that is fees for a title search or appraisal, whether paid to the directly related to those disclosures. The following is creditor, paid by the consumer directly to a third party, or directly related information: passed on from the creditor to the third party. * * * i. A description of a grace period after which a late payment charge will be imposed. For example, the disclosure given under section 226.18(1) may state 8. In Supplement I to Part 226, under Section 226.16— that a late charge will apply to "any payment Advertising, under 16(d) Additional Requirements for received more than 15 days after the due date." Home Equity Plans, a new paragraph 7. is added to read ii. A statement that the transaction is not secured. as follows: For example, the creditor may add a category labelled "unsecured" or "not secured" to the security interest disclosures given under section 226.18(m). iii. The basis for any estimates used in making Section 226.16—Advertising. disclosures. For example, if the maturity date of a loan depends solely on the occurrence of a future event, the creditor may indicate that the disclosures assume that event will occur at a certain time. 16(d) Additional Requirements for Home Equity Plans. iv. The conditions under which a demand feature may be exercised. For example, in a loan subject to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 465 demand after five years, the disclosures may state illustrating an increase resulting from changes in that the loan will become payable on demand in the index. five years. xiii. The disclosures set forth under secv. An explanation of the use of pronouns or other tion 226.18(f)(1) for variable-rate transactions subreferences to the parties to the transaction. For ject to section 226.18(f)(2). example, the disclosures may state, "'You' refers xiv. A statement whether or not a subsequent purto the customer and 'we' refers to the creditor." chaser of the property securing an obligation may vi. Instructions to the creditor or its employees on be permitted to assume the remaining obligation on the use of a multiple-purpose form. For example, its original terms. the disclosures may state, "Check box if applica- xv. A late-payment fee disclosure under secble." tion 226.18(1) on a single payment loan. vii. A statement that the borrower may pay a minimum finance charge upon prepayment in a simpleinterest transaction. For example, when state law Paragraph 17(c)(4). prohibits penalties, but would allow a minimum finance charge in the event of prepayment, the creditor may make the section 226.18(k)(l) disclo- 4. Relation to prepaid finance charges. Prepaid finance sure by stating, "You may be charged a minimum charges, including "odd-days" or "per-diem" interest, finance charge." paid prior to or at closing may not be treated as the first viii. A brief reference to negative amortization in payment on a loan. Thus, creditors may not disregard an variable-rate transactions. For example, in the irregularity in disclosing such finance charges. variable- rate disclosure, the creditor may include a short statement such as "Unpaid interest will be added to principal." (See the commentary to sec- 17(f) Early disclosures. tion 226.18(f)(l)(iii).) 1. Change in rate or other terms. Redisclosure is reix. A brief caption identifying the disclosures. For quired for changes that occur between the time discloexample, the disclosures may bear a general title sures are made and consummation if the annual percentsuch as "Federal Truth in Lending Disclosures" or age rate in the consummated transaction exceeds the a descriptive title such as "Real Estate Loan Disclo- limits prescribed in section 226.22(a) (Vfe of 1 percentage sures." point in regular transactions and lA of 1 percentage point x. A statement that a due-on-sale clause or other in irregular transactions). Redisclosure is also required, conditions on assumption are contained in the loan even if the annual percentage rate is within the permitted document. For example, the disclosure given under tolerance, if the disclosures were not based on estimates section 226.18(q) may state, "Someone buying your in accordance with section 226.17(c)(2) and labelled as home may, subject to conditions in the due-on-sale such. To illustrate: clause contained in the loan document, assume the i. If disclosures are made in a regular transaction on remainder of the mortgage on the original terms." July 1, the transaction is consummated on July 15, xi. If a state or Federal law prohibits prepayment and the actual annual percentage rate varies by penalties and excludes the charging of interest after more than Vs of 1 percentage point from the disprepayment from coverage as a penalty, a statement closed annual percentage rate, the creditor must that the borrower may have to pay interest for some either redisclose the changed terms or furnish a period after prepayment in full. The disclosure complete set of new disclosures before consummagiven under section 226.18(k) may state, for exam- tion. Redisclosure is required even if the disclople, "If you prepay your loan on other than the sures made on July 1 are based on estimates and regular installment date, you may be assessed inter- marked as such; est charges until the end of the month." ii. If disclosures are made on July 1, the transaction xii. More than one hypothetical example under is consummated on July 15, and the finance charge section 226.18(f)(l)(iv) in transactions with more increased by $35 but the disclosed annual percentthan one variable-rate feature. For example, in a age rate is within the permitted tolerance, the credivariable-rate transaction with an option permitting tor must at least redisclose the changed terms consumers to convert to a fixed-rate transaction, the that were not marked as estimates. (See secdisclosures may include an example illustrating the tion 226.18(d) and footnote 41 of this part); and effects on the payment terms of an increase result- iii. If early disclosures are marked as estimates and ing from conversion in addition to the example the disclosed annual percentage rate is within toler- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

466 Federal Reserve Bulletin • May 1995 ance at consummation, the creditor need not redis- actions, under paragraph 19(b)(2)(vii)., paragraph 2. is close the changed terms (including the annual per- revised to read as follows: centage rate). Section 226.19—Certain Residential Mortgage and Variable-Rate Transactions. 10. In Supplement I to Part 226, under Section 226.18— Content of Disclosures, the following amendments are made: Paragraph 19(b)(2)(vii). a. Under Paragraph 18(c)(l)(iv)., a new paragraph 2. is added; and b. Under 18(d) Finance charge., paragraph 2. is revised. 2. Negative amortization and interest rate carryover. A creditor must disclose, where applicable, the possibility of negative amortization. For example, the disclosure The additions and revisions read as follows: might state, "If any of your payments is not sufficient to cover the interest due, the difference will be added to your loan amount." Loans that provide for more than Section 226.18—Content of Disclosures. one way to trigger negative amortization are separate variable-rate programs requiring separate disclosures. (See the commentary to section 226.19(b)(2) for a dis- Paragraph 18(c)(l)(iv). cussion on the definition of a variable-rate loan program and the format for disclosure.) If a consumer is given the option to cap monthly payments that may result in 2. Prepaid mortgage insurance premiums. RESPA re- negative amortization, the creditor must fully disclose quires creditors to give consumers a settlement statement the rules relating to the option, including the effects of disclosing the costs associated with mortgage loan trans- exercising the option (such as negative amortization will actions. Included on the settlement statement are mort- occur and the principal loan balance will increase); howgage insurance premiums collected at settlement, which ever, the disclosure in section 226.19(b)(2)(viii) need not are prepaid finance charges. In calculating the total be provided. amount of prepaid finance charges, creditors should use the amount for mortgage insurance listed on the line for mortgage insurance on the settlement statement (line 12. In Supplement I to Part 226, under Section 226.22— 1002 on HUD-1 or HUD 1-A), without adjustment, even Determination of the Annual Percentage Rate, under if the actual amount collected at settlement may vary Paragraph 22(a)(1)., in paragraph 5., the reference because of RESPA's escrow accounting rules. Figures "Footnote 45a" is revised to read "Footnote 45d". for mortgage insurance disclosed in conformance with 13. In Supplement I to Part 226, under Section 226.23— RESPA shall be deemed to be accurate for purposes of Right of Rescission, the following amendments are Regulation Z. made: a. Under Paragraph 23(a)(1)., paragraph 3. is revised; 18(d) Finance charge. b. Under Paragraph 23(a)(1)., paragraph 4. is revised; c. Under Paragraph 23(d)(2)., in paragraph 1., the third sentence is revised; and 2. Tolerance. A tolerance for the finance charge is prod. Under 23(f) Exempt transactions., in paragraph 4., vided in footnote 41 of this part. When a miscalculation two new sentences are added following the first senof the amount financed, or of some other numerical tence, and a new sentence is added at the end of the disclosure for which the regulation provides no specific paragraph. tolerance, results from an error in a finance charge, the miscalculated amount financed or other numerical dis- The additions and revisions read as follows: closure does not violate the act or the regulation if the finance charge disclosed under section 226.18(d) is within the permissible tolerance under footnote 41 of this part. Section 226.23—Right of Rescission. 11. In Supplement I to Part 226, under Section 226.19 — Certain Residential Mortgage and Variable-Rate Trans- Paragraph 23(a)(1). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 467 tor for purposes of the exemption in section 226.23(f)(2). 3. Principal dwelling. A consumer can only have one * * * The general rescission notice (model form H-8) is principal dwelling at a time. (But see comment 23(a)(l)-4.) the appropriate form for use by creditors not considered A vacation or other second home would not be a princi- original creditors in refinancing transactions. pal dwelling. A transaction secured by a second home (such as a vacation home) that is not currently being used as the consumer's principal dwelling is not rescind- 14. In Supplement I to Part 226, under Appendix J, able, even if the consumer intends to reside there in the under the subheading References, under 1981 changes:, future. When a consumer buys or builds a new dwelling the last sentence is revised to read as follows: that will become the consumer's principal dwelling within one year or upon completion of construction, the new dwelling is considered the principal dwelling if it secures the acquisition or construction loan. In that case, the transaction secured by the new dwelling is a residen- APPENDIX J—ANNUAL PERCENTAGE RATE tial mortgage transaction and is not rescindable. For COMPUTATIONS FOR CLOSED-END CREDIT example, if a consumer whose principal dwelling is TRANSACTIONS currently A builds B, to be occupied by the consumer upon completion of construction, a construction loan to finance B and secured by B is a residential mortgage References transaction. Dwelling, as defined in section 226.2, includes structures that are classified as personalty under state law. For example, a transaction secured by a mo- 1981 changes: * * * Paragraph (b)(5)(vi) has been bile home, trailer, or houseboat used as the consumer's revised to permit creditors in single-advance, singleprincipal dwelling may be rescindable. payment transactions in which the term is less than a year and is equal to a whole number of months, to use 4. Special rule for principal dwelling. Notwithstanding either the 12-month method or the 365-day method to the general rule that consumers may have only one compute the number of unit-periods per year. principal dwelling, when the consumer is acquiring or constructing a new principal dwelling, any loan subject to Regulation Z and secured by the equity in the consumer's current principal dwelling (for example, a bridge ORDERS ISSUED UNDER BANK HOLDING loan) is subject to the right of rescission regardless of the COMPANY ACT purpose of that loan. For example, if a consumer whose principal dwelling is currently A builds B, to be occu- Orders Issued Under Section 3 of the Bank pied by the consumer upon completion of construction, a Holding Company Act construction loan to finance B and secured by A is subject to the right of rescission. A loan secured by both Chase Manhattan Corporation A and B is, likewise, rescindable. New York, New York Order Approving the Formation of a De Novo Bank Paragraph 23(d)(2). 1. Refunds to consumer. * * * "Any amount" includes Chase Manhattan Corporation, New York, New York finance charges already accrued, as well as other charges, ("Chase"), a bank holding company within the meaning such as broker fees, application and commitment fees, or of the Bank Holding Company Act ("BHC Act"), has fees for a title search or appraisal, whether paid to the applied under section 3 of the BHC Act (12 U.S.C. creditor, paid directly to a third party, or passed on from § 1842) to acquire all the voting shares of Chase Savings the creditor to the third party. * * * Bank, New York, New York, a de novo state-chartered savings bank ("Savings Bank"). Notice of the application, affording interested persons 23(f) Exempt transactions. an opportunity to submit comments, has been published (59 Federal Register 65,361 (1994)). The time for filing comments has expired, and the Board has considered the 4. New advances. * * * The original creditor is the application and all comments received in light of the creditor to whom the written agreement was initially factors set forth in section 3(c) of the BHC Act. made payable. In a merger, consolidation or acquisition, Chase, with consolidated assets of approximately the successor institution is considered the original credi- $114 billion, operates five subsidiary banks in Connecti- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

468 Federal Reserve Bulletin • May 1995 cut, Delaware, Florida, Maryland, and New York, con- For these reasons, and based on all the facts of record, trolling approximately $33.3 billion in total domestic the Board concludes that consummation of this proposal deposits.1 Chase's lead bank, Chase Manhattan Bank, would not result in any significantly adverse effects on N.A., New York, New York ("Manhattan Bank"), con- competition in any relevant banking market. The Board trols deposits of $29.5 billion, representing approxi- also concludes that the financial and managerial remately 12 percent of total domestic deposits in commer- sources and future prospects of Chase and its subsidiarcial banks in New York. Chase also engages in a number ies and other supervisory factors the Board must conof permissible nonbanking activities nationwide. sider under section 3 of the BHC Act are consistent with Savings Bank would be chartered as a non-operating approval of this proposal.5 institution in connection with a multi-step corporate reorganization of Chase's banks in New York and Con- Convenience and Needs Considerations necticut. Specifically, Chase has structured this proposal in order to merge Chase Manhattan Bank of Connecti- In acting on an application to acquire a depository insticut, N.A., Bridgeport, Connecticut ("Connecticut tution under the BHC Act, the Board must consider the Bank"), and Manhattan Bank, with Manhattan Bank convenience and needs of the communities to be served surviving the merger and operating the branches of Con- and take into account the records of the relevant deposinecticut Bank in Connecticut.2 This proposal represents tory institutions under the Community Reinvestment Act a reorganization of Chase's existing banking operations, (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires and would not result in any expansion of Chase's the federal financial supervisory agencies to encourage deposit-taking facilities. The steps involving the merger financial institutions to help meet the credit needs of the of Connecticut Bank into Manhattan Bank is subject to local communities in which they operate, consistent with review by the Federal Deposit Insurance Corporation their safe and sound operation. To accomplish this end, ("FDIC") and the Office of the Comptroller of the the CRA requires the appropriate federal supervisory Currency ("OCC"), under applicable federal laws, and authority to "assess the institution's record of meeting the other steps in this transaction are subject to the the credit needs of its entire community, including lowreview of the state banking supervisors of New York and and moderate-income neighborhoods, consistent with Connecticut.3 The proposal before the Board represents the safe and sound operation of such institution," and to an intermediary and transitory step to facilitate the un- take that record into account in its evaluation of applicaderlying merger.4 tions.6 Protestant submitted comments alleging a number of deficiencies in Chase's record of performance under the 1. Asset and deposit data are as of December 31, 1994. CRA. In particular, Protestant contends that Manhattan 2. Chase proposes to accomplish this merger in four steps. Initially, Bank and its mortgage subsidiaries7 have failed to ascer- Connecticut Bank would convert from a national bank to a Connecticut state-chartered bank and then, as discussed above, Chase would estab- tain credit needs, market their services or extend credit lish and acquire Savings Bank as an interim New York state-chartered savings bank. In the third step, Connecticut Bank would merge with and into Savings Bank, with Savings Bank surviving the merger. Finally, Savings Bank would merge with and into Manhattan Bank. cut's interstate banking statutes. In this light, the Board concludes that 3. On October 13, 1994, the New York Superintendent of Banks Protestant's comments do not provide a basis for denying this proposal. approved Chase's application to charter Savings Bank, and on Febru- 5. Protestant contends that Manhattan Bank's recent settlement of ary 10, 1995, the OCC approved Chase's proposal to merge Savings alleged securities laws violations, political repercussions in Mexico Bank into Manhattan Bank (and to retain the branches of Connecticut from an article published by Chase's Emerging Markets Groups, and Bank) pursuant to 12 U.S.C. §§ 215a, 36(b), and 1828(c). The Connect- Chase's alleged overexposure to Mexican debt, reflect adversely under icut Banking Commissioner has indicated preliminarily that the pro- these factors. Chase recently resolved allegations by the Securities and posed charter conversion of Connecticut Bank in step one is permissible Exchange Commission involving the alleged failure of Manhattan Bank under Connecticut law. Similarly, the FDIC and the New York State to properly report the reappearance of cancelled corporate bond certifi- Superintendent of Banks have indicated preliminarily that the merger of cates by paying a $100,000 fine without admitting or denying liability. the resulting Connecticut state-chartered bank with and into Savings Manhattan Bank has reviewed and revised its procedures for the cancel- Bank in step three is permissible under the Bank Merger Act (12 U.S.C. lation, storage, and destruction of cancelled certificates to the satisfac- § 1828(c)) and New York State law. tion of the OCC. Protestant's comments have been reviewed in light of 4. Inner City Press/Community on the Move ("Protestant") main- all the facts of record, including relevant reports of examination by the tains that this proposal is inconsistent with Connecticut interstate bank- OCC assessing Chase's financial and managerial resources. Based on ing laws. As noted earlier, step three of the proposal involves the merger these and other facts of record, the Board concludes that Protestant's comments do not warrant an adverse determination on these factors. of a Connecticut savings bank with and into the surviving out-of-state New York savings bank, which is authorized by Conn. Gen. Stat. 6. See 12 U.S.C. § 2903. § 36-555 (1995). The remaining step of this transaction, the merger of a 7. Chase has reorganized its mortgage lending operations into an state-chartered savings bank with a nationally chartered bank, and the indirect subsidiary of Manhattan Bank. Specifically, Chase created retention of the Connecticut branches by a nationally chartered bank Chase Manhattan Mortgage Corporation ("CMMC") by merging Chase headquartered in New York, is authorized under the Bank Merger Act, Home Mortgage Corporation with Troy & Nichols, Inc. and American the Bank Conservation Act and the National Bank Act (See 12 U.S.C. Residential Mortgage Company which Chase acquired in 1993 and §§ 1828(c), 215a and 36(b)(2)). The OCC has approved the structure of 1994, respectively. Personal Finance Services, Inc., formerly a subsidthis proposal under federal law, and the Connecticut Bank Commission iary of Chase U.S. Consumer Services, Inc., is now a division of has informally indicated that this proposal is consistent with Connecti- CMMC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 469 in neighborhoods with low- and moderate-income and ing and credit practices of Chase to the OCC, the federal minority residents in the South Bronx and Upper Man- supervisor responsible for evaluating the underlying hattan.8 In addition, Protestant maintains, on the basis of merger of Connecticut Bank with and into Manhattan data filed under the Home Mortgage Disclosure Act Bank. In reviewing these comments, the OCC consid- (12 U.S.C. § 2801 et seq.) ("HMDA"), that Manhattan ered the CRA performance records of both banks in- Bank and its mortgage subsidiaries have failed to assist volved and the lending records of Chase's mortgage in meeting the housing-related credit needs of areas subsidiaries, performance examinations it had conwithin its service communities in New York City and ducted, and the results of fair lending examinations for Upstate New York. Protestant also makes similar allega- some of Chase's mortgage subsidiaries. tions for Connecticut Bank and Chase's mortgage sub- On the basis of all the facts of record, the OCC sidiaries operating in Connecticut. Finally, Protestant concluded that neither the banks nor the mortgage submaintains that Chase does not have a sufficient number sidiaries had engaged in illegal discriminatory lending or of branches to serve the needs of low- and moderate- credit practices as alleged by Protestant. The OCC also income areas, particularly in the Bronx and Manhattan. determined that the relevant factors for consideration Protestant also alleges that Chase and its mortgage under the Bank Merger Act, including convenience and subsidiaries violate both the Equal Credit Opportunity needs considerations and the CRA performance records Act (15 U.S.C. § 1601 et seq.) ("ECOA") and the Fair of Manhattan Bank and Connecticut Bank, were consis- Housing Act (42 U.S.C. § 3601 et seq.) ("FHA") (to- tent with approval of the substantive portion of this gether, "fair lending laws"). Specifically, Protestant be- transaction—the merger of the two nationally chartered lieves that Chase "steers" low- and moderate-income banks into a single nationally chartered bank with and minority mortgage loan applicants to Manhattan branches in New York and Connecticut.11 The Board has Bank for housing-related loans to improve the bank's considered all of the comments received in light of all CRA record of performance while directing and market- the facts of record, including information provided to the ing mortgage loans by its mortgage subsidiaries, which Board by the OCC and the OCC's action on the substanare not subject to CRA performance evaluation, to only tive merger. affluent non-minority customers.9 Protestant maintains that this practice and other practices by Manhattan Bank Evaluation of CRA Performance and its mortgage subsidiaries, and deficiencies in Chase's CRA performance record, result in illegal dis- A. Fair Lending Issues parate treatment of and disparate effects on minority borrowers under the fair lending laws. The Board has carefully considered Protestant's allega- The Board has carefully reviewed the CRA perfor- tions that Chase violates fair lending laws by steering mance record of Chase and its subsidiaries in light of the prospective borrowers to its banks or mortgage subsid- CRA, relevant fair lending laws and related regulatory iaries in a discriminatory manner.12 Protestant also bematerials, the Board's regulations, the Statement of the lieves that this structure permits Chase's mortgage sub- Federal Financial Supervisory Agencies Regarding the sidiaries to avoid scrutiny under the fair lending laws Community Reinvestment Act ("Agency CRA State- and the CRA. In addition, Protestant contends that pracment"),10 all comments received, and Chase's response tices by Chase's mortgage subsidiaries such as offering to these comments. primarily larger "jumbo" mortgages and marketing these products to affluent non-minority borrowers is an OCC Review of Protestant's Comments illegal fair lending activity. Finally, Protestant believes As noted above, this application represents an interim step in a reorganization of banks already owned by 11. See Decision of the OCC and letter dated February 10, 1995 Chase through a merger transaction that is subject to full ("OCC Decision"). 12. Protestant also argues that Manhattan Bank's lending activities, review by the OCC. The Board notes that Protestant conducted in cooperation with such organizations as the New York City submitted substantially similar comments about the lend- Partnership Foundation ("NYC Partnership") and private redevelopers, involve illegal "pre-screening" of applicants. Illegal pre-screening is an activity that discourages a reasonable person from making or pursuing an application on a prohibited basis such as race, national origin or sex. 8. The South Bronx is approximated by Community Districts 1-6, Prospective borrowers, however, may be evaluated on the basis of and Upper Manhattan is approximated by Community Districts 1-9 income and credit history under fair lending laws, and Protestant's within the Bronx and Manhattan sections of New York City. allegations relate to this type of activity. Chase also contends loan 9. Protestant argues that HMDA data for Chase's banks and mortgage underwriting criteria are used for all borrowers referred by private subsidiaries, and interpretations of these data in studies performed by redevelopers in making its loan decisions. Moreover, OCC examiners community groups and the press, show illegal discriminatory lending have favorably noted Manhattan Bank's participation in the NYC practices. Partnership program as a means to assist in meeting needs for affordable 10. 54 Federal Register 13,742 (1989). housing. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

470 Federal Reserve Bulletin • May 1995 that the mortgage-backed securities activities Chase con- Chase has also implemented a comprehensive Naducts through Chase Manhattan Finance Corporation, tional Mortgage Fair Lending Program designed to enwhich involve the pooling of loans from Chase mortgage sure equal treatment of applicants and compliance with company affiliates, also violate fair lending laws and fair lending laws. The program covers all of Chase's provide an economic incentive to continue these and consumer and small business lending and sets consistent other alleged violations. standards for all Chase entities (bank and nonbank) and Chase contends that Manhattan Bank's mortgage lend- all Chase credit products, including mortgage, auto, ing activities are organized along functional lines, with credit card, small business, educational, home equity, the bank and each of its subsidiaries fulfilling a different and installment loan products.16 The program specififunction. Chase notes that this approach has permitted cally recognizes that all of Chase's bank and nonbank Manhattan Bank and its mortgage subsidiaries to offer a affiliates are required to comply with fair lending laws, variety of loan products, including conventional and irrespective of whether the entity is covered by the CRA. jumbo mortgages and community development loans, to Training and monitoring for compliance through regular meet the housing-related credit needs of their entire review procedures and testing are major components of community by specializing in the types of loan products this program. that meet the personal needs of the borrower. Chase In light of these and other facts of record, the Board maintains that prospective customers are directed to the does not believe that these comments present adverse appropriate unit of Manhattan Bank based on the prod- considerations relating to Chase's compliance with fair uct profile and financing requirements of the borrower.13 lending laws or the CRA. Chase also contends that mortgage pools assembled from mortgages originated by this functional approach do not B. Examination Record of CRA Performance violate fair lending laws and are packaged for sale by Chase Finance Mortgage Corporation according to crite- The Agency CRA Statement provides that a CRA examria, such as loan size, coupon interest rates and caps, and ination is an important and often controlling factor in the length of time on Chase's books, that are not prohibited consideration of an institution's CRA record, and that under fair lending laws. these reports will be given great weight in the applica- The most recent CRA examination of Manhattan Bank tions process.17 In this case, the Board notes that all of and the OCC Decision both noted that the performance Chase's subsidiary banks received "outstanding" or of Chase's mortgage subsidiaries were evaluated in as- "satisfactory" ratings at the most recent examinations of sessing the bank's CRA performance in its delineated their CRA performance. In particular, Chase's lead bank, community. Moreover, all housing-related loans made Manhattan Bank, received a "satisfactory" rating from by these subsidiaries are reflected in the relevant HMDA the OCC at its most recent examination for CRA perfordata. In addition, the OCC conducted a fair lending mance as of October 1993 ("Manhattan Bank Examinaexamination of the mortgage company subsidiaries,14 tion"). Connecticut Bank also received a "satisfactory" and found no evidence of illegal discrimination by Man- rating from the OCC at its most recent examination for hattan Bank or its affiliates. The OCC also reviewed CRA performance as of October 1993 ("Connecticut Protestant's comments about steering and the specialized Bank Examination").18 lending activities of Manhattan Bank's mortgage units in light of relevant fair lending laws and determined that there were no illegal credit practices.15 the criteria required for mortgages eligible for sale on the secondary market. 16. Protestant alleges that HMDA data for American Residential Mortgage Corporation indicates illegal "pre-screening" of refinanced 13. In general, jumbo mortgages are for larger amounts (with lower mortgages. As previously noted, this company was not acquired by loan-to-value ratios), require more income to qualify, and are processed Chase until October 1994, and has since been merged into CMMC. by loan officers with experience in financial and tax considerations. In CMMC is subject to all of the compliance policies and procedures of contrast, conventional loans with special financing considerations are Chase's fair lending program, and the supervisory authority of the OCC processed by loan officers and underwriters trained to take into account as a subsidiary of a national bank. particular circumstances, such as interrupted employment histories, 17 .See Agency CRA Statement, at 13,745. government benefits and alternate indicia of creditworthiness. 18. The Chase Manhattan Bank of Florida, Tampa, Florida, also 14. The sample files were drawn from New York, Connecticut, and received a "satisfactory" rating from the OCC at its most recent Florida, the three states in which Chase's national banks operate, and examinations for CRA performance as of October 1993. In addition, included sample loan files from Chase Home Mortgage Corporation, The Chase Manhattan Bank of Maryland, Baltimore, Maryland, re- Personal Financial Services, and other nonbank affiliates that sell mort- ceived a "satisfactory" rating from the Federal Reserve Bank of Richgages to Chase's subsidiary banks. The OCC reviewed loan files for mond at its most recent examination for CRA performance as of approximately half of all minority applicants denied and compared October 1993; and The Chase Manhattan Bank (USA), Wilmington, them to the files of white applicants provided loans. Delaware ("Chase-USA"), a specialized bank engaged in credit card 15. The OCC Decision noted that Manhattan Bank's processing of operations, received an "outstanding" rating from its primary regulator, low- and moderate-income mortgage applications benefitted borrowers the FDIC, at its most recent examination for CRA performance as of because these loans could use more flexible underwriting criteria than August 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 471 C. Manhattan Bank's Record of CRA its community development corporation, Chase Commu- Performance nity Development Corporation ("CCDC") to finance a wide variety of housing-related programs that provide Lending Activities. Manhattan Bank has initiated a num- housing for low- to moderate-income residents in the ber of steps to strengthen its already satisfactory record bank's delineated communities, including residents of of meeting the housing-related credit needs in low- to Upper Manhattan and the South Bronx.23 moderate-income areas of its communities throughout its The credit needs of small businesses are also ad- New York City and State designated communities,19 dressed by several programs offered by Chase. For examparticularly in Upper Manhattan and the South Bronx. ple, in 1993, Chase's Small Business Group developed For example, in 1993, Manhattan Bank introduced a Tax an enhanced Small Business Plan to achieve higher Advantaged Installment Loan product ("TAIL") to meet levels of lending to small businesses in low- to moderate the financing needs of residents of Co-op City and income areas. In furtherance of this goal, the Small Concourse Village, both in the Bronx. This product Business Group has prepared a mailing focusing on offers applicants up to 100 percent financing for cooper- companies with sales of $500,000 to $1 million located ative units, with no application or appraisal fees and in low- to moderate-income areas.24 As a result of these minimal closing costs. During the first year of this pro- efforts, the Small Business Group has approved 20 small gram, the bank originated 209 TAIL loans with minority business loans totalling $1.9 million, with the majority applicants receiving more than 90 percent of these of the applicants located in low- to moderate-income loans.20 Manhattan Bank also offers an affordable mort- areas. During the fourth quarter of 1994, the Small gage product through Community Homebuyers Program Business Group developed a pilot lending program to be ("CHBP"). This loan program, developed by the Fed- introduced in the Bronx, with a total of $500,000 allocated among four branch managers. Under this program, eral National Mortgage Association, provides mortgage each participating branch manager has the authority to loans with such features as a low down payment mortgage product and flexible underwriting criteria.21 approve loans between $10,000 and $25,000 (up to a total of $125,000) in the aggregate for existing custom- Chase also provided $8.9 million for the acquisition, ers who did not meet conventional underwriting stanrehabilitation and permanent financing of nine occupied dards.25 buildings containing 487 units of affordable housing in Upper Manhattan and the Bronx through the Ownership Manhattan Bank also actively participates in govern- Transfer Program, which operates in conjunction with mentally sponsored programs such as those of the Small the Community Service Society, local community based Business Administration ("SBA"), the New York City organizations, and organized tenants groups.22 Chase Small Business Reserve Fund ("Reserve Fund"), and also has provided over $120 million in real estate and the New York Business Development Program. For exreal estate-related commercial loans since 1989 through ample, Manhattan Bank has the largest outstanding amount of loans for lenders under the Reserve Fund, which provides financing to small businesses located in the inner city. In terms of SBA lending, Manhattan Bank 19. Protestant maintains that the nationwide lending activities of Manhattan Bank's subsidiaries should expand consideration of its rele- originated 20 loans totalling $5 million during the first vant service area beyond the bank's delineated communities. Protestant contends that the Board should consider the nationwide lending record of these subsidiaries, including the alleged fair lending violations, in its evaluation of this application. Protestant also believes that Manhattan 23. Protestant believes that indirect lending programs should be Bank's current service communities should include New Jersey. The accorded less weight under the CRA, and that CCDC is used to ensure geographic scope of Manhattan Bank's community delineations was that only creditworthy CRA-related loans are booked by Manhattan determined to be reasonable and not to arbitrarily exclude any low- and Bank. OCC examiners concluded in the Manhattan Bank Examination moderate-income areas by examiners in the Manhattan Bank Examina- that the lending activities of CCDC, characterized as a multi-purpose tion. Moreover, as previously noted, the mortgage subsidiaries' perfor- lender concentrating in the low- and moderate-income neighborhoods mance under the CRA and fair lending laws has been evaluated by the of the greater New York City area, were appropriate to consider in OCC in its CRA performance examinations of these banks and the OCC assessing the bank's CRA performance in its delineated communities. Decision. Based on these and other facts of record, including findings in Examiners also noted with approval lending activities conducted with the OCC Decision, the Board believes that the communities delineated the NYC Partnership, which administers the New Homes Program by Manhattan Bank are the appropriate areas to consider consistent with (described by examiners as one of the largest affordable housing new the requirements of the CRA and its implementing regulations. construction programs in New York City). Based on all the facts of 20. Manhattan Bank also introduced a special loan program to meet record, the Board does not believe that Protestant's comments warrant the housing-related finance needs of individuals purchasing units of a adverse consideration of these activities under the CRA and fair lending cooperative in Morningside Heights in Upper Manhattan. laws. 21. During the first half of 1993, Manhattan Bank originated 140 24. Chase also has prepared a "Guide to Government Programs" to CHBP loans totalling $17 million. be used both internally for product awareness and training of branch 22. Chase also provided $17.4 million in construction financing for officers, and externally in targeted branches located in low- to moderatethe renovation of 673 vacant units to be used as affordable rental income areas. housing through the HPD's Vacant Building Program, the New York 25. In addition, Chase recently funded four special funds for small City Housing Authority Turnkey Program, and the State of New York loans to organizations in Rockaway, Inwood (Upper Manhattan), Ridge- Mortgage Agency rehab program. wood, and the South Bronx. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

472 Federal Reserve Bulletin • May 1995 half of 1993. Chase also originated eight loans totalling regulatory guidelines, and that this policy included the $2 million under the New York Business Development consideration of input from local community groups and Loan Program. political leaders in order to minimize any impact a Outreach and Marketing. The Manhattan Bank Exam- closing would have on an area. ination noted that Chase has a formalized process to ascertain community credit needs through focus groups, D. Connecticut Bank's Performance in community contacts, and independent market research. Connecticut The bank's outreach efforts include regular contacts with individuals and groups representing a variety of view- The 1993 CRA performance examination for Connectipoints, including governmental, religious, real estate de- cut Bank found that the bank affirmatively solicits mortvelopment, and minority rights interests. Examiners gage loans in low- and moderate-income census tracts found that Manhattan Bank's outreach and ascertain- and minority neighborhoods, and noted that Chase's ment efforts have lead to a number of new products, initiatives to increase its lending in certain underserved many of which are housing related. low- and moderate-income areas within the bank's delin- After its credit products and programs are developed, eated community were yielding positive results. These Manhattan Bank's marketing program is designed to steps included the origination of mortgages in the bank's inform all members of its community of available prod- branches, hiring low- and moderate-income mortgage ucts and services, including low- and moderate-income originating specialists, expanding the types of mortgage and minority residents. Examiners found that Manhattan products to include government sponsored loan pro- Bank's marketing efforts have included specific low- and grams, and increased marketing efforts. As a result of moderate-income areas and minority residents within its these efforts, the new mortgage originators approved 38 delineated communities. For example, Manhattan Bank loans totalling approximately $3 million (as of October retained a minority-owned marketing and public rela- 1993), and Connecticut Bank developed a pre-approval tions firm to assist in developing a formal strategy to program for low- and moderate-income home buyers. focus on minority residents. The bank also advertises its The bank also began offering mortgages through governcredit products in a number of media designed to reach ment sponsored programs with the Federal Housing Adminority and low- to moderate-income residents of New ministration, Veterans Administration, Connecticut York, including subway posters, spot radio campaigns, Housing Finance Authority, the Connecticut Homebuyand television advertisements in English and Spanish. ers Affordable Mortgage Program, and the State Treasur- Other marketing efforts include trade shows, mortgage er's Affordable Residential Mortgage Program. seminars, and banking seminars conducted with commu- Connecticut Bank also actively participates in governnity based organizations throughout its delineated com- mentally sponsored small business programs such as munity. those of the SBA and the Connecticut Development Branch Locations and Closings. OCC examiners con- Authority ("CDA"). In particular, Connecticut Bank parcluded that Manhattan Bank's branch locations provided ticipates in the Connecticut Works Guarantee Fund (a reasonable access to most segments of its delineated program to create and maintain jobs in Connecticut community, and noted with approval Chase's efforts through the use of loan guarantees from the state), and through the use of mobile banking units to provide the Urbank Fund (a lending program specifically debanking services to underserved areas. Moreover, nine of signed to assist small businesses).26 In addition, CCDC Manhattan Bank's 14 Bronx branches and mobile bank- provided $1 million to a program sponsored by the CDA ing units are located in low- to moderate-income census to provide direct financing and investment to Connectitracts, while 11 of the bank's 48 Manhattan branches are cut businesses that are unable to obtain traditional filocated in low- to moderate-income census tracts. Man- nancing. Connecticut Bank also is a founding member of hattan Bank also has expanded its locations of ATMs to the Connecticut Economic Development Fund, which serve low- and moderate-income and minority neighbor- focuses on inner city lending.27 hoods. For example, the bank will establish an ATM in East Harlem during the first quarter of 1995. Manhattan Bank has established, in conjunction with the Veterans Administration, the Homeless Veterans Program under which the bank provides for the direct deposit of benefit 26. As of the Connecticut Bank Examination in 1993, Connecticut checks and allows for access through bank ATMs. Bank had originated five SBA loans totalling $1.6 million, three Connecticut Works loans totalling $3.9 million, and nine Urbank loans The Manhattan Bank Examination also noted that totalling over $900,000. branch office closings have had no adverse impact on 27. In addition, the bank's Small Business Sales Group conducted regional small business meetings, primarily in the urban centers of Chase's communities. OCC examiners concluded that Bridgeport, Norwalk, Stamford, Waterbury, and Danbury. These meetthe branch closing policy was consistent with current ings resulted in the development and introduction of two small business Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 473 OCC examiners concluded that the bank's outreach 1993 HMDA data also indicate that Chase has imand marketing efforts inform its entire community of the proved its record of lending to low- to moderate-income credit products and services being offered. Products and and minority areas in Upstate New York. For example, services are marketed through various newspaper, radio, these data indicate an increase in the number of applicadirect mail, and billboard advertisements. In addition, tions received from residents of low- to moderate- Connecticut Bank's mortgage loan department conducts income census tracts, as well as an increase in the homebuyer workshops in various communities to make number of mortgages originated in these census tracts.31 consumers aware of government programs available to These data also indicate an increase in the number of assist in the purchase of a home. The Connecticut Bank loan applications received from minorities. Examination also concluded that the bank's office loca- Similarly, 1993 HMDA data indicate improvement in tions were reasonably accessible to the entire commu- the record of Chase's lending in the communities its nity, with 17 of its 51 branches located in low- and subsidiaries serve in Connecticut, particularly with remoderate-income communities. gard to home purchase and home improvement lending. For example, 1993 HMDA data indicate that Chase E. HMDA Data significantly increased the number of home purchase and home improvement loans it received from low- and The Board has carefully reviewed 1992 and 1993 moderate-income areas in Connecticut. HMDA data reported by Manhattan Bank, Connecticut However, HMDA data for Chase and its mortgage Bank, and the relevant mortgage subsidiaries in light of subsidiaries in its delineated communities also indicate Protestant's comments.28 These data generally indicate some disparities in the rate of loan origination, denials, that Chase has improved its record of home mortgage and applications by racial group and income levels. The lending to low- and moderate-income and minority Board is concerned when an institution's record indineighborhoods throughout the communities served by cates disparities in lending to minority applicants and these subsidiaries. For example, 1993 HMDA data re- believes that all banks are obligated to ensure that their ported by Chase subsidiaries serving Upper Manhattan lending practices are based on criteria that assure not and the South Bronx indicate an increase in the number only safe and sound lending, but also assure equal access of applications received from residents of low- to to credit by creditworthy applicants regardless of race. moderate-income census tracts, as well as an increase in The Board recognizes, however, that HMDA data alone the number of mortgages originated in these census provide an incomplete measure of an institution's lendtracts. Chase also has shown improvement in its record ing in its community, and have limitations that make the of lending to communities with predominately minority data an inadequate basis, absent other information, for populations.29 In particular, 1993 HMDA data indicate concluding that an institution has engaged in illegal an increase in the number of loan applications received discrimination in making lending decisions. from, and loans extended to, African Americans and The Board notes that in the most recent CRA perfor- Hispanics in Upper Manhattan and the South Bronx. mance examinations for Manhattan Bank and Connecti- Preliminary 1994 HMDA data submitted by Chase cut Bank, OCC examiners found no evidence of prohibshows continued improvement in these lending trends in ited discrimination or other illegal credit practices.32 The low- to moderate-income and minority neighborhoods in examination also found no evidence of practices in- Upper Manhattan and the South Bronx.30 tended to discourage applications for the types of credit listed in the banks' CRA statements. Chase has also initiated steps that have resulted in increasing the number of applications received and loans made to low- and moderate-income and minority borproducts, the Small Business Installment Loan and the Small Business Line of Credit. rowers. These efforts include a second review program 28. The 1993 HMDA data does not include data reported by Troy & for all mortgage denials for borrowers with household Nichols, which was acquired by Chase in July 1993. TTie Board has also incomes of less than $55,000 to ensure that standards are reviewed preliminary 1994 HMDA for the New York City Metropolitan Statistical Area ("MSA"), which confirms that applications from and applied fairly and uniformly to these applicants. Chase lending to minorities have continued to increase, and that these levels exceed the aggregate for all HMDA reporting lenders in the New York City MSA. 29. In the New York City MSA, applications received from African 31. Chase's origination rate of 78.2 percent in low- and moderate- Americans increased from 453 in 1992 to 976 in 1993, and originations income census tracts in Upstate New York exceeded the origination rate increased from 295 to 635 during this period. of aggregate lenders in these communities (66.4 percent) during 1993. 30. For example, of the applications Chase received from the South 32. The Manhattan Bank Examination noted some procedural defi- Bronx in 1994, 47 percent were submitted by African-American appli- ciencies in compliance with the ECOA and the Fair Credit Reporting cants and 44 percent by Hispanic applicants. Notably, Chase's denial Act that did not indicate discrimination or illegal credit practices. The rate for all applications received from the South Bronx in 1994 dropped OCC has concluded that these issues have been satisfactorily addressed to 10.1 percent. by the bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

474 Federal Reserve Bulletin • May 1995 also has implemented a regular analysis of HMDA data case, the Board has not received such a recommendation to review declination rates and a comparative mortgage from any state or federal supervisory authority. loan file review as part of its mortgage lending activities. Generally, under the Board's rules, the Board may, in Special advertising programs have also been initiated to its discretion, hold a public hearing or meeting on an concentrate on minority borrowers in certain geographi- application to clarify factual issues related to the applicacal areas. The effectiveness of these steps is monitored tion and to provide an opportunity for testimony, if through review procedures and a "mystery shopper" appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The program. Board has carefully considered this request in light of all the facts of record. In the Board's view, Protestant has Conclusion Regarding Convenience and Needs had ample opportunity to submit its views, and has in Considerations fact submitted hundreds of pages of materials before, during and after the close of the public comment period The Board has carefully considered all the facts of that have been considered by the Board in acting on this record, including all comments received, in reviewing application. Protestant's request fails to demonstrate why the convenience and needs factors under the BHC Act. its substantial written submissions do not adequately Based on a review of the entire record of performance, present its allegations, what additional evidence it would including information provided by the OCC and relevant produce at an oral hearing, or why a public hearing or reports of examination, the Board believes that the ef- meeting is otherwise warranted in this case.35 Moreover, forts of Chase and its subsidiaries to help meet the credit after a careful review of all the facts of record, the Board needs of all segments of its communities, including low- concludes that Protestant's request disputes the weight and moderate-income neighborhoods, is consistent with that should be accorded to, and the conclusions that may approval of this application.33 be drawn from, the existing facts of record, and does not identify any genuine dispute about facts that are material Request for a Hearing to the Board's decision. Based on all the facts of record, the Board has determined that a public meeting or hear- Protestant has requested that the Board hold a public hear- ing is not necessary to clarify the factual record in this ing or meeting in connection with this application. Protes- application, or otherwise warranted in this case, and the tant supports this request by alleging that facts are in request for a public hearing or meeting on this applicadispute relating to a number of issues.34 Section 3(b) of the tion is denied. BHC Act does not require the Board to hold a public Based on the foregoing and in light of all the facts of hearing on an application unless the appropriate supervi- record, the Board has determined that this application sory authority for the bank to be acquired makes a timely should be, and hereby is, approved. The Board's apwritten recommendation of denial of the application. In this proval is conditioned upon compliance by Chase with all commitments made in connection with the application. The commitments and conditions relied on by the Board 33. The Board also has received comments from the Broome County in reaching this decision are deemed to be conditions CRA Coalition asserting generally that Chase has illegally discrimi- imposed in writing by the Board in connection with its nated against low- to moderate-income and minority residents of findings and decision, and as such may be enforced in Broome County, New York, and objecting to this proposal while discussions between the Coalition and Chase are pending. The Board notes proceedings under applicable law. that 1993 HMDA data indicate an increase in the number of mortgages This acquisition should not be consummated before the originated in low- to moderate-income census tracts in Broome County. Moreover, for the reasons discussed above and in light of all the facts of fifteenth calendar day following the effective date of this record, the Board does not believe that the record supports this com- order, or later than three months following the effective date menter's allegations of illegal discrimination in Broome County, and of this order, unless such period is extended for good cause that Chase's record of helping to meet the credit needs of all its delineated communities is consistent with approval. The Board has also by the Board or by the Federal Reserve Bank of New York, previously stated that while communication by depository institutions acting pursuant to delegated authority. with community groups provides a valuable method of assessing and determining how best to address the credit needs of the community, By order of the Board of Governors, effective neither the CRA nor the Agency Policy Statement require depository March 13,1995. institutions to enter into agreements with particular organizations. Accordingly, the Board's review has focused on the programs and policies that Chase has in place to serve the credit needs of its entire community. See Fifth Third Bancorp, 80 Federal Reserve Bulletin 838 (1994). 34. Protestant also argues that factual disputes have been created by 35. Although Protestant alleges that at a hearing it would seek to Chase's failure to provide clarifications of its responses as requested by dispute certain facts or record, Protestant does not identify what evi- Protestant, certain data relating to its small business and consumer dence it would present for that purpose. The Board's rules expressly lending activities, and other information requested from Chase by require that a party requesting a hearing summarize the evidence that Protestant. For the reasons stated above, and in light of all the facts of would be presented. 12 C.F.R. 262.3(e). Consequently, Protestant has record, the Board concludes that the record before the Board is suffi- not provided sufficient information for the Board to determine that a cient to act on this application. hearing would serve any useful purpose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 475 Voting for this action: Vice Chairman Blinder and Governors The Board has previously determined, in an application LaWare, Lindsey, Phillips, and Yellen. Absent and not voting: under the International Banking Act (12 U.S.C. § 3101 Chairman Greenspan and Governor Kelley. et seq.) (the "IBA"), that another Korean credit institution was subject to comprehensive consolidated supervi- JENNIFER J. JOHNSON sion by its home country authorities.6 Cho Hung has Deputy Secretary of the Board represented to the Board that it is subject to the same regulatory scheme applicable to the other Korean credit Cho Hung Bank institution, and has furnished information regarding the Seoul, Korea authorities' ability to supervise and regulate the activities of Cho Hung on a worldwide consolidated basis.7 Order Approving the Acquisition of a Bank The Board has reviewed this information, as well as the information previously received as it may apply to Cho Cho Hung Bank, Seoul, Korea ("Cho Hung"), a bank Hung. holding company within the meaning of the Bank Hold- Based on all the facts of record, including the informaing Company Act ("BHC Act"), has applied under tion described above, the Board has concluded that Cho section 3 of the BHC Act (12 U.S.C. § 1842) to acquire Hung is subject to comprehensive supervision and regu- Seoul Bank of California, Los Angeles, California lation on a consolidated basis by its home country super- ("Bank"). visor. Notice of the application, affording interested persons In addition, Cho Hung has committed that, to the an opportunity to submit comments, has been published extent not prohibited by applicable law, it will make (59 Federal Register 56,080 (1994)). The time for filing available to the Board such information on the operacomments has expired, and the Board has considered the tions of Cho Hung and any of its affiliates that the Board application and all comments received in light of the deems necessary to determine and enforce compliance factors set forth in section 3 of the BHC Act. with the BHC Act, the IBA, and other applicable federal Cho Hung, with total consolidated assets equivalent to law. Cho Hung also has committed to cooperate with the approximately $35.1 billion, is the 153d largest commer- Board to obtain any waivers or exemptions that may be cial banking organization in the world, and the fourth necessary in order to enable Cho Hung to make any such largest banking organization in Korea.1 In the United information available to the Board. In light of these States, Cho Hung controls a bank in New York, New commitments and other facts of record,8 the Board has York;2 operates branches in New York, New York and concluded that Cho Hung has provided adequate assur- Chicago, Illinois; and maintains an agency in San Franances of access to any appropriate information the Board cisco, California. Bank controls $21.3 million in deposmay request. For these reasons, and based on all the facts its, representing less than 1 percent of total deposits in of record, the Board concludes that the supervisory commercial banks in the state.3 Cho Hung and Bank do factors the Board is required to consider under section 3 not compete in any relevant banking market. Accordof the BHC Act are consistent with approval. ingly, the Board concludes that consummation of this proposal would not have a significantly adverse effect on The Board also has concluded that considerations competition or the concentration of banking resources in relating to the financial and managerial resources and any relevant banking market. future prospects of Cho Hung and its subsidiaries and Bank and the convenience and needs of the community Under section 3 of the BHC Act, as amended by the Foreign Bank Supervision Enhancement Act of 1991,4 the Board may not approve an application involving a manner that its home country supervisor receives sufficient information foreign bank unless the bank is "subject to comprehenon the worldwide operations of the foreign bank, including the relationsive supervision or regulation on a consolidated basis by ship of the bank to its affiliates, to assess the foreign bank's overall the appropriate authorities in the bank's home country."5 financial condition and compliance with law and regulation. 12 C.F.R. 211.24(c)(l)(ii). 6. See KorAm Bank, 80 Federal Reserve Bulletin 184 (1994) ("KorAm"). 7. The activities of Cho Hung's leasing subsidiary, Cho Hung Leas- 1. Asset and ranking data are as of December 31, 1993, and employ ing Co., Ltd. ("CH Leasing"), are regulated by the Korean Ministry of exchange rates then in effect. Finance and Economy ("MFE"). The activities of Cho Hung's securi- 2. Cho Hung's subsidiary bank is Cho Hung Bank of New York. ties subsidiary, Cho Hung Securities Co., Ltd. ("CH Securities"), are 3. Deposit data are as of December 31, 1994. subject to supervision by the Korean Securities Supervisory Board 4. Pub. L. No. 102-242, § 201 et seq., 105 Stat. 2286 (1991). ("SSB"), which is a subordinate agency of the MFE. The MFE and the 5. 12 U.S.C. § 1842(c)(3)(B). As provided in the Board's Regulation SSB supply information as needed to other regulators, such as the Office Y, the Board determines whether a foreign bank is subject to consoli- of Bank Supervision of the Bank of Korea, Cho Hung's primary dated home country supervision under the standards set forth in Regula- supervisor. tion K. 12 C.F.R. 225.13(b)(5). Regulation K provides that a foreign 8. In this regard, the Board notes that it previously has reviewed bank may be considered subject to consolidated supervision if the relevant provisions of Korean confidentiality, secrecy, and other laws. Board determines that the bank is supervised or regulated in such a See KorAm. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

476 Federal Reserve Bulletin • May 1995 to be served are consistent with approval of this pro- in California, controlling deposits of $1.4 billion, repreposal.9 senting less than 1 percent of the total deposits in com- Based on the foregoing and all the other facts of mercial banking organizations in the state.1 University record, the Board has determined that this application Bank is the 42d largest commercial banking organization should be, and hereby is, approved. The Board's ap- in California, controlling deposits of $383.4 million, proval of this proposal is expressly conditioned upon representing less than 1 percent of total deposits in Cho Hung's compliance with all the commitments made commercial banking organizations in the state. Upon in connection with this application, and with the condi- consummation of this proposal, Comerica would betions in this order. For purposes of this action, these come the 11th largest commercial banking organization commitments and conditions are deemed to be condi- in California, controlling deposits of $1.9 billion, repretions imposed in writing by the Board in connection with senting less than 1 percent of total deposits in commerits findings and decision, and, as such, may be enforced cial banking organizations in the state. in proceedings under applicable law. Comerica and University Bank own depository institu- This transaction shall not be consummated before the tions that compete directly in the San Francisco, Califorfifteenth calendar day following the effective date of this nia, banking market ("San Francisco banking market").2 order, or later than three months after the effective date Comerica is the 14th largest banking or thrift organizaof this order, unless such period is extended for good tion ("depository institution") in this market, controlling cause by the Board or by the Federal Reserve Bank of deposits of $995.1 million, representing approximately New York, acting pursuant to delegated authority. 1.2 percent of total deposits in depository institutions in By order of the Board of Governors, effective the market ("market deposits").3 University Bank is the March 1, 1995. 30th largest depository institution in the market, controlling deposits of $352 million, representing less than Voting for this action: Chairman Greenspan, Vice Chairman 1 percent of market deposits. Upon consummation of Blinder, and Governors Kelley, LaWare, Lindsey, and Phillips. this proposal, Comerica would become the 13th largest Absent and not voting: Governor Yellen. depository institution in the San Francisco banking market, controlling deposits of $1.3 billion, representing JENNIFER J. JOHNSON approximately 1.6 percent of the market deposits. The Deputy Secretary of the Board Herfindahl-Hirschman Index ("HHI") would increase by 1 point to 1501 and 115 banking competitors would Comerica Incorporated remain in the market.4 Detroit, Michigan Order Approving the Acquisition of a Bank 1. Asset and state deposit data are as of June 30, 1994. Comerica Incorporated, Detroit, Michigan, and Com- 2. The San Francisco banking market consists of the San Franciscoerica California Incorporated, San Jose, California (col- Oakland Ranally Metropolitan Area. The Board has considered comlectively, "Comerica"), bank holding companies within ments from an individual ("New York Protestant") alleging that this proposal would have anti-competitive effects on banking services in the meaning of the Bank Holding Company Act ("BHC California and suggesting that entry into the market through branches Act"), have applied under section 3 of the BHC Act would be more procompetitive. 3. Market data are as of June 30, 1993. Market share data are based (12 U.S.C. § 1842) to acquire all the voting shares of on calculations in which the deposits of thrift institutions are included at University Bank & Trust Company, Palo Alto, Califor- 50 percent. The Board previously has indicated that thrift institutions nia ("University Bank"). have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Re- Notice of the application, affording interested persons serve Bulletin 386 (1989); National City Corporation, 70 Federal an opportunity to submit comments, has been published Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50 percent (59 Federal Register 62,731 (1994)). The time for filing weighted basis. See, e.g., First Hawaiian Inc., 77 Federal Reserve comments has expired and the Board has considered the Bulletin 52 (1991). application and all comments received in light of the 4. Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the postfactors set forth in section 3 of the BHC Act. merger HHI is between 1000 and 1800 is considered moderately con- Comerica, with total consolidated assets of $31.9 bil- centrated. A market in which the post-merger HHI is above 1800 is lion, is the 13th largest commercial banking organization considered to be highly concentrated. In such markets, the Justice Department is likely to challenge a merger that increases the HHI by more than 50 points. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless 9. The Board notes that Cho Hung's capital is in excess of the the post-merger HHI is at least 1800 and the merger increases the HHI minimum levels that would be required under the Basle accord, and is by more than 200 points. The Justice Department has stated that the considered equivalent to the capital that would be required of a U.S. higher than normal threshold for an increase in the HHI when screening bank holding company. bank mergers and acquisitions for anticompetitive effects implicitly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 74 Based on all the facts of record, including the number The Board has carefully reviewed the CRA perforof competitors that would remain in the San Francisco mance records of Comerica and its subsidiary depository banking market, and the relatively small increase in the institutions as well as University Bank, all comments market concentration and market share, the Board has received regarding these applications, Comerica's reconcluded that consummation of Comerica's proposal sponses to those comments, and all other relevant facts would not result in any significantly adverse effects on of record in light of the CRA, the Board's regulations, competition in the San Francisco banking market or any and the Statement of the Federal Financial Supervisory other relevant banking market. Agencies Regarding the Community Reinvestment Act ("Agency CRA Statement").7 Convenience and Needs Considerations Record of Performance Under the CRA In acting on an application to acquire a depository institution under the BHC Act, the Board must consider the A. CRA Performance Examinations convenience and needs of the communities to be served and take into account the records of the relevant deposi- The Agency CRA Statement provides that a CRA examtory institutions under the Community Reinvestment Act ination is an important and often controlling factor in the (12 U.S.C § 2901 et seq.) ("CRA"). The CRA requires consideration of an institution's CRA record and that the federal financial supervisory agencies to encourage reports of these examinations will be given great weight financial institutions to help meet the credit needs of the in the applications process.8 The Board notes that local communities in which they operate, consistent with Comerica-Detroit received a "satisfactory" rating from their safe and sound operation. To accomplish this end, the Federal Reserve Bank of Chicago ("Reserve Bank") the CRA requires the appropriate federal supervisory at its most recent examination for CRA performance in authority to "assess the institution's record of meeting March 1993 ("1993 Detroit Examination") and the credit needs of its entire community, including low- Comerica-Illinois received a "satisfactory" rating from and moderate-income neighborhoods, consistent with the Reserve Bank at its most recent examination for the safe and sound operation of such institution," and to CRA performance in March 1994 ("1994 Illinois Examtake that record into account in its evaluation of bank ination"). Comerica Bank - California, San Jose, Caliexpansion proposals.5 fornia ("Comerica-California"), received a "satisfacto- In connection with this application, the Board has ry" rating from the Federal Deposit Insurance received comments from an organization in San Jose, Corporation ("FDIC") in January 1993 ("1993 Califor- California ("California Protestant"), criticizing the lend- nia Examination"). Comerica's remaining four subsiding record of Comerica's subsidiary banks, in Detroit, iary banks and savings associations received either "out- Michigan (Comerica - Detroit, Detroit, Michigan, standing" or "satisfactory" ratings from their primary "Comerica-Detroit"), and Chicago, Illinois (Comerica - federal supervisors in the most recent examinations of Franklin Park, Franklin Park, Illinois, "Comerica- their CRA performance.9 University Bank received a Illinois"), in meeting the housing- related credit needs of "satisfactory" performance rating from the Federal Re- African Americans and Hispanics. In particular, Califor- serve Bank of San Francisco as of April 1994. nia Protestant maintains that data filed under the Home Mortgage Disclosure Act ("HMDA") for 1993 show that denial rates for African-American and Hispanic borrowers at these banks are higher than denial rates for white borrowers.6 California Protestant argues that the 7. 54 Federal Register 13,742 (1989). 8. Id. at 13,745. alleged deficiencies in the records of Comerica-Detroit 9. New York Protestant has questioned the CRA performance record and Comerica-Illinois indicate that Comerica will not for Comerica Bank - Midwest NA, Toledo, Ohio ("Comerica-Ohio"), assist in meeting the credit needs of underserved African because Protestant was unable to obtain financing to redevelop a warehouse as an industrial "incubator." The Board notes that Comerica- Americans and Hispanics in San Jose for housing-related Ohio received a "satisfactory" rating from the Office of the Comptroller credit. of the Currency ("OCC"), its primary federal supervisor, in its most recent CRA performance examination as of November 1993 ("1993 Ohio Examination"). Comerica-Ohio is recognized by the OCC as a limited service banking institution engaged primarily in offering credit recognizes the competitive effect of limited-purpose lenders and other cards and other revolving consumer credit products. The OCC noted in non-depository financial entities. the 1993 Ohio Examination that in offering these products, Comerica- 5. 12 U.S.C. § 2903. Ohio eliminated minimum income level requirements for all products in 6. California Protestant also contends that disparities exist between order to increase the availability of credit. Based on these and other facts of record, the Board believes that the CRA record of performance the percentage of home purchase loan applications from and originaof Comerica-Ohio is consistent with approval of this application. This tions to African-American and Hispanic borrowers by these banks and complaint has been referred to the OCC, which has authority to investithe percentage of African-American and Hispanic households in Detroit gate and resolve claims of this type. and Chicago. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

478 Federal Reserve Bulletin • May 1995 B. HMDA Data offers a below-market-rate installment loan to cover the borrower's out-of-pocket closing costs. In 1994, CMC The Board has carefully reviewed California Protes- originated 220 MAP loans in Michigan, totalling approxtant's allegations that Comerica-Detroit and Comerica- imately $8 million. MAP was introduced in Illinois in Illinois have not adequately served the African- mid-1994, and 36 MAP loans, totalling approximately American and Hispanic communities in Detroit and $131,346, have been originated to date. In addition, in Chicago. The Board has carefully reviewed 1992 and late 1994, CMC introduced an Acquisition Renovation 1993 HMDA data for Comerica-Detroit and Comerica- Loan Program for nonprofit community organizations Illinois in light of Protestant's concerns. The HMDA that purchase property to renovate and resell or rent to data indicate that conventional home purchase lending low- and moderate-income individuals in Michigan. by Comerica-Detroit and Comerica-Illinois to African- CMC also offers mortgage loans on behalf of the American and Hispanic borrowers and in low- and Federal National Mortgage Association, Government moderate-income neighborhoods is comparable to that National Mortgage Association, and Federal Home Loan of lenders in the aggregate in the Detroit and Chicago Mortgage Corporation. In addition, CMC has established area. However, these data show some disparities in the a separate $10 million loan fund to provide funding for rate of loan originations, denials, and applications by applicants who may not meet regular lending standards. racial group or income level. In addition, CMC offers alternative mortgage underwrit- The Board is concerned when the record of an institu- ing criteria that give creditworthy low-income individution indicates disparities in lending to minority appli- als improved access to conventional mortgage products. cants and it believes that all banks are obligated to CMC adjusts standard underwriting criteria by broadenensure that their lending practices are based on criteria ing debt-to-income ratios, consideration of alternative that assure not only safe and sound lending, but also credit histories, and down payment sources. assure equal access to credit by creditworthy applicants Detroit. Comerica-Detroit offers several other lending regardless of race. The Board recognizes, however, that programs focusing on its low- and moderate-income HMDA data alone provide an incomplete measure of an communities and provides technical assistance to neighinstitution's lending in its community. The Board also borhood and community organizations that are commitrecognizes that HMDA data have limitations that make ted to improving their communities. Comerica-Detroit the data an inadequate basis, absent other information, participates in governmentally insured and guaranteed for concluding that an institution has engaged in illegal loan programs to further improve its lending to minoridiscrimination in lending. ties and low- and moderate-income communities. In particular, the 1993 Detroit Examination noted that the The 1994 Illinois Examination found that Comericabank participated in Veteran's Administration ("VA") Illinois is in compliance with the substantive proviand Federal Housing Administration ("FHA") lending sions of fair lending laws. Examiners also found no programs, and had approximately $81 million in outevidence of prohibited discriminatory credit practices. standing loans under these programs. Examiners also Moreover, the examination found that the delineation found that the bank had over $2.7 million outstanding in does not exclude any low- and moderate-income Small Business Administration ("SBA") loans. In 1994, neighborhoods that the bank could reasonably be ex- Comerica-Detroit originated 341 FHA Mortgage and pected to serve. The 1993 Detroit Examination also Home Improvement loans, totalling approximately found that Comerica-Detroit's delineation of its local $16.7 million, 117 VA Mortgage loans, totalling approxcommunities was reasonable and did not exclude lowimately $7.8 million, and 44 SBA loans, totalling apto moderate-income areas and that the bank annually proximately $29.6 million. reviews it's delineations. Comerica-Detroit established the Comerica Community Development Corporation ("CCDC") in the third quarter of 1993 to further enhance community develop- C. Record of Lending Activities ment activities for low- and moderate-income individu- Housing-Related Lending. Comerica engages in residen- als in Michigan. CCDC has provided financing for tial mortgage lending in Michigan and Illinois through 14 development projects through several community its subsidiary, Comerica Mortgage Corporation, Detroit, organizations, totalling approximately $3.6 million in Michigan ("CMC"). CMC has developed several pro- 1993 and 1994. In addition, Comerica-Detroit has programs to serve low- and moderate-income home buyers. vided approximately $87.3 million in financing to new For example, CMC established the Mortgage Affordabil- businesses, neighborhood and nonprofit organizations, ity Program ("MAP") in November 1993. Under this and community development organizations, such as program, qualified low- and moderate-income borrowers Northwest Detroit Neighborhood Development, Inc., may obtain a 30-year, zero-point mortgage product that West Detroit Inter-Faith Community Organization, and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 479 HOP, a lending consortium that funds affordable home Comerica-California is also active in small business purchases in Kalamazoo, Michigan.10 lending. The 1993 California Examination noted that the Illinois. Comerica-Illinois also has several lending bank has made small business loans in the San Jose programs to provide assistance to low- and moderate- Enterprise Zone, an area designed by the California income borrowers. Through its Installment Loan Depart- Department of Commerce as a depressed area. In addiment, the bank can advance 100 percent of home equity tion, examiners noted that the bank funded over to creditworthy applicants for home improvement loans, $63 million in SBA loans and loaned approximately while the standard credit policy allows a maximum $53 million to low- and moderate-income and minority advance of 80 percent. Comerica-Illinois also partici- businessman in 1992. pates in the Chicago Family Housing Fund ("Fund"), a partnership with Neighborhood Housing Services of Chi- D. Conclusion Regarding Convenience and Needs cago, Inc. and others, to provide financial and leadership Factors assistance to local housing and economic development projects. In the last quarter of 1993, the Fund originated The Board has carefully considered the entire record, 28 loans, totalling approximately $1.4 million, in priincluding the comments filed in this case, in reviewing mary and secondary mortgages. In 1994, a total of the convenience and needs factors under the BHC 32 first mortgages and 60 refinancings, totalling Act. Based on a review of the entire record of perfor- $3.2 million, were originated through the Fund. In addimance, including information provided by Protestants tion, Comerica-Illinois participates in several governand Comerica, and the CRA performance examinamentally insured, guaranteed or subsidized loan protions and other information from the bank's primary grams that benefit the community, including FHA and regulators, the Board believes that the efforts of Com- SBA lending. In 1994, the bank originated four FHA erica to help meet the credit needs of all segments of loans, totalling approximately $496,473, and 12 SBA the communities served by its subsidiary banks, inloans, totalling approximately $2.3 million. cluding low- and moderate-income neighborhoods, Comerica-Illinois also is active in community develare consistent with approval. For these reasons, and opment lending. For example, the bank has funded ten based on all the facts of record, the Board concludes loans, totalling $84,500, to the Chicago Association of that convenience and needs considerations, including Neighborhood Development Organizations Self Employthe CRA performance records of the companies and ment Loan Fund, which provides technical assistance banks involved in these proposals, are consistent with and loan packaging for entrepreneurs. Comerica-Illinois approval of these applications. also has issued a credit for approximately $289,675 to Neighborhood Housing Services' Redevelopment Corporation for the rehabilitation of five properties for a Other Considerations lease-to-purchase program. Moreover, in August 1994, CCDC expanded into Illinois, and has funded one project in the amount of $94,500. The Board also has concluded that the financial and California. Comerica-California is primarily a whole- managerial resources and future prospects of Comerica, sale lender and does not make a large number of its subsidiaries, and University Bank, and other supervihousing-related loans directly. However, examiners sory factors the Board must consider under section 3 of noted in the 1993 California Examination that the bank the BHC Act, are consistent with approval of this proassists in meeting the housing-related credit needs of posal. low- and moderate-income and minority borrowers by Based on the foregoing, including the commitments concentrating on lending to mortgage bankers and devel- made to the Board by Comerica in connection with this opers that specialize in low- income housing and com- application, and in light of all the facts of record, the munity rehabilitation loans. For example, from 1993 Board has determined that this application should be, through the third quarter of 1994, the bank loaned ap- and hereby is, approved. The Board's approval is specifproximately $145 million to mortgage bankers to finance ically conditioned on Comerica's compliance with all VA, FHA, and California Housing Finance Authority commitments made in connection with this application. Government Housing Agency Bond loans. The commitments and conditions relied on by the Board in reaching this decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in 10. New York Protestant asserts that Comerica-Detroit's service fees proceedings under applicable law. are excessive. Comerica responds that its service fees are competitive This transaction shall not be consummated less than with other major financial institutions and are fully disclosed to the bank's customers. fifteen calendar days following the effective date of this Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

480 Federal Reserve Bulletin • May 1995 order, or later than three months after the effective date IFS and AFC compete directly in the Chicago, Illiof this order, unless such period is extended for good nois, banking market.2 After consummation of this procause by the Board or by the Federal Reserve Bank of posal, this banking market would remain unconcentrated Chicago, acting pursuant to delegated authority. as measured by the Herfindahl-Hirschman Index By order of the Board of Governors, effective ("HHI"),3 and numerous competitors would remain in March 1, 1995. the market. Based on all the facts of record, the Board concludes that consummation of this proposal is not likely to result in significantly adverse effects on compe- Voting for this action: Chairman Greenspan, Vice Chairman tition or the concentration of banking resources in the Blinder, and Governors Kelley, LaWare, Lindsey, and Phillips. Chicago banking market or any other relevant banking Absent and not voting: Governor Yellen. market. JENNIFER J. JOHNSON Convenience and Needs Considerations Deputy Secretary of the Board In acting on applications to acquire a depository institu- Illinois Financial Services, Inc. tion, the Board must consider the convenience and needs Chicago, Illinois of the communities to be served, and take into account the records of the relevant depository institutions under Alpha Bancorp, the Community Reinvestment Act (12 U.S.C. § 2901 Chicago, Illinois et seq.) ("CRA"). The CRA requires the federal financial supervisory agencies to encourage financial institu- Order Approving the Formation and Acquisition of a tions to help meet the credit needs of the local communi- Bank Holding Company ties in which they operate, consistent with their safe and sound operation. To accomplish this end, the CRA re- Illinois Financial Services, Inc. ("IFS"), has applied quires the appropriate federal supervisory authority to under section 3 of the Bank Holding Company Act "assess the institution's record of meeting the credit ("BHC Act") (12 U.S.C. § 1842(a)) to acquire indirectly needs of its entire community, including low- and 80 percent of Alpha Financial Corporation ("AFC"), moderate-income neighborhoods, consistent with the and thereby indirectly acquire AFC's subsidiary banks, safe and sound operation of such institutions," and to Archer National Bank ("ANB") and Chicago National take that record into account in its evaluation of these Bank ("CNB"), all of Chicago, Illinois. To effect this applications.4 proposal, IFS has also applied to form a new intermedi- The Board has reviewed comments submitted by an ary holding company, Alpha Bancorp, Chicago, Illinois, individual ("Protestant") generally alleging that the suband to acquire at least 80 percent of its shares. sidiary banks of IFS and AFC have not adequately met Notice of the applications, affording interested persons the credit and banking services needs of Africanan opportunity to submit comments, has been published American communities. In addition, Protestant contends (59 Federal Register 65,056 (1995)). The time for filing that data filed by IFS's subsidiary banks under the Home comments has expired, and the Board has considered Mortgage Disclosure Act (12 U.S.C. § 2801 et seq.) these applications and all comments received in light of ("HMDA") in 1994 show that these banks illegally the factors set forth in section 3(c) of the BHC Act. discriminate against minorities in making housing- IFS is the 62d largest commercial banking organization in Illinois, controlling deposits of $331.8 million, representing less than 1 percent of total deposits in commercial banks in the state.1 AFC is the 109th largest 2. The Chicago banking market is approximated by Cook, Du Page, and Lake Counties in Illinois. commercial banking organization in Illinois, controlling 3. Under the revised Department of Justice Merger Guidelines, 49 approximately $176.7 million in deposits, representing Federal Register 26,823 (June 29, 1984), a market in which the postless than 1 percent of total deposits in commercial banks merger HHI is less than 1000 is considered to be unconcentrated. In such markets, the Justice Department is unlikely to challenge a merger. in the state. Upon consummation of the proposal, IFS The Justice Department has informed the Board that a bank merger or would become the 40th largest commercial banking acquisition generally will not be challenged (in the absence of other organization in Illinois, controlling approximately factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. $508.5 million in deposits, representing less than 1 per- The Justice Department has stated that the higher than normal HHI cent of total deposits in commercial banks in the state. thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non-depository financial entities. In this case, the post-merger HHI for the Chicago market would remain at 594 points and increase by 1. Deposit and state data are as of June 30, 1994, and market data are less than one point. as of June 30, 1993. 4. 12 U.S.C. § 2903. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 481 related loans. Protestant also maintains that other aspects that HMDA data alone provide an incomplete measure of the CRA performance record of IFS's subsidiary of an institution's lending in its community, and that bank, North Community Bank, Chicago, Illinois ("Com- these data have limitations that make the data an inademunity Bank"), including the bank's ascertainment and quate basis, absent other information, for conclusively marketing efforts, do not adequately serve the credit determining whether an institution has engaged in illegal needs of African-American communities. discrimination in making lending decisions. The Board has carefully reviewed the CRA perfor- The most recent CRA performance examinations of mance records of the subsidiary banks of IFS and AFC, all IFS banks by their primary regulator, the FDIC, all comments received on these applications, the re- concluded that the institutions were in compliance with sponses from IFS to these comments, and all other the substantive provisions of the fair housing and fair relevant facts of record in light of the CRA, the Board's lending laws, and found no illegal discriminatory pracregulations and the Statement of the Federal Financial tices.7 Examiners also found no practices intended to Supervisory Agencies Regarding the Community Rein- discourage credit applications.8 vestment Act ("Agency CRA Statement").5 IFS banks assist in meeting the housing-related credit needs of its communities primarily through construction Record of Performance Under the CRA and rehabilitation projects. For example, Community Bank, with total assets of $134.2 million, extended seven A. Evaluation of CRA Performance loans for multi-family housing totalling $1.2 million, and 24 loans for the rehabilitation of buildings for non- The Agency CRA Statement provides that a CRA exam- profit and business organizations totalling $9.2 million ination is an important and often controlling factor in the in 1994.9 In addition, all IFS banks participate in lending consideration of an institution's CRA record, and that programs sponsored by the Small Business Administrareports of these examinations will be given great weight tion ("SBA"). In 1994, Community Bank extended six in the applications process.6 Community Bank received SBA loans totalling approximately $1.7 million, while an "outstanding" CRA performance rating from its pri- Metropolitan Bank and Plaza Bank extended SBA loans mary federal supervisor, the Federal Deposit Insurance totalling $974,000 and $2.3 million, respectively. Com- Corporation ("FDIC") as of April 1993. Community munity Bank also assists in financing specialized credit Bank's lending activities are primarily concentrated in needs such as the City of Chicago's Taxi Medallion commercial lending, particularly in loans to small busi- Program which offers financing of up to $100,000 for nesses. IFS's other subsidiary banks, Metropolitan Bank qualified taxicab drivers.10 and Trust Company, Chicago ("Metropolitan Bank"), and Plaza Bank, Norridge ("Plaza Bank"), both of Illinois, also received "satisfactory" CRA performance rat- 7. Examiners noted some procedural violations of fair lending and ings as of September 1993 and October 1992, respec- fair housing statutes. In response to these findings, bank management tively, from the FDIC. AFC's two subsidiary banks, has substantially implemented all its proposed corrective measures to the satisfaction of the FDIC. which are the banks IFS proposes to acquire, both re- 8. Protestant alleges that he was treated unfairly in several loan ceived less than satisfactory CRA performance ratings applications with Community Bank, and that Community Bank requires from their primary federal supervisor, the Office of the excessive documentation to apply for a loan or to open a deposit account. Protestant has also submitted a 1992 petition signed by 700 Comptroller of the Currency, at their most recent CRA residents alleging that Community Bank illegally discriminates in its performance evaluation. lending practices. As noted above, the CRA performance examination of Community Bank found that the bank was in compliance with the substantive provisions of fair lending laws and not engaged in practices B. HMDA and Lending Activities of IFS Banks that discourage credit applications. Based on all the facts of record, the Board believes that these are isolated disputes involving individual transactions between Protestant and the bank. The Board has referred The Board has carefully reviewed the 1993 and 1994 Protestant's allegations to the FDIC for consideration. data filed by IFS's subsidiary banks in light of Protes- 9. In 1994, Metropolitan Bank, with total assets of $119.7 million, also extended seven loans for multi-family housing totalling $3.2 miltant's allegations that these banks, particularly Commulion, and seven loans for the rehabilitation of buildings for nonprofit and nity Bank, illegally discriminate against African Ameri- business organizations totalling $600,000. The 1994 lending record for cans. As noted above, Community Bank is primarily a Plaza Bank, which has assets of $125.4 million, included 13 multifamily housing loans totalling $1.9 million, and 13 loans for the commercial lender and HMDA data show that the num- rehabilitation of buildings for nonprofit and business organizations ber of loan applications and originations for the bank are totalling $4.1 million. 10. In 1994, Community Bank extended 81 medallion loans totalling very small. Moreover, the Board has previously noted approximately $2.3 million under this program. Each bank also provides special deposit products for low- and moderate-income persons. In particular, the banks offer low-cost checking and participate in the Illinois Smart Money Program, which provides free checking for any 5. 54 Federal Register 13,742 (1989). participant of federal or state entitlement programs who receives bene- 6. Id. at 13,742. fits through the Automated Clearing House. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

482 Federal Reserve Bulletin • May 1995 The lending activities of IFS's subsidiary banks assist the facts of record, the Board concludes that IFS has the in meeting the credit needs of their entire communities, types of policies and programs in place at its subsidiary including low- and moderate-income neighborhoods. All banks that can be effective in helping meet the credit IFS banks were found to have a reasonable geographic needs of an entire community, including low- and distribution of loans within their delineated communities moderate-income and minority neighborhoods. Commuat their most recent examinations for CRA performance. nity Bank currently has an "outstanding" CRA perfor- Moreover, in 1993 and 1994, Community Bank made mance rating, and implementation of IFS's plan at the approximately 76 percent and 80 percent, respectively, AFC banks will be directed by Community Bank's manof its loans within its delineated community. For both agement. One goal of the IFS plan is to increase the years, approximately 28 percent of these loans were lending-to-deposit ratios of both banks from their current made in low- and moderate-income census tracts. In the 10 percent levels to 60 percent within five years in order case of Metropolitan Bank, examiners found that most of to help meet the credit needs of the banks' entire delinits loans were made within its delineated community, eated community, including low- and moderate-income and no adverse patterns of distribution relating to low- areas.12 The Board expects IFS to improve the CRA and moderate-income census tracts were noted. The performance records of both AFC banks and will review Plaza Bank examination showed similar results, with a IFS's progress in future applications to establish deposimajority of sampled loans extended to borrowers within tory institutions. In addition, part of IFS's plan to imits delineated community and a reasonable penetration of prove the CRA performance record of the AFC banks all segments within the community. includes increasing the ascertainment efforts of these banks to concentrate on helping meet the credit needs of their entire communities, including minority neighbor- C. Other Aspects of CRA Performance hoods.13 by IFS Banks IFS banks ascertain and market their credit products to E. Conclusion the entire community in several ways. Community Bank uses a questionnaire to survey local organizations to determine the types of banking and credit services The Board has carefully considered all the facts of needed within the community and to determine if those record, including the comments received on all subsidneeds are being met. In addition, the bank relies on a iary banks of IFS and AFC, IFS's responses, the banks' calling program and personal contacts to ascertain credit CRA performance examinations and the commitments needs. Metropolitan Bank uses similar means to elicit referred to in this order. Based on a review of the entire assistance from well-known community leaders in idenrecord, and in reliance on commitments, the Board contifying community credit needs.11 cludes that convenience and needs considerations, in- Products and services are marketed in media designed cluding the CRA records of performance of the IFS to reach minority communities. Community Bank adver- subsidiary banks are consistent with approval of these tises in newspapers such as La Raza and Afrique that applications.14 serve the Hispanic and African-American communities in Chicago. Metropolitan Bank markets its products and services through local newspapers and outdoor signs in 12. The Board notes that the loan-to-deposit ratio of Plaza Bank, English and Spanish. Plaza Bank advertises its products which examiners concluded in 1992 had a satisfactory dispersion of loans throughout its entire community, was increased by IFS from and services through advertisements in newspapers and 40 percent in 1989 to 60 percent in 1991. fliers throughout the delineated community. 13. For example, IFS would implement a local media campaign to advertise depository and lending products and hire bilingual personnel to assist customers. D. CRA Performance Records of AFC Banks 14. Protestant has requested that the Board hold a public meeting or hearing on this application. Section 3(b) of the BHC Act does not require the Board to hold a public hearing or meeting on an application As previously noted, both of AFC's subsidiary banks unless the appropriate supervisory authority for the bank to be acquired received less than satisfactory ratings in their most re- makes a timely written recommendation of denial of the application. No cent examinations for CRA performance. Upon the ac- supervisory agency has recommended denial of the proposal. Generally, under its rules, the Board may, in its discretion, hold a public hearing or quisition of the AFC banks by IFS, IFS has committed to meeting on an application to clarify factual issues related to the applicaimplement policies and programs to improve the CRA tion and to provide an opportunity for testimony, if appropriate. 12 performance records of the acquired banks. In light of all C.F.R. 262.3(e) and 262.25(d). In the Board's view, all parties have had ample opportunity to submit their views, and have, in fact, submitted substantial written submissions that have been carefully considered in connection with the Board's decision. Protestant's request also fails to demonstrate why written submissions are inadequate in this case to 11. Metropolitan Bank also recently initiated a low-cost deposit present his views or resolve the issues raised by his comments as program and a school sponsored bank awareness program. required by the Board's rules. 12 C.F.R. 262.3(e). For these reasons, and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 483 Other Considerations Investors Banking Corporation Salem, Oregon The Board also concludes that financial and managerial resources and future prospects of IFS and Bancorp and Order Approving the Acquisition of a Bank Holding their respective subsidiary banks, and the other supervi- Company sory factors that the Board must consider under section 3 of the BHC Act, are consistent with approval of this Investors Banking Corporation, Salem, Oregon ("Invesproposal. tors Banking"), a bank holding company within the Based on the foregoing and all the facts of record, the meaning of the Bank Holding Company Act ("BHC Board has determined that these applications should be, Act"), has applied under section 3(a)(3) of the BHC Act and hereby are, approved.15 The Board's approval is (12 U.S.C. § 1842(a)(3)) to acquire up to 88 percent of expressly conditioned on IFS's compliance with all the the voting shares of BKLA Bancorp ("BKLA"), and commitments made in connection with this application. thereby indirectly acquire up to 88 percent of the voting The commitments and conditions relied on by the Board shares of Bank of Los Angeles ("Bank"), both of West in reaching this decision shall be deemed to be condi- Hollywood, California. tions imposed in writing by the Board in connection with Notice of the application, affording interested persons its findings and decision, and, as such, may be enforced an opportunity to submit comments, has been published in proceedings under applicable law. (59 Federal Register 43,585 (1994)). The time for filing The acquisition shall not be consummated before the comments has expired, and the Board has considered the fifteenth calendar day following the effective date of this applications and all comments received in light of the order, or later than three months after the effective date factors set forth in section 3(c) of the BHC Act. of this order, unless such period is extended for good Investors Banking, a one-bank holding company, is cause by the Board or by the Federal Reserve Bank of the 25th largest commercial banking organization in Chicago, acting pursuant to delegated authority. Oregon, controlling deposits of approximately $58.8 mil- By order of the Board of Governors, effective lion, representing less than 1 percent of total deposits in March 13, 1995. commercial banking organizations in the state.1 Investors Banking does not currently control any banks in California. BKLA is the 187th largest commercial bank- Voting for this action: Vice Chairman Blinder and Governors ing organization in California, controlling deposits of LaWare, Lindsey, Phillips, and Yellen. Absent and not voting: approximately $79.1 million, representing less than Chairman Greenspan and Governor Kelley. 1 percent of total deposits in commercial banking organizations in the state. JENNIFER J. JOHNSON Investors Banking and BKLA do not compete directly Deputy Secretary of the Board in any banking market. Accordingly, consummation of this proposal would not have a significantly adverse effect on competition or the concentration of banking resources in any relevant banking market. Douglas Amendment Analysis based on all the facts of record, the Board has determined that a public Section 3(d) of the BHC Act, the Douglas Amendment, meeting or hearing is not necessary to clarify the factual record in this application, or otherwise warranted in this case. Accordingly, Protes- prohibits the Board from approving an application by a tant's request for a public hearing or meeting on these applications is bank holding company to acquire control of any bank denied. 15. Protestant and the 1992 petition filed with his comments allege located outside the bank holding company's home state, that IFS and Community Bank discriminate against African Americans unless such acquisition is "specifically authorized by the in their hiring and promotion practices. The Board notes that, because statute laws of the State in which such bank is located, IFS employs more than 50 people, serves as a depository of government funds, and acts as agent in selling or redeeming U.S. savings bonds and by language to that effect and not merely by implicanotes, IFS and its subsidiaries are subject to regulations enforceable by tion."2 For purposes of the Douglas Amendment, the the Department of Labor that require: home state of Investors Banking is Oregon.3 (1) The filing of annual reports with the Equal Employment Opportunity Commission; and (2) A written affirmative action compliance program which states efforts and plans to achieve equal opportunity in the employment, hiring, promotion, and separation of personnel. See 41 C.F.R. 50-1.7(a), 60-1.40. The Board also notes that Protes- 1. State deposit data are as of September 30, 1994. tant's 1989 claim of illegal employment discrimination against Commu- 2. 12 U.S.C. § 1842(d). nity Bank was considered by the Chicago Commission on Human 3. A bank holding company's home state is that state in which the Relations and no action was taken against Community Bank. operations of the bank holding company's banking subsidiaries were Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

484 Federal Reserve Bulletin • May 1995 The California interstate banking law permits out-of- to the convenience and needs and other supervisory state bank holding companies to acquire California factors that the Board must consider under section 3 of banks or bank holding companies, provided that the the BHC Act also are consistent with approval. home state of the acquiring bank holding company per- Based on the foregoing and all the facts of record, the mits the acquisition of banks or bank holding companies Board has determined that the application should be, and in that state on a reciprocal basis.4 Oregon's interstate hereby is, approved. The Board's approval is condibanking law permits out-of-state bank holding compa- tioned on Investors Banking's compliance with all comnies to acquire established Oregon banks or bank hold- mitments made in connection with this application and ing companies, with approval of the Oregon Department on receipt of all required state regulatory approvals. For of Insurance and Finance.5 The California Superinten- purposes of this action, these commitments and condident of Banks has preliminarily indicated that the pro- tions relied on by the Board in reaching its decision are posed acquisition is expressly authorized under Califor- deemed to be conditions imposed in writing by the nia state law. In light of the foregoing, and based on an Board, and, as such, may be enforced in proceedings analysis of the interstate banking statutes involved, the under applicable law. Board has determined that this proposal is not prohibited This transaction shall not be consummated before the by the Douglas Amendment. Approval of this proposal fifteenth calendar day following the effective date of this is conditioned upon Investors Banking receiving all re- order, or later than three months after the effective date quired state regulatory approvals. of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Other Considerations San Francisco, acting pursuant to delegated authority. By order of the Board of Governors, effective In considering the financial and managerial factors in March 6, 1995. this case, the Board has reviewed the financial condition of BKLA and Bank. Under this proposal, Investors Voting for this action: Chairman Greenspan, Vice Chairman Banking would provide substantial new capital to BKLA Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. and Bank, and would restore Bank's capital to the levels required by Bank's federal and state supervisors. The JENNIFER J. JOHNSON Board also notes that Investors Banking has committed Deputy Secretary of the Board to provide managerial resources to BKLA and has an established record of improving the financial condition Irving National Bancshares, Inc., of troubled institutions it acquires. Dallas, Texas In this light, and based on all the facts of record, the Board concludes that the financial and managerial re- Order Approving the Formation of a Bank Holding sources and future prospects of Investors Banking, Company BKLA, and their respective subsidiaries are consistent with approval of this proposal.6 Considerations relating Irving National Bancshares, Inc., Dallas, Texas ("Applicant"), has applied under section 3(a)(1) of the Bank holding Company Act (12 U.S.C. § 1842(a)(1)) ("BHC principally conducted on July 1, 1966, or the date on which the Act") to become a bank holding company by acquiring company became a bank holding company, whichever is later. all the voting shares of Irving National Bank, Irving, 4. See Cal. Fin. Code §§ 3753 and 3756 (West Supp. 1994). Under Texas ("INB"), and First Continental Bank of Grand California law, the California Superintendent of Banks must determine that the Oregon interstate banking statute is substantially reciprocal Prairie, N.A., Grand Prairie, Texas ("FCB"). with California's interstate banking law and that the proposal would not Notice of the application, affording interested persons have an "adverse effect on the public convenience or advantage in California." Id. an opportunity to submit comments, has been published 5. See Or. Rev. Stat. § 715.065(1) (1993). (59 Federal Register 63,805 (1994)). The time for filing 6. In reaching this conclusion, the Board has carefully reviewed a comments has expired, and the Board has considered the settlement between a management official of Investors Banking and its subsidiary bank, Colonial Bank, Grants Pass, Oregon ("Colonial application and all comments received in light of the Bank"), and the Securities and Exchange Commission ("SEC") that factors set forth in section 3(c) of the BHC Act. concluded an SEC enforcement action in connection with alleged insider trading transactions unrelated to this proposal. The Board also Applicant is a non-operating company formed for the has carefully considered information received from Colonial Bank's purpose of acquiring INB and FCB. INB is the 684th primary federal supervisor, the Federal Deposit Insurance Corporation largest commercial banking organization in Texas, con- ("FDIC"), including Colonial Bank's most recent reports of examination assessing its managerial resources, and the FDIC's review of this trolling deposits of approximately $23.5 million, reprematter. The Board notes that the FDIC did not object to this proposal. senting less than 1 percent of total deposits in commer- Based on these and all the facts of record, the Board does not believe that this single incident, which has been addressed through corrective cial banks in the state. FCB is the 739th largest actions, warrants adverse consideration under the BHC Act. commercial banking organization in Texas, controlling Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 485 deposits of approximately $18.8 million, representing and to take that record into account in its evaluation of less than 1 percent of total deposits in commercial banks these applications.4 in the state. Upon consummation of this proposal, Appli- Comments on the application were submitted by an cant would become the 455th largest commercial bank- individual ("Protestant") criticizing the record of INB ing organization in Texas, controlling approximately under the CRA, and alleging that INB does not support $42.3 million in deposits, representing less than 1 per- community development or charitable projects that cent of total deposits in commercial banks in the state.1 would economically revitalize the bank's culturally di- INB and FCB compete directly in the Dallas, Texas, verse community. The Board has carefully reviewed the banking market.2 After consummation of this proposal, entire CRA performance record of INB and FCB, all numerous competitors would remain in the market; the comments received on these applications, Applicant's market would remain moderately concentrated, as mea- response to these comments, and all other relevant facts sured by the Herfindahl-Hirschman Index ("HHI"); and of record, in light of the CRA, the Board's regulations, this proposal would not exceed the Department of Justice and the Statement of the Federal Financial Supervisory merger guidelines.3 Based on all the facts of record, the Agencies Regarding the Community Reinvestment Act Board concludes that consummation of this proposal is not ("Agency CRA Statement").5 likely to result in significantly adverse effects on competition or the concentration of banking resources in the Dallas A. Record of CRA Performance banking market or any other relevant banking market. The Agency CRA Statement provides that a CRA exam- Convenience and Needs Considerations ination is an important and often controlling factor in the consideration of an institution's CRA record and that In acting on applications to acquire a depository institu- reports of these examinations will be given great weight tion, the Board must consider the convenience and needs in the applications process.6 The Board notes that INB of the communities to be served, and take into account received a "satisfactory" rating at its most recent examthe records of the relevant depository institutions under ination for CRA performance from its primary supervithe Community Reinvestment Act (12 U.S.C. § 2901 sor, the Office of the Comptroller of the Currency et seq.) ("CRA"). The CRA requires the federal finan- ("OCC"), as of February 8, 1995. FCB also received a cial supervisory agencies to encourage financial institu- "satisfactory" CRA rating from its primary supervisor, tions to help meet the credit needs of the local communi- the OCC, as of April 15, 1993. ties in which they operate, consistent with the safe and sound operation of such institutions. To accomplish this B. Lending Activities end, the CRA requires the appropriate federal supervisory authority to "assess the institution's record of meet- INB is a small bank with $26.1 million in total assets ing the credit needs of its entire community, including that provides primarily consumer and small business low- and moderate-income neighborhoods, consistent loans. After its 1992 CRA examination, INB created a with the safe and sound operation of such institutions," CRA Advisory Council to ascertain the credit needs of the community. The CRA Advisory Council conducted a comprehensive survey of the needs of its delineated community, and based on that survey, began participating in programs offered by the Small Business Adminis- 1. Asset, deposit, and state data are as of December 31, 1994. Market tration ("SBA"). INB subsequently hired a lending offidata are as of June 30, 1993. 2. The Dallas banking market is approximated by Dallas County, cer with SBA experience and became a SBA certified Denton and Lewisville in Denton County, McKinney and Piano in lender. In 1994, the bank funded 17 SBA loans, totalling Collin County, the northern half of Rockwall County, the communities of Forney and Terrell in Kaufman County, Midlothian, Waxahachie, $4.7 million dollars. Approximately $1.7 million (more and Ferris in Ellis County, and Grapevine and Arlington in Tarrant than 20 percent) of these loans were made to businesses County. owned by women and minorities, and 29 percent of these 3. Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post- loans were extended to businesses that operate in lowmerger HHI is between 1000 and 1800 is considered moderately con- and moderate-income census tracts. centrated. The Justice Department has informed the Board that a bank During 1994, INB participated with the Dallas/Fort merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger Worth International Airport Director of Disadvantaged HHI is at least 1800 and the merger increases the HHI by more than 200 Business Enterprises to develop a special financing propoints. The Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders and other non-depository financial entities. The HHI for the Dallas 4. 12 U.S.C. § 2903. market is 1402 and would increase by less than one point as a result of 5. 54 Federal Register 13,742 (1989). this transaction. 6. Id. at 13,745. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

486 Federal Reserve Bulletin • May 1995 gram for businesses owned by women and minorities in CRA records of performance of the banks, are consistent connection with concession contracts awarded by the with approval of this application. airport.7 The program has resulted in several loans Other Considerations funded by the bank as part of an effort to improve minority participation in airport service contracts. The financial and managerial resources and future pros- The 1995 examination also found that INB has a pects of Applicant, INB and FCB, and the other supervisatisfactory record of participating in community devel- sory factors that the Board must consider under section 3 opment activities. For example, examiners noted that the of the BHC Act, are consistent with approval of this bank makes loans to rehabilitation contractors who make proposal. home improvements to housing for low- and moderate- Based on the foregoing and all the facts of record, the income persons that qualify under the Tarrant County Board has determined that the application should be, and Department of Housing & Human Services ("DHHS") hereby is, approved. The Board's approval is expressly Revitalization Program. Under that program, Tarrant conditioned on Applicant's compliance with all the com- County homeowners apply to the DHHS for a loan mitments made in connection with this application. The funded by HUD to pay for the home improvements. INB commitments and conditions relied on by the Board in also works with Habitat for Humanity to provide reaching this decision shall be deemed to be conditions interest-free financing for qualified first time home imposed in writing by the Board in connection with its buyers. findings and decision, and, as such, may be enforced in The 1995 examination of INB found no evidence of proceedings under applicable law. illegal discrimination and found that INB was in compli- The acquisition shall not be consummated before the ance with laws and regulations related to discrimination. fifteenth calendar day following the effective date of this In addition, the 1995 examination found no evidence of order, or later than three months after the effective date practices intended to discourage credit applications. With of this order, unless such period is extended for good regard to credit offered, the examination found that cause by the Board or by the Federal Reserve Bank of INB's loan volume was good relative to its funding Dallas, acting pursuant to delegated authority. ability, the local competitive environment, and the com- By order of the Board of Governors, effective munity's credit needs. As of December 31, 1994, loans March 13, 1995. comprised 68 percent of INB's total assets, resulting in a loan-to-deposit ratio of 75 percent, and 53 percent of the Voting for this action: Vice Chairman Blinder and Governors LaWare, Lindsey, Phillips, and Yellen. Absent and not voting: total loan volume are extended within INB's delineated Chairman Greenspan and Governor Kelley. community. According to the 1995 examination, the bank solicits credit applications from all segments of its JENNIFER J. JOHNSON delineated community and the overall geographic distri- Deputy Secretary of the Board bution of loans throughout all the areas within its delin- Northern Trust Corporation eated community is reasonable. Chicago, Illinois The 1993 examination of FCB found that the bank was in compliance with fair lending laws and regulations Northern Trust of Florida Corporation and noted that there are no discriminatory or other Miami, Florida practices intended to discourage credit applications. FCB Order Approving Acquisition of a Bank Holding is a small bank, with total assets of $22.3 million, and Company examiners concluded that its CRA-related activities are consistent with the bank's financial condition and size. Northern Trust Corporation, Chicago, Illinois ("Northern Trust"), and Northern Trust of Florida Corporation, C. Conclusion Miami, Florida ("Northern Florida"), bank holding The Board has considered carefully all the facts of companies within the meaning of the Bank Holding record, including Protestant's comments, in reviewing Company Act ("BHC Act"), have applied under section the CRA records of performance for INB and FCB. 3 of the BHC Act (12 U.S.C. § 1842) to acquire by Based on a review of the entire record, including rele- merger Beach One Financial Services, Inc. ("Beach vant reports of examination, the Board concludes that One"), and thereby indirectly acquire all the voting convenience and needs considerations, including the shares of The Beach Bank of Vero Beach ("Beach Bank"), both of Vero Beach, Florida. Notice of the applications, affording interested persons an opportunity to submit comments, has been published (59 Federal Register 16,815 (1994)). The time for filing 7. Dallas/Fort Worth International Airport is within INB's delineated community. comments has expired, and the Board has considered the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 487 applications and all comments received in light of the deposits in commercial banks in the state. Beach One is factors set forth in section 3 of the BHC Act. the 47th largest commercial banking organization in the state, controlling approximately $184 million in depos- Douglas Amendment Analysis its, representing less than 1 percent of total deposits in Section 3(d) of the BHC Act, the Douglas Amendment, commercial banks. Upon consummation of this proprohibits the Board from approving an application by a posal, Northern Trust would remain the seventh largest bank holding company to acquire control of any bank commercial banking organization in Florida, controlling located outside its home state, unless such acquisition is approximately $1.3 billion in deposits, representing ap- "specifically authorized by the statute laws of the State in proximately 1 percent of total deposits in commercial which such bank is located, by language to that effect and banking organizations in the state. not merely by implication."1 For purposes of the Douglas Northern Trust and Beach One do not compete di- Amendment, Northern Trust's home state is Illinois. rectly in any relevant banking market. Based on all the Under Florida's current interstate banking statute, ac- facts of record, the Board concludes that consummation quisitions of banks by out-of-state bank holding compa- of this proposal would not have a significantly adverse nies are not permitted unless the acquiring company is effect on competition or the concentration of banking located in a specified region that does not include Illi- resources in any relevant banking market. nois.2 However, an out-of-state bank holding company that controlled a Florida bank when this statute was Managerial and Convenience and Needs enacted in 1984 is permitted to make additional banking Considerations acquisitions in Florida. Northern Trust has controlled a Florida bank since 19823 and is authorized to make In considering an application to acquire a depository additional banking acquisitions in Florida. The Florida institution under the BHC Act, the Board must consider State Comptroller has determined that the proposed the managerial resources of the companies and banks transaction is expressly authorized under the laws of involved in the proposal and the convenience and needs Florida and has approved it. In light of the foregoing, the of the communities to be served, and take into account Board has determined that its approval of this proposal is the records of the relevant depository institutions under not prohibited by the Douglas Amendment. the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). In reviewing this proposal, the Board Competitive Considerations has considered the fact that the Department of Justice ("DOJ") is investigating Northern Trust's Illinois bank- Northern Trust, with total assets of $18.4 billion, con- ing subsidiaries, including Northern Trust's lead subsidtrols eight banks in Illinois, Florida, Texas, Arizona, and iary bank, The Northern Trust Company, Chicago, Illi- California, and engages through other subsidiaries in nois ("Chicago Bank"), for compliance with federal fair various permissible nonbanking activities.4 Northern lending statutes.5 Chicago Bank represents approxi- Trust is the seventh largest commercial banking organi- mately 81 percent of Northern Trust's total assets. zation in Florida, controlling approximately $1.1 billion The DOJ investigation has focused primarily on a in deposits, representing less than 1 percent of total period from 1992 until early 1994. Northern Trust has addressed concerns expressed by DOJ regarding the documentation and oversight of its loan underwriting 1. 12 U.S.C. § 1842(d). A bank holding company's home state is that process during the time period covered by the DOJ state in which the operations of the bank holding company's banking investigation, but has denied that its Illinois banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is subsidiaries violated the substantive provisions of the later. federal fair lending laws in processing loan applications 2. See Fla. Stat. Ann. § 658.925(3)(b) (West 1984 and supp.). Effecfrom African Americans, Hispanics, or other minorities. tive May 1, 1995, Florida statutory law will permit bank holding companies to acquire a Florida bank or bank holding company on a Northern Trust also has submitted extensive information reciprocal nationwide basis, provided that the Florida bank to be ac- to the Board on steps taken and to be taken, particularly quired or all banking subsidiaries of the Florida bank holding company to be acquired have been in existence and continuously operated for at at Chicago Bank, to improve its underwriting practices least two years. See 1994 Fla. Sess. Laws ch. 94-203, § 1. Beach Bank and its fair lending compliance programs. The DOJ and has been in existence and continuously operated for more than two Northern Trust are discussing the issues raised by this years. 3. Under Florida law in efiFect in 1982, an out-of-state bank holding company that controlled a Florida trust company as of December 20, 1972, was permitted to acquire a Florida bank. See NCNB Corporation, 68 Federal Reserve Bulletin 54 (1982); see also 1980 Fla. Sess. Laws 5. The other Illinois banking subsidiaries of Northern Trust are: ch. 80-260, § 19. Northern Trust acquired a Florida trust company Northern Trust Bank/DuPage, Oakbrook Terrace, Illinois ("DuPage under section 4 of the BHC Act before the 1972 grandfather date. See Bank"); Northern Trust Bank/Lake Forest, N.A., Lake Forest, Illinois Nortrust Corporation, 58 Federal Reserve Bulletin 67 (1972). ("Lake Forest Bank"); and Northern Trust Bank/O'Hare, N.A., Chi- 4. Asset and deposit data are as of June 30,1994. cago, Illinois ("O'Hare Bank"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

488 Federal Reserve Bulletin • May 1995 investigation, but there has been no judicial or other final responsibility to design, implement, and manage a corporesolution of this matter. rate consumer compliance program. In addition, Chicago The Board has an obligation under the BHC Act to Bank revised its loan underwriting guidelines to incorpoconsider specified statutory factors in acting on applica- rate detailed and objective rules that address many issues tions. The Board must apply the criteria specified by concerning an applicant's income level, outstanding debts statute on the basis of the evidence of record before the and obligations, and borrowing capacity not addressed or Board, and its findings must be supported by substantial inconsistently handled under the previous guidelines. evidence. In addition, the BHC Act and the Board's Two new quality control officers, one for mortgage regulations require the Board to act on applications lending and the other for installment lending, have been submitted under section 3 of the BHC Act within speci- hired by Chicago Bank and have responsibility to review fied time periods. and monitor all changes in procedure and recommend The Board notes that it has received no comment from improvements. The success of these initiatives will be the public opposing this proposal or contending that assessed by the bank's audit department, which has been Northern Trust is not serving the credit needs of its many restructured by assigning a team to conduct quarterly local communities, including the low- and moderate- consumer compliance audits and report their findings to income neighborhoods of these communities. The Board the bank's board of directors. This team will receive also notes that all the banking subsidiaries of Northern specialized training, and the bank may employ outside Trust subject to the DOJ investigation received either experts to assist in the conduct of the first audit. "outstanding" or "satisfactory" ratings for CRA perfor- The bank also has adopted a uniform loan summary mance from their primary federal supervisors in recent sheet that serves as a checklist to ensure that consistent examinations that covered the period after the period borrower information has been obtained and loan apunder review by the DOJ.6 Examiners did not find any proval criteria have been used in every case, and a pattern or practice of illegal discrimination or other uniform installment loan application form to replace illegal practices intended to discourage applications for several different forms previously used and to provide credit during the time periods covered by these examina- the loan underwriter more complete information.7 The tions. Beach Bank also received a "satisfactory" rating bank expanded its loan tracking system to facilitate from the FDIC at its most recent CRA examination as of monitoring of the information obtained and assistance January 6, 1993. rendered during the loan underwriting process. All home mortgage and consumer lenders have been trained in the A. Compliance with Fair Lending Laws use of the new guidelines, forms, and procedures. To ensure compliance with these measures, Northern The Board has carefully considered a number of steps taken Trust increased the responsibility of its fair lending by Northern Trust and Chicago Bank to strengthen their policy committee for setting fair lending policy and fair lending compliance programs and underwriting proce- overseeing the implementation of its policy at the holddures. For example, in consultation with the DOJ, in 1994 ing company's subsidiary banks. For example, the com- Chicago Bank implemented a second review process for all mittee directed each of Northern Trust's Illinois subsidmortgage and installment loans that receive a preliminary iary banks to adopt the second review policy and recommendation of denial. Prior to any adverse action on a structure developed at Chicago Bank, and has overseen loan, the complete loan file is reviewed by a senior manage- the adoption of a modified second review policy at all ment committee, the members of which represent several the subsidiary banks not located in Illinois.8 operational areas of the bank and diverse racial and ethnic backgrounds. For each loan reviewed, the committee con- 7. In particular, the Northern Trust banks subject to the DOJ investisiders the adequacy of the information obtained, the accugation received the following ratings for CRA performance: Chicago racy of the loan processing, and the availability of any Bank, "satisfactory" as of April 25, 1994, by the Federal Reserve Bank alternative lending programs. Northern Trust also hired a of Chicago ("Reserve Bank"); Lake Forest Bank, "outstanding" as of March 21, 1994, by the Office of the Comptroller of the Currency new corporate consumer compliance officer with overall ("OCC"); O'Hare Bank, "satisfactory" as of March 21, 1994, by the OCC; and DuPage Bank, "outstanding" as of November 21, 1994, by the Federal Deposit Insurance Corporation ("FDIC"). Northern Trust 6. In particular, the Northern Trust banks subject to the DOJ investi- subsidiary banks in Texas, Arizona, and California also received "satisgation received the following ratings for CRA performance: Chicago factory" ratings in their most recent CRA performance examinations. Bank, "satisfactory" as of April 25, 1994, by the Federal Reserve Bank 8. To ensure that Beach Bank will comply with consumer lending of Chicago ("Reserve Bank"); Lake Forest Bank, "outstanding" as of laws following consummation of this proposal, Northern Trust has March 21, 1994, by the Office of the Comptroller of the Currency committed to the Board that CRA and consumer compliance officers of ("OCC"); O'Hare Bank, "satisfactory" as of March 21, 1994, by the Florida Bank would have direct responsibility for consumer compliance OCC; and DuPage Bank, "outstanding" as of November 21, 1994, by at Beach Bank. Northern Trust would follow a detailed and specific the Federal Deposit Insurance Corporation ("FDIC"). Northern Trust schedule to review consumer compliance at Beach Bank, develop a subsidiary banks in Texas, Arizona, and California also received "satis- comprehensive compliance manual, and implement revised procedures factory" ratings in their most recent CRA performance examinations. at the bank. In addition, Northern Trust's fair lending policy committee, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 489 Finally, Chicago Bank has revised its incentive com- estate projects in low- and moderate-income neighborpensation program to encourage lending to low- and hoods of Cook County, Illinois. In 1993, the bank promoderate-income borrowers. The bank broadened the vided a $4 million line of credit to the Community loan product base upon which sales credit is given, in Investment Corporation and committed to purchase order to increase the bonus opportunities for loan officers $12.5 million of loans originated by the organization to making loans under the bank's affordable mortgage pro- finance the purchase or rehabilitation of multi-family grams. In addition, Chicago Bank has opened its first housing in 20 low- and moderate-income Chicago branch in the predominantly minority and low- and neighborhoods. The bank committed an additional moderate-income area of south Chicago.9 $375,000 to the Evanston Housing Mortgage Corporation for a similar purpose in Evanston, Illinois. Chicago B. Chicago Bank's Record of Lending in its Bank also has committed to make a $6 million loan to Community the Local Initiatives Support Corporation to fund equity bridge loans to help selected local community develop- Commercial Lending and Community Development Ac- ment corporations revitalize low- and moderate-income tivities. The Board notes that the CRA does not require neighborhoods. Under the New Homes for Chicago banks to use specific lending products or services Program, Chicago Bank, in cooperation with various to meet the credit needs of a community. Rather, the community development corporations, during 1994 fi- Board has, in the past, recognized the importance of nanced or committed to finance the purchase of over 45 allowing banks to focus their lending efforts on particu- new homes with no points and no application fee in lar community needs in meeting their responsibilities the South Shore, West Humboldt Park, Edgewater, under the CRA.10 Marshall Square/Douglas Park, and Near Westside The record in this case indicates that, consistent with neighborhoods and the 37th aldermanic ward.11 Chicago Bank's commercial lending orientation, Chi- Special Home Mortgage Products. In addition to its cago Bank has endeavored to meet community credit commercial lending and community development activineeds through commercial lending and community deties, Chicago Bank is striving to meet the home mortvelopment activities. Several of Chicago Bank's loan gage credit needs of its communities, including low- and programs and initiatives focus on business development, moderate-income neighborhoods. Chicago Bank offers creating employment opportunities, and supporting the First-Time Home Buyer's Club, a low-cost convenneighborhood revitalization efforts of private developers. tional mortgage for first-time low- and moderate-income In 1993, for example, Chicago Bank made five loans home buyers that features no points and no application totaling $24.8 million for economic redevelopment fee and provides financial counseling to help applicants funded by linked deposits by the Illinois State Treasurer. increase their savings for a down payment. Chicago The bank made three other loans to small businesses Bank made 320 loans under this program in 1992 and under the linked deposit program of the City of Chicago, 1993. Chicago Bank also introduced a number of new and two loans to finance job creation under the State of home mortgage programs in 1994. These include two Illinois Department of Commerce and Community Afprograms supported by the Illinois State Treasurer's fairs Small Business Loan Program and the City of linked deposit program: the American Dream Initiative, Chicago Department of Planning and Development Bank under which Chicago Bank committed to make $1 mil- Loan Participation Program. Chicago Bank also is prolion of loans during the year featuring below-market viding a $5 million revolving credit facility to be used by interest rates, flexible underwriting, no private mortgage delivery drivers for a large food products company to insurance, and pre-qualification credit counseling; and purchase and independently operate their delivery routes. the HomeStart Program, under which the bank commit- Chicago Bank loaned $13.7 million during 1992 and ted to make an additional $1 million of loans during the 1993 for neighborhood revitalization through the North- year featuring flexible underwriting, the use of gifts for a ern Trust Neighborhood Lending Program, a project portion of the down payment, and home buyer counselco-sponsored by the Chicago Reinvestment Alliance, to ing. Chicago Bank also gained approval to participate in finance housing, small businesses, and mixed-use real 11. Chicago Bank also participates in several government-assisted consumer compliance policy committee, and CRA policy committee housing programs. In 1994, Chicago Bank committed $600,000 to the would have ongoing responsibility to review Beach Bank's CRA and Chicago Family Housing Fund, a loan pool underwritten and adminisconsumer compliance performance. tered by the City of Chicago Department of Housing and by Neighbor- 9. Preliminary data submitted by Chicago Bank under the Home hood Housing Services of Chicago for reduced rate home purchase, Mortgage Disclosure Act ("HMDA") for the first three quarters of 1994 rehabilitation, and improvement loans. The bank does not directly indicate increases in lending to African Americans and Hispanics. underwrite FHA or VA loans, but refers all such loan applications to an 10. See, e.g., Dominion Bancshares Corporation, 72 Federal Reserve independent loan broker, from which it buys back participations in the Bulletin 787 (1986); C&S/Sovran Corporation/Avantor Financial Cor- loans. The bank also purchases blocks of FHA home improvement poration, 76 Federal Reserve System 779 (1990). loans from an independent bank serving the south side of Chicago. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

490 Federal Reserve Bulletin • May 1995 the General Electric Community Home Buyer's Pro- Bank during 1994 and early 1995, and results of CRA gram, which allows the bank to employ more flexible examinations of all the banks subject to the DOJ investiloan underwriting standards for insured loans, including gation conducted subsequently to the DOJ investigation. a higher loan-to-value ratio and the use of gifts for a On the basis of all the facts of record, and for the reasons portion of the down payment. Finally, Chicago Bank has discussed in this order, the Board concludes that managesigned agreements with two loan brokers serving south rial and convenience and needs factors, including the Chicago, including the low- and moderate-income neigh- CRA performance of Chicago Bank, are consistent with borhoods in this area, to market its entire array of approval of these applications, and that the record does community lending programs. not provide a basis to deny these applications under the Ascertainment and Marketing. Chicago Bank employed statutory factors the Board must consider in applications African-American and Hispanic focus groups in a study of of this type. In acting on these applications, the Board its products and services in November 1993, and employed has considered that its actions will not hinder the DOJ in a focus group of realtors serving African-American and any action that may result from its investigation. The low- and moderate-income neighborhoods to study the Board will monitor the DOJ investigation, and it will credit needs of these areas in February 1994. Chicago Bank monitor Chicago Bank's progress in implementing the also has an extensive officer call program, which regularly programs and procedures discussed in this order and the contacts several organizations serving minority and low- effects of those efforts through the submission of quarand moderate-income areas of the community. This call terly reports to the Reserve Bank. The Board expects program has led to the introduction of several credit pro- Northern Trust, Chicago Bank, and the other Chicago grams for low- and moderate-income individuals, including area banking subsidiaries of Northern Trust to continue low-interest rate installment loans secured by a savings their efforts to improve their internal procedures and to account, low-cost home equity loans, and a credit repair increase their lending to minority and low- and counseling program. moderate-income borrowers in their delineated commu- Chicago Bank relies extensively on product-specific nities. The Board retains authority to take appropriate newspaper and radio advertising. The bank advertises in supervisory action, including action on future applicanewspapers oriented to African-American readers, in tions by Northern Trust or Chicago Bank, if warranted. Spanish-language newspapers, and in neighborhood newspapers in south Chicago. In addition, it advertises on radio stations with primarily African-American and Other Considerations Spanish speaking listeners. Direct mail advertising also has been used to market the low-cost home equity and The Board also concludes that the financial resources secured installment loan programs described above, and and future prospects of Northern Trust, Northern Flor- "back-to-school" loans have been advertised in fliers ida, Beach One, and their respective subsidiary banks, distributed to community groups, churches, and neigh- and other supervisory factors the Board must consider borhood associations. The bank's management expects under section 3 of the BHC Act, are consistent with the recent opening of the bank's first full-service branch approval of this proposal. on Chicago's south side to increase the effectiveness of Based on the foregoing, including the conditions deits advertising and its officer call program in this area. scribed in this order, commitments by Northern Trust in connection with these applications, and in light of all the facts of record, the Board has determined that these Conclusion Regarding Managerial and Convenience applications should be, and hereby are, approved. The and Needs Factors Board's approval is specifically conditioned on compliance by Northern Trust with all conditions and commit- The Board has carefully considered the entire record ments made in connection with these applications as available to it in reviewing these applications under the well as the conditions discussed in this order. The comfactors specified in the BHC Act, including the views of mitments and conditions relied on by the Board in reachthe DOJ on compliance by Northern Trust and its Illinois ing this decision are both deemed to be conditions imbanking subsidiaries with the federal fair lending laws posed in writing by the Board in connection with its and the steps subsequently taken by Northern Trust to findings and decision, and, as such, may be enforced in improve its record of performance in this area. The DOJ proceedings under applicable law. investigation, however, focused on the period from 1992 This transaction shall not be consummated before the until early 1994. The Board has reviewed information fifteenth calendar day following the effective date of this concerning Chicago Bank's record of performance dur- order, and shall not be consummated later than three ing the first three quarters of 1994, additional corrective months following the effective date of this order, unless measures implemented by Northern Trust and Chicago such period is extended for good cause by the Board or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 491 by the Federal Reserve Bank of Chicago, acting pursuant we do think this is an inappropriate time for the Board to to delegated authority. make its decision for the reasons previously discussed. By order of the Board of Governors, effective March 1, 1995. March 1, 1995 Voting for this action: Chairman Greenspan and Governors Orders Issued Under Section 4 of the Bank Kelley, LaWare, Lindsey, and Phillips. Voting against this action: Holding Company Act Vice Chairman Blinder and Governor Yellen. Banc One Corporation JENNIFER J. JOHNSON Deputy Secretary of the Board Columbus, Ohio CoreStates Financial Corp Dissenting Statement of Vice Chairman Blinder and Philadelphia, Pennsylvania Governor Yellen PNC Bank Corp. Pittsburgh, Pennsylvania We dissent not because we think the application should be denied, but because we believe it wise to wait a short KeyCorp while for more pertinent information. Cleveland, Ohio The evidence presented to the Board to date raises substantial questions about the adequacy of Chicago National City Corporation Bank's policies and practices designed to ensure that all Cleveland, Ohio loan applicants have equal opportunity to obtain credit. This evidence includes the conclusions from an investi- Order Approving Notices to Acquire Certain Data gation by DOJ, although the record available to us does Processing Assets and to Engage in Certain not contain the evidence gathered by the DOJ. Based on Nonbanking Activities all the facts of record, including a recent examination of Chicago Bank by the Reserve Bank, we do not think that Banc One Corporation, Columbus, Ohio; CoreStates Fithe evidence before the Board sustains a finding of nancial Corp, Philadelphia, Pennsylvania; PNC Bank illegal discrimination. Corp., Pittsburgh, Pennsylvania; and KeyCorp, Cleve- Chicago Bank now appears to be making good faith land, Ohio (collectively, "Current Owners"), bank holdefforts to address its deficiencies in the fair lending area. ing companies within the meaning of the Bank Holding These steps may well prove sufficient, but many of them Company Act ("BHC Act"), have given notice pursuant are yet to be taken. Thus, in our view, it seems impossi- to section 4(c)(8) of the BHC Act (12 U.S.C. ble to find that Chicago Bank already has "the necessary § 1843(c)(8)) and section 225.23(a) of the Board's Regpolicies in place and working well," as required by the ulation Y (12 C.F.R. 225.23(a)) to acquire certain data Agency CRA Statement. processing assets of a fifth bank holding company, Na- While we realize that there have been delays in this tional City Corporation, Cleveland, Ohio ("National case, significant new information will be available City", and, together with Current Owners, collectively, shortly. First, we note that Northern Trust and DOJ are "Applicants"). The acquisition would be made through discussing the issues raised by the DOJ investigation, the Current Owners' existing joint venture subsidiary, and these discussions could be completed in the near Electronic Payment Services, Inc., Wilmington, Delafuture. Although we do not believe as a matter of policy ware ("EPS"), and would include all of National City's that applications should be delayed for pending investi- automated teller machine ("ATM") assets and some of gations, information from these discussions, if provided its point of sale ("POS") assets.1 In addition, National expediently, could be very important in deciding this City has given notice of its intention to become an equity case. Second, Chicago Bank's first quarterly status re- owner of EPS.2 port to the Reserve Bank on the bank's progress in addressing problems in the fair lending area is due by April 30, 1995. These two pieces of information, we believe, would put the Board in a much better position to 1. National City's POS processing subsidiary, National City Processing Company, would not be acquired as part of this transaction. make a determination. 2. Keycorp also has given notice of its intention to increase its equity As noted above, we are not prepared to argue that this ownership in EPS. As a result of this proposal, each of the Applicants would own a 20 percent interest in EPS. As used herein, the term application should be denied on the basis of illegal discrim- "EPS" includes the operating subsidiaries of EPS, unless the context ination in light of the facts available to the Board. However, clearly indicates otherwise. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

492 Federal Reserve Bulletin • May 1995 Notice of this proposal, affording interested persons an KeyCorp opportunity to submit comments, has been published Cleveland, Ohio (59 Federal Register 44,149 (1994)). The time for filing comments has expired, and the Board has considered the National City Corporation notices and all comments received in light of the factors Cleveland, Ohio set forth in section 4(c)(8) of the BHC Act. On the basis of all the facts of record, including Statement by the Board of Governors of the Federal comments received from organizations opposing this Reserve System Regarding Notices to Acquire Certain proposal, the notices are approved for the reasons set Data Processing Assets and to Engage in Certain forth in the Board's Statement, which will be released at Nonbanking Activities a later date. The Board also has denied requests for a hearing on the proposal. By order dated March 1, 1995, the Board approved the The Board's approval is specifically conditioned on notices pursuant to section 4(c)(8) of the Bank Holding Applicants' compliance with the commitments made in Company Act (12 U.S.C. § 1843(c)(8)) ("BHC Act") connection with these notices. The Board's determina- and section 225.23(a) of the Board's Regulation Y tion also is subject to all of the conditions set forth in (12 C.F.R. 225.23(a)) of Banc One Corporation, Colum- Regulation Y, including those in sections 225.7 and bus, Ohio; CoreStates Financial Corp, Philadelphia, 225.23(b) of Regulation Y (12C.F.R. 225.7 and Pennsylvania; PNC Bank Corp., Pittsburgh, Pennsylva- 225.23(b)), and to the Board's authority to require such nia; and KeyCorp, Cleveland, Ohio (collectively, "Curmodification or termination of the activities of a bank rent Owners"), bank holding companies within the holding company or any of its subsidiaries as the Board meaning of the BHC Act, to acquire certain data profinds necessary to ensure compliance with, and to pre- cessing assets of a fifth bank holding company, National vent evasion of, the provisions of the BHC Act and the City Corporation, Cleveland, Ohio ("National City", Board's regulations and orders issued thereunder. For and, together with Current Owners, collectively, "Applipurposes of this action, these commitments and condi- cants"). Under this proposal, the acquisition would be tions are deemed to be conditions imposed in writing by made through the Current Owners' existing joint venture the Board in connection with its findings and decision, subsidiary, Electronic Payment Services, Inc., Wilmingand, as such, may be enforced in proceedings under ton, Delaware ("EPS"), and would include all of Naapplicable law. tional City's automated teller machine ("ATM") assets and some of its point of sale ("POS") assets.1 The Board This transaction shall not be consummated later than also approved National City's notice of its intention to three months after the effective date of this order, unless become an equity owner of EPS.2 such period is extended for good cause by the Board or by the Federal Reserve Bank of Cleveland or the Federal Notice of this proposal, affording interested persons an Reserve Bank of Philadelphia, acting pursuant to dele- opportunity to submit comments, has been published gated authority. (59 Federal Register 44,149 (1994)). The time for filing By order of the Board of Governors, effective comments has expired, and the Board has considered the March 1,1995. notices and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. Voting for this action: Chairman Greenspan and Governors Applicants are large commercial banking organiza- Kelley, LaWare, Lindsey, and Phillips. Voting against this action: tions headquartered in Ohio and Pennsylvania,3 and en- Vice Chairman Blinder. Absent and not voting: Governor Yellen. gage directly and through subsidiaries in a broad range of banking and permissible nonbanking activities in the JENNIFER J. JOHNSON United States. EPS currently provides data processing Deputy Secretary of the Board and transmission services to banks and retail merchants Banc One Corporation Columbus, Ohio 1. National City's POS processing subsidiary, National City Process- CoreStates Financial Corp ing Company, would not be acquired as part of this transaction. 2. The Board also approved Keycorp's notice of its intention to Philadelphia, Pennsylvania increase its equity ownership in EPS. As a result of this proposal, each of the Applicants would own a 20 percent interest in EPS. As used herein, the term "EPS" includes the operating subsidiaries of EPS, PNC Bank Corp. unless the context clearly indicates otherwise. 3. Asset and deposit information for each of the Applicants is Pittsburgh, Pennsylvania contained in the Appendix. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 493 who are members of EPS's branded ATM and POS section 4(c)(8) of the BHC Act, and requested that the network ("MAC").4 EPS also is engaged in developing Board hold a hearing on the proposal. and providing a variety of electronic payment, benefit The Board has carefully considered these comments in transfer, and data interchange services.5 light of all the facts of record, including the extensive Section 4(c)(8) of the BHC Act provides that a bank written submissions from both Applicants and Protesholding company may, with Board approval, engage in tants. The record of this matter also has been developed any activity that the Board determines to be "so closely through an informal meeting among Federal Reserve related to banking or managing or controlling banks as System staff, Applicants, and Protestants for the purpose to be a proper incident thereto." The Board previously of receiving additional information and clarifying issues has determined that all the activities proposed in these in this case.9 In addition, the Board has reviewed these notices are closely related to banking within the meaning notices in light of the recent proceeding between EPS of section 4(c)(8) of the BHC Act.6 Applicants would and the Department of Justice ("DOJ"). EPS and DOJ conduct these activities in accordance with Regulation Y have entered into a consent decree ("Consent Decree") and previous Board decisions. that requires EPS to modify certain operational practices To approve these transactions, the Board also must of the MAC network.10 In addition, DOJ conducted an determine that the performance of the proposed activities investigation of the competitive effects of the transacby Applicants through EPS "can reasonably be expected tions between National City and EPS during the proto produce benefits to the public . . . that outweigh cessing of these notices, and has not objected to approval of this proposal. possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."7 Competitive Considerations The Board has received comments opposing this pro- In order to determine whether a particular transaction is posal from an electronic funds transfer ("EFT") network likely to decrease competition, the Board traditionally ("Money Station") and several banking organizations has considered the area of effective competition between that operate in Ohio and adjacent states (collectively, parties. The area of effective competition has been de- "Protestants"). Protestants generally allege that consum- fined by reference to the line of commerce, or product mation of the proposal would result in significant anti- market, and a geographic market. The Board has carecompetitive effects in the market for ATM services in the fully considered the relevant product and geographic Ohio-Kentucky-Pennsylvania region, and particularly in markets in which to analyze the competitive effects of certain areas in Ohio.8 Protestants also believe that this this proposal in light of all the facts of record, including proposal would not result in benefits to the public that information provided by Applicants and Protestants, the would outweigh possible adverse effects as required by geographic scope of and services provided by existing ATM networks and other providers of EFT services, and legal precedents in this area. 4. In general, an ATM network is an arrangement whereby more than one ATM and more than one depository institution (or the depository In this case, for example, MAC provides three distinct records of such institutions) are connected by electronic or telecommu- services to its network members: nications means to one or more computers, processors, or switches for (1) Network access (access to an ATM network identithe purpose of providing ATM services to retail customers of depository institutions. POS terminals are generally located in the establishments fied by a common trademark or logo displayed on of merchants. They accept ATM or similar cards and, using the ATM ATMs and ATM cards);11 network or a parallel POS-only network, access the cardholder's account to transfer funds to the merchant's account. EPS provides POS processing services through a separate subsidiary, BUYPASS Corporation. 5. See Banc One Corporation, et al„ 79 Federal Reserve Bulletin 1158 (1993) ("1993 EPS Order"). 9. See 12 C.F.R. 262.25(c). 6. See 12 C.F.R. 225.25(b)(7) and 1993 EPS Order. As part of this 10. The DOJ filed a complaint against EPS in April 1994, in the proposal, EPS would engage in merchant processing services (the United States District Court for the District of Delaware, alleging that settlement and reconciliation of merchants' POS transactions and re- certain operating practices of the MAC network violated sections 1 and lated data processing activities). The Board believes that this activity is 2 of the Sherman Act (15 U.S.C. §§ 1 and 2). This action was resolved within EPS's previous authorization to engage in data processing activ- by agreement of the parties ratified in a final judgment entered on ities under Regulation Y. October 14,1994, after opportunity for public comment. See 59 Federal 7. See 12 U.S.C. § 1843(c)(8). Register 24,711 and 44,757 (1994). 8. Protestants also generally object to the competitive effects of the 11. Network access includes providing: proposal on the provision of POS services in these areas. As previously (1) The right to "brand" ATMs and ATM cards with the trademark or noted, EPS would acquire only a portion of National City's POS assets, logo of the ATM network; consisting of a single merchant account, and National City would retain (2) The ability of an ATM cardholder with an account at one member its POS processing subsidiary. Based on all the facts of record, the depository institution to initiate withdrawal and other account trans- Board believes that this aspect of the proposal is de minimis and would actions at an ATM owned by another depository institution that is a not significantly affect competition in any market for POS-related member of the same network; and services in light of the number of actual and potential competitors in (3) Minimum standards for network performance and products ofthese markets. fered through the network. 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494 Federal Reserve Bulletin • May 1995 (2) Network services (the switching functions for the and immediate.19 The Board notes that early ATM netnetwork);12 and works typically were composed of banks that used their (3) ATM processing (the data processing and telecom- ATMs for cash-dispensing purposes, and were confined munications facilities used to operate, monitor, and to branches in local banking markets. More recently, support a bank's ATMs).13 however, local ATM networks have consolidated in an effort to enhance the value of their services to customers In contrast to MAC, some networks directly provide through the economies of ubiquity.20 A recent survey of only network access (with network services and ATM the 50 largest regional shared EFT networks indicated processing generally being provided through third par- that 17 networks identified their markets as encompassties),14 while other networks provide network access and ing two to five states, while 21 networks had markets of network services separately from ATM processing.15 In six to 15 states and four networks had markets of more this regard, several regional or national firms offer net- than 15 states.21 In addition, a study conducted by Fedwork switching services and ATM processing services to eral Reserve System staff suggests that the geographic unaffiliated networks and their members.16 market for network access is an area significantly larger The Board notes that ATM networks have been recog- than local banking markets.22 The Board also believes nized as encompassing separate product markets. For that the markets for network services and ATM proexample, the DOJ concluded in the Consent Decree that cessing are at least regional.23 Moreover, the Board notes network access and ATM processing by MAC consti- that the DOJ considered MAC a regional ATM network tuted separate product markets for antitrust purposes.17 in the Consent Decree.24 The Consent Decree further indicates that switching may For these reasons, and based on all the facts of record, be a service distinct from ATM processing.18 On the the Board believes that the appropriate geographic marbasis of these considerations and all the other facts of ket area for MAC's product lines is a region composed record, the Board concludes that network access, net- of several states, and that MAC has a competitively work services, and ATM processing constitute the rele- significant presence in the following three regions: New vant product markets for evaluating the competitive ef- England (Maine, New Hampshire, Vermont, Massachufects of this proposal. setts, Rhode Island, Connecticut, and upstate New York); The Supreme Court has indicated that the appropriate Middle Atlantic (southern New York, New Jersey, most geographic market for each relevant line of commerce is of Pennsylvania, Delaware, and a portion of Maryland the area in which the effect of a transaction will be direct outside the Washington-Baltimore area); and Mideast 19. United States v. Philadelphia National Bank, 374 U.S. 321, 357 (1963). 12. Switching functions are provided by means of an "ATM switch", 20. In particular, as an ATM network expands the number of its which is a telecommunications and data processing facility operated by financial institution members and available ATMs, its value to network or on behalf of an ATM network and used to receive and route cardholders increases due to the greater accessibility of their deposit transactions from ATMs or ATM processors to data processing facilities accounts. Similarly, as the number of cardholders increases, so will the used by depository institutions to authorize ATM transactions. Network number of transactions and hence the economic return on ATM termiservices also may include "gateways" between regional networks. With nals deployed in the network. This increased economic return provides a gateway, the transaction can be routed directly from the network of incentives for banks to establish additional ATMs, thereby further the ATM owner to the network of the card issuer, without passing enhancing the network's value to cardholders. Accordingly, banks tend through a national ATM network. Access to other networks may be to place a greater value on membership in a network as its membership provided through these regional network gateways or through the use of expands. third-party processors. See 59 Federal Register 44,759 (1994) (discus- 21. See Bank Network News (November 1994). Only eight networks sion by DOJ of comments received on the Consent Decree). identified a single state as their market. Currently, five ATM networks 13. ATM processing includes the provision of terminal driving, are recognized as "national" networks. These networks are regarded in transaction routing and authorization, and account reconciliation ser- the industry as networks of last resort in the sense that they are used vices. only when two banks involved in a transaction are not members of the 14. Two of the five largest shared regional networks (STAR and same regional network. National networks typically provide more basic MOST) provide network access but do not provide their own switching services and charge higher fees than regional networks. The two largest services. See Bank Network News (November 1994). national networks, CIRRUS and PLUS, are operated by MasterCard 15. For example, before the merger of the Yankee 24 and NYCE and VISA, respectively. regional ATM networks, approximately 96 percent and 68 percent of the 22. See McAndrews and Kauffman, "Network Externalities and networks' members, respectively, relied on third parties for ATM pro- Shared Electronic Banking Network Adoption," Working Paper No. cessing. Member depository institutions also may provide ATM pro- 93-18, November 1993, Federal Reserve Bank of Philadelphia. cessing to themselves (as so-called "intercept processors"). 23. Companies are able to provide ATM processing and network 16. Examples of these firms include Deluxe Data Systems and services through data processing and telecommunications facilities with- Electronic Data Systems. See Bank Network News (November 1994). out regard to the physical proximity of their customers. Some firms 17. See 59 Federal Register 24,712 (1994). provide nationwide ATM processing and network services. The Board 18. The Consent Decree defines the function of an ATM switch as notes that any increase in the size of the geographic markets beyond a routing transactions from "ATMs or ATM processors." The term "MAC certain region would tend to decrease any adverse competitive effects of switch" is defined as an ATM switch "operated by or on behalf of, or this proposal because additional existing and potential competitors providing such functionality for branded ATM network access to" would be included in the relevant product markets. MAC. See 59 Federal Register 24,712 (1994). 24. See 59 Federal Register 24,711 (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 495 (western Pennsylvania, Ohio, Indiana, Kentucky, and lieves that Protestants' concerns regarding these poten- West Virginia). In light of National City's banking pres- tial effects on direct competition are speculative at this ence in Ohio, Indiana, and Kentucky, the appropriate time because MAC's equity owners are permitted to be, geographic market in which to analyze the competitive and in fact are, members of competing regional ATM effects of this proposal is MAC's Mideast region. networks. Moreover, even if all of National City's ATM Under this proposal, EPS would acquire National terminals were converted to provide access only to the City's branded ATM network ("MoneyCenter"), which MAC network, the effect on competition of such a developerates in Ohio, Indiana, and Kentucky.25 MoneyCenter opment should be considered at that time in light of all operates as a network to serve only National City's the relevant facts, including the effects of the Consent subsidiary banks, as opposed to a "shared" network.26 Decree and other events that may occur within the In this capacity, MoneyCenter provides branded network region. access only to banks that are subsidiaries of National Protestants also contend that this proposal would de- City.27 EPS, by contrast, provides branded network ac- crease competition and result in other adverse effects cess to MAC member institutions that are unaffiliated under section 4(c)(8) of the BHC Act by solidifying the with the banking organizations that own MAC, as well affiliation of National City's ATM cardholders and termias to affiliated institutions, through a shared network. nals with the MAC network through National City's MoneyCenter also provides network services and ATM equity ownership. Protestants believe that such an affiliprocessing only to its affiliated banks.28 EPS, on the ation would result in the elimination of National City as other hand, offers network services and ATM processing a potential competitor of EPS and a significant increase to all its member institutions. As a result, National City in the barriers to entry or expansion for potential or does not compete with EPS for new network members, existing ATM network competitors. In Protestants' view, does not seek to enhance the value of its network's this proposal increases the difficulty for existing or potrademark in competition with MAC, and does not com- tential competing ATM networks to retain or assemble pete with MAC for switching volume or ATM pro- the necessary "critical mass" of terminals and cardholdcessing contracts. Accordingly, National City does not ers required by economic considerations, such as econocompete with MAC in the markets for network access, mies of scale and ubiquity, to be effective competitors of network services, or ATM processing. This proposal, MAC. Because of the combined relative size of National therefore, would not result in the loss of an existing City's operations and the Ohio- and Kentucky-based competitor in any of the relevant product markets within operations of the Current Owners, Protestants believe the Mideast region. that these adverse effects of this proposal are particularly significant in Ohio and Kentucky. Protestants contend, however, that consummation of this proposal would adversely affect existing competi- The facts of record do not support the view that tion, including competition with Money Station and National City would be particularly likely to enter any other ATM networks in the area, because after the acqui- relevant product market in the Mideast region indepensition there would be an economic incentive for National dently, or through another joint venture in competition City to remove its ATM cards and terminals from any with MAC, if this proposal were denied. The Board network affiliation other than MAC.29 The Board be- notes that National City abandoned its attempts to form a new regional ATM network with other large banking organizations in 1992, and instead became a participat- 25. National City owns approximately 500 ATMs in Ohio, 270 in ing member of the MAC network. National City also has Indiana, and 125 in Kentucky. ceased offering ATM processing services to unaffiliated 26. A shared network generally is accessible to cardholders of many unaffiliated institutions that elect to become members of the network, third parties, for example, by allowing ATM processing and is often a joint venture owned by some or all of the network's contracts obtained through acquisitions of other banking members. organizations to expire. In addition, MAC would remain 27. Cardholders of institutions belonging to certain other branded ATM networks also may conduct transactions at National City's ATM subject to actual and potential competition from other terminals. providers of EFT services, including other regional net- 28. Until recently, National City provided ATM processing for a works, the national ATM networks, and third-party prolimited number of banks pursuant to processing contracts that were acquired in a 1992 acquisition. The record indicates that the last of these viders of network services and ATM processing. contracts terminated in October 1994, and that National City has not Moreover, the Board previously has determined that advertised this service or sought any new processing business. 29. Protestants attempt to quantify MAC's alleged increased market ATM network operating rules are an important considershare resulting from this proposal through calculations based on the ation in assessing the competitive impact of a proposal number of ATM terminals branded by MAC and ATM terminals owned by EPS's shareholders. Because National City does not currently compete with MAC in any relevant market, this proposal would not produce an increase in MAC's market share. However, it should be noted that data on ATM ownership do not sufficiently account for the impact that shares or changes in market shares, or for the fact that National City co-branded ATM terminals could have on the calculation of market currently is a participating member of the MAC network. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

496 Federal Reserve Bulletin • May 1995 under the section 4(c)(8) factors.30 In this case, the through the MAC network and MAC's holding company Board has given careful consideration to a number of rule that generally requires membership of all affiliated steps implemented under the Consent Decree that pro- banks, were reviewed by the DOJ and were not made mote competition and access to the MAC network. subject to any remedy in the Consent Decree. Under the terms of the Consent Decree, EPS may not Protestants also maintain that because of MAC's alrequire depository institutions that obtain ATM network leged history of engaging in anticompetitive practices, access services from MAC also to obtain ATM pro- the anticompetitive conduct that the Consent Decree cessing services from MAC. Third-party processors can sought to restrain will continue. Protestants suggest that provide banking organizations in the MAC network, MAC's execution of long-term ATM processing conparticularly small banks, with a competitive alternative tracts with smaller network banks after entry of the to MAC's ATM processing services. Moreover, these Consent Decree, MAC's delay in certifying third-party third-party processors also can provide a channel for processors that would then be able to offer processing entry by competing regional ATM networks. In particu- services to MAC members pursuant to the Consent Delar, a third-party processor may maintain connections to cree, and MAC's failure to inform some network memseveral regional ATM networks, any one of which would bers of the effects of the decree support their belief that then be able to reach banks that are connected with the MAC will continue in practice to require MAC members processor. These connections can reduce costs and entry to obtain ATM processing services from MAC, and barriers for those networks seeking to attract new mem- otherwise to continue to engage in anticompetitive conbers and thereby compete with MAC or other networks. duct, notwithstanding the Consent Decree. MAC has permitted dual network memberships since The Board notes that the Consent Decree recently 1992, and if the ATM card and the ATM terminal used in became effective, and that its terms are designed to a transaction both have more than one common trade- achieve procompetitive effects over time during the tenmark or logo, the card issuer can generally elect, under year duration of the decree. In addition, the Board does MAC's routing rules, which network would process the not conclude from the facts alleged by Protestants that transaction. Under the Consent Decree, MAC must per- MAC has violated provisions of the Consent Decree, mit its members to display multiple network trademarks including the provisions requiring the completion of on all of their ATM terminals. MAC also must permit third-party processor certification in a reasonably prompt multiple branding of ATM cards issued by MAC mem- manner. If violations should occur in the future, the DOJ bers in several states where MAC has or could soon gain may enforce the provisions of the decree in the courts. market power, including Ohio.31 Moreover, as noted previously, the DOJ has reviewed Protestants claim that other provisions of MAC's cur- this proposal in light of the Consent Decree, and has rent operating rules, not covered by the Consent Decree, raised no objection based on its investigation of the have serious anticompetitive effects. For example, Prot- National City acquisition and equity investment.33 estants contend MAC's routing rules and various fees For these reasons, and based on all the facts of record, thwart any procompetitive effects achieved under the the Board concludes that this proposal would not result decree. In particular, Protestants argue that MAC's pro- in significant adverse effects on the competitive considhibition on subswitching, and MAC's rights under the erations required to be reviewed under the section 4(c)(8) Consent Decree to charge a royalty fee if subswitching standard. were to be permitted, diminish the procompetitive effects of allowing third-party processors.32 The Consent Decree did not enjoin MAC from prohibiting subswitching. Moreover, the DOJ did not conclude that MAC's prohibition on subswitching was a substantial barrier to entry, 33. Protestants also raise issues with respect to EPS's publicly announced position that the Consent Decree's provisions restricting and expressly permitted MAC to assess royalty fees in MAC from prohibiting co-branding of its ATM cards does not apply to the event that subswitching were allowed. Other rules ATM cards that contain an integrated circuit computer chip with a and fees cited by Protestants, including MAC's require- stored value function (so-called "smart cards"). Since EPS has not made smart cards available to its members, and in view of the state of ment that national network transactions be routed development of this product and the uncertainty of its ultimate efifect on the EFT industry, the Board believes that Protestants' concerns in this regard are both speculative and premature. In addition, the Board notes that the DOJ disagrees with EPS's interpretation of the Consent Decree, 30. See generally The Bank of New York Company, et al„ 80 Federal and maintains that the decree's restrictions apply to the ATM functions Reserve Bulletin 1107 (1994). of a smart card. Moreover, the DOJ has stated that the Consent Decree 31. See 59 Federal Register 24,721 (1994). does not give EPS the "right" to prohibit multiple branding of smart 32. "Subswitching" refers to the switching of transactions between cards, and that any prohibitions EPS may implement in the future with members of the same regional network without accessing that network, respect to smart cards would remain subject to the antitrust laws and and therefore without paying the network's switch fee. Generally, this is scrutiny by the DOJ. The Board also notes that the DOJ has full accomplished by routing the transaction through a third-party processor statutory authority to seek remedies for any illegal anticompetitive that provides ATM processing services for both network members. practices by EPS, as well as to enforce the terms of the Consent Decree. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 497 Other Considerations cally provide for membership in other regional networks, and MAC members, including members that are The Board also must consider under section 4(c)(8) of equity owners, do in fact participate in other regional the BHC Act whether a proposal may result in an undue networks throughout the United States as well as in concentration of resources. Initially, the Board notes that some of the national networks. In this regard, the Board the inclusion of undue concentration of resources as an notes that in Ohio, which has been identified by Protesadverse effect in the section 4(c)(8) balancing test ap- tants and DOJ as an area where MAC has market power, pears to reflect a congressional concern that the combi- a MAC member, under an agreement between MAC and nation of large banking and nonbanking organizations Money Station, is permitted to allow cardholders of might be contrary to the public interest.34 The transac- Money Station network members to conduct transactions tion contemplated here does not involve the combination at ATMs owned by the MAC member. This proposal of a large banking organization with a large nonbanking would not alter the terms of the MAC/Money Station business, or the merger of large regional shared EFT agreement.38 For these reasons, and based on all the facts networks, but instead would result in additional equity of record, the Board concludes that consummation of investments in a single regional data processing and this proposal would not result in undue concentration of transmission joint venture already owned by banking resources. organizations. In all cases under section 4(c)(8) of the BHC Act, the It has been recognized that MAC has a significant Board also considers the financial and managerial reposition in ATM network access services in certain states sources of the applicants and their subsidiaries, and any in the Mideast region.35 However, the significant posi- company to be acquired, and the effect of the proposal tion of a regional ATM network is not, standing alone, on those resources.39 Based on all the facts of record, the contrary to the public interest. Network externalities, Board concludes that financial and managerial considersuch as the economies of ubiquity, tend to promote ations are consistent with approval of this proposal.40 consolidation of regional ATM networks. As a result, in Based on a review of the record, including the considvarious geographic areas, like the Mideast region, domi- erations discussed above, the Board finds that this pronant ATM networks have been emerging throughout the posal is not likely to result in any significant unfair EFT industry.36 One recent study indicates that the ten competition, conflicts of interests, unsound banking largest regional networks now account for 80 percent of practices, or other adverse effects 41 all regional ATM network transactions in the United States.37 In this light, the Board believes that, as a result of economic and market structure conditions, regions are 38. Protestants contend that the agreement may be cancelled with six likely to have one dominant ATM network. months' prior notice. The Board believes that whether this event would occur, or would lead to an undue concentration of resources or other Moreover, while approval of this proposal would peradverse effects, is speculative at this time and would depend on a mit MAC to obtain control of National City's ATM number of factors, including the effects of the Consent Decree. assets, it is at best speculation that the availability of 39. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 National City's ATM terminals for access to competing Federal Reserve Bulletin 155 (1987). networks would be altered by the terms of this proposal. 40. The Board has reviewed Protestants' allegations that misstatements were made by Current Owners in their 1992 applications to form All MAC member terminals would remain available, EPS. Protestants contend that Current Owners failed to present to the under the MAC rules, for transactions by cardholders of Board potential adverse competitive effects that could result from the other regional ATM networks. The MAC rules specifi- formation of EPS. In addition, Protestants point to several alleged differences between presentations of procompetitive considerations described in the 1992 applications and the current notices, including matters relating to the procompetitive role played by National City and 34. See Citicorp v. Board of Governors of the Federal Reserve Money Station and the subsequent withdrawal by some Current Owners System, 589 F.2d 1182, 1190-91 (2d Cir. 1979), aff'g Citicorp, 64 from competing ATM networks such as Money Station and Quest (a Federal Reserve Bulletin 321 (1978) (application by nation's third branded ATM network in Kentucky that will cease operations this year). largest banking organization to acquire nation's fourth largest mortgage The Board believes that these matters raised by Protestants concern banker denied in part on undue concentration of resources grounds). judgments and inferences about competitive effects to be drawn from 35. Although MAC is one of the nation's largest ATM networks, the the facts of record in each case, and do not involve misrepresentations Board notes that there are a number of other large ATM networks of material fact. The Board also notes that the record does not indicate serving regions where MAC has a small competitive presence, and that any failure by Current Owners to comply with any of the commitments this proposal would have a de minimis effect on the concentration of relied on by the Federal Reserve System as a basis for approving the resources in the EFT industry nationwide. 1992 applications. Moreover, the Board believes that the potential 36. For example, Southeast Switch, Inc., operator of the Honor adverse effects of this proposal have been fully developed in this network, is the dominant firm in the southeastern United States, while protested proceeding. On the basis of these considerations and all the InfiNet Payment Services, Inc., operator of the NYCE and Yankee 24 other facts of record, the Board believes that managerial considerations networks, has a dominant position in the northeastern United States. are consistent with approval of this proposal. 37. For example, Southeast Switch, Inc., operator of the Honor 41. Protestants believe that consumer convenience would be adnetwork, is the dominant firm in the southeastern United States, while versely affected by the possibility that National City's ATM cards and InfiNet Payment Services, Inc., operator of the NYCE and Yankee 24 terminals would access the MAC network exclusively. The Board networks, has a dominant position in the northeastern United States. believes that this concern is too speculative at this time to represent a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

498 Federal Reserve Bulletin • May 1995 Public Benefits Based on the foregoing and all the other facts of record, the Board has determined that consummation of Section 4(c)(8) requires that, in order to approve a pro- this proposal would not result in any significant adverse posal, the Board must determine that the public benefits effects, such as undue concentration of resources, dereasonably to be expected from the proposal would creased or unfair competition, conflicts of interests, or outweigh potential adverse effects. This is a balancing unsound banking practices, that would not be outprocess that necessarily takes into account the extent of weighed by the benefits to the public that may reasonthe potential for adverse effects, which, for the reasons ably be expected to result from this proposal. Accordindicated above, the Board does not believe to be signif- ingly, the Board concludes that the balance of the public icant in this case. interest factors that it is required to consider under Both National City and KeyCorp propose to make section 4(c)(8) of the BHC Act is favorable, and consissignificant cash investments to purchase or increase their tent with approval of this proposal. respective equity positions in the operations of EPS, including the MAC network. The capital infusions result- Request for a Hearing ing from these investments should enable EPS to continue and to expand its research and development efforts, Protestants have requested that the Board hold a hearing and thereby improve its ability to develop and offer to on these notices. To support this request, Protestants the public innovative electronic banking and funds trans- allege that a number of issues of material fact are in fer products, such as stored value cards and home bank- dispute, including issues that would require a hearing to: ing services. (1) Quantify the anticompetitive impact of this pro- Protestants also dispute generally EPS's claims that posal; public benefits would result from this proposal and, in (2) Show whether the Consent Decree has had proparticular, the claim that this proposal would result in competitive effects; innovative electronic banking products and services. (3) Ascertain whether MAC has engaged in anticom- While the Board recognizes that some of these products petitive practices; and are already offered in some form, the Board believes that (4) Evaluate the public benefits Applicants allege the availability of these products throughout a broad- would result from this proposal. based ATM network such as MAC represents some public benefit. Similarly, while the Board believes that Section 4(c)(8) of the BHC Act provides that a bank EPS already has made substantial progress in developing holding company may, with Board approval and "after these products without the contemplated capital infu- due notice and opportunity for hearing", engage in sions, the enhanced research and development capabili- certain nonbanking activities [emphasis supplied]. Unties generated by these investments should improve der the Board's rules, a formal hearing will be ordered EPS's ability to introduce these products sooner, to under section 4(c)(8) "only if there are disputed issues ensure the quality of the products being offered, and to of material fact that cannot be resolved in some other present the products to a broad customer base. The manner."42 Since the Bank Holding Company Act Board also believes that the broader ownership base of Amendments of 1970 ("1970 Amendments")43 it has EPS should improve the probability of success for new become well established that a formal hearing is not products by increasing the number of financial institu- required on every section 4(c)(8) application.44 The tions and consumers that are likely to use these products courts have uniformly interpreted the 1970 Amendments in earlier stages of development. in light of relevant legislative history, which reflects that evidentiary hearings are to be reserved only for cases significant potential adverse effect for the reasons previously discussed, including die agreement between MAC and Money Station which permits a MAC member to allow cardholders of Money Station network members to conduct transactions at ATMs owned by the MAC member. 42. 12 C.F.R. 225.23(g). A hearing request must also "include a Protestants also contend that Applicants have an inherent conflict of statement of why a written presentation would not suffice in lieu of a interest between earning profits from the operation of MAC and obtain- hearing, identifying specifically any questions of fact that are in dispute ing the lowest ATM costs for their cardholders, and that MAC's history and summarizing the evidence that would be presented at a hearing." of anticompetitive operating practices and its elimination of competitors 12 C.F.R. 262.3(e). through acquisitions weighs against approval. The conflicts identified 43. See Pub. L. 91-607, Title I, § 103, 84 Stat. 1763 (December 31, by Protestants are potentially present in all the joint ventures that 1970). currently own ATM networks, and in all proposals to provide nonbank- 44. See Connecticut Bankers Association v. Board of Governors of ing services to affiliated financial institutions. The Board also notes that the Federal Reserve System, 627 F.2d 245, 250 (D.C. Cir. 1980) MAC's past practices have been addressed by the Consent Decree. It is ("Connecticut Bankers")', American Bancorp, Inc. v. Board of Goverthe Board's view that these contentions do not raise potential adverse nors of the Federal Reserve System, 509 F.2d 29, 35 (8th Cir. 1974) effects that would weigh significantly in favor of denial of this proposal. ("American Bancorp"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 499 "where a contest is raised."45 Moreover, even when a also believe that a hearing would provide facts relevant contest is raised, the statute and its legislative history to defining the relevant product and geographic markets have not been interpreted as requiring a formal hearing and the appropriate measurements of market share within in every case, even when the protestant has alleged that those markets. These inquiries, however, do not dispute there are disputed questions of fact.46 Rather, the Board any specific facts, but instead represent the ultimate is required to grant a full evidentiary hearing to inter- factual findings that, to the extent relevant to this deciested parties only when there is a dispute as to facts that sion, the Board must make based on the record. In are material to the Board's decision.47 addition, as discussed earlier, the Board has concluded In American Bancorp, the court noted that "not every on undisputed facts that MAC and National City are not list of unanswered factual issues will unlock the door to current or significant potential competitors in any relea trial-type hearing."48 The dispute must be a meaning- vant product or geographic market. For these reasons, ful one, justifying a substantial, in-depth inquiry. The the Board believes that a hearing with respect to the Board is not required to "investigate every potential number of current competitors and their market shares in adverse contingency which a contestant hypothesizes."49 the relevant markets, as well as the likelihood of entry Protestants and Applicants have had the opportunity into such markets, is not required. to present, and have submitted, substantial written mate- Protestants also claim a hearing is necessary with rials as part of the record in this case. In addition, as regard to their claim that the Consent Decree will not in noted previously, the record in this case has been devel- fact prevent the anticompetitive conduct that the Decree oped through an informal meeting among Federal Re- sought to eliminate. Protestants do not dispute any of the serve System staff, Applicants, and Protestants. After a terms of the Consent Decree or MAC rules that Applicareful review of all the facts of record, the Board cants claim will allow MAC members to select alternabelieves that Protestants' request disputes the weight tive processors and to join other ATM networks. Instead, accorded to, and the conclusions that may be drawn Protestants cite the need to examine the extent and from, all the facts of record, and does not identify nature of MAC's existing long-term ATM processing disputed issues of fact that are material to the Board's contracts with its members, and MAC's market position decision.50 For the reasons discussed below, the Board in terms of number of ATMs after the acquisition of the does not believe that a hearing is necessary to clarify the National City ATMs.51 However, these suggested lines factual record or is otherwise required or warranted in of inquiry do not challenge any facts of record relied on this case. by the Board. Moreover, even if it is assumed that Protestants' factual allegations regarding the current sta- Protestants contend that a hearing is required to detertus of MAC's compliance with the Consent Decree are mine the competitive impact of the proposal on regional correct, that conduct by MAC, as the Board has deterbranded ATM network services in the Ohio-Kentuckymined above, would not demonstrate a violation of the Pennsylvania region, and suggest that facts would be Consent Decree or any significant anticompetitive efproduced to resolve whether National City is an actual fects that would be material to the Board's decision competitor of MAC or a potential competitor with entry here.52 advantages, what shares of the relevant markets are held by MAC and National City, and whether an appreciable Another basis cited by Protestants for conducting a number of institutions favor MAC or would be likely to hearing is their claim that MAC has engaged in past join a competing network in the near future. Protestants anticompetitive behavior and that certain of MAC's current operating rules not addressed by the Consent Decree have anticompetitive effects.53 As discussed above, most 45. Connecticut Bankers, 627 F.2d at 250; H.R. Rep. No. 1747, 91st Cong., 2d. Sess. 15 (1970). 46. Connecticut Bankers, 627 F.2d at 250. In particular, a party does not become entitled to an evidentiary hearing merely on the basis of a 51. Protestants believe that a hearing would produce facts relating to bald or conclusory allegation that a dispute of material fact exists. Id. at the Consent Decree's effects on MAC's operations, such as whether 251. MAC has certified any third-party processors, whether an appreciable 47. See Independent Bankers of Georgia v. Board of Governors of the number of banks have informed MAC that they intend to add other Federal Reserve System, 516 F.2d 1206, 1220-21 (D.C. Cir. 1975); logos to their ATMs and cards, whether MAC members have indicated Independent Insurance Agents of America v. Board of Governors of the that they intend to use third-party processors, and whether fees charged Federal Reserve System, 658 F.2d 571, 574 (8th Cir. 1981); Indepen- by MAC are now lower as a result of the decree. dent Insurance Agents of America v. Board of Governors of the Federal 52. Similarly, Protestants' assertion that MAC is attempting to evade Reserve System, 646 F.2d 868, 869 (4th Cir. 1981). the terms of the Consent Decree with respect to the potential co- 48. 509 F.2d at 39. See also Connecticut Bankers, 627 F.2d at 251. branding of smart cards is a dispute over the legal meaning of the terms 49. Connecticut Bankers, 627 F.2d at 254. of the decree and does not present any current factual dispute for which 50. Protestants' request also poses a number of questions that they a hearing would be required. maintain could be explored at a hearing without indicating why a 53. Specifically, Protestants cite MAC's prior history of not allowing written presentation would not suffice, or what evidence would be its members to join other ATM networks or to route transactions produced by Protestants at a hearing, as required by Regulation Y and through other networks, and of tying membership in the MAC network the Board's Rules of Procedure. See 12 C.F.R. 225.23(g) and 262.3(e). with MAC's provision of ATM processing services, as well as MAC's Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

500 Federal Reserve Bulletin • May 1995 of the specific operating rules Protestants complain of adequately indicated how a hearing would assist in rehave either been changed by MAC voluntarily or are solving these issues. Accordingly, Protestants' request specifically addressed in the Consent Decree. The provi- for a hearing is hereby denied. sions of MAC's other current operating rules are not in dispute. With respect to other anticompetitive behavior Conclusion cited by Protestants, that conduct, even if assumed to be true, would not be material to the Board's consideration of this proposal because the relevant behavior occurred Based on all the facts of record, and for the reasons before the Consent Decree but was not addressed by the discussed in this statement, the Board has determined DOJ.54 that the notices should be approved. The Board's ap- Protestants also contend that a hearing should be proval is specifically conditioned on Applicants' compliconducted in order to determine what effect the various ance with the commitments made in connection with fees charged by MAC to users of its network, which these notices. The Board's determination also is subject Protestants claim are higher than the industry norm, to all the conditions set forth in Regulation Y, including would have on the competitive effects of this proposal. those in sections 225.7 and 225.23(b) of Regulation Y However, the fees charged by MAC are a matter of (12 C.F.R. 225.7 and 225.23(b)), and to the Board's record.55 And, although the DOJ regarded, for example, authority to require such modification or termination of MAC's switch fee schedule as the "steepest in the the activities of a bank holding company or any of its industry," the Consent Decree indicates that any poten- subsidiaries as the Board finds necessary to ensure comtial competitive deterrent posed by MAC fees could be pliance with, and to prevent evasion of, the provisions of offset by the procompetitive influence of the Consent the BHC Act and the Board's regulations and orders Decree. Thus, the issue raised by Protestants here relates issued thereunder. All of the commitments and condinot to facts in dispute, but to the inferences to be drawn tions relied on by the Board in reaching its decision in from the undisputed facts. this case are deemed to be conditions imposed in writing Finally, with regard to expected benefits to the public by the Board in connection with its findings and decifrom this proposal, Protestants cite as material facts in sion, and, as such, may be enforced in proceedings under dispute MAC's claim that the new investments in MAC applicable law. resulting from this proposal would produce improvements, including improvements in the payment systems JENNIFER J. JOHNSON and data processing technology. According to Protes- Deputy Secretary of the Board tants, these advances can be, and were going to be, offered by MAC without the additional capital that would March 6, 1995 be provided if these notices are approved. However, these facts are not in dispute. Even if Protestants' statements on this point are taken as true, the Board has Appendix found that the infusion of additional capital would encourage existing efforts to develop technology and would Asset and Deposit Data as of September 30, 1994. benefit the public as discussed above. In light of these considerations and all the facts of record, the Board does not believe that Protestants have Banc One Corporation, with $88.1 billion in total consoldemonstrated disputed issues of material fact that cannot idated assets, is the eighth largest commercial banking be resolved in some manner other than a hearing, or have organization in the United States, controlling $65.7 billion in deposits. Banc One operates subsidiary banks in Ohio, Kentucky, Indiana, Michigan, Illinois, Wisconsin, Texas, Colorado, Arizona, California, Oklahoma, Utah, and West Virginia. current rules relating to transaction routing and membership of subsid- CoreStates Financial Corp, with $27.2 billion in total iary banks of a single holding company. consolidated assets, is the 30th largest commercial bank- 54. Protestants also assert that MAC has a history of acquiring or ing organization in the United States, controlling eliminating competing networks. For example, Protestants allege that in 1993, EPS forced Star Banc to abandon its Tellerific branded ATM $19.5 billion in deposits. CoreStates operates subsidiary network and agree to exclusive participation in the MAC network as a banks in Pennsylvania, New Jersey, and Delaware. condition of membership. This past conduct is not disputed and is of little relevance to this proposal, which does not involve the acquisition PNC Bank Corp., with $64.1 billion in total consoliof a direct competitor network. In addition, the Board notes that these dated assets, is the 12th largest commercial banking events occurred before the Consent Decree but were not made the organization in the United States, controlling $33.6 bilsubject of any restrictions in that decree. 55. See 59 Federal Register 24,711, 24,719 and n.5 (1994). lion in deposits. PNC operates subsidiary banks in Penn- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 501 sylvania, Ohio, Kentucky, Indiana, New Jersey, Massa- Banco Santander, S.A. chusetts, and Delaware. Madrid, Spain KeyCorp, with $64.5 billion in total consolidated assets, is the 11th largest commercial banking organization Order Approving Application to Engage De Novo in in the United States, controlling $47.8 billion in depos- Underwriting and Dealing in All Types of Debt and its. KeyCorp operates subsidiary banks in Ohio, Indiana, Equity Securities on a Limited Basis and Other Michigan, New York, Washington, Maine, Oregon, Nonbanking Activities Idaho, Utah, Colorado, Wyoming, and Alaska. National City, with $31.1 billion in total consolidated Banco Santander, S.A., Madrid, Spain ("Applicant"), a assets, is the 28th largest commercial banking organiza- foreign bank subject to the Bank Holding Company Act tion in the United States, controlling $22.9 billion in ("BHC Act"), has applied under section 4(c)(8) of the deposits. National City operates subsidiary banks in BHC Act (12 U.S.C. 1843(c)(8)) and section 225.23(a) Ohio, Indiana, and Kentucky. of the Board's Regulation Y (12 C.F.R. 225.23(a)) to engage de novo through its wholly owned subsidiary, Santander Investment Securities Inc., New York, New Dissenting Statement of Vice Chairman Blinder York ("Company"), in the following nonbanking activities: (1) Underwriting and dealing in securities which may I agree that this proposal should be approved. My dissent be underwritten and dealt in by state member banks is based on a matter of law, not economics. The reduc- ("bank-eligible securities"); tion of competition that will result from the proposed (2) Underwriting and dealing in all types of debt and acquisition is modest and thus not very troubling on equity securities; strictly economic grounds. (3) Engaging as agent in the private placement of all But, section 4(c)(8) of the Bank Holding Company types of securities; Act imposes a sterner test: It requires the Board to (4) Buying and selling all types of securities on the determine that the acquisition "can reasonably be ex- order of investors as a riskless principal; pected to produce benefits to the public . . . that out- (5) Making, acquiring or servicing loans or other weigh possible adverse effects, such as . . . decreased or extensions of credit (including issuing letters of credit unfair competition . . . ." In this case, it seems undeni- and accepting drafts), including, without limitation, able that allowing National City's ATM network to be purchasing and selling such loans or extensions of merged into the MAC network would result in some credit in the secondary market, and engaging in mortadverse effect on competition. Therefore, to approve this gage banking and commercial finance activities. transaction, the Board must find that there are sufficient public benefits to outweigh the loss of competition. The Notice of the application, affording interested persons application, per se, demonstrates no such benefits to the an opportunity to submit comments on the proposal, has public, in my view. been published (59 Federal Register 54,454 (1994)). The Board previously has recognized that ATM net- The time for filing comments has expired, and the Board work operating rules are an important consideration in has considered the application and all comments reassessing competition in this industry under the section ceived in light of the public interest factors set forth in 4(c)(8) standard. If, as a condition for approving this section 4(c)(8) of the BHC Act. application, the Board were to require a few procompeti- Applicant, with total consolidated assets of $73.1 biltive changes in MAC's operating rules (such as eliminat- lion, is the third largest commercial banking organizaing the holding company rule that generally requires all tion in Spain and the 81st largest bank in the world.1 affiliated banks of a holding company to be members of Applicant operates a branch in New York, New York; a the network if one bank joins), the net public benefits finance company in Wilmington, Delaware; and an test of section 4(c)(8) would be met. Absent some agency and an Edge corporation in Miami, Florida. changes, however, I do not see how the standard is met. Applicant also has a controlling interest in First Fidelity The Board's decision came down to choosing between Bancorporation, a bank holding company in Law- (a) approving the transaction conditioned on certain renceville, New Jersey.2 Company is a member of the changes in MAC's operating rules or (b) approving the transaction unconditionally. In view of the law, I could not vote for the latter and so instead supported the 1. All data are as of December 31, 1993. former. 2. Applicant also controls Banco de Santander-Puerto Rico, S.A., Hato Rey, Puerto Rico, and Santander Overseas Bank, Hato Rey, Puerto Rico. Applicant owns a minority, non-controlling interest in The Royal March 6, 1995 Bank of Scotland Group pic., Edinburgh, Scotland. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

502 Federal Reserve Bulletin • May 1995 National Association of Securities Dealers, Inc. The Board also has determined that the proposed ("NASD") and will be registered as a broker-dealer with underwriting and dealing activities involving bankthe Securities and Exchange Commission ("SEC"). Ac- ineligible securities are so closely related to banking as cordingly, Company will be subject to the recordkeeping to be proper incidents thereto within the meaning of and reporting obligations, fiduciary standards, and other section 4(c)(8) of the BHC Act when they are conducted requirements of the Securities Exchange Act of 1934 subject to the prudential framework of limitations estab- (15 U.S.C. § 78a et seq.), the SEC, and the NASD. lished in previous decisions.5 These limitations address the potential for conflicts of interest, unsound banking Activities Approved by Regulation practices, or other adverse effects. Applicant has committed that Company will conduct the proposed under- Two of the activities proposed by Applicant have been writing and dealing activities using the same methods determined by regulation to be activities that are closely and procedures, and subject to the same prudential limirelated to banking for purposes of section 4(c)(8) of the tations established by the Board in the Section 20 Orders BHC Act. See 12 C.F.R. 225.25(b)(1) (making and ser- and other previous cases.6 vicing loans), and (b)(16) (underwriting and dealing in bank-eligible securities). Applicant proposes to conduct Private Placement and Riskless Principal Activities these activities through Company in accordance with the Board's regulations. Private placement involves the placement of new issues of securities with a limited number of sophisticated Underwriting and Dealing in Bank-Ineligible purchasers in a nonpublic offering. A financial intermedi- Securities ary in a private placement transaction acts solely as an agent of the issuer in soliciting purchasers, and does not The Board previously has determined that the conduct of purchase the securities and attempt to resell them. Secuthe proposed securities underwriting and dealing activi- rities that are privately placed are not subject to the ties is consistent with section 20 of the Glass-Steagall registration requirements of the Securities Act of 1933, Act, provided that the underwriting and dealing subsid- and are offered only to financially sophisticated instituiary derives no more than 10 percent of its total gross tions and individuals and not to the public. Applicant has revenue over any two-year period from underwriting and committed that Company would not privately place regdealing in securities that a bank may not underwrite or istered securities, and would only place securities with deal in directly ("bank-ineligible securities").3 Appli- customers who qualify as "accredited investors." cant has committed that Company will conduct its under- "Riskless principal" is the term used in the securities writing and dealing activities with respect to bank- business to refer to a transaction in which a brokerineligible securities subject to this 10 percent revenue test.4 determined that section 20 subsidiaries may provide services that are necessary incidents to approved underwriting and dealing activities, 3. See Canadian Imperial Bank of Commerce, et al., 76 Federal provided that any activities conducted as a necessary incident to bank- Reserve Bulletin 158 (1990); J.P. Morgan & Company Incorporated, ineligible securities activities are treated as part of the bank-ineligible et al., 75 Federal Reserve Bulletin 192 (1989), aff'dsub nom, Securities securities activities unless Company has received specific approval Industry Association v. Board of Governors of the Federal Reserve under section 4(c)(8) of the BHC Act to conduct the activities indepen- System, 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal dently. See J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve Reserve Bulletin 473 (1987), aff'd sub nom, Securities Industry Associ- Bulletin at 213 n. 59. Until such approval is obtained, any revenues ation v. Board of Governors of the Federal Reserve System, 839 F.2d 47 from the incidental activities must be counted as ineligible revenues (2d Cir.), cert, denied, 486 U.S. 1059 (1988) (collectively, "Section 20 subject to the 10 percent revenue limitations set forth in the Section 20 Orders"). Compliance with the 10 percent revenue limitation shall be Orders, as modified by the Modification Orders. calculated in accordance with the method stated in the Section 20 5. See Section 20 Orders. Orders, as modified by the Order Approving Modifications to Section 20 6. Applicant has received approval to engage through Company in Orders, 75 Federal Reserve Bulletin 751 (1989), the Order Approving full-service brokerage pursuant to 12 C.F.R. 225.25(b)(4) and (b)(15). Modifications to the Section 20 Orders, 79 Federal Reserve Bulletin In order to address potential conflicts of interest arising from Compa- 226 (1993), and the Supplement to Order Approving Modifications to ny's conduct of full-service brokerage activities together with under- Section 20 Orders, 79 Federal Reserve Bulletin 360 (1993) (collective- writing and dealing in bank-ineligible securities, Applicant has commitly, the "Modification Orders"). The Board notes that Applicant has not ted that whenever Company provides full-service brokerage services adopted the Board's alternative indexed revenue test to measure compli- with respect to ineligible securities that it holds as principal, Company ance with the 10 percent limitation on bank-ineligible securities activi- will inform its customers at the commencement of the relationship that, ties, and, absent such election, will continue to employ the Board's as a general matter, Company may be a principal or may be engaged in original 10 percent revenue standard. underwriting with respect to, or may purchase from an affiliate, those 4. As an incident to the proposed underwriting and dealing activities, securities for which brokerage and advisory services are provided. In Company also proposes to engage in trading options, futures, and addition, at the time any brokerage order is taken, the customer will be options on futures in bank-eligible and bank-ineligible securities, for informed (usually orally) whether Company is acting as agent or hedging purposes only. Applicant has committed that these activities principal with respect to a security. Confirmations sent to customers will be conducted in accordance with the Board's policy statement on also will state whether Company is acting as agent or principal. See derivative transactions, 12 C.F.R. 225.142. The Board has previously PNC Financial Corp., 75 Federal Reserve Bulletin 396 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 503 dealer, after receiving an order to buy (or sell) a security as modified to reflect Applicant's status as a foreign from a customer, purchases (or sells) the security for its bank.11 own account to offset a contemporaneous sale to (or purchase from) the customer.7 Riskless principal transac- Other Considerations tions are understood in the industry to include only transactions in the secondary market. Thus, Company In every case under section 4(c)(8) of the BHC Act, the would not act as a riskless principal in selling securities Board considers the financial and managerial resources at the order of a customer that is the issuer of the of the applicant and its subsidiaries and the effect of the securities to be sold, or in any transaction where Com- transaction upon such resources.12 In considering these pany has a contractual agreement to place the securities factors, the Board has noted that Applicant's capital as agent of the issuer. Company also would not act as a ratios satisfy applicable risk-based standards established riskless principal in any transaction involving a security under the Basle Accord, and are considered equivalent to for which it makes a market. the capital levels that would be required of a U.S. bank- The Board has determined by order that, subject to ing organization. The Board has also reviewed the capiprudential limitations that address the potential for con- talization of Applicant and Company in accordance with flicts of interests, unsound banking practices, or other the standards set forth in the Section 20 Orders, and finds adverse effects, the proposed private placement and risk- the capitalization of each to be consistent with approval less principal activities are so closely related to banking of this proposal. With respect to the capitalization of as to be a proper incident thereto within the meaning of Company, this determination is based on all the facts of section 4(c)(8) of the BHC Act.8 The Board also has record, including Applicant's projections of the volume determined that acting as agent in the private placement of Company's underwriting and dealing activities in of securities, and purchasing and selling securities on the bank-ineligible securities. order of investors as a riskless principal, do not consti- On the basis of all the facts of record, including the tute underwriting and dealing in securities for purposes foregoing, the Board has concluded that financial and of section 20 of the Glass-Steagall Act, and that revenue managerial considerations are consistent with approval derived from these activities is not subject to the 10 of this application. The Federal Reserve Bank of New percent revenue limitation on bank-ineligible securities York has completed a review of Applicant's and Compaunderwriting and dealing.9 ny's policies and procedures to determine whether those Applicant has committed that Company will conduct policies and procedures ensure compliance with the Secits private placement and riskless principal activities tion 20 Firewalls and the other requirements of this order using the same methods and procedures, and subject to and the Section 20 Orders, including computer, audit, the same prudential limitations established by the Board and accounting systems, internal risk management conin the Bankers Trust Order and the J. P. Morgan Order,10 trols, and the necessary operational and managerial infrastructure. The results of that review are consistent with approval of the application. Under the framework and conditions established in this and prior decisions, consummation of this proposal is not likely to result in any significant adverse effects, 7. See Securities and Exchange Commission Rule 10b-10. 17 C.F.R. 240.10b-10(a)(8)(i). such as undue concentration of resources, decreased or 8. See J.P. Morgan & Company Incorporated, 76 Federal Reserve unfair competition, conflicts of interests, or unsound Bulletin 26 (1990) ("J.P. Morgan Order"); Bankers Trust New York banking practices. Moreover, the Board expects that the Corporation, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust Order"). de novo entry of Company into the market for the 9. See Bankers Trust Order at 831-833. proposed services in the United States would provide 10. Among the prudential limitations detailed more fully in the added convenience to Applicant's customers, and would Bankers Trust Order and the J. P. Morgan Order are that Company will maintain specific records that will clearly identify all riskless principal increase the level of competition among existing providtransactions, and that Company will not engage in any riskless principal ers of these services. For these reasons, the Board has transactions for any securities carried in its inventory. When acting as a determined that the performance of the proposed activiriskless principal, Company will not hold itself out as making a market in the securities that it buys and sells as a riskless principal. Moreover, ties by Applicant can reasonably be expected to produce Company will not engage in riskless principal transactions on behalf of public benefits that outweigh possible adverse effects any foreign affiliate that engages in securities dealing activities outside the United States and will not act as riskless principal for registered investment company securities. In addition, Company will not act as a riskless principal for any securities of investment companies that are advised by Applicant or any of its affiliates. With regard to private 11. See, e.g., The Bank of Nova Scotia, 76 Federal Reserve Bulletin placement activities, Applicant has committed that Company will not 545 (1990). privately place registered investment company securities or securities of 12. See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 investment companies that are advised by Applicant or any of its Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank, AG, 73 affiliates. Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

504 Federal Reserve Bulletin • May 1995 under the proper incident to banking standard of section by the Federal Reserve Bank of New York, acting pursu- 4(c)(8) of the BHC Act. ant to delegated authority. Accordingly, and for the reasons set forth in this order By order of the Board of Governors, effective and in the Section 20 Orders, the Board has concluded March 27, 1995. that Applicant's proposal to engage through Company in the proposed activities is consistent with the Glass- Voting for this action: Chairman Greenspan, Vice Chairman Steagall Act, and that the proposed activities are so Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and closely related to banking as to be proper incidents Yellen. thereto within the meaning of section 4(c)(8) of the BHC WILLIAM w. WILES Act, provided that Applicant limits Company's activities Secretary of the Board as specified in this order and the Section 20 Orders, as modified by the Modification Orders. Carbon County Holding Company Englewood, Colorado Conclusion Order Approving Notice to Engage in Investment Advisory and Related Nonbanking Activities On the basis of the foregoing and all the facts of record, including the commitments furnished by Applicant, the Carbon County Holding Company, Englewood, Colo- Board has determined that the application should be, and rado ("Carbon County"), a bank holding company hereby is, approved, subject to all the terms and condiwithin the meaning of the Bank Holding Company Act tions of this order and the Section 20 Orders, as modified ("BHC Act"), has applied under section 4(c)(8) of the by the Modification Orders. The Board's approval of this BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of proposal extends only to activities conducted within the the Board's Regulation Y (12 C.F.R. 225.23) to acquire limitations of those orders and this order, including the Hanifen, Imhoff Management Co., Inc., Denver, Colo- Board's reservation of authority to establish additional rado ("Company"), and to engage through Company in limitations to ensure that Company's activities are conproviding investment advisory and administrative sersistent with safety and soundness, conflicts of interests, vices to one open-end investment company or mutual and other relevant considerations under the BHC Act. fund (the "Fund").1 Underwriting and dealing in any manner other than as Notice of the application, affording interested persons approved in this order and the Section 20 Orders is not an opportunity to submit comments, has been published authorized for Company. (59 Federal Register 56,494 (1994)). The time for filing Company may immediately commence the proposed comments has expired, and the Board has considered the underwriting and dealing activities, subject to the other application and all comments received in light of the conditions of this order and the Section 20 Orders. factors set forth in section 4 of the BHC Act. The Board's determination also is subject to all the Carbon County is a one-bank holding company that terms and conditions set forth in Regulation Y, including operates Rawlins National Bank, Rawlins, Wyoming those in sections 225.7 and 225.23(b) of Regulation Y, ("Bank"). Bank has total assets of $89.8 million.2 Carbon and to the Board's authority to require such modification County does not engage in any nonbanking activities. or termination of the activities of a bank holding com- Company currently provides investment advisory and pany or any of its subsidiaries as the Board finds necesadministrative services to the Fund. The administrative sary to ensure compliance with, and to prevent evasion services Company provides to the Fund include computof, the provisions of the BHC Act and the Board's ing the Fund's net asset value and performance data, regulations and orders issued thereunder. The Board's coordinating communications and activities between the decision is specifically conditioned on compliance with investment advisor and the other service providers, acall the commitments made in connection with this applicounting and recordkeeping, disbursing payments for the cation, including the commitments discussed in this order and conditions set forth in this order and the abovenoted Board regulations and orders. These commitments and conditions are deemed to be conditions imposed in 1. The Fund is registered under the Investment Company Act of 1940 writing by the Board in connection with its findings and (15 U.S.C. § 80a-1 et seq.) ("1940 Act"). Fund is not a so-called decision, and, as such, may be enforced in proceedings proprietary mutual fund, and shares of Fund would not be sold or marketed primarily to customers of Company's bank affiliate or customunder applicable law. ers of any other insured depository institution affiliate. Upon consumma- This transaction shall not be consummated later than tion of this proposal, Company would change its name to Freedom Funds Management Company, and the Fund would be named Freedom three months after the effective date of this order, unless Fund. such period is extended for good cause by the Board or 2. Asset data are as of December 31, 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 505 Fund's expenses, arranging office space for the Fund, writer, and often its administrator. The 1940 Act also and preparing and filing regulatory reports for the Fund.3 requires that these contracts be reviewed annually the mutual fund's board of directors, and that these contracts Glass-Steagall Act be terminable by the board of directors on no more than 60 days written notice.10 Carbon County has committed Under the Glass-Steagall Act, a company that owns a that a majority of the Fund's trustees will be disintermember bank may not control "through stock ownership ested persons. or in any other manner" a company that engages princi- Company has committed to provide advisory and adpally in distributing, underwriting or issuing securities.4 ministrative services in accordance with the conditions In 1972, the Board issued an interpretive rule that ex- relied on by the Board in Mellon.u In particular, the plained the Board's view that the provisions of the distributor of the Fund would not be affiliated with Glass-Steagall Act govern the relationship between mu- Carbon County. Company would not, by virtue of betual funds and companies that own member banks be- coming administrator to a fund that it or an affiliate cause mutual funds engage continuously in issuing advises, become involved in policy-making functions of and redeeming securities.5 The Board found that the the Fund to a greater extent than if Company provided Glass-Steagall Act prohibited affiliates of banks from solely investment advisory services. The Board believes sponsoring, organizing, or controlling mutual funds or that control of the Fund would continue to rest with the distributing their shares.6 board of trustees of the Fund, which would be indepen- The Board also found, however, that the Glass-Steagall dent of Company. In this regard, Carbon County has Act does not prohibit all relationships between a bank committed that it will not have any director or officer holding company and a mutual fund. The Board previously interlocks with the Fund.12 has determined that bank holding companies may serve as In providing this combination of services, Carbon the investment advisor to mutual funds, and, therefore, that County and Company would also be subject to the a bank holding company that serves as investment advisor restrictions set forth in the Board's interpretive rule on to a mutual fund does not control the fund for purposes of investment advisory activities (12 C.F.R. 225.125). The the Glass-Steagall Act.7 rule requires any bank holding company that acts as The Board also has determined previously that a bank agent in the purchase or sale of shares of an investment holding company may provide investment advisory and company advised by a holding company affiliate or administrative services to a mutual fund consistent with recommends the purchase or sale of such shares to any the provisions of the Glass-Steagall Act.8 In the Board's customer to disclose to the customer in writing the role opinion, permitting a bank holding company that serves of the bank holding company and its affiliates with the as the investment advisor to a mutual fund also to investment company. In addition, the bank holding comprovide the essentially ministerial or supporting func- pany must disclose in writing that the shares of the tions as administrator to that fund would not signifi- investment company are not federally insured, are not cantly increase the ability of the bank holding company deposits, and are not obligations of, or guaranteed by, to control the mutual fund. In Mellon, the Board noted any bank. that the 1940 Act requires that at least 40 percent of the The interpretive rule also precludes an investment board of directors of a mutual fund be disinterested company advised by a bank holding company from individuals who are not affiliated with the investment advisor, with any person that the Securities Exchange 10. Company provides the Fund with investment advisory and admin- Commission ("SEC") has determined to have a material istrative services under a single contract. Accordingly, directors who are business or professional relationship with the fund, with not considered interested persons of the investment advisor must also any employee or officer of the fund, with any registered review and approve the contract for administrative services. 11. Carbon County would not be involved in the distribution of the broker or dealer, or with any other interested or affiliated shares of any mutual fund. In particular, Company would not be person.9 These unaffiliated board members must approve involved in the promotion or sale of the Fund's shares. Carbon County the fund's contracts with its investment advisor, under- has committed that Company would not engage in any marketing, sales or advertising activities relative to any mutual fund. Company would provide the distributor of the Fund with performance and portfolio data. In addition, Company would review marketing materials prepared by 3. A list of the proposed administrative services is included in the the distributor for the sole purpose of ensuring compliance with all Appendix. pertinent regulatory requirements. 4. 12 U.S.C. §§ 221a, 377. 12. An officer and director of Company, who would serve as an 5. 12 C.F.R. 225.125. officer and director of Carbon County and Bank, has served as Secretary 6. Carbon County has committed that Company will not sponsor any to the Fund's board of trustees. Carbon County has committed that, additional mutual funds. prior to Company's acquisition by Carbon County, this individual will 7. 12 C.F.R. 225.25(b)(4); 12 C.F.R. 225.125. resign his position with the Fund and would attend meetings of the 8. Mellon Bank Corporation, 79 Federal Reserve Bulletin 626 (1993) Fund's board of trustees only to the extent necessary for him to provide ("Mellon"). information to the board on behalf of Company as investment advisor 9. 15 U.S.C. §§ 80a-2, 80a-10. and administrator to the Fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

506 Federal Reserve Bulletin • May 1995 having a name that is similar to, or a variation of, the the expected public benefits of the proposal.16 In making name of any bank holding company or any of its subsid- this determination, the Board has considered the finaniary banks.13 In addition, the Board's rule prohibits a cial and managerial resources of Carbon County and its bank holding company from owning shares of any mu- subsidiaries, including Company, and the effect of this tual fund that it advises, from purchasing in a fiduciary proposal upon such resources, and has concluded that capacity in its sole discretion shares of these mutual financial and managerial factors are consistent with apfunds, and from lending to any such fund or accepting proval of this application.17 shares of such funds as collateral for any loan for the Based on the foregoing and all the facts of record, purpose of acquiring shares of the fund. Carbon County including all the commitments and representations made has committed to abide by these restrictions. by Carbon County in this case, and subject to all the On this basis, and subject to the commitments made terms and conditions set forth in this order, the Board by Carbon County and its compliance with the Board's has determined that the application should be, and interpretive rule, the Board believes that Carbon Coun- hereby is, approved. The Board's determination is subty's proposal to provide both investment advisory and ject to all the conditions set forth in the Board's Regulaadministrative services to the Fund is not prohibited by tion Y, including those in sections 225.7 and the Glass-Steagall Act. 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 and 225.23(b)(3)), and to the Board's authority to require Bank Holding Company Act modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board The Board has previously determined by regulation that finds necessary to assure compliance with, and to prea bank holding company may act as investment advisor vent evasion of, the provisions of the BHC Act and the to a mutual fund.14 In addition, the Board has previously Board's regulations and orders issued thereunder. The determined by order that acting as the administrator for a Board's decision is specifically conditioned on Carbon County's compliance with all the commitments and repmutual fund is closely related to banking for purposes of section 4(c)(8) of the BHC Act.15 In order to approve resentations made in connection with this application, including the commitments and conditions discussed in this proposal, the Board also must find that the perforthis order. The commitments, representations, and condimance of the proposed activities by Company "can tions relied on in reaching this decision shall be deemed reasonably be expected to produce benefits to the public to be conditions imposed in writing by the Board in ... that outweigh possible adverse effects, such as undue connection with its findings and decision and, as such, concentration of resources, decreased or unfair competimay be enforced in proceedings under applicable law. tion, conflicts of interest, or unsound banking practices." 12 U.S.C. § 1843(c)(8). This transaction shall not be consummated later than The Board has previously determined that the provi- three months after the effective date of this order, unless sion of administrative services within certain parameters such period is extended for good cause by the Board or is not likely to result in the types of subtle hazards at by the Federal Reserve Bank of Kansas City, acting which the Glass-Steagall Act is aimed or any other pursuant to delegated authority. adverse effects. For the same reasons, and based on the By order of the Board of Governors, effective commitments made by Carbon County, the Board has March 6, 1995. determined that the performance of the proposed activities by Company can reasonably be expected to produce Voting for this action: Chairman Greenspan, Vice Chairman benefits to the public such as increased efficiency and Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. greater convenience that would outweigh any possible JENNIFER J. JOHNSON adverse effects of this proposal under the proper incident Deputy Secretary of the Board to banking standard of section 4(c)(8) of the BHC Act. There is no evidence in the record to indicate that consummation of this proposal, subject to the commit- 16. Carbon County has committed that there will be no cash or ments noted above, would result in significant adverse security transactions between the Fund and Bank or any other insured effects, such as undue concentration of resources, de- depository institution affiliate, Carbon County, or Rawlins National Bancorporation, a wholly owned subsidiary of Carbon County that is creased or unfair competition, conflicts of interests, or the direct parent company of Bank. unsound banking practices, that are not outweighed by 17. The Board notes that its capital adequacy guidelines ("Guidelines") provide that bank holding companies with less than $150 million in assets, such as Carbon County, are generally subject to the Guidelines on a bank-only basis, unless the bank holding company engages in significant nonbanking activities. In recognition of the 13. 12 C.F.R. 225.125(f). significant nonbanking activities approved in this order, the Board 14. 12 C.F.R. 225.25(b)(4). believes that it is appropriate that Carbon County meet the Guidelines 15. See Mellon. on a consolidated basis, and Carbon County has committed to do so. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 507 Appendix the Bank Holding Company Act ("BHC Act"), has applied for the Board's approval under section 4(c)(8) of List of Administrative Services 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) to acquire Seaboard Savings Bank, F.S.B., Stuart, Flor- (1) Maintaining and preserving the records of the Fund, ida ("Seaboard"), and thereby engage in the operation including financial and corporate records; of a savings association pursuant to section 225.25(b)(9) (2) Computing net asset value, dividends, performance of the Board's Regulation Y (12 C.F.R. 225.25(b)(9)). data and financial information regarding the Fund; Notice of the application, affording interested persons (3) Furnishing statistical and research data; an opportunity to submit comments, has been published (4) Preparing and filing with the SEC and state securities (59 Federal Register 36,765) (1994)). The time for filing regulators registration statements, notices, reports and comments has expired, and the Board has considered the other material required to be filed under applicable laws; application and all comments received in light of the (5) Preparing reports and other informational materials factors set forth in section 4(c)(8) of the BHC Act. regarding the Fund including proxies and other share- Johnson, with consolidated assets of $1.1 billion, conholder communications and reviewing prospectuses; trols five bank subsidiaries in Wisconsin. Johnson is the (6) Providing office facilities and clerical support for the sixth largest commercial banking organization in Wis- Fund; consin, controlling deposits of $673.5 million, represent- (7) Developing and implementing procedures for moniing 1.6 percent of total deposits in commercial banking toring compliance with regulatory requirements and organizations in the state.1 Seaboard is the 51st largest compliance with the Fund's investment objectives, polithrift organization in Florida, controlling deposits of cies, and restrictions as established by the Fund's board; $69.6 million, representing less than one percent of total (8) Providing routine fund accounting services and liaideposits in thrift institutions in Florida. Johnson and son with outside auditors; Seaboard do not compete in any banking market. (9) Reviewing and arranging for payment of the Fund's The Board has determined that the operation of a expenses; savings association by a bank holding company is (10) Providing communication and coordination services closely related to banking for purposes of section 4(c)(8) with regard to the Fund's investment advisor, transfer of the BHC Act (12 C.F.R. 225.25(b)(9)).2 To approve agent, custodian, distributor and other service organizaan application under section 4(c)(8) of the BHC Act, the tions that render recordkeeping or shareholder communi- Board also is required to determine that the applicant's cation services; ownership and operation of the acquired company "can (11) Reviewing and providing advice to the distributor, reasonably be expected to produce benefits to the public, the Fund and investment advisor regarding sales literasuch as greater convenience, increased competition, or ture and marketing plans to assure regulatory compligains in efficiency, that outweigh possible adverse efance; fects, such as undue concentration of resources, de- (12) Providing information to the distributor's personnel creased or unfair competition, conflicts of interests, or concerning the Fund's performance and administration; unsound banking practices."3 (13) Participation in seminars, meetings, and confer- The Board notes that in each of the last three conences designed to present information to brokers and sumer compliance examinations of the lead bank of investment companies, but not in connection with the Johnson, Heritage Bank and Trust, Racine, Wisconsin sale of shares of the funds to the public, concerning the ("Heritage"), the Federal Deposit Insurance Corporaoperations of the funds, including administrative sertion ("FDIC"), Heritage's primary supervisor, issued to vices provided by Carbon County to the funds; the bank an unsatisfactory compliance rating and cited (14) Assisting the Fund in the development of additional portfolios; and (15) Providing reports to the Fund's board with regard to 1. All banking data are as of June 30, 1994. its activities. 2. In making this determination the Board requires savings associations acquired by bank holding companies to conform their direct and indirect activities to those permissible for bank holding companies Johnson International, Inc. under section 4(c)(8) of the BHC Act and Regulation Y. Johnson has committed to conform all activities of Seaboard to these requirements. Racine, Wisconsin 3. 12 U.S.C. § 1843(c)(8). Pursuant to section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24), the Board's analysis includes an evaluation of the financial and managerial resources of Johnson, its Order Denying Acquisition of a Savings Association subsidiaries, and Seaboard. In considering an application to acquire a savings association under section 4(c)(8) of the BHC Act, the Board also reviews the records of performance of the relevant institutions Johnson International, Inc., Racine, Wisconsin ("Johnunder the Community Reinvestment Act (12 U.S.C. § 2901 et seq.). See son"), a bank holding company within the meaning of Norwest Corporation, 76 Federal Reserve Bulletin 873, 876 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

508 Federal Reserve Bulletin • May 1995 substantive violations by Heritage of federal consumer resources of an applicant.5 In this case, significant violalaws and deficiencies in policies and procedures for tions of consumer compliance and other laws have been assuring compliance with federal consumer laws. These noted in three successive examination reports beginning violations and deficiencies include numerous errors in in 1989. Many of these violations appear to stem from reporting Home Mortgage Disclosure Act ("HMDA") inadequate managerial oversight, training, and review data, violations of the Truth in Lending Act that require procedures. The Board believes that the past failure to reimbursement to customers, and numerous violations of address these violations and the deficiencies in corporate other consumer laws, including the Equal Credit Oppor- policies and practices that permit these violations to tunity Act, Fair Housing Act, and Truth in Savings Act. continue over an extended period of time reflects ad- The examinations also noted numerous deficiencies in versely on the managerial resources of Johnson. While compliance with the Bank Secrecy Act, Electronic Funds Johnson has recently taken a number of steps and pro- Transfer Act, and the Expedited Funds Availability Act. posed others to correct these violations, it is unclear at The Board notes that some of the specific deficiencies this time whether these steps will be sufficient to address identified by Heritage's primary supervisor have per- fully and adequately the compliance deficiencies found sisted over two examinations, and one deficiency was at Heritage. The Board is unable to conclude, in light of criticized in each of the past three examinations.4 Upon the significant period of time over which these matters completion of the 1992 examination, Heritage entered have been identified by examiners and remained uncorinto a memorandum of understanding with the FDIC, rected by Johnson, that Johnson has demonstrated a which remains in effect. Heritage is the largest bank record of performance that outweighs these adverse manoperated by Johnson, and represents 56 percent of the agerial considerations. consolidated total assets of Johnson. Johnson contends that consummation of this proposal During the processing of this application, Johnson has can reasonably be expected to result in public benefits indicated that it has undertaken various steps to improve that justify approval of this proposal. In particular, Johnthe regulatory compliance record of Heritage. For exam- son contends that the proposal will improve the financial ple, in November 1994, Heritage established a Compli- condition of Seaboard and permit Seaboard to provide ance Committee that reports weekly to Johnson's corpo- additional services to Seaboard's customers. The Board rate audit committee and board of directors regarding notes that Seaboard's financial condition is improving corrective measures implemented, internal review re- under its current management and that the proposed sults, training programs, regulatory developments, and acquisition is not required by Seaboard's federal or state other compliance issues. In January 1995, Johnson im- supervisor. Moreover, management of Johnson must foplemented a compliance program at Heritage. The pro- cus attention on compliance efforts within its existing gram includes a compliance training plan for bank per- organization. The acquisition of another company at this sonnel; review of all closed retail and mortgage loans for time may distract management from that effort. Thus, the proper documentation and disclosures; conversion of the Board believes that the potential benefits for consummabank's HMDA Loan Application Register to ensure re- tion of this proposal are at best small and would not porting accuracy; and implementation of new audit pro- outweigh the adverse effects in this case. cedures. The FDIC reviewed these steps in January The Board also has considered the financial condition 1995, and indicated these steps are relatively new and of Johnson and its subsidiaries, the potential competitive have not been in place for a sufficient period of time to effects of the proposal, and the other factors required allow for an adequate evaluation of the effectiveness of under section 4(c)(8) of the BHC Act. While these these initiatives. factors appear to be consistent with approval, the Board The Board has previously stated that repeated viola- believes these factors do not outweigh the adverse contions of consumer compliance laws are regarded as seri- siderations discussed above. ous matters that reflect adversely on the managerial For these reasons and based on all the facts of record, the Board has determined that approval of this application is not warranted and that the application should be, and hereby is, denied. By order of the Board of Governors, effective 4. In the consumer compliance examination of Heritage conducted by March 27, 1995. the FDIC as of August 1, 1989, examiners noted violations in 11 of 16 consumer regulations reviewed. In the consumer compliance examination as of August 31, 1992, FDIC examiners noted numerous violations, including eight violations cited in the 1989 examination. The most recent examination of Heritages's compliance program, as of September 12, 1994, noted that eight of the violations cited in this examination were also cited in 1992, and one violation had been cited in 1989 and 1992. The 1994 examination also noted new violations of consumer 5. See, e.g., First State Holding Company, Inc., 67 Federal Reserve regulations. Bulletin 802 (1981). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 509 Voting for this action: Chairman Greenspan, Vice Chairman agement of Sunrise without permitting North Fork to Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and gain actual control of Sunrise.3 The requirement under Yellen. section 4(c)(8) of the BHC Act, however, that the Board's prior approval must be obtained before a bank WILLIAM W. WILES holding company acquires more than 5 percent of the Secretary of the Board voting shares of a nonbanking company indicates that Congress contemplated the acquisition by bank holding North Fork Bancorporation, Inc. companies of less than a controlling interest in nonbank- Mattituck, New York ing companies.4 In addition, North Fork has made other commitments Order Approving Notice to Acquire Shares of a of the type relied on by the Board in previous cases Nonbanking Company involving the acquisition of a minority interest in a bank or bank holding company in order to address concerns North Fork Bancorporation, Inc., Mattituck, New York about the effect that North Fork's acquisition of shares ("North Fork"), a bank holding company within the would have on the management and operations of Sunmeaning of the Bank Holding Company Act ("BHC rise.5 These commitments include a commitment not to Act"), has requested Board approval pursuant to section seek or accept any representation on the board of direc- 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and tors of Sunrise or any of its subsidiaries, and a commitsection 225.23(a) of the Board's Regulation Y (12 C.F.R. ment not to attempt to influence the management or 225.23(a)) to acquire up to 9.9 percent of the voting policies of Sunrise or any of its subsidiaries. North Fork, shares of Sunrise Bancorp, Inc. ("Sunrise"), and thereby therefore, may not participate in the deliberations or indirectly acquire an interest in Sunrise's wholly owned decision making of the board of directors of Sunrise or subsidiary, Sunrise Federal Savings Bank ("Savings any of its subsidiaries without the Board's prior ap- Bank"), and Savings Bank's wholly owned nonbank proval. Based on the facts of record and North Fork's subsidiary, Paumanok Service Corp. ("Paumanok"), all commitments, the Board concludes that North Fork of Farmingdale, New York. would not acquire control or the ability to exercise a Notice of this proposal, affording interested persons an controlling influence over Sunrise upon consummation opportunity to submit comments, has been published of this proposal. On this basis, the Board does not (59 Federal Register 7567 (1995)). The time for filing believe that the proposed ownership of up to 9.9 percent comments has expired, and the Board has considered the of the voting shares of Sunrise by North Fork would notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. The Board has previously determined that the opera- 3. Sunrise notes that it converted in 1993 from a mutual savings tion of a savings association and the conduct of discount association to a capital stock association, and that North Fork is resecurities brokerage activities are closely related to bank- quired to obtain the written approval of the Office of Thrift Supervision ing for purposes of section 4(c)(8) of the BHC Act.1 In ("OTS") prior to acquiring or offering to acquire, directly or indirectly, more than 10 percent of any class of equity security of Sunrise within order to approve this proposal, the Board also is required three years of the consummation of its conversion. 12 C.F.R. by section 4(c)(8) of the BHC Act to determine that the 563b.3(i)(3)(i). In addition, Sunrise states that it will oppose North Fork's acquisition of any additional shares of North Fork voting shares acquisition by North Fork of its interest in Sunrise "can during this period, and alleges that North Fork has not demonstrated its reasonably be expected to produce benefits to the public financial ability to acquire a large number of additional shares in the ... that outweigh possible adverse effects, such as undue near future. Sunrise argues that these factors render it highly uncertain whether North Fork can significantly increase its shareholding interest concentration of resources, decreased or unfair competiin Sunrise in the near future, and that as a result this proposal would tion, conflicts of interests, or unsound banking practic- tend to perpetuate dissension within Sunrise management. es."2 The Board has carefully considered comments 4. Sunrise also alleges that North Fork's expressed interest in acquiring additional shares of Sunrise voting stock in the future, together with submitted by Sunrise in opposing this proposal. Sunrise the shares of voting stock to be acquired by North Fork in this proposal, argues that this notice should be denied because it repre- amounts to an "offer" to acquire more than 10 percent of a class of equity securities of Sunrise. The Board notes that North Fork seeks sents a minority investment that would disrupt the manapproval to acquire less than 10 percent of Sunrise's voting shares, and has indicated that it has no right or agreement to acquire any additional voting shares of Sunrise at this time. The OTS has informally advised 1. 12 C.F.R. 225.25(b)(9) and 225.25(b)(15)(i). In making this deter- Board staff that it concurs in the view that a general expression of mination, the Board requires that savings associations acquired by bank interest in acquiring shares of a savings association does not constitute holding companies conform their direct and indirect activities to those an "offer" under 12 C.F.R. 563b.3(i)(3)(i) or the underlying OTS polipermissible for bank holding companies under section 4(c)(8) of the cies. Moreover, North Fork's inquiries of Sunrise management concern- BHC Act. Paumanok engages in certain insurance activities impermissi- ing its receptivity to the basic structure of a potential acquisition are expressly permitted by the OTS. See 12 C.F.R. 563b.3(i)(7)(ii). OTS ble under the BHC Act. As set forth in the Appendix, North Fork has rules also would permit North Fork to acquire in excess of 10 percent of committed to cease or otherwise address these and other impermissible the voting shares of Sunrise after obtaining OTS approval. activities. 2. 12 U.S.C. § 1843(c)(8). 5. These commitments are set forth in the Appendix. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

510 Federal Reserve Bulletin • May 1995 impede the ability of the management of Sunrise to and Sunrise, if considered as a combined banking organideploy the assets acquired through the recent conversion zation, would remain the 22d largest depository instituof Sunrise from mutual to stock form. tion in the market, and would control total deposits of The Board's inquiry does not end, however, with its approximately $2.8 billion, representing less than 1 perfinding that North Fork will not control Sunrise. The cent of market deposits. The Metropolitan New York- Board notes that noncontrolling interests in directly com- New Jersey banking market is unconcentrated, with a peting depository institutions may raise serious ques- Herfindahl-Hirschman Index ("HHI") of 531, which tions under the BHC Act. The Board has previously would remain unchanged upon consummation of this noted that one company need not acquire control of proposal.10 Based on all the facts of record, the Board another in order to substantially lessen competition be- concludes that consummation of this proposal would not tween them, and that the specific facts of each case will have a significantly adverse effect on competition or on determine whether the minority investment in a com- the concentration of resources in any relevant banking pany would be anticompetitive.6 In this case, it is the market in which North Fork and Sunrise compete. Board's judgment, based upon careful analysis of the In reviewing whether the public benefits of a proposal record, that no significant reduction in competition is outweigh the adverse effects, the Board considers the likely to result from the acquisition. The record indicates financial and managerial resources of the applicant. that there will be no officer or director interlocks be- Based on a review of relevant examination reports and tween North Fork and Sunrise, that North Fork intends other information relating to the financial condition and the acquisition to be a strictly passive investment, and managerial resources and plans of North Fork and its that North Fork is prohibited by the BHC Act and its subsidiaries, the Board concludes that the potential ficommitments from acting in concert with any other nancial strength of North Fork as a shareholder, and the entity for control of Sunrise. financial11 and managerial12 resources of North Fork, Moreover, even if the Board were to conclude that Sunrise and their banking and nonbanking subsidiaries North Fork would control Sunrise, the elimination of are consistent with approval of this proposal. Accordcompetition between the two entities would not be so ingly, for all the reasons discussed in this order, the substantial as to warrant denial of the application. North Board has determined that the balance of the public Fork is the 34th largest bank or thrift organization ("de- interest factors it is required to consider under section pository institution") in New York, controlling deposits 4(c)(8) of the BHC Act is favorable and consistent with of approximately $2.3 billion, representing less than approval. 1 percent of total deposits in depository institutions in Based on the foregoing and all the facts of record, the state.7 Sunrise is the 73d largest depository institu- including all of North Fork's commitments and represention in New York, controlling deposits of approximately tations, and subject to all the terms and conditions set $439 million, also representing less than 1 percent of total deposits in depository institutions in the state. North Fork and Sunrise compete directly in the Metropolitan 100 percent in the calculation of pro forma market share. See Norwest New York-New Jersey banking market,8 where each Corporation, 78 Federal Reserve Bulletin 452 (1992); First Banks, Inc., controls less than 1 percent of the total deposits in 76 Federal Reserve Bulletin 669 (1990). 10. Under the revised Department of Justice Merger Guidelines, depository institutions in the market ("market depos- 49 Federal Register, 26,823 (June 29, 1984), a market in which the its").9 Upon consummation of this proposal, North Fork post-merger HHI is less than 1000 is considered to be unconcentrated. The Department of Justice has informed the Board that, as a general matter, a bank merger or acquisition will not be challenged, in the absence of other factors indicating anticompetitive effects, unless the 6. See Sun Banks, Inc., 71 Federal Reserve Bulletin 243 (1985). post-merger HHI is at least 1800 and the merger or acquisition increases 7. State and market deposit data are as of June 30, 1994. In this the HHI by 200 points. The Department of Justice has stated that the context, depository institutions include commercial banks, savings higher-than-average HHI thresholds for screening bank mergers for banks, and savings associations. anticompetitive effects implicitly recognize the competitive effects of 8. The Metropolitan New York-New Jersey banking market includes limited-purpose lenders and other non-depository financial entities. New York City, Long Island, and Orange, Putnam, Rockland, Sullivan, 11. Sunrise alleges that this proposal, together with North Fork's and Westchester Counties in New York; Bergen, Essex, Hudson, Hunt- proposed noncontrolling equity investment in another depository instituerdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sus- tion, may reduce North Fork's ability to serve as a financial source of sex, Union, Warren, and a portion of Mercer Counties in New Jersey; strength to its subsidiary depository institutions. Pike County in Pennsylvania; and portions of Fairfield and Litchfield 12. The Board has received a comment from a shareholder of North Counties in Connecticut. Fork alleging that North Fork's management is inattentive to the inter- 9. Market share data before consummation are based on calculations ests of the depositors of its wholly owned subsidiary, North Fork Bank, in which the deposits of thrift institutions, other than Sunrise, are Mattituck, New York ("Bank"). The Board has carefully reviewed this included at 50 percent. The Board previously has indicated that thrift allegation in light of all facts of record, including the relevant reports of institutions have become, or have the potential to become, significant examination of North Fork and Bank. The Board notes that the findings competitors of commercial banks. See WM Bancorp, 76 Federal Re- and conclusions in these reports indicate North Fork and Bank have serve Bulletin 788 (1990); National City Corporation, 70 Federal satisfactory records of management performance, and do not support Reserve Bulletin 743 (1984). Because North Fork and Sunrise are being the shareholder's allegation. Based on all the facts of record, the Board analyzed as a combined entity, the deposits of Sunrise are included at does not believe that this allegation warrants denial of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 511 forth in this order, the Board has determined that the (5) Propose a director or slate of directors in opposition notice should be, and hereby is, approved. The Board's to a nominee or slate of nominees proposed by the determination is subject to all the conditions set forth in management or board of directors of Sunrise or any of Regulation Y, including those in sections 225.7 and its subsidiaries; 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 and (6) Attempt to influence the dividend policies or prac- 225.23(b)(3)), and to the Board's authority to require tices of Sunrise or any of its subsidiaries; modification or termination of the activities of a bank (7) Solicit or participate in soliciting proxies with reholding company or any of its subsidiaries as the Board spect to any matter presented to the shareholders of finds necessary to assure compliance with, or to prevent Sunrise or any of its subsidiaries; evasion of, the provisions of the BHC Act and the (8) Attempt to influence the loan and credit decisions or Board's regulations and orders issued thereunder. The policies of Sunrise and its thrift subsidiary, the pricing of Board's decision is specifically conditioned on North services, any personnel decision, the location of any Fork's compliance with all the commitments and repre- offices, branching, the hours of operation, or similar sentations made in connection with the notice, including activities of Sunrise or any of its subsidiaries; the commitments and conditions discussed in this order. (9) Dispose or threaten to dispose of shares of Sunrise or The commitments, representations, and conditions relied any of its subsidiaries in any manner as a condition of on in reaching this decision shall be deemed to be specific action or nonaction by Sunrise or any of its conditions imposed in writing by the Board in connec- subsidiaries; tion with its findings and decisions and may be enforced (10) Enter into any banking or nonbanking transactions in proceedings under applicable law. with Sunrise or any of its subsidiaries, except that North This transaction shall not be consummated later than Fork may establish and maintain deposit accounts with three months after the effective date of this order, unless any thrift subsidiaries of Sunrise; provided that the agsuch period is extended for good cause by the Board or gregate balance of all such accounts does not exceed by the Federal Reserve Bank of New York, acting pursu- $500,000 and that the accounts are maintained on subant to delegated authority. stantially the same terms as those prevailing for compa- By order of the Board of Governors, effective rable accounts of persons unaffiliated with Sunrise or March 29, 1995. any of its subsidiaries; or (11) Seek or accept representation on the board of direc- Voting for this action: Chairman Greenspan, Vice Chairman tors of Sunrise or any of its subsidiaries. Blinder, and Governors Kelley, LaWare, Phillips, and Yellen. Absent and not voting: Governor Lindsey. North Fork also has committed that it will: WILLIAM W. WILES Secretary of the Board (12) No later than two years following the date of increasing its interest in the voting shares of Sunrise to 5 percent or more, either: Appendix (i) Acquire control of Sunrise and cause Sunrise to cease all impermissible activities and cause Paumanok to cease all impermissible insurance activi- As part of this proposal, North Fork has committed that ties and divest all commissions, if any, generated it will not, without the Board's prior approval: from those impermissible insurance activities, or (ii) Reduce its interest in the voting shares of Sun- (1) Exercise or attempt to exercise a controlling influ- rise to less than 5 percent. ence over the management or policies of Sunrise or any of its subsidiaries; Orders Issued Under Sections 3 and 4 of the (2) Have or seek to have any employees or representa- Bank Holding Company Act tive serve as an officer, agent, or employee of Sunrise or any of its subsidiaries; Bank of Ireland (3) Take any action causing Sunrise or any of its subsid- Dublin, Ireland iaries to become a subsidiary of North Fork or any of its subsidiaries; Bank of Ireland First Holdings, Inc. (4) Acquire or retain shares that would cause the com- Manchester, New Hampshire bined interests of North Fork or any of its subsidiaries and its officers, directors, and affiliates to equal or exceed 10 percent of the outstanding voting shares of First NH Bank Sunrise or any of its subsidiaries; Manchester, New Hampshire Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

512 Federal Reserve Bulletin • May 1995 Order Approving Acquisition of a Bank Holding representing approximately 1.8 percent of all deposits in Company depository institutions in the state. Upon consummation of this proposal, Applicant would remain the largest Bank of Ireland, Dublin, Ireland ("Applicant"), and its depository institution in New Hampshire, controlling subsidiary, Bank of Ireland First Holdings, Inc., deposits of $2.73 billion, representing approximately Manchester, New Hampshire ("BOIFH"), bank holding 19.1 percent of all deposits in depository institutions in companies within the meaning of the Bank Holding the state.5 Company Act ("BHC Act"), have applied under section Applicant and Great Bay compete directly in the 3 of the BHC Act (12 U.S.C. § 1842) to acquire indi- Portsmouth-Dover-Rochester banking market.6 Upon rectly all the voting shares of Great Bay Bancshares, consummation of this proposal, this market would re- Inc., Dover, New Hampshire ("Great Bay"), and thereby main moderately concentrated as measured by the indirectly acquire Great Bay's subsidiary bank, South- Herfindahl-Hirschman Index ("HHI").7 After considereast Bank for Savings, Dover, New Hampshire ing the competition offered by other depository institu- ("Bank").1 tions in the market, the number of competitors that Applicant, BOIFH, and First NH also have applied would remain in the market, the resulting market concenunder section 4(c)(8) of the BHC Act (12 U.S.C. tration as measured by the HHI and deposit share, and all § 1843(c)(8)) and section 225.23 of the Board's Regula- other facts of record, the Board has concluded that tion Y (12 C.F.R. 225.23) to acquire Constitution Trust consummation of this proposal would not have a signifi- Company, Dover, New Hampshire ("Constitution cantly adverse effect on competition or the concentration Trust"), a wholly owned subsidiary of Great Bay that of banking resources in any relevant banking market. engages in trust company activities under section 225.25(b)(3) of Regulation Y.2 Supervisory Considerations Notice of the applications, affording interested persons an opportunity to submit comments, has been published In order to approve an application by a foreign bank to (60 Federal Register 1781, 3403 (1995)). The time for acquire a U.S. bank or bank holding company, the BHC filing comments has expired, and the Board has considered the applications and all comments received in light of the factors set forth in sections 3 and 4 of the BHC 5. The Bank Commissioner for the State of New Hampshire has Act. approved the merger of Bank and First NH. 6. The Portsmouth-Dover-Rochester banking market is approximated Applicant, with consolidated assets equivalent to apby the Portsmouth-Dover-Rochester RMA plus the towns of Brookfield, proximately $28.3 billion, is the second largest banking Epping, Fremont, Hampton Falls, Kensington, Middleton, New organization in Ireland.3 In the United States, Applicant Durham, Northwood, Nottingham, Strafford, and Wakefield in New Hampshire and the town of Lebanon in Maine. indirectly controls First NH, a state-chartered guaranty The Board previously has indicated that thrift institutions have besavings bank. Applicant is the largest depository institu- come, or have the potential to become, significant competitors of tion4 in New Hampshire, controlling deposits of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 743 $2.47 billion, representing approximately 17.3 percent (1984). Market share data are based on calculations in which the of all deposits in depository institutions in the state. deposits of thrift institutions operating in the market, except First NH, Great Bay is the eighth largest depository institution in are included at 50 percent. In light of all the facts of record, including the full cluster of banking products and loans offered by First NH and New Hampshire, controlling deposits of $260.1 million, its level of non-real estate commercial lending activities, the deposits controlled by First NH have been included at 100 percent in the calculation of existing and pro forma market share. See Peoples Heritage Financial Group, 80 Federal Reserve Bulletin 755 (1994); 1. First NH Bank, Manchester, New Hampshire ("First NH"), a state Fleet/Norstar Financial Group, Inc., 77 Federal Reserve Bulletin nonmember bank wholly owned by BOIFH, also has applied to become 669 (1990). Because Bank will be affiliated with First NH upon consuma bank holding company by acquiring directly all the voting shares of mation of this proposal, the deposits of Bank are also included at 100 Great Bay. First NH would become a bank holding company only percent in the calculation of pro forma market share. See Norwest momentarily to facilitate the acquisition of Great Bay by Applicant and Corporation, 78 Federal Reserve Bulletin 452 (1992); First Banks, Inc., BOIFH and the merger of Bank into First NH. First NH has obtained 76 Federal Reserve Bulletin 669, 670 n.9 (1990). approval from the Federal Deposit Insurance Corporation for its pro- 7. Under the revised Department of Justice Merger Guidelines, 49 posed merger with Bank under the Bank Merger Act (12 U.S.C. Federal Register 26,823 (June 29, 1984), a market in which the post- § 1828(c)). merger HHI is between 1000 and 1800 is considered moderately con- 2. Immediately upon consummation of this transaction, Constitution centrated. The Justice Department has informed the Board that a bank Trust would be merged with and into First New Hampshire Investment merger or acquisition generally will not be challenged (in the absence of Services ("FNH3S"), a wholly owned trust company subsidiary of First other factors indicating anti-competitive effects) unless the post-merger NH engaged in trust activities permissible for banks under New Hamp- HHI is at least 1800 and the merger or acquisition increases the HHI by shire law. See 12 C.F.R. 225.22(d)(2)(ii). at least 200 points. The Justice Department has stated that the higher 3. Asset and national ranking data are as of September 30, 1994. State than normal threshold for an increase in the HHI when screening bank deposit and ranking data are as of June 30, 1994. Market deposit data mergers and acquisitions for anti-competitive effects implicitly recogare as of June 30, 1993. nizes the competitive effect of limited-purpose lenders and other non- 4. In this context, depository institutions include commercial banks, depository financial entities. Upon consummation of this transaction, savings banks, and savings associations. the HHI would increase by 343 points to 1380. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 513 Act and Regulation Y require the Board to determine elude matters such as asset quality, large exposures, that the foreign bank is subject to comprehensive super- capital adequacy, liquidity, corporate governance, and vision or regulation on a consolidated basis by its home internal controls. country supervisor.8 The Board also must determine that The Central Bank also monitors developments regardthe foreign bank has provided adequate assurances that it ing banking organizations and their activities through will make available to the Board such information on its regularly scheduled meetings with senior bank manageoperations and activities and those of its affiliates that the ment. These meetings allow the Central Bank to monitor Board deems appropriate to determine and enforce com- the plans of banks to diversify either geographically or pliance with applicable law.9 by product line. Representatives of the Central Bank The Board considers a foreign bank to be subject to meet quarterly with Applicant's Group Chief Financial comprehensive supervision or regulation on a consoli- Officer and semiannually with Applicant's Group Chief dated basis if the Board determines that its home country Executive. Frequent unscheduled discussions also take supervisor receives sufficient information on the foreign place between the Central Bank and senior management bank's worldwide operations, including the bank's rela- of Bank of Ireland. tionship to any affiliate, to assess the bank's overall The Central Bank also monitors the operations of financial condition and compliance with law and regula- Applicant through quarterly and semiannual consolition.10 In making its determination on these applications, dated financial reports that address matters such as offthe Board considered the following information. balance-sheet exposures, capital adequacy, large expo- The Central Bank of Ireland ("Central Bank") is the sures, liquidity, and bad or doubtful debts. These reports bank supervisory authority in the Republic of Ireland are used by the Central Bank to monitor the performance and, as such, is the home country supervisor of Appli- and financial condition of banking organizations and to cant. The Central Bank is authorized to issue and revoke schedule special examinations when conditions warrant. banking licenses, prescribe requirements as to capital The Central Bank also may request additional financial adequacy and the composition of assets and liabilities, information from the Applicant and its subsidiaries and issue regulations for the prudent conduct of banking whenever deemed necessary. The Central Bank also business. The Central Bank's supervision of Applicant is relies on information provided by independent auditors, conducted on a consolidated basis and consists of on-site which review the consolidated operations of Applicant, inspections, meetings with senior management, review including operations outside Ireland.11 of required periodic financial reports, and review of Applicant's transactions with its affiliates are monitored information provided by independent auditors. The Cen- by the Central Bank through investment application retral Bank may enforce compliance with prudential con- quirements, lending restrictions, and reporting requiretrols and other supervisory or regulatory requirements by ments. Any investment by a licensed bank in 10 percent or imposing conditions on or revoking a banking license. more of the shares or voting rights of any enterprise re- The Central Bank has the authority to conduct inspec- quires the approval of the Central Bank. There are exposure tions of all banks licensed in Ireland as it deems neces- ceilings and reporting requirements for lending to clients in sary, and exercises this authority frequently. The Central which the bank has a major interest, and for lending to Bank's inspection powers extend to branches and subsid- directors and significant shareholders. Moreover, several of iaries of Applicant, both domestic and foreign, and in- Applicant's financial institution subsidiaries also are regulated directly by the Central Bank. The Central Bank ensures that Applicant has adequate procedures for monitoring and controlling its activities 8. See 12 U.S.C. § 1842(c)(3)(B); 12 C.F.R. 225.13(b)(5). 9. See 12 U.S.C. § 1842(c)(3)(A); 12 C.F.R. 225.13(b)(4). worldwide through its review of Applicant's internal 10. In assessing this standard, the Board considers, among other controls and procedures as part of its inspection profactors, the extent to which the home country supervisor: (i) Ensures that the foreign bank has adequate procedures for gram. Applicant monitors and controls its worldwide monitoring and controlling its activities worldwide; operations through three distinct internal functions ad- (ii) Obtains information on the condition of the foreign bank and dressing matters relating to financial control, internal its subsidiaries and offices outside the home country through regular reports of examination, audit reports, or otherwise; audit, and credit control. All business units are required (iii) Obtains information on the dealings and relationships between to produce monthly management information, which the foreign bank and its affiliates, both foreign and domestic; (iv) Receives from the foreign bank financial reports that are consolidated on a worldwide basis, or comparable information that permits analysis of the foreign bank's financial condition on a worldwide, consolidated basis; and 11. Independent auditors are required by law to report to the Central (v) Evaluates prudential standards, such as capital adequacy and Bank without delay if they have reason to believe that circumstances risk asset exposure, on a worldwide basis. exist that are likely to materially affect the bank's ability to fulfill its These are indicia of comprehensive, consolidated supervision. No sin- obligations to depositors, that there are any material defects in the gle factor is essential, and other elements may inform the Board's accounting records of the bank, or that there are material inaccuracies in determination. 12 C.F.R. 211.24(c)(1). or omissions from reports provided by Applicant to the Central Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

514 Federal Reserve Bulletin • May 1995 includes detailed profit and loss accounts, balance sheets, that consummation of this proposal is likely to result in and information regarding asset quality. Comprehensive any significantly adverse effects, such as undue concenfull-scope internal audits are performed annually. tration of resources, decreased or unfair competition, Based on all the facts of record, the Board concludes conflicts of interests, or unsound banking practices that that Applicant is subject to comprehensive supervision would outweigh the public benefits of this proposal. on a consolidated basis by its home country supervisor. Accordingly, the Board has determined that the balance The Board has reviewed the restrictions on disclosure of public interest factors it must consider under section in certain jurisdictions where Applicant operates and has 4(c)(8) of the BHC Act is favorable and consistent with communicated with the relevant government authorities approval of these applications. concerning access to information. Applicant has commit- Based on the foregoing and all the other facts of ted to make available to the Board such information on record, the Board has determined that the applications the operations or activities of Applicant and any affiliate should be, and hereby are, approved. Should any restricof Applicant that the Board deems necessary to deter- tions on access to information on the operations or mine and enforce compliance with the International activities of Applicant and any of its affiliates subse- Banking Act, the BHC Act, as amended, and other quently interfere with the Board's ability to determine applicable federal law. To the extent that the provision of the safety and soundness of Applicant's U.S. operations such information to the Board may be prohibited or or the compliance by Applicant or its affiliates with impeded by law, Applicant has committed to cooperate applicable federal statutes, the Board may require termiwith the Board in obtaining any necessary consent or nation of any of Applicant's direct or indirect activities waivers that might be required from third parties for in the United States. The Board's approval is specifically disclosure. In light of these commitments and other facts conditioned on compliance by Applicant with all the of record, and subject to the condition described below, commitments made in connection with these applicathe Board concludes that Applicant has provided ade- tions and on receipt by Applicant, BOIFH, and First NH quate assurances of access to any necessary information of all necessary approvals from state and federal regulathe Board may request. tors. The determination on the nonbanking activities is also subject to all the terms and conditions set forth in Other Considerations Regulation Y, including those in sections 225.7 and 225.23(b) of Regulation Y (12 C.F.R. 225.7 and The Board also considers the financial condition of a 225.23(b)), and to the Board's authority to require such foreign bank involved in a section 3 application.12 Appli- modification or termination of the activities of a bank cant's capital exceeds the minimum standards contained holding company or any of its subsidiaries as the Board in the Basle Accord and is equivalent to capital that finds necessary to ensure compliance with, and to prewould be required of a U.S. banking organization. vent evasion of, the provisions of the BHC Act and the Based on the foregoing and all the facts of record, the Board's regulations and orders issued thereunder. The Board has determined that the financial and managerial commitments and conditions relied on by the Board in resources and future prospects of Applicant, BOIFH, and reaching this decision are deemed to be conditions im- First NH, and the other supervisory factors the Board must posed in writing by the Board in connection with its consider under section 3 of the BHC Act, are consistent findings and decision, and, as such, may be enforced in with approval of the proposal. In addition, the convenience proceedings under applicable law against Applicant, its and needs of the communities to be served, the supervision offices, and its affiliates. of Applicant, and the Board's access to information are all The acquisition of Bank shall not be consummated consistent with approval of this proposal. before the fifteenth calendar day following the effective Applicant, BOIFH, and First NH also have applied to date of this order, and the banking and nonbanking acquire Constitution Trust pursuant to section 4(c)(8) of transactions shall not be consummated later than three the BHC Act and thereby engage in trust company months after the effective date of this order, unless such activities. The Board has determined by regulation that period is extended for good cause by the Board or by the the operation of a trust company is a permissible activity Federal Reserve Bank of Boston, acting pursuant to for a bank holding company.13 The record in this case delegated authority. indicates that there are numerous providers of trust ser- By order of the Board of Governors, effective vices, and there is no evidence in the record to indicate March 6, 1995. Voting for this action: Chairman Greenspan, Vice Chairman Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. 12. See 12 C.F.R. 225.13(b)(1). 13. See 12 C.F.R. 225.25(b)(3). Constitution Trust would not open for JENNIFER J. JOHNSON business as a separate nonbank subsidiary of Applicant, but would merge with FNHIS, First NH's existing trust company subsidiary. Deputy Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 515 ORDERS ISSUED UNDER BANK MERGER ACT The transaction may be consummated immediately, but in no event later than three months after the effective First Interstate Bank of California date of this order, unless such period is extended for Los Angeles, California good cause by the Board or by the Federal Reserve Bank of San Francisco, acting pursuant to delegated authority. Order Approving the Acquisition of Assets and the By order of the Secretary of the Board, acting pursu- Assumption of Liabilities of a Bank ant to delegated authority for the Board of Governors, effective March 3, 1995. First Interstate Bank of California, Los Angeles, California ("First Interstate"), has applied for the Board's WILLIAM W. WILES approval under the Bank Merger Act (12 U.S.C. § 1828) Secretary of the Board to acquire certain assets and assume certain liabilities of First Trust Bank, Ontario, California ("Bank"). First Interstate also has applied to establish branches pursuant ORDERS ISSUED UNDER INTERNATIONAL to section 9 of the Federal Reserve Act (12 U.S.C. § 321) BANKING ACT at the current locations of Bank. Public notice of the applications before the Board is Banque Nationale de Paris not required by the Bank Merger Act, and in view of the Paris, France emergency situation, the Board has not followed its normal practice of affording interested parties the oppor- Order Approving Establishment of Two Branches tunity to submit comments and views. In view of the emergency situation involving Bank, the California State Banque Nationale de Paris ("Bank"), Paris, France, a Banking Department has recommended immediate ac- foreign bank within the meaning of the International tion by the Board to prevent the probable failure of Banking Act ("IBA"), has applied under section 7(d) of Bank. the IBA (12 U.S.C. § 3105(d)) to establish state-licensed In connection with the applications, the Secretary of branches in Los Angeles and San Francisco, California.1 the Board has taken into consideration the competitive A foreign bank must obtain the approval of the Board to effects of the proposed transaction, the financial and establish a branch, agency, commercial lending commanagerial resources and future prospects of the banks pany, or representative office in the United States under concerned and the convenience and needs of the commu- the Foreign Bank Supervision Enhancement Act of 1991 nities to be served. On the basis of the information ("FBSEA"), which amended the IBA. before the Board, the Secretary of the Board finds that an Notice of the applications, affording interested persons emergency situation exists so as to require that the an opportunity to submit comments, has been published Secretary of the Board act immediately pursuant to the in newspapers of general circulation in Los Angeles, provisions of section 18(c)(3) of the Federal Deposit California (Los Angeles Daily Journal, January 25, Insurance Act (12 U.S.C. § 1828(c)(3)) in order to safe- 1995), and San Francisco, California (The Recorder, guard depositors of Bank. Having considered the record January 25, 1995). The time for filing comments has of these applications in light of the factors contained in expired and the Board has considered all comments the Bank Merger Act and the Federal Reserve Act, the received. Secretary of the Board has determined that consumma- Bank, with total consolidated assets equivalent to aption of the transaction would be in the public interest and proximately $272 billion as of December 31, 1994, is that the applications should be approved on a basis that chartered in France. Bank operates through an extensive would not preclude immediate consummation of the worldwide network, with offices in approximately proposal. On the basis of these considerations, the appli- 78 countries throughout the world. Bank's operations in cations are approved. France include retail banking, insurance, leasing, factor- Based on the foregoing and all the facts of record, ing, real estate investment, and securities activities. the Board has determined that these applications Bank owns a bank in San Francisco, California;2 should be, and hereby are, approved. The Board's operates branches in New York, New York, and Chiapproval of these applications is conditioned on com- cago, Illinois; maintains agencies in Los Angeles and pliance by Bank with the commitments made in con- San Francisco, California; Miami, Florida; and Houston, nection with these applications. For purposes of this action, the commitments and conditions relied on in reaching this decision are both conditions imposed in 1. By these applications, Bank proposes to convert two existing writing by the Board and, as such, may be enforced in state-licensed agencies to branches. 2. Bank's subsidiary bank is Bank of the West, a state-chartered proceedings under applicable law. non-member bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

516 Federal Reserve Bulletin • May 1995 Texas; and owns a commercial lending company in New making its determination on these applications, the York, New York.3 Bank also operates in the United Board considered the following information. States through several nonbank subsidiaries and affili- Bank is subject to the regulatory and supervisory ates.4 Bank is a qualifying foreign banking organization authority of the Banque de France, the Commission as defined in Regulation K. 12 C.F.R. 211.23(b). Bancaire, the Comite de la Reglementation Bancaire, In order to approve an application by a foreign bank to and the Comite des Etablissements de Credit. The Coestablish a branch in the United States, the IBA and mite de la Reglementation Bancaire issues regulations Regulation K require the Board to determine that the setting forth the supervisory standards to which credit foreign bank engages directly in the business of banking institutions are subject. The Comite des Etablissements outside of the United States and has furnished to the de Credit grants banking licenses, approves de novo Board the information it needs to assess adequately the banks or branches, and is empowered to withdraw authoapplication. The Board also must determine that the rization if a credit institution fails to comply with regulaforeign bank applicant and any foreign bank parent are tory requirements. The Commission Bancaire, which has subject to comprehensive supervision or regulation on a primary responsibility for supervising Bank, monitors consolidated basis by its home country supervisor. Bank's compliance with French law and regulatory stan- 12 U.S.C. § 3105(d)(2), 12 C.F.R. 211.24(c)(1). The IBA dards, as well as Bank's financial condition. France's and Regulation K also permit the Board to take into central bank, the Banque de France, is the coordinating account additional standards. 12 U.S.C. §3105(d)(3)- body for the regulatory agencies. The Commission Ban- (4)), 12 C.F.R. 211.24(c)(2). caire receives information on the worldwide operations Bank engages directly in the business of banking of Bank, including domestic and foreign branches and outside of the United States through its extensive bank- affiliates, through the review of periodic reports submiting operations in France and throughout the world. Bank ted by Bank, the review of annual reports prepared by also has provided the Board with the information neces- Bank's two statutory external auditors, and the conduct sary to assess the application through submissions that of periodic on-site inspections of Bank. address the relevant issues. Regulation K provides that a Bank is required to satisfy extensive financial reportforeign bank and any parent foreign bank will be consid- ing requirements on an annual, semi-annual, quarterly, ered to be subject to comprehensive supervision or regu- and monthly basis. These financial reports generally are lation on a consolidated basis if the Board determines submitted to the Commission Bancaire and are consolithat the bank is supervised and regulated in such a dated to include the operations of Bank's domestic and manner that its home country supervisor receives suffi- foreign subsidiaries. The statutory auditors, which must cient information on the bank's worldwide operations, be chosen from a list approved by the Commission including its relationship to any affiliate, to assess the Bancaire, certify the accuracy and sufficiency of Bank's bank's overall financial condition and its compliance financial statements annually. Bank and its material subwith law and regulation.5 12 C.F.R. 211.24(c)(1). In sidiaries are subject to an annual full scope audit by external auditors. The external audits of Bank's worldwide operations are coordinated from France by its statutory auditors. Bank also is required to maintain ade- 3. Bank's commercial lending company subsidiary is French- quate internal controls in order to monitor properly its American Banking Corporation, a company organized under Article XII of the New York Banking Law. extensive worldwide operations. Bank reports annually 4. Bank controls several nonbank subsidiaries engaged in activities to the statutory auditors, and to the Commission Banunder section 4(c)(8) of the Bank Holding Company Act, a commercial caire on request, regarding its internal control procepaper subsidiary, and a company operating under section 25 of the Federal Reserve Act. dures. 5. In assessing this standard, the Board considers, among other The Commission Bancaire has the authority to confactors, the extent to which the home country supervisor: duct inspections of Bank and to gain access to any (i) Ensures that the foreign bank has adequate procedures for monitoring and controlling its activities worldwide; documentation and information, including the reports (ii) Obtains information on the condition of the foreign bank and and records of Bank's subsidiaries. The inspections of its subsidiaries and offices outside the home country through regular examination reports, audit reports, or otherwise; Bank, which are conducted by examiners from the (iii) Obtains information on the dealings and relationships between Banque de France, generally take place every four or the foreign bank and its affiliates, both foreign and domestic; five years, but could occur more frequently in the discre- (iv) Receives from the foreign bank financial reports that are consolidated on a worldwide basis, or comparable information that tion of the Commission Bancaire if conditions warpermits analysis of the foreign bank's financial condition on a ranted. The scope of inspections of Bank is broad, and worldwide consolidated basis; includes a review of Bank's asset quality and internal (v) Evaluates prudential standards, such as capital adequacy and risk asset exposure, on a worldwide basis. controls. A formal report of the examiners' findings is These are indicia of comprehensive, consolidated supervision. No sin- provided to Bank's statutory auditors. gle factor is essential, and other elements may influence the Board's determination. The Commission Bancaire supervises the dealings and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 517 relationships of Bank with its foreign and domestic with the IBA, the Bank Holding Company Act of 1956, affiliates through the review of consolidated financial as amended, and other applicable federal law. To the reports. The audited reports are required to address the extent that the provision of such information to the status of the companies included in the consolidation, Board may be prohibited or impeded by law, Bank has the foreseeable prospects of such companies, and signif- committed to cooperate with the Board in obtaining any icant events that have occurred after the close of Bank's necessary consents or waivers that might be required fiscal year. Limits, which are expressed in terms of from third parties for disclosure. In light of these compercentages of Bank's regulatory capital, also are im- mitments and other facts of record, and subject to the posed on equity investments by Bank and are monitored condition described below, the Board concludes that through reporting requirements. Bank has provided adequate assurances of access to any The Commission Bancaire has the authority to impose necessary information the Board may request. sanctions if it considers banking regulations have been On the basis of all the facts of record, and subject to violated. These sanctions may include revocation of the commitments made by Bank, as well as the terms banking authorization, appointment of a temporary ad- and conditions set forth in this order, the Board has ministrator to manage a bank it deems to be misman- determined that Bank's applications to establish the aged, or appointment of a liquidator. Other disciplinary branches should be, and hereby are, approved. Should powers include imposition of monetary penalties, limita- any restrictions on access to information on the operation or termination of specific activities, and dismissal of tions or activities of Bank and any of its affiliates subsemembers of management. quently interfere with the Board's ability to determine Based on all the facts of record, including the informa- the safety and soundness of Bank's U.S. operations or tion described above, the Board concludes that Bank is the compliance by Bank or its affiliates with applicable subject to comprehensive supervision on a consolidated federal statutes, the Board may require termination of basis by its home country supervisor. any of Bank's direct or indirect activities in the United States. Approval of this application is also specifically In considering these applications, the Board also has conditioned on Bank's compliance with the committaken into account the additional standards set forth in ments made in connection with this application and with section 7 of the IBA. 12 U.S.C. § 3105(d)(3)-(4). The the conditions contained in this order.6 The commit- Banque de France has indicated that it has no objection ments and conditions referred to above are conditions to the establishment by Bank of the proposed branches. imposed in writing by the Board in connection with its In addition, subject to certain restrictions, the Commisdecision, and may be enforced in proceedings against sion Bancaire may share information with other banking Bank, its offices, and its affiliates under applicable law. authorities, including the Board. France is a signatory to the Basle risk-based capital By order of the Board of Governors, effective standards, and French risk-based capital standards meet March 27, 1995. those established by the Basle Capital Accord and the European Union. Bank's capital is in excess of the Voting for this action: Chairman Greenspan, Vice Chairman minimum levels that would be required by the Basle Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and Yellen. Capital Accord and is considered equivalent to capital that would be required of a U.S. banking organization. WILLIAM W. WILES Managerial and financial resources of Bank are also Secretary of the Board considered consistent with approval. Bank, which has numerous branches and subsidiaries outside France, ap- Standard Bank of South Africa pears to have the experience and capacity to conduct Johannesburg, South Africa banking operations in the United States through the proposed branches. In addition, Bank has established Order Approving Establishment of a Representative controls and procedures for its U.S. offices to ensure Office compliance with U.S. law. Finally, with respect to access to information regard- Standard Bank of South Africa ("Bank"), Johannesburg, ing Bank's operations, the Board has reviewed the re- South Africa, a foreign bank within the meaning of the strictions on disclosure in certain jurisdictions where Bank operates and has communicated with the relevant government authorities concerning access to informa- 6. The Board's authority to approve the establishment of the proposed branches parallels the continuing authority of the California State tion. Bank has committed that it will make available to Banking Department to license offices of a foreign bank. The Board's the Board such information on the operations or activi- approval of this application does not supplant the authority of the State ties of Bank and any affiliate of Bank that the Board of California, and its agent, the California State Banking Department, to license the proposed branches of Bank in accordance with any terms or deems necessary to determine and enforce compliance conditions that the California State Banking Department may impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

518 Federal Reserve Bulletin • May 1995 International Banking Act ("IBA"), has applied under take into account the standards that apply to the estabsection 10(a) of the IBA (12 U.S.C. § 3107(a)) to estab- lishment of a branch or agency, subject to the following lish a representative office in New York, New York. The considerations. With respect to supervision by home Foreign Bank Supervision Enhancement Act of 1991, country authorities, a foreign bank that proposes to eswhich amended the IBA, provides that a foreign bank tablish a representative office must be subject to a signifmust obtain the approval of the Board to establish a icant degree of supervision by its home country supervirepresentative office in the United States. sor.4 A foreign bank's financial and managerial resources Notice of the application, affording interested persons will be reviewed to determine whether its financial conan opportunity to submit comments, has been published dition and performance demonstrate that the bank is in a newspaper of general circulation in New York, New capable of complying with applicable laws and has an York (New York Times, July 7, 1994). The time for filing operating record that would be consistent with the estabcomments has expired, and the Board has considered the lishment of a representative office in the United States. application and all comments received. All foreign banks, whether seeking to establish a branch, Bank, with $20.2 billion in consolidated assets,1 is the agency or representative office, will be required to prosecond largest commercial bank chartered in the Repub- vide adequate assurances of access to information on the lic of South Africa. Bank operates approximately operations of bank and its affiliates that is necessary to 650 branches in South Africa.2 Bank also has a subsid- determine compliance with U.S. laws. iary bank in Bophuthatswana, a branch in Taiwan, and a In this case, with respect to supervision by home representative office in the Republic of Mozambique. country authorities, the Board has considered the fol- The proposed representative office would engage in rep- lowing information. The South African Reserve Bank resentational functions, including soliciting loans for ("Reserve Bank") is the primary bank supervisory Bank's head office, providing liaison services for South authority in South Africa and, as such, is the home African and U.S. companies, and developing correspon- country supervisor of Bank. The Reserve Bank has dent banking relationships. Bank is a wholly owned authorized Bank to establish the proposed representasubsidiary of Standard Bank Investment Corporation tive office. The Reserve Bank establishes capital and Limited ("Parent"), Johannesburg, South Africa, a com- liquidity requirements, evaluates the financial condipany that is engaged primarily in commercial and mer- tion and performance of all South African banks, and chant banking activities.3 monitors all banks and their controlling companies for In acting on an application to establish a representa- adherence to South African laws and regulations. tive office, the IBA and Regulation K provide that the Through the Office for Deposit-Taking Institutions, Board shall take into account whether the foreign bank the Reserve Bank supervises the foreign and domestic engages directly in the business of banking outside of banking activities of Bank and Parent. The Reserve the United States, has furnished to the Board the infor- Bank monitors the operations of Bank through the mation it needs to assess adequately the application, and review of information obtained from required statuis subject to comprehensive supervision or regulation on tory reports and from independent reviews conducted a consolidated basis by its home country supervisor by external auditors. Bank is required to submit to the (12 U.S.C. § 3105(d)(2); 12 C.F.R. 211.24(c)(1)). The Reserve Bank on a monthly and quarterly basis its Board may also take into account additional standards as balance sheet, income statement and various other set forth in the IBA (12 U.S.C. § 3105(d)(3)-(4)) and reports. Also, Parent annually submits to the Reserve Regulation K (12 C.F.R. 211.24(c)(2)). Bank a consolidated balance sheet and a notice of any The Board has previously stated that the standards that non-banking subsidiary that is engaged in banking apply to the establishment of a branch or agency need related activities. In addition, Bank's Taiwan branch not in every case apply to the establishment of a repre- and each of Parent's foreign banking subsidiaries are sentative office because a representative office does not required to provide various quarterly financial reports. engage in a banking business and cannot take deposits or In addition to required periodic regulatory reports, the make loans (see 58 Federal Register 6348,6351 (1993)). Reserve Bank requires both external and internal audits In evaluating an application to establish a representative of the worldwide operations of Parent's banking group. office under the IBA and Regulation K, the Board will External audits of the operations of the group are conducted annually and include a review of the Bank's and foreign affiliates' asset quality and risk management processes. The external auditor reviews all internal audit 1. Data are as of December 31, 1994, unless otherwise noted. 2. Bank also has South African subsidiaries that engage in property fund management, mortgage bond financing, insurance brokerage, and credit card services. 3. Through a U.K. banking subsidiary, Parent indirectly operates 4. See Citizens National Bank, 79 Federal Reserve Bulletin 805 Standard New York Inc., New York, New York, a U.S. broker/dealer. (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 519 reports and maintains informal contact with the internal Bank and Parent also have committed to cooperate with auditors. The Reserve Bank meets annually with the the Board to obtain approvals or consents that may be external auditor, and relies on the external auditor for required for the Board to gain access to information that determining whether Bank and Parent are in compliance the Board may request. The Board also has reviewed the with regulatory and legal requirements.5 restrictions on disclosure of information by banks in With respect to the internal monitoring of the banking jurisdictions in which Bank has material operations. In group's operations, a Board Audit Committee has been light of the commitments provided by Bank and Parent established to coordinate internal audits, review audit and other facts of record, and subject to the condition findings, and meet with Reserve Bank staff.6 Based on described below, the Board concludes that Bank has the guidelines established by this committee, internal provided adequate assurances of access to any necessary audits of the operations of Bank's head office, branch information the Board may request. network, and Parent's foreign banking subsidiaries are On the basis of all the facts of record, and subject to conducted at least once every two years. Also, Parent the commitments made by Bank, as well as the terms receives monthly financial reports from its foreign sub- and conditions set forth in this order, the Board has sidiaries. determined that Bank's application to establish a repre- Based on all the facts of record, which include the sentative office should be, and hereby is, approved. If information described above, the Board concludes that any restrictions on access to information on the operafactors relating to the supervision of Bank by its home tions or activities of Bank and any of its affiliates subsecountry supervisors are consistent with approval of the quently interfere with the Board's ability to determine proposed representative office. the compliance by Bank or its affiliates with applicable The Board also has found that Bank engages directly federal statutes, the Board may require termination of in the business of banking outside of the United States any of Bank's direct or indirect activities in the United through its commercial banking operations in South States. Approval of this application is also specifically Africa. Bank has provided the Board with the informa- conditioned on Bank's compliance with the committion necessary to assess the application through submis- ments made in connection with this application and with sions that address relevant issues. the conditions in this order.7 The commitments and The Board also has taken into account the additional conditions referred to above are conditions imposed in standards set forth in section 7 of the IBA and Regula- writing by the Board in connection with its decision, and tion K (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. may be enforced in proceedings against Bank and its 211.24(c)(2)). As noted above, Reserve Bank has autho- affiliates under 12 U.S.C. § 1818. rized Bank to establish the proposed representative of- By order of the Board of Governors, effective fice. March 22, 1995. With respect to the financial and managerial resources of Bank, given Bank's record of operations in its home Voting for this action: Chairman Greenspan, Vice Chairman country, its overall financial resources, and its standing Blinder, and Governors Kelley, LaWare, Lindsey, Phillips, and with its home country supervisors, the Board has deter- Yellen. mined that the financial and managerial factors are con- JENNIFER J. JOHNSON sistent with approval of the proposed representative of- Deputy Secretary of the Board fice. Bank appears to have the experience and capacity to support the proposed office and has established controls West Merchant Bank Limited and procedures for the proposed representative office to London, England ensure compliance with U.S. law. Bank and Parent have committed to make available to Order Approving Establishment of an Agency the Board such information on the operations of Bank and any affiliate of Bank that the Board deems necessary West Merchant Bank Limited ("Bank"), London, Ento determine and enforce compliance with the IBA, the gland, a foreign bank within the meaning of the Interna- Bank Holding Company Act of 1956, as amended, and other applicable Federal law. To the extent that the disclosure of such information is prohibited by law, 7. The Board's authority to approve the establishment of the proposed representative office parallels the continuing authority of the State of 5. Reserve Bank staff also meet directly with officers of the banking New York to license offices of a foreign bank. The Board's approval of group quarterly and annually to discuss a variety of issues, including the this application does not supplant the authority of the State of New York financial condition and performance of Bank and Parent. and its agent, the New York State Banking Department, to license the 6. Members of the Board Audit Committee include directors and proposed representative office of Bank in accordance with any terms or officers of both Bank and Parent. conditions that the New York State Banking Department may impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

520 Federal Reserve Bulletin • May 1995 tional Banking Act ("IBA"), has applied under section Board with the information necessary to assess the appli- 7(d) of the IBA (12 U.S.C. § 3105(d)) to establish a cation through submissions that address relevant issues. state-licensed agency in New York, New York. A for- Regulation K provides that a foreign bank will be eign bank must obtain the approval of the Board to considered to be subject to comprehensive supervision establish a branch, agency, commercial lending com- or regulation on a consolidated basis if the Board deterpany, or representative office in the United States under mines that the bank is supervised and regulated in such a the Foreign Bank Supervision Enhancement Act of 1991, manner that its home country supervisor receives suffiwhich amended the IBA. cient information on the bank's worldwide operations, Notice of the application, affording interested persons including its relationship to any affiliate, to assess the an opportunity to submit comments, has been published bank's overall financial condition and its compliance in a newspaper of general circulation in New York, New with law and regulation. 12 C.F.R. 211.24(c)(1).4 In York (New York Times, January 4 and 5, 1995). The time making its determination under this standard, the Board for filing comments has expired and the Board has has considered the following information. considered the application and all comments received. Bank, with assets of $4.4 billion,1 operates branches in Supervision of Bank by U.K. Authorities Germany and Singapore and representative offices in seven countries. Westdeutsche Landesbank Girozentrale The Bank of England is the home country supervisor of ("WestLB"), Diisseldorf, Federal Republic of Germany, Bank. The Bank of England has broad statutory powers indirectly owns approximately 75 percent of Bank.2 to supervise and take enforcement action against an WestLB has substantial direct and indirect U.S. opera- authorized institution such as Bank. The Board has pretions. Siidwestdeutsche Landesbank Girozentrale viously considered applications in which it determined ("Sudwest LB"), Stuttgart, Federal Republic of Ger- that particular banks in the United Kingdom were submany, indirectly owns approximately 25 percent of ject to comprehensive, consolidated home country super- Bank.3 Bank currently operates in the United States only vision.5 Bank states that it is subject to the same supervithrough its representative office and a nonbanking sub- sion as other U.K. banks and has furnished information sidiary. Bank and its foreign bank parents would be regarding the authorities' ability to supervise and reguqualifying foreign banking organizations within the late the activities of Bank on a worldwide consolidated meaning of Regulation K after establishment of the basis.6 The Board has reviewed this information, as well proposed agency. 12 C.F.R. 211.23(b). as information previously received as it may apply to In order to approve an application by a foreign bank to Bank, and has determined that Bank is supervised by the establish an agency in the United States, the IBA and Bank of England on substantially the same terms and Regulation K require the Board to determine that the conditions as set forth in the earlier orders. foreign bank applicant engages directly in the business of banking outside of the United States and has furnished the Board with the information it needs to adequately assess the application. The Board also must determine that each of the foreign bank applicant and 4. In assessing this standard, the Board considers, among other any foreign bank parent is subject to comprehensive factors, the extent to which the home country supervisors: supervision or regulation on a consolidated basis by its (i) Ensure that the bank has adequate procedures for monitoring home country supervisors. 12 U.S.C. § 3105(d)(2); and controlling its activities worldwide; (ii) Obtain information on the condition of the bank and its 12 C.F.R. 211.24(c)(1). The IBA and Regulation K also subsidiaries and offices through regular examination reports, audit permit the Board to take into account additional reports, or otherwise; (iii) Obtain information on the dealings with and relationship standards. 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. between the bank and its affiliates, both foreign and domestic; 211.24(c)(2). (iv) Receive from the bank financial reports that are consolidated Bank engages directly in the business of banking on a worldwide basis, or comparable information that permits analysis of the bank's financial condition on a worldwide consolioutside of the United States through its banking operadated basis; and tions in the United Kingdom. Bank also has provided the (v) Evaluate prudential standards, such as capital adequacy and risk asset exposure, on a worldwide basis. These are indicia of comprehensive, consolidated supervision. No single factor is essential and other elements may inform the Board's determination. 1. Financial data are as of December 31, 1994, unless otherwise 5. See Coutts & Co. AG, 79 Federal Reserve Bulletin 636 (1993); noted. Singer & Friedlander, 79 Federal Reserve Bulletin 809 (1993). 2. WestLB currently operates a branch in New York, New York, and 6. Certain activities of Bank are also subject to regulation by the is subject to the provisions of the Bank Holding Company Act ("BHC Securities and Futures Authority ("SFA"), a self-regulatory organiza- Act") and the IBA. tion in the United Kingdom. The SFA and the Bank of England 3. SiidwestLB is a foreign bank that would become subject to the exchange supervisory information as necessary to supervise operations BHC Act and the IBA upon the establishment of the proposed agency. of Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 521 Supervision of WestLB and SudwestLB by German Each of the Parent Banks' transactions with affiliated Authorities parties also are monitored by the FBSO and the Bundesbank through lending restrictions and reporting require- The German Federal Banking Supervisory Office ments. Although German banks may invest in commer- ("FBSO") and the Bundesbank share responsibility as cial, industrial and insurance companies, the aggregate WestLB's and SudwestLB's (collectively, "Parent book value of investments in nonfinancial enterprises Banks") home country supervisors. The FBSO has en- may not exceed 60 percent of the bank's total capital. forcement powers with regard to bank regulation and Investment in any one nonfinancial enterprise may not supervision and works closely with the Bundesbank in exceed 15 percent of total capital.8 There are also reportsupervising Parent Banks. The FBSO's supervision of ing requirements for loans to significant shareholders or Parent Banks is conducted on a consolidated basis and companies of which the bank owns more than 25 perconsists of, among other things, review of required peri- cent. odic financial reports and information provided by exter- The FBSO has authority to enforce the German banknal and internal auditors. ing laws by levying fines or imposing other penalties. The FBSO also has authority to carry out on-site The FBSO also may restrict dividends, prohibit the sale audits of German credit institutions. Generally, the of assets, close the bank, or revoke its license. FBSO relies on independent external auditors to conduct Based on all facts of record, which include the inforsuch audits, which may encompass all of a bank's opera- mation described above, the Board finds that Bank, tions or may be limited to specific areas, such as internal WestLB, and SUdwestLB are subject to comprehensive auditing, accounting or lending operations. The Bundes- supervision or regulation on a consolidated basis by their bank also is authorized to conduct on-site audits of respective home country supervisors. foreign exchange operations. Areas covered by these The Board has also taken into account the additional audits include the organization of foreign exchange oper- standards set forth in section 7 of the IBA and Regulaations, adequacy of internal controls, and compliance tion K. See 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. with foreign currency risk regulations. 211.24(c)(2). Bank's direct and indirect supervisors have The FBSO and the Bundesbank also monitor the oper- indicated they have no objection to establishment of the ations of Parent Banks through the receipt of annual and proposed state-licensed agency. In addition, subject to monthly reports that are prepared on a consolidated certain conditions, the Bank of England the FBSO, and basis. Annual reports are prepared by external auditors the Bundesbank may share information on the operations and include evaluation of a bank's financial statements, of Bank and the Parent Banks with other supervisors, internal controls, and loan classification practices.7 including the Board. Monthly reports include financial returns and reports The United Kingdom is a signatory to the Basle riskaddressing capital adequacy and liquidity. Quarterly re- based capital standards, and United Kingdom risk-based ports are also required regarding extensions of credit, capital standards meet those established by the Basle interest rates, and securities activities. The German bank- Capital Accord and the European Union. Bank's capital ing supervisors may require the provision of additional is in excess of the minimum levels that would be reinformation from external auditors or the institution it- quired by the Basle Capital Accord and is considered self. equivalent to capital that would be required of a U.S. Parent Banks are also required to have adequate proce- banking organization. Managerial and other financial dures for monitoring and controlling their worldwide resources of Bank are also consistent with approval in activities. Under these requirements, banks are required light of commitments and conditions reflected in the to maintain an internal auditing department capable of record. Bank appears to have the experience and capaceffectively monitoring their worldwide activities in all ity to support the proposed agency and has established business areas. The reports of a bank's internal auditors, controls and procedures for its U.S. offices to ensure and their compliance with FBSO guidelines, are re- compliance with U.S. law. viewed by their external auditors as part of the annual Finally, the Board has reviewed the restrictions on review. Each of the Parent Banks has established an disclosure in certain jurisdictions where Bank and audit department that conducts or oversees periodic au- Parent Banks operate and has communicated with dits of all branches and representative offices located in relevant government authorities concerning access to Germany and abroad, and all majority-owned bank and information. Bank and Parent Banks have committed non-bank subsidiaries. to make available to the Board such information on 8. Other limitations include the requirement that a capital investment 7. The external auditors that conduct on-site audits on behalf of the in a foreign bank subsidiary must be deducted from total capital, if a FBSO generally do not audit the annual accounts of the same bank. parent bank cannot obtain information required for consolidation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

522 Federal Reserve Bulletin • May 1995 the operations of Bank and any of its affiliates that the PENDING CASES INVOLVING THE BOARD OF Board deems necessary to determine and enforce com- GOVERNORS pliance with the IBA, the BHC Act, as amended, and other applicable Federal law. To the extent that the This list of pending cases does not include suits against the provision of such information to the Board may be Federal Reserve Banks in which the Board of Governors is prohibited or impeded by law, Bank and Parent Banks not named a party. have committed to cooperate with the Board to obtain necessary consents or waivers that may be required Jones v. Board of Governors, No. 95-1142 (D.C. Cir., filed from third parties to gain access to such information. March 3, 1995). Petition for review of a Board order In light of these commitments and other facts of dated February 2, 1995, approving the applications by record, and subject to the condition described below, First Commerce Corporation, New Orleans, Louisiana, to the Board concludes that Bank has provided adequate assurances of access to any necessary information the merge with City Bancorp, Inc., New Iberia, Louisiana, Board may request. and First Bankshares, Inc., Slidell, Louisiana. In re Subpoena Duces Tecum, No. 95-5034 (D.C. Cir., filed On the basis of all the facts of record, and subject to January 26, 1995). Appeal of partial denial of plaintiff's all commitments made by Bank and Parent Banks, as well as the terms and conditions set forth in this order, motion to compel production of examination and other the Board has determined that Bank's application to supervisory material in connection with a shareholder establish a state-licensed agency should be, and hereby derivative action against a bank holding company. is, approved. If any restrictions on access to information Kuntz v. Board of Governors, No. 95-3044 (6th Cir., filed on the operations or activities of Bank or any of its January 12, 1995). Petition for review of a Board order affiliates subsequently interfere with the Board's ability dated December 19, 1994, approving an application by to determine the safety and soundness of Bank's U.S. KeyCorp, Cleveland, Ohio, to acquire BANKVERMONT operations or compliance by Bank or its affiliates with Corp., Burlington, Vermont. On February 10, 1995, the applicable Federal statutes, the Board may require termi- Board filed its motion to dismiss. nation of any of Bank's direct or indirect activities in the Zemel v. Board of Governors, No. 95-5007 (D.C. Cir., filed United States. Approval of this application is also specif- December 30, 1994). Appeal of district court's dismissal ically conditioned on compliance by Parent Banks and of Age Discrimination in Employment Act case. Bank with the commitments made in connection with In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., this application, and with the conditions in this order.9 filed January 6, 1995). Action to enforce subpoena seek- The commitments and conditions referred to above are ing pre-decisional supervisory documents sought in conconditions imposed in writing by the Board in connecnection with an action by Bank of New England Corporation with its decision, and may be enforced in proceedtion's trustee in bankruptcy against the Federal Deposit ings under 12 U.S.C. § 1818 or 12 U.S.C. § 1847 against Insurance Corporation. The Board filed its opposition on Bank, including its offices and its affiliates. January 20, 1995. By order of the Board of Governors, effective Cavallari v. Board of Governors, No. 94-4183 (2d Cir., March 29, 1995. filed October 17, 1994). Petition for review of Board order of prohibition against a former outside counsel to a Voting for this action: Chairman Greenspan, Vice Chairman national bank (80 Federal Reserve Bulletin 1046 (1994)). Blinder, and Governors Kelley, LaWare, Phillips, and Yellen. Absent and not voting: Governor Lindsey. The case was consolidated with a petition for review of orders of the Comptroller of the Currency imposing a WILLIAM W. WILES civil money penalty and cease and desist order against Secretary of the Board petitioner (Cavallari v. OCC, No. 94-4151). Oral argument was heard on March 23, 1995. In re Subpoena Duces Tecum, No. 94-MS-214 (D. D.C., filed June 27, 1994). Subpoena enforcement case in which the plaintiff in a securities fraud class action seeks examination reports and internal Board memos. On February 1, 1995, the court granted the plaintiff's motion to 9. The Board's authority to approve the establishment of the proposed compel, subject to the Board's right to claim privilege office parallels the continuing authority of the State of New York to with respect to the documents sought. license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York, and its Beckman v. Greenspan, No. CV 94-41-BCG-RWA (D. agent, the New York State Banking Department, to license the proposed Mont., filed April 13, 1994). Action against Board and office of Bank in accordance with any terms or conditions that the State of New York may impose. others seeking damages for alleged violations of constitu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 523 tional and common law rights. The Board's motion to WRITTEN AGREEMENTS APPROVED BY FEDERAL dismiss was filed May 19,1994. RESERVE BANKS Board of Governors v. Ghaith R. Pharaon, No. 91-CIV- Equitable Bank 6250 (S.D. New York, filed September 17, 1991). Action North Miami Beach, Florida to freeze assets of individual pending administrative adjudication of civil money penalty assessment by the Board. The Federal Reserve Board announced on March 8, On September 17,1991, the court issued an order tempo- 1995, the execution of a Written Agreement between the rarily restraining the transfer or disposition of the individ- Federal Reserve Bank of Atlanta and the Equitable Bank, ual' s assets. North Miami Beach, Florida. 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 Applicant(s) Bank(s) Effective Date South Trust Corporation, CNB Capital Corporation, March 28, 1995 Birmingham, Alabama Pascagoula, Mississippi Sections 3 and 4 Applicant(s) Bank(s) Effective Date Old National Bancorp., Citizens National Bank Corporation, March 10, 1995 Evansville, Indiana Tell City, Indiana Citizens National Life Insurance Corporation, Tell City, Indiana 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 Applicant(s) Bank(s) Reserve Bank Effective Date American Community American Community Bank, Chicago February 22, 1995 Bankshares, Inc., Wausau, Wisconsin Wausau, Wisconsin Baltz Family Partners, Ltd., First United Bancorporation, Kansas City February 24, 1995 Parker, Colorado Parker, Colorado Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

524 Federal Reserve Bulletin • May 1995 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Benjamin Franklin Bancorp, Benjamin Franklin Savings Bank, Boston February 27, 1995 M.H.C., Franklin, Massachusetts Franklin, Massachusetts B J Morgan Bancshares, Inc., First State Bank, Chicago February 23, 1995 Morgantown, Indiana Morgantown, Indiana Boatmen's Bancshares, Inc., West Side Bancshares, Inc., St. Louis March 1, 1995 St. Louis, Missouri San Angelo, Texas The Chase Manhattan Corporation, The Chase Manhattan Bank of New New York March 3, 1995 New York, New York Jersey, National Association, Chase Manhattan National Holding Oradell, New Jersey Corporation, New York, New York Cullen/Frost Bankers, Inc., Valley Bancshares, Inc., Dallas February 27, 1995 San Antonio, Texas McAllen, Texas Deposit Guaranty Corporation, Citizens National Bancshares, Inc., Atlanta March 8, 1995 Jackson, Mississippi Hammond, Louisiana Fifth Third Bancorp, Fifth Third Bank of Northeastern Ohio, Cleveland March 8, 1995 Cincinnati, Ohio Cleveland, Ohio First Centralia Bancshares, Inc., Onaga Bancshares, Inc., Kansas City March 2, 1995 Centralia, Kansas Onaga, Kansas First Citizens BancShares, Inc., Old White Bankshares, Inc., Richmond March 16, 1995 Raleigh, North Carolina White Sulphur Springs, West Virginia Foxdale Bancorp, Foxdale Bank, Chicago March 8, 1995 South Elgin, Illinois South Elgin, Illinois Ida Grove Bancshares, Inc., American National Bank, Chicago February 23, 1995 Ida Grove, Iowa Hostein, Iowa Independent Bancorp, Inc., The Independent Bank of Oxford, Atlanta March 16, 1995 Oxford, Alabama Oxford, Alabama IBW, Inc., Industrial Bank of Washington, Richmond March 2, 1995 Washington, D.C. Washington, D.C. ISB Financial Corporation, Iberia Savings Bank, Atlanta February 24, 1995 New Iberia, Louisiana New Iberia, Louisiana L.B.S. McMullan Limited Citizens Union Bancorp of Shelbyville, St. Louis March 14, 1995 Partnership, Inc., Shelbyville, Kentucky Shelbyville, Kentucky MNB Bancshares, Inc., Auburn Bancshares, Inc., Kansas City March 10, 1995 Manhattan, Kansas Auburn, Kansas Morrill Bancshares, Inc., Onaga Bancshares, Inc., Kansas City March 2, 1995 Sabetha, Kansas Onaga, Kansas National Bancorp, Inc., Northwest Community Bank, Chicago February 24, 1995 Melrose Park, Illinois Prospect Heights, Illinois National City Bancshares, Inc., White County Bank, St. Louis March 14, 1995 Evansville, Indiana Carmi, Illinois Norwest Corporation, United Texas Financial Corporation, Minneapolis March 1, 1995 Minneapolis, Minnesota Wichita Falls, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 525 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Otto Bremer Foundation, Morris State Bancorporation, Minneapolis March 16, 1995 St. Paul, Minnesota Morris, Minnesota Bremer Financial Corporation, St. Paul, Minnesota Peoples Bancorp, Inc., Piano Bank & Trust, Dallas February 28, 1995 Piano, Texas Piano, Texas Peoples Bancorp of Delaware, Inc., Dover, Delaware Peoples Bancorp of Delaware, Piano Bank & Trust, Dallas February 28, 1995 Inc., Piano, Texas Dover, Delaware Persons Banking Company, Spivey Bank Shares, Inc., Atlanta March 13, 1995 Lithonia, Georgia Swainsboro, Georgia State Bank Employees Stock Prairie State Bancshares, Inc., Kansas City March 6, 1995 Ownership Plan, Hoxie, Kansas Hoxie, Kansas Synovus Financial Corp., Citizens & Merchants Corporation, Atlanta March 3, 1995 Columbus, Georgia Douglasville, Georgia TB&C Bancshares, Inc., Columbus, Georgia Texas Financial Bancorporation, Shady Oaks Bancshares, Inc., Dallas March 1, 1995 Inc., Fort Worth, Texas Minneapolis, Minnesota Shady Oaks National Bank, First Bancorp, Inc., Fort Worth, Texas Denton, Texas First Delaware Bancorp, Inc., Dover, Delaware United Valley Bancorp, Inc., United Valley Bank, Philadelphia March 1, 1995 Philadelphia, Pennsylvania Philadelphia, Pennsylvania Warren County Bancshares, Inc., Bay-Hermann-Berger Bank, St. Louis March 2, 1995 Warrenton, Missouri Hermann, Missouri West Plains Investors, Inc., Pleasant Plains State Bank, Chicago March 1, 1995 Pleasant Plains, Illinois Pleasant Plains, Illinois Wilmot Bank Holding Company, Wilmot State Bank, St. Louis February 27, 1995 Wilmot, Arkansas Wilmot, Arkansas Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Central Louisiana Capital To engage de novo in consumer Dallas February 16, 1995 Corporation, finance activities and the sale of Vidalia, Louisiana money orders Central Louisiana Capital To engage de novo in the sale of credit Dallas March 2, 1995 Corporation, related insurance Vidalia, Louisiana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

526 Federal Reserve Bulletin • May 1995 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Deutsche Bank AG, Deutsche Bank Trust Company, New York March 3, 1995 Frankfurt (Main), Federal New York, New York Republic of Germany Gillmor Financial Services, Inc.. The Old Fort Real Estate Company, Cleveland February 16, 1995 Old Fort, Ohio Old Fort, Ohio ISB Financial Corporation, Iberia Financial Services, Inc., Atlanta March 1, 1995 New Iberia, Louisiana New Iberia, Louisiana Jacob Schmidt Company, American Credit Corporation, Minneapolis March 8, 1995 St. Paul, Minnesota St. Paul, Minnesota American Bancorporation, Inc., St. Paul, Minnesota The Toronto-Dominion Bank, Lancaster Financial Corporation, New York February 28, 1995 Toronto, Canada New York, New York 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. Applicant(s) Bank(s) Reserve Bank Effective Date 1st United Bank, Jupiter Tequesta National Bank, Atlanta March 2, 1995 Boca Raton, Florida Tequesta, Florida Enterprise Bank and Trust First Union National Bank of Richmond February 24, 1995 Company, North Carolina, Winston-Salem, North Carolina Charlotte, North Carolina Fifth Third Bank of Northeastern The Fifth Third Bank, Cleveland March 8, 1995 Ohio, Cincinnati, Ohio Cleveland, Ohio Firstar Bank Illinois, All American Bank, Chicago March 1, 1995 Naperville, Illinois Chicago, Illinois Colonial Bank, Chicago, Illinois Community Bank & Trust Company of Edgewater, Chicago, Illinois Michigan Avenue National Bank, Chicago, Illinois First Colonial Bank Southwest, Burbank, Illinois First Colonial Bank of McHenry County, Crystal Lake, Illinois First Colonial Bank of Downers Grove, Downers Grove, Illinois York State Bank, Elmhurst, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 527 Bank Merger Act—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Fox Lake State Bank, Fox Lake, Illinois First Colonial Bank/Highwood, Highwood, Illinois First Colonial Bank/Mundelein, Mundelein, Illinois First Colonial Bank of DePage County, Naperville, Illinois First Colonial Bank Northwest, Niles, Illinois First Colonial Bank/Northlake, Northlake, Illinois Avenue Bank of Oak Park, Oak Park, Illinois First Colonial Bank/Rosemont, Rosemont, Illinois First Colonial Bank of Lake County, Vernon Hills, Illinois Old Kent Bank, Countryside Bank, Chicago March 2, 1995 Elmhurst, Illinois Edgewood, Illinois Pace American Bank, NationsBank of Virginia, N.A., Richmond February 24, 1995 Lawrenceville, Virginia Richmond, Virginia Shelby County State Bank, Strasburg State Bank, Chicago March 10, 1995 Shelbyville, Illinois Strasburg, Illinois United Valley Bank, UVB Interim Bank, Philadelphia March 1, 1995 Philadelphia, Pennsylvania Philadelphia, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

529 Directors of Federal Reserve Banks and Branches Regional decentralization and a combination of govern- crimination as to race, creed, color, sex, or national mental and private characteristics are important hall- origin. marks of the uniqueness of the Federal Reserve System. Class A directors of each Reserve Bank represent the Under the Federal Reserve Act, decentralization was stockholding member banks of the Federal Reserve Disachieved by division of the country into twelve regions trict. Class B and Class C directors represent the public called Federal Reserve Districts, and the establishment and are chosen with due, but not exclusive, considerin each District of a separately incorporated Federal ation to the interests of agriculture, commerce, industry, Reserve Bank with its own board of directors. The services, labor, and consumers; they may not be officers, blending of governmental and private characteristics is directors, or employees of any bank. In addition, Class C provided through ownership of the stock of the Reserve directors may not be stockholders of any bank. The Bank by member banks in its District, which also elect Board of Governors designates annually one Class C the majority of the board of directors, and by the general director as chairman of the board of directors of each supervision of the Reserve Banks by the Board of Gover- District Bank and designates another Class C director as nors, an agency of the federal government. The Board deputy chairman. also appoints a minority of each board of directors. Each of the twenty-five Branches of the Federal Thus, there are essential elements of regional participa- Reserve Banks has a board of either seven or five direction and counsel in the conduct of the System's affairs tors, a majority of whom are appointed by the parent for which the Federal Reserve relies importantly on the Federal Reserve Bank; the others are appointed by the contributions of the directors of the Federal Reserve Board of Governors. One of the Board's appointees is Banks and Branches. designated annually as chairman of the board of that The following list of directors of Federal Reserve Branch in a manner prescribed by the parent Federal Banks and Branches shows for each director the class of Reserve Bank. directorship, the principal business affiliation, and the The names of the chairman and deputy chairman of date the current term expires. Each Federal Reserve the board of directors of each Reserve Bank and of the Bank has nine members on its board of directors: The chairman of each Branch are published monthly in the member banks elect the three Class A and three Class B Federal Reserve Bulletin.1 directors, and the Board of Governors appoints the three directors in Class C. Directors are chosen without dis- 1. The current list appears on page A86 of this Bulletin. Term expires DISTRICT 1—BOSTON December 31 Class A Ira Stepanian Chairman and Chief Executive Officer, The Bank of Boston 1995 Corporation, Boston, Massachusetts David A. Page President and Chief Executive Officer, Ocean National Bank of 1996 Kennebunk, Kennebunk, Maine Jane C. Walsh President and Chief Executive Officer, Northmark Bank, 1997 North Andover, Massachusetts Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

530 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 1—Continued December 31 Class B Joan T. Bok Chairman, New England Electric System, Westborough, 1995 Massachusetts Stephen L. Brown Chairman and Chief Executive Officer, John Hancock Mutual Life 1996 Insurance Company, Boston, Massachusetts Edward Dugger III President and Chief Executive Officer, UNC Ventures, Inc., 1997 Boston, Massachusetts Class C Professor of Economics and Chair, Department of Economics, 1995 William C. Brainard Yale University, New Haven, Connecticut Executive Director, The Quality Connection, East Dennis, 1996 John E. Flynn Massachusetts Chairman and Chief Executive Officer, New England Medical Center, 1997 Jerome H. Grossman Inc., Boston, Massachusetts DISTRICT 2—NEW YORK Class A Chairman, President, and Chief Executive Officer, Manufacturers and 1995 Robert G. Wilmers Traders Trust Company, Buffalo, New York Chairman and Chief Executive Officer, The First National Bank of 1996 J. William Johnson Long Island, Glen Head, New York Chairman and Chief Executive Officer, The Bank of New York, 1997 J. Carter Bacot New York, New York Class B William C. Steere, Jr. Chairman and Chief Executive Officer, Pfizer Inc., New York, 1995 New York Sandra Feldman President, United Federation of Teachers, New York, New York 1996 Eugene R. McGrath Chief Executive Officer, Consolidated Edison Company of New York, 1997 Inc., New York, New York Class C Herbert L. Washington Owner, HLW Fast Track, Inc., Rochester, New York 1995 David A. Hamburg President, Carnegie Corporation of New York, New York, New York 1996 Maurice R. Greenberg Chairman and Chief Executive Officer, American International Group, 1997 Inc., New York, New York BUFFALO BRANCH Appointed by the Federal Reserve Bank George W. Hamlin IV President and Chief Executive Officer, The Canandaigua National 1995 Bank and Trust Company, Canandaigua, New York Louise C. Woerner Chairman and Chief Executive Officer, HCR, Rochester, New York 1996 William E. Swan President and Chief Executive Officer, Lockport Savings Bank, 1997 Lockport, New York Mark W. Adams Owner and Operator, Adams Poultry Farm, Naples, New York 1997 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Directors of Federal Reserve Banks and Branches 531 Term expires DISTRICT 2—Continued December 31 Buffalo Branch—Continued Appointed by the Board of Governors F.C. Richardson President, Buffalo State College, Buffalo, New York 1995 Joseph J. Castiglia President and Chief Executive Officer, Pratt & Lambert, Inc., Buffalo, 1996 New York Donald L. Rust Plant Manager, Tonawanda Engine Plant, General Motors Powertrain 1997 Division, General Motors Corporation, Buffalo, New York DISTRICT 3—PHILADELPHIA Class A Carl L. Campbell President and Chief Executive Officer, Keystone Financial, Inc., 1995 Harrisburg, Pennsylvania Terry K. Dunkle Chairman, United States National Bank, Johnstown, Pennsylvania 1996 Dennis W. DiLazzero President and Chief Executive Officer, Minotola National Bank, 1997 Vineland, New Jersey Class B David W. Huggins President and Chief Executive Officer, RMS Technologies, Inc., 1995 Marlton, New Jersey J. Richard Jones President and Chief Executive Officer, Jackson-Cross Company, 1996 Philadelphia, Pennsylvania Robert D. Burris President and Chief Executive Officer, Burris Foods, Inc., 1997 Milford, Delaware Class C James M. Mead President and Chief Executive Officer, Capital Blue Cross, 1995 Harrisburg, Pennsylvania Joan Carter President and Chief Operating Officer, UM Holdings Ltd., 1996 Haddonfield, New Jersey Donald J. Kennedy Business Manager, International Brotherhood of Electrical Workers, 1997 Local Union No. 269, Trenton, New Jersey DISTRICT 4—CLEVELAND Class A Chairman and Chief Executive Officer, National City Corporation, 1995 Edward B. Brandon Cleveland, Ohio Chairman, President, and Chief Executive Officer, The Apple Creek 1996 Alfred C. Leist Banking Company, Apple Creek, Ohio President and Chief Executive Officer, Southwest National 1997 David S. Dahlmann Corporation, Greensburg, Pennsylvania Class B I.N. Rendall Harper, Jr. President and Chief Executive Officer, American Micrographics 1995 Company, Inc., Monroeville, Pennsylvania Thomas M. Nies President, Cincom Systems, Inc., Cincinnati, Ohio 1996 Michele Tolela Myers President, Denison University, Granville, Ohio 1997 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

532 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 4—Continued December 31 Class C Chief Executive, Old Mill Group, Hudson, Ohio 1995 Executive Secretary-Treasurer, Ohio State Building and Construction 1996 A. William Reynolds Trades Council, Columbus, Ohio Robert Y. Farrington G. Watts Humphrey, Jr. President, GWH Holdings, Inc., Pittsburgh, Pennsylvania 1997 CINCINNATI BRANCH Appointed by the Federal Reserve Bank Jerry W. Carey President and Chief Executive Officer, Union National Bank and Trust 1995 Company, Barbourville, Kentucky Judith G. Clabes Editor, The Kentucky Post, Covington, Kentucky 1996 Phillip R. Cox President, Cox Financial Corporation, Cincinnati, Ohio 1996 Jerry A. Grundhofer Chairman, President, and Chief Executive Officer, Star Banc 1997 Corporation, Cincinnati, Ohio Appointed by the Board of Governors Eleanor Hicks President, M.I.N.D.S. International, Cincinnati, Ohio 1995 John N. Taylor, Jr. Chairman and Chief Executive Officer, Kurz-Kasch, Inc., 1996 Dayton, Ohio C. Wayne Shumate Chairman and Chief Executive Officer, Kentucky Textiles, Inc. 1997 Paris, Kentucky PITTSBURGH BRANCH Appointed by the Federal Reserve Bank Helen J. Clark Chairman, President, and Chief Executive Officer, Apollo Trust 1995 Company, Apollo, Pennsylvania Randall L.C. Russell President and Chief Executive Officer, Ranbar Technology, Inc., 1996 Glenshaw, Pennsylvania Wesley W. von Schack Chairman, President, and Chief Executive Officer, DQE, 1996 Pittsburgh, Pennsylvania Thomas J. 0'Shane President and Chief Executive Officer, First Western Bancorp, Inc., 1997 New Castle, Pennsylvania Appointed by the Board of Governors Robert P. Bozzone Vice Chairman of the Board, Allegheny Ludlum Corporation, 1995 Pittsburgh, Pennsylvania Sandra L. Phillips Executive Director, Pittsburgh Partnership for Neighborhood 1996 Development, Pittsburgh, Pennsylvania John T. Ryan III President, Chairman, and Chief Executive Officer, Mine Safety 1997 Appliances Company, Pittsburgh, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Directors of Federal Reserve Banks and Branches 533 Term expires DISTRICT 5—RICHMOND December 31 Class A Charles E. Weller President, Elkridge National Bank and ENB Financial Corporation, 1995 Elkridge, Maryland Robert M. Freeman Chairman and Chief Executive Officer, Signet Banking Corporation, 1996 Richmond, Virginia Philip L. McLaughlin President and Chief Executive Officer, Horizon Bancorp, Inc., and 1997 Greenbrier Valley National Bank, Lewisburg, West Virginia Class B R.E. Atkinson, Jr. Chairman, Dilmar Oil Company, Inc., Florence, South Carolina 1995 Paul A. DelaCourt Chairman, The North Carolina Enterprise Corporation, 1996 Raleigh, North Carolina L. Newton Thomas, Jr. Senior Vice President (Retired), ITT/Carbon Industries, Inc., 1997 Charleston, West Virginia Class C Henry J. Faison Chairman, Faison, Charlotte, North Carolina 1995 Stephen Brobeck Executive Director, Consumer Federation of America, 1996 Washington, D.C. Claudine B. Malone President, Financial & Management Consulting, Inc., 1997 McLean, Virginia BALTIMORE BRANCH Appointed by the Federal Reserve Bank Richard M. Adams Chairman and Chief Executive Officer, United Bankshares, Inc., 1995 Parkersburg, West Virginia Morton I. Rapoport President and Chief Executive Officer, University of Maryland 1996 Medical System, Baltimore, Maryland Thomas J. Hughes President and Chief Executive Officer, Navy Federal Credit Union, 1997 Vienna, Virginia F. Levi Ruark Chairman, President, and Chief Executive Officer, The National Bank 1997 of Cambridge, Cambridge, Maryland Appointed by the Board of Governors Daniel R. Baker President and Chief Executive Officer, Tate Access Floors, Inc., 1995 Jessup, Maryland Michael R. Watson President, Association of Maryland Pilots, Baltimore, Maryland 1996 Rebecca Hahn Windsor Chairman and Chief Executive Officer, Hahn Transportation, Inc., 1997 New Market, Maryland CHARLOTTE BRANCH Appointed by the Federal Reserve Bank David B. Jordan Vice Chairman, Chief Executive Officer, and Director, Security 1995 Capital Bancorp, Salisbury, North Carolina Jim M. Cherry, Jr. President and Chief Executive Officer, Williamsburg First National 1996 Bank, Kingstree, South Carolina Dorothy H. Aranda President, Dohara Associates, Inc., Hilton Head Island, South Carolina 1997 J. Walter McDowell President and Chief Executive Officer, Wachovia Bank of 1997 North Carolina, N.A., Winston-Salem, North Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

534 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 5—Continued December 31 Charlotte Branch—Continued Appointed by the Board of Governors James O. Roberson President and Chief Executive Officer, Research Triangle Foundation 1995 of North Carolina, Research Triangle Park, North Carolina Dennis D. Lowery Chief Executive Officer and Chairman, Continental Ltd., 1996 Charlotte, North Carolina Joan H. Zimmerman President, Southern Shows, Inc., Charlotte, North Carolina 1997 DISTRICT 6—ATLANTA Class A W.H. Swain Chairman, First National Bank, Oneida, Tennessee 1995 James B. Williams Chairman and Chief Executive Officer, SunTrust Banks, Inc., 1996 Atlanta, Georgia D. Paul Jones, Jr. Chairman and Chief Executive Officer, Compass Bancshares, Inc., 1997 Birmingham, Alabama Class B J. Thomas Holton President, Sherman International Corporation, Birmingham, Alabama 1995 Andre M. Rubenstein Chairman and Chief Executive Officer, Rubenstein Brothers, Inc., 1996 New Orleans, Louisiana Maria Camila Leiva Executive Vice President, Miami Free Zone Corporation, 1997 Miami, Florida Class C Leo Benatar Chairman and Chief Executive Officer, Engraph, Inc., 1995 Atlanta, Georgia Daniel E. Sweat, Jr. Program Director, The America Project, Atlanta, Georgia 1996 Hugh M. Brown President and Chief Executive Officer, BAMSI, Inc., 1997 Titusville, Florida BIRMINGHAM BRANCH Appointed by the Federal Reserve Bank J. Stephen Nelson Chairman and Chief Executive Officer, First National Bank of 1995 Brewton, Brewton, Alabama Julian W. Banton Chairman, President, and Chief Executive Officer, SouthTrust Bank of 1996 Alabama, N.A., Birmingham, Alabama Marlin D. Moore, Jr. Chairman, Pritchett-Moore, Inc., Tuscaloosa, Alabama 1997 Columbus Sanders President, Consolidated Industries, Inc., Huntsville, Alabama 1997 Appointed by the Board of Governors Patricia B. Compton President, Patco, Inc., Georgiana, Alabama 1995 Donald E. Boomershine President, The Better Business Bureau of Central Alabama, Inc., and 1996 the Counties of the Wiregrass, Birmingham, Alabama D. Bruce Carr International Representative, Laborers' International Union, AFL-CIO 1997 of North America, Gadsden, Alabama Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Directors of Federal Reserve Banks and Branches 535 Term expires DISTRICT 6—Continued December 31 JACKSONVILLE BRANCH Appointed by the Federal Reserve Bank Royce B. Walden Vice President, Ward Bradford & Company, Orlando, Florida 1995 William G. Smith, Jr. President, Capital City First National Bank, Tallahassee, Florida 1996 Terry R. West President and Chief Executive Officer, Jax Navy Federal Credit 1997 Union, Jacksonville, Florida Arnold A. Heggestad Chester Holloway Professor of Entrepreneurship, University of 1997 Florida, Gainesville, Florida Appointed by the Board of Governors Lana Jane Lewis-Brent President, Paul Brent Designer, Inc., Panama City, Florida 1995 Joan Dial Ruffier General Partner, Sunshine Cafes, Orlando, Florida 1996 Patrick C. Kelly Chairman and Chief Executive Officer, Physician Sales & Service, 1997 Inc., Jacksonville, Florida MIAMI BRANCH Appointed by the Federal Reserve Bank E. Anthony Newton President and Chief Executive Officer, Island National Bank and Trust 1995 Company, Palm Beach, Florida Pat L. Tornillo, Jr. Executive Vice President, United Teachers of Dade, Miami, Florida 1996 Steven C. Shimp President, O-A-K/Florida, Inc., Fort Myers, Florida 1996 Carlos A. Migoya President, Dade/Monroe Counties, First Union National Bank of 1997 Florida, Miami, Florida Appointed by the Board of Governors R. Kirk Landon Chairman and Chief Executive Officer, American Bankers Insurance 1995 Group, Miami, Florida Michael T. Wilson President, Vinegar Bend Farms, Inc., Belle Glade, Florida 1996 Kaaren Johnson-Street Vice President, Diversity Business Enterprise, Burger King 1997 Corporation, Miami, Florida NASHVILLE BRANCH Appointed by the Federal Reserve Bank James D. Harris President and Chief Executive Officer, Brentwood National Bank, 1995 Brentwood, Tennessee Williams E. Arant, Jr. President and Chief Executive Officer, First Knoxville Bank, 1996 Knoxville, Tennessee Jack J. Vaughn President, Opryland Hospitality & Attractions Group, Gaylord 1997 Entertainment Company, Nashville, Tennessee John E. Seward, Jr. President and Chief Executive Officer, The Paty Company, 1997 Piney Flats, Tennessee Appointed by the Board of Governors Frances F. Marcum Chairman, Micro Craft, Inc., Tullahoma, Tennessee 1995 Paula Lovell President, Lovell Communications, Inc., Nashville, Tennessee 1996 James E. Dalton, Jr. President and Chief Executive Officer, Quorum Health Group, Inc., 1997 Brentwood, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

536 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 6—Continued December 31 NEW ORLEANS BRANCH Appointed by the Federal Reserve Bank Thomas E. Walker Chairman and Chief Executive Officer, Bank of Forest, 1995 Forest, Mississippi Howard C. Gaines Chairman and Chief Executive Officer, First National Bank of 1996 Commerce, New Orleans, Louisiana Angus R. Cooper II Chairman and Chief Executive Officer, Cooper/T. Smith Corporation, 1997 Mobile, Alabama Kay L. Nelson President, Nelson Capital Corporation, New Orleans, Louisiana 1997 Appointed by the Board of Governors Lucimarian Tolliver Roberts President, Mississippi Coast Coliseum Commission, 1995 Biloxi, Mississippi Victor Bussie President, Louisiana AFL-CIO, Baton Rouge, Louisiana 1996 Jo Ann Slaydon President, Slaydon Consultants and Insight Productions and 1997 Advertising, Baton Rouge, Louisiana DISTRICT 7—CHICAGO Class A Arnold C. Schultz Chairman and President, Grundy National Bank, 1995 Grundy Center, Iowa David W. Fox Chairman and Chief Executive Officer, The Northern Trust 1996 Corporation and The Northern Trust Company, Chicago, Illinois Stefan S. Anderson Chairman, President, and Chief Executive Officer, First Merchants 1997 Corporation, Muncie, Indiana Class B Donald J. Schneider President, Schneider National, Inc., Green Bay, Wisconsin 1995 A. Charlene Sullivan Associate Professor of Management, Krannert Graduate School of 1996 Management, Purdue University, West Lafayette, Indiana Thomas C. Dorr President and Chief Executive Officer, Dorr's Pine Grove Farm Co., 1997 Marcus, Iowa Class C Richard G. Cline Chairman and Chief Executive Officer, NICOR Inc., 1995 Naperville, Illinois Robert M. Healey Member, Illinois Labor Relations Board, Chicago, Illinois 1996 Lester H. McKeever, Jr. Managing Partner, Washington, Pittman & McKeever, 1997 Chicago, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Directors of Federal Reserve Banks and Branches 537 Term expires DISTRICT 7—Continued December 31 DETROIT BRANCH Appointed by the Federal Reserve Bank Norman F. Rodgers President and Chief Executive Officer, Hillsdale County National 1995 Bank, Hillsdale, Michigan William E. Odom Chairman and Chief Executive Officer, Ford Motor Credit Company, 1996 Dearborn, Michigan Charles E. Allen President and Chief Executive Officer, Graimark Realty Advisors, 1996 Inc., Detroit, Michigan Charles R. Weeks Chairman, President, and Chief Executive Officer, Citizens Banking 1997 Corporation, Hint, Michigan Appointed by the Board of Governors J. Michael Moore Chairman and Chief Executive Officer, Invetech Company, 1995 Detroit, Michigan Florine Mark President and Chief Executive Officer, The WW Group, 1996 Farmington Hills, Michigan John D. Forsyth Executive Director, University of Michigan Hospitals, 1997 Ann Arbor, Michigan DISTRICT 8—ST. LOUIS Class A Chairman and President, Trans Financial Bancorp, Inc., 1995 Douglas M. Lester Bowling Green, Kentucky Chairman and Chief Executive Officer, First National Bank of Eastern 1996 W.D. Glover Arkansas, Forrest City, Arkansas Chairman, President, and Director, The First National Bank of 1997 Michael A. Alexander Woodlawn, Mount Vernon, Illinois Class B Richard E. Bell President and Chief Executive Officer, Riceland Foods, Inc., 1995 Stuttgart, Arkansas Warren R. Lee President, W.R. Lee & Associates, Inc., Louisville, Kentucky 1996 Sandra B. Sanderson President and Chief Executive Officer, Sanderson Plumbing Products, 1997 Inc., Columbus, Mississippi Class C John F. McDonnell Chairman, McDonnell Douglas Corporation, St. Louis, Missouri 1995 Veo Peoples, Jr. Partner, Peoples & Hale, St. Louis, Missouri 1996 Robert H. Quenon Mining Consultant, St. Louis, Missouri 1997 LITTLE ROCK BRANCH Appointed by the Federal Reserve Bank Mark A. Shelton III President, M.A. Shelton Farming Company, Altheimer, Arkansas 1995 Mahlon A. Martin President, Winthrop Rockefeller Foundation, Little Rock, Arkansas 1996 James V. Kelley Chairman, President, and Chief Executive Officer, First United 1996 Bancshares, Inc., El Dorado, Arkansas Lunsford W. Bridges President and Chief Executive Officer, Metropolitan National Bank, 1997 Little Rock, Arkansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

538 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 8—Continued December 31 Little Rock Branch—Continued Appointed by the Board of Governors Betta Carney Chairman and Chief Executive Officer, World Wide Travel Service, 1995 Inc., Little Rock, Arkansas Janet M. Jones President, The Janet Jones Company, Little Rock, Arkansas 1996 Robert Daniel Nabholz, Jr. Chief Executive Officer, Nabholz Construction Corporation, 1997 Conway, Arkansas LOUISVILLE BRANCH Appointed by the Federal Reserve Bank Malcolm B. Chancey, Jr. Chairman and Chief Executive Officer, Liberty National Bank & Trust 1995 Company of Kentucky, Louisville, Kentucky Charles D. Storms President and Chief Executive Officer, Red Spot Paint and Varnish 1996 Company, Inc., Evansville, Indiana Robert M. Hall Owner, East Fork Growers, Seymour, Indiana 1996 Thomas E. Spragens, Jr. President and Chief Executive Officer, Farmers National Bank, 1997 Lebanon, Kentucky Appointed by the Board of Governors Daniel L. Ash Consultant, Wenz-Neely Company, Louisville, Kentucky 1995 John A. Williams Chairman and Chief Executive Officer, Computer Services, Inc., 1996 Paducah, Kentucky Laura M. Douglas Legal Counsel, Louisville & Jefferson County Metropolitan Sewer 1997 District, Louisville, Kentucky MEMPHIS BRANCH Appointed by the Federal Reserve Bank Anthony M. Rampley President, Chief Executive Officer, and Director, Arkansas Glass 1995 Container Corporation, Jonesboro, Arkansas Katie S. Winchester President and Director, First Citizens National Bank, 1996 Dyersburg, Tennessee Benjamin W. Rawlins, Jr. Chairman and Chief Executive Officer, Union Planters Corporation, 1996 Memphis, Tennessee Lewis F. Mallory, Jr. Chairman, President, and Chief Executive Officer, NBC Capital 1997 Corporation, Starkville, Mississippi Appointed by the Board of Governors John V. Myers President, Better Business Bureau, Memphis, Tennessee 1995 Woods E. Eastland President and Chief Executive Officer, Staple Cotton Cooperative 1996 Association, Greenwood, Mississippi Vacancy 1997 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Directors of Federal Reserve Banks and Branches 539 Term expires DISTRICT 9—MINNEAPOLIS December 31 Class A Susanne V. Boxer President and Chief Executive Officer, MFC First National Bank, 1995 Houghton, Michigan Jerry B. Melby President, First National Bank, Bowbells, North Dakota 1996 William S. Pickerign President, The Northwestern Bank, Chippewa Falls, Wisconsin 1997 Class B President, TMI Systems Design Corporation/TMI Transport 1995 Dennis W. Johnson Corporation, Dickinson, North Dakota President, M/C Professional Associates, Inc., 1996 Clarence D. Mortenson Pierre, South Dakota Owner and Dealer, Bitterroot Motors, Missoula, Montana 1997 Kathryn A. Ogren Class C Chairman and Chief Executive Officer, Opus Corporation, 1995 Minneapolis, Minnesota Gerald A. Rauenhorst Chairman and Chief Executive Officer, Graco, Inc., 1996 Golden Valley, Minnesota David A. Koch Professor, Consumption and Consumer Economics, Department of 1997 Agricultural and Applied Economics, University of Minnesota, Jean D. Kinsey St. Paul, Minnesota HELENA BRANCH Appointed by the Federal Reserve Bank Ronald D. Scott President and Chief Executive Officer, The First State Bank of Malta, 1995 Malta, Montana Donald E. Olsson, Jr. President, Ronan State Bank, Ronan, Montana 1996 Sandra M. Stash Manager, Montana Facilities, Atlantic Richfield Company (ARCO), 1996 Anaconda, Montana Appointed by the Board of Governors Matthew J. Quinn President, Carroll College, Helena, Montana 1995 Lane W. Basso President, Deaconess Medical Center of Billings, Inc., 1996 Billings, Montana DISTRICT 10—KANSAS CITY Class A William L. McQuillan President, Chief Executive Officer, and Director, City National Bank, 1995 Greeley, Nebraska L.W. Menefee Chairman and Chief Executive Officer, Union Colony Bank, 1996 Greeley, Colorado Samuel P. Baird President, Farmers State Bank & Trust Co., Superior, Nebraska 1997 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

540 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 10—Continued December 31 Class B W.W. Allen Chairman and Chief Executive Officer, Phillips Petroleum Company, 1995 Bartlesville, Oklahoma Charles W. Nichols Managing Partner, Davison & Sons Cattle Company, 1996 Arnett, Oklahoma Jo Marie Dancik Area Managing Partner, Ernst & Young LLP, Denver, Colorado 1997 Class C Herman Cain President and Chief Executive Officer, Godfather's Pizza, Inc., 1995 Omaha, Nebraska Colleen D. Hernandez Executive Director, Kansas City Neighborhood Alliance, 1996 Kansas City, Missouri A. Drue Jennings Chairman, President, and Chief Executive Officer, Kansas City Power 1997 & Light Company, Kansas City, Missouri DENVER BRANCH Appointed by the Federal Reserve Bank Peter I. Wold Partner, Wold Oil & Gas Company, Casper, Wyoming 1995 Peter R. Decker President, Peter R. Decker & Associates, Denver, Colorado 1996 Richard I. Ledbetter President and Chief Executive Officer, The First National Bank of 1997 Farmington, Farmington, New Mexico Clifford E. Kirk President and Chief Executive Officer, First National Bank of Gillette, 1997 Gillette, Wyoming Appointed by the Board of Governors Sandra K. Woods Vice President, Environmental Health and Safety Systems, Coors 1995 Brewing Company, Golden, Colorado Vacancy 1996 Donald E. Gallegos President, King Soopers, Denver, Colorado 1997 OKLAHOMA CITY BRANCH Appointed by the Federal Reserve Bank C. Kendric Fergeson Chairman and Chief Executive Officer, The National Bank of 1995 Commerce, Altus, Oklahoma Dennis M. Mitchell President, Citizens Bank of Ardmore, Ardmore, Oklahoma 1995 Gordona Duca President and Owner, Gordona Duca, Inc., Realtors, Tulsa, Oklahoma 1996 Michael S. Samis President and Chief Executive Officer, Macklanburg-Duncan Co., 1997 Oklahoma City, Oklahoma Appointed by the Board of Governors Barry L. Eller Senior Vice President and General Manager, MerCruiser, 1995 Stillwater, Oklahoma Ernest L. Holloway President, Langston University, Langston, Oklahoma 1996 Victor R. Schock President and Chief Executive Officer, Credit Counseling Centers, 1997 Tulsa, Oklahoma Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Directors of Federal Reserve Banks and Branches 541 Term expires DISTRICT 10—Continued December 31 OMAHA BRANCH Appointed by the Federal Reserve Bank Robert L. Peterson Chairman, President, and Chief Executive Officer, IBP, Inc., 1995 Dakota City, Nebraska Bruce R. Lauritzen President, First National Bank of Omaha, Omaha, Nebraska 1996 Donald A. Leu President and Chief Executive Officer, Consumer Credit Counseling 1997 Service, Omaha, Nebraska Thomas H. Olson Chairman, First National Bank, Sidney, Nebraska 1997 Appointed by the Board of Governors Sheila Griffin Special Adviser to the Governor of the State of Nebraska for 1995 International Trade, Lincoln, Nebraska LeRoy W. Thom President, T-L Irrigation Company, Hastings, Nebraska 1996 Arthur L. Shoener Executive Vice President—Operations, Union Pacific Railroad, 1997 Omaha, Nebraska DISTRICT 11—DALLAS Class A Chairman and President, The First National Bank of Panhandle, 1995 Eugene M. Phillips Panhandle, Texas President and Chief Executive Officer, Texas Independent Bank, 1996 Gayle M. Earls Dallas, Texas President and Chief Executive Officer, Security Bank, Ralls, Texas 1997 Kirk A. McLaughlin Class B Milton Carroll Chairman and Chief Executive Officer, Instrument Products, Inc., 1995 Houston, Texas J.B. Cooper, Jr. Farmer, Roscoe, Texas 1996 Peyton Yates President, Yates Drilling Company, Artesia, New Mexico 1997 Class C Chairman, President, and Chief Executive Officer, Diamond 1995 Roger R. Hemminghaus Shamrock, Inc., San Antonio, Texas Second General Vice President, International Association of Bridge, 1996 James A. Martin Structural, & Ornamental Iron Workers, Austin, Texas General Partner, Phillips-Smith Specialty Retail Group, Dallas, Texas 1997 Cece Smith EL PASO BRANCH Appointed by the Federal Reserve Bank Wayne Merritt President, Norwest Bank Texas, Midland, N.A., Midland, Texas 1995 Ben H. Haines, Jr. President and Chief Executive Officer, First National Bank of 1996 Dona Ana County, Las Cruces, New Mexico Veronica K. Callaghan Vice President and Principal, KASCO Ventures, Inc., El Paso, Texas 1996 Hugo Bustamante, Jr. Owner and Chief Executive Officer, CarLube, Inc., and ProntoLube, 1997 Inc., El Paso, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

542 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 11—Continued December 31 El Paso Branch—Continued Appointed by the Board of Governors W. Thomas Beard III President, Leoncita Cattle Company, Alpine, Texas 1995 Patricia Z. Holland-Branch President and Director of Design, PZH Contract Design, Inc., 1996 El Paso, Texas Alvin T. Johnson President, Management Assistance Corporation of America, 1997 El Paso, Texas HOUSTON BRANCH Appointed by the Federal Reserve Bank J. Michael Solar Managing Partner, Solar & Fernandes, L.L.P., Houston, Texas 1995 Judith B. Craven President, United Way of the Texas Gulf Coast, Houston, Texas 1996 Walter E. Johnson President and Chief Executive Officer, Southwest Bank of Texas, 1996 Houston, Texas Tieman H. Dippel, Jr. Chairman and President, Brenham Bancshares, Inc., Brenham, Texas 1997 Appointed by the Board of Governors Judy Ley Allen Partner and Administrator, Allen Investments, Houston, Texas 1995 Robert C. McNair Chairman and Chief Executive Officer, Cogen Technologies, Inc., 1996 Houston, Texas Isaac H. Kempner III Chairman, Imperial Holly Corporation, Sugar Land, Texas 1997 SAN ANTONIO BRANCH Appointed by the Federal Reserve Bank Gregory W. Crane President and Chief Executive Officer, Broadway National Bank, 1995 San Antonio, Texas Juliet V. Garcia President, University of Texas at Brownsville, Brownsville, Texas 1996 Douglas G. Macdonald President, South Texas National Bank, Laredo, Texas 1996 Calvin R. Weinheimer President and Chief Operating Officer, Kerrville Communications 1997 Corporation, Kerrville, Texas Appointed by the Board of Governors Carol L. Thompson President, The Thompson Group, Austin, Texas 1995 Erich Wendl President and Chief Executive Officer, Maverick Markets, Inc., 1996 Corpus Christi, Texas H.B. Zachry, Jr. Chairman and Chief Executive Officer, H.B. Zachry Company, 1997 San Antonio, Texas DISTRICT 12—SAN FRANCISCO Class A Carl J. Schmitt Chairman, University Bank & Trust Company, Palo Alto, California 1995 Richard L. Mount Chairman, President, and Chief Executive Officer, Saratoga Bancorp, 1996 Saratoga, California Gerry B. Cameron Chairman and Chief Executive Officer, U.S. Bancorp, 1997 Portland, Oregon Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Directors of Federal Reserve Banks and Branches 543 Term expires DISTRICT 12—Continued December 31 Class B E. Kay Stepp Principal and Owner, Executive Solutions, Portland, Oregon 1995 Gary G. Michael Chairman and Chief Executive Officer, Albertson's, Inc., Boise, Idaho 1996 Krestine Corbin President and Chief Executive Officer, Sierra Machinery, Inc., 1997 Sparks, Nevada Class C Cynthia A. Parker Executive Director, Anchorage Neighborhood Housing Services, Inc., 1995 Anchorage, Alaska Chairman and Chief Executive Officer (Retired), Kaiser Foundation 1996 James A. Vohs Health Plan, Inc., and Kaiser Foundation Hospitals, Oakland, California Partner, Foster Pepper & Shefelman, Seattle, Washington 1997 Judith M. Runstad LOS ANGELES BRANCH Appointed by the Federal Reserve Bank Steven R. Sensenbach President and Chief Executive Officer, Vineyard National Bank, 1995 Rancho Cucamonga, California Thomas L. Stevens, Jr. President, Los Angeles Trade-Technical College, 1996 Los Angeles, California William S. Randall Chief Operating Officer, First Interstate Bancorp, Phoenix, Arizona 1997 Antonia Hernandez President and General Counsel, Mexican American Legal Defense and 1997 Educational Fund, Los Angeles, California Appointed by the Board of Governors Anne L. Evans Chairman, Evans Hotels, San Diego, California 1995 Anita Landecker Western Regional Vice President, Local Initiatives Support 1996 Corporation, Los Angeles, California David L. Moore President, Western Growers Association, Newport Beach, California 1997 PORTLAND BRANCH Appointed by the Federal Reserve Bank John D. Eskildsen President and Chief Executive Officer, U.S. National Bank of Oregon, 1995 Portland, Oregon Elizabeth K. Johnson President, TransWestern, Inc., Scappoose, Oregon 1996 Cecil W. Drinkward President and Chief Executive Officer, Hoffman Construction 1996 Company, Portland, Oregon Thomas C. Young Chairman, President, and Chief Executive Officer, Northwest National 1997 Bank, Vancouver, Washington Appointed by the Board of Governors Carol A. Whipple Owner and Manager, Rocking C Ranch, Elkton, Oregon 1995 Ross R. Runkel Professor of Law, Willamette University, Salem, Oregon 1996 Marvin R. O'Quinn Chief Operating Officer, Providence Portland Medical Center, 1997 Portland, Oregon Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

544 Federal Reserve Bulletin • May 1995 Term expires DISTRICT 12—Continued December 31 SALT LAKE CITY BRANCH Appointed by the Federal Reserve Bank Roy C. Nelson President, Bank of Utah, Ogden, Utah 1995 Daniel R. Nelson Chairman and Chief Executive Officer, West One Bancorp, 1996 Boise, Idaho Nancy Mortensen Vice President—Marketing, ZCMI, Salt Lake City, Utah 1996 Vacancy 1997 Appointed by the Board of Governors Richard E. Davis President and Chief Executive Officer, Salt Lake Convention & 1995 Visitors Bureau, Salt Lake City, Utah Constance G. Hogland Executive Director, Boise Neighborhood Housing Services, Inc., 1996 Boise, Idaho Gerald R. Sherratt President, Southern Utah University, Cedar City, Utah 1997 SEATTLE BRANCH Appointed by the Federal Reserve Bank Constance L. Proctor Partner, Alston, Courtnage, MacAulay & Proctor, Seattle, Washington 1995 Tomio Moriguchi President, Uwajimaya, Inc., Seattle, Washington 1996 John V. Rindlaub Chairman and Chief Executive Officer, Seafirst Corporation, 1996 Seattle, Washington Thomas E. Cleveland Chairman and Chief Executive Officer, Enterprise Bank, 1997 Bellevue, Washington Appointed by the Board of Governors Emilie A. Adams President and Chief Executive Officer, Better Business Bureau 1995 Foundation, Seattle, Washington George F. Russell, Jr. Chairman, Frank Russell Company, Tacoma, Washington 1996 William R. Wiley Senior Vice President for Science & Technology Policy, Battelle 1997 Memorial Institute, Richland, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1 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 institutions A27 Stock market—Selected statistics 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 A11 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 • May 1995 Domestic Financial Statistics—Continued A55 Selected U.S. liabilities to foreign official institutions REAL ESTATE REPORTED BY BANKS A37 Mortgage markets IN THE UNITED STATES A38 Mortgage debt outstanding A55 Liabilities to and claims on foreigners CONSUMER INSTALLMENT CREDIT A56 Liabilities to foreigners A58 Banks' own claims on foreigners A39 Total outstanding A59 Banks' own and domestic customers' claims on A39 Terms foreigners A59 Banks' own claims on unaffiliated foreigners FLOW OF FUNDS A60 Claims on foreign countries—Combined domestic offices and foreign branches A40 Funds raised in U.S. credit markets A42 Summary of financial transactions REPORTED BY NONBANKING BUSINESS A43 Summary of credit market debt outstanding ENTERPRISES IN THE UNITED STATES A44 Summary of financial assets and liabilities A61 Liabilities to unaffiliated foreigners Domestic Nonfinancial Statistics A62 Claims on unaffiliated foreigners SELECTED MEASURES SECURITIES HOLDINGS AND TRANSACTIONS A45 Nonfinancial business activity—Selected A63 Foreign transactions in securities measures A64 Marketable U.S. Treasury bonds and A45 Labor force, employment, and unemployment notes—Foreign transactions A46 Output, capacity, and capacity utilization A47 Industrial production—Indexes and gross value INTEREST AND EXCHANGE RATES A49 Housing and construction A50 Consumer and producer prices A65 Discount rates of foreign central banks A51 Gross domestic product and income A65 Foreign short-term interest rates A52 Personal income and saving A66 Foreign exchange rates International Statistics A67 Guide to Statistical Releases and Special Tables SUMMARY STATISTICS SPECIAL TABLES A53 U.S. international transactions—Summary A54 U.S. foreign trade A68 Terms of lending at commercial banks, A54 U.S. reserve assets February 1995 A54 Foreign official assets held at Federal Reserve A72 Assets and liabilities of U.S. branches and agencies Banks of foreign banks, December 31, 1994 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

3 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 Nonfinancial Statistics • May 1995 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1994 1994 1995 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q1 Q2 Q3 Q4 Oct. Nov.r Decr Jan. Feb. Reserves of depository institutions2 1 Total 3.3r -3.r — 1.9r -3.3' -6.0r -1.9 -1.2 —4.4r -4.2 2 Required 2.7r -2.3r -1.91 -3.0r -,8r -6.1 -4.5 -s.o* 3.9 3 Nonborrowed 3.9r -4.2r -3.5r -2.r -3.9r .7 -.4 -2.9r -2.6 4 Monetary base3 9.8r 8.4' 1.5' 6.9 7.3r 8.5 4.1 8.1r 3.5 Concepts of money, liquid assets, and debt4 5 Ml 5.5 2.7 2.4 -1.2 -3.0 -.6 .3 l.C -1.8 6 M2 1.8 1.7 ,7r -.4 -1.3 .6 1.4 4.4 -1.2 7 M3 .6 1.3 1.9r 1.7r 1.9r 1.9 3.3 7.1r 2.8 8 L 2.4 1.6 1.7 3.9r 5.8r 3.6 9.6 4.5 n.a. 9 Debt 5.6r 4.8' 4.71 5.5 5.3r 5.9 4.3 4.9 n.a. Nontransaction components 10 In M25 .1 1.3 -,lr ,0r -.5 1.1 1.8 5.9 -.9 11 In M3 only6 -5.8 -1.3 8.6r 13.2r 19.5 9.2 13.6 21.2r 23.1 Time and savings deposits Commercial banks 12 Savings, including MMDAs 5.0 -3.7 -4.6 -8.5 -11.5 -9.7 -10.9 -12.9 -15.8 13 Small time7 -5.1 .3 9.4 16.0 16.2r 15.5 20.4 24.4r 27.4 14 Large time8'9 -.9 .8 13.1 19.2r 19.8 18.7 16.7 -3.2r 33.5 Thrift institutions 15 Savings, including MMDAs .2 -.4 -11.5 -11.1' -15.5 -21.3 -20.5 — 19.3r -24.9 16 Small time7 -11.1 -5.8r -1.7 8.6 11.4 17.5 5.4 19.9 31.2 17 Large time8 -7.4 -3.5 6.8 12.0 19.1 3.8 7.5 33.6 27.2 Money market mutual funds 18 General purpose and broker-dealer 3.4 11.9 5.0 8.9 9.9 14.2 17.2 8.9 -1.2 19 Institution-only -20.5 -15.7 -4.5 7.3 30.6 -2.0 2.0 36.5 -38.0 Debt components4 20 Federal 7.3 5.4 3.9 5.9 5.4 8.5 1.1 2.5 n.a. 21 Nonfederal 5Xf 4.5r 4.9r 5.3' 5.3" 4.9 5.4 5.8 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts Kingdom and Canada, and (3) balances in both taxable and tax-exempt, institution-only outstanding during preceding month or quarter. money market funds. Excludes amounts held by depository institutions, the U.S. govern- 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with ment, money market funds, and foreign banks and official institutions. Also excluded is regulatory changes in reserve requirements. (See also table 1.20.) the estimated amount of overnight RPs and Eurodollars held by institution-only money 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally market funds. Seasonally adjusted M3 is computed by adjusting its non-M2 component as adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency a whole and then adding this result to seasonally adjusted M2. component of the money stock, plus (3) (for all quarterly reporters on the "Report of L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters securities, commercial paper, and bankers acceptances, net of money market fund holdwhose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted ings of these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, difference between current vault cash and the amount applied to satisfy current reserve short-term Treasury securities, commercial paper, and bankers acceptances, each seasonrequirements. ally adjusted separately, and then adding this result to M3. 4. Composition of the money stock measures and debt is as follows: Debt: The debt aggregate is the outstanding credit market debt of the domestic Ml: (1) currency outside the US. Treasury, Federal Reserve Banks, and the vaults of nonfinancial sectors—the federal sector (U.S. government, not including governmentdepository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all sponsored enterprises or federally related mortgage pools) and the nonfederal sectors commercial banks other than those owed to depository institutions, the U.S. government, (state and local governments, households and nonprofit organizations, nonfinancial corpoand foreign banks and official institutions, less cash items in the process of collection and rate and nonfarm noncorporate businesses, and farms). Nonfederal debt consists of Federal Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable mortgages, tax-exempt and corporate bonds, consumer credit, bank loans, commercial order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository paper, and other loans. The data, which are derived from the Federal Reserve Board's flow institutions, credit union share draft accounts, and demand deposits at thrift institutions. of funds accounts, are break-adjusted (that is, discontinuities in the data have been Seasonally adjusted Ml is computed by summing currency, travelers checks, demand smoothed into the series) and month-averaged (that is, the data have been derived by deposits, and OCDs, each seasonally adjusted separately. averaging adjacent month-end levels). M2: Ml plus (1) overnight (and continuing contract) repurchase agreements (RPs) 5. Sum of (1) overnight RPs and overnight Eurodollars, (2) money market fund issued by all depository institutions and overnight Eurodollars issued to U.S. residents by balances (general purpose and broker-dealer), (3) savings deposits (including MMDAs), foreign branches of U.S. banks worldwide, (2) savings (including MMDAs) and small and (4) small time deposits. time deposits (time deposits—including retail RPs—in amounts of less than $100,000), 6. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. residents, and (3) balances in both taxable and tax-exempt general-purpose and broker-dealer and (4) money market fund balances (institution-only) ,less (5) a consolidation adjustment money market funds. Excludes individual retirement accounts (IRAs) and Keogh balances that represents the estimated amount of overnight RPs and Eurodollars held by institutionat depository institutions and money market funds. Also excludes all balances held by only money market funds. This sum is seasonally adjusted as a whole. U.S. commercial banks, money market funds (general purpose and broker-dealer), foreign 7. Small time deposits—including retail RPs—are those issued in amounts of less governments and commercial banks, and the U.S. government. Seasonally adjusted M2 is than $100,000. All IRA and Keogh account balances at commercial banks and thrift computed by adjusting its non-Mi component as a whole and then adding this result to institutions are subtracted from small time deposits. seasonally adjusted Ml. 8. Large time deposits are those issued in amounts of $100,000 or more, excluding M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of $100,000 or those booked at international banking facilities. more) issued by all depository institutions, (2) term Eurodollars held by U.S. residents at 9. Large time deposits at commercial banks less those held by money market funds, foreign branches of U.S. banks worldwide and at all banking offices in the United depository institutions, the U.S. government, and foreign banks and official institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A5 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT1 Millions of dollars Average of Average of daily figures for week ending on date indicated daily figures Factor 1994 1995 1995 Dec. Jan. Feb. Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 405,187 404,335' 400,035 407,550 406,094 398,989' 399,710 398,931 398,954 400,874 US. government securities 2 Bought outright—System account 364,374 363,467 361,651 366,654 364,185 361,134 361,265 336600,,229966 335599,,992222 336633,,007744 3 Held under repurchase agreements 3,278 2,758 46 3,187 2,772 0 732 0 0 0 Federal agency obligations 4 Bought outright 3,653 3,600 3,542 3,629 3,610 3,585 3,546 33,,554466 33,,554466 33,,554466 5 Held under repurchase agreements 648 440 1 509 743 0 266 0 0 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 87 111 23 15 43 115533 97 2233 1199 3300 8 Seasonal credit 101 43 32 40 36 40 41 29 32 34 9 Extended credit 0 4 0 0 0 19 0 0 0 0 10 Float 825 727' 653 812 1,355 742' 154 270 616 1,004 11 Other Federal Reserve assets 32,220 33,184 34,086 32,704 33,350 33,315 33,607 34,768 34,820 33,186 1? Gold stock 11,051 11,050 11,050 11,050 11,050 11,050 11,050 11,050 11,050 11,050 N 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 22,971 23,031 23,090 23,015 23,029 23,043 23,057 23,071 23,085 23,099 ABSORBING RESERVE FUNDS 15 Currency in circulation 398,875 399,371 396,641 401,478 399,552 397,765 395,636 396,007 396,538 397,249 16 Treasury cash holdings 350 332 339 330 331 332 335 335 338 343 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 6,113 7,147 5,753 7,421 6,525 5,919 8,630 6,864 4,789 55,,770077 18 Foreign 195 198 183 170 206 201 187 176 187 200 19 Service-related balances and adjustments 4,573 4,460 4,349 4,440 4,361 4,276 4,810 4,525 4,368 4,241 70 Other 342 333 426 223 284 307 308 335 356 359 71 Other Federal Reserve liabilities and capital ..... 12,000 12,367 12,705 12,127 12,492 12,495 12,525 12,589 12,691 12,724 22 Reserve balances with Federal Reserve Banks ... 24,778 22,225r 21,798 23,444 24,440 19,804' 19,404 20,241 21,839 22,220 End-of-month figures Wednesday figures Dec. Jan. Feb. Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 411,368 403,812' 405,238 406,330 410,028 399,203' 401,808 399,137 404,187 403,556 U.S. government securities 2 Bought outright—System account 364,519 362,987 365,631 367,578 364,434 361,284 363,404 360,277 366,209 336655,,008877 3 Held under repurchase agreements 9,565 2,010 0 249 5,821 0 1,300 0 0 0 Federal agency obligations 4 Bought outright 3,637 3,546 3,491 3,610 3,610 3,546 3,546 33,,554466 33,,554466 33,,554466 5 Held under repurchase agreements 1,025 1,320 0 300 1,101 0 25 0 0 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 148 48 18 20 53 470 45 19 20 2255 8 Seasonal credit 75 30 36 27 38 46 27 32 33 38 9 Extended credit 0 0 0 0 3 22 0 0 0 0 10 Float -716 151' 1,895 1,777 1,691 369' -282 276 1,398 1,558 11 Other Federal Reserve assets 33,115 33,722 34,167 32,769 33,278 33,465 33,743 34,988 32,980 33,303 1? Gold stock 11,051 11,050 11,050 11,051 11,050 11,050 11,050 11,050 11,050 11,050 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 23,001 23,057 23,113 23,015 23,029 23,043 23,057 23,071 23,085 23,099 ABSORBING RESERVE FUNDS IS Currency in circulation 403,850 396,025 397,729 400,964 399,642 397,176 396,341 397,234 397,370 398,094 16 Treasury cash holdings 335 335 340 331 332 335 334 338 343 340 Deposits, other than reserve balances, with Federal Reserve Banks 17 7,161 13,964 6,890 7,276 6,888 7,672 6,774 7,774 5,234 5,660 18 250 185 188 197 157 200 170 255 166 296 19 Service-related balances and adjustments 4,463 4,810 4,171 4,440 4,361 4,276 4,810 4,525 4,368 4,241 70 Other 876 308 325 273 296 315 332 349 386 332 71 Other Federal Reserve liabilities and capital 11,959 12,854 13,710 12,009 12,495 12,248 12,396 12,184 12,480 12,570 22 Reserve balances with Federal Reserve Banks 24,543 17,456r 24,064 22,924 27,955 19,091' 22,776 18,616 25,992 24,191 1. Amounts of cash held as reserves are shown in table 1.12, line 2. 3. Excludes required clearing balances and adjustments to compensate for float. 2. Includes securities loaned—fully guaranteed by U.S. government securities 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 Nonfinancial Statistics • May 1995 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1992 1993 1994 1994 1995 Dec. Dec. Dec. Aug. Sept. Oct. Nov. Dec. Jan.1 Feb. 1 Reserve balances with Reserve Banks2 25,368 29,374 24,658 25,284 25,157 24,745 24,715 24,658 22,291 21,758 2 Total vault cash3 34,541 36,818 40,365 37,618 38,433 38,231 38,933 40,365 42,290 39,792 3 Applied vault cash4 31,172 33,484 36,682 34,052 34,794 34,745 35,291 36,682 38,230 35,940 4 Surplus vault cash5 3,370 3,334 3,683 3,566 3,639 3,486 3,642 3,683 4,059 3,852 5 Total reserves6 56,540 62,858 61,340 59,337 59,951 59,490 60,006 61,340 60,521 57,698 6 Required reserves 55,385 61,795 60,172 58,333 58,891 58,686 58,999 60,172 59,182 56,752 7 Excess reserve balances at Reserve Banks7 1,155 1,063 1,168 1,004 1,060 804 1,008 1,168 1,339 946 8 Total borrowings at Reserve Banks8 124 82 209 469 487 380 249 209 136 59 9 Seasonal borrowings 18 31 100 445 444 339 164 100 46 33 10 Extended credit9 1 0 0 0 0 0 0 0 4 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1994 1995 Oct. 26 Nov. 9 Nov. 23 Dec. 7 Dec. 21 Jan. 4 Jan. 18 Feb. lr Feb. 15 Mar. 1 1 Reserve balances with Reserve Banks2 25,025 23,771 25,360 24,638 24,288 25,189 23,958 19,603 21,028 22,710 2 Total vault cash3 37,609 39,238 38,237 39,936 40,864 39,967 42,165 43,140 41,292 37,921 3 Applied vault cash4 34,137 35,506 34,677 36,245 37,082 36,429 38,223 38,793 37,274 34,285 4 Surplus vault cash5 3,472 3,733 3,560 3,691 3,782 3,539 3,942 4,347 4,018 3,636 5 Total reserves 59,161 59,276 60,037 60,883 61,370 61,618 62,181 58,396 58,302 56,994 6 Required reserves 58,587 58,435 59,092 59,538 60,291 60,451 60,822 57,026 57,329 56,110 7 Excess reserve balances at Reserve Banks7 574 841 945 1,346 1,080 1,167 1,360 1,370 973 885 8 Total borrowings at Reserve Banks8 346 351 201 216 179 246 68 176 51 60 9 Seasonal borrowings 326 223 152 112 98 95 38 41 31 36 10 Extended credit9 0 0 0 0 0 0 0 10 0 0 1. Data in this table also appear in the Board's H.3 (502) weekly statistica lrelease. For cash applied during the maintenance period by "nonbound" institutions (that is, those ordering address, see inside front cover. whose vault cash exceeds their required reserves) to satisfy current reserve requirements. 2. Excludes required clearing balances and adjustments to compensate for float and 5. Total vault cash (line 2) less applied vault cash (line 3). 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 may be 7. Total reserves (line 5) less required reserves (line 6). used to satisfy reserve requirements. The maintenance period for weekly reporters ends 8. Also includes adjustment credit. sixteen days after the lagged computation period during which the vault cash is held. 9. Consists of borrowing at the discount window under the terms and conditions Before Nov. 25, 1992, the maintenance period ended thirty days after the lagged established for the extended credit program to help depository institutions deal with computation period. sustained liquidity pressures. Because there is not the same need to repay such borrowing 4. All vault cash held during the lagged computation period by "bound" institutions promptly as with traditional short-term adjustment credit, the money market impact of (that is, those whose required reserves exceed their vault cash) plus the amount of vault extended credit is similar to that of nonborrowed 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 1995, week ending Monday SSoouurrccee aanndd mmaattuurriittyy Jan. 2 Jan. 9 Jan. 16 Jan. 23 Jan. 30 Feb. 6 Feb. 13 Feb. 20 Feb. 27 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 74,453r 78,333r 75,143r 75,617r 73,540r 74,373 71,099 74,506 69,701 2 For all other maturities 13,891 12,820 13,670 13,954 15,165 15,394 14,544 14,022 14,853 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 17,401r 19,000r 17,932r 18,450r 15,016r 20,317 19,630 21,042 18,988 4 For all other maturities 20,101 17,422 17,940 19,076 20,508 20,479 23,904 22,603 24,916 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 25,756 26,281 23,152 20,963 20,598 23,508 22,125 22,527 21,324 6 For all other maturities 25,348r 27,495r 33,496 33,118 36,738r 33,747 35,697 33,721 34,532 All other customers 7 For one day or under continuing contract 37,512 38,237 37,952 38,303 38,572 39,335 37,966 38,545 37,337 8 For all other maturities 16,874 15,842 16,597 17,609 18,616r 17,323 18,202 18,293 18,981 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 68,735 69,356 69,328 71,078 68,464 69,137 64,408 67,736 65,706 10 To all other specified customers2 22,477 22,646 25,209 23,779 24,888 27,851 28,860 29,856 28,604 1. Banks with assets of $4 billion or more as of Dec. 31, 1988. 2. Brokers and nonbank dealers in securities, other depository institutions, foreign Data in this table also appear in the Board's H.5 (507) weekly statistical release. For banks and official institutions, and US. government agencies, ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • May 1995 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 4/ O 7/ n 95 Effective date Previous rate 4/ O 7/ n 95 Effective date Previous rate 4/ O 7/ n 95 Effective date Previous rate Boston 5.25 2/1/95 4.75 6.05 3/30/95 6.05 6.55 3/30/95 6.55 New York 2/1/95 Philadelphia 2/2/95 Cleveland 2/9/95 Richmond 2/1/95 Atlanta 2/2/95 Chicago 2/1/95 St. Louis 2/1/95 Minneapolis 2/2/95 Kansas City 2/1/95 Dallas 2/2/95 San Francisco 5.25 2/1/95 4.75 6.05 3/30/95 6.05 6.55 3/30/95 6.55 Range of rates for adjustment credit in recent years4 Range (or F.R. Range (or F.R. Range (or F.R. l A ev ll e l F )— .R. B o an f k l A ev ll e l F ) . — R. Ba o n f k Effective date l A ev ll e l F ) . — R. B o an f k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1977 1981—Nov. 2 13-14 13 1987—Sept. 4 5.5-6 6 6 13 13 11 6 6 1978—Jan. 9 6-6.5 6.5 Dec. 4 12 12 20 6.5 6.5 1988—Aug. 9 6-6.5 6.5 May 11 6.5-7 7 1982—July 20 11.5-12 11.5 11 6.5 6.5 12 7 7 23 11.5 11.5 July 3 7-7.25 7.25 Aug. 2 11-11.5 11 1989—Feb. 24 6.5-7 7 10 7.25 7.25 3 11 11 27 7 7 Aug. 21 7.75 7.75 16 10.5 10.5 Sept. 22 8 8 27 10-10.5 10 1990—Dec. 19 6.5 6.5 Oct. 16 8-8.5 8.5 30 10 10 20 8.5 8.5 Oct. 12 9.5-10 9.5 1991—Feb. 1 6-6.5 6 Nov. 1 8.5-9.5 9.5 13 9.5 9.5 4 6 6 3 9.5 9.5 Nov. 22 9-9.5 9 Apr. 30 5.5-6 5.5 26 9 9 May 2 5.5 5.5 1979—July 20 10 10 Dec. 14 8.5-9 9 Sept. 13 5-5.5 5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 17 5 5 20 10.5 10.5 17 8.5 8.5 Nov. 6 4.5-5 4.5 Sept. 19 10.5-11 11 7 4.5 4.5 21 11 11 1984—Apr. 9 8.5-9 9 Dec. 20 3.5-4.5 3.5 Oct. 8 11-12 12 13 9 9 24 3.5 3.5 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 1992—July 2 3-3.5 3 1980—Feb. 15 12-13 13 Dec. 24 8 8 7 3 3 19 13 13 May 29 12-13 13 1985—May 20 7.5-8 7.5 1994—May 17 3-3.5 3.5 30 12 12 24 7.5 7.5 18 3.5 3.5 June 13 11-12 11 Aug. 16 3.5-4 4 July 2 1 8 6 10 1 - 1 1 1 1 1 1 0 1986—Mar. 1 7 0 7- 7 7 .5 7 7 Nov. 1 1 8 5 4-4 4 . 75 4 4. 75 29 10 10 Apr. 21 6.5-7 6.5 17 4.75 4.75 Sept. 26 11 11 23. 6.5 6.5 Nov. 17 12 12 July 11 6 6 1995—Feb. 1 4.75-5.25 5.25 Dec. 5 12-13 13 Aug. 21 5.5-6 5.5 9 5.25 5.25 8 13 13 22 5.5 5.5 1981—May 5 13-14 14 In effect Apr. 7, 1995 5.25 5.25 14 14 1. Available on a short-term basis to help depository institutions meet temporary needs thirty days; however, at the discretion of the Federal Reserve Bank, this time period may for funds that cannot be met through reasonable alternative sources. The highest rate be shortened. Beyond this initial period, a flexible rate somewhat above rates charged on established for loans to depository institutions may be charged on adjustment credit loans market sources of funds is charged. The rate ordinarily is reestablished on the first of unusual size that result from a major operating problem at the borrower's facility. business day of each two-week reserve maintenance period, but it is never less than the 2. Available to help relatively small depository institutions meet regular seasonal needs discount rate applicable to adjustment credit plus 50 basis points. for funds that arise from a clear pattern of intrayearly movements in their deposits and 4. For earlier data, see the following publications of the Board of Governors: Banking loans and that cannot be met through special industry lenders. The discount rate on and Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, seasonal credit takes into account rates charged by market sources of funds and ordinarily 1970-1979. is reestablished on the first business day of each two-week reserve maintenance period; In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustmenthowever, it is never less than the discount rate applicable to adjustment credit. credit borrowings by institutions with deposits of $500 million or more that had borrowed 3. May be made available to depository institutions when similar assistance is not in successive weeks or in more than four weeks in a calendar quarter. A 3 percent reasonably available from other sources, including special industry lenders. Such credit surcharge was in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 may be provided when exceptional circumstances (including sustained deposit drains, percent was reimposed on Nov. 17, 1980; the surcharge was subsequently raised to 3 impaired access to money market funds, or sudden deterioration in loan repayment percent on Dec. 5,1980, and to 4 percent on May 5,1981. The surcharge was reduced to 3 performance) or practices involve only a particular institution, or to meet the needs of percent effective Sept. 22, 1981, and to 2 percent effective Oct. 12, 1981. As of Oct. 1, institutions experiencing difficulties adjusting to changing market conditions over a longer 1981, the formula for applying the surcharge was changed from a calendar quarter to a period (particularly at times of deposit disintermediation) .The discount rate applicable to moving thirteen-week period. The surcharge was eliminated on Nov. 17, 1981. adjustment credit ordinarily is charged on extended-credit loans outstanding less than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Type of deposit Net transaction accounts 1 $0 million-$54.0 million.. 12/20/94 2 More than $54.0 million4 . 12/20/94 3 Nonpersonal time deposits1 12/27/90 4 Eurocurrency liabilities6... 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve no more than three may be checks (accounts subject to such limits are considered savings Banks or vault cash. Nonmember institutions may maintain reserve balances with a deposits). Federal Reserve Bank indirectly, on a pass-through basis, with certain approved The Monetary Control Act of 1980 requires that the amount of transaction accounts institutions. For previous reserve requirements, see earlier editions of the Annual against which the 3 percent reserve requirement applies be modified annually by 80 Report or the Federal Reserve Bulletin. Under provisions of the Monetary Control Act percent of the percentage change in transaction accounts held by all depository instituof 1980, depository institutions include commercial banks, mutual savings banks, tions, determined as of June 30 of each year. Effective Dec. 20, 1994, the amount was savings and loan associations, credit unions, agencies and branches of foreign banks, increased from $51.9 million to $54.0 million. and Edge Act corporations. 4. The reserve requirement was reduced from 12 percent to 10 percent on 2. The Garn-St Germain Depository Institutions Act of 1982 requires that $2 million Apr. 2,1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that of reservable liabilities of each depositoiy institution be subject to a zero percent reserve report quarterly. requirement. The Board is to adjust the amount of reservable liabilities subject to this zero 5. For institutions that report weekly, the reserve requirement on nonpersonal time percent reserve requirement each year for the succeeding calendar year by 80 percent of deposits with an original maturity of less than 1 Vi years was reduced from 3 percent to the percentage increase in the total reservable liabilitie sof all depository institutions, 1 l/i percent for the maintenance period that began Dec. 13, 1990, and to zero for the measured on an annual basis as of June 30. No corresponding adjustment is to be made in maintenance period that began Dec. 27, 1990. The reserve requirement on nonpersonal the event of a decrease. On Dec. 20, 1994, the exemption was raised from $4.0 million to time deposits with an original maturity of 1 Vi years or more has been zero since Oct. 6, $4.2 million. The exemption applies only to accounts that would be subject to a 3 percent 1983. reserve requirement. For institutions that report quarterly, the reserve requirement on nonpersonal time 3. Includes all deposits against which the account holder is permitted to make with- deposits with an original maturity of less than 1VS years was reduced from 3 percent to drawals by negotiable or transferable instruments, payment orders of withdrawal, and zero on Jan. 17, 1991. telephone and preauthorized transfers for the purpose of making payments to third persons 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to or others, other than money market deposit accounts (MMDAs) and similar accounts that zero in the same manner and on the same dates as was the reserve requirement on permit no more than six preauthorized, automatic, or other transfers per month, of which nonpersonal time deposits with an original maturity of less than 1 years (see note 5). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • May 1995 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1994 1995 TTyyppee ooff ttrraannssaaccttiioonn 11999922 11999933 11999944 aanndd mmaattuurriittyy July Aug. Sept. Oct. Nov. Dec. Jan. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 14,714 17,717 17,484 0 1,610 0 518 6,109 444 0 2 Gross sales 1,628 0 0 0 0 0 0 0 0 0 3 Exchanges 308,699 332,229 380,327r 29,559 36,281 29,668 29,361 36,543 29,883 37,122 4 Redemptions 1,600 0 0 0 0 0 0 0 0 0 Others within one year 5 Gross purchases 1,096 1,223 1,238 0 0 151 450 0 125 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 36,662 31,368 0 1,692 6,131 961 460 1,790 -2,430' 2,835 8 Exchanges -30,543 -36,582 0 -1,626 -4,089 -2,203 0 -5,795 1,680' -3,167 9 Redemptions 0 0 0 0 0 0 0 0 0 0 One to five years 10 Gross purchases 13,118 10,350 9,168 0 0 2,530 0 200 2,208 0 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -34,478 -27,140 0 -1,692 -5,506 -837 -460 -1,123 2,430' -2,145 13 Exchanges 25,811 0 0 1,626 2,889 2,203 0 4,192 -1,680' 3,167 Five to ten years 14 Gross purchases 2,818 4,168 3,818 0 0 938 0 0 660 0 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts -1,915 0 0 0 -549 -125 0 -278 0 -690 17 Exchanges 3,532 0 0 0 750 0 0 1,603 0 0 More than ten years 18 Gross purchases 2,333 3,457 3,606 0 0 840 0 0 1,252 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts -269 0 0 0 -76 0 0 -389 0 0 21 Exchanges 1,200 0 0 0 450 0 0 0 0 0 All maturities 22 Gross purchases 34,079 36,915 35,314 0 1,610 4,459 968 6,309 4,689 0 23 Gross sales 1,628 0 0 0 0 0 0 0 0 0 24 Redemptions 1,600 767 2,337 302 0 0 979 0 0 621 Matched transactions 25 Gross sales l,480,14C 1,475,94 lr 1,700,836' 126,677' 169,018' 151,029' 136,556' 148,425' 166,648' 160,465 26 Gross purchases l,482,467r 1,475,085r 1,701,309' 125,181' 170,356' 151,589' 137,242' 147,858' 166,007' 167,676 Repurchase agreements 27 Gross purchases 378,374 475,447 309,276 28,085 44,948 4,975 17,088 35,456 29,406 32,201 28 Gross sales 386,257 470,723 311,898 35,374 41,199 9,354 15,613 32,561 26,351 39,756 29 Net change in U.S. Treasury securities 20,642 41,729 29,882 -6,095 4,022 -479 778 9,771 8,385 -15,387 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 0 0 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 632 774 1,002 20 63 31 62 70 37 91 Repurchase agreements 33 Gross purchases 14,565 35,063 52,696 9,472 8,491 3,620 2,868 8,615 5,090 5,243 34 Gross sales 14,486 34,669 52,696 8,702 8,109 4,982 2,838 7,360 5,720 4,948 35 Net change in federal agency obligations -554 -380 -1,002 750 319 -1,393 -32 1,185 -667 204 36 Total net change in System Open Market Account... 20,089 41,348 28,880 -5,345 4,341 -1,872 746 10,956 7,718 -15,183 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 1995 1994 1995 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 Dec. 31 Jan. 31 Feb. 28 Consolidated condition statement ASSETS 1 Gold certificate account 11,050 11,050 11,050 11,050 11,050 11,051 11,050 11,050 2 Special drawing rights certificate account 8,018 8,018 8,018 8,018 8,018 8,018 8,018 8,018 3 Coin 380 404 423 439 436 320 402 429 Loans 4 To depository institutions 538 72 51 53 63 223 77 54 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 3,546 3,546 3,546 3,546 33,,554466 33,,663377 33,,554466 33,,449911 8 Held under repurchase agreements 0 25 0 0 0 1,025 1,320 0 9 Total U.S. Treasury securities 361,284 364,704 360,277 366,209 365,087 374,084 364,997 365,631 10 Bought outright2 361,284 363,404 360,277 366,209 365,087 364,519 362,987 365,631 11 Bills 174,764 176,884 173,757 179,689 178,567 177,378 176,467 179,111 12 Notes 143,522 143,522 143,522 143,773 143,773 144,143 143,522 143,773 13 Bonds 42,998 42,998 42,998 42,747 42,747 42,998 42,998 42,747 14 Held under repurchase agreements 0 1,300 0 0 0 9,565 2,010 0 15 Total loans and securities 365369 368,347 363,874 369,808 368,695 378,969 369,940 369,176 16 Items in process of collection 5,620 5,728 5,849 6,444 9,694 4,688 6,979 9,161 17 Bank premises 1,076 1,076 1,076 1,076 1,079 1,076 1,076 1,078 Other assets 18 Denominated in foreign currencies 22,589 22,833 23,850 23,868 23,873 22,031 22,829 24,743 19 All other4 9,802 9,889 10,093 8,080 8,421 10,333 9,833 8,388 20 Total assets 423,905 427,345 424,234 428,784 431,267 436,487 430,126 432,044 LIABILITIES 21 Federal Reserve notes 374,849 374,021 374,923 375,067 375,772 381,505 373,705 375,385 22 Total deposits 31,806 35,490 32,049 36,367 35,090 39,075 37,224 36,469 23 Depository institutions 23,619 28,214 23,670 30,579 28,802 30,789 22,768 28,754 24 U.S. Treasury—General account 7,672 6,774 7,774 5,234 5,660 7,161 13,964 6,890 25 Foreign—Official accounts 200 170 255 166 296 250 185 188 26 Other 315 332 349 386 332 876 308 325 27 Deferred credit items 5,001 5,438 5,077 4,870 7,835 3,948 6,343 6,479 28 Other liabilities and accrued dividends5 4,414 4,370 4,295 4,549 4,604 4,592 4,423 4,510 29 Total liabilities 416,071 419,319 416,344 420,853 423,301 429,120 421,696 422,843 CAPITAL ACCOUNTS 30 Capital paid in 3,697 3,698 3,756 3,759 3,777 3,683 3,696 3,768 31 Surplus 3,683 3,683 3,683 3,683 3,683 3,683 3,683 3,683 32 Other capital accounts 453 645 450 488 505 0 1,051 1,749 33 Total liabilities and capital accounts 423,905 427,345 424,234 428,784 431,267 436,487 430,126 432,044 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 405,890 409,168 411,459 413,486 414,268 410,405 408,118 418,667 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 455,381 455,676 456,243 456,314 456,976 454,642 455,470 457,095 36 LESS: Held by Federal Reserve Banks 80,532 81,655 81,320 81,247 81,204 73,137 81,765 81,710 37 Federal Reserve notes, net 374,849 374,021 374,923 375,067 375,772 381,505 373,705 375,385 Collateral held against notes, net 38 Gold certificate account 11,050 11,050 11,050 11,050 11,050 11,051 11,050 11,050 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 355,781 354,953 355,855 355,999 356,704 362,437 354,637 356,317 42 Total collateral 374,849 374,021 374,923 375,067 375,772 381,505 373,705 375,385 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 in 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities pledged Treasury bills maturing within ninety days. with Federal Reserve Banks—and excludes securities sold and scheduled to be bought 5. Includes exchange-translation account reflecting the monthly revaluation at market back under matched sale-purchase transactions. exchange rates of foreign exchange commitments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics • May 1995 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday Type of holding and maturity 1 Total loans 2 Within fifteen days1 536 202 3 Sixteen days to ninety days 3 21 4 Ninety-one days to one year 0 0 5 Total acceptances 6 Within fifteen days' 0 0 0 7 Sixteen days to ninety days 0 0 0 8 Ninety-one days to one year 0 0 0 9 Total U.S. Treasury securities... 361,284 363,405 360,277 366,209 365,087 364,519 362,988 10 Within fifteen days' 17,673 21,435 17,775 15,333 18,268 11,685 14,385 11 Sixteen days to ninety days 79,448 78,186 82,950 87,589 83,531 87,450 84,818 12 Ninety-one days to one year 112,478 112,969 108,736 113,464 113,464 112,455 112,969 13 One year to five years 90,242 89,373 89,373 87,289 87,289 90,031 89,373 14 Five years to ten years 26,597 26,597 26,597 26,990 26,990 28,053 26,597 15 More than ten years 34,845 34,845 34,845 35,545 35,545 34,845 34,845 16 Total federal agency obligations 3,546 3,546 3,546 3,546 3,546 3,637 3,546 17 Within fifteen days' 116 0 0 310 310 252 116 18 Sixteen days to ninety days 628 758 758 448 448 573 683 19 Ninety-one days to one year 902 888 888 888 888 912 847 20 One year to five years 1,393 1,393 1,393 1,418 1,418 1,387 1,393 21 Five years to ten years 482 482 425 457 457 488 482 22 More than ten years 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 1994r 1995 IItteemm 1 D 9 e 9 c 1 . D 19 e 9 c 2 . 1 D 9 e 9 c 3 . D 19 e 9 c. 4 r July Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS 1 Total reserves3 45.54r 54.35r 60.50* 59.34 60.11 59.84 59.79 59.50 59.40 59.34 59.12 58.92 2 Nonborrowed reserves4 45.34 54.23r 60.42r 59.13 59.65 59.37 59.31 59.12 59.15 59.13 58.99 58.86 3 Nonborrowed reserves plus extended credit5 45.34 54.23r 60.42' 59.13 59.65 59.37 59.31 59.12 59.15 59.13 58.99 58.86 4 Required reserves 44.56r 53.20r 59.44' 58.17 59.00 58.84 58.73 58.69 58.39 58.17 57.79 57.97 5 Monetary base 317.43 351.12' 386.60 418.22 407.18 409.24 411.34 413.85 416.79 418.22 421.05 422.29 Not seasonally adjusted 6 Total reserves7 46.98 56.06 62.37 61.13 59.92 59.14 59.73 59.24 59.73 61.13 60.52 57.72 7 Nonborrowed reserves 46.78 55.93 62.29 60.92 59.47 58.67 59.24 58.86 59.48 60.92 60.38 57.66 8 Nonborrowed reserves plus extended credit5 46.78 55.93 62.29 60.92 59.47 58.67 59.24 58.86 59.48 60.92 60.39 57.66 9 Required reserves8 46.00 54.90 61.31 59.96 58.82 58.14 58.67 58.44 58.72 59.96 59.18 56.78 10 Monetary base9 321.07 354.55 390.59 422.51 408.38 409.21 411.37 413.15 417.08 422.51 421.83 419.23 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 55.53 56.54 62.86 61.34 60.09 59.34 59.95 59.49 60.01 61.34 60.52 57.70 12 Nonborrowed reserves 55.34 56.42 62.78 61.13 59.63 58.87 59.47 59.11 59.76 61.13 60.39 57.64 13 Nonborrowed reserves plus extended credit5 55.34 56.42 62.78 61.13 59.64 58.87 59.47 59.11 59.76 61.13 60.39 57.64 14 Required reserves 54.55 55.39 61.80 60.17 58.99 58.33 58.89 58.69 59.00 60.17 59.18 56.75 15 Monetary base12 333.61 360.90 397.62 427.25 414.39 414.92 416.70 418.19 421.90 427.25 426.30 423.55 16 Excess reserves .98 1.16 1.06 1.17 1.11 1.00 1.06 .80 1.01 1.17 1.34 .95 17 Borrowings from the Federal Reserve .19 .12 .08 .21 .46 .47 .49 .38 .25 .21 .14 .06 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) 8. To adjust required reserves for discontinuities that are due to regulatoryc hanges in weekly statistical release. Historical data starting in 1959 and estimates of the impact on reserve requirements, a multiplicative procedure is used to estimate what required required reserves of changes in reserve requirements are available from the Money and reserves would have been in past periods had current reserve requirements been in effect. Reserves Projections Section, Division of Monetary Affairs, Board of Governors of the Break-adjusted required reserves include required reserves against transactions deposits Federal Reserve System, Washington, DC 20551. and nonpersonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regula- 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), tory changes in reserve requirements. (See also table 1.10) plus (2) the (unadjusted) currency component of the money stock, plus (3) (for all 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault adjusted required reserves (line 4) plus excess reserves (line 16). Cash" and for all those weekly reporters whose vault cash exceeds their required 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally ad- reserves) the break-adjusted difference between current vault cash and the amount applied justed, break-adjusted total reserves (line 1) less total borrowings of depository institu- to satisfy current reserve requirements. tions from the Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with 5. Extended credit consists of borrowing at the discount window under no adjustments to eliminate the effects of discontinuities associated with regulatory the terms and conditions established for the extended credit program to help depository changes in reserve requirements. institutions deal with sustained liquidity pressures. Because there is not the same need to 11. Reserve balances with Federal Reserve Banks plus vaul tcash used to satisfy repay such borrowing promptly as with traditional short-term adjustment credit, the reserve requirements. money market impact of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally total reserves (line 11), plus (2) required clearing balances and adjustments to compensate adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency for float at Federal Reserve Banks, plus (3) the currency component of the money stock, component of the money stock, plus (3) (for al lquarterly reporters on the "Report of plus (4) (for all quarterly reporters on the "Report of Transaction Accounts, Other Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Deposits and Vault Cash" and for all those weekly reporters whose vault cash exceeds whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted their required reserves) the difference between current vault cash and the amount applied difference between current vault cash and the amount applied to satisfy current reserve to satisfy current reserve requirements. Since the introduction of contemporaneous reserve requirements. requirements in February 1984, currency and vault cash figures have been measured over 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus the computation periods ending on Mondays. excess reserves (line 16). 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics • May 1995 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES1 Billions of dollars, averages of daily figures 1994 1995 J em 1991 1992 1993 1994 Dec. Dec. Dec. Dec. Nov. Dec. Jan. Feb. Seasonally adjusted Measures2 1 Ml 897.3 1,024.4 1,128.6 1,147.8 1,147.5 1,147.8 1,148.8' 1,147.1 2 M2 3,457.9 3,515.3 3,583.6 3,611.9r 3,607.8r 3,611.9' 3,625.0' 3,621.5 3 M3 4,176.0 4,182.9 4,242.5 4,301. lr 4,289.3r 4,301.1' 4,326.4' 4,336.4 4 L 4,990.9 5,061.1 5,150.3 5,291.5r 5,249.5r 5,291.5' 5,311.3 n.a. 5 Debt ll,174.1r 11,714.4r 12,335.3' 12,965.0' 12,919.2' 12,965.0' 13,018.4 n.a. MI components 6 Currency3 267.4 292.8 322.1 354.5 353.0 354.5 357.7 358.8 7 Travelers checks4 7.7 8.1 7.9 8.4 8.4 8.4 8.4 8.4 8 Demand deposits5 289.5 338.9 383.9 382.0 382.3 382.0 383.5 384.1 9 Other checkable deposits6 332.7 384.6 414.7 402.9 403.8 402.9 399.2' 395.7 Nontransaction components 10 In M27 2,560.6 2,490.9 2,455.0 2,464.0r 2,460.3r 2,464.0' 2,476.2' 2,474.4 11 In M38 only 718.1 667.6 658.9 689.2r 681.5' 689.2' 701.4' 714.9 Commercial banks 12 Savings deposits, including MMDAs 665.6 754.7 785.8 752.3 759.2 752.3 744.2 734.4 13 Small time deposits9 602.5 508.1 468.6 502.4 494.0 502.4 512.6' 524.3 14 Large time deposits10' " 333.3 286.7 271.2 297.9r 293.8 297.9' 297.1' 305.4 Thrift institutions 15 Savings deposits, including MMDAs 375.6 428.9 429.8 391.6r 398.4 391.6' 385.3 377.3 16 Small time deposits9 464.1 361.1 316.5 314.2 312.8 314.2 319.4 327.7 17 Large time deposits10 83.3 67.1 61.6 64.3 63.9 64.3 66.1 67.6 Money market mutual funds 18 General purpose and broker-dealer 374.2 356.9 360.1 389.7 384.2 389.7 392.6 392.2 19 Institution-only 180.0 200.2 198.1 180.8 180.5 180.8 186.3 180.4 Debt components 20 Federal debt 2,763.3 3,067.9 3,328.0 3,497.4 3,494.1' 3,497.4 3,504.7 n.a. 21 Nonfederal debt 8,410.8r 8,646.5r 9,007.3r 9,467.6r 9,425.1' 9,467.6' 9,513.7 n.a. Not seasonally adjusted Measures2 22 Ml 916.0 1,046.0 1,153.7 1,173.5 1,155.3 1,173.5 1,158.5 1,134.1 23 M2 3,472.7 3,533.6 3,606.1 3,635.4r 3,616.1' 3,635.4' 3,631.5' 3,607.8 24 M3 4,189.4 4,201.4 4,266.3 4,327.2r 4,303.7' 4,327.2' 4,336.0' 4,325.1 25 L 5,015.5 5,090.8 5,184.9 5,329.2r 5,271.6' 5,329.2' 5,334.3 n.a. 26 Debt 11,171.4r 11,717.3r 12,327.4r 12,956.8r 12,890.3' 12,956.8' 12,993.1 n.a. Ml components 27 Currency3 269.9 295.0 324.8 357.6 353.2 357.6 355.9 357.0 28 Travelers checks4 7.4 7.8 7.6 8.1 8.2 8.1 8.1 8.1 29 Demand deposits5 302.4 354.4 401.8 400.1 390.7 400.1 388.8 375.0 30 Other checkable deposits6 336.3 388.9 419.4 407.6 403.1 407.6 405.7 394.0 Nontransaction components 31 In M27 2,556.6 2,487.7 2,452.4 2,461.9r 2,460.8' 2,461.9' 2,473.1' 2,473.6 32 In M38 716.7 667.7 660.2 691.8r 687.6' 691.8' 704.5' 717.3 Commercial banks 33 Savings deposits, including MMDAs 664.0 752.9 784.3 751.1 761.4 751.1 739.6' 730.0 34 Small time deposits9 601.9 507.8 468.2 502.0 493.7 502.0 513.1' 524.4 35 Large time deposits10' 11 332.6 286.2 270.8 297.6r 295.2 297.6' 295.8' 303.9 Thrift institutions 36 Savings deposits, including MMDAs 374.8 427.9 429.0 390.9 399.5 390.9 382.9 375.0 37 Small time deposits9 463.7 360.9 316.2 313.9 312.7' 313.9 319.7 327.8 38 Large time deposits10 83.1 67.0 61.5 64.3 64.2 64.3 65.8 67.2 Money market mutual funds 39 General purpose and broker-dealer 372.2 355.1 358.3 387.7 380.8 387.7 393.3 397.0 40 Institution-only 180.8 201.7 200.0 183.1 182.5 183.1 192.4 188.8 Repurchase agreements and Eurodollars 41 Overnight and continuing 79.9 83.2 96.5 116.3r 112.7' 116.3' 124.5' 119.3 42 Term 132.7 127.8 144.1 159.2r 158.7' 159.2' 164.2' 170.3 Debt components 43 Federal debt 2,765.0 3,069.8 3,329.5 3,499.0 3,485.4' 3,499.0 3,499.0 n.a. 44 Nonfederal debt 8,406.5r 8,647.4r 8,997.9r 9,457.7r 9,404.9' 9,457.7' 9,494.1 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) short-term Treasury securities, commercial paper, and bankers acceptances, each seasonweekly statistical release. Historical data starting in 1959 are available from the Money ally adjusted separately, and then adding this result to M3. and Reserves Projections Section, Division of Monetary Affairs, Board of Governors of Debt: The debt aggregate is the outstanding credit market debt of the domestic the Federal Reserve System, Washington, DC 20551. nonfinancial sectors—the federal sector (U.S. government, not including government- 2. Composition of the money stock measures and debt is as follows: sponsored enterprises or federally related mortgage pools) and the nonfederal sectors Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of (state and local governments, households and nonprofit organizations, nonfinancial corpodepository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all rate and nonfarm noncorporate businesses, and farms). Nonfederal debt consists of commercial banks other than those owed to depository institutions, the U.S. government, mortgages, tax-exempt and corporate bonds, consumer credit, bank loans, commercial and foreign banks and official institutions, less cash items in the process of collection and paper, and other loans. The data, which are derived from the Federal Reserve Board's flow Federal Reserve float, and (4), other checkable deposits (OCDs), consisting of negotiable of funds accounts, are break-adjusted (that is, discontinuities in the data have been order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository smoothed into the series) and month-averaged (that is, the data have been derived by institutions, credit union share draft accounts, and demand deposits at thrift institutions. averaging adjacent month-end levels). Seasonally adjusted Ml is computed by summing currency, travelers checks, demand 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of deposideposits, and OCDs, each seasonally adjusted separately. tory institutions. M2: Ml plus (1) overnight (and continuing contract) repurchase agreements (RPs) 4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issued by all depository institutions and overnight Eurodollars issued to U.S. residents by issuers. Travelers checks issued by depository institutions are included in demand foreign branches of U.S. banks worldwide, (2) savings (including MMDAs) and small deposits. time deposits (time deposits—including retail RPs—in amounts of less than $100,000), 5. Demand deposits at commercial banks and foreign-related institutions other than and (3) balances in both taxable and tax-exempt general-purpose and broker-dealer those owed to depository institutions, the U.S. government, and foreign banks and official money market funds. Excludes individual retirement accounts (IRLAS) and Keogh balances institutions, less cash items in the process of collection and Federal Reserve float. at depository institutions and money market funds. Also excludes all balances held by 6. Consists of NOW and ATS account balances at all depository institutions, credit U.S. commercial banks, money market funds (general purpose and broker-dealer), foreign union share draft account balances, and demand deposits at thrift institutions. governments and commercial banks, and the U.S. government. Seasonally adjusted M2 is 7. Sum of (1) overnight RPs and overnight Eurodollars, (2) money market fund computed by adjusting its non-Mi component as a whole and then adding this result to balances (general purpose and broker-dealer), (3) savings deposits (including MMDAs), seasonally adjusted Ml. and (4) small time deposits. M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of $100,000 or 8. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. residents, more) issued by all depository institutions, (2) term Eurodollars held by U.S. residents at and (4) money market fund balances (institution-only) ,less (5) a consolidation adjustment foreign branches of U.S. banks worldwide and at all banking offices in the United that represents the estimated amount of overnight RPs and Eurodollars held by institution- Kingdom and Canada, and (3) balances in both taxable and tax-exempt, institution-only only money market funds. money market funds. Excludes amounts held by depository institutions, the U.S. govern- 9. Small time deposits—including retail RPs—are those issued in amounts of less ment, money market funds, and foreign banks and official institutions. Also excluded is than $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions the estimated amount of overnight RPs and Eurodollars held by institution-only money are subtracted from small time deposits. market funds. Seasonally adjusted M3 is computed by adjusting its non-M2 component as 10. Large time deposits are those issued in amounts of $100,000 or more, excluding a whole and then adding this result to seasonally adjusted M2. those booked at international banking facilities. L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury 11. Large time deposits at commercial banks less those held by money market funds, securities, commercial paper, and bankers acceptances, net of money market fund hold- depository institutions, the U.S. government, and foreign banks and official institutions. ings of these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • May 1995 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1994 1995 IItteemm 1992 1993 Dec. Dec. June July Aug. Sept. Oct/ Nov/ Dec/ Jan/ Feb. Interest rates (annual effective yields)2 INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts 2.33 1.86 1.82 1.83 1.85 1.87 1.88 1.92 1.96 1.98 2.01 2 Savings deposits3 2.88 2.46 2.54 2.57 2.63 2.67 2.72 2.81 2.91 2.98 3.09 Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.90 2.65 3.08 3.17 3.29 3.36 3.47 3.65 3.81 3.96 4.19 4 92 to 182 days 3.16 2.91 3.36 3.44 3.61 3.75 3.93 4.22 4.44 4.67 4.83 5 183 days to 1 year 3.37 3.13 3.76 3.88 4.11 4.27 4.50 4.85 5.12 5.39 5.57 6 More than 1 year to 2 Vi years 3.88 3.55 4.26 4.39 4.61 4.80 5.08 5.42 5.74 6.00 6.12 7 More than 2vi years 4.77 4.29 5.02 5.14 5.33 5.47 5.77 6.09 6.30 6.47 6.52 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts 2.45 1.87 1.88 1.89 1.89 1.91 1.88 1.91 1.95 1.99 2.05 9 Savings deposits3 3.20 2.63 2.69 2.67 2.74 2.78 2.76 2.83 2.88 2.91 2.95 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 3.13 2.70 2.84 2.98 3.03 3.11 3.32 3.51 3.80 3.98 4.17 11 92 to 182 days 3.44 3.02 3.41 3.53 3.69 3.87 4.10 4.42 4.89 5.13 5.33 12 183 days to 1 year 3.61 3.31 3.92 4.02 4.24 4.47 4.80 5.18 5.52 5.75 5.95 13 More than 1 year to 2xh years 4.02 3.66 4.38 4.56 4.83 5.04 5.39 5.70 6.09 6.29 6.37 14 More than 2vi years 5.00 4.62 5.24 5.35 5.47 5.64 5.79 6.18 6.43 6.68 6.75 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 286,541 305,223 290,220 290,631 295,320 286,787 294,072 294,282 303,724 291,355 290,184 16 Savings deposits3 738,253 766,413 767,539 765,751 764,035 755,249 751,183 746,605 734,519 723,295 714,915 17 Personal 578,757 597,838 608,132 605,881 600,892 595,175 590,875 584,628 578,459 569,619 566,871 18 Nonpersonal 159,496 168,575 159,407 159,870 163,143 160,074 160,308 161,977 156,060 153,676 148,044 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 38,474 29,455 28,763 28,659 27,959 28,312 31,447 31,077 32,375 32,154 31,770 20 92 to 182 days 127,831 110,069 102,439 100,424 98,085 96,398 95,359 94,692 95,901 96,895 98,014 21 183 days to 1 year 163,098 146,565 151,165 152,216 155,964 157,253 158,753 159,645 161,831 163,939 169,043 22 More than 1 year to 2VS years 152,977 141,223 144,686 146,875 150,807 152,514 155,111 158,382 162,486 168,515 177,185 23 More than 2'/i years 169,708 181,528 181,843 182,944 186,490 190,209 188,479 189,741 190,897 190,215 191,364 24 IRA and Keogh plan deposits 147,350 143,985 142,513 142,649 142,617 142,700 142,896 143,075 143,428 143,900 145,017 BIF-INSURED SAVINGS BANKS4 ' 25 Negotiable order of withdrawal accounts 10,871 11,151 10,792 10,925 11,016 10,769 11,120 11,002 11,317 11,127 10,870 26 Savings deposits3 81,786 80,115 77,289 77,337 75,108 74,659 73,416 72,622 70,642 71,639 69,526 27 Personal 78,695 77,035 74,121 74,064 72,040 71,525 70,215 69,412 67,673 68,760 66,701 28 Nonpersonal 3,091 3,079 3,168 3,273 3,068 3,134 3,201 3,211 2,969 2,878 2,825 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 3,867 2,793 2,614 2,531 2,523 2,402 2,245 2,209 2,166 2,041 2,065 30 92 to 182 days 17,345 12,946 12,515 12,511 12,292 12,276 11,987 11,913 11,793 12,084 11,846 31 183 days to 1 year 21,780 17,426 17,310 17,591 17,593 17,928 18,123 18,509 18,753 19,336 19,808 32 More than 1 year to 2'/i years 18,442 16,546 16,493 16,901 16,824 17,287 17,519 17,999 17,842 20,460 21,650 33 More than 2 vi years 18,845 20,464 21,079 21,573 21,531 21,923 21,624 21,687 21,600 21,888 22,056 34 IRA and Keogh plan accounts 21,713 19,356 19,511 19,757 19,445 19,532 19,550 19,532 19,325 19,802 19,938 1. BIF, Bank Insurance Fund. Data in this table also appear in the Board's H.6 (508) 2. As of October 31, 1994, interest rate data for NOW accounts and savings deposits Special Supplementary Table monthly statistical release. For ordering address, see inside reflect a series break caused by a change in the survey used to collect these data. front cover. Estimates are based on data collected by the Federal Reserve System from a 3. Includes personal and nonpersonal money market deposits. stratified random sample of about 425 commercial banks and 75 savings banks on the last 4. Includes both mutual and federal savings banks. day of each month. Data are not seasonally adjusted and include IRA and Keogh deposits and foreign currency-denominated deposits. Data exclude retail repurchase agreements and deposits held in U.S. branches and agencies of foreign 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 1994 BBaannkk ggrroouupp,, oorr ttyyppee ooff ddeeppoossiitt July' Aug. Sept. Oct.' Nov.' Dec. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 313,128.1' 334,245.6R 367,155.9 348,403.1 380,282.1' 368,276.6' 352,480.7 369,318.2 371,157.4 2 Major New York City banks 165,447.7R 171,227.3R 191,169.5 183,403.1 195,568.2' 186,074.2' 179,395.0 186,348.6 187,955.9 3 Other banks 147,680.4R 163,018.3' 175,986.4 165,000.0 184,713.9' 182,202.4' 173,085.6 182,969.6 183,201.6 4 Other checkable deposits4 3,780.3R 3,467.1' 3,830.1 3,582.2 3,890.7' 3,905.1' 3,896.5 4,116.0 4,183.3 5 Savings deposits (including MMDAs)5 3,309. LR 3,508.8' 3,733.1 3,464.3 3,862.2' 3,760.0' 3,639.7 3,835.9 3,984.6 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 825.9R 785.3' 813.1 763.7 842.1' 815.5' 783.8 826.7 820.9 7 Major New York City banks 4,795.3R 4,198.1' 4,481.6 4,130.6 4,608.4' 4,502.1' 4,414.6 4,544.7 4,490.8 8 Other banks 428.7 423.6' 430.4 400.7 451.5' 444.1' 423.1 451.0 446.5 9 Other checkable deposits4 14.4 11.8 12.7 11.8 12.9' 13.0 13.0 13.9 14.1 10 Savings deposits (including MMDAs)5 4.7 4.6 4.8 4.5 5.0 4.9' 4.8 5.1 5.3 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 313,344.9 334,354.6 367,245.6 347,403.9 394,394.4 365,063.0 352,653.3 359,333.9 384,332.1 12 Major New York City banks 165,595.0 171,283.5 191,226.1 182,452.9 202,845.6 186,161.8 181,406.6 184,656.3 194,120.1 13 Other banks 147,749.9 163,071.0 176,019.6 164,951.0 191,548.8 178,901.2 171,246.6 174,677.5 190,211.9 14 Other checkable deposits4 3,783.6 3,467.5 3,826.5 3,515.0 3,861.2 3,960.9 3,796.9 3,845.6 4,348.8 15 Savings deposits (including MMDAs)5 3,310.0 3,509.5 3,730.7 3,521.8 3,873.3 3,716.4 3,472.3 3,640.6 4,193.8 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 826.1 785.4 813.9 761.9 889.5 811.9 774.8 786.1 815.2 17 Major New York City banks 4,803.5 4,197.9 4,490.3 4,150.3 4,960.2 4,539.5 4,435.8 4,391.6 4,343.4 18 Other banks 428.8 423.8 430.6 400.4 475.9 437.8 413.4 420.9 445.7 19 Other checkable deposits4 14.4 11.8 12.7 11.8 13.0 13.3 12.9 13.0 14.4 20 Savings deposits (including MMDAs)5 4.7 4.6 4.8 4.6 5.0 4.9 4.6 4.8 5.6 1. Historical tables containing revised data for earlier periods can be obtained from the 4. As of January 1994, other checkable deposits (OCDs), previously defined as Publications Section, Division of Support Services, Board of Governors of the Federal automatic transfer to demand deposits (ATSs) and negotiable order of withdrawal (NOW) Reserve System, Washington, DC 20551. accounts, were expanded to include telephone and preauthorized transfer accounts. This Data in this table also appear in the Board's G.6 (406) monthly statistical release. For change redefined OCDs for debits data to be consistent with OCDs for deposits data. ordering address, see inside front cover. 5. Money market deposit accounts. 2. Annual averages of monthly figures. 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 • May 1995 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Billions of dollars Monthly averages Wednesday figures Account 1994r 1995 1995 Feb. Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Feb. 1 Feb. 8 Feb. 15 Feb. 22 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,155.3 3,269.2 3,281.4 3,290.7 3,300.8 3,320.3 3,351.7 3,363.5 3,358.7 3,351.2 3,359.1 3,366.0 2 Securities in bank credit 943.0 969.5 967.4 959.3 952.3 948.4 946.7 938.2 939.3 938.2 934.9 939.9 3 U.S. government securities 735.7 745.7 740.6 731.2 723.7 719.5 720.6 715.8 716.2 718.8 714.5 715.2 4 Other securities 207.4 223.9 226.8 228.1 228.7 228.9 226.1 222.4 223.1 219.5 220.4 224.7 5 Loans and leases in bank credit2 .. . 2,212.3 2,299.6 2,314.0 2,331.5 2,348.4 2,372.0 2,405.0 2,425.3 2,419.3 2,412.9 2,424.1 2,426.1 6 Commercial and industrial 592.3 623.5 628.0 634.5 640.7 646.0 658.8 670.9 668.1 667.6 670.4 670.6 7 Real estate 942.7 973.1 980.6 985.5 990.8 998.5 1,013.5 1,021.0 1,018.5 1,017.9 1,019.9 1,022.6 8 Revolving home equity 73.3 74.4 74.9 75.1 75.7 76.2 76.6 76.9 76.9 77.0 76.9 76.9 9 Other 869.4 898.7 905.7 910.4 915.1 922.4 936.8 944.1 941.6 940.9 943.0 945.6 10 Consumer 398.3 429.7 435.0 441.4 444.4 449.7 454.6 455.6 455.9 453.9 455.5 456.8 11 Security3 83.0 75.0 69.7 71.2 71.8 73.6 71.9 70.8 70.3 68.1 70.8 70.9 12 Other 195.9 198.3 200.7 198.9 200.8 204.1 206.3 206.9 206.5 205.3 207.7 205.3 13 Interbank loans4 153.9 160.6 161.7 165.8 173.0 175.8 179.8 178.6 182.8 173.5 180.6 177.2 14 Cash assets5 224.0 205.7 203.2 209.2 205.7 208.3 218.5 216.3 231.8 205.5 213.9 216.7 15 Other assets6 212.1 224.2 221.1 220.3 222.2 231.4 242.7 251.0 250.3 247.7 251.6 249.7 16 Total assets7 3,687.8 3,802.7 3310.6 3,829.2 3345.1 3,879.2 3,935.4 3,9524 3,9664 3^21.1 3,948.1 3,9515 Liabilities 17 Deposits 2,527.6 2,517.5 2,517.7 2,526.8 2,522.9 2,528.9 2,544.0 2,546.7 2,561.2 2,532.5 2^45.0 2,544.8 18 Transaction 816.9 809.6 803.6 804.7 796.7 795.8 806.6 802.8 820.9 791.7 803.3 798.5 19 Nontransaction 1,710.6 1,707.9 1,714.1 1,722.2 1,726.2 1,733.1 1,737.4 1,743.8 1,740.3 1,740.9 1,741.6 1,746.3 20 Large time 341.0 341.5 346.5 353.6 357.6 360.4 364.6 371.9 367.0 367.2 369.9 376.2 21 Other 1,369.7 1,366.4 1,367.6 1,368.6 1,368.6 1,372.7 1,372.7 1,371.9 1,373.3 1,373.7 1,371.7 1,370.0 22 Borrowings 537.9 577.0 579.7 583.7 591.2 607.1 639.9 642.7 657.0 626.1 646.9 642.6 23 From banks in the U.S 154.4 158.5 160.5 165.7 170.0 177.6 182.0 179.6 186.2 173.3 183.1 176.9 24 From nonbanks in the U.S 383.6 418.5 419.2 418.1 421.2 429.5 457.9 463.1 470.9 452.8 463.8 465.7 25 Net due to related foreign offices 145.7 205.3 209.7 214.3 213.1 225.3 244.5 252.2 248.0 262.2 255.3 247.4 26 Other liabilities8 170.7 177.9 177.9 180.0 180.6 187.6 183.3 189.4 186.3 187.6 185.6 188.9 27 Total liabilities 3,381.9 3,477.7 3,485.0 3,504.8 3,507.8 3,548.9 3,611.7 3,631.0 3,652^ 3,6084 3,6323 3,623.7 28 Residual (assets less liabilities)9 305.9 325.1 325.5 324.4 337.4 330.3 323.7 321.4 313.8 312.6 315.4 328.8 Not seasonally adjusted Assets 29 Bank credit 3,152.3 3,262.7 3,280.2 3,291.1 3,309.1 3,336.6 3,348.2 3,359.5 3,357.7 3,351.2 3,358.4 3,352.2 30 Securities in bank credit 941.7 968.0 965.7 958.1 953.7 943.5 940.7 936.9 936.7 937.8 935.8 935.3 31 U.S. government securities 731.7 746.8 743.1 730.6 724.6 718.3 714.5 711.3 712.4 714.2 711.0 709.6 32 Other securities 210.0 221.2 222.6 227.6 229.1 225.2 226.3 225.6 224.3 223.6 224.8 225.7 33 Loans and leases in bank credit2 .. . 2,210.5 2,294.6 2,314.6 2,332.9 2,355.4 233.1 2,407.4 2,422.6 2,421.0 2,413.4 2,422.6 2,417.0 34 Commercial and industrial 591.1 620.6 624.5 632.3 640.7 646.7 655.5 669.5 665.1 665.2 668.8 668.3 35 Real estate 939.2 972.6 981.9 988.1 995.5 1,004.9 1,011.8 1,017.2 1,015.0 1,016.0 1,017.0 1,016.9 36 Revolving home equity 73.0 74.5 75.2 75.7 76.1 76.2 76.6 76.5 76.7 76.7 76.7 76.6 37 Other 866.3 898.1 906.7 912.4 919.4 928.7 935.2 940.6 938.2 939.3 940.3 940.3 38 Consumer 399.4 429.3 435.9 441.4 444.6 454.7 459.3 456.9 458.9 456.4 457.3 457.5 39 Security3 87.2 72.6 68.4 71.0 73.4 78.6 74.4 74.2 75.8 71.3 73.5 73.1 40 Other 193.6 199.5 203.8 200.1 201.2 208.2 206.5 204.8 206.3 204.6 206.0 201.1 41 Interbank loans4 155.4 156.7 158.8 164.0 174.5 186.6 186.7 180.8 190.8 175.7 186.5 175.2 42 Cash assets5 220.1 198.2 204.6 209.7 212.2 222.1 223.8 212.9 225.8 190.1 214.3 220.1 43 Other assets6 210.2 225.8 221.6 222.2 225.0 237.3 242.6 248.7 252.3 246.2 248.7 245.4 44 Total assets7 3,6804 3,786^ 3,8083 3,8303 3364.1 3,925.6 3,944.5 3,944.8 3,969.6 3,906.1 3,950.7 3,9353 Liabilities 45 Deposits 2,518.5 2,503.3 2,514.6 2,522.4 2,537.9 2,561.6 2,547.9 2,537.4 2,547.3 2,517.1 2,542.9 2,530.3 46 Transaction 808.2 793.2 800.9 801.9 810.9 831.5 816.9 794.0 813.9 775.4 800.9 785.4 47 Nontransaction 1,710.3 1,710.1 1,713.7 1,720.5 1,727.1 1,730.1 1,731.0 1,743.5 1,733.4 1,741.7 1,742.0 1,744.8 48 Large time 341.3 342.2 346.4 351.5 356.7 359.0 361.4 372.2 364.5 367.6 370.0 376.2 49 Other 1,369.0 1,367.9 1,367.3 1,368.9 1,370.3 1,371.2 1,369.6 1,371.3 1,368.9 1,374.2 1,372.0 1,368.6 50 Borrowings 542.4 584.0 589.5 591.5 604.2 619.7 633.2 639.0 657.0 621.5 644.1 636.7 51 From banks in the U.S 155.9 156.5 158.6 163.7 174.3 186.6 186.7 180.8 190.8 175.7 186.5 175.2 52 From nonbanks in the U.S 386.5 427.5 430.9 427.8 430.0 433.1 446.4 458.2 466.2 445.9 457.7 461.4 53 Net due to related foreign offices 143.0 200.7 204.2 214.1 212.9 230.2 251.2 249.3 249.1 250.6 249.2 252.0 54 Other liabilities8 171.2 177.1 177.7 181.8 185.8 190.8 186.3 190.2 189.6 188.8 186.5 188.6 55 Total liabilities 3,375.1 3,465.2 3,485.9 3,509.8 3^40.9 3,6023 3,618.6 3,615.9 3,642.9 3,578.1 3,6223 3,607.6 56 Residual (assets less liabilities)9 305.2 321.3 322.3 320.4 323.2 323.3 325.9 328.9 326.6 328.0 327.9 328.3 Footnotes appear on followingp age. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A19 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS'—Continued Billions of dollars Monthly averages Wednesday figures 1994r Aug. Sept. Oct. Nov. Dec. Jan. Feb. Feb. 1 Feb. 8 Feb. 15 Feb. 22 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 2,818.1 22,,991188..22 2,928.0 2,939.2 2,948.0 2,962.7 2,991.8 2,993.8 2,996.2 2,980.9 2,990.0 3,000.5 58 Securities in bank credit 865.3 888866..11 881.7 875.5 871.3 868.8 864.2 848.2 855.7 847.6 845.7 851.8 59 U.S. government securities , 679.7 686.3 680.7 674.0 669.7 667.9 666.8 655.2 661.8 657.0 655.4 655.9 60 Other securities 185.6 199.8 201.1 201.5 201.6 201.0 197.4 193.0 194.0 190.5 190.3 195.8 61 Loans and leases in bank credit2. 1,952.8 2,032.1 2,046.3 2,063.7 2,076.8 2,093.8 2,127.6 2,145.6 2,140.4 2,133.3 2,144.4 2,148.7 62 Commercial and industrial . 442.6 465.4 469.3 473.6 476.5 479.8 491.0 498.2 497.1 495.4 497.4 498.4 63 Real estate 897.3 930.4 938.3 943.9 949.4 957.3 972.9 980.9 978.2 977.8 979.7 982.5 64 Revolving home equity.. 73.2 74.4 74.9 75.1 75.7 76.1 76.6 76.9 76.9 77.0 76.9 76.9 65 Other 824.0 856.1 863.4 868.8 873.8 881.2 896.2 904.1 901.3 900.8 902.8 905.5 66 Consumer 398.3 429.7 435.0 441.4 444.4 449.7 454.6 455.6 455.9 453.9 455.5 456.8 67 Security3 55.1 47.0 43.6 45.6 46.2 45.7 45.7 46.8 45.4 43.9 47.1 47.6 68 Other 159.5 159.6 160.1 159.2 160.3 161.3 163.4 164.2 163.8 162.3 164.6 163.4 69 Interbank loans4 129.0 136.1 138.2 141.2 149.7 153.0 156.6 156.7 158.0 151.2 159.7 154.8 70 Cash assets5 198.5 181.3 180.8 185.2 181.2 181.3 191.5 190.8 204.6 180.3 188.1 190.8 71 Other assets6 164.8 170.0 167.2 165.7 166.2 168.0 173.1 177.1 178.8 176.4 179.3 175.2 72 Total assets7 3,253.0 3,348.7 3,357.4 3,374.6 3^8&8 3,4084 3,455.8 3,461.6 3,480.5 3/13X0 3,460.0 3,4643 Liabilities 73 Deposits 2,380.4 2,372.6 2,367.8 2,371.1 2,367.3 2,369.9 2,389.0 2,394.3 2,407.8 2,378.0 2,394.0 2,391.7 74 Transaction 805.9 799.5 793.6 794.8 787.1 786.1 797.1 793.1 811.1 782.3 793.3 788.6 75 Nontransaction 1,574.5 1,573.1 1,574.2 1,576.3 1,580.2 1,583.8 1,591.9 1,601.2 1,596.7 1,595.7 1,600.7 1,603.1 76 Large time 208.5 210.3 209.3 212.6 216.7 217.7 225.0 234.1 229.1 229.8 233.9 236.1 77 Other 1,366.0 1,362.8 1,364.8 1,363.6 1,363.5 1,366.1 1,367.0 1,367.1 1,367.6 1,365.9 1,366.7 1,367.0 78 Borrowings 433.5 470.9 475.5 483.1 488.3 501.0 534.4 533.7 550.1 518.9 538.4 538.5 79 From banks in the U.S 134.4 140.7 143.4 149.3 153.7 161.4 163.6 160.6 168.5 154.7 163.9 159.1 80 From nonbanks in the U.S 299.1 330.2 332.1 333.8 334.6 339.6 370.8 373.1 381.5 364.1 374.5 379.3 81 Net due to related foreign offices 5.1 52.2 58.9 65.4 66.4 77.4 91.3 87.8 84.3 94.4 87.4 87.0 82 Other liabilities8 128.6 132.1 133.4 133.6 133.3 130.8 122.9 126.0 125.1 124.9 125.1 125.0 83 Total liabilities 2^47.6 3,027.8 3,035.6 3,053.2 3,055.2 3,079.1 3,137.7 3,141.7 3,167.4 3,116J 3,144.8 3,142.1 84 Residual (assets less liabilities)9. 305.4 320.9 321.7 321.4 333.6 329.3 318.1 319.9 313.1 315.8 315.2 322.2 Not seasonally adjusted Assets 85 Bank credit 2,814.1 2,912.5 22,,992288..66 2,941.3 2,956.0 2,970.1 2,982.8 2,989.2 2,989.0 2,978.9 2,988.6 2,989.0 86 Securities in bank credit .... 864.4 884.9 888800..66 873.9 871.8 862.4 856.8 847.3 851.2 847.6 846.3 848.2 87 US. government securities . 676.7 687.8 683.5 673.1 669.4 664.7 659.4 652.0 656.0 653.9 652.6 652.0 88 Other securities 187.7 197.0 197.0 200.8 202.4 197.8 197.4 195.4 195.2 193.7 193.7 196.2 89 Loans and leases in bank credit2. 1,949.7 2,027.6 2,048.1 2,067.4 2,084.3 2,107.7 2,126.0 2,141.9 2,137.8 2,131.4 2,142.3 2,140.8 90 Commercial and industrial . 442.2 462.1 466.3 472.4 476.6 479.5 487.5 497.7 494.5 494.1 496.9 497.5 91 Real estate 893.7 929.8 939.4 946.6 954.1 963.8 971.3 976.9 974.6 975.5 976.6 976.8 92 Revolving home equity.. 72.9 74.5 75.2 75.7 76.1 76.2 76.6 76.5 76.7 76.7 76.7 76.5 93 Other 820.7 855.3 864.2 870.8 878.0 887.6 894.7 900.4 897.8 898.9 900.0 900.3 94 Consumer 399.4 429.3 435.9 441.4 444.6 454.7 459.3 456.9 458.9 456.4 457.3 457.5 95 Security3 56.8 46.1 43.7 46.1 47.4 46.2 45.2 48.1 47.0 44.5 48.2 48.5 96 Other 157.7 160.4 162.7 160.8 161.5 163.5 162.8 162.4 162.9 160.9 163.3 160.4 97 Interbank loans4 131.6 133.3 134.8 138.5 151.5 161.4 162.1 159.8 165.5 155.8 166.3 152.6 98 Cash assets5 195.5 173.2 181.0 184.9 187.8 194.9 197.4 188.4 199.3 165.5 189.7 195.6 99 Other assets6 162.8 170.8 168.6 167.9 167.9 170.3 172.5 174.8 180.4 173.4 176.3 172.2 100 Total assets7 3,246.4 3,332.9 3,356.0 3,376.0 3,406.5 3,439.7 3,457.9 3,455.2 3,477.0 3,416.5 3,463.8 3,4523 Liabilities 101 Deposits 2,370.5 2,358.8 2,365.2 2,370.4 2,383.9 2,402.6 2,393.3 2,384.3 2,393.1 2,361.8 2,391.6 2,376.3 102 Transaction 797.2 783.3 790.1 791.9 801.2 821.4 807.2 784.3 803.9 766.0 791.2 775.5 103 Nontransaction 11,,557733..33 1,575.5 1,575.1 1,578.5 1,582.7 1,581.2 1,586.1 1,600.0 1,589.2 1,595.9 1,600.4 1,600.8 104 Large time 220088..88 211.8 210.2 213.5 216.9 216.1 222.8 234.3 227.3 230.2 234.3 236.3 105 Other 1,364.6 1,363.7 1,364.8 1,365.1 1,365.9 1,365.1 1,363.3 1,365.7 1,361.9 1,365.6 1,366.1 1,364.5 106 Borrowings 440.8 476.0 484.7 490.8 501.6 512.2 528.6 532.6 550.4 516.3 538.1 537.0 107 From banks in the U.S 136.5 138.8 141.0 148.0 157.4 168.9 167.7 162.3 171.8 157.3 167.4 159.0 108 From nonbanks in the U.S 304.3 337.2 343.7 342.8 344.2 343.3 360.8 370.3 378.6 358.9 370.7 378.0 109 Net due to related foreign offices 5.4 51.0 55.5 63.2 64.9 74.5 90.2 88.5 84.7 91.0 86.2 91.3 110 Other liabilities8 128.3 131.0 133.2 136.1 137.8 132.0 124.8 125.6 127.0 124.2 124.8 124.3 111 Total liabilities 2^45.1 3,0164 3,038.6 3,060.5 3,088-2 3,1213 3,136.9 3,131.1 3,155.2 3,0933 3,140.7 3,1284 112 Residual (assets less liabilities)9. 301.3 316.1 317.4 315.5 318.3 318.4 321.0 324.1 321.9 323.2 323.1 323.5 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • May 1995 NOTES TO TABLE 1.26 1. Covers the following types of institutions in the fifty states and the District of 4. Consists of federal funds sold to, reverse repurchase agreements with, and loans to Columbia: domestically chartered commercial banks that submit a weekly report of commercial banks in the United States. condition (large domestic); other domestically chartered commercial banks (small domes- 5. Includes vault cash, cash items in process of collection, demand balances due from tic); branches and agencies of foreign banks; New York State investment companies, and depository institutions in the United States, balances due from Federal Reserve Banks, Edge Act and agreement corporations (foreign-related institutions). Excludes interna- and other cash assets. tional banking facilities. Data are Wednesday values, or pro rata averages of Wednesday 6. Excludes the due-from position with related foreign offices, which is included in values. Large domestic banks constitute a universe; data for small domestic banks and lines 25, 53, 81, and 109. foreign-related institutions are estimates based on weekly samples and on quarter-end 7. Excludes unearned income, reserves for losses on loans and leases, and reserves for condition reports. Data are adjusted for breaks caused by reclassifications of assets and transfer risk. Loans are reported gross of these items. liabilities. 8. Excludes the due-to position with related foreign offices, which is included in lines 2. Excludes federal funds sold to, reverse repurchase agreements with, and loans to 25, 53, 81, and 109. commercial banks in the United States. 9. This balancing item is not intended as a measure of equity capital for use in capital 3. Consists of reserve repurchase agreements with broker-dealers and loans to pur- adequacy analysis. chase 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 1995 AAccccoouunntt Dec. 28 Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 ASSETS 1 Cash and balances due from depository institutions 132,405r 143,036' 113,317' 139,226' 105,967' 128,696 100,961 121,554 122,838 2 U.S. Treasury and government securities 293,581 299,779 302,334' 302,228' 298,516' 299,869 297,331 298,527 298,558 3 Trading account 17,116 18,990 21,645 21,955 20,114 20,335 19,341 23,689 22,279 4 Investment account 276,465 280,789 280,688' 280,273' 278,402' 279,534 277,990 274,838 276,279 5 Mortgage-backed securities 95,238 96,323 96,573' 96,015' 95,246 96,209 96,156 95,160 96,026 All others, by maturity 6 One year or less 43,583 44,761 45,728 45,201 45,276 44,801 44,789 44,667 4455,,331188 7 One year through five years 73,645 75,510 74,805' 75,182' 74,811' 75,027 73,408 71,563 71,709 8 More than five years 63,999 64,196 63,583' 63,874' 63,069' 63,497 63,637 63,448 63,226 9 Other securities 112,454r 112,724r 112,252' 111,211' 112,721' 109,513 108,087 108,301 110,885 in Trading account 2,135 2,002 2,035 1,941 2,128 2,180 1,916 2,059 1,843 ii Investment account 62,093r 62,039 62,276' 62,241' 62,176' 61,329 61,422 61,393 61,050 12 State and local government, by maturity 21,450' 21,306 21,330' 21,401' 21,390 20,622 20,576 20,468 20,432 N One year or less 5,481' 5,475 5,491' 5,533' 5,547' 5,561 5,524 5,454 5,455 14 More than one year 15,969 15,831 15,839' 15,868' 15,843' 15,061 15,053 15,013 14,977 is Other bonds, corporate stocks, and securities 40,643 40,732 40,946' 40,840' 40,786' 40,707 40,846 40,926 40,618 16 Other trading account assets 48,226' 48,684' 47,942' 47,030' 48,418' 46,004 44,750 44,849 47,992 17 Federal funds sold2 107,395 113,284 107,548 112,092 106,989 114,501 106,375 119,278 108,281 18 To commercial banks in the United States 79,541 81,434 77,598' 82,937' 76,100' 82,849 73,986 83,153 73,413 19 To nonbank brokers and dealers in securities 21,494 24,928 24,206 23,286 24,539 25,750 24,406 27,875 28,211 20 To others3 6,361 6,922 5,745' 5,869' WSO1 5,902 7,984 8,250 6,657 71 Other loans and leases, gross 1,156,160 1,167,223 1,162,864' 1,167,837' 1,166,987' 1,179,813 1,170,993 1,176,200 1,176,309 77 Commercial and industrial 314,699' 316,927' 316,214' 318,785' 319,878' 325,292 325,163 327,481 328,212 73 Bankers acceptances and commercial paper 2,680 2,605 2,536 2,523 2,434 2,525 2,437 2,254 2,224 74 All other 312,018' 314,322' 313,678' 316,262' 317,443' 322,768 322,726 325,227 325,988 75 U.S. addressees 309,940' 312,251' 311,604' 314,165' 315,272' 320,639 320,622 323,145 323,936 76 Non-U.S. addressees 2,078 2,071 2,073 2,097 2,171 2,129 2,103 2,082 2,052 77 Real estate loans 456,506' 459,993' 462,501' 463,463' 463,524' 465,681 465,839 466,230 466,883 28 Revolving, home equity 46,686 46,912 47,038 47,090 47,127' 47,173 47,141 47,165 47,153 79 All other 409,821' 413,081' 415,464' 416,374' 416,397' 418,508 418,699 419,065 419,730 30 To individuals for personal expenditures 240,169 241,470 241,312 240,777' 239,566 240,013 237,979 238,327 238,303 31 To depository and financial institutions 52,955 54,328 54,428 54,087 55,671 56,405 54,224 54,369 52,999 37 Commercial banks in the United States 32,792 33,522 33,286 32,752 35,247 36,179 34,617 34,684 34,045 33 Banks in foreign countries 2,844 3,410 2,830 3,141 2,785 2,790 2,203 2,726 2,827 34 Nonbank depository and other financial institutions 17,319 17,397 18,311 18,194 17,639 17,436 17,404 16,958 16,127 35 For purchasing and carrying securities 16,050 15,112 15,068 15,302 15,417 16,026 14,803 15,019 15,137 36 To finance agricultural production 6,389 6,580 6,468 6,338 6,321 6,276 6,233 6,254 6,150 37 To states and political subdivisions 11,299 11,234 11,083 11,111 11,089 11,248 11,160 11,272 11,163 38 To foreign governments and official institutions 942 912 914 1,034 904 925 901 938 957 39 All other loans4 25,407 28,804 22,789' 24,657 22,265 25,539 22,223 23,803 23,914 40 Lease-financing receivables 31,743 31,861 32,087 32,283 32,352 32,407 32,468 32,509 32,591 41 LESS: Unearned income 1,764 1,755 1,760 1,756 1,769 1,771 1,778 1,790 1,801 4? Loan and lease reserve 34,267 34,329 34,303' 34,30C 34,319' 34,428 34,504 34,527 34,489 43 Other loans and leases, net 1,120,129 1,131,139 1,126,801' 1,131,78c 1,130,898' 1,143,614 1,134,711 1,139,883 1,140,019 44 All other assets 135,915' 135,107' 133,869' 131,685' 132,623' 142,994 136,953 142,158 135,522 45 Total assets6 1,901,880' L,935,069R L,896,121R L,928,224R L,887,714R 1,939,187 1,884,418 1,929,702 1,916,104 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • May 1995 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1994 1995 AAccccoouunntt Dec. 28 Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 LIABILITIES 46 Deposits 1,171,898 1,202,073 1,157,465 1,173,998 1,133,572' 1,167,953 1,139,077 1,165,945 1,152,126 47 Demand deposits7 327,647 340,463 298,284 315,649 281,139' 310,677 279,679 304,364 293,097 48 Individuals, partnerships, and corporations 274,439 285,612 252,923 263,060 236,447 257,513 237,511 256,362 245,031 49 Other holders 53,208 54,851 45,360 52,588 44,692' 53,164 42,168 48,002 48,066 50 States and political subdivisions 9,845 10,336 8,642 9,189 9,203 10,485 8,584 9,526 8,896 51 U.S. government 2,144 3,109 2,253 3,428 1,890' 3,075 1,669 3,274 1,552 52 Depository institutions in the United States 23,143 25,535 18,786 24,587 18,382 23,907 17,584 21,164 21,186 53 Banks in foreign countries 5,910 5,007 5,675 5,784 5,734 5,508 4,582 5,305 5,422 54 Foreign governments and official institutions 816 794 673 658 815 824 710 652 723 55 Certified and officers' checks 11,350 10,069 9,332 8,943 8,669 9,366 9,037 8,082 10,287 56 Transaction balances other than demand deposits4 127,581 136,150 131,460 130,198 124,859 128,070 127,146 125,907 124,150 57 Nontransaction balances 716,670 725,459 727,721 728,151 727,574 729,207 732,253 735,674 734,879 58 Individuals, partnerships, and corporations 696,718 705,834 707,525 707,757 705,485 707,325 709,632 712,812 711,455 59 Other holders 19,952 19,626 20,196 20,394 22,089 21,882 22,621 22,862 23,424 60 States and political subdivisions 16,833 17,796 18,095 18,265 18,508 18,322 18,921 18,900 19,438 61 U.S. government 1,279 330 331 336 1,715 1,726 1,815 1,881 1,805 62 Depository institutions in the United States 1,327 995 1,273 1,298 1,372 1,339 1,382 1,662 1,824 63 Foreign governments, official institutions, and banks .. 513 504 496 495 494 495 503 419 356 64 Liabilities for borrowed money5 365,997 367,917 373,357 384,533' 378,062' 401,055 371,221 391,762 387,819 65 Borrowings from Federal Reserve Banks 0 890 0 0 350 0 0 0 0 66 Treasury tax and loan notes 9,835 8,128 10,346R 19,297 19,732' 26,536 12,626 10,872 14,633 67 Other liabilities for borrowed money6 356,163 358,899 363,011R 365,235' 357,981' 374,519 358,595 380,890 373,186 68 Other liabilities (including subordinated notes and debentures)... 189,950R 189,846R 189,655' 192,891' 198,770' 192,874 197,485 195,360 198,437 69 Total liabilities L,727,845R 1,759,835' L,720,476R L,751,421R L,710,405R 1,761,882 1,707,783 1,753,067 1,738,382 70 Residual (total assets less total liabilities)7 174,035' 175,234 175,644' 176,803' 177,309' 177,305 176,635 176,635 177,722 MEMO 71 Total loans and leases, gross, adjusted, plus securities L,557,259R L,578,054R 1,574,114' 1,577,680' 1,573,867' 1,584,668 1,574,183 1,584,470 1,586,576 72 Time deposits in amounts of $100,000 or more 95,684R 96,582 99,944 101,659 103,408 103,183 104,530 107,633 108,525 73 Loans sold outright to affiliates 617 603 602 597 580 579 576 578 572 74 Commercial and industrial 298 296 296 295 295 295 295 295 295 75 Other 319 307 306 302 285 284 281 283 277 76 Foreign branch credit extended to US. residents 23,048 23,343 23,458 23,821 23,893 23,497 23,686 23,710 23,366 77 Net owed to related institutions abroad 75,297R 79,264 81,218 88,440 90,942 78,794 85,463 81,427 86,253 1. Includes certificates of participation, issued or guaranteed by agencies of the US. 8. Excludes loans to and federal funds transactions with commercial banks in the government, in pools of residential mortgages. United States. 2. Includes securities purchased under agreements to resell. 9. Affiliates include a bank's own foreign branches, nonconsolidated nonbank affiliates 3. Includes allocated transfer risk reserve. of the bank, the bank's holding company (if not a bank), and nonconsolidated nonbank 4. Includes negotiable order of withdrawal (NOWs) and automatic transfer service subsidiaries of the holding company. (ATS) accounts, and telephone and preauthorized transfers of savings deposits. 10. Credit extended by foreign branches of domestically chartered weekly reporting 5. Includes borrowings only from other than directly related institutions. banks to nonbank U.S. residents. Consists mainly of commercial and industrial loans, but 6. Includes federal funds purchased and securities sold under agreements to repur- includes an unknown amount of credit extended to other than nonfinancial businesses. chase. 7. This balancing item is not intended as a measure of equity capital for use in capital-adequacy analysis. 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 1995 AAccccoouunntt Dec. 28 Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 ASSETS 1 Cash and balances due from depository institutions 17,987 17,500 16,455 16,542 16,043 16,567 15,327 1155,,228833 15,299 2 U.S. Treasury and government agency securities 37,614 37,116 36,875 37,634 38,502 38,624 4411,,226666 3399,,889900 3399,,444477 3 Other securities 12,855 12,962 13,241 13,725 13,685 13,602 13,901 14,533 13,789 4 Federal funds sold' 35,824 30,802 30,250 28,238 30,776 29,097 26,119 24,767 24,944 To commercial banks in the United States 9,094 7,412 6,791 6,588 8,099 7,434 4,804 5,078 6,663 6 To others2 26,730 23,390 23,459 21,650 22,677 21,663 21,315 19,689 18,281 7 Other loans and leases, gross 170,760 169,588r 168,063' 168,531' 169,425' 171,511 169,919 170,173 168,574 8 Commercial and industrial 107,554r 106,587r 107,558' 107,604' 108,258' 109,607 109,557 110,020 109,427 9 Bankers acceptances and commercial paper . 3,668 3,730 3,501 3,500 3,455 3,713 3,665 3,715 3,432 in All other 103,887' 102,858' 104,057' 104,104' 104,802' 105,895 105,892 106,305 105,995 11 U.S. addressees 99,713r 98,804r 100,091' 99,998' 100,631' 101,732 101,748 102,276 101,884 i? Non-U.S. addressees 4,174 4,054 3,967 4,106 4,171 4,163 4,144 4,029 4,111 13 Loans secured by real estate 25,788 25,421r 25,472' 25,462' 25,409' 25,350 25,290 25,256 25,130 14 Loans to depository and financial institutions 28,545r 28,465r 26,528' 26,805' 27,324' 27,590 26,457 26,417 25,746 IS Commercial banks in the United States 5,785r 5,450r 5,485' 5,705' 5,832' 5,854 5,658 5,527 5,124 16 Banks in foreign countries 2,097 2,019 2,184 2,152 2,101 1,992 1,931 2,005 2,039 17 Nonbank financial institutions 20,663r 20,996r 18,858' 18,948' 19,391' 19,743 18,867 18,885 18,583 18 For purchasing and carrying securities 4,784r 4,850 4,181 4,334 3,947 4,307 4,288 3,971 3,900 19 To foreign governments and official institutions 378 374 401 338 344 349 374 336633 332299 7.0 All other 3,710 3,891 3,923 3,988 4,143 4,308 3,952 4,145 4,042 21 Other assets (claims on nonrelated parties) 42,775 44,952 46,189 46,063 47,344 47,705 48,208 47,806 48,640 22 Total assets3 343,194R 338,276R 338,506R 334,405R 338,740R 340,319 336,708 334,614 332,375 LIABILITIES 7.3 Deposits or credit balances owed to other than directly related institutions 99,639 95,015 96,035 95,750 99,404 96,295 97,044 95,647 96,621 24 Demand deposits4 4,737 4,499 3,840 3,822 3,716 4,127 3,800 4,024 4,133 25 Individuals, partnerships, and corporations .... 3,911 3,755 3,229 3,093 3,059 3,359 3,014 3,032 3,114 76 Other 826 744 610 728 657 768 785 992 1,019 7.7 Nontransaction accounts 94,902 90,516 92,196 91,928 95,688 92,169 93,245 91,623 92,488 28 Individuals, partnerships, and corporations .... 63,532 61,330 62,645 62,474 64,678 62,214 61,924 60,836 62,557 29 Other 31,370 29,186 29,551 29,454 31,010 29,955 31,321 30,787 29,931 30 Borrowings from other than directly related institutions 79,948 74,847 74,770 73,861 73,294 75,652 75,354 7766,,883344 7711,,771177 31 Federal funds purchased5 43,489 42,698 42,908 41,284 38,998 43,331 41,812 44,664 38,776 37. From commercial banks in the United States . . 6,620 7,515 8,929 7,656 5,393 7,303 6,848 8,291 5,687 33 From others 36,869 35,183 33,979 33,629 33,605 36,028 34,964 36,373 33,089 34 Other liabilities for borrowed money 36,459 32,149 31,862 32,576 34,296 32,321 33,542 32,170 32,941 35 To commercial banks in the United States 6,425 6,122 6,738 6,262 6,448 6,960 6,169 6,235 5,927 36 To others 30,034 26,027 25,123 26,314 27,848 25,361 27,373 25,936 27,014 37 Other liabilities to nonrelated parties 40,192 42,079 43,263 43,065 44,288 44,116 45,705 44,101 45,656 38 Total liabilities6 343,194' 338,276R 338,506R 334,405R 338,740R 340,319 336,708 334,614 332,375 MEMO 39 Total loans (gross) and securities, adjusted 242,174r 237,606r 236,153' 235,835' 238,457' 239,546 240,743 238,758 234,968 40 Net owed to related institutions abroad 98,037 100,979r 97,005' 98,057' 98,788' 101,043 96,637 95,870 96,699 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. For U.S. branches and agencies of foreign banks having a net "due to" position, 3. For U.S. branches and agencies of foreign banks having a net "due from" position, includes net owed to related institutions abroad. includes net due from related institutions abroad. 7. Excludes loans to and federal funds transactions with commercial banks in the 4. Includes other transaction deposits. United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • May 1995 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1994 1995 IItteemm 1990 1991 1992 1993 1994 Aug. Sept. Oct. Nov. Dec. Jan. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 562,656 528,832 545,619 555,075 601,940 564,639 574,471 592^18 580,673 601,940 Financial companies' Dealer-placed paper2 2 Total 214,706 212,999 226,456 218,947 225,413 214,769 214,349 224,280 215,748 225,413 3 Bank-related (not seasonally adjusted)3 ... 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 200,036 182,463 171,605 180,389 211,017 199,031 203,573 207,296 202,781 211,017 5 Bank-related (not seasonally adjusted)3... n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6 Nonfinancial companies5 147,914 133,370 147,558 155,739 165,510 150,839 156,549 160,942 162,144 165,510 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 54,771 43,770 38,194 32,348 29,835 30,448 31,164 30,413 29,760 29,835 By holder 8 Accepting banks 9,017 11,017 10,555 12,421 11,783 11,543 11,299 11,061 11,689 11,783 9 Own bills 7,930 9,347 9,097 10,707 10,462 10,824 10,475 9,931 10,548 10,462 10 Bills bought from other banks 1,087 1,670 1,458 1,714 1,321 719 824 1,130 1,142 1,321 Federal Reserve Banks7 11 Foreign correspondents 918 1,739 1,276 725 410 325 388 332 234 410 n.a. 12 Others 44,836 31,014 26,364 19,202 17,642 18,580 19,477 19,020 17,836 17,642 By basis 13 Imports into United States 13,095 12,843 12,209 10,217 10,062 10,486 10,985 10,674 10,272 10,062 14 Exports from United States 12,703 10,351 8,096 7,293 6,355 6,458 6,575 6,754 6,688 6,355 15 All other 28,973 20,577 17,890 14,838 13,417 13,505 13,604 12,986 12,800 13,417 1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales, 6. Data on bankers dollar acceptances are gathered from approximately 100 institupersonal, and mortgage financing; factoring, finance leasing, and other business lending; tions. The reporting group is revised every January. Beginning January 1995, data for insurance underwriting; and other investment activities. Bankers dollar acceptances will be reported annually in September. 2. Includes all financial-company paper sold by dealers in the open market. 7. In 1977 the Federal Reserve discontinued operations in bankers dollar acceptances 3. Series were discontinued in January 1989. for its own account. 4. As reported by financial companies that place their paper directly with investors. 5. Includes public utilities and firmse ngaged primarily in such activities as communications, construction, manufacturing, mining, wholesale and retail trade, transportation, and services. 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 t a e g e Av r e a r t a e g e Av r e a r t a e g e 1992—Jan. 1 6.50 1992 6.25 S—Jan 6.00 1994—Jan. 6.00 July 2 6.00 1993 6.00 Feb 6.00 Feb. .. 6.00 1994 7.15 Mar 6.00 Mar. .. 6.06 1994—Mar. 24 6.25 Apr. 6.00 Apr. .. 6.45 Apr. 19 6.75 1992--Jan. ... 6.50 May 6.00 May .. 6.99 May 17 7.25 Feb. .. 6.50 June 6.00 June .. 7.25 Aug. 16 7.75 Mar. .. 6.50 July 6.00 July ... 7.25 Nov. 15 8.50 Apr. .. 6.50 Aug 6.00 Aug 7.51 1995—Feb. 1 9.00 J M un ay e . . . . 6 6 . . 5 5 0 0 O Se c p t t 6 6 . . 0 0 0 0 S O e c p t t . . 7 7 . . 7 7 5 5 July ... 6.02 Nov 6.00 Nov. .. 8.15 Aug. .. 6.00 Dec 6.00 Dec 8.50 Sept. .. 6.00 Oct 6.00 1995—Jan. 8.50 Nov. ... 6.00 Feb. 9.00 Dec. 6.00 Mar. 9.00 1. The prime rate is one of several base rates that banks use to price short-term recent Call Report. Data in this table also appear in the Board's H.15 (519) weekly and business loans. The table shows the date on which a new rate came to be the predominant G. 13 (415) monthly statistical releases. For ordering address, see inside front cover. one quoted by a majority of the twenty-five largest banks by asset size, based o tnhe most Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • May 1995 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1994 1995 1995, week ending IItteemm 11999922 11999933 11999944 Nov. Dec. Jan. Feb. Jan. 27 Feb. 3 Feb. 10 Feb. 17 Feb. 24 MONEY MARKET INSTRUMENTS 1 Federal funds',2,3 3.52 3.02 4.21 5.29 5.45 5.53 5.92 5.42 5.63 5.95 5.93 5.94 2 Discount window borrowing2,4 3.25 3.00 3.60 4.40 4.75 4.75 5.25 4.75 4.82 5.25 5.25 5.25 Commercial paper* 5'6 3 1-month 3.71 3.17 4.43 5.40 6.08 5.86 6.05 5.94 6.08 6.03 6.07 6.03 4 3-month 3.75 3.22 4.66 5.81 6.26 6.22 6.15 6.24 6.23 6.14 6.16 6.12 5 6-month 3.80 3.30 4.93 6.01 6.62 6.63 6.38 6.63 6.58 6.38 6.38 6.30 Finance paper, directly placed*'*'1 6 1-month 3.62 3.12 4.33 5.30 5.93 5.76 5.95 5.83 5.96 5.94 5.97 5.92 / 3-month 3.65 3.16 4.53 5.67 6.12 6.10 6.04 6.10 6.10 6.06 6.05 6.00 8 6-month 3.63 3.15 4.56 5.58 6.17 6.25 6.10 6.23 6.19 6.12 6.12 6.05 Bankers acceptances3'5'8 9 3-month 3.62 3.13 4.56 5.71 6.18 6.12 6.05 6.10 6.11 6.05 6.05 6.00 10 6-month 3.67 3.21 4.83 5.93 6.53 6.45 6.22 6.41 6.36 6.26 6.22 6.13 Certificates of deposit, secondary market3'9 11 1-month 3.64 3.11 4.38 5.38 6.01 5.84 6.01 5.92 6.03 6.01 6.01 5.99 12 3-month 3.68 3.17 4.63 5.79 6.29 6.24 6.16 6.22 6.22 6.16 6.17 6.11 13 6-month 3.76 3.28 4.96 6.11 6.78 6.71 6.44 6.65 6.58 6.46 6.46 6.34 14 Eurodollar deposits, 3-month3'10 3.70 3.18 4.63 5.78 6.27 6.23 6.14 6.23 6.21 6.13 6.15 6.11 US. Treasury bills Secondary market3'5 15 3-month 3.43 3.00 4.25 5.29 5.60 5.71 5.77 5.77 5.82 5.79 5.75 5.72 16 6-month 3.54 3.12 4.64 5.72 6.21 6.21 6.03 6.18 6.14 6.09 6.04 5.94 1/ 1-year 3.71 3.29 5.02 6.13 6.67 6.59 6.28 6.50 6.43 6.37 66..2299 66..1155 Auction average3'5,11 18 3-month 3.45 3.02 4.29 5.25 5.64 5.81 5.80 5.80 5.79 5.83 5.82 5.74 19 6-month 3.57 3.14 4.66 5.69 6.21 6.31 6.10 6.24 6.12 6.10 6.15 6.01 20 1-year 3.75 3.33 4.98 6.09 6.75 6.86 6.59 n.a. n.a. 6.59 n.a. n.a. U.S. TREASURY NOTES AND BONDS Constant maturities'2 21 1-year 3.89 3.43 5.32 6.54 7.14 7.05 6.70 6.95 6.88 6.79 6.70 6.54 22 2-year 4.77 4.05 5.94 7.15 7.59 7.51 7.11 7.45 7.27 7.22 7.15 6.96 23 3-year 5.30 4.44 6.27 7.44 7.71 7.66 7.25 7.60 7.41 7.39 7.28 7.07 24 5-year 6.19 5.14 6.69 7.72 7.78 7.76 7.37 7.74 7.54 7.47 7.40 7.23 25 7-year 6.63 5.54 6.91 7.83 7.80 7.79 7.44 7.78 7.59 7.53 7.47 7.33 26 10-year 7.01 5.87 7.09 7.96 7.81 7.78 7.47 7.78 7.62 7.56 7.48 7.36 21 20-year n.a. 6.29 7.49 8.20 7.99 7.97 7.73 7.97 7.81 7.76 7.73 7.69 28 30-year 7.67 6.59 7.37 8.08 7.87 7.85 7.61 7.86 7.72 7.66 7.60 7.56 Composite 29 More than 10 years (long-term) 7.52 6.45 7.41 8.16 7.97 7.93 7.69 7.94 7.79 7.73 7.69 7.64 STATE AND LOCAL NOTES AND BONDS Moody's series'3 30 6.09 5.38 5.77 6.57 6.62 6.55 6.05 6.64 6.18 6.05 6.00 5.98 31 Baa 6.48 5.82 6.17 6.89 7.17 7.05 6.61 7.00 6.69 6.69 6.56 6.49 32 Bond Buyer series14 6.44 5.60 6.18 6.97 6.80 6.53 6.22 6.49 6.40 6.18 6.18 6.11 CORPORATE BONDS 33 Seasoned issues, all industries15 8.55 7.54 8.26 8.94 8.73 8.71 8.50 8.73 8.57 8.52 8.50 8.47 Rating group 34 8.14 7.22 7.97 8.68 8.46 8.46 8.26 8.49 8.33 8.28 8.26 8.23 35 Aa 8.46 7.40 8.15 8.83 8.62 8.60 8.39 8.62 8.46 8.41 8.39 8.36 36 A 8.62 7.58 8.28 8.94 8.73 8.70 8.48 8.72 8.55 8.51 8.48 8.46 37 Baa 8.98 7.93 8.63 9.32 9.10 9.08 8.85 9.10 8.92 8.87 8.85 8.82 38 A-rated, recently offered utility bonds16 8.52 7.46 8.29 8.95 8.78 8.75 8.55 8.69 8.54 8.62 8.55 8.49 MEMO Dividend-price ratio17 39 Common stocks 2.99 2.78 2.82 2.86 2.91 2.87 2.81 2.87 2.86 2.80 2.79 2.79 1. The daily effective federal funds rate is a weighted average of rates on trades issue-date basis. through New York brokers. 12. Yields on actively traded issues adjusted to constant maturities. Source: U.S. 2. Weekly figures are averages of seven calendar days ending on Wednesday of the Department of the Treasury. current week; monthly figures include each calendar day in the month. 13. General obligations based on Thursday figures; Moody's Investors Service. 3. Annualized using a 360-day year for bank interest. 14. State and local government general obligation bonds maturing in twenty years are 4. Rate for the Federal Reserve Bank of New York. used in compiling this index. The twenty-bond index has a rating roughly equivalent to 5. Quoted on a discount basis. Moodys' A1 rating. Based on Thursday figures. 6. An average of offering rates on commercial paper placed by several leading dealers 15. Daily figures from Moody's Investors Service. Based on yields to maturity on for firms whose bond rating is AA or the equivalent. selected long-term bonds. 7. An average of offering rates on paper directly placed by finance companies. 16. Compilation of the Federal Reserve. This series is an estimate of the yield on 8. Representative closing yields for acceptances of the highest-rated money center recently offered, A-rated utility bonds with a thirty-year maturity and five years of call banks. protection. Weekly data are based on Friday quotations. 9. An average of dealer offering rates on nationally traded certificates of deposit. 17. Standard & Poor's corporate series. Common stock ratio is based on the 500 stocks 10. Bid rates for Eurodollar deposits at 11:00 a.m. London time. Data are for indication in the price index. purposes only. NOTE. Some of the data in this table also appear in the Board's H.15 (519) weekly and 11. Auction date for daily data; weekly and monthly averages computed on an G. 13 (415) monthly statistical releases. For ordering address, see inside fron ctover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.36 STOCK MARKET Selected Statistics 1994 1995 IInnddiiccaattoorr 11999922 11999933 11999944 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 229.00 249.71 254.16 251.21 249.29 256.08 257.61 255.22 252.48 248.65 253.56 261.86 2 Industrial 284.26 300.10 315.32 308.66 307.34 316.56 322.19 321.53 319.33 313.92 319.93 328.98 3 Transportation 201.02 242.68 247.17 246.64 244.21 244.67 239.10 230.71 227.44 218.93 230.25 237.29 4 Utility 99.48 114.55 104.96 103.27 102.73 105.61 102.30 101.67 100.07 100.01 100.58 103.87 5 Finance 179.29 216.55 209.75 215.89 210.91 214.77 211.90 203.33 198.38 195.25 201.05 211.76 6 Standard & Poor's Corporation (1941-43 = 10)1 415.75 451.63 460.42 454.83 451.40 464.24 466.96 463.81 461.01 455.19 465.25 481.92 7 American Stock Exchange (Aug. 31, 1973 = 50)2 391.28 438.77 449.49 436.08 430.10 444.89 456.31 456.25 445.16 427.39 436.09 446.37 Volume of trading (thousands of shares) 8 New York Stock Exchange 202,558 263,374 290,652 265,341 250,382 277,877 292,356 301,327 297,001 302,049 326,652 333,020 9 American Stock Exchange 14,171 18,188 17,951 18,400 14,378 15,874 18,785 20,731 18,465 18,745 18,829 18,424 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers3 43,990 60,310 61,160 60,800 61,930 63,070 61,630 62,150 61,000 61,160 64,380 59,800 Free credit balances at brokers4 11 Margin accounts5 8,970 12,360 14,095 12,560 12,620 12,090 12,415 12,875 13,635 14,095 13,225 12,380 12 Cash accounts 22,510 27,715 28,870 28,585 25,790 24,400 25,230 24,180 25,625 28,870 26,440r 25,860 Margin requirements (percent of market value and effective date)6 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. In July 1976 a financial group, composed of banks and insurance companies, was credit is collateralized by securities. Margin requirements on securities other than options added to the group of stocks on which the index is based. The index is now based on 400 are the difference between the market value (100 percent) and the maximum loan value of industrial stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility collateral as prescribed by the Board. Regulation T was adopted effective Oct. 15, 1934; (formerly 60), and 40 financial. Regulation U, effective May 1, 1936; Regulation G, effective Mar. 11, 1968; and 2. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Regulation X, effective Nov. 1, 1971. previous readings in half. On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T 3. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has the initial margin required for writing options on securities, setting it at 30 percent of the included credit extended against stocks, convertible bonds, stocks acquired through the current market value of the stock underlying the option. On Sept. 30, 1985, the Board exercise of subscription rights, corporate bonds, and government securities. Separate changed the required initial margin, allowing it to be the same as the option maintenance reporting of data for margin stocks, convertible bonds, and subscription issues was margin required by the appropriate exchange or self-regulatory organization; such maintediscontinued in April 1984. nance margin rules must be approved by the Securities and Exchange Commission. 4. Free credit balances are amounts in accounts with no unfulfilled commitments to Effective Jan. 31, 1986, the SEC approved new maintenance margin rules, permitting brokers and are subject to withdrawal by customers on demand. margins to be the price of the option plus 15 percent of the market value of the stock 5. Series initiated in June 1984. underlying the option. 6. Margin requirements, stated in regulations adopted by the Board of Governors Effective June 8, 1988, margins were set to be the price of the option plus 20 percent of pursuant to the Securities Exchange Act of 1934, limit the amount of credit that can be the market value of the stock underlying the option (or 15 percent in the case of used to purchase and carry "margin securities" (as defined in the regulations) when such stock-index options). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • May 1995 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1994 1995 11999922 11999933 11999944 Sept. Oct. Nov. Dec. Jan. Feb. US budget1 1 Receipts, total 1,090,453 1,153,226 1,257,187 135,895 89,024 87,673 130,810 131,801 82,544 2 On-budget 788,027 841,292 922,161 105,212 65,385 62,083 103,859 101,036 54,405 3 Off-budget 302,426 311,934 335,026 30,683 23,639 25,590 26,951 30,765 28,139 4 Outlays, total 1,380,856 1,408,532 1,461,067' 131,903 120,365' 124,915' 134,941' 115,172' 120,536 5 On-budget 1,128,518 1,141,945 1,460,557' 103,189 95,307 99,464 123,643' 89,890' 94,058 6 Off-budget 252,339 266,587 279,372 28,714 25,059' 25,452' 11,297' 25,282' 26,478 7 Surplus or deficit (-), total -290,403 -255,306 -203,370 3,993 -31,342' -37,242' -4,130' 16,628' -37,992 8 On-budget -340,490 -300,653 -259,024 2,024 -29,922 -37,381 -19,783' 11,146' -39,653 9 Off-budget 50,087 45,347 55,654 1,969 -1,420' 138' 15,653' 5,483' 1,661 Source of financing (total) 10 Borrowing from the public 310,918 248,594 184,998 -11,996 32,457 40,528 -13,316 13,337 38,972 11 Operating cash (decrease, or increase (-)) -17,305 6,283 16,564 -5,855 -480 9,366 476 -23,264 14,000 12 Other2 -3,210 429 1,808 13,858 -635' -12,652' 16,970' -6,701' -14,980 MEMO 13 Treasury operating balance (level, end of period) 58,789 52,506 35,942 35,942 36,422 27,056 26,580 49,844 35,844 14 Federal Reserve Banks 24,586 17,289 6,848 6,848 5,164 5,348 7,161 13,964 6,890 15 Tax and loan accounts 34,203 35,217 29,094 29,094 31,258 21,709 19,419 35,880 28,954 1. Since 1990, off-budget items have been the social security trust funds (federal gold; net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF old-age survivors insurance and federal disability insurance) and the U.S. Postal Service. loan-valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCES. U.S. Department of the Treasury, Monthly Treasury Statement of Receipts International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; and Outlays of the US. Government; and U.S. Office of Management and Budget, Budget accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous of the U.S Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on 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 1993 1994 1995 11999933 11999944 HI H2 HI H2 Dec. Jan. Feb. RECEIPTS 1 All sources 1,153,226 1,257,453 593,212 582,038 652,236 625,557 130,810 131,801 82,544 2 Individual income taxes, net 509,680 543,055 255,556 262,073 275,053 273,474 54,315 79,162 33,863 3 Withheld 430,211 459,699 209,517 228,423 225,387 240,062 50,680 49,432 40,643 4 Presidential Election Campaign Fund 28 70 25 2 63 10 0 0 4 5 Nonwithheld 154,989 160,364 113,510 41,768 118,245 42,031 3,635 29,980 1,061 6 Refunds 75,546 77,077 67,468 8,115 68,642 9,207 579 245 7,845 Corporation income taxes 7 Gross receipts 131,548 154,205 69,044 68,266 80,536 78,392 32,616 5,415 3,483 8 Refunds 14,027 13,820 7,198 6,514 6,933 7,331 700 2,157 1,423 9 Social insurance taxes and contributions, net... 428,300 461,475 227,177 206,176 248,301 220,141 36,358 40,442 38,653 10 Employment taxes and contributions2 396,939 428,810 208,776 192,749 228,714 206,613 35,708 26,096 35,667 11 Self-employment taxes and contributions3 . 20,604 24,433 16,270 4,335 20,762 4,135 0 1,279 1,718 12 Unemployment insurance 26,556 28,004 16,074 11,010 17,301 11,177 230 1,069 2,630 13 Other net receipts4 4,805 4,661 2,326 2,417 2,284 2,349 420 372 357 14 Excise taxes 48,057 55,225 23,398 25,994 26,444 30,062 4,587 4,555 3,485 15 Customs deposits 18,802 20,099 8,860 10,215 9,500 11,042 1,747 1,539 1,435 16 Estate and gift taxes 12,577 15,225 6,494 6,617 8,197 7,071 1,092 1,005 916 17 Miscellaneous receipts5 18,273 22,041 9,879 9,227 11,170 13,305 1,375 1,839 2,131 OUTLAYS 18 All types 1,408,532 1,461,067 673,915 727,685 710,620 751,642' 134,941' 115,172' 120,536 19 National defense 291,086 281,451 140,535 146,672 133,841r 141,092 26,348 18,499 21,461 20 International affairs 16,826 17,249 6,565 10,186 5,800 12,056 1,334 999 1,108 21 General science, space, and technology 17,030 17,602 7,996 8,880 8,502 8,979 1,529 1,194 1,374 22 Energy 4,319 5,398 2,462 1,663 2,036 2,949 417 488 260 23 Natural resources and environment 20,239 20,902 8,592 11,221 9,1 lC 12,373 1,622 1,571 1,374 24 Agriculture 20,443 15,131 11,872 7,516 7,451 7,697 1,938 1,049 1,264 25 Commerce and housing credit -22,725 -4,851 -14,537 -1,490 -5,114 -2,678 -2,166 -1,469 -2,978 26 Transportation 35,004 36,835 16,076 19,570 16,760r 20,489 3,021 3,080 2,799 27 Community and regional development 9,051 11,877 4,929 4,288 5,592 7,070 1,102 1,140 228 28 Education, training, employment, and social services 50,012 44,730 24,080 26,753 19,000 25,887 5,779 4,650 4,078 29 Health 99,415 106,495 49,882 52,958 53,439r 54,123 9,246 9,440 8,918 30 Social security and Medicare 435,137 464,314 195,933 223,735 232,777 236,819 41,216 39,734 39,461 31 Income security 207,257 213,972 107,870 102,380 109,080 101,743 19,331 16,326 20,583 32 Veterans benefits and services 35,720 37,637 16,385 19,852 16,686 19,757 4,277 1,996 3,023 33 Administration of justice 14,955 15,283 7,482 7,400 7,718 7,800 1,278 1,568 1,099 34 General government 13,009 11,348 5,205 6,531 5,076 7,393 1,972 -233 1,170 35 Net interest6 198,811 202,957 99,635 99,914 99,844 109,435 19,302 19,568 18,002 36 Undistributed offsetting receipts7 -37,386 -37,772 -17,035 -20,344 -17,308 -20,065 -2,671 -2,911 -2,688 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 total for 6. Includes interest received by trust funds. outlays does not correspond to calendar year data because revisions from the Budget have 7. Rents and royalties for the outer continental shelf, U.S. government contributions for not been fully distributed across months. 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 Receipts 3. Old-age, disability, and hospital insurance. and Outlays of the US. Government; and U.S. Office of Management and Budget, Budget 4. Federal employee retirement contributions and civil service retirement and of the US Government, Fiscal Year 1996. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • May 1995 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1992 1993 1994 IItteemm Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1 Federal debt outstanding 4,196 4,250 4,373 4,436 4,562 4,602 4,673 4,721 4,800 2 Public debt securities 4,177 4,231 4,352 4,412 4,536 4,576 4,646 4,693 n.a. 3 Held by public 3,129 3,188 3,252 3,295 3,382 3,434 3,443 3,480 n.a. 4 Held by agencies 1,048 1,043 1,100 1,117 1,154 1,142 1,203 1,213 n.a. 5 Agency securities 19 20 21 25 27 26 28 29 n.a. 6 Held by public 19 20 21 25 27 26 27 29 n.a. 7 Held by agencies 0 0 0 0 0 0 0 0 n.a. 8 Debt subject to statutory limit 4,086 4,140 4,256 4,316 4,446 4,491 4,559 4,605 4,711 9 Public debt securities 4,085 4,139 4,256 4,315 4,445 4,491 4,559 4,605 4,711 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,145 4,145 4,370 4,900 4,900 4,900 4,900 4,900 4,900 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified SOURCES. U.S. Department of the Treasury, Monthly Statement of the Public Debt of participation certificates, notes to international lending organizations, and District of the United States and Treasury Bulletin. Columbia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1994 TTyyppee aanndd hhoollddeerr 11999911 11999922 11999933 11999944 Ql Q2 Q3 Q4 1 Total gross public debt 3,801.7 4,177.0 4,535.7 n.a. 4,575.9 4,645.8 4,692.8 n.a. By type 2 Interest-bearing 3,798.9 4,173.9 4,532.3 4,769.2 4,572.6 4,642.5 4,689.5 4,769.2 3 Marketable 2,471.6 2,754.1 2,989.5 3,126.0 3,042.9 3,051.0 3,091.6 3,126.0 4 Bills 590.4 657.7 714.6 733.8 721.2 698.5 697.3 733.8 5 Notes 1,430.8 1,608.9 1,764.0 1,867.0 1,802.5 1,835.7 1,867.5 1,867.0 6 Bonds 435.5 472.5 495.9 510.3 504.2 501.8 511.8 510.3 7 Nonmarketable' 1,327.2 1,419.8 1,542.9 1,643.1 1,529.7 1,591.5 1,597.9 1,643.1 8 State and local government series 159.7 153.5 149.5 132.6 145.5 143.4 137.4 132.6 9 Foreign issues2 41.9 37.4 43.5 42.5 42.7 42.2 42.0 42.5 10 Government 41.9 37.4 43.5 42.5 42.7 42.2 42.0 42.5 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 135.9 155.0 169.4 177.8 172.6 174.9 176.4 177.8 13 Government account series 959.2 1,043.5 1,150.0 1,259.8 1,138.4 1,200.6 1,211.7 1,259.8 14 Non-interest-bearing 2.8 3.1 3.4 31.0 3.3 3.3 3.2 31.0 By holder 4 15 U.S. Treasury and other federal agencies and trust funds 968.7 1,047.8 1,153.5 1,141.7 1,203.0 1,213.1 16 Federal Reserve Banks 281.8 302.5 334.2 342.6 357.7 355.2 17 Private investors 2,563.2 2,839.9 3,047.7 3,094.6 3,088.2 3,127.8 18 Commercial banks 233.4 294.0 316.0 345.0 330.7 325.0 19 Money market funds 80.0 79.4 80.5 70.5 59.5 59.9 20 Insurance companies 168.7 197.5 216.0 236.9 244.1 250.0 21 Other companies 150.8 192.5 213.0 n.a. 216.3 226.3 229.3 n a. 22 State and local treasuries 520.3 534.8 564.0 517.4 520.1 521.0 Individuals 23 Savings bonds 138.1 157.3 171.9 175.0 177.1 178.6 24 Other securities 125.8 131.9 137.9 140.1 144.0 148.6 25 Foreign and international5 491.8 549.7 623.3 632.7 632.5 653.8 26 Other miscellaneous investors6 651.3 702.4 725.0 760.7 754.0 761.6 1. Includes (not shown separately) securities issued to the Rural Electrification Admin- 5. Consists of investments of foreign balances and international accounts in the United istration, depository bonds, retirement plan bonds, and individual retirement bonds. States. 2. Nonmarketable series denominated in dollars, and series denominated in foreign 6. Includes savings and loan associations, nonprofit institutions, credit unions, mutual currency held by foreigners. savings banks, corporate pension trust funds, dealers and brokers, certain U.S. Treasury 3. Held almost entirely by U.S. Treasury and other federal agencies and trust funds. deposit accounts, and federally sponsored agencies. 4. Data for Federal Reserve Banks and U.S. government agencies and trust funds are SOURCES. U.S. Treasury Department, data by type of security. Monthly Statement of the actual holdings; data for other groups are Treasury estimates. Public Debt of the United States; data by holder. Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A31 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1994 1995 1994 and 1995, week ending IItteemm Nov. Dec. Jan. Dec. 28 Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Feb. 22 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 53,255 55,792 61,020 49,061 55,855 66,421 66,093 52,203 62,823 6644,,993377 61,124 50,127 Coupon securities, by maturity 2 Five years or less 102,316' 83,764 99,644r 57,849 59,195 90,630 109,668 109,685 116,168 108,919 114,585 114,831 3 More than five years 51,516r 34,619 40,619r 25,146 24,992 39,174 45,847 39,817 48,611 58,840 59,828 46,130 4 Federal agency 18,993 23,472 26,320 25,435 24,608 25,552 28,506 26,378 25,757 23,905 24,872 26,459 5 Mortgage-backed 30,516 24,508 27,653 10,989 15,892 40,358 30,241 24,790 20,936 40,686 36,306 21,248 By type of counterparty With interdealer broker 6 U.S. Treasury 120,872 100,469 116,796r 73,664 74,860 114,424 129,807 117,266 134,359 134,701 137,768 119,117 7 Federal agency 543 510 662 399 523 597 655 714 789 766 988 1,198 8 Mortgage-backed 9,765 8,208 10,543 3,380 5,982 13,741 11,492 11,019 8,183 10,912 11,292 8,384 With other 9 U.S. Treasury 86,216 73,707 84,487r 58,392 65,182 81,801 91,801 84,438 93,244 97,994 97,769 91,970 10 Federal agency 18,450 22,962 25,658 25,036 24,086 24,956 27,851 25,664 24,968 23,139 23,884 25,261 11 Mortgage-backed 20,751 16,300 17,111 7,609 9,911 26,618 18,749 13,771 12,753 29,774 25,013 12,864 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 1,667 1,377 1,096 865 589 504 1,577 1,067 1,653 995599 1,870 2,022 Coupon securities, by maturity 13 Five years or less 3,642 3,097 3,016 1,714 2,249 2,574 3,503 2,952 3,616 3,362 3,710 3,966 14 More than five years 14,287 10,277 11,231 5,509 6,740 11,893 12,927 10,268 12,856 12,955 15,352 13,378 15 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 16 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 0 OPTIONS TRANSACTIONS4 By type of underlying security 17 U.S. Treasury bills 0 0 0 0 0 0 0 00 0 00 0 0 Coupon securities, by maturity 18 Five years or less 2,722 1,353 3,049 1,063 1,504 2,498 4,455 2,254 4,131 3,109 3,722 2,986 19 More than five years 5,327 2,938 4,025 2,034 3,047 3,678 4,594 4,524 3,859 3,806 4,142 5,649 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 463 330 476 324 392 581 342 390 682 787 957 1,301 1. Transactions are market purchases and sales of securities as reported to the Federal Forward transactions are agreements made in the over-the-counter market that specify Reserve Bank of New York by the U.S. government securities dealers on its published list delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt of primary dealers. Monthly averages are based on the number of trading days in the securities are included when the time to delivery is more than five business days. Forward month. Transactions are assumed evenly distributed among the trading days of die report contracts for mortgage-backed agency securities are included when the time to delivery is week. Immediate, forward, and futures transactions are reported at principal value, which more than thirty business days. does not include accrued interest; options transactions are reported at the face value of the 3. Futures transactions are standardized agreements arranged on an exchange. All underlying securities. futures transactions are included regardless of time to delivery. Dealers report cumulative transactions for each week ending Wednesday. 4. Options transactions are purchases or sales of put and call options, whether arranged 2. Outright transactions include immediate and forward transactions. Immediate deliv- on an organized exchange or in the over-the-counter market, and include options on ery refers to purchases or sales of securities (other than mortgage-backed federal agency futures contracts on U.S. Treasury and federal agency securities. securities) for which delivery is scheduled in five business days or less and "when- NOTE, "n.a." indicates that data are not published because of insufficient activity. issued" securities that settle on the issue date of offering. Transactions for immediate delivery Major changes in the report form filed by primary dealers induced a break in the dealer of mortgage-backed agency securities include purchases and sales for which delivery is scheduled data series as of the week ending July 6, 1994. in thirty business days or less. Stripped securities are reported at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • May 1995 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1994 1995 1994 and 1995, week ending IItteemm Nov. Dec. Jan. Dec. 28 Jan. 4 Jan. 11 Jan. 18 Jan. 25 Feb. 1 Feb. 8 Feb. 15 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 13,089r 15,132r 5,471 8,075r 10,528 6,451 6,063 2,953 3,205 1,205 5,957 Coupon securities, by maturity 2 Five years or less -7,394r -7,690r -10,042 -2,705r -5,594 -11,478 -12,361 -8,820 -10,054 -10,384 -20,384 3 More than five years -30,584r -32,196r -32,613 -32,559r -30,074 -33,434 -35,026 -31,830 -31,447 -24,482 -22,832 4 Federal agency 20,097 20,263 20,004 21,122 17,995 18,012 19,871 24,072 19,077 17,773 21,203 5 Mortgage-backed 35,323 32,889 32,275 33,082 35,146 31,658 31,304 31,428 33,204 33,378 32,940 NET FUTURES POSITIONS By type of deliverable security 6 U.S. Treasury bills -275 -906 -1,906 -446 277 -1,485 81 -1,414 -6,744 -6,059 -6,655 Coupon securities, by maturity 7 Five years or less 7,470 5,292 3,629 3,167 2,832 5,314 3,853 3,202 2,432 2,419 1,396 8 More than five years 2,308 857r 2,312 755r 1,978 3,403 2,685 1,750 1,484 -3,157 -3,283 9 Federal agency 0 0 0 0 0 0 0 0 0 0 0 10 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 Financing5 Reverse repurchase agreements 11 Overnight and continuing 248,670 238,704 240,357 215,630 233,813 236,713 244,351 231,203 254,993 231,926 263,908 12 Term 343,089 355,245 347,721 350,856 302,271 345,503 353,508 378,397 338,067 368,698 312,969 Securities borrowed 13 Overnight and continuing 180,702 181,785 181,131 180,017 189,326 181,843 175,727 181,015 181,276 181,229 178,938 14 Term 46,394 46,339 50,752 46,874 47,633 52,023 50,255 54,151 47,962 51,132 48,770 Securities received as pledge IS Overnight and continuing 2,392 3,346 3,637 3,351 4,011 4,318 3,268 3,505 3,178 3,189 3,594 16 Term 32 37 177 16 110 n.a. 58 105 445 22 n.a. Repurchase agreements 17 Overnight and continuing 438,464 432,430 442,422 394,035 436,633 431,608 447,158 433,618 463,644 439,118 493,818 18 Term 338,786 341,663 307,485 345,223 272,824 306,085 313,968 331,153 297,051 321,373 258,536 Securities loaned 19 Overnight and continuing 6,262 5,994 6,775 5,750 6,689 6,877 6,031 6,693 7,678 6,822 7,015 20 Term 1,285 1,328 1,524 1,037 1,187 1,529 1,755 1,558 1,435 1,993 1,097 Securities pledged 21 Overnight and continuing 33,695 35,928 33,191 35,697 38,583 35,606 33,191 31,506 28,746 29,590 28,136 22 Term 3,416 1,609 1,684 1,566 1,660 1,397 1,899 2,073 1,328 1,429 2,631 Collateralized loans 23 Overnight and continuing 17,871 14,021 14,886 14,414 15,023 15,822 16,650 12,370 14,578 18,241 15,967 24 Term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. MEMO: Matched book6 Securities in 25 Overnight and continuing 224,758 223,889 230,619 201,905 228,378 228,823 232,307 223,723 240,286 216,882 238,935 26 Term 323,287 326,161 321,937 322,628 276,235 319,933 324,174 354,843 313,742 338,830 283,869 Securities out 27 Overnight and continuing 260,138 255,975 278,708 233,666 265,477 275,129 282,169 280,339 285,765 272,573 301,655 28 Term 272,124 279,824 258,389 286,163 219,517 255,201 262,886 285,746 250,859 267,966 206,040 1. Data for positions and financing are obtained from reports submitted to the Federal 4. Futures positions reflect standardized agreements arranged on an exchange. All Reserve Bank of New York by the U.S. government securities dealers on its published list futures positions are included regardless of time to delivery. of primary dealers. Weekly figures are close-of-business Wednesday data. Positions for 5. Overnight financing refers to agreements made on one business day that mature on calendar days of the report week are assumed to be constant. Monthly averages are based the next business day; continuing contracts are agreements that remain in effect for more on the number of calendar days in the month. than one business day but have no specific maturity and can be terminated without 2. Securities positions are reported at market value. advance notice by either party; term agreements have a fixed maturity of more than one 3. Net outright positions include immediate and forward positions. Net immediate business day. Financing data are reported in terms of actual funds paid or received, positions include securities purchased or sold (other than mortgage-backed agency securi- including accrued interest. ties) that have been delivered or are scheduled to be delivered in five business days or less 6. Matched-book data reflectf inancial intermediation activity in which the borrowing and "when-issued" securities that settle on the issue date of offering. Net immediate and lending transactions are matched. Matched-book data are included in the financing positions for mortgage-backed agency securities include securities purchased or sold that breakdowns given above. The reverse repurchase and repurchase numbers are not always have been delivered or are scheduled to be delivered in thirty business days or less. equal because of the "matching" of securities of different values or different types of Forward positions reflect agreements made in the over-the-counter market that specify collateralization. delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt NOTE, "n.a." indicates that data are not published because of insufficient activity. securities are included when the time to delivery is more than five business days. Forward Major changes in the report form filed by primary dealers induced a break in the dealer contracts for mortgage-backed agency securities are included when the time to delivery is data series as of the week ending July 6, 1994. more than thirty business days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A33 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1994 AAggeennccyy 11999900 11999911 11999922 11999933 Aug. Sept. Oct. Nov. Dec. 1 Federal and federally sponsored agencies 434,668 442,772 483,970 570,711 674,020 684,129r 698,792r 715,782r 741,992 2 Federal agencies 42,159 41,035 41,829 45,193 43,861 42,544 39,037 39,662 39,186 3 Defense Department1 7 7 7 6 6 6 6 6 6 4 Export-Import Bank2,3 11,376 9,809 7,208 5,315 4,389 3,932 3,932 3,932 3,455 5 Federal Housing Administration4 393 397 374 255 101 112 114 117 116 6 Government National Mortgage Association certificates of participation 0 0 0 0 0 0 0 0 0 7 Postal Service6 6,948 8,421 10,660 9,732 9,773 8,973 7,773 8,073 8,073 8 Tennessee Valley Authority 23,435 22,401 23,580 29,885 29,592 29,521 27,212 27,534 27,536 9 United States Railway Association 0 0 0 0 0 0 0 0 0 10 Federally sponsored agencies7 392,509 401,737 442,141 525,518 630,159 641,585 659,755 676,120 702,806 11 Federal Home Loan Banks 117,895 107,543 114,733 141,577 169,284 174,414 185,894 193,920 208,881 12 Federal Home Loan Mortgage Corporation 30,941 30,262 29,631 49,993 81,270 83,947 88,680 90,709 93,279 13 Federal National Mortgage Association 123,403 133,937 166,300 201,112 237,564 239,320 242,575 247,743 257,230 14 Farm Credit Banks8 53,590 52,199 51,910 53,123 53,844 54,333 53,609 54,800 53,175 15 Student Loan Marketing Association 34,194 38,319 39,650 39,784 48,313 49,692 49,112 49,066 50,335 16 Financing Corporation10 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation 23,055 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 179,083 185,576 154,994 128,187 112,804 109,357 106,935 105,662 103,817 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 11,370 9,803 7,202 5,309 4,383 3,926 3,926 3,926 3,449 21 Postal Service6 6,698 8,201 10,440 9,732 9,773 8,973 7,773 8,073 8,073 22 Student Loan Marketing Association 4,850 4,820 4,790 4,760 0 0 0 0 0 23 Tennessee Valley Authority 14,055 10,725 6,975 6,325 4,375 3,400 3,200 3,200 3,200 24 United States Railway Association 0 0 0 0 0 0 0 0 0 Other lending14 25 Farmers Home Administration 52,324 48,534 42,979 38,619 34,594 34,129 33,869 33,719 33,719 26 Rural Electrification Administration 18,890 18,562 18,172 17,578 17,402 17,316 17,322 17,365 17,392 27 Other 70,896 84,931 64,436 45,864 42,322 41,613 40,845 39,379 37,984 1. Consists of mortgages assumed by the Defense Department between 195 7and 1963 10. The Financing Corporation, established in August 1987 to recapitalize the Federal under family housing and homeowners assistance programs. Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation, established in January 1988 to 3. On-budget since Sept. 30, 1976. provide assistance to the Farm Credit System, undertook its first borrowing in July 1988. 4. Consists of debentures issued in payment of Federal Housing Administration 12. The Resolution Funding Corporation, established by the Financial Institutions insurance claims. Once issued, these securities may be sold privately on the securities Reform, Recovery, and Enforcement Act of 1989, undertook its first borrowing in October market. 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government 13. The FFB, which began operations in 1974, is authorized to purchase or sell National Mortgage Association acting as trustee for the Farmers Home Administration, obligations issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt the Department of Health, Education, and Welfare, the Department of Housing and Urban solely for the purpose of lending to other agencies, its debt is not included in the main Development, the Small Business Administration, and the Veterans' Administration. portion of the table in order to avoid double counting. 6. Off-budget. 14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loans 7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. In- guaranteed by numerous agencies, with the amounts guaranteed by any one agency cludes Federal Agricultural Mortgage Corporation, therefore details do not sum to total. generally being small. The Fanners Home Administration entry consists exclusively of Some data are estimated. agency assets, whereas the Rural Electrification Administration entry consists of both 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is agency assets and guaranteed loans. shown on line 17. 9. Before late 1982, the association obtained financing through the Federal 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 Nonfinancial Statistics • May 1995 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1994 1995 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11999922 11999933 11999944 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 All issues, new and refunding1 226,818 279,945 153,922r 13,533r 12,289r 7,903r ll,053r ll,856r 9,513' 7,331 7,114 By type of issue 2 General obligation 78,611 90,599 54,258 7,110 4,177 2,309 2,891 5,592 2,284 3,780 3,681 3 Revenue 136,580 189,346 92,100 5,340 8,133 5,325 6,899 6,093 7,970 3,551 3,433 By type of issuer 4 State 24,874 27,999 19,363 4,686 1,675 1,009 952 1,528 151 739 1,032 5 Special district or statutoiy authority2 138,327 178,714 87,751 4,931 7,963 4,962 6,511 6,148 7,501 4,484 4,657 6 Municipality, county, or township 63,617 73,232 40,524 2,833 2,672 1,663 2,327 4,009 2,102 2,108 1,425 7 Issues for new capital 101,865 91,434 106,799r 10,970r 10,536r 6,195r 9,127r 9,630r 8,447r 5,473 5,576 By use of proceeds 8 Education 18,852 16,831 21,3601 l,312r 2,242r 833' l,650r l,780r l,713r 1,333 1,515 9 Transportation 14,357 9,167 10,765r 295r l,089r 335r l,380r 621r 304r 587 666 10 Utilities and conservation 12,164 12,014 10,23 <f 729r l,108r 454r 979r 976r 1,29(f 524 367 11 Social welfare 16,744 13,837 19,917 1,698 2,117 1,897 1,887 1,535 2,172 1,036 943 12 Industrial aid 6,188 6,862 9,054 959 1,128 403 420 688 1,085 260 346 13 Other purposes 33,560 32,723 37,250 5,560 3,401 2,011 2,396 4,750 2,063 1,733 1,739 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 1994 Type of issue, offering, or issuer July Aug. Sept. 1 All issues 559,827 754,969 49,578 29,818 37,871 29,416 34,421r 38,801r 22,999 31,123 2 Bonds2 471,502 641,498 43,210 26,159 34,495 25,983 30,849r 33,276r 20,493 28,000 By type of offering 3 Public, domestic 378,058 486,879 364,942 38,472 22,441 30,088 22,736 25,132' 27,268 17,809 20,000 4 Private placement, domestic3 . 65,853 116,240 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 27,591 38,379 56,184 4,738 3,718 4,406 3,248 5,718r 6,008r 2,684 8,000 By industry group 6 Manufacturing 82,058 88,002 31,971 2,093 2,316 2,596 2,167 2,498 2,481 1,508 1,322 7 Commercial and miscellaneous 43,111 60,293 27,885 3,277 997 3,570 2,112 2,204r 1,578 2,469 3,875 8 Transportation 9,979 10,756 4,573 1,082 248 315 229 227 239 269 0 9 Public utility 48,055 56,272 11,713 681 487 575 707 695 744 273 529 10 Communication 15,394 31,950 11,986 618 429 345 526 279 333 419 899 11 Real estate and financial 272,904 394,226 332,999 35,459 21,682 27,094 20,242 24,947r 27,902r 15,556 21,375 12 Stocks2 88,325 113,472 6,368 3,659 3,376 3,433 3,572 5,525 2,506 3,123 By type of offering 13 Public preferred 21,339 18,897 12,952 1,396 584 710 555 1,202 279 178 505 14 Common 57,118 82,657 47,670 4,972 3,075 2,666 2,877 2,370 5,246 2,327 2,618 15 Private placement3 9,867 11,917 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 22,723 22,271 1,106 492 569 904 745 1,963 1,148 1,049 17 Commercial and miscellaneous 20,231 25,761 1,834 701 805 821 1,105 1,783 830 177 2 1 1 0 8 9 C T P r u o a m b n li m s c p u o u n r t t i i a c li t a t i t o y io n n 6 2 2 , , , 5 5 3 9 3 6 5 2 6 7 2 3 , , , 0 2 4 3 3 5 7 9 0 4 2 4 9 28 9 7 7 0 0 5 1 5 8 0 0 0 2 7 2 0 8 3 7 4 0 9 3 7 3 0 6 3 1 2 6 0 0 5 4 2 7 0 1 2 9 9 21 Real estate and financial 33,879 52,021 2,654 2,386 1,767 1,407 1,639 1,351 343 1,000 1. Figures represent gross proceeds of issues maturing in more than one year; they are 2. Monthly data cover only public offerings. the principal amount or number of units calculated by multiplying by the offering price. 3. Monthly data are not available. Figures exclude secondary offerings, employee stock plans, investment companies other SOURCES. Beginning July 1993, Securities Data Company and the Board of Governors than closed-end, intracorporate transactions, equities sold abroad, and Yankee bonds. of the Federal Reserve System. 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 1994 1995 IItteemm 11999933 11999944 June July Aug. Sept. Oct. Nov. Dec.r Jan. 1 Sales of own shares2 851,885 841,286 65,333 59,258 64,833 62,263 59,285 56,849 73,183 75,099 2 Redemptions of own shares 567,881 699,823 56,068 50,275 53,242 53,383 53,743 55,757 70,747 63,737 3 Net sales3 284,004 141,463 9,265 8,983 1,592 8,880 5,543 1,092 2,436 11,362 4 Assets4 1,510,209 1,550,490 1,509,998 1,552,652 1,604,961 1,588,277 1,601,363 1,549,186 1,550,490 1,563,187 5 Cash5 100,209 121,296 114,885 120,129 120,315 121,575 126,766 125,843 121,296 124,351 6 Other 1,409,838 1,429,195 1,395,113 1,432,523 1,484,646 1,466,702 1,474,597 1,423,344 1,429,195 1,438,836 1. Data on sales and redemptions exclude money market mutual funds but include 4. Market value at end of period, less current liabilities. limited-maturity municipal bond funds. Data on asset positions exclude both money 5. Includes all U.S. Treasury securities and other short-term debt securities. market mutual funds and limited-maturity municipal bond funds. SOURCE. Investment Company Institute. Data based on reports of membership, which 2. Includes reinvestment of net income dividends. Excludes reinvestment of capital comprises substantially all open-end investment companies registered with the Securities gains distributions and share issue of conversions from one fund to another in the same and Exchange Commission. Data reflect underwritings of newly formed companies after group. their initial offering of securities. 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 1993 1994 AAccccoouunntt 11999922 11999933 11999944 Q1 Q2 Q3 04 Ql Q2 Q3 Q4 1 Profits with inventory valuation and capital consumption adjustment 405.1 485.8 n.a. 442.5 473.1 493.5 533.9 508.2 546.4 556.0 n.a. 2 Profits before taxes 395.9 462.4 n.a. 432.7 456.6 458.7 501.7 483.5 523.1 538.1 n.a. 3 Profits-tax liability 139.7 173.2 n.a. 159.8 171.8 169.9 191.5 184.1 201.7 208.6 n.a. 4 Profits after taxes 256.2 289.2 n.a. 273.0 284.8 288.9 310.2 299.4 321.4 329.5 n.a. 5 Dividends 171.1 191.7 205.2 188.2 190.7 193.2 194.6 196.3 202.5 207.9 213.9 6 Undistributed profits 85.1 97.5 n.a. 84.7 94.1 95.6 115.6 103.0 118.9 121.6 n.a. 7 Inventory valuation -6.4 -6.2 -19.3r -11.2 -10.0 3.0 -6.5 -12.3 -14.1 -19.6 -31.2 8 Capital consumption adjustment 15.7 29.5 37.7 21.0 26.5 31.7 38.8 37.0 37.4 37.5 38.8 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 1993 1994 IInndduussttrryy 11999922 11999933 11999944'' Ql Q2 Q3 Q4 Ql Q2 Q3 Q41 1 Total nonfarm business 546.60 586.73 638.37 563.48 578.95 594.56 604.51 61934 637.08 651.92 645.13 Manufacturing 2 Durable goods industries 73.32 81.45 92.78 78.19 80.33 82.74 83.64 86.03 91.71 98.97 94.44 3 Nondurable goods industries 100.69 98.02 99.77 95.80 97.22 99.74 98.51 99.02 102.28 98.39 99.39 Nonmanufacturing 4 Mining 8.88 10.08 11.24 8.98 9.10 11.09 10.92 11.43 10.70 11.57 11.27 Transportation 5 Railroad 6.67 6.14 6.72 6.16 5.94 5.89 6.55 7.46 5.36 6.65 7.40 6 Air 8.93 6.42 3.95 7.26 6.63 6.70 5.06 4.23 4.53 3.86 3.16 7 Other 7.04 9.22 10.53 8.96 8.92 8.74 10.23 10.77 9.70 10.22 11.42 Public utilities 8 Electric 48.22 52.55 52.25 49.98 50.61 52.96 55.60 48.68 53.55 54.15 52.60 9 Gas and other 23.99 23.43 24.20 23.79 23.83 22.98 23.27 24.51 22.96 24.35 24.97 10 Commercial and other 268.84 299.44 336.93 284.35 296.35 303.74 310.73 327.20 336.28 343.76 340.48 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 Nonfinancial Statistics • May 1995 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1993 1994 AAccccoouunntt 11999911 11999922 11999933 Q1 Q2 Q3 Q4 Q1 Q2 Q3 ASSETS 1 Accounts receivable, gross2 484.6 491.8 482.8 477.9 473.7 474.0 482.8 494.5 511.3 524.1 2 Consumer 121.7 118.3 116.5 112.6 110.6 111.0 116.5 120.1 124.3 130.3 3 Business 295.8 301.3 294.6 292.7 291.8 291.9 294.6 302.3 313.2 317.2 4 Real estate 67.1 72.2 71.7 72.5 71.4 71.1 71.7 72.1 73.8 76.6 5 LESS: Reserves for unearned income 56.1 53.2 50.7 50.1 49.7 49.5 50.7 51.2 51.9 51.1 6 Reserves for losses 13.1 16.2 11.2 15.2 10.8 11.2 11.2 11.6 12.1 12.1 7 Accounts receivable, net 415.4 422.4 420.9 412.6 413.2 413.3 420.9 431.7 447.3 460.9r 8 All other 144.9 142.5 170.9 150.6 151.5 163.9 170.9 171.2 174.6 177.2 9 Total assets 560.3 564.9 591.8 563-3 564.7 577.3 591.8 602.9 621.9 638.1 LIABILITIES AND CAPITAL 10 Bank loans 42.3 37.6 25.3 34.1 29.4 25.8 25.3 24.2 23.3 21.6 11 Commercial paper 159.5 156.4 159.2 149.8 144.5 149.9 159.2 165.9 171.2 171.0 Debt 12 Other short-term n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13 Long-term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 14 Owed to parent 35.5 39.5 42.7 43.1 45.0 44.6 42.7 41.1 44.7 50.0 15 Not elsewhere classified 190.2 196.3 206.0 197.3 199.9 204.2 206.0 211.7 219.6 228.2 16 All other liabilities 68.4 68.0 87.1 72.5 77.8 83.8 87.1 90.5 89.9 95.0 17 Capital, surplus, and undivided profits 64.5 67.1 71.4 66.5 68.1 68.9 71.4 69.5 73.2 72.3 18 Total liabilities and capital 560.3 564.9 591.8 5633 564.7 5773 591.8 602.9 621.9 638.1 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 o ffinance 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 1994 1995 TTyyppee ooff ccrreeddiitt 11999922 11999933 11999944rr Aug. Sept. Oct. Nov. Dec/ Jan. Seasonally adjusted 11 TToottaall 540,679 546,020 610,710 579,032 590,512 596,397 602,463 610,710 618,239 2 3 2 3 CC RR oo eeaa nn ll ss uu ee mm sstt ee aa rr ttee 22 1 7 5 2 7 , , 4 8 9 5 6 7 1 7 6 1 0 , , 9 8 9 0 1 2 1 7 7 8 4 , , 7 0 7 5 4 9 1 7 6 5 6 , , 5 92 2 1 4 1 7 7 6 2 , , 4 54 2 7 4 1 7 7 6 3 , , 9 1 7 7 1 8 1 7 7 7 4 , , 9 3 9 2 1 4 1 7 7 8 4 , , 7 0 7 5 4 9 1 7 7 9 5 , , 0 5 4 7 5 9 44 BBuussiinneessss 310,325 313,226 357,877 336,587 341,542 346,248 350,148 357,877 363,615 Not seasonally adjusted 5 Total 544,691 550,387 615,758 575,769 588,525 596,054 603,305 615,758 617,625 6 Consumer 159,558 162,770 176,316 166,501 172,002 172,813 174,118 176,316 176,569 • 1 1 9 7 8 0 1 Re O S M S a e e l t o c c h e u t u e o s r r r t r i i a t t c i t i v o z z e e n e e 2 h d d su i c o m m l t e h o e s r e t o 3 r r c v o e n h su ic m le e s r 4 4 . 7 6 2 5 1 2 1 9 7 1 , , , , , 2 0 7 5 2 4 4 3 2 5 3 5 4 0 9 7 6 3 5 1 1 0 6 6 0 , , , , , 7 3 0 0 2 2 9 5 2 9 7 6 7 4 3 7 3 7 6 8 9 1 3 1 , , , , , 8 2 6 4 6 6 2 2 7 0 1 1 5 9 9 7 3 6 5 6 9 1 6 8 , , , , , 7 5 6 0 5 8 1 0 1 8 7 7 8 2 9 7 3 6 6 6 9 9 2 0 , , , , , 5 3 7 3 5 8 2 8 7 2 5 4 4 2 2 7 7 3 6 9 7 0 1 0 , , , , , 6 2 8 5 7 5 3 1 9 5 9 5 2 2 0 7 3 7 6 7 9 1 1 1 , , , , , 9 4 5 7 3 0 9 0 5 7 7 4 2 0 2 7 3 7 6 9 1 3 8 1 , , , , , 8 2 6 4 6 6 2 2 7 0 1 1 5 9 9 7 3 7 6 9 4 0 9 2 , , , , , 3 2 6 5 3 9 2 2 4 2 1 8 4 0 6 12 Business 312,890 315,890 360,963 333,256 339,938 346,006 351,280 360,963 361,516 1 1 1 3 4 5 Mo R W to e h r ta o v i l l e e 5 s h a ic le le 6 s 2 2 8 0 9 9 , , , 5 0 8 4 1 9 1 1 0 3 9 1 1 5 8 , , , 1 1 0 4 7 9 8 3 1 1 2 3 1 1 5 8 , , , 0 5 1 3 9 1 7 7 4 1 2 2 0 5 0 2 , , , 8 2 6 7 5 7 5 5 2 1 2 2 0 7 1 6 , , , 2 1 3 0 6 6 1 4 5 1 2 2 1 1 9 0 , , , 6 3 0 4 0 8 5 2 9 1 2 3 1 2 0 3 , , , 1 6 2 1 1 2 3 4 2 1 2 3 1 5 1 8 , , , 0 5 1 3 9 1 7 7 4 1 2 3 1 1 4 8 , , , 8 4 8 1 4 8 1 7 5 16 Leasing 38,580 45,934 61,646 56,508 58,000 59,142 60,495 61,646 62,627 17 Equipment 151,424 145,452 157,953 151,388 152,782 152,675 154,312 157,953 158,351 1 1 9 8 W Re h ta o i l l e sale6 3 8 3, , 5 6 2 8 1 0 3 8 5 , , 0 5 0 1 1 3 3 9 9 , , 6 6 7 8 8 0 3 8 9 , , 9 6 6 2 8 9 3 9 9, , 3 1 5 1 7 9 3 9 8 , , 1 5 3 8 4 4 3 9 8 , ,9 4 1 8 2 4 3 9 9 , , 6 6 7 8 8 0 40 9 , , 1 3 8 6 7 1 2 2 2 0 1 2 S O e t c L h u e e r r a i s t b i i z n u e g s d i n b es u s s 7 i ness assets4 1 6 0 1 0 9 1 , , , 8 2 5 5 2 9 6 3 9 1 2 5 0 3 1 1 , , , 9 2 9 9 6 3 7 8 8 1 2 6 0 3 1 8 , , , 3 4 5 1 9 9 8 5 5 1 2 5 0 6 2 2 , , , 3 8 7 8 9 2 9 1 4 1 2 5 0 8 2 4 , , , 1 6 3 0 9 0 1 0 6 1 2 5 0 3 9 4 , , , 9 3 95 2 1 7 8 4 1 2 5 0 9 3 5 , , , 8 8 9 9 5 1 3 3 6 1 2 6 0 3 1 8 , , , 3 4 5 1 9 9 8 5 5 1 2 6 0 3 1 8 , , , 0 1 8 8 9 0 7 3 3 23 Retail 1,120 2,483 3,065 2,656 2,564 2,956 2,853 3,065 2,901 24 Wholesale 5,756 10,584 14,499 14,147 14,411 15,173 15,311 14,499 14,621 25 Leasing 4,723 8,201 5,754 6,021 5,715 5,799 5,689 5,754 5,565 1. Includes finance company subsidiaries of bank holding companies but not of 4. Outstanding balances of pools upon which securities have been issued; these retailers and banks. Data are before deductions for unearned income and losses. Data in balances are no longer carried on the balance sheets of the loan originator. this table also appear in the Board's G.20 (422) monthly statistica lrelease. For ordering 5. Passenger car fleets and commercial land vehicles for which licenses are required. address, see inside front cover. 6. Credit arising from transactions between manufacturers and dealers, that is, floor 2. Includes all loans secured by liens on any type of real estate, for example, first and plan financing. junior mortgages and home equity loans. 7. Includes loans on commercial accounts receivable, factored commercial accounts, 3. Includes personal cash loans, mobile home loans, and loans to purchase other types and receivable dealer capital; small loans used primarily for business or farm purposes; of consumer goods such as appliances, apparel, general merchandise, and recreation and wholesale and lease paper for mobile homes, campers, and travel trailers. Digitized for FRvAehSicEleRs. 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 1994 1995 IItteemm 11999922 11999933 11999944 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms' 1 Purchase price (thousands of dollars) 158.1 163.1 170.4 167.6 170.6 173.4 178.2 184.9 176.5 175.6 2 Amount of loan (thousands of dollars) 118.1 123.0 130.8 129.3 133.7 131.9 136.2 136.2 134.2 135.6 3 Loan-to-price ratio (percent) 76.6 78.0 78.8 79.0 79.4 78.3 78.0 76.9 78.0 79.3 4 Maturity (years) 25.6 26.1 27.5 28.0 27.9 27.6 27.9 28.0 28.0 28.3 5 Fees and charges (percent of loan amount)2 1.60 1.30 1.29 1.38 1.36 1.22 1.30 1.38 1.31 1.32 Yield (percent per year) 6 Contract rate1 7.98 7.02 7.26 7.45 7.48 7.55 7.59 7.61 7.96 8.07 7 Effective rate1, 8.25 7.24 7.47 7.67 7.70 7.76 7.81 7.83 8.18 8.28 8 Contract rate (HUD series)4 8.43 7.37 8.58 8.68 8.96 9.19 9.34 9.32 9.11 8.79 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 8.46 7.46 8.68 8.66 9.10 9.23 9.53 9.54 9.10 9.05 10 GNMA securities 7.71 6.65 7.96 8.15 8.28 8.66 8.86 8.76 8.69 8.38 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 158,119 190,861 222,057 212,680 215,249 218,479 220,377 222,057 222,774 223,137 12 FHA/VA insured 22,593 23,857 28,377 25,604 25,800 26,226 27,118 28,377 28,368 28,420 13 Conventional 135,526 167,004 194,499 187,076 189,449 192,253 193,259 194,499 195,170 195,439 Mortgage transactions (during period) 14 Purchases 75,905 92,037 62,389 4,077 4,266 5,003 3,549 3,399 2,154 1,802 Mortgage commitments (during period) 15 Issued7 74,970 92,537 54,038 3,776 4,880 3,421 2,696 2,910 1,720 1,683 16 To sell8 10,493 5,097 1,820 0 0 48 20 55 57 82 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 17 Total 33,665 55,012 72.693 64,118 66,478 69,340 70,757 72,693 73,553 75,184 18 FHA/VA insured 352 321 276 291 287 284 279 276 272 n.a. 19 Conventional 33,313 54,691 72,416 63,827 66,191 69,057 70,477 72,416 73,281 n.a. Mortgage transactions (during period) 20 Purchases 191,125 229,242 124,697 6,407 5,512 8,351 3,022 4,890 3,254 5,537 21 179,208 208,723 117,110 5,828 5,213 8,139 2,865 3,769 2,862 4,806 Mortgage commitments (during period)9 22 Contracted 261,637 274,599 136,067 5,649 5,035 7,288 3,454 2,412 6,541 7,741 1. Weighted averages based on sample surveys of mortgages originated by major 6. Average net yields to investors on fully modified pass-through securities backed by institutional lender groups for purchase of newly built homes; compiled by the Federal mortgages and guaranteed by the Government National Mortgage Association (GNMA), Housing Finance Board in cooperation with the Federal Deposit Insurance Corporation. assuming prepayment in twelve years on pools of thirty-year mortgages insured by the 2. Includes all fees, commissions, discounts, and "points" paid (by the borrower or Federal Housing Administration or guaranteed by the Department of Veterans Affairs. the seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby commitments 3. Average effective interest rate on loans closed for purchase of newly built homes, converted. 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 mortgages; from 9. Includes conventional and government-underwritten loans. The Federal Home Loan U.S. Department of Housing and Urban Development (HUD). Based on transactions on Mortgage Corporation's mortgage commitments and mortgage transactions include activthe first day of the subsequent month. ity under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages exclude swap activity. 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

A178 Domestic Nonfinancial Statistics • May 1995 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1993 1994 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999911 11999922 11999933 Q4 Q1 Q2 Q3 Q4P 1 All holders 3,926,154 4,056,233 4,215,480 4,215,480 4,242,350' 4,300,086' 4361,119 4,409,390 By type of property 2 One- to four-family residences 2,781,327r 2,963,391 3,147,255 3,147,255 3,181,125' 3,234,663' 3,291,915 3,339,190 3 Multifamily residences 306,551' 295,417 290,489 290,489 289,236' 290,807' 292,180 292,151 4 Commercial 759,154r 716,687 696,542 696,542 690,718' 692,764' 694,736 695,548 5 79,122r 80,738 81,194 81,194 81,272' 81,853' 82,288 82,500 By type of holder 6 Major financial institutions 1,846,726 1,769,187 1,767,835 1,767,835 1,746,474 1,763,296' 1,786,171 1,813,751 7 Commercial banks2 876,100 894,513 940,444 940,444 937,944 981,365 1,004,237 8 One- to four-family 483,623 507,780 556,538 556,538 553,894' 569,512' 592,021 609,521 9 Multifamily 36,935 38,024 38,635 38,635 38,690' 38,609' 38,004 39,289 10 Commercial 337,095 328,826 324,409 324,409 324,106' 326,800' 328,931 332,859 11 Farm 18,447 19,882 20,862 20,862 21,254 21,918' 22,408 22,567 12 Savings institutions3 705,367 627,972 598,330 598,330 584,531 585,671 587,538 596,035 13 One- to four-family 538,358 489,622 469,959 469,959 458,057' 462,219' 466,697 477,144 14 Multifamily 79,881 69,791 67,362 67,362 66,924' 66,281' 65,530 64,557 15 Commercial 86,741 68,235 60,704 60,704 59,253' 56,872' 55,019 54,048 16 Farm 388 324 305 305 297 299 291 286 17 Life insurance companies 265,258 246,702 229,061 229,061 223,999 220,785 217,269 213,479 18 One- to four-family 11,547 11,441 9,458 9,458 9,245 9,107 8,956 8,794 19 Multifamily 29,562 27,770 25,814 25,814 25,232 24,855 24,442 24,002 20 Commercial 214,105 198,269 184,305 184,305 180,152 177,463 174,514 171,368 21 Farm 10,044 9,222 9,484 9,484 9,370 9,360 9,357 9,315 22 Federal and related agencies 266,146 286,263 317,486 317,486 323,464 327,690 334,359 335,228 23 Government National Mortgage Association 19 30 22 22 20 12 12 6 24 One- to four-family 19 30 15 15 13 12 12 6 25 Multifamily 0 0 7 7 7 0 0 0 26 Farmers Home Administration4 41,713 41,695 41,386 41,386 41,209 41,370 41,587 41,781 27 One- to four-family 18,496 16,912 15,303 15,303 14,870 14,459 14,084 13,826 28 Multifamily 10,141 10,575 10,940 10,940 11,037 11,147 11,243 11,319 29 Commercial 4,905 5,158 5,406 5,406 5,399 5,526 5,608 5,670 30 Farm 8,171 9,050 9,739 9,739 9,903 10,239 10,652 10,966 31 Federal Housing and Veterans' Administrations 10,733 12,581 12,215 12,215 11,344 11,169 10,533 10,964 32 One- to four-family 4,036 5,153 5,364 5,364 4,738 4,826 4,321 4,753 33 Multifamily 6,697 7,428 6,851 6,851 6,606 6,343 6,212 6,211 34 Resolution Trust Corporation 45,822 32,045 17,284 17,284 14,241 13,908 15,403 10,428 35 One- to four-family 14,535 12,960 7,203 7,203 6,308 6,045 6,998 5,200 36 Multifamily 15,018 9,621 5,327 5,327 4,208 4,230 4,569 2,859 37 Commercial 16,269 9,464 4,754 4,754 3,726 3,633 3,836 2,369 38 Farm 0 0 0 0 0 0 0 0 39 Federal National Mortgage Association 112,283 137,584 166,642 166,642 172,343 175,377 177,200 178,059 40 One- to four-family 100,387 124,016 151,310 151,310 156,576 159,437 161,255 162,160 41 Multifamily 11,896 13,568 15,332 15,332 15,767 15,940 15,945 15,899 42 Federal Land Banks 28,767 28,664 28,460 28,460 28,181 28,475 28,538 28,565 43 One- to four-family 1,693 1,687 1,675 1,675 1,658 1,675 1,679 1,681 44 Farm 27,074 26,977 26,785 26,785 26,523 26,800 26,859 26,885 45 Federal Home Loan Mortgage Corporation 26,809 33,665 51,476 51,476 56,127 57,379 61,087 65,424 46 One- to four-family 24,125 31,032 48,929 48,929 53,571 54,799 58,432 62,594 47 Multifamily 2,684 2,633 2,547 2,547 2,556 2,580 2,655 2,830 48 Mortgage pools or trusts5 1,250,666 1,425,546 1,550,818 1,550,818 1,604,449 1,643,627 1,668,496 1,683,946 49 Government National Mortgage Association 425,295 419,516 414,066 414,066 423,446 435,709 444,976 450,934 50 One- to four-family 415,767 410,675 404,864 404,864 414,194 426,363 435,511 441,198 51 Multifamily 9,528 8,841 9,202 9,202 9,251 9,346 9,465 9,736 52 Federal Home Loan Mortgage Corporation 359,163 407,514 443,029 443,029 459,949 470,183 469,062 467,071 53 One- to four-family 351,906 401,525 438,494 438,494 455,779 466,361 465,614 463,945 54 Multifamily 7,257 5,989 4,535 4,535 4,170 3,822 3,448 3,126 55 Federal National Mortgage Association 371,984 444,979 495,525 495,525 507,376 514,855 523,512 530,343 56 One- to four-family 362,667 435,979 486,804 486,804 498,489 505,730 514,375 520,763 57 Multifamily 9,317 9,000 8,721 8,721 8,887 9,125 9,137 9,580 58 Fanners Home Administration4 47 38 28 28 26 22 20 19 59 One- to four-family 11 8 5 5 5 4 4 3 60 Multifamily 0 0 0 0 0 0 0 0 61 Commercial 19 17 13 13 12 10 9 9 62 Farm 17 13 10 10 9 8 7 7 63 Private mortgage conduits 94,177 153,499 198,171 198,171 213,653 222,858 230,926 235,579 64 One- to four-family 84,000 132,000 164,000 164,000 177,000 179,500 182,300 183,600 65 Multifamily 3,698 6,305 8,701 8,701 9,202 11,514 13,891 14,850 66 Commercial 6,479 15,194 25,469 25,469 27,451 31,844 34,735 37,129 67 Farm 0 0 0 0 0 0 0 0 68 Individuals and others6 562,616 575,237 579,341 579,341 567,963' 565,473' 572,092 576,465 69 One- to four-family 370,157' 382,572 387,334 387,334 376,728' 374,612' 379,656 384,001 70 Multifamily 83,937' 85,871 86,516 86,516 86,700 87,014 87,638 87,893 71 Commercial 93,541' 91,524 91,482 91,482 90,621 90,617 92,084 92,096 72 14,981' 15,270 14,009 14,009 13,915' 13,229' 12,714 12,474 1. Multifamily debt refers to loans on structures of five or more units. 6. Other holders include mortgage companies, real estate investment trusts, state and 2. Includes loans held by nondeposit trust companies but not loans held by bank trust local credit agencies, state and local retirement funds, noninsured pension funds, credit departments. unions, and finance companies. 3. Includes savings banks and savings and loan associations. SOURCES. Based on data from various institutional and government sources. Separation 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated of nonfarm mortgage debt by type of property, if not reported directly, and interpolations from FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of and extrapolations, when required for some quarters, are estimated in part by the Federal accounting changes by the Fanners Home Administration. Reserve. Line 64 from Inside Mortgage Securities. 5. Outstanding principal balances of mortgage-backed securities insured or guaranteed by the agency indicated. 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 1994 1995 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999922 11999933 11999944rr Aug. Sept. Oct. Nov/ Dec/ Jan. Seasonally adjusted 1 Total 731,098 794,300 911,311 869,628 879,961 891,603 904,757 911,311 918,956 2 Automobile 257,678 282,036 324,519 309,721 315,162 318,036 323,447 324,519 324,230 3 Revolving 257,304 287,875 337,694 321,365 322,823 327,707 334,843 337,694 342,406 4 Other 216,117 224,389 249,098 238,542 241,976 245,860 246,467 249,098 252,319 Not seasonally adjusted 5 Total 747,690 812,782 932,890 868,049 880,609 891,442 906,436 932,890 927,933 By major holder 6 Commercial banks 330,088 368,549 434,790 404,438 410,312 414,833 421,790 434,790 430,241 7 Finance companies 118,279 116,453 134,830 125,197 130,306 131,562 132,874 134,830 136,717 8 Credit unions 91,694 101,634 120,158 113,122 114,699 116,325 117,984 120,158 120,798 9 Savings institutions 37,049 37,855 38,750 37,975 37,943 38,122 38,275 38,750 39,250 10 Nonfinancial business 49,184 57,637 64,944 56,496 55,967 56,020 58,247 64,944 61,382 11 Pools of securitized assets 121,396 130,654 139,418 130,821 131,382 134,580 137,266 139,418 139,545 By major type of credit1 12 Automobile 258,226 282,825 325,536 310,925 316,778 320,182 323,744 325,536 324,201 13 Commercial banks 109,623 123,358 148,117 142,452 144,260 146,456 148,004 148,117 146,622 14 Finance companies 57,259 56,057 61,609 58,589 60,522 60,750 61,372 61,609 62,326 15 Pools of securitized assets 33,888 39,490 34,515 34,584 35,149 34,394 34,301 34,515 32,869 16 Revolving 271,368 303,444 355,859 319,003 321,205 325,872 336,575 355,859 349,242 17 Commercial banks 132,966 149,527 180,530 161,417 164,724 165,561 171,318 180,530 175,828 18 Nonfinancial business 43,974 52,113 58,870 50,873 50,314 50,332 52,475 58,870 55,405 19 Pools of securitized assets 74,931 79,887 93,545 85,644 85,051 88,762 91,469 93,545 95,015 20 Other 218,096 226,513 251,495 238,121 242,626 245,388 246,117 251,495 254,490 21 Commercial banks 87,499 95,664 106,143 100,569 101,328 102,816 102,468 106,143 107,791 22 Finance companies 61,020 60,396 73,221 66,608 69,784 70,812 71,502 73,221 74,391 23 Nonfinancial business 5,210 5,524 6,074 5,623 5,653 5,688 5,772 6,074 5,977 24 Pools of securitized assets 12,577 11,277 11,358 10,593 11,182 11,424 11,496 11,358 11,661 1. The Board's series on amounts of credit covers most short- and intermediate-term 2. Outstanding balances of pools upon which securities have been issued; these credit extended to individuals that is scheduled to be repaid (or has the option of balances are no longer carried on the balance sheets of the loan originator. repayment) in two or more installments. 3. Totals include estimates for certain holders for which only consumer credit totals are Data in this table also appear in the Board's G. 19 (421) monthly statistical release. For available. ordering address, see inside front cover. 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent per year except as noted 1994 1995 IItteemm 11999922 11999933 11999944 July Aug. Sept. Oct. Nov. Dec. Jan. INTEREST RATES Commercial banks1 1 48-month new car 9.29 8.09 8.12 n.a. 8.41 n.a. n.a. 8.75 n.a. n.a. 2 24-month personal 14.04 13.47 13.19 n.a. 13.33 n.a. n.a. 13.59 n.a. n.a. Credit card plan 3 All accounts n.a. n.a. 15.91 n.a. n.a. n.a. n.a. 15.91 n.a. n.a. 4 Accounts assessed interest n.a. n.a. 15.74 n.a. n.a. n.a. n.a. 15.74 n.a. n.a. Auto finance companies 9.93 9.48 99..7799 1100..1177 10.32 10.13 10.39 1100..5533 1100..7722 1111..3355 6 Used car 13.80 12.80 13.50 13.90 13.90 14.00 14.00 14.20 14.50 14.60 OTHER TERMS3 Maturity (months) 54.0 54.5 54.0 5533..99 54.2 54.3 54.9 54.6 53.9 53.9 8 Used car 48.0 49.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 52.0 Loan-to-value ratio 9 New car 89 91 92 93 93 93 92 93 92 92 10 Used car 97 98 99 100 100 100 100 100 100 99 Amount financed (dollars) 13,584 14,332 15,375 15,319 15,283 15,419 15,827 15,971 16,187 16,068 12 Used car 9,119 9,875 10,709 10,735 10,755 10,906 10,554 11,202 11,309 11,185 1. The Board's series on amounts of credit covers most short- and intermediate-term 2. Data are available for only the second month of each quarter, credit extended to individuals that is scheduled to be repaid (or has the option of 3. At auto finance companies, Digitized forre pFaRymAenSt)E inR tw o 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. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Financial Statistics • May 1995 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1993 1994 11998899 11999900 11999911 Q2 Q3 Q4 Q1 Q2r Q3r Q4 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 729.0 635.6 475.8 536.1 628.1 740.5 613.3 677.2 657.1R 550.6 620.8 649.5 By sector and instrument 2 US. government 146.4 246.9 278.2 304.0 256.1 336.4 173.4 274.2 210.5r 122.9 135.0 155.0 3 Treasury securities 144.7 238.7 292.0 303.8 248.3 332.3 157.2 266.5 211.8 118.2 130.7 162.1 4 Budget agency issues and mortgages 1.6 8.2 -13.8 .2 7.8 4.1 16.2r 7.7 -1.3 4.7 4.3 -7.1 5 Private 582.7 388.7 197.5 232.1 372.0 404.1 439.9 403.0 446.6r 427.7 485.8 494.5 By instrument 6 Tax-exempt obligations 69.8 48.7 68.7 31.1 78.1 130.3 66.2 27.4 22.6 -9.8 -41.2 -32.1 7 Corporate bonds 73.8 47.1 78.8 67.5 75.2 75.7 72.0 67.4 35.5r 35.8 14.0 2.4 8 Mortgages 281.2 199.5 161.4 123.9 155.7r 152.2 222.2r 148.5 mo1 188.6 239.8 185.0 9 Home mortgages 224.5 185.6 163.8 179.5 183.9 193.5 236.5 184.5 191.2r 172.3 224.8 179.5 10 Multifamily residential 11.5 4.8 -3.1 -11.2 -6.1 -11.4 -4.9 -2.6 -5.1r 6.1 5.5 .4 11 Commercial 47.8 9.3 .4 -45.5 -22.5 -30.9 -9.9 -33.6 -23.4 7.8 7.8 4.3 12 Farm -2.5 -.3 .4 1.1 .5 1.0 .4 .2 .3r 2.3 1.7 .8 13 Consumer credit 45.8 16.0 -15.0 5.5 62.3 41.6 76.2 111.3 72.7 121.9 125.9 149.4 14 Bank loans n.e.c 27.3 .4 -40.9 -13.8 5.0 -.2 7.8 28.5 68.2r 57.9 89.4 94.8 15 Commercial paper 21.4 9.7 -18.4 8.6 10.0 33.2 17.2 3.8 8.0 16.4 33.8 27.2 16 Other loans 63.3 67.4 -37.1 9.2 — 14.4r -28.6 -21.7 16.2 76.5 16.9 24.1 67.8 By borrowing sector 17 Household 281.6 218.9 170.9 217.7 284.5 264.1 368.5 337.7 304.3r 316.0 387.7 390.5 18 Nonfinancial business 233.1 123.7 -35.9 -2.0 21.9 26.7 24.1 48.2 135.8r 139.9 146.8 150.7 19 Farm .6 2.3 2.1 1.0 2.0 2.7 4.1 3.6 2.6r 8.1 1.7 -3.2 20 Nonfarm noncorporate 40.3 10.1 -28.5 -43.9 -26.0 -33.4 -26.2 -15.6 8.4 18.5 28.9 23.2 21 Corporate 192.1 111.3 -9.6 40.9 45.8 57.4 46.3 60.2 124.7r 113.2 116.2 130.7 22 State and local government 68.0 46.0 62.6 16.4 65.7 113.2 47.3 17.1 6.5r -28.2 -48.7 -46.6 23 Foreign net borrowing in United States 10.2 23.9 13.9 21.3 46.9 42.8 83.1 22.9 -66.3 -10.1 4.1 23.9 24 Bonds 4.9 21.4 14.1 14.4 59.4 45.3 84.5 41.4 29.0 9.4 4.9 25.2 25 Bank loans n.e.c -.1 -2.9 3.1 2.3 .7 6.6 1.0 -6.3 6.0 -4.5 4.7 -.5 26 Commercial paper 13.1 12.3 6.4 5.2 -9.0 -.6 -1.6 -12.0 -101.8 -5.2 -8.1 5.9 27 U.S. government and other loans -7.6 -7.0 -9.8 -.6 -4.2 -8.4 -.8 -.1 .5 -9.8 2.8 -6.6 28 Total domestic plus foreign 739.2 659.4 489.6 557.4 675.0 783.3 696.4 700.2 590.8R 540.5 624.9 673.4 Financial sectors 29 Total net borrowing by financial sectors 225.1 202.9 152.6 237.1 286.1 175.5 438.9 349.8 488.9R 343.5 367.7 479.6 By instrument 30 US. government-related 149.5 167.4 145.7 155.8 161.2 56.6 287.3 131.3 320.8 245.2 224.9 281.7 31 Government-sponsored enterprises securities 25.2 17.1 9.2 40.3 80.6 68.8 167.8 53.4 160.0 146.6 152.1 250.2 32 Mortgage pool securities 124.3 150.3 136.6 115.6 80.6 -12.2 119.5 77.9 180.0 98.6 72.8 31.5 Si Loans from U.S. government .0 -.1 .0 .0 .0 .0 .0 .0 -19.2 .0 .0 .0 34 Private 75.7 35.5 6.8 81.3 125.0 118.9 151.6 218.5 168.2r 98.3 142.8 197.9 35 Corporate bonds 41.5 46.3 67.6 78.5 118.3 92.4 143.4 138.3 154.5r 91.9 84.3 82.8 36 Mortgages .3 .6 .5 .6 3.6 1.4 6.2 5.5 .2 .6 .1 -1.5 37 Bank loans n.e.c 13.5 4.7 8.8 2.2 -14.0 12.8 -16.1 -18.0 - 12.3r -30.1 -14.6 -6.2 38 Open market paper 31.3 8.6 -32.0 -.7 -6.2 -16.2 -9.4 76.0 36.6 3.6 42.3 84.0 39 Loans from Federal Home Loan Banks -11.0 -24.7 -38.0 .8 23.3 28.4 27.4 16.8 -10.8 32.3 30.7 38.8 By borrowing sector 40 Government-sponsored enterprises 25.2 17.0 9.1 40.2 80.6 68.8 167.8 53.4 140.8 146.6 152.1 250.2 41 Federally related mortgage pools 124.3 150.3 136.6 115.6 80.6 -12.2 119.5 77.9 180.0 98.6 72.8 31.5 42 75.7 35.5 6.8 81.3 125.0 118.9 151.6 218.5 168.2' 98.3 142.8 197.9 43 Commercial banks -1.4 -.7 -11.7 8.8 5.6 11.3 6.5 1.2 2.0 12.4 22.8 2.9 44 Bank holding companies 6.2 -27.7 -2.5 2.3 8.8 1.3 .5 12.2 3.5 10.1 11.5 8.5 45 Funding corporations 12.5 15.4 -6.5 13.2 2.9 -1.6 7.9 36.7 48.2r -17.9 46.5 26.3 46 Savings institutions -15.1 -30.2 -44.5 -6.7 11.1 12.6 13.5 8.8 -5.6 5.8 14.8 36.1 47 Credit unions .0 .0 .0 .0 .2 .3 .3 .1 .1 .2 .5 .2 48 Life insurance companies .0 .0 .0 .0 .2 .6 -.1 .4 .0 .0 .0 1.3 49 Finance companies 27.4 24.0 18.6 -3.6 .2 -13.6 17.5 16.3 63.3 67.0 16.9 54.0 50 Mortgage companies 10.1 .0 -2.4 8.0 -1.0 32.4 -.8 -10.4 -21.6r -18.2 -7.0 -5.0 51 Real estate investment trusts (REITs) 1.4 .8 1.2 .3 3.5 1.3 6.0 6.2 1.2 2.2 2.3 1.1 52 Issuers of asset-backed securities (ABSs) 28.3 52.3 51.0 56.3 81.5 60.5 85.8 117.6 86.9r 36.5 42.2 53.1 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 1993 1994 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 Q2 Q3 Q4 Q1 Q2' Q3' Q4 All sectors S3 Total net borrowing, all sectors 964.4 862.3 642.2 794.5 961.2 958.8 1,135.3 1,050.0 l,079.7r 884.0 992.6 1,153.0 54 US. government securities 295.8 414.4 424.0 459.8 417.3 393.0 460.7 405.5 550.5 368.1 359.9 436.7 55 Tax-exempt securities 69.8 48.7 68.7 31.1 78.1 130.3 66.2 27.4 22.6 -9.8 -41.2 -32.1 56 Corporate and foreign bonds 120.2 114.7 160.5 160.4 252.9 213.4 299.9 247.1 219.0' 137.0 103.1 110.3 57 Mortgages 281.6 200.1 161.9 124.5 159.2 153.5 228.3 154.0 163.2' 189.1 239.9 183.5 58 Consumer credit 45.8 16.0 -15.0 5.5 62.3 41.6 76.2 111.3 72.7 121.9 125.9 149.4 59 Bank loans n.e.c 40.7 2.2 -29.1 -9.4 -8.3 19.2 -7.3 4.2 61.9 23.3 79.5 88.1 60 Open market paper 65.9 30.7 -44.0 13.1 -5.1 16.4 6.3 67.7 -57.2 14.8 68.0 117.1 61 Other loans 44.7 35.6 -84.9 9.5 4.7 -8.7 4.9 32.9 47.0 39.4 57.6 100.0 Funds raised through mutual funds and corporate equities 62 Total net share issues -60.8 19.7 215.4 296.0 437.1' 471.9 498.0 434.5r 312Jr 236.4 126.7 -36.0 63 Mutual funds 37.2 65.3 151.5 211.9 317.C 358.0 348.9 292.0' 204.5' 167.0 129.3 12.3 64 Corporate equities -98.0 -45.6 64.0 84.1 120.1 113.9 149.1 142.4 107.8' 69.4 -2.6 -48.3 65 Nonfinancial corporations -124.2 -63.0 18.3 27.0 21.3 23.2 32.3 21.5 -9.6 -2.0 -50.0 -102.0 66 Financial corporations 9.0 10.0 15.1 26.4 38.2 38.6 38.2 40.9 47.9' 24.8 23.7 17.9 67 Foreign shares purchased in United States 17.2 7.4 30.7 30.7 60.6 52.1 78.6 80.0 69.4 46.7 23.7 35.7 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 • May 1995 1.58 SUMMARY OF FINANCIAL TRANSACTIONS' Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1993 1994 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11998899 11999900 11999911 11999922 11999933 Q2 Q3 Q4 Q1 Q2' Q3' Q4 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 964.4 862.3 642.2 794.5 961.2 958.8 1,135.3 1,050.0 1,079.7' 884.0 992.6 1,153.0 2 Private domestic nonfinancial sectors 137.0 190.1 -7.5 72.0 4.8r -4.6' -39.5 86.3' 391.3' 340.1 152.0 302.5 3 Households 94.7 157.2 -39.6 70.7 — 11.5' -76.5' -69.7 174.7' 394.3' 408.3 246.6 464.1 4 Nonfarm noncorporate business -.8 -1.7 -3.7 -1.1 -3.2 -3.2 -3.3 -3.5 -3.6 -1.8 -1.9 -.5 5 Nonfinancial corporate business 13.7 -3.7 6.7 29.2 18.0 17.3 41.2 16.0 22.3' 16.9 21.8 11.7 6 State and local governments 29.3 38.3 29.2 -26.8 1.5 57.7 -7.7 -101.0 -21.6 -83.2 -114.4 -172.7 / U.S. government -3.1 33.7 10.5 -11.9 -18.4 -27.1 -15.4 -7.9 -40.8 -11.1 -.9 -25.7 8 Foreign 86.6 85.5 26.6 100.5 126.0 93.4 123.5 221.2 127.6' 49.4 119.6 219.6 9 Financial sectors 743.8 553.0 612.5 633.9 848.8' 897.1' 1,066.6 750.4' 601.6' 505.5 721.9 656.6 10 Government sponsored enterprises -4.1 13.9 15.2 69.0 90.2 128.0 144.8 71.2 92.4 101.1 125.6 156.5 11 Federally related mortgage pools 124.3 150.3 136.6 115.6 80.6 -12.2 119.5 77.9 180.0 98.6 72.8 31.5 12 Monetary authority -7.3 8.1 31.1 27.9 36.2 35.7 28.2 38.5 48.8 17.9 24.0 35.4 13 Commercial banking 177.2 125.1 80.8 95.3 142.2 133.4 146.7 188.1 184.7 109.1 191.3 163.3 14 U.S. commercial banks 146.1 94.9 35.7 69.5 149.6 137.4 160.3 197.3 120.6 128.4 164.6 178.7 15 Foreign banking offices 26.7 28.4 48.5 16.5 -9.8 -14.3 -16.9 -6.5 59.0 -21.5 22.1 -15.7 16 Bank holding companies 2.8 -2.8 -1.5 5.6 .0 7.9 1.2 -4.8 3.1 .2 2.7 -1.5 17 Banks in U.S. affiliated areas 1.6 4.5 -1.9 3.7 2.4 2.4 2.2 2.1 2.1 1.9 1.9 1.8 18 Funding corporations 8.0 16.1 15.8 23.5 18.1 1.1 32.4 42.6 17.8 35.3 21.4 -24.1 19 Thrift institutions -90.0 -154.0 -123.5 -61.3 -1.7' 16.1' 21.0 -13.3 13.6' 42.6 52.0 34.1 20 Life insurance companies 101.8 94.4 83.2 79.1 105.1 109.4 111.8 86.4 53.7 6.1 83.4 78.3 21 Other insurance companies 29.7 26.5 32.6 12.8 33.3 36.0 37.6 32.1 27.9 20.8 16.0 19.7 22 Private pension funds 81.1 17.2 85.7 37.3 40.2 11.1 91.9 -60.1 -97.7 -30.7 -17.5 -25.5 23 State and local government retirement hinds 46.1 34.9 46.0 34.4 25.5 47.5 27.4 36.9 30.3' 51.2 41.5 52.1 24 Finance companies 32.0 29.0 -12.7 1.7 -9.0 -34.7 9.4 22.6 72.1 49.8 58.9 86.4 25 Mortgage companies 20.1 .0 11.2 .1 .0 65.1 -1.6 -13.3 -43.5' -36.3 -14.0 -10.0 26 Mutual funds 23.8 41.4 90.3 123.7 164.0 194.4 174.6 138.4 IS.C 11.3 -18.7 -66.5 27 Closed-end funds 6.6 .2 14.7 17.4 10.2 10.5 5.9 7.7 8.3' 3.2 1.4 1.0 28 Money market funds 67.1 80.9 30.1 1.3 14.7' 33.3 25.3 57.3' -44.5' 33.7 54.4 78.4 29 Real estate investment trusts (REITs) .5 -.7 -.7 1.1 .6 .8 1.0 .2 .7 .7 .7 .7 30 Brokers and dealers 80.2 2.8 17.5 -6.9 9.2 52.5 -7.8 -82.8 -56.1 -52.6 -11.8 -7.6 31 Asset-backed securities issuers (ABSs) 27.1 51.1 48.9 53.8 80.1 59.4 88.6 111.1 86.0' 38.7 37.4 45.1 32 Bank personal trusts 19.7 15.9 10.0 8.0 9.5 10.0 9.9 8.9 9.3 5.2 2.9 7.7 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Net flows through credit markets 964.4 862.3 642.2 794.5 961.2 958.8 1,1353 1,050.0 1,079.7' 884.0 992.6 1,153.0 Other financial sources 34 Official foreign exchange 24.8 2.0 -5.9 -1.6 .8 -4.0 1.7 2.2 -.2 -14.6 .2 -7.8 35 Special drawing rights certificates 3.5 1.5 .0 -2.0 .0 .0 .0 .0 .0 .0 .0 .0 36 Treasury currency .6 1.0 .0 .2 .4 .4 .4 .7 .7 .6 .8 .7 37 Life insurance reserves 28.8 25.7 25.7 27.3 35.2 35.3 36.6' 35.5' 20.0 8.1 23.8 28.7 38 Pension fund reserves 321.2 165.1 360.3 249.7 309.2' 313.7' 349.9' 251.6' -8.8' 64.3 214.4 185.6 39 Interbank claims -16.2 35.4 -3.9 61.7 44.7' 128.9' -5.0' -13.7' 150.9' 184.9 -26.6 30.8 40 Checkable deposits and currency 6.4 43.3 86.4 113.8 117.3 214.4 73.1 81.9 173.1 -66.1 -87.4 -60.6 41 Small time and savings deposits 98.7 63.7 1.5 -57.2 -70.3 -67.8 -68.1 -36.6 2.5 -62.4 -56.4 -42.9 42 Large time deposits 16.9 -66.1 -58.5 -73.2 -23.5 -26.8 -59.5 13.7 -39.6 -4.4 83.8 42.9 43 Money market fund shares 90.1 70.3 41.2 3.9 15.3' 61.8 .6 45.7' -33.5' 67.8 50.3 100.8 44 Security repurchase agreements 77.8 -24.2 -16.5 35.5 65.5 37.9 67.8 -14.4 14.3' 175.9 76.9 49.3 45 Foreign deposits 35.7 38.2 -16.7 -7.2 -LL.O1 -17.1 -50.7 35.7' 16.4' 14.6 -8.4 29.6 46 Mutual fund shares 37.2 65.3 151.5 211.9 SN.O1 358.0 348.9 292.0' 204.5' 167.0 129.3 12.3 47 Corporate equities -98.0 -45.6 64.0 84.1 120.1 113.9 149.1 142.4 107.8' 69.4 -2.6 -48.3 48 Security credit 15.6 3.5 51.4 4.2 61.9 40.0 76.6 86.5 29.7 -17.5 -61.7 37.3 49 Trade debt 68.2 37.0 3.6 41.5 49.0 51.0 49.6 51.9 35.6' 87.2 92.2 87.4 50 Taxes payable 2.4 -4.8 -6.2 8.5 4.6 7.3 -1.8 4.9 14.2' -11.6 2.7 3.9 51 Noncorporate proprietors' equity -25.8 -28.3 -3.3 18.4 -10.2 -14.9' 6.3' -25.6' -50.3' -44.6 -40.7 -43.8 52 Investment in bank personal trusts 19.6 29.7 16.1 -7.1 1.6 -7.2 .1 17.6 15.4 -15.5 6.7 11.9 53 Miscellaneous 313.8 135.7 197.2 257.6 289.7' 402.1' 221.4' 342.0' 359.6' 272.3 289.2 118.9 54 Total financial sources 1,985.7 1,410.6 1,530.2 1,764.5 2,278.5' 2,585.6' 2,332.5' 2364.0' 2,092.0r 1,759.5 1,679.0 1,689.9 Floats not included in assets (—) 55 U.S. government checkable deposits 8.4 3.3 -13.1 .7 -1.5 2.9 2.1 -15.5 -2.4 -1.4 15.2 -30.3 56 Other checkable deposits -2.2 8.5 4.5 1.6 -1.3 8.3 -5.2 -6.2 .6 -1.1 -6.2 -4.3 57 Trade credit 7.0 9.1 9.7 4.1 16.5 25.7 22.2 12.5 -25.7' 5.6 14.1 2.3 Liabilities not identified as assets (-) 58 Treasury currency -.2 .2 -.6 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.2 59 Interbank claims -4.4 1.6 26.2 -4.9 4.2 .5 -10.4 24.0 -29.1 5.3 11.3 1.7 60 Security repurchase agreements 32.4 -24.0 6.2 27.9 82.2' 60.8 66.6 21.6' 4.4' 117.3 62.1 -17.1 61 Taxes payable 2.7 .1 1.3 14.0 1.0 18.2 1.2 -8.6 -.3' 4.2 -4.6 -3.8 62 Miscellaneous -55.6 -35.4 -45.3 -46.0 -41.9' -98.0' -20.9' 48.2' -66.0' -171.5 147.5 61.0 63 Total identified to sectors as assets 1,997.6 1,447.2 1,541.2 1,767.2 2,219.5' 2,567.4' 2,277.1' 2,288.2' 2,210.9' 1,8013 1,439.9 1,680.5 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, 2. Excludes corporate equities and mutual fund shares, 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 1993 1994 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 Q2 Q3 Q4 Ql Q2r Q3r Q4 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 10,712.6 11,181.5 11,720.7 12363.1 12,008.9 12,1553 12363.1 1122,,448877..00rr 12,633.0 12,780.4 12,982.5 By sector and instrument 2 US. government 2,498.1 2,776.4 3,080.3 3,336.5 3,201.2 3,247.3 3,336.5 3,387.7 3,395.4 3,432.6 3,492.3 Treasury securities 2,465.8 2,757.8 3,061.6 3,309.9 3,180.6 3,222.6 3,309.9 3,361.4 3,368.0 3,404.1 3,465.6 4 Budget agency issues and mortgages 32.4 18.6 18.8 26.6 20.6 24.7 26.6 26.3 27.4 28.5 26.7 5 Private 8,214.5 8,405.1 8,640.4 9,026.6 8,807.7 8,908.1 9,026.6 9,099.3r 9,237.5 9,347.7 9,490.2 By instrument 6 Tax-exempt obligations 1,039.9 1,108.6 1,139.7 1,217.8 1,202.2 1,210.0 1,217.8 1,222.3 1,229.5 1,209.9 1,202.7 7 Corporate bonds 1,008.2 1,086.9 1,154.4 1,229.6 1,194.8 1,212.8 1,229.6 l,238.5r 1,247.5 1,251.0 1,251.6 8 Mortgages 3,758.5 3,920.0 4,043.9 4,206.5 4,109.9 4,166.6 4,206.5 4,233.3r 4,290.9 4,351.9 4,400.6 9 Home mortgages 2,616.3 2,780.0 2,959.6 3,147.3 3,038.1 3,098.3 3,147.3 3,181.lr 3,234.7 3,291.9 3,339.2 10 Multifamily residential 307.9 304.8 293.6 287.5 289.4 288.2 287.5 286.3r 287.8 289.1 289.2 11 Commercial 755.4 755.8 710.3 690.6 701.4 699.0 690.6 684.7 686.6 688.6 689.7 17, Farm 78.9 79.3 80.4 81.2 81.0 81.1 81.2 81.3r 81.9 82.3 82.5 n Consumer credit 812.4 797.4 803.0 866.5 800.2 824.3 866.5 863.6 895.3 931.8 984.0 14 Bank loans n.e.c 726.9 686.0 672.1 677.2 666.3 665.6 677.2 687.3r 707.4 726.4 754.7 15 Commercial paper 116.9 98.5 107.1 117.8 124.0 123.2 117.8 129.9 135.7 138.7 139.2 16 Other loans 751.8 707.8 720.2 711.1 710.2 705.5 711.1 724.3 731.2 738.1 757.4 By borrowing sector 17 Household 3,614.3 3,784.7 4,002.3 4,292.0 4,093.0 4,190.9 4,292.0 4,331.7r 4,425.0 4,527.1 4,641.3 18 Nonfinancial business 3,751.7 3,709.3 3,710.5 3,741.5 3,729.8 3,729.1 3,741.5 3,774.0r 3,816.3 3,845.8 3,885.0 19 Farm 135.4 135.0 136.0 138.3 136.7 138.7 138.3 136.6' 141.3 142.8 140.6 70 Nonfarm noncorporate 1,147.0 1,116.4 1,074.1 1,049.1 1,059.4 1,052.2 1,049.1 1,050.4 1,055.6 1,062.2 1,068.8 71 Corporate 2,469.2 2,458.0 2,500.4 2,554.1 2,533.7 2,538.3 2,554.1 2,586.9r 2,619.3 2,640.9 2,675.6 22 State and local government 848.6 911.1 927.5 993.2 984.9 988.0 993.2 993.6r 996.3 974.8 963.9 23 Foreign credit market debt held in United States 285.0 298.8 310.9 357.8 332.0 3513 357.8 340.3 339.2 338.8 345.8 74 Bonds 115.4 129.5 143.9 203.4 171.9 193.0 203.4 210.6 212.9 214.2 220.4 75 Bank loans n.e.c 18.5 21.6 23.9 24.6 25.9 26.2 24.6 26.2 25.1 26.3 26.1 76 Commercial paper 75.3 81.8 77.7 68.7 72.1 71.7 68.7 43.3 42.0 39.9 41.4 27 US. government and other loans 75.7 65.9 65.3 61.1 62.0 60.3 61.1 60.3 59.2 58.4 57.8 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 10,997.6 11,480-3 12,031.6 12,720.8 12340.9 12,506.6 12,720.8 12,827.3r 12,972.2 13,119.2 133283 Financial sectors 79 Tbtal credit market debt owed by financial sectors 2,599.5 2,752.1 3,004.7 3,2973 3,096.6 3,204.7 3,2973 3,4153r 3307.6 3397.7 3,722.4 By instrument 30 U.S. government-related 1,418.4 1,564.2 1,720.0 1,881.1 1,774.5 1,845.2 1,881.1 1,954.5 2,021.1 2,075.9 2,149.3 31 Government-sponsored enterprises securities 393.7 402.9 443.1 523.7 468.4 510.3 523.7 563.7 600.3 638.3 700.9 32 Mortgage pool securities 1,019.9 1,156.5 1,272.0 1,352.6 1,301.3 1,330.1 1,352.6 1,390.8 1,420.8 1,437.6 1,448.4 33 Loans from U.S. government 4.9 4.8 4.8 4.8 4.8 4.8 4.8 .0 .0 .0 .0 34 Private 1,181.1 1,187.9 1,284.8 1,416.1 1,322.2 1,359.5 1,416.1 l,460.9r 1,486.6 1,521.8 1,573.2 35 CCoorrppoorraattee bboonnddss 572.4 640.0 724.8 844.1 774.8 810.5 844.1 880.8r 904.5 925.4 944.9 36 MMoorrttggaaggeess 4.3 4.8 5.4 8.9 6.0 7.6 8.9 9.0 9.1 9.2 8.8 37 Bank loans n.e.c 69.6 78.4 80.5 66.5 73.3 69.2 66.5 61.8r 54.1 50.5 50.7 38 Open market paper 417.7 385.7 394.3 393.5 375.9 373.2 393.5 408.8 410.3 420.5 442.8 39 Loans from Federal Home Loan Banks 117.1 79.1 79.9 103.1 92.1 98.9 103.1 100.4 108.5 116.2 125.9 By borrowing sector 40 Government-sponsored enterprises 398.5 407.7 447.9 528.5 473.2 515.1 528.5 563.7 600.3 638.3 770000..99 41 Federally relatedm ortgage pools 1,019.9 1,156.5 1,272.0 1,352.6 1,301.3 1,330.1 1,352.6 1,390.8 1,420.8 1,437.6 1,448.4 47 Private financial sectors 1,181.1 1,187.9 1,284.8 1,416.1 1,322.2 1,359.5 1,416.1 l,460.9r 1,486.6 1,521.8 1,573.2 43 Commercial banks 76.7 65.0 73.8 79.5 76.6 77.9 79.5 78.4 82.1 87.5 89.5 44 Bank holding companies 114.8 112.3 114.6 123.4 120.2 120.3 123.4 124.2 126.8 129.6 131.8 45 Funding corporations 145.7 139.1 161.6 169.9 166.5 166.3 169.9 190.6r 191.1 200.1 200.9 46 Savings institutions 139.1 94.6 87.8 99.0 93.4 96.8 99.0 97.6 99.0 102.7 111.7 47 Credit unions .0 .0 .0 .2 .1 .2 .2 .3 .3 .4 .5 48 Life insurance companies .0 .0 .0 .2 .2 .1 .2 .3 .3 .3 .6 49 Finance companies 374.4 393.0 389.4 390.5 373.8 380.0 390.5 401.9 414.2 420.9 440.8 50 Mortgage companies 24.6 22.2 30.2 29.2 32.0 31.8 29.2 23.8r 19.3 17.5 16.3 51 Real estate investment trusts (REITs) 12.4 13.6 13.9 17.4 14.4 15.8 17.4 17.7 18.3 18.8 19.1 52 Issuers of asset-backed securities (ABSs) 278.1 329.1 391.7 473.2 422.3 443.8 473.2 494.9r 504.0 514.5 527.8 All sectors 53 Total credit market debt, domestic and foreign 13,597.1 14,232.3 15,0363 16,018.1 15,437.5 15,7113 16,018.1 16,242.6r 16,479.8 16,716.9 17,050.7 54 U.S. government securities 3,911.7 4,335.7 4,795.5 5,212.8 4,970.9 5,087.7 5,212.8 5,342.2 5,416.5 5,508.6 5,641.6 55 Tax-exempt securities 1,039.9 1,108.6 1,139.7 1,217.8 1,202.2 1,210.0 1,217.8 1,222.3 1,229.5 1,209.9 1,202.7 56 CCoorrppoorraattee aanndd ffoorreeiiggnn bboonnddss 1,696.0 1,856.5 2,023.1 2,277.0 2,141.5 2,216.3 2,277.0 2,329.9r 2,364.9 2,390.5 2,416.9 57 MMoorrttggaaggeess 3,762.9 3,924.8 4,049.3 4,215.5 4,116.0 4,174.2 4,215.5 4,242.4r 4,300.1 4,361.1 4,409.4 58 Consumer credit 812.4 797.4 803.0 866.5 800.2 824.3 866.5 863.6 895.3 931.8 984.0 59 Bank loans n.e.c 815.0 785.9 776.6 768.4 765.5 761.0 768.4 775.4 786.6 803.2 831.6 60 Open market paper 609.9 565.9 579.0 580.0 572.0 568.2 580.0 582.0 587.9 599.2 623.5 61 Other loans 949.4 857.5 870.2 880.1 869.1 869.6 880.1 884.9 898.9 912.7 941.1 1. Data in this table also appear in the Board's Z.l (780) quarterly statistica rlelease, Digitized forta FblRes AL.S2 tEhrRou gh L.4. For ordering address, see inside front cover. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • May 1995 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1993 1994 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 Q2 Q3 Q4 Ql Q2' Q3r Q4 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 13,597.1 14,2323 15,0363 16,018.1 15,437.5 15,7113 16,018.1 16,242.6' 16,479.8 16,716.9 17,050.7 2 Private domestic nonfinancial sectors 2,260.8 2,240.2 2,318.0 2,338.9* 2,296.1' 2,284.8' 2,338.9' 2,432.9' 2,513.8 2,551.1 2,663.4 3 Households 1,499.3 1,446.5 1,523.1 l,525.9r 1,473.3' 1,459.6' 1,525.9' 1,631.1' 1,723.4 1,789.3 1,932.3 4 Nonfarm noncorporate business 47.8 44.1 42.9 39.7 41.4 40.6 39.7 38.8 38.4 37.9 37.7 5 Nonfinancial corporate business 189.6 196.2 225.4 248.1 227.3 234.7 248.1 243.8' 250.9 253.9 266.2 6 State and local governments 524.1 553.3 526.5 525.2r 554.2' 549.9' 525.2' 519.2' 501.1 470.0 427.2 7 U.S. government 239.0 246.9 235.0 216.6 223.1 218.8 216.6 206.3 204.0 203.3 197.0 8 Foreign 918.3 958.1 1,052.7 1,175.1 1,084.0 1,118.1 1,175.1 1,206.8 1,218.5 1,251.3 1,304.1 9 Financial sectors 10,179.0 10,787.2 11,430.6 12,287.5' 11,834.2' 12,089.6' 12,287.5' 12,396.5' 12,543.5 12,711.1 12,886.2 10 Government-sponsored enterprises 375.6 390.7 459.7 549.8 495.5 531.8 549.8 572.0 597.9 629.4 668.7 11 Federally related mortgage pools 1,019.9 1,156.5 1,272.0 1,352.6 1,301.3 1,330.1 1,352.6 1,390.8 1,420.8 1,437.6 1,448.4 12 Monetaiy authority 241.4 272.5 300.4 336.7 318.2 324.2 336.7 341.5 351.6 356.8 368.2 13 Commercial banking 2,772.5 2,853.3 2,948.6 3,090.8 2,998.8 3,036.4 3,090.8 3,120.2 3,156.2 3,204.2 3,252.9 14 US. commercial banks 2,466.7 2,502.5 2,571.9 2,721.5 2,628.5 2,670.2 2,721.5 2,743.8 2,780.3 2,822.4 2,869.6 15 Foreign banking offices 270.8 319.2 335.8 326.0 327.1 322.3 326.0 331.8 330.8 335.5 337.0 16 Bank holding companies 13.4 11.9 17.5 17.5 18.4 18.7 17.5 18.2 18.3 19.0 18.6 17 Banks in U.S. affiliated areas 21.6 19.7 23.4 25.8 24.8 25.3 25.8 26.4 26.8 27.3 27.8 18 Funding corporations 35.7 51.5 75.0 93.1 74.3 82.4 93.1 97.5 106.3 111.7 105.6 19 Thrift institutions 1,320.5 1,192.6 1,134.5 l,132.7r 1,130.0' 1,136.5' 1,132.7' 1,134.2' 1,146.1 1,160.1 1,168.3 20 Life insurance companies 1,116.5 1,199.6 1,278.8 1,383.9 1,343.9 1,372.1 1,383.9 1,404.2 1,409.1 1,430.3 1,439.3 21 Other insurance companies 344.0 376.6 389.4 422.7 405.3 414.6 422.7 429.6 434.8 438.8 443.8 22 Private pension funds 607.4 693.0 730.4 770.6 762.6 785.6 770.6 746.2 738.5 734.1 727.7 23 State and local government retirement funds 433.9 479.9 514.3 542.6 526.5 533.4 542.6 550.2' 563.0 573.3 586.4 24 Finance companies 497.6 484.9 486.6 482.8 473.7 474.0 482.8 494.5 511.3 524.1 549.6 25 Mortgage companies 49.2 60.3 60.5 60.4 64.1 63.8 60.4 49.5' 40.4 37.0 34.5 26 Mutual funds 360.2 450.5 574.2 738.2 659.9 703.6 738.2 720.1' 722.9 718.2 701.6 27 Closed-end funds 35.6 50.3 67.7 77.9 74.5 76.0 77.9 80.(f 80.8 81.1 81.4 28 Money market funds 372.7 402.7 404.1 418.8r 403.9 400.6 418.8' 422.2 422.0 425.1 449.2 29 Real estate investment trusts (REITs) 7.7 7.0 8.1 8.6 8.3 8.6 8.6 8.8 9.0 9.1 9.3 30 Brokers and dealers 106.5 124.0 117.1 126.3 149.0 147.1 126.3 112.3 99.2 96.2 94.3 31 Asset-backed securities issuers (ABSs) 268.9 317.8 377.9 458.0 408.1 430.2 458.0 479.5' 489.2 498.5 509.8 32 Bank personal trusts 213.4 223.5 231.5 240.9 236.2 238.7 240.9 243.3 244.6 245.3 247.2 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Total credit market debt 13,597.1 14,2323 15,0363 16,018.1 15,437.5 15,7113 16,018.1 16,242.6' 16,479.8 16,716.9 17,050.7 Other liabilities 34 Official foreign exchange 61.3 55.4 51.8 53.4 53.9 55.6 53.4 56.4 54.9 55.5 53.2 35 Special drawing rights certificates 10.0 10.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 36 Treasury currency 16.3 16.3 16.5 17.0 16.7 16.8 17.0 17.1 17.3 17.5 17.6 37 Life insurance reserves 380.0 405.7 433.0 468.2 450.2' 459.4' 468.2 473.2 475.2 481.2 488.4 38 Pension fund reserves 3,484.2 4,138.3 4,516.5 4,974.7r 4,730.8' 4,887.8' 4,974.7' 4,923.0' 4,915.8 5,045.5 5,061.2 39 Interbank claims 95.3 96.4 132.8 177.7r 145.2' 166.91 177.7' 204.2' 223.8 243.4 263.8 40 Deposits at financial institutions 5,005.3 5,044.8 5,059.1 5,152.4r 5,097.1 5,088.5 5,152.4' 5,158.9' 5,180.5 5,198.2 5,261.5 41 Checkable deposits and currency 934.2 1,020.6 1,134.4 1,251.7 1,168.0 1,181.9 1,251.7 1,220.5 1,229.7 1,205.4 1,241.4 42 Small time and savings deposits 2,349.2 2,350.7 2,293.5 2,223.2 2,255.0 2,236.6 2,223.2 2,233.8 2,214.1 2,198.9 2,183.4 43 Large time deposits 546.9 488.4 415.2 391.7 401.1 389.4 391.7 382.6 379.0 402.9 412.4 44 Money market fund shares 498.4 539.6 543.6 558.91 549.8 547.9 558.9' 576.2' 570.3 579.9 605.3 45 Security repurchase agreements 372.3 355.8 392.3 457.8 450.4 472.5 457.8 472.7' 510.6 536.4 536.9 46 Foreign deposits 304.3 289.6 280.1 269. LR 272.8 260.2 269.1' 273.2' 276.8 274.7 282.1 47 Mutual fund shares 602.1 813.9 1,042.1 1,429.3 1,225.8 1,342.4 1,429.3 1,438.7' 1,443.6 1,505.7 1,463.0 48 Security credit 137.4 188.9 217.3 279.3 234.7 254.5 279.3 282.7 278.0 263.3 276.2 49 Trade debt 942.2 935.9 977.4 1,026.4 989.7 1,009.6 1,026.4 1,023.6' 1,045.7 1,076.6 1,102.0 50 Taxes payable 77.4 71.2 79.6 84.2 81.2 82.8 84.2 SG.O1 82.4 85.4 86.5 51 Investment in bank personal trusts 522.1 608.3 629.6 660.9 637.6 651.2 660.9 655.3 640.2 656.8 655.6 52 Miscellaneous 2,820.4 2,992.2 3,160.2 3,402.3r 3,248.3' 3,314.6' 3,402.3' 3,510.9' 3,571.1 3,662.8 3,687.8 53 Total liabilities 27,751.1 29,609.6 31,360.1 33,751.8r 32,356.5' 33,049.4r 33,751.8' 34,083.7' 34,416.5 35,016.8 35,475.6 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 22.0 22.3 19.6 20.1 20.0 20.3 20.1 20.4 20.8 21.0 21.1 55 Corporate equities 3,530.2 4,863.6 5,462.9 6,186.5 5,683.7 5,941.7 6,186.5 6,052.2 5,877.7 6,135.1 6,048.8 56 Household equity in noncorporate business 2,529.1 2,444.4 2,411.5 2,421.7r 2,407.1' 2,420.3' 2,421.7' 2,460.2' 2,473.6 2,482.9 2,485.0 Floats not included in assets (-) 57 U.S. government checkable deposits 15.0 3.8 6.8 5.6 3.5 2.2 5.6 .3 .9 1.2 3.4 58 Other checkable deposits 35.9 40.4 42.0 40.7 41.6 33.7 40.7 36.3 38.7 30.6 38.0 59 Trade credit -130.3 -129.3 -124.6 -101.7 -135.0 -130.4 -101.7 -121.2' -130.7 -127.2 -102.3 Liabilities not identified as assets (-) 60 Treasury currency -4.1 -4.8 -4.9 -5.1 -5.0 -5.1 -5.1 -5.2 -5.2 -5.3 -5.4 61 Interbank claims -32.0 -4.2 -9.3 -4.7 -5.7 -7.8 -4.7 -7.7 -7.4 -3.5 -6.5 62 Security repurchase agreements 3.0 9.2 38.1 120.2' 108.0 132.6 120.2' 133.4' 160.0 186.1 162.3 63 Taxes payable 17.8 17.8 25.2 26.2 24.3 24.3 26.2 15.3' 21.7 21.0 25.1 64 Miscellaneous -261.2 -330.7 -398.4 -477.2' -436.1' -480.5' -477.2' -491.2' -461.4 -481.2 -519.4 65 Total identified to sectors as assets 34,1883 37,337.6 39,679.1 42,776.1r 40,871.8r 41,862.8r 42,776.1r 43,056.7r 43,171.9 44,034.1 44,435.1 1. Data in this table also appear in the Board's Z.l (780) quarterly statistica rlelease, 2. Excludes corporate equities and mutual fund shares, 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 1994 1995 MMeeaassuurree 11999922 11999933 11999944 June July Aug. Sept. Oct. Nov. Dec/ Jan.r Feb. 1 Industrial production1 107.6 112.0 118.1 118.0 118.2 119.1 119.0 119.5 120Jr 121.7 122.0 122.6 Market groupings ? Products, total 106.5 110.7 115.9 115.9 116.2 116.7 116.4 116.9 117.5r 111188..77 111199..11 111199..77 3 109.0 113.4 118.4 118.4 118.5 119.2 118.9 119.2 119.8r 121.2 121.6 122.1 4 Consumer goods 105.9 109.4 113.2 113.5 113.3 113.8 113.0 113.0 113.9 115.2 115.3 115.9 5 Equipment 113.4 119.3 126.5 125.8 126.4 127.5 128.0 128.8 128.9r 130.4 131.5 131.8 6 Intermediate 98.8 102.4 108.2r 108.5 109.1 109.2 108.6 109.9 110.6r 111.1 111.6 112.0 7 Materials 109.2 114.1 121.5r 121.2 121.4 122.8 122.9 123.4 124.6 126.3 126.3 127.2 Industry groupings 8 Manufacturing 108.0 112.9 119.7 119.3 119.8 112200..99 112200..99 112211..55 112222..66 112244..11 112244..33 112244..88 9 Capacity utilization, manufacturing (percent)2.. 79.2 80.9 83.4 83.2 83.3 83.8 83.6 83.8 84.4 85.2 85.1 85.1 10 Construction contracts3 97.7 104.4 107.8' 105.0 109.0 110.0 109.0 107.0 111.0 101.0 104.0 111.0 11 Nonagricultural employment, total4 106.5 108.4 111.3 111.2 111.4 111.7 112.0 112.2 112.7 112.9 113.1 113.4 17 Goods-producing, total 94.2 94.3 95.6 95.6 95.6 95.8 95.9 96.1 96.6 96.8 97.1 97.1 n Manufacturing, total 95.3 94.8 95.1 95.0 95.0 95.2 95.3 95.5 95.7 95.9 96.2 96.3 14 Manufacturing, production workers 94.9 94.9 96.1 96.0 96.0 96.3 96.4 96.7 97.1 97.3 97.6 97.8 15 Service-producing 110.5 112.9 116.3 116.1 116.5 116.8 117.1 117.3 117.8 118.1 118.2 118.6 16 Personal income, total 135.6 141.4 150.0 149.3 150.0 150.7 151.7 153.7 153.7r 154.8 156.1 n.a. 17 Wages and salary disbursements 131.6 136.2 145.0 144.5 145.2 145.5 146.4 148.2 148.1 149.0 150.3 n.a. 18 Manufacturing 118.0 120.0 126.0 125.3 125.6 126.2 126.7 128.8 127.9 128.5 129.1 n.a. 19 Disposable personal income 137.0 142.5 150.8 150.1 150.9 151.6 152.6 154.8r 154.7r 155.9 157.0 n.a. 20 Retail sales5 126.4r 134.7r 145.2r 144.4r 144.4r 146.5r 147.6r 149.3r 149.8r 150.0 150.9 150.2 Prices6 71 Consumer (1982-84=100) 140.3 144.5 148.2 148.0 148.4 149.0 149.4 149.5 149.7 149.7 150.3 115500..99 22 Producer finished goods (1982=100) 123.2 124.7 125.5 125.6 126.0 126.5 125.6 125.8 126.1 126.2 126.5 126.9 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. 5. Based on data from U.S. Department of Commerce, Survey of Current Business. For the ordering address, see the inside front cover. The latest historical revision of the 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the industrial production index and the capacity utilization rates was released in November price indexes can be obtained from the U.S. Department of Labor, Bureau of Labor 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve Statistics, Monthly Labor Review. Bulletin, vol. 81 (January 1995), pp. 16-26. For a detailed description of the industrial NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for production index, see "Industrial Production: 1989 Developments and Historical Revi- series mentioned in notes 3 and 6, can also be found in the Survey of Current Business. sion," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. Figures for industrial production for the latest month are preliminary, and many figures 2. Ratio of index of production to index of capacity. Based on data from the Federal for the three months preceding the latest month have been revised. See "Recent Develop- Reserve, DR1 McGraw-Hill, U.S. Department of Commerce, and other sources. ments in Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 3. Index of dollar value of total construction contracts, including residential, nonresi- 1990), pp. 411-35. See also "Industrial Production Capacity and Capacity Utilization dential, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. since 1987," Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. Dodge Division. 4. Based on data from U.S. Department of Labor, Employment and Earnings. Series covers employees only, excluding personnel in the armed forces. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted except as noted 1994 1995 CCaatteeggoorryy 11999922 11999933 11999944 July Aug. Sept. Oct. Nov. Dec/ Jan/ Feb. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 126,982 128,040 131,056 130,774 131,086 131,291 131,646 131,718 131,725 132,136 132,308 Employment 2 Nonagricultural industries3 114,391 116,232 119,651 119,448 119,761 120,233 120,647 120,903 121,038 121,064 121,469 3 Agriculture 3,207 3,074 3,409 3,333 3,436 3,411 3,494 3,500 3,532 3,575 3,656 Unemployment 9,384 8,734 7,996 7,993 7,889 7,647 7,505 7,315 7,155 7,498 7,183 5 Rate (percent of civilian labor force) 7.4 6.8 6.1 6.1 6.0 5.8 5.7 5.6 5.4 5.7 5.4 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 108,604 110,525 113,423 113,624 113,914 114,186 114,348 114,882 115,113 115,289 115,607 18,104 18,003 18,064 18,045 18,095 18,096 18,142 18,183 18,226 18,270 18,297 635 611 604 601 603 605 599 600 597 599 597 4,492 4,642 4,916 4,944 4,942 4,972 4,974 5,044 5,050 5,091 5,059 10 Transportation and public utilities 5,721 5,787 5,842 5,857 5,866 5,865 5,867 5,888 5,911 5,911 5,929 11 Trade 25,354 25,675 26,362 26,439 26,484 26,565 26,629 26,772 26,887 26,940 27,035 6,602 6,712 6,789 6,797 6,801 6,794 6,786 6,791 6,785 6,784 6,782 29,052 30,278 31,805 31,918 32,036 32,138 32,231 32,414 32,506 32,562 32,753 18,653 18,817 19,041 19,023 19,087 19,151 19,120 19,190 19,151 19,132 19,155 1. Beginning January 1994, reflects redesign of current population survey and popula- 4. Includes all full- and part-time employees who worked during, o rreceived pay for, tion controls from the 1990 census. the pay period that includes the twelfth day of the month; excludes proprietors, self- 2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly employed persons, household and unpaid family workers, and members of the armed figures are based on sample data collected during the calendar week that contains the forces. Data are adjusted to the March 1992 benchmark, and only seasonally adjusted data twelfth day; annual data are averages of monthly figures. By definition, seasonality does are available at this time. not exist in population figures. SOURCE. Based on data from U.S. Department of Labor, Employment and Earnings. 3. Includes self-employed, unpaid family, and domestic service workers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • May 1995 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1994 1994 1994 SSeerriieess Q1 Q2 Q3 Q4r Q1 Q2 Q3 Q4r Q1 Q2 Q3 Q4r Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 115.7 117.4 118.8 120.5 139.0 140.0 140.9 141.9 83.2 83.8 84.3 84.9 2 Manufacturing 116.8 118.9 120.5 122.7 142.0 143.1 144.2 145.3 82.3 83.1 83.6 84.5 3 Primary processing3 112.4 114.7 115.9 118.4 130.3 131.0 131.6 132.3 86.3 87.6 88.1 89.5 4 Advanced processing4 118.9 120.9 122.7 124.8 147.4 148.7 150.0 151.3 80.7 81.3 81.8 82.5 5 Durable goods 122.0 124.1 126.5 129.5 148.8 150.2 151.6 153.1 82.0 82.6 83.4 84.6 6 Lumber and products 104.4 105.4 106.6 107.9 115.1 115.5 116.0 116.5 90.7 91.2 91.9 92.6 7 Primary metals 110.6 114.4 114.1 119.5 124.7 125.0 125.2 125.4 88.6 91.6 91.1 95.3 8 Iron and steel 114.5 120.2 115.8 123.7 127.5 127.9 128.4 128.8 89.8 93.9 90.2 96.0 9 Nonferrous 105.3 106.9 111.4 113.9 120.6 120.5 120.5 120.5 87.3 88.7 92.4 94.5 10 Industrial machinery and equipment 152.1 157.6 162.6 167.7 176.5 179.0 181.6 184.1 86.2 88.0 89.6 91.1 11 Electrical machinery 150.3 156.8 163.5 169.4 175.8 179.9 184.1 188.5 85.5 87.1 88.8 89.9 12 Motor vehicles and parts 140.0 133.3 135.0 141.5 156.7 158.5 160.3 162.2 89.4 84.1 84.2 87.2 13 Aerospace and miscellaneous transportation equipment. 83.7 84.2 82.1 80.8 130.1 129.8 129.4 129.1 64.4 64.9 63.5 62.6 14 Nondurable goods 111.0 113.1 113.8 115.2 134.0 134.8 135.5 136.3 82.9 83.9 84.0 84.5 15 Textile mill products 106.8 108.7 108.9 111.6 120.1 120.8 121.4 122.0 88.9 90.1 89.7 91.4 16 Paper and products 115.1 115.9 118.5 120.5 126.0 126.6 127.1 127.7 91.4 91.6 93.2 94.4 17 Chemicals and products 122.1 123.6 124.4 126.1 150.5 151.9 153.3 154.7 81.1 81.4 81.1 81.5 18 Plastics materials 120.6 124.3 126.9 130.0 129.2 130.0 130.8 131.6 93.4 95.6 97.0 98.8 19 Petroleum products 103.7 106.3 104.9 106.5 115.4 115.3 115.2 115.1 89.9 92.2 91.1 92.5 20 Mining 99.3 100.7 100.1 99.2 111.5 111.5 111.5 111.4 89.1 90.3 89.8 89.0 21 Utilities 119.3 117.2 118.1 116.5 134.6 135.0 135.4 135.8 88.6 86.8 87.2 85.8 22 Electric 117.6 118.0 118.2 117.3 132.1 132.6 133.1 133.6 89.0 89.0 88.8 87.8/ 1973 1975 Previous cycle5 Latest cycle6 1994 1994 1995 High Low High Low High Low Feb. Sept. Oct. Nov/ Dec/ Jan. Feb.p Capacity utilization rate (percent;2 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 83.2 84.2 84.4 84.8 85.5 85.5 85.7 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 82.2 83.6 83.8 84.4 85.2 85.1 85.1 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 86.1 88.2 88.3 89.5 90.7 89.9 89.8 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.2 80.7 81.8 82.1 82.4 83.0 83.2 83.3 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 82.0 83.6 83.9 84.3 85.5 85.6 85.6 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.3 90.2 92.6 91.7 91.6 94.5 94.6 93.6 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.0 89.5 92.6 92.5 95.0 98.5 95.0 94.6 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.1 91.0 92.0 92.4 94.6 101.0 96.7 95.1 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.0 87.7 93.5 92.7 95.6 95.2 93.0 94.1 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 72.5 86.1 90.2 90.9 91.0 91.5 92.5 92.4 11 Electrical machinery 87.8 63.8 89.4 71.1 84.9 76.6 85.4 88.9 89.3 89.6 90.8 90.4 90.7 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 57.6 91.0 85.3 85.7 87.2 88.8 89.4 89.7 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 79.4 64.1 62.9 62.6 62.6 62.5 62.4 62.3 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.4 82.6 83.8 83.9 84.6 85.1 84.7 84.8 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.9 88.6 89.0 90.8 91.7 91.8 92.1 92.2 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.5 91.9 93.2 93.2 95.0 95.0 92.4 92.7 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 78.9 81.0 80.4 80.2 81.6 82.6 82.5 82.7 18 nasties materials 102.0 50.6 90.9 63.4 97.0 74.8 93.3 95.7 93.3 98.5 104.6 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 83.7 89.9 91.4 90.4 93.5 93.7 93.4 93.7 20 Mining 94.4 88.4 96.6 80.6 86.5 86.0 89.3 89.8 89.0 88.2 89.8 89.7 89.9 21 Utilities 95.6 82.5 88.3 76.2 92.6 83.2 88.9 86.0 86.4 85.8 85.2 86.2 88.3 22 Electric 99.0 82.7 88.3 78.7 94.8 86.5 88.9 87.9 88.3 88.0 87.1 88.1 90.4 1. Data in this table also appear in the Board's G.17 (419) monthly statistica rlelease. 3. Primary processing includes textiles; lumber; paper; industrial chemicals; petroleum For the ordering address, see the inside front cover. The latest historical revision of the refining; rubber and plastics; stone, clay, and glass; and primary and fabricated metals. industrial production index and the capacity utilization rates was released in November 4. Advanced processing includes food, tobacco, apparel, furniture, printing, chemical 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve products such as drugs and toiletries, leather and products, machinery, transportation Bulletin, vol. 81 (January 1995), pp. 16-26. For a detailed description of the industrial equipment, instruments, and miscellaneous manufacturing. production index, see "industrial Production: 1989 Developments and Historical Revi- 5. Monthly highs, 1978-80; monthly lows, 1982. sion," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. 6. Monthly highs, 1988-89; monthly lows, 1990-91. 2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally adjusted index of industrial production to the corresponding index of capacity. 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 1992 1994 1995 GGrroouupp por- 1 a 9 v 9 g 4 . tion Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov/ Dec/ Jan. FFeebb..'''' Index (1987 = 100) MAJOR MARKETS 1 Total Index 100.0 118.1 115.6 116.6 116.7 117.4 118.0 118.2 119.1 119.0 119.5 120.3 121.7 122.0 122.6 7 Products 60.9 115.9 114.0 114.7 114.7 115.3 115.9 116.2 116.7 116.4 116.9 117.5 118.7 119.1 119.7 3 Final products 46.6 118.4 117.0 117.4 117.3 117.8 118.4 118.5 119.2 118.9 119.2 119.8 121.2 121.6 122.1 4 Consumer goods, total 28.5 113.2 112.4 112.9 112.3 112.8 113.5 113.3 113.8 113.0 113.0 113.9 115.2 115.3 115.9 Durable consumer goods 5.5 119.4 121.1 119.0 117.8 116.4 118.0 118.0 120.7 119.1 119.4 120.5 123.3 123.9 124.1 6 Automotive products 2.5 125.5 131.5 126.4 124.1 120.1 121.0 119.5 124.9 123.8 124.5 127.1 131.2 131.6 133.3 7 Autos and trucks 1.6 125.4 134.8 127.7 125.0 118.1 118.5 115.0 126.0 122.5 122.3 126.5 131.4 132.7 134.4 8 Autos, consumer .9 94.9 102.7 98.8 96.0 90.4 89.6 86.5 91.7 90.2 92.9 94.0 100.5 103.6 103.2 9 Trucks, consumer .7 180.7 192.7 179.6 177.2 168.0 170.7 166.6 189.0 181.5 175.5 185.8 187.3 184.6 190.6 10 Auto parts and allied goods .9 123.2 121.9 121.1 119.8 121.9 123.8 126.6 120.0 123.9 126.6 125.7 128.1 126.7 128.1 11 Other 3.0 114.1 112.2 112.7 112.5 113.2 115.4 116.7 117.1 115.2 115.2 115.0 116.5 117.4 116.2 12 Appliances televisions and air conditioners .7 126.0 121.6 124.3 120.7 125.6 132.8 129.7 135.1 130.2 124.9 126.9 131.0 128.7 125.0 N Carpeting and furniture .8 105.0 103.5 103.1 104.5 103.3 103.6 108.4 106.9 104.1 107.4 105.9 107.5 109.6 109.2 14 Miscellaneous home goods 1.5 113.8 112.7 112.8 113.2 113.1 114.2 115.3 114.6 114.6 114.9 114.5 114.9 116.5 116.0 IS Nondurable consumer goods 23.0 111.8 110.4 111.5 111.0 112.0 112.5 112.2 112.2 111.7 111.5 112.4 113.3 113.3 114.0 16 Foods and tobacco 10.3 110.4 107.6 109.8 110.2 110.9 110.5 110.6 111.2 111.9 112.2 112.4 113.1 113.0 113.5 17 Clothing 2.4 95.9 94.5 95.7 96.4 97.2 96.3 96.5 95.9 95.5 96.2 96.2 96.8 95.9 95.2 18 Chemical products 4.5 129.7 128.7 130.3 128.4 129.5 131.4 131.1 129.8 127.5 127.2 130.5 134.5 135.4 136.8 19 Paper products 2.9 104.7 103.9 103.9 105.1 105.6 105.8 105.2 105.9 105.2 103.6 104.6 104.3 103.0 103.3 70 Energy 2.9 113.9 117.3 114.5 110.0 112.4 115.5 114.3 113.1 110.5 109.8 110.6 109.8 110.6 113.1 71 Fuels .9 106.7 105.4 105.8 108.3 107.4 106.5 105.8 105.8 107.4 103.9 109.8 107.4 107.4 108.7 22 Residential utilities 2.1 116.9 122.2 118.1 110.5 114.4 119.3 117.8 116.1 111.8 112.2 110.7 110.7 111.8 114.8 73 Equipment 18.1 126.5 123.8 124.3 124.9 125.4 125.8 126.4 127.5 128.0 128.8 128.9 130.4 131.5 131.8 74 Business equipment 14.0 146.7 142.0 142.6 143.5 144.5 145.5 146.9 148.9 149.5 150.9 151.0 153.1 154.7 155.2 75 Information processing and related 5.7 176.4 168.5 170.0 170.2 171.8 173.7 177.1 179.7 181.1 183.2 184.2 188.6 190.2 190.5 76 Compute and office equipment 1.5 284.2 267.6 270.9 270.8 271.6 276.5 282.6 288.9 295.8 300.5 305.7 311.9 317.9 324.2 77 Industrial 4.0 121.0 116.4 117.8 119.2 120.7 120.6 122.1 122.3 123.0 124.4 124.1 125.2 127.0 127.8 78 Transit 2.6 137.9 142.3 139.3 138.0 135.3 136.1 132.6 137.9 136.8 137.1 137.5 137.8 139.6 140.5 79 Autos and trucks 1.2 148.0 154.6 148.1 145.9 140.0 141.7 138.2 149.4 147.7 149.2 151.6 152.6 157.2 158.1 30 Other 1.7 129.4 122.3 123.3 127.1 129.4 130.5 132.6 133.5 133.3 134.3 133.1 133.1 133.8 133.9 31 Defense and space equipment 3.4 71.0 73.6 73.7 73.6 72.4 71.3 69.9 69.2 68.8 68.7 69.0 68.7 68.4 68.0 37 Oil and gas well drilling .5 90.8 91.9 92.1 93.2 94.6 94.2 93.7 89.6 93.9 88.3 86.0 86.0 86.7 89.1 33 Manufactured homes .2 137.3 131.5 135.6 132.4 135.2 137.8 133.3 134.5 138.4 142.0 143.1 153.6 153.6 34 Intermediate products, total 14.3 108.2 104.9 106.3 106.9 107.7 108.5 109.1 109.2 108.6 109.9 110.6 111.1 111.6 112.0 Construction supplies 5.3 106.8 102.7 103.2 104.7 106.1 106.4 107.9 108.2 108.6 109.7 109.8 111.6 112.2 112.3 36 Business supplies 9.0 109.2 106.5 108.4 108.5 108.8 110.1 110.0 109.9 108.7 110.1 111.3 111.0 111.3 112.0 37 Materials 39.1 121.5 118.1 119.5 119.7 120.5 121.2 121.4 122.8 122.9 123.4 124.6 126.3 126.3 127.2 38 Durable goods materials 20.6 131.2 126.2 128.3 129.2 129.8 130.0 130.9 132.6 133.3 134.2 136.0 138.7 139.1 140.0 39 Durable consumer parts 3.9 132.2 129.7 131.5 130.1 129.7 129.2 130.4 133.2 133.1 133.8 135.8 139.7 139.8 140.4 40 Equipment parts 7.5 143.1 135.6 137.9 139.6 140.5 142.1 143.8 145.2 146.7 149.0 150.7 152.5 154.2 156.7 41 Other 9.1 121.3 117.1 119.3 120.4 121.2 120.8 121.1 122.3 122.8 122.7 124.6 127.3 126.9 126.8 47 Basic metal materials 3.0 119.8 116.9 117.6 119.7 120.0 119.6 118.8 119.3 121.1 121.3 123.2 126.4 123.2 123.0 43 Nondurable goods materials 8.9 118.4 115.6 116.7 115.9 118.2 118.1 118.6 120.3 119.8 120.3 121.5 122.4 121.0 121.6 44 Textile materials 1.1 105.3 102.7 104.0 104.4 104.2 104.8 104.8 105.7 105.9 106.9 110.3 108.9 109.3 109.8 45 Paper materials 1.8 118.7 116.3 117.8 116.1 118.9 118.4 117.5 122.5 121.5 120.5 122.1 120.8 118.1 119.0 46 Chemical materials 4.0 123.2 120.0 120.6 120.6 123.8 122.9 123.4 124.8 124.0 124.6 125.9 127.4 125.8 126.7 47 Other 2.0 116.8 114.0 115.6 113.3 114.8 116.5 118.6 118.1 118.2 119.5 119.3 122.1 121.2 121.2 48 Energy materials 9.6 105.2 104.7 105.0 104.8 104.6 106.7 105.2 106.1 105.6 105.2 104.9 105.4 106.0 107.1 49 Primary energy 6.3 100.3 99.4 100.5 100.9 100.4 100.2 100.3 100.9 100.8 100.3 100.7 101.7 101.9 102.5 50 Converted fuel materials 3.3 115.0 115.2 114.0 112.5 112.8 119.9 114.9 116.3 115.1 115.1 113.4 112.8 114.1 116.2 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 117.6 114.8 116.1 116.2 117.1 117.7 118.1 118.7 118.6 119.1 119.8 121.1 121.4 122.0 52 Total excluding motor vehicles and parts 95.2 117.1 114.3 115.5 115.7 116.6 117.3 117.7 118.2 118.0 118.5 119.2 120.5 120.7 121.4 53 Total excluding computer and office equipment 98.3 115.4 113.1 114.0 114.1 114.8 115.4 115.5 116.4 116.1 116.6 111177..44 111188..77 118.9 111199..55 54 Consumer goods excluding autos and trucks . 26.9 112.4 111.0 111.9 111.5 112.4 113.2 113.2 113.0 112.4 112.4 113.1 114.2 114.2 114.7 55 Consumer goods excluding energy 25.6 113.1 111.9 112.7 112.5 112.8 113.2 113.2 113.8 113.3 113.3 114.2 115.8 115.8 116.2 56 Business equipment excluding autos and trucks 12.8 146.5 140.7 142.0 143.2 144.8 145.7 147.7 148.8 149.5 151.0 115500..99 115533..00 154.3 115544..88 57 Business equipment excluding computer and office equipment 12.5 130.8 127.2 127.6 128.5 129.4 130.0 131.1 132.7 113322..77 133.8 113333..66 113355..22 113366..44 113366..55 58 Materials excluding energy 29.5 127.3 122.9 124.8 125.1 126.2 126.4 127.2 128.8 129.2 129.9 131.6 133.7 133.6 134.4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • May 1995 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 1994 1995 GGrroouupp SIC pro- 1994 code por- avg. tion Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov/ Dec/ Jan. Feb.'' Index (1987 = 100) MAJOR INDUSTRIES 59 IMal index 100.0 118.1 115.6 116.6 116.7 117.4 118.0 118.2 119.1 119.0 119.5 120.3 121.7 122.0 122.6 60 Manufacturing 85.5 119.7 116.7 118.0 118.4 119.0 119.3 119.8 120.9 120.9 121.5 122.6 124.1 124.3 124.8 61 Primary processing 26.5 115.3 112.2 113.3 114.0 115.2 114.7 115.3 116.3 116.2 116.6 118.4 120.2 119.4 119.5 62 Advanced processing 59.0 121.8 118.9 120.2 120.5 120.8 121.5 121.9 123.1 123.1 123.8 124.6 126.0 126.7 127.3 63 Durable goods 45.1 125.5 122.1 122.9 123.7 124.0 124.6 125.2 127.0 127.2 128.0 129.1 131.3 131.9 132.5 64 Lumber and products "24 2.0 106.0 103.8 104.0 103.9 106.0 106.2 106.8 105.5 107.6 106.7 106.7 110.2 110.5 109.6 65 Furniture and fixtures 25 1.4 111.4 107.6 107.7 110.2 110.1 111.8 114.0 115.5 112.4 114.8 113.0 114.4 115.3 114.5 66 Stone, clay, and glass products 32 2.1 104.9 101.8 103.7 105.0 105.5 104.4 104.3 105.8 105.8 105.4 106.9 110.0 109.7 109.3 67 Primary metals 33 3.1 114.5 111.6 112.1 114.8 114.8 113.7 112.7 113.5 116.0 115.9 119.1 123.5 119.4 119.1 68 Iron and steel 331,2 1.7 118.3 116.0 116.7 121.5 120.9 118.2 116.1 113.0 118.2 118.8 121.9 130.3 124.9 123.0 69 Raw steel .1 107.9 105.8 106.0 105.3 105.7 106.3 104.7 107.0 109.9 109.0 114.2 121.9 114.6 70 Nonferrous 333-6,9 1.4 109.3 105.8 106.0 106.2 106.9 107.6 108.0 113.6 112.7 111.8 115.2 114.8 112.2 113.8 71 Fabricated metal products... 34 5.0 110.7 106.6 108.5 109.6 110.0 110.2 111.7 112.4 111.6 112.2 113.3 114.8 115.8 116.2 72 Industrial and commercial machinery and computer equipment... 35 7.9 160.0 151.9 154.0 156.1 157.7 158.9 160.6 162.6 164.6 166.5 167.5 169.2 172.3 173.6 73 Computer and office equipment 357 1.7 284.2 267.6 270.9 270.8 271.6 276.5 282.6 288.9 295.8 300.5 305.7 311.9 317.9 324.2 74 Electrical machinery 36 7.3 160.0 150.1 152.6 154.3 156.5 159.5 161.5 164.1 165.0 166.9 168.8 172.5 173.4 175.9 75 Transportation equipment... 37 9.6 109.7 112.3 110.7 109.5 107.6 107.5 105.7 109.5 108.8 109.0 110.5 111.9 112.5 113.1 76 Motor vehicles mid parts . 371 4.8 137.9 142.6 138.8 136.2 131.6 132.2 129.6 138.1 137.4 138.4 141.4 144.6 146.1 147.4 77 Autos and light trucks . 371 2.5 131.9 141.9 134.7 131.7 124.4 124.6 120.8 131.9 128.4 128.6 132.7 138.4 140.0 141.6 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.8 82.6 83.3 83.8 84.1 84.6 83.8 82.8 82.3 81.4 80.8 80.9 80.6 80.4 80.3 79 Instruments 38 5.4 107.4 106.3 106.9 106.6 106.4 106.8 108.5 108.7 108.0 108.2 107.7 109.1 109.4 109.0 80 Miscellaneous 39 1.3 116.2 113.5 114.1 115.2 115.4 115.8 118.6 117.1 117.0 118.4 118.6 117.6 118.9 120.1 81 Nondurable goods 40.5 113.2 110.7 112.5 112.4 113.4 113.4 113.6 114.0 113.7 114.2 115.4 116.2 115.9 116.3 82 Foods "20 9.4 112.8 109.9 112.9 111.9 112.8 112.8 113.4 113.7 114.6 113.4 113.9 114.7 114.6 115.1 83 Tobacco products 21 1.6 96.2 93.6 93.0 98.1 98.5 95.9 93.7 96.2 96.1 104.5 101.5 102.6 102.2 102.9 84 Textile mill products 22 1.8 109.0 106.4 107.9 108.6 108.9 108.7 109.4 109.0 108.3 110.6 112.0 112.2 112.8 113.1 85 Apparel products 23 2.2 96.3 94.9 95.7 96.2 97.1 97.0 97.0 96.8 96.8 96.9 96.8 97.0 96.7 95.7 86 Paper and products 26 3.6 117.4 115.7 115.7 114.4 116.7 116.6 116.6 120.2 118.7 118.9 121.3 121.5 118.4 119.1 87 Printing and publishing 27 6.8 101.1 98.8 101.3 101.7 101.6 102.4 102.1 101.5 100.9 101.4 102.0 101.6 101.4 101.6 88 Chemicals and products 28 9.9 124.1 121.8 123.1 122.4 124.0 124.4 124.7 124.7 123.7 123.8 126.2 128.2 128.4 129.2 89 Petroleum products 29 1.4 105.3 103.8 103.4 107.5 107.0 104.5 104.3 105.2 105.3 104.0 107.6 107.7 107.5 107.9 90 Rubber and plastic products . 30 3.5 133.5 128.2 130.9 130.8 132.4 132.8 134.5 134.5 134.7 136.7 138.3 140.1 140.7 140.8 91 Leather and products 31 .3 85.8 85.4 87.0 87.6 85.9 85.5 86.3 85.5 85.4 85.6 84.5 84.4 83.7 83.9 92 Mining 6.8 99.8 99.5 100.5 100.7 100.7 100.6 100.1 100.0 100.1 99.2 98.3 100.1 100.0 100.2 93 Metal 10 .4 159.4 161.6 165.2 157.0 156.4 162.8 159.5 156.6 160.0 158.9 154.3 156.5 157.3 158.5 94 Coal 12 1.0 112.0 112.0 117.7 118.3 111.5 113.4 108.6 111.4 110.7 110.2 110.1 117.8 117.9 117.5 95 Oil and gas extraction 13 4.7 93.0 92.7 92.9 93.2 94.3 93.8 93.9 93.5 93.7 92.2 91.2 92.1 91.7 92.1 96 Stone and earth minerals 14 .6 107.0 104.8 104.7 105.9 108.1 105.6 107.9 106.6 106.7 109.3 109.9 110.0 112.0 110.4 97 Utilities 7.7 118.2 119.6 117.9 114.7 115.8 121.1 119.0 118.8 116.5 117.2 116.5 115.8 117.3 120.3 98 Electric 49L3PT 6.1 117.8 117.5 117.2 116.4 116.2 121.4 119.0 118.4 117.1 117.9 117.5 116.6 118.0 121.2 99 Gas 492,3PT 1.6 119.6 128.1 120.5 107.9 114.1 120.0 118.9 120.4 114.2 114.4 112.3 112.7 114.4 116.7 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.7 118.6 115.2 116.7 117.3 118.2 118.6 119.2 119.8 119.9 120.5 121.5 122.9 123.0 123.5 101 Manufacturing excluding office and computing machines... 83.8 116.5 113.7 114.9 115.3 115.9 116.2 116.6 117.6 117.5 118.1 119.1 120.6 120.7 121.1 Gross value (billions of 1987 dollars, annual rates) MAJOR MARKETS 102 Products, total 1,707.0 2,0063 1,977.8 1,985.6 1,985.8 1,990.7 2,002.5 2,002.1 2,020.2 2,015.6 2,020.4 2,037.2 2,057.7 2,062.6 2,073.6 103 Final 1,314.6 1,576.4 1,559.9 1,563.6 1,559.9 1,561.7 1,571.1 1,569.3 1,586.6 1,584.2 1,584.4 1,598.4 1,615.2 1,619.4 1,629.6 104 Consumer goods 866.6 982.5 979.6 981.3 976.0 977.1 983.0 979.0 987.3 981.5 977.0 988.5 998.6 996.3 1,003.2 105 Equipment 448.0 593.9 580.4 582.3 583.9 584.5 588.1 590.3 599.3 602.7 607.3 609.9 616.6 623.1 626.4 106 Intermediate 392.5 430.0 417.8 422.0 425.9 429.0 431.4 432.9 433.5 431.4 436.0 438.8 442.5 443.2 444.1 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. Bulletin, vol. 81 (January 1995), pp. 16-26. For a detailed description of the industrial For the ordering address, see the inside front cover. The latest historical revision of the production index, see "Industrial Production: 1989 Developments and Historical Reviindustrial production index and the capacity utilization rates was released in November sion," Federal Reserve Bulletin, vol. 76, (April 1990), pp. 187-204. 1994. See "Industrial Production and Capacity Utilization: A Revision," Federal Reserve 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 1994 1995 IItteemm 11999922 11999933 11999944rr Apr. May June July Aug. Sept. Oct. Nov.' Dec.' Jan. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,095 1,199 1,369 1,377 1,383 1,336 1,347 1,382 1,416 1,391 1,355 1,421 1,302 2 One-family 911 986 1,061 1,068 1,099 1,054 l,035r 1,047 1,052 1,028 1,011 1,094 999 3 Two-family or more 184 213 307 309 284 282 312r 335 364 363 344 327 303 4 Started 1,200 1,288 1,457 1,463 1,489 1,370 1,440 1,463 1,511 1,451 1,536 1,545 1,359 5 One-family 1,030 1,126 1,198 1,209 1,197 1,174 1,219 1,174 1,235 1,164 1,186 1,250 1,059 6 Two-family or more 169 162 259 254 292 196 221 289 276 287 350 295 300 7 Under construction at end of period1 612 680 764 736r 746r 751 757' 770' 773' 779 787 792 794 8 One-family 473 543 560 582' 581r 585r 585 589' 59C 587 587 587 582 9 Two-or-more-family 140 137 204 154r 165r 166r 172r 181 183 192 200 205 212 10 Completed 1,158 1,193 1,347 l,363r l,438r l,333r 1.2801 1,337' 1,400 1,376' 1,371 1,388 1,410 11 One-family 964 1,040 1,160 1,2(Xf l,245r 1,151 1,157' 1,144' 1,158' 1,169' 1,136 1,174 1,183 12 Two-or-more-family 194 153 187 163r 193r 182r 123' 193' 242' 207 235 214 227 13 Mobile homes shipped 210 254 304 292 296 295 289 295 307 314 322 347 361 Merchant builder activity in one-family units 14 Number sold 610 666 672 672r 689' 632r 630 672' 691' 707' 648 654 679 15 Number for sale at end of period1 265r 293' 341 298 302r 313 317 322 328 33C 335 341 344 Price of units sold (thousands of dollars)2 16 Median 121.3 126.1 130.3 129.0 129.9 133.5 124.4 133.3 129.7 113322..00'' 129.9 134.0 125.1 17 Average 144.9 147.6 153.6 152.9 151.8 158.4 144.4 154.9 157.2 153.0 155.0 158.8 142.7 EXISTING UNITS (one-family) 18 Number sold 3,520 3,800 3,946 4,110 4,110 4,010 3,940 3,910 3,870 3,820 3,690 3,760 3,610 Price of units sold (thousands of dollars)2 19 Median 103.6 106.5 109.6 109.1 109.9 113.3 112.4 113.0 108.9 107.5 108.7 109.1 110088..11 20 Average 130.8 133.1 136.4 135.7 136.7 141.3 139.7 141.2 135.8 133.0 134.7 135.6 135.3 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 435,355 466,365 506,943 497,035 504,356 506,144 505,445 505,470 514,197 521,376 525,136 530,927 529,738 77, Private 316,115 341,101 377,782 374,091 378,235 379,345 376,463 376,216 382,287 384,888 393,536 395,215 393,068 7.3 Residential 187,870 210,455 237,945 238,049 241,162 240,694 237,775 236,871 238,529 239,337 242,339 243,936 242,775 74 Nonresidential 128,245 130,646 139,837 136,042 137,073 138,651 138,688 139,345 143,758 145,551 151,197 151,279 150,293 25 Industrial buildings 20,720 19,533 21,600 21,221 21,338 20,960 21,117 22,012 22,621 22,318 24,951 23,096 23,933 26 Commercial buildings 41,523 42,627 48,268 47,481 47,912 48,410 48,607 48,185 50,180 50,535 51,954 53,271 54,469 27 Other buildings 21,494 23,626 23,835 23,824 23,956 24,439 23,838 23,648 24,784 24,107 24,376 25,104 25,465 28 Public utilities and other 44,508 44,860 46,134 43,516 43,867 44,842 45,126 45,500 46,173 48,591 49,916 49,808 46,426 79 Public 119,238 125,262 129,157 122,944 126,121 126,799 128,982 129,255 131,910 136,488 131,600 135,712 136,671 30 Military 2,502 2,454 2,338 1,959 2,024 2,277 2,351 2,357 2,364 2,585 2,285 2,455 2,748 31 Highway 34,899 37,355 40,185 39,508 40,655 40,300 40,305 40,057 40,797 41,685 40,126 39,466 40,920 32 Conservation and development 6,021 5,976 6,246 5,851 5,677 4,605 5,935 5,754 7,521 7,155 6,930 7,925 7,325 33 Other 75,816 79,477 80,388 75,626 77,765 79,617 80,391 81,087 81,228 85,063 82,259 85,866 85,678 1. Not at annual rates. SOURCES. Bureau of the Census estimates for all series except (1) mobile homes, which 2. Not seasonally adjusted. are private, domestic shipments as reported by the Manufactured Housing Institute and 3. Recent data on value of new construction may not be strictly comparable with data seasonally adjusted by the Census Bureau, and (2) sales and prices of existing units, for previous periods because of changes by the Bureau of the Census in its estimating which are published by the National Association of Realtors. All back and current figures techniques. For a description of these changes, see Construction Reports (C-30-76-5), are available from the originating agency. Permit authorizations are those reported to the issued by the Census Bureau in July 1976. Census Bureau from 17,000 jurisdictions beginning in 1984. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • May 1995 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (annual rate) IIInnndddeeexxx llleeevvveeelll,,, IIIttteeemmm 1994 1994 1995 FFFeeebbb... 11999944 11999955 111999999555111 FFeebb.. FFeebb.. Mar. June Sept. Dec. Oct. Nov. Dec. Jan. Feb. CONSUMER PRICES2 (1982-84=100) 1 All items IS 2.9 2.2 2.7 3.6 1.9 .1 .1 .2 3 3 150.9 2 Food 2.1 3.1 -.3 2.8 5.1 3.9 .1 .1 .8 -.3 .3 147.4 3 Energy items -.2 1.7 3.1 -3.0 9.2 .4 -.3 .5 -.1 .3 -.1 103.7 4 All items less food and energy 2.8 3.0 2.9 3.1 2.6 2.0 .2 .2 .1 .4 .3 159.6 5 Commodities .8 1.9 .6 3.9 .9 .3 .0 .0 .1 .4 .1 138.4 6 Services 3.7 3.4 3.9 2.7 3.6 2.6 .2 .2 .2 .5 .4 171.7 PRODUCER PRICES (1982=100) 7 Finished goods .2 1.7 2.9 .0 1.9 2.2 -.4 .6 .4 .3 .3 126.9 8 Consumer foods 1.8 1.3 -.9 -5.5 1.9 9.2 -.R 1.4 -.6 .3 128.3 9 Consumer energy -2.6 2.3 14.7 -2.6 3.2 .0 — 1.3r 2.4r -1.0 2.3 .4 76.6 10 Other consumer goods -.5 1.5 1.5 2.0 1.7 .6 -.3 .1 .3 .1 .3 140.8 11 Capital equipment 1.8 1.9 2.7 3.0 2.1 .0 -.5 .1 .4 .3 .3 136.1 Intermediate materials 12 Excluding foods and feeds .6 6.3 3.1 2.8 6.2 7.6 ,4r .9r .5 1.0 1.0 123.9 13 Excluding energy 1.1 7.0 1.9 3.9 6.8 8.3 ,7r .8r .5 1.0 1.0 133.6 Crude materials 14 Foods 6.7 -8.0 -4.9 -18.0 -13.5 -.8 -1.1 .7 .2 -.1 1.2 104.0 15 Energy -11.9 2.2 10.1 21.0 -19.2 -13.8 -1.5r .lr -2.3 -.1 1.7 69.8 16 Other 10.6 16.4 25.1 -.8 20.3 26.7 .6 3.1 2.3 3.0 1.4 177.0 1. Not seasonally adjusted. SOURCE. US. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rentalequivalence 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 1993 1994 AAccccoouunntt 11999922 11999933 11999944rr Q4 Ql Q2 Q3 Q4r GROSS DOMESTIC PRODUCT 1 6,020.2 6,343.3 6,736.1 6,478.1 6,574.7 6,689.9 6,791.7 6,888.1 By source 2 Personal consumption expenditures 4,136.9 4,378.2 4,628.0 4,469.6 4,535.0 4,586.4 4,657.5 4,732.9 3 Durable goods 492.7 538.0 591.4 562.8 576.2 580.3 591.5 617.6 4 Nondurable goods 1,295.5 1,339.2 1,394.4 1,355.2 1,368.9 1,381.4 1,406.1 1,421.2 5 Services 2,348.7 2,501.0 2,642.1 2,551.6 2,589.9 2,624.7 2,659.9 2,694.1 6 Gross private domestic investment 788.3 882.0 1,031.6 922.5 966.6 1,034.4 1,055.1 1,070.2 7 Fixed investment 785.2 866.7 979.6 913.5 942.5 967.0 992.5 1,016.6 8 Nonresidential 561.4 616.1 696.9 646.3 665.4 683.3 709.1 729.7 9 Structures 171.1 173.4 182.6 176.7 172.7 181.8 184.6 191.4 10 Producers' durable equipment 390.3 442.7 514.3 469.6 492.7 501.5 524.5 538.4 11 Residential structures 223.8 250.6 282.8 267.2 277.1 283.6 283.4 286.9 12 Change in business inventories 3.0 15.4 51.9 9.0 24.1 67.4 62.6 53.6 13 Nonfarm -2.7 20.1 45.5 10.7 22.3 60.4 53.4 46.1 14 Net exports of goods and services -30.3 -65.3 -98.6 -71.2 -86.7 -97.6 -109.6 -100.6 IS Exports 638.1 659.1 718.7 680.3 674.2 704.5 730.5 765.6 16 Imports 668.4 724.3 817.3 751.4 760.9 802.1 840.1 866.2 17 Government purchases of goods and services 1,125.3 1,148.4 1,175.2 1,157.2 1,159.8 1,166.7 1,188.8 1,185.5 18 Federal 449.0 443.6 437.3 439.8 437.8 435.1 444.3 431.8 19 State and local 676.3 704.7 737.9 717.4 722.0 731.5 744.5 753.7 By major type of product ?0 Final sales, total 6,017.2 6,327.9 6,684.2 6,469.2 6,550.6 66,,662222..55 66,,772299..11 66,,883344..55 71 Goods 2,292.0 2,390.4 2,531.5 2,452.6 2,489.1 2,493.7 2,543.6 2,599.6 77 Durable 968.6 1,032.4 1,117.9 1,072.9 1,098.2 1,099.4 1,125.8 1,148.3 7.3 Nondurable 1,323.4 1,358.1 1,413.6 1,379.7 1,390.9 1,394.3 1,417.8 1,451.3 74 3,227.2 3,405.5 3,575.6 3,459.3 3,503.8 3,555.4 3,603.6 3,639.5 25 Structures 498.1 532.0 577.1 557.2 557.7 573.4 581.9 595.4 26 Change in business inventories 3.0 15.4 51.9 9.0 24.1 67.4 62.6 53.6 77 Durable goods -13.0 8.6 33.8 9.0 20.6 38.2 44.1 32.4 28 Nondurable goods 16.0 6.7 18.1 .0 3.5 29.2 18.5 21.1 MEMO 29 Total GDP in 1987 dollars 4,979.3 5,134.5 5,342.4 5,218.0 5,261.1 5,314.1 5367.0 5,427.2 NATIONAL INCOME 30 4,829.5 5,131.4 n.a. 5,262.0 5,308.7 5,430.7 5,494.9 n.a. 31 Compensation of employees 3,591.2 3,780.4 4,004.6 3,845.8 3,920.0 3,979.3 4,023.7 4,095.6 32 Wages and salaries 2,954.8 3,100.8 3,279.0 3,148.4 3,208.3 3,257.2 3,293.9 3,356.6 33 Government and government enterprises 567.3 583.8 602.8 587.8 595.7 601.9 604.4 609.1 34 Other 2,387.5 2,517.0 2,676.2 2,560.7 2,612.6 2,655.4 2,689.6 2,747.5 35 Supplement to wages and salaries 636.4 679.6 725.6 697.4 711.7 722.0 729.7 739.0 36 Employer contributions for social insurance 307.7 324.3 344.6 330.6 338.5 343.6 346.0 350.3 37 Other labor income 328.7 355.3 381.0 366.8 373.2 378.4 383.7 388.7 38 Proprietors' income1 418.7 441.6 473.6 462.9 471.0 471.3 467.0 485.3 39 Business and professional1 374.4 404.3 434.2 418.5 423.8 431.9 437.1 443.8 40 44.4 37.3 39.4 44.4 47.2 39.3 29.8 41.4 41 Rental income of persons2 -5.5 24.1 27.7 30.3 15.3 34.1 32.6 28.8 42 Corporate profits' 405.1 485.8 n.a. 533.9 508.2 546.4 556.0 n.a. 43 Profits before tax 395.9 462.4 n.a. 501.7 483.5 523.1 538.1 n.a. 44 Inventory valuation adjustment -6.4 -6.2 -19.3 -6.5 -12.3 -14.1 -19.6 -31.2 45 Capital consumption adjustment 15.7 29.5 37.7 38.8 37.0 37.4 37.5 38.8 46 Net interest 420.0 399.5 n.a. 389.1 394.2 399.7 415.7 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 • May 1995 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1993 1994 11999922 11999933 1994r Q4 Q1 Q2 Q3 Q4r PERSONAL INCOME AND SAVING 1 Total personal income 5,154.3 5,375.1 5,701.9 5,484.6 5,555.8 5,659.9 5,734.5 5,857.5 2 Wage and salary disbursements 2,974.8 3,080.8 3,279.0 3,148.4 3,208.3 3,257.2 3,293.9 3,356.6 3 Commodity-producing industries 757.6 773.8 818.1 791.0 801.9 811.6 821.8 837.1 4 Manufacturing 578.3 588.4 617.5 601.7 609.4 612.8 618.3 629.3 5 Distributive industries 682.3 701.9 748.6 712.6 728.6 742.5 753.5 769.9 6 Service industries 967.6 1,021.4 1,109.5 1,057.0 1,082.0 1,101.2 1,114.3 1,140.5 7 Government and government enterprises 567.3 583.8 602.8 587.8 595.7 601.9 604.4 609.1 8 Other labor income 328.7 355.3 381.0 366.8 373.2 378.4 383.7 388.7 9 Proprietors' income1 418.7 441.6 473.6 462.9 471.0 471.3 467.0 485.3 10 Business and professional1 374.4 404.3 434.2 418.5 423.8 431.9 437.1 443.8 11 Farm1 44.4 37.3 39.4 44.4 47.2 39.3 29.8 41.4 12 Rental income of persons2 -5.5 24.1 27.7 30.3 15.3 34.1 32.6 28.8 13 Dividends 161.0 181.3 194.3 184.1 185.7 191.7 196.9 202.7 14 Personal interest income 665.2 637.9 664.3 627.7 631.1 649.4 674.2 702.4 15 Transfer payments 860.2 915.4 963.4 931.0 947.4 957.6 969.0 979.6 16 Old-age survivors, disability, and health insurance benefits 414.0 444.4 473.5 452.1 463.8 470.7 476.5 483.0 17 LESS: Personal contributions for social insurance 248.7 261.3 281.4 266.6 276.3 279.9 282.9 286.6 18 EQUALS: Personal income 5,154.3 5,375.1 5,701.9 5,484.6 5,555.8 5,659.9 5,734.5 5,857.5 19 LESS: Personal tax and nontax payments 648.6 686.4 742.1 707.0 723.0 746.4 744.1 754.9 20 EQUALS: Disposable personal income 4,505.8 4,688.7 4,959.8 4,777.6 4,832.8 4,913.5 4,990.3 5,102.6 21 LESS: Personal outlays 4,257.8 4,496.2 4,756.1 4,588.2 4,657.3 4,712.4 4,787.0 4,867.5 22 EQUALS: Personal saving 247.9 192.6 203.7 189.4 175.5 201.1 203.3 235.1 MEMO Per capita (1987 dollars) 23 Gross domestic product 19,489.7 19,878.8 20,469.7 20,119.1 20,235.2 20,389.7 20.536.5 20,714.5 24 Personal consumption expenditures 13,110.4 13,390.8 13,715.0 13,518.9 13,639.8 13,650.9 13.716.6 13,851.5 25 Disposable personal income 14,279.0 14,341.0 14,698.0 14,451.0 14,535.0 14,625.0 14,697.0 14,934.0 26 Saving rate (percent) 5.5 4.1 4.1 4.0 3.6 4.1 4.1 4.6 GROSS SAVING 27 Gross saving 722.9 787.5 n.a. 825.8 886.2 9233 922.6 n.a. 28 Gross private saving , 980.8 1,002.5 n.a. 1,011.4 1,037.3 1,041.4 1,052.7 n.a. 29 Personal saving 247.9 192.6 203.7 189.4 175.5 201.1 203.3 235.1 30 Undistributed corporate profits 94.3 120.9 n.a. 147.9 127.7 142.3 139.5 n.a. 31 Corporate inventory valuation adjustment -6.4 -6.2 -19.3 -6.5 -12.3 -14.1 -19.6 -31.2 Capital consumption allowances 32 Corporate 396.8 407.8 432.2 411.1 432.2 425.9 432.6 438.1 33 Noncorporate 261.8 261.2 283.2 263.0 301.8 272.1 277.3 281.4 34 Government surplus, or deficit (-), national income and product accounts -257.8 -215.0 n.a. -185.6 -151.1 -118.1 -130.1 n.a. 35 Federal -282.7 -241.4 n.a. -220.1 -176.2 -145.1 -154.0 n.a. 36 State and local 24.8 26.3 n.a. 34.5 25.2 27.0 23.9 n.a. 37 Gross investment 731.7 789.8 n.a. 809.3 850.2 8993 901.5 n.a. 38 Gross private domestic investment 788.3 882.0 1,031.6 922.5 966.6 1,034.4 1,055.1 1,070.2 39 Net foreign investment -56.6 -92.3 n.a. -113.2 -116.4 -135.1 -153.6 n.a. 40 Statistical discrepancy. 8.8 23 n.a. -16.5 -36.1 -24.0 -21.1 n.a. 1. With inventory valuation and capital consumption adjustments. SOURCE. U.S. Department of Commerce, Survey of Current 1 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 1993 1994 IItteemm ccrreeddiittss oorr ddeebbiittss 11999922 11999933 11999944pp Q4 Ql Q2 Q3 Q4P 1 Balance on current account -67,886 -103,896 -155,673 -30,587 -32,238r -37,827r -40,848 -44,758 7 Merchandise trade balance2 -96,097 -132,575 -166,364 -33,169 -37,052r -41,721r -44,615 -42,976 3 Merchandise exports 440,361 456,866 502,729 119,679 117,848r 122,510r 127,632 134,739 4 Merchandise imports -536,458 -589,441 -669,093 -152,848 -154,goo1 -164,231r -172,247 -177,715 5 Military transactions, net -3,034 -763 268 -444 -338 177 230 199 6 Other service transactions, net 58,747 57,613 59,726 13,637 13,070r 14,907r 15,647 16,102 7 Investment income, net 4,540 3,946 -15,181 -590 -820r -2,819r -4,037 -7,504 8 U.S. government grants -15,010 -14,620 -14,532 -5,591 -2,371 -3,590 -2,839 -5,731 9 U.S. government pensions and other transfers -3,735 -3,785 -4,246 -987 -889r -895r -1,474 -988 10 Private remittances and other transfers -13,297 -13,712 -15,343 -3,443 -3,838r -3,886r -3,760 -3,860 11 Change in US. government assets other than official reserve assets, net (increase, —) -1,652 -306 -277 -321 490 462 -270 --996611 12 Change in U.S. official reserve assets (increase, -) 3,901 -1,379 5,346 -673 -59 3,537 -165 2,033 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) 2,316 -537 -441 -113 -101 -108 -111 -121 15 Reserve position in International Monetary Fund -2,692 -44 494 -80 -3 251 273 -27 16 Foreign currencies 4,277 -797 5,293 -480 45 3,394 -327 2,181 17 Change in U.S. private assets abroad (increase, -) -63,759 -146,214 -130,756 -62,628 -48,887r -ll,250r -25,414 -45,208 18 Bank-reported claims 22,314 32,238 -2,033 -9,293 -1,236 15,248 1,268 -17,313 19 Nonbank-reported claims 45 -598 -9,679 -303 1,941 -4,264 -7,356 20 U.S. purchases of foreign securities, net -45,114 -119,983 -60,621 -30,349 -24,605 -14,007 -8,103 -i3,906 21 U.S. direct investments abroad, net -41,004 -57,870 -58,423 -22,683 -24,987r -8,227r -11,223 -13,989 77 Change in foreign official assets in United States (increase, +) 40,858 71,681 38,912 23,962 11,530 8,925 19,460 -1,003 7.3 U.S. Treasury securities 18,454 48,702 30,441 22,856 1,193 6,033 15,841 7,374 24 Other US. government obligations 3,949 4,062 5,988 970 50 2,355 2,003 1,580 25 Other U.S. government liabilities4 2,572 1,666 2,514 825 938 252 700 624 7.6 Other U.S. liabilities reported by U.S. banks3 16,571 14,666 2,317 -587 10,139 1,241 1,695 -10,758 27 Other foreign official assets5 -688 2,585 -2,348 -102 -790 -956 -779 177 28 Change in foreign private assets in United States (increase, +) 105,646 159,017 275,702 66,200 ss.eoo' 40,384r 60,794 90,924 29 U.S. bank-reported liabilities3 15,461 18,452 106,189 7,370 35,200 25,539 18,353 27,097 30 US. nonbank-reported liabilities 13,573 14,282 17,955 4,733 5,867 3,662 8,426 31 Foreign private purchases of U.S. Treasury securities, net 36,857 24,849 32,925 7,996 9,260 -7,434 5,111 25,988 32 Foreign purchases of other U.S. securities, net 29,867 80,068 58,562 38,008 21,258 13,152 14,168 9,984 33 Foreign direct investments in United States, net 9,888 21,366 60,071 8,093 12,015r 5,465r 14,736 27,855 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -17,108 21,096 -33,255 4,047 - 14,436r -4,231r -13,557 -1,027 36 Due to seasonal adjustment 103 5,899r 728r -6,686 62 37 Before seasonal adjustment —17,108 21,096 -33,255 3,944 -20,335 -4,959 -6,871 -1,089 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) 3,901 -1,379 5,346 -673 -59 3,537 -165 22,,003333 39 Foreign official assets in United States, excluding line 25 (increase, +) 38,286 70,015 36,398 23,137 10,592 8,673 18,760 --11,,662277 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 5,942 -3,847 -1,049 -229 -1,674 -4,149 3,726 11,,004488 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38^tO. 4. Associated primarily with military sales contracts and other transactions arranged 2. Data are on an international accounts basis. The data differ from the Census basis with or through foreign official agencies. data, shown in table 3.11, for reasons of coverage and timing. Military exports are 5. Consists of investments in U.S. corporate stocks and in debt securities of private excluded from merchandise trade data and are included in line 5. corporations and state and local governments. 3. Reporting banks include all types of depository institution as well as some brokers SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of and dealers. Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • May 1995 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1994' 1995 IItteemm 11999922 11999933 11999944'' July Aug. Sept. Oct. Nov. Dec. Jan.p 1 Goods and services, balance -40,384 -75,725 -106,370 -10,732 -9,124 -8,879 -9,996 -9,628 -7,261 -12,227 2 Merchandise -96,097 -132,575 -166,364 -15,955 -14,141 -14,517 -15,117 -15,170 -12,896 -17,191 3 Services 55,713 56,850 59,994 5,223 5,017 5,638 5,121 5,542 5,635 4,964 4 Goods and services, exports 616,924 641,677 698,016 56,510 60,291 60,510 59,881 61,909 63,611 60,697 5 Merchandise 440,361 456,866 502,729 40,101 44,054 43,485 43,289 44,814 46,490 43,978 6 Services 176,563 184,811 195,287 16,409 16,237 17,025 16,592 17,095 17,121 16,719 7 Goods and services, imports -657,308 -717,402 -804,386 -67,242 -69,415 -69,389 -69,877 -71,537 -70,872 -72,924 8 Merchandise -536,458 -589,441 -669,093 -56,056 -58,195 -58,002 -58,406 -59,984 -59,386 -61,169 9 Services -120,850 -127,961 -135,293 -11,186 -11,220 -11,387 -11,471 -11,553 -11,486 -11,755 MEMO 10 Balance on merchandise trade, Census basis -84,501 — 115,568 -151,098 —14,875 -12,788 -13,418 -13,845 -14,092 -11,644 -16,254 1. Data show monthly values consistent with quarterly figures in the U.S. balance of SOURCE. FT900, U.S. Department of Commerce, Bureau of the Census and Bureau of payments accounts. Economic Analysis. 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1994 1995 AAsssseett 11999911 11999922 11999933 Aug. Sept. Oct. Nov. Dec. Jan. Feb." 1 Total 77,719 71,323 73,442 75,740 76,532 78,172 74,000 74,335 76,027 81,439 2 Gold stock, including Exchange Stabilization Fund1 11,057 11,056 11,053 11,054 11,054 11,053 11,052 11,051 11,050 11,050 3 Special drawing rights ' 11,240 8,503 9,039 9,837 9,971 10,088 10,017 10,039 10,154 11,158 4 Reserve position in International Monetary Fund2 9,488 11,759 11,818 12,161 12,067 12,339 12,037 12,030 12,120 12,853 5 Foreign currencies4 45,934 40,005 41,532 42,688 43,440 44,692 40,894 41,215 42,703 46,378 1. Gold held "under earmark" at Federal Reserve Banks for foreign and international been used. U.S. SDR holdings and reserve positions in the IMF also have been valued on accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold this basis since July 1974. stock is valued at $42.22 per fine troy ounce. 3. Includes allocations of SDRs by the International Monetary Fund on Jan. 1 of the 2. Special drawing rights (SDRs) are valued according to a technique adopted by the year indicated, as follows: 1970—$867 million; 1971—$717 million; 1972—$710 mil- International Monetary Fund (IMF) in July 1974. Values are based on a weighted average lion; 1979—$1,139 million; 1980—$1,152 million; 1981—$1,093 million; plus net of exchange rates for the currencies of member countries. From July 1974 through transactions in SDRs. December 1980, sixteen currencies were used; since January 1981, five currencies have 4. Valued at current market exchange rates. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1994 1995 AAsssseett 11999911 11999922 11999933 Aug. Sept. Oct. Nov. Dec. Jan. Feb.p 1 Deposits 968 205 386 188 342 223 230 250 185 188 Held in custody 2 U.S. Treasury securities2 281,107 314,481 379,394 427,574 429,819 439,854 444,339 441,866 439,139 447,206 3 Earmarked gold3 13,303 13,118 12,327 12,044 12,044 12,039 12,037 12,033 12,033 12,033 1. Excludes deposits and U.S. Treasury securities held for international and regional 3. Held in foreign and international accounts and valued at $42.22 per fine troy ounce; organizations. 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, in each case measured at face (not market) 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 July Aug. Sept. 1 Total1 412,624 482,858 516,466 518,785 520,585 531,073 523,530 519,408 By type 2 Liabilities reported by banks in the United States 54,967 69,808 84,889 79,806 82,582 79,436 73,525 72,318 3 U.S. Treasury bills and certificates 104,596 150,900 146,244 143,400 138,261 147,849 143,132 139,480 U.S. Treasury bonds and notes 4 Marketable 210,931 212,253 233,720 242,936 247,624 250,465 253,111 253,693 5 Nonmarketable4 4,532 5,652 5,913 5,952 5,990 6,031 6,069 6,109 6 U.S. securities other than U.S. Treasury securities1 37,598 44,245 45,700 46,691 46,128 47,292 47,693 47,808 By area 7 Europe1 189,230 206,921 227,466 226,234 225,600 223,205 217,415 214,854 8 Canada 13,700 15,285 18,656 18,597 19,287 18,402 17,339 17,046 9 Latin America and Caribbean 37,973 55,898 42,749 44,224 44,427 47,844 45,303 41,326 10 Asia 164,690 197,758 217,931 221,100 222,971 232,191 233,654 236,174 11 Africa 3,723 4,052 3,862 4,259 4,388 4,232 4,673 4,179 12 Other countries6 3,306 2,942 5,800 4,369 3,910 5,197 5,144 5,827 1. Includes the Bank for International Settlements. 5. Debt securities of U.S. government corporations and federally sponsored agencies, 2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, and U.S. corporate stocks and bonds. negotiable time certificates of deposit, and borrowings under repurchase agreements. 6. Includes countries in Oceania and Eastern Europe. 3. Includes nonmarketable certificates of indebtedness (including those payable in SOURCE. Based on U.S. Department of the Treasury data and on data reported to the foreign currencies through 1974) and Treasury bills issued to official institutions of department by banks (including Federal Reserve Banks) and securities dealers in the foreign countries. United States, and on the 1989 benchmark survey of foreign portfolio investment in the 4. Excludes notes issued to foreign official nonreserve agencies. Includes bonds and United States. 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 1994 IItteemm 11999911 11999922 11999933 Mar. June Sept. Dec. 1 Banks' liabilities 75,129 72,796 78,120 86,459 72,312 82,183 89,534 2 Banks' claims 73,195 62,799 59,262 72,696 55,978 58,536 54,382 3 Deposits 26,192 24,240 19,404 19,684 20,499 19,623 19,122 4 Other claims 47,003 38,559 39,858 53,012 35,479 38,913 35,260 5 Claims of banks' domestic customers2 3,398 4,432 3,058 3,655 4,182 4,987 9,508 1. Data on claims exclude foreign currencies held by U.S. monetary authorities. 2. Assets owned by customers of the reporting bank located in the United 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 • May 1995 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1994 IItteemm 11999922 11999933 11999944rr July Aug. Sept. Oct. Nov. Dec. Jan.p BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 810,259 920,995 1,003,713 997,239 993,475 993,564 1,006,836 984,833r 1,003,713 1,005,841 2 Banks' own liabilities 606,444 622,847 713,253 697,021 692,920 706,331 708,805 686,124r 713,253 720,953 3 Demand deposits 21,828 21,574 25,136 23,549 22,962 23,541 24,627 23,969 25,136 27,526 4 Time deposits2 160,385 175,116 185,812 185,826 184,552 178,006 181,169 178,399r 185,812 188,346 Other3 93,237 110,144 108,811 127,500 118,816 134,614 133,661 124,104r 108,811 119,345 6 Own foreign offices4 330,994 316,013 393,494 360,146 366,590 370,170 369,348 359,652r 393,494 385,736 7 Banks' custodial liabilities5 203,815 298,148 290,460 300,218 300,555 287,233 298,031 298,709r 290,460 284,888 8 U.S. Treasury bills and certificates6 127,644 176,523 162,504 170,064 170,592 164,341 174,239 168,864r 162,504 156,424 9 Other negotiable and readily transferable instruments7 21,974 36,289 41,555 46,257 46,416 39,033 37,681 39,854r 41,555 40,435 10 Other 54,197 85,336 86,401 83,897 83,547 83,859 86,111 89,991r 86,401 88,029 11 Nonmonetary international and regional organizations8... 9,350 10,936 4,639 7,318 5,323 7,279 7,574 6,207 4,639 6,215 12 Banks' own liabilities 6,951 5,639 4,209 5,511 4,328 6,302 5,797 5,441 4,209 5,749 13 Demand deposits 46 15 29 29 36 28 83 35 29 24 14 Time deposits 3,214 2,780 2,641 3,469 2,691 2,699 2,845 2,817 2,641 3,331 15 Other3 3,691 2,844 1,539 2,013 1,601 3,575 2,869 2,589 1,539 2,394 16 Banks' custodial liabilities5 2,399 5,297 430 1,807 995 977 1,777 766 430 466 17 U.S. Treasury bills and certificates6 1,908 4,275 281 1,082 836 767 1,572 501 281 280 18 Other negotiable and readily transferable instruments7 486 1,022 149 725 159 205 205 265 149 181 19 Other 5 0 0 0 0 5 0 0 0 5 20 Official institutions9 159,563 220,708 211,798 231,133 223,206 220,843 227,285 216,657 211,798 206,969 21 Banks' own liabilities 51,202 64,231 58,867 73,967 67,619 72,109 67,580 60,735 58,867 62,058 22 Demand deposits 1,302 1,601 1,566 1,472 1,232 1,691 2,028 1,682 1,566 1,598 23 Time deposits2 17,939 21,654 22,995 27,497 25,948 26,909 23,801 20,634 22,995 22,622 24 Other3 31,961 40,976 34,306 44,998 40,439 43,509 41,751 38,419 34,306 37,838 25 Banks' custodial liabilities5 108,361 156,477 152,931 157,166 155,587 148,734 159,705 155,922 152,931 144,911 26 U.S. Treasury bills and certificates6 104,596 150,900 139,480 146,244 143,400 138,261 147,849 143,132 139,480 132,924 27 Other negotiable and readily transferable instruments7 3,726 5,482 13,245 10,863 12,054 10,407 11,820 12,773 13,245 11,947 28 Other 39 95 206 59 133 66 36 17 206 40 29 Banks10 547,320 588,448 674,564 649,670 652,508 646,547 653,356 643,185r 674,564 675,235 30 Banks' own liabilities 476,117 476,426 564,548 536,234 536,398 538,016 545,107 532,222r 564,548 564,444 31 Unaffiliated foreign banks 145,123 160,413 171,054 176,088 169,808 167,846 175,759 172,570 171,054 178,708 32 Demand deposits 10,170 9,719 13,073 11,792 11,837 10,555 11,023 11,259 13,073 14,369 33 Time deposits2 90,296 105,192 111,659 106,888 107,110 101,741 106,646 106,087' 111,659 112,191 34 Other3 44,657 45,502 46,322 57,408 50,861 55,550 58,090 55,224r 46,322 52,148 35 Own foreign offices4 330,994 316,013 393,494 360,146 366,590 370,170 369,348 359,652r 393,494 385,736 36 Banks' custodial liabilities5 71,203 112,022 110,016 113,436 116,110 108,531 108,249 110,963r 110,016 110,791 37 U.S. Treasury bills and certificates6 11,087 10,707 11,043 10,138 12,249 10,951 10,771 11,690* 11,043 10,884 38 Other negotiable and readily transferable instruments 7,555 17,020 14,279 21,446 22,049 15,388 13,248 13,550* 14,279 14,182 39 Other 52,561 84,295 84,694 81,852 81,812 82,192 84,230 85,723* 84,694 85,725 40 Other foreigners 94,026 100,903 112,712 109,118 112,438 118,895 118,621 118,784* 112,712 117,422 41 Banks' own liabilities 72,174 76,551 85,629 81,309 84,575 89,904 90,321 87,726 85,629 88,702 42 Demand deposits 10,310 10,239 10,468 10,256 9,857 11,267 11,493 10,993 10,468 11,535 43 Time deposits2 48,936 45,490 48,517 47,972 48,803 46,657 47,877 48,861 48,517 50,202 44 Other3 12,928 20,822 26,644 23,081 25,915 31,980 30,951 27,872 26,644 26,965 45 Banks' custodial liabilities5 21,852 24,352 27,083 27,809 27,863 28,991 28,300 31,058* 27,083 28,720 46 U.S. Treasury bills and certificates6 10,053 10,641 11,700 12,600 14,107 14,362 14,047 13,541* 11,700 12,336 47 Other negotiable and readily transferable instruments 10,207 12,765 13,882 13,223 12,154 13,033 12,408 13,266* 13,882 14,125 48 Other 1,592 946 1,501 1,986 1,602 1,596 1,845 4,251* 1,501 2,259 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 9,111 17,567 17,928 25,589 25,338 19,160 16,813 17,417 17,928 16,487 1. Reporting banks include all types of depository institutions, as well as some brokers 6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to and dealers. official institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in "Other 7. Principally bankers acceptances, commercial paper, and negotiable time certificates negotiable and readily transferable instruments." of deposit. 3. Includes borrowing under repurchase agreements. 8. Principally the International Bank for Reconstruction and Development, the Inter- 4. For U.S. banks, includes amounts owed to own foreign branches and foreign American Development Bank, and the Asian Development Bank. Excludes "holdings of subsidiaries consolidated in quarterly Consolidated Reports of Condition filed with bank dollars" of the International Monetary Fund. regulatory agencies. For agencies, branches, and majority-owned subsidiaries of foreign 9. Foreign central banks, foreign central governments, and the Bank for International banks, consists principally of amounts owed to the head office or parent foreign bank, and Settlements. to foreign branches, agencies, or wholly owned subsidiaries of the head office or parent 10. Excludes central banks, which are included in "Official institutions." 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

Bank-Reported Data A57 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1994 1995 IItteemm 11999922 11999933 11999944rr July Aug. Sept. Oct. Nov. Dec. Jan.p AREA 1 Total, all foreigners 810,259 920,995 1,003,713 997,239 993,475 993,564 1,006,836 984,833r 1,003,713 1,005,841 2 Foreign countries 800,909 910,059 999,074 989,921 988,152 986,285 999,262 978,626' 999,074 999,626 3 Europe 307,670 376,988 389,658 422,577 419,932 406,937 413,278 393,102r 389,658 391,769 4 Austria 1,611 1,917 3,649 3,364 3,349 3,014 3,610 4,264 3,649 3,331 5 Belgium and Luxembourg 20,567 28,627 21,758 25,145 27,159 27,593 23,591 22,346 21,758 21,578 6 Denmark 3,060 4,517 2,776 2,877 2,634 2,128 2,374 2,307 2,776 2,657 7 Finland 1,299 1,872 1,433 2,504 1,747 2,319 2,601 1,587 1,433 2,396 8 France 41,411 39,741 44,704 41,410 41,911 43,143 44,209 41,160 44,704 42,251 9 Germany 18,630 26,613 27,004 30,838 31,046 31,889 33,136 31,049 27,004 28,491 10 Greece 913 1,519 1,389 1,153 1,199 1,227 1,711 1,477 1,389 1,228 11 Italy 10,041 11,559 10,760 11,537 11,725 10,781 10,701 9,685 10,760 10,151 12 Netherlands 7,365 16,096 15,990 18,446 17,199 18,754 18,034 17,310 15,990 14,830 13 Norway 3,314 2,966 2,336 3,731 3,195 2,861 3,400 2,807 2,336 2,306 14 Portugal 2,465 3,366 2,845 2,865 2,867 3,023 2,861 2,919 2,845 2,862 15 Russia 577 2,511 2,063 4,593 3,794 2,899 2,337 2,367 2,063 1,449 16 Spain 9,793 20,493 14,588 17,137 15,455 14,198 16,324 15,038r 14,588 15,113 17 Sweden 2,953 2,572 3,093 5,709 4,149 4,651 3,467 3,361 3,093 2,258 18 Switzerland 39,440 41,555 41,863 41,378 43,486 41,050 41,834 41,756 41,863 39,505 19 Turkey 2,666 3,227 3,301 3,515 3,238 3,013 3,133 3,032 3,301 3,598 20 United Kingdom 111,805 133,936 162,527 171,239 174,078 160,361 171,954 162,775 162,527 173,839 21 Yugoslavia" 504 570 245 230 227 224 220 240 245 261 22 Other Europe and other former U.S.S.R. 29,256 33,331 27,534 34,906 31,474 33,909 27,981 27,822 27,534 23,865 23 Canada 22,420 20,227 23,947 26,625 26,341 24,660 23,115 23,295 23,947 26,498 24 Latin America and Caribbean 317,228 357,380 417,529 375,700 377,864 384,805 386,867 393,001r 417,529 408,971 25 Argentina 9,477 14,477 17,177 14,592 14,806 13,783 15,577 15,950 17,177 12,766 26 Bahamas 82,284 73,150 105,344 87,264 83,260 86,011 88,168 89,597 105,344 99,281 27 Bermuda 7,079 7,830 7,803 10,103 8,422 10,334 8,936 7,615 7,803 8,901 28 Brazil 5,584 5,301 9,121 6,261 5,697 5,670 6,195 6,723r 9,121 8,964 29 British West Indies 153,033 190,446 223,525 198,471 204,677 208,452 205,671 211,547r 223,525 225,035 30 Chile 3,035 3,183 3,111 3,353 2,988 3,407 3,078 3,741 3,111 2,965 31 Colombia 4,580 3,171 4,603 3,773 3,726 4,027 4,471 4,417' 4,603 4,302 32 Cuba 3 33 13 12 13 13 7 7 13 12 33 Ecuador 993 880 874 819 847 823 830 825 874 1,339 34 Guatemala 1,377 1,207 1,117 1,207 1,142 1,103 1,076 l,036r 1,117 1,056 35 Jamaica 371 410 520 518 531 565 589 513 520 439 36 Mexico 19,454 28,018 12,232 20,182 20,821 19,937 21,254 19,199r 12,232 12,596 37 Netherlands Antilles 5,205 4,195 4,516 4,301 5,058 4,268 4,146 4,838 4,516 3,831 38 Panama 4,177 3,582 4,540 4,087 3,843 4,082 4,077 4,598 4,540 4,803 39 Peru 1,080 926 896 916 1,027 1,079 1,027 935 896 889 40 Uruguay 1,955 1,611 1,595 1,420 1,336 1,399 1,471 1,595 1,795 41 Venezuela 11,387 12,786 13,954 12,004 13,157 13,297 13,805 13,833' 13,954 13,412 42 Other 6,154 6,174 6,588 6,417 6,513 6,555 6,489 6,437 6,588 6,585 43 143,540 144,639 155,105 151,279 152,530 158,328 163,346 157,086 155,105 159,152 China 44 People's Republic of China 3,202 4,011 10,063 5,018 4,394 5,062 5,625 8,017 10,063 12,908 45 Republic of China (Taiwan) 8,408 10,633 9,794 8,811 8,737 8,863 9,483 10,929 9,794 9,136 46 Hong Kong 18,499 17,233 17,188 18,759 18,679 18,819 18,244 17,573r 17,188 18,425 47 India 1,399 1,114 2,336 1,695 1,777 2,187 2,376 2,377r 2,336 2,293 48 Indonesia 1,480 1,986 1,561 1,676 1,835 1,828 1,734 1,613 1,561 1,598 49 Israel 3,773 4,435 5,150 3,822 3,436 3,204 6,607 5,066 5,150 5,470 50 Japan 58,435 61,466 64,030 65,671 65,755 68,242 66,145 63,331 64,030 61,566 51 Korea (South) 3,337 4,913 5,104 5,310 4,873 4,622 4,740 5,016 5,104 4,792 52 Philippines 2,275 2,035 2,709 3,396 3,214 3,135 3,158 3,064 2,709 2,612 53 Thailand 5,582 6,137 6,466 5,222 6,364 6,503 5,682 5,926 6,466 8,216 54 Middle Eastern oil-exporting countries 21,437 15,824 15,433 14,935 15,928 17,138 17,232 17,678 15,433 16,136 55 Other 15,713 14,852 15,271 16,964 17,538 18,725 22,320 16,496 15,271 16,000 56 5,884 6,633 6,458 6,153 6,360 6,278 6,375 6,939 6,458 6,270 57 Egypt 2,472 2,208 1,839 1,706 1,914 2,014 1,996 2,097 1,839 1,721 58 Morocco 76 99 93 80 82 72 66 67 93 74 59 South Africa 190 451 433 289 417 197 245 693 433 285 60 Zaire 19 12 9 8 8 9 9 10 9 10 61 Oil-exporting countries14 1,346 1,303 1,343 1,291 1,156 1,186 1,176 1,227 1,343 1,409 62 Other 1,781 2,560 2,741 2,779 2,783 2,800 2,883 2,845 2,741 2,771 63 Other 4,167 4,192 6,377 7,587 5,125 5,277 6,281 5,203 6,377 6,966 64 Australia 3,043 3,308 5,141 6,288 3,935 3,966 5,114 4,094 5,141 5,395 65 Other 1,124 884 1,236 1,299 1,190 1,311 1,167 1,109 1,236 1,571 66 Nonmonetary international and regional organizations.... 9,350 10,936 4,639 7,318 5,323 7,279 7,574 6,207 4,639 6,215 67 International15 7,434 6,851 3,634 5,446 3,998 5,350 5,847 4,361 3,634 4,852 68 Latin American regional 1,415 3,218 551 612 418 1,058 950 1,094 551 865 69 Other regional17 501 867 454 1,260 907 871 777 752 454 498 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 14. Comprises Algeria, Gabon, Libya, and Nigeria. 12. Includes the Bank for International Settlements. Since December 1992, has 15. Principally the International Bank for Reconstruction and Development. Excludes included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and "holdings of dollars" of the International Monetary Fund. Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabi aa,nd United 17. Asian, African, Middle Eastern, and European regional organizations, except the Arab Emirates (Trucial States). Bank for International Settlements, which is included in "Other Europe." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • May 1995 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 1994 1995 AArreeaa oorr ccoouunnttrryy 11999922 11999933 11999944rr July Aug. Sept. Oct. Nov. Dec. Jan.p 1 Total, all foreigners 499,437 483,600 477,429 468,933 478,179 474,585 478,822 464,104r 477,429 478,613 2 Foreign countries 494,355 481,195 473,306 467,537 476,220 471,321 476,817 462,81lr 473,306 475,627 3 Europe 123,377 121,253 122,651 123,072 124,237 119,758 131,486 119,780r 122,651 124,866 4 Austria 331 413 692 470 442 282 440 369 692 350 Belgium and Luxembourg 6,404 6,535 6,644 6,915 6,543 7,250 6,323 6,237 6,644 5,545 6 Denmark 707 382 1,039 622 464 521 880 668 1,039 480 7 Finland 1,418 594 696 735 507 599 591 718 696 722 8 France 14,723 11,497 12,128 13,263 15,992 14,829 16,292 12,906 12,128 12,610 9 Germany 4,222 7,693 6,642 7,927 9,996 8,650 8,496 8,46c 6,642 8,461 10 Greece 717 679 592 583 657 613 520 518 592 668 11 Italy 9,047 8,845 6,052 6,039 5,518 5,308 6,652 5,920 6,052 6,730 12 Netherlands 2,468 3,063 2,914 3,006 2,948 2,854 3,358 3,360 2,914 2,870 13 Norway 355 396 504 751 826 650 905 981 504 11,,006699 14 Portugal 325 834 938 1,035 1,040 1,182 1,056 1,006 938 998888 15 Russia 3,147 2,310 949 1,541 1,378 1,272 1,220 1,172 949 1,148 16 Spain 2,755 2,766 3,532 1,900 2,664 2,211 2,731 2,174 3,532 2,944 17 Sweden 4,923 4,082 4,111 3,601 4,168 3,903 3,156 3,596 4,111 3,837 18 Switzerland 4,717 6,567 7,493 9,028 6,938 5,854 7,670 6,544 7,493 9,025 19 Turkey 962 1,287 860 1,208 1,152 1,024 1,142 912r 860 548 20 United Kingdom 63,430 60,997 65,435 62,492 61,264 60,518 68,211 62,525 65,435 64,865 21 Yugoslavia^. 569 536 265 275 273 258 266 266 265 265 22 Other Europe and other former U.S.S.R.3 2,157 1,777 1,165 1,681 1,467 1,980 1,577 l,448r 1,165 1,741 23 Canada 13,845 18,413 17,974 19,888 19,678 19,226 16,384 17,785r 17,974 18,709 24 Latin America and Caribbean 218,078 224,112 220,152 215,608 223,297 220,137 221,254 216,326r 220,152 220,529 25 Argentina 4,958 4,427 5,782 5,811 5,876 5,585 5,588 5,717r 5,782 5,837 26 Bahamas 60,835 65,060 66,638 67,955 63,358 63,096 65,196 61,219r 66,638 64,018 27 Bermuda 5,935 8,034 7,472 5,783 7,328 5,430 5,186 6,697 7,472 14,608 28 Brazil 10,773 11,812 9,449 10,547 10,051 10,278 10,188 9,781' 9,449 9,625 29 British West Indies 101,507 97,997 94,264 89,528 100,519 100,657 99,345 95,922' 94,264 90,141 30 Chile 3,397 3,616 3,787 3,327 3,410 3,391 3,429 3,628' 3,787 3,866 31 Colombia 2,750 3,179 4,003 3,326 3,414 3,459 3,670 3,768 4,003 3,816 32 Cuba 0 0 0 8 0 0 12 C 0 0 33 Ecuador 884 680 685 683 604 624 628 635' 685 712 34 Guatemala 262 286 366 308 320 310 337 335 366 349 35 Jamaica 162 195 254 186 210 204 255 251 254 253 36 Mexico 14,991 15,838 17,496 16,378 16,459 16,223 16,825 17,405' 17,496 17,300 37 Netherlands Antilles 1,379 2,367 1,018 2,118 2,139 1,295 1,158 1,781 1,018 1,205 38 Panama 4,654 2,892 2,190 2,335 2,386 2,372 2,307 22,,330044 2,190 2,156 39 Peru 730 653 959 926 924 943 857 888844 959 997 40 Uruguay 936 952 485 748 706 711 800 652 485 420 41 Venezuela 2,525 2,907 1,830 2,240 2,146 2,055 1,934 1,921 1,830 1,716 42 Other 1,400 3,217 3,474 3,401 3,447 3,504 3,539 3,426' 3,474 3,510 43 131,789 110,751 106,365 102,408 102,391 105,597 101,197 110033,,005511'' 110066,,336655 110044,,774455 China 44 People's Republic of China 906 2,299 835 951 764 1,177 822 817 835 923 45 Republic of China (Taiwan) 2,046 2,628 1,386 1,786 1,807 1,256 1,467 1,485 1,386 1,245 46 Hong Kong 9,642 10,878 9,171 10,045 9,921 13,066 10,354 11,228 9,171 10,291 47 India 529 589 980 791 829 950 971 1,021 980 1,099 48 Indonesia 1,189 1,522 1,454 1,369 1,363 1,343 1,326 1,364' 1,454 1,478 49 Israel 820 826 691 638 675 663 860 696 691 673 50 Japan 79,172 59,616 58,936 53,286 52,597 52,872 50,032 53,356 58,936 54,742 51 Korea (South) 6,179 7,569 9,998 8,112 8,553 8,639 8,948 8,933 9,998 10,533 5'2 Philippines 2,145 1,408 636 514 533 562 639 583 636 563 53 Thailand 1,867 2,154 2,818 2,839 2,784 2,686 2,756 2,676 2,818 2,795 54 Middle Eastern oil-exporting countries4 18,540 14,398 13,732 16,342 16,080 15,293 15,424 14,454 13,732 14,084 55 Other 8,754 6,864 5,728 5,735 6,485 7,090 7,598 6,438 5,728 6,319 56 4,279 3,857 2,989 3,456 3,659 3,473 3,147 3,085 2,989 2,937 57 Egypt 186 196 225 234 229 250 237 229 225 227 58 Morocco 441 481 429 479 485 490 468 480 429 415 59 South Africa 1,041 633 652 492 656 569 480 454 652 657 60 Zaire 4 4 2 3 3 3 3 3 2 2 61 Oil-exporting countries5 1,002 1,129 842 1,194 1,189 1,103 955 879 842 825 62 Other 1,605 1,414 839 1,054 1,097 1,058 1,004 1,040 839 811 63 Other 2,987 2,809 3,175 3,105 2,958 3,130 3,349 2,784 3,175 3,841 64 Australia 2,243 2,072 2,303 1,587 1,390 1,810 2,158 1,687 2,303 2,203 65 Other 744 737 872 1,518 1,568 1,320 1,191 1,097 872 1,638 66 Nonmonetary international and regional organizations6... 5,082 2,405 4,123 1,396 1,959 3,264 2,005 1,293 4,123 2,986 1. Reporting banks include all types of depository institutions, as well as some brokers 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab and dealers. 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, has included 6. Excludes the Bank for International Settlements, which is included in "Other all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Europe." 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 States1 Payable in U.S. Dollars Millions of dollars, end of period 1994 1995 TTyyppee ooff ccllaaiimm 11999922 11999933 11999944'' July Aug. Sept. Oct. Nov. Dec. Jan.'' 1 Ibtal 559,495 535,131 546,763 528,287 546,763 2 Banks' claims 499,437 483,600 477,429 468,933 478,179 474,585 478,822 464,104 477,429 478,613 3 Foreign public borrowers 31,367 28,904 22,911 21,536 22,392 24,419 22,144 20,571 22,911 22,827 4 Own foreign offices 303,991 286,880 282,532 283,848 287,022 283,308 287,017 276,503 282,532 278,156 5 Unaffiliated foreign banks 109,342 98,165 109,278 100,922 102,200 100,414 106,566 103,419 109,278 103,913 6 Deposits 61,550 47,039 58,131 50,849 49,809 50,736 52,709 50,418 58,131 53,715 7 Other 47,792 51,126 51,147 50,073 52,391 49,678 53,857 53,001 51,147 50,198 8 All other foreigners 54,737 69,651 62,708 62,627 66,565 66,444 63,095 63,611 62,708 73,717 9 Claims of banks' domestic customers3 60,058 51,531 69,334 53,702 69,334 10 Deposits 15,452 20,006 35,649 24,441 35,649 11 Negotiable and readily transferable instruments4 31,474 17,842 20,658 16,246 20,658 12 Outstanding collections and other claims 13,132 13,683 13,027 13,015 13,027 MEMO 13 Customer liability on acceptances 8,655 7,854 8,315 7,605 8,315 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 38,623 26,073 26,875 22,880 23,026 24,574 23,268' 27,856 26,875 n.a. 1. For banks' claims, data are monthly; for claims of banks' domestic customers, data and to foreign branches, agencies, or wholly owned subsidiaries of the head office or are for quarter ending with month indicated. parent foreign bank. Reporting banks include all types of depository institution, as well as some brokers and 3. Assets held by reporting banks in the accounts of their domestic customers. dealers. 4. Principally negotiable time certificates of deposit and bankers acceptances. 2. For U.S. banks, includes amounts due from own foreign branches and foreign 5. Includes demand and time deposits and negotiable and nonnegotiable certificate sof subsidiaries consolidated in quarterly Consolidated Reports of Condition filed with bank deposit denominated in US. dollars issued by banks abroad. For description of changes in regulatory agencies. For agencies, branches, and majority-owned subsidiaries of foreign data reported by nonbanks, see Federal Reserve Bulletin, vol. 65 (July 1979), p. 550. banks, consists principally of amounts due from the head office or parent foreign bank. 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 1994 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999911 11999922 11999933 Mar. June Sept. Dec.p 1 Total 195,302 195,119 195,180 193,306 185,359 190,159 194,184 By borrower 2 Maturity of one year or less 162,573 163,325 166,567 166,741 160,270 164,659 169,295 3 Foreign public borrowers 21,050 17,813 17,563 15,953 12,786 16,703 14,937 4 All other foreigners 141,523 145,512 149,004 150,788 147,484 147,956 154,358 5 Maturity of more than one year 32,729 31,794 28,613 26,565 25,089 25,500 24,889 6 Foreign public borrowers 15,859 13,266 10,813 9,260 8,056 7,379 7,675 7 All other foreigners 16,870 18,528 17,800 17,305 17,033 18,121 17,214 By area Maturity of one year or less 8 Europe 51,835 53,300 56,432 58,919 51,037 57,719 56,259 9 Canada 6,444 6,091 7,545 7,272 8,258 7,202 7,251 10 Latin America and Caribbean 43,597 50,376 56,720 58,942 56,552 56,779 58,817 11 Asia 51,059 45,709 40,341 36,007 37,992 36,161 39,751 12 Africa 2,549 1,784 1,821 1,620 1,798 1,496 1,364 13 All other3 7,089 6,065 3,708 3,981 4,633 5,302 5,853 Maturity of more than one year 14 Europe 3,878 5,367 4,404 3,840 3,327 3,609 3,642 15 Canada 3,595 3,287 2,553 2,548 2,451 2,607 2,373 16 Latin America and Caribbean 18,277 15,312 13,863 13,023 12,420 12,145 11,958 17 Asia 4,459 5,038 5,412 4,704 4,607 4,841 4,551 18 Africa 2,335 2,380 1,934 2,001 1,849 1,836 1,549 19 All other3 185 410 447 449 435 462 816 1. Reporting banks include all kinds of depository institutions besides commercial 2 .Maturity is time remaining to maturity, 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 • May 1995 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1992 1993 1994 AArreeaa oorr ccoouunnttrryy 11999900 11999911 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec.p 1 Total 320.1 343.6 346.5 361.1 377.1 388.4 404.1 489.3 499.4r 504.1r 506.8 2 G-10 countries and Switzerland 132.2 137.6 132.9 142.5 150.0 153.3 161.1 178.1 171.4r lss.t/ 187.3 3 Belgium and Luxembourg .0 6.0 5.6 6.1 7.0 7.1 7.4 8.1 8.8 9.7r 7.0 4 10.4 11.0 15.3 13.5 14.0 12.3 11.7 16.4 18.8 20.7r 19.1 5 Germany 10.6 8.3 9.3 9.9 10.8 12.4 12.6 28.7 24.4 23.5r 24.4 6 5.0 5.6 6.5 6.7 7.9 8.7 7.7 15.5 14.0 11.6 11.8 7 Netherlands .0 4.7 2.8 3.6 3.7 3.7 4.7 4.1 3.6 3.4 3.5 8 Sweden 2.2 1.9 2.3 3.0 2.5 2.5 2.5 2.8 2.9 2.6 2.7 9 Switzerland 4.4 3.4 4.8 5.3 4.7 5.6 5.9 6.3 6.5 6.2 6.9 10 United Kingdom 60.9 68.5 60.8 65.7 73.5 74.7 84.5 69.9 63.3r 81.5r 81.8 11 Canada 5.9 5.8 6.3 8.2 8.0 9.7 6.7 7.6 9.5 9.8 9.5 12 24.0 22.6 19.3 20.4 17.9 16.8 17.4 18.7 19.5 16.0 20.5 13 Other industrialized countries 22.9 22.8 24.0 25.4 27.2 26.0 24.6 41.2 41.6 41.5 44.3 14 Austria 1.4 .6 1.2 1.2 1.3 .6 .4 1.0 1.0 1.0 1.1 15 Denmark 1.1 .9 .9 .8 1.0 1.1 1.0 1.1 1.1 .8 1.2 16 Finland .7 .7 .7 .7 .9 .6 .4 1.0 .8 .8 1.0 17 Greece 2.7 2.6 3.0 2.7 3.1 3.2 3.2 3.8 4.6 4.3 4.5 18 Norway 1.6 1.4 1.2 1.8 1.8 2.1 1.7 1.6 1.6 1.6 2.0 19 Portugal .6 .6 .4 .7 .9 1.0 .8 1.2 1.1 1.0 1.2 20 8.3 8.3 8.9 9.5 10.5 9.3 8.9 12.3 11.7 13.1 13.6 21 Turkey 1.7 1.4 1.3 1.4 2.1 2.1 2.1 2.4 2.1 1.8 1.6 22 Other Western Europe 1.2 1.8 1.7 2.0 1.7 2.2 2.6 3.0 2.8 1.0 2.7 23 South Africa 1.8 1.9 1.7 1.6 1.3 1.2 1.1 1.2 1.2 1.2 1.0 24 Australia 1.8 2.7 2.9 2.9 2.5 2.8 2.3 12.7 13.7 15.0 14.4 25 OPEC2 12.8 14.5 16.1 16.6 15.7 14.8 16.7 22.5 21.5 21.5 22.1 26 Ecuador 1.0 .7 .6 .6 .6 .5 .5 .5 .5 .4 .5 27 Venezuela 5.0 5.4 5.2 5.1 5.5 5.4 5.1 4.7 4.4 3.9 3.7 28 Indonesia 2.7 2.7 3.0 3.1 3.1 2.8 3.2 3.4 3.2 3.2 3.6 29 Middle East countries 2.5 4.2 6.2 6.6 5.4 4.9 6.7 12.8 12.4 13.0 13.4 30 African countries 1.7 1.5 1.1 1.1 1.1 1.1 1.2 1.1 1.1 1.0 .9 31 Non-OPEC developing countries 65.4 63.9 72.1 74.4 76.7 77.0 82.6 93.5 93.9 91.9 94.9 Latin America 32 Argentina 5.0 4.8 6.6 7.1 6.6 7.2 7.7 8.7 9.8 10.5 11.1 33 Brazil 14.4 9.6 10.8 11.6 12.3 11.7 12.0 12.5 11.8 9.1 8.2 34 Chile 3.5 3.6 4.4 4.6 4.6 4.7 4.7 5.1 5.1 5.4 6.1 35 Colombia 1.8 1.7 1.8 1.9 1.9 2.0 2.1 2.2 2.4 2.4 2.6 36 Mexico 13.0 15.5 16.0 16.8 16.8 17.5 17.7 18.7 18.3 19.5 18.1 37 Peru .5 .4 .5 .4 .4 .3 .4 .5 .6 .6 .5 38 Other 2.3 2.1 2.6 2.7 2.7 2.7 3.0 2.7 2.7 2.7 2.5 Asia China 39 Peoples Republic of China .2 .3 .7 .6 1.6 .5 2.0 .8 .7 1.0 1.1 40 Republic of China (Taiwan) 3.5 4.1 5.2 5.3 5.9 6.4 7.3 7.5 7.1 6.9 9.1 41 3.3 3.0 3.2 3.1 3.1 2.9 3.2 3.6 3.7 3.9 4.2 42 .5 .5 .4 .5 .4 .4 .5 .4 .4 .4 .4 43 Korea (South) 6.2 6.8 6.6 6.5 6.9 6.5 6.7 13.9 14.1 13.9 14.1 44 Malaysia 1.9 2.3 3.1 3.4 3.7 4.1 4.4 5.2 5.2 3.9 3.3 45 Philippines 3.8 3.7 3.6 3.4 2.9 2.6 3.1 3.4 3.2 2.9 3.3 46 Thailand 1.5 1.7 2.2 2.2 2.4 2.8 3.1 2.9 3.3 3.4 3.7 47 Other Asia 1.7 2.0 2.7 2.7 2.6 3.0 2.9 3.1 3.5 3.6 4.8 Africa 48 Egypt .4 .4 .2 .2 .2 .2 .4 .4 .5 .3 .3 49 Morocco .8 .7 .6 .5 .6 .6 .7 .7 .7 .7 .6 50 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 1.0 .7 1.0 .8 .9 .8 .8 1.0 .9 .9 .8 52 Eastern Europe 2.3 2.4 3.1 2.9 3.2 3.0 3.1 3.4 3.0 3.0r 2.6 53 Russia4 .2 .9 1.9 1.7 1.9 1.7 1.6 1.5 1.2 1.1 .8 54 Yugoslavia5 1.2 .9 .6 .6 .6 .6 .6 .5 .5 .5 .5 55 Other .9 .7 .6 .7 .8 .7 .9 1.4 1.4 1.5r 1.3 56 Offshore banking centers 44.7 54.2 58.3 60.3 58.0 67.9 72.5 78.3 76.5r 75.4r 68.8 57 Bahamas 2.9 11.9 6.9 9.7 7.1 12.7 12.6 15.5 13.6 13.9r 10.4 58 Bermuda 4.4 2.3 6.2 4.1 4.5 5.5 8.1 8.4 6.1 5.3 7.3 59 Cayman Islands and other British West Indies 11.7 15.8 21.8 17.6 15.6 15.1 17.0 17.2 20.0 20.4r 18.7 60 Netherlands Antilles 7.9 1.2 1.1 1.6 2.5 2.8 2.3 2.7 2.4 1.7 .9 61 Panama6 1.4 1.4 1.9 2.0 2.1 2.1 2.4 2.0 1.9 1.8 1.5 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 9.7 14.4 13.8 16.7 16.9 19.1 18.7 19.7 21.8 20.3 19.8 64 Singapore 6.6 7.1 6.5 8.4 9.3 10.4 11.2 12.7 10.6r 11.8 10.0 65 Other' .0 .0 .0 .0 .0 .0 .1 .0 .0 ,0r .1 66 Miscellaneous and unallocated8 39.9 48.0 39.7 38.8 46.2 46.3 43.3 72.0 91.0 85.4r 86.7 1. The banking offices covered by these data include U.S. offices and foreign branches 3. Excludes Liberia. Beginning March 1994 includes Namibia. of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not 4. As of December 1992, excludes other republics of the former Soviet Union. covered include U.S. agencies and branches of foreign banks. Beginning March 1994, the 5. As of December 1992, excludes Croatia, Bosnia and Hercegovinia, and Slovenia. data include large foreign subsidiaries of U.S. banks. The data also include other types of 6. Includes Canal Zone. U.S. depository institutions as well as some types of brokers and dealers. To eliminate 7. Foreign branch claims only. duplication, the data are adjusted to exclude the claims on foreign branches held by a U.S. 8. Includes New Zealand, Liberia, and international and regional organizations. office or another foreign branch of the same banking institution. 2. Organization of Petroleum Exporting Countries, shown individually; other members of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates); and Bahrain and Oman (not formally members of OPEC). 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 1993 1994 Type of liability, and area or country 11999900 11999911 11999922 June Sept. Dec. Mar. June Sept. 1 Total 46,043 44,708 45,331 46,502 48,513 49,645 51,728 55,265 56,917 2 Payable in dollars 40,786 39,029 37,276 36,988 39,270 38,361 38,074 42,463 42,536 3 Payable in foreign currencies 5,257 5,679 8,055 9,514 9,243 11,284 13,654 12,802 14,381 By type 4 Financial liabilities 21,066 22,518 23,661 25,100 26,731 28,254 30,111 33,226 35,580 5 Payable in dollars 16,979 18,104 16,780 16,935 18,705 18,175 18,481 22,424 23,081 6 Payable in foreign currencies 4,087 4,414 6,881 8,165 8,026 10,079 11,630 10,802 12,499 7 Commercial liabilities 24,977 22,190 21,670 21,402 21,782 21,391 21,617 22,039 21,337 8 Trade payables 10,683 9,252 9,566 9,358 9,215 8,787 8,944 9,855 9,534 9 Advance receipts and other liabilities ... 14,294 12,938 12,104 12,044 12,567 12,604 12,673 12,184 11,803 10 Payable in dollars 23,807 20,925 20,496 20,053 20,565 20,186 19,593 20,039 19,455 11 Payable in foreign currencies 1,170 1,265 1,174 1,349 1,217 1,205 2,024 2,000 1,882 By area or country Financial liabilities 12 Europe 10,978 12,003 13,207 14,199 16,445 18,185 20,293 23,564 23,552 13 Belgium and Luxembourg 394 216 414 268 278 175 525 503 650 14 France 975 2,106 1,623 2,219 2,077 2,326 2,589 1,590 2,241 15 Germany 621 682 889 863 855 975 1,214 939 1,467 16 Netherlands 1,081 1,056 606 585 573 534 564 533 648 17 Switzerland 545 408 569 491 378 634 1,200 631 633 18 United Kingdom 6,357 6,528 8,430 9,118 11,694 12,925 13,595 18,151 16,598 19 Canada 229 292 544 493 663 859 508 698 618 20 Latin America and Caribbean 4,153 4,784 4,053 4,199 3,719 3,359 3,553 3,282 3,159 21 Bahamas 371 537 379 476 1,301 1,148 1,157 1,052 1,112 22 Bermuda 0 114 114 124 114 0 120 115 15 23 Brazil 0 6 19 18 18 18 18 18 7 24 British West Indies 3,160 3,524 2,850 2,901 1,600 1,533 1,613 1,454 1,364 25 Mexico 5 7 12 11 15 17 14 13 15 26 Venezuela 4 4 6 5 5 5 5 5 5 27 Asia2 5,295 5,381 5,818 6,039 5,754 5,689 5,601 5,643 8,099 28 Japan . 4,065 4,116 4,750 4,857 4,725 4,620 4,589 4,709 6,897 29 Middle Eastern oil-exporting countries' 5 13 19 19 23 23 24 24 31 30 Africa .. 2 6 6 130 132 133 133 9 133 0 4 0 123 124 123 124 0 123 31 Oil-exporting countries 409 52 33 40 18 29 23 30 19 32 Allother5 Commercial liabilities 10,310 8,701 7,398 6,804 7,048 6,830 6,545 6,903 6,870 33 Europe 275 248 298 269 257 239 252 254 287 34 Belgium and Luxembourg 1,218 1,039 700 774 642 654 553 711 742 35 France 1,270 1,052 729 603 571 684 577 669 552 36 Germany 844 710 535 576 600 688 628 642 674 37 Netherlands 775 575 350 441 536 375 387 472 391 38 Switzerland 2,792 2,297 2,505 2,186 2,319 2,051 2,155 2,309 2,358 39 United Kingdom 40 Canada 1,261 1,014 1,002 939 845 881 1,037 1,062 1,071 41 Latin America and Caribbean 1,672 1,355 1,533 1,824 1,754 1,663 1,907 2,004 1,787 42 Bahamas 12 3 3 6 4 21 8 2 6 43 Bermuda 538 310 307 356 340 348 493 416 200 44 Brazil 145 219 209 226 214 216 211 217 148 45 British West Indies 30 107 33 16 35 26 19 23 33 46 Mexico 475 307 457 658 576 483 556 705 670 47 Venezuela 130 94 142 172 173 126 150 194 192 48 Asia2 9,483 9,334 10,594 10,518 10,915 10,961 10,904 10,898 10,480 49 Japan 3,651 3,721 3,612 3,390 3,726 4,310 4,612 4,385 4,234 50 Middle Eastern oil-exporting countries' 2,016 1,498 1,889 1,815 1,968 1,526 1,533 1,813 1,675 51 Africa .. 844 715 568 665 641 464 490 523 482 52 Oil-exporting countries 422 327 309 378 320 171 199 247 271 53 Other5 1,406 1,071 575 652 579 592 734 649 647 1. For a description of the changes in the international statistics tables, see Federal 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Reserve Bulletin, vol. 65, (July 1979), p. 550. Emirates (Trucial States). 2. Revisions include a reclassification of transactions, which also affects the totals for 4. Comprises Algeria, Gabon, Libya, and Nigeria. Asia and the grand totals. 5. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • May 1995 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1993 1994 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999900 11999911 11999922 June Sept. Dec. Mar. June Sept. 1 35,348 45,262 45,073 45,680 46,002 48,853 48,849 50,664 49,279 2 Payable in dollars 32,760 42,564 42,281 42,245 42,314 45,523 45,312 47,028 45,938 3 Payable in foreign currencies 2,589 2,698 2,792 3,435 3,688 3,330 3,537 3,636 3,341 By type 4 Financial claims 19,874 27,882 26,509 25,632 26,902 28,537 28,607 29,706 27,857 5 Deposits 13,577 20,080 17,695 14,298 14,512 16,815 16,943 17,449 17,494 6 Payable in dollars 12,552 19,080 16,872 13,329 13,503 16,041 16,117 16,598 16,914 7 Payable in foreign currencies 1,025 1,000 823 969 1,009 774 826 851 580 8 Other financial claims 6,297 7,802 8,814 11,334 12,390 11,722 11,664 12,257 10,363 9 Payable in dollars 5,280 6,910 7,890 10,185 11,282 10,641 10,575 11,163 9,304 10 Payable in foreign currencies 1,017 892 924 1,149 1,108 1,081 1,089 1,094 1,059 11 Commercial claims 15,475 17,380 18,564 20,048 19,100 20,316 20,242 20,958 21,422 12 Trade receivables 13,657 14,468 16,007 17,565 16,122 17,372 17,404 18,187 18,698 13 Advance payments and other claims 1,817 2,912 2,557 2,483 2,978 2,944 2,838 2,771 2,724 14 Payable in dollars 14,927 16,574 17,519 18,731 17,529 18,841 18,620 19,267 19,720 15 Payable in foreign currencies 548 806 1,045 1,317 1,571 1,475 1,622 1,691 1,702 By area or country Financial claims 16 Europe 9,645 13,441 9,331 9,745 8,376 8,136 7,545 8,093 8,045 17 Belgium and Luxembourg 76 13 8 74 70 131 122 83 114 18 France 371 269 764 781 708 785 753 859 825 19 Germany 367 283 326 383 362 452 419 407 331 20 Netherlands 265 334 515 500 485 502 503 480 503 21 Switzerland 357 581 490 494 512 515 520 495 747 22 United Kingdom 7,971 11,534 6,252 6,579 5,230 4,608 4,136 4,696 4,461 23 Canada 2,934 2,642 1,833 2,034 2,103 2,206 2,573 3,547 3,156 24 Latin America and Caribbean 6,201 10,717 13,893 10,095 12,965 15,834 15,363 15,393 14,019 25 Bahamas 1,090 827 778 827 980 968 1,157 1,187 1,005 26 Bermuda 3 8 40 258 197 125 34 65 52 27 Brazil 68 351 686 590 590 599 567 370 341 28 British West Indies 4,635 9,056 11,747 7,484 10,000 12,807 12,463 12,940 11,786 29 Mexico 177 212 445 665 882 865 782 507 453 30 Venezuela 25 40 29 24 25 161 26 33 32 31 860 640 864 3,016 2,754 1,785 2,646 2,209 2,154 32 Japan 523 350 668 2,485 2,213 1,047 1,782 1,351 662 33 Middle Eastern oil-exporting countries2 8 5 3 10 5 3 5 2 19 34 Africa 37 57 83 125 88 99 76 74 87 35 Oil-exporting countries3 0 1 9 1 1 1 0 1 1 36 All other4 195 385 505 617 616 477 404 390 396 Commercial claims 37 Europe 7,044 8,193 8,451 9,083 8,201 8,897 8,534 8,726 8,678 38 Belgium and Luxembourg 212 194 189 173 163 184 173 179 172 39 France 1,240 1,585 1,537 1,511 1,438 1,941 1,817 1,761 1,763 40 Germany 807 955 933 1,046 935 999 923 920 866 41 Netherlands 555 645 552 565 410 417 351 288 327 42 Switzerland 301 295 362 442 376 424 404 675 533 43 United Kingdom 1,775 2,086 2,094 2,561 2,287 2,268 2,219 2,338 2,430 44 Canada 1,074 1,121 1,286 1,359 1,360 1,355 1,440 1,451 1,506 45 Latin America and Caribbean 2,375 2,655 3,043 3,456 3,071 3,210 3,505 3,809 3,888 46 Bahamas 14 13 28 17 20 11 12 17 33 47 Bermuda 246 264 255 239 225 173 210 285 246 48 Brazil 326 427 357 788 407 462 422 494 472 49 British West Indies 40 41 40 43 39 70 58 66 49 50 Mexico 661 842 924 913 866 946 986 1,000 1,047 51 Venezuela 192 203 345 317 286 295 291 303 385 52 4,127 4,591 4,866 5,220 5,538 5,836 5,772 6,041 6,391 53 Japan 1,460 1,899 1,903 1,885 2,519 2,154 2,339 2,327 2,439 54 Middle Eastern oil-exporting countries2 460 620 693 673 456 709 656 601 612 55 Africa 488 430 554 516 493 513 512 483 457 56 Oil-exporting countries3 67 95 78 99 107 84 101 90 68 57 Other4 367 390 364 414 437 505 479 448 502 1. For a description of the changes in the international statistic stables, see Federal 3. Comprises Algeria, Gabon, Libya ,and Nigeria. 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 1995 1994 1995 Transaction, and area or country 1993 1994r J J a a n n . . - July Aug. Sept. Oct. Nov. Dec. Jan.p U.S. corporate securities STOCKS 1 Foreign purchases 319,728 355,267 24,999 24,332 29,312 28,849 27,794 28,730* 28,224 24,999 2 Foreign sales 298,145 352,645 25,893 25,174 26,400 30,431 29,841 27,658' 30,161 25,893 3 Net purchases, or sales (—) 21,583 2,622 -894 -842 2,912 -1,582 -2,047 1,072 -1,937 -894 4 Foreign countries 21,311 2,612 -930 -846 2,914 -1,596 -2,079 1,049 -1,939 -930 5 Europe 10,665 6,597 -516 -291 1,424 -1,198 -1,394 216 -1,445 -516 6 France -103 -216 -255 -68 -22 -63 -198 -25 -117 -255 7 Germany 1,647 2,362 -157 56 73 -104 -158 -57 -159 -157 8 Netherlands -600 1,851 278 357 266 -134 316 264 211 278 9 Switzerland 2,986 30 -389 82 136 -104 -655 -555 10 -389 10 United Kingdom 4,560 642 253 -830 866 -641 -557 565 -1,256 253 11 Canada -3,213 -1,109 129 -313 -366 57 -416 -116 157 129 12 Latin America and Caribbean 5,724 -1,589 991 -476 989 -625 -516 673 -553 991 13 Middle East1 -328 -1,076 -22 -94 -281 -431 -75 1 -85 -22 14 Other Asia 8,198 -1,040 -1,469 280 1,031 589 335 273 -149 -1,469 15 Japan 3,825 1,284 -860 555 1,132 761 251 272 -171 -860 16 Africa 63 30 -36 -7 0 10 12 -4 -25 -36 17 Other countries 202 799 -7 55 117 2 -25 6 161 -7 18 Nonmonetary international and regional organizations 272 10 36 4 -2 14 32 23 2 36 BONDS2 19 Foreign purchases 283,946 291,782 19,280 25,166 22,963 19,131 20,204 22,219r 18,900 19,280 20 Foreign sales 217,932 230,862 12,800 18,898 15,686 17,540 16,304 15,306 14,719 12,800 21 Net purchases, or sales (—) 66,014 60,920 6,480 6,268 7,277 1,591 3,900 6,913r 4,181 6,480 22 Foreign countries 65,476 59,985 6,276 5,883 7,344 1,574 3,901 6,929r 3,841 6,276 23 Europe 22,586 38,129 6,653 4,531 5,152 2,406 3,546 4,45 lr 2,586 6,653 24 France 2,346 243 157 21 -18 -16 105 -106 4 157 25 Germany 885 647 1,516 52 34 -355 449 200 451 1,516 26 Netherlands -290 3,018 -241 29 610 -64 125 344 28 -241 27 Switzerland -627 1,052 -85 -192 -9 292 4 489 13 -85 28 United Kingdom 19,686 32,837 5,406 4,409 4,497 1,997 1,475 3,587* 1,916 5,406 29 Canada 1,668 3,018 245 625 519 194 460 201 462 245 30 Latin America and Caribbean 15,697 5,081 -655 -527 -81 -1,852 -981 1,290 694 -655 31 Middle East1 3,257 750 59 375 157 -76 56 -86 -176 59 32 Other Asia 20,846 12,276 -28 766 1,558 857 745 1,079 251 -28 33 Japan 11,569 5,536 -396 712 763 340 375 445 -172 -396 34 Africa 1,149 44 21 -23 18 2 20 -4 8 21 35 Other countries 273 687 -19 136 21 43 55 -2 16 -19 36 Nonmonetary international and regional organizations 538 935 204 385 -67 17 -1 -16 340 204 Foreign securities 37 Stocks, net purchases, or sales (-) -63,287 -47,174 -195 -3,093 -4,568 679 -4,372 -2,552* -2,114 -195 38 Foreign purchases 245,561 384,060 27,967 29,291 30,534 37,367 29,813 28,263* 25,668 27,967 39 Foreign sales 308,848 431,234 28,162 32,384 35,102 36,688 34,185 30,815* 27,782 28,162 40 Bonds, net purchases, or sales (-) -70,136 -20,113 1,182 -2,282 861 -1,150 -4,638 -2,598* 1,101 1,182 41 Foreign purchases 828,922 904,575 71,889 59,351 67,288 78,604 66,413 66,476* 68,775 71,889 42 Foreign sales 899,058 924,688 70,707 61,633 66,427 79,754 71,051 69,074* 67,674 70,707 43 Net purchases, or sales (-), of stocks and bonds -133,423 —67,287 987 -5,375 -3,707 -471 -9,010 —5,150r -1,013 987 44 Foreign countries —133,584 -67,807 923 -5,557 -3,890 56 -8,860 —5,103r -1,768 923 45 Europe -90,005 -9,799 3,385 -2,490 -174 -2,931 -4,891 -914* -726 3,385 46 Canada -14,997 -7,369 -165 -2,041 -600 865 -814 -910 1,629 -165 47 Latin America and Caribbean -9,229 -22,337 -466 -1,437 -2,287 4,819 -1,481 -2,281* -512 -466 48 Asia -15,300 -23,536 -1,749 339 -321 -1,913 -1,503 453* -2,148 -1,749 49 Africa -185 -623 -2 29 48 -22 -73 -267* -96 -2 50 Other countries -3,868 -4,143 -80 43 -556 -762 -98 -1,184 85 -80 51 Nonmonetary international and regional organizations 161 520 64 182 183 -527 -150 -47 755 64 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). corporations organized to finance direct investmen atsbroad. 2. Includes state and local government securities and securities o fU.S. government Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • May 1995 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions1 Millions of dollars; net purchases, or sales (—) during period 1995 1994 1995 AArreeaa oorr ccoouunnttrryy 11999933 11999944 J J a a n n . . - July Aug. Sept. Oct. Nov. Dec. Jan.p 1 Total estimated 23,451 77,594r 9,313 1,710 15,160 11,085 10,587 13,106 11,495 9,313 2 Foreign countries 23,225 77,667 9,987 2,043 14,744 11,163 9,492 13,069 11,898 9,987 3 Europe -2,403 38,418 2,906 4,891 8,274 3,922 -1,430 7,780 8,224 2,906 4 Belgium and Luxembourg 1,218 1,053 134 -78 529 -15 32 19 430 134 5 Germany -9,975 6,669 60 714 1,795 -243 254 924 725 60 6 Netherlands -515 1,412 2,388 120 -15 -68 954 -2 156 2,388 7 Sweden 1,421 794 -35 100 -158 105 -37 211 61 -35 8 Switzerland -1,501 395 166 -416 -259 441 -718 -1,512 656 166 9 United Kingdom 6,167 22,657 299 4,820 5,361 3,522 -1,822 7,728 6,196 299 10 Other Europe and former U.S.S.R 782 5,438 -106 -369 1,021 180 -93 412 0 -106 11 Canada 10,309 3,178 3,177 2,937 1,888 1,515 -420 -1,352 -557 3,177 12 Latin America and Caribbean -4,572 -9,845 636 -7,273 -2,310 -666 6,680 713 984 636 13 Venezuela 390 -270 -211 17 -132 19 7 43 91 -211 14 Other Latin America and Caribbean -5,806 -20,048 3,028 -7,663 3,172 1,487 -449 -2,086 80 3,028 15 Netherlands Antilles 844 10,473 -2,181 373 -5,350 -2,172 7,122 2,756 813 -2,181 16 Asia 20,581 46,247 3,664 2,522 5,987 6,761 4,386 4,942 3,642 3,664 17 Japan 17,070 29,584 3,444 -812 3,681 3,210 2,190 4,551 2,067 3,444 18 Africa 1,156 240 -9 5 80 200 135 -11 58 -9 19 Other -1,846 -571 -387 -1,039 825 -569 141 997 -453 -387 20 Nonmonetary international and regional organizations 226 —73r -674 -333 416 -78 1,095 37 -403 -674 21 International -279 54r -708 -425 317 -65 1,074 73 -322 -708 22 Latin American regional 654 75 -6 23 -4 -1 6 4 -3 -6 MEMO 23 Foreign countries 23,225 77,667 9,987 2,043 14,744 11,163 9,492 13,069 11,898 9,987 24 Official institutions 1,322 41,440* 1,742 4,897 9,216 4,688 2,841 2,646 582 1,742 25 Other foreign 21,903 36,227r 8,245 -2,854 5,528 6,475 6,651 10,423 11,316 8,245 Oil-exporting countries 26 Middle East2 -8,836 21 -360 12 621 3 445 623 -405 -360 27 -5 0 0 0 1 0 0 0 -1 0 1. Official and private transactions in marketable US. Treasury securities having an 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab original maturity of more than one year. Data are based on monthly transactions reports. Emirates (Trucial States). Excludes nonmarketable US. Treasury bonds and notes held by official institutions of 3. Comprises Algeria, Gabon, Libya, and Nigeria. 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, averages of daily figures Rate on Mar. 31, 1995 Rate on Mar. 31, 1995 Rate on Mar. 31, 1995 Country Country Country Month Month Month effective effective effective Austria.. 4.0 Mar. 1995 Germany... 4.0 Mar. 1995 Norway 4.75 Feb. 1994 Belgium. 4.0 Mar. 1995 Italy 8.25 Feb. 1995 Switzerland 3.0 Mar. 1995 Canada.. 8.47 Mar. 1995 Japan 1.75 Sept. 1993 United Kingdom 12.0 Sept. 1992 Denmark 6.0 Mar. 1995 Netherlands 4.0 Mar. 1995 France2 . 5.0 July 1994 1. Rates shown are mainly those at which the central bank either discounts or makes 2. Since February 1981, the rate has been that at which the Bank of France discounts advances against eligible commercial paper or government securities for commercial Treasury bills for seven to ten days. banks or brokers. For countries with more tha none 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 1994 1995 TTyyppee oorr ccoouunnttrryy 11999922 11999933 11999944 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 3.70 3.18 4.63 5.01 5.52 5.78 6.27 6.23 6.14 6.15 9.56 5.88 5.45 5.65 5.83 5.98 6.30 6.50 6.68 6.61 6.76 5.14 5.57 5.61 5.56 5.77 6.75 7.86 8.14 8.32 9.42 7.17 5.25 4.95 5.12 5.10 5.29 5.04 5.00 4.96 7.67 4.79 4.03 4.00 4.02 3.86 4.07 3.95 3.77 3.62 9.25 6.73 5.09 4.98 5.12 5.15 5.35 5.09 5.03 5.03 10.14 8.30 5.72 5.50 5.52 5.49 5.82 5.76 5.70 7.77 8 Italy 13.91 10.09 8.45 8.68 8.80 8.72 8.98 9.10 9.07 10.98 9.31 8.10 5.65 5.34 5.15 5.09 5.42 5.29 5.33 6.21 4.39 2.96 2.24 2.31 2.33 2.33 2.34 2.31 2.27 2.11 1. Rates are for three-month interbank loans, with the following exceptions: Canada, finance company paper, Belgium, three-month Treasury bills; and Japan, C Drate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 International Statistics • May 1995 3.28 FOREIGN EXCHANGE RATES' Currency units per dollar except as noted 1994 1995 Country/currency unit 11999922 11999933 11999944 Oct. Nov. Dec. Jan. Feb. Mar. 1 Australia/dollar2 73.521 67.993 73.161 73.787 75.492 77.389 76.469 74.473 73.452 2 Austria/schilling 10.992 11.639 11.409 10.695 10.838 11.063 10.769 10.573 9.898 3 Belgium/franc 32.148 34.581 33.426 31.284 31.694 32.329 31.542 30.908 29.035 4 Canada/dollar 1.2085 1.2902 1.3664 1.3503 1.3647 1.3893 1.4132 1.4005 1.4077 5 China, P.RVyuan 5.5206 5.7795 8.6295 8.5492 8.5370 8.3833 8.4608 8.4553 8.4483 6 Denmark/krone 6.0372 6.4863 6.3561 5.9479 6.0268 6.1614 6.0311 5.9302 5.6281 7 Finland/markka 4.4865 5.7251 5.2340 4.6866 4.7388 4.8590 4.7505 4.6547 4.3967 8 France/franc 5.2935 5.6669 5.5459 5.2025 5.2867 5.4132 5.2912 5.2252 4.9756 9 Germany/deutsche mark 1.5618 1.6545 1.6216 1.5195 1.5396 1.5716 1.5302 1.5022 1.4061 10 Greece/drachma 190.81 229.64 242.50 233.06 237.38 242.96 238.21 236.17 228.53 11 Hong Kong/dollar 7.7402 7.7357 7.7290 7.7276 7.7306 7.7379 7.7439 7.7314 7.7318 12 India/rupee 28.156 31.291 31.394 31.373 31.394 31.389 31.374 31.380 31.587 13 Ireland/pound2 170.42 146.47 149.69 158.64 156.39 153.36 155.67 156.20 159.76 14 Italy/lira 232.17 1,573.41 1,611.49 1,548.29 1,583.81 1,633.71 1,611.53 1,620.58 1,688.99 15 Japan/yen 126.78 111.08 102.18 98.35 98.04 100.18 99.77r 98.24 90.52 16 Malaysia/ringgit 2.5463 2.5738 2.6237 2.5589 2.5604 2.5626 2.5556 2.5526 2.5464 17 Netherlands/guilder 1.7587 1.8585 1.8190 1.7028 1.7261 1.7601 1.7159 1.6844 1.5774 18 New Zealand/dollar2... 53.792 54.127 59.358 60.898 62.093 63.726 64.018 63.448 64.598 19 Norway/krone 6.2142 7.1009 7.0553 6.6166 6.7297 6.8561 6.6968 6.5974 6.2730 20 Poitugal/escudo 135.07 161.08 165.93 155.26 157.27 161.21 157.86 155.36 147.92 21 Singapore/dollar 1.6294 1.6158 1.5275 1.4761 1.4682 1.4657 1.4532 1.4541 1.4216 22 South Africa/rand 2.8524 3.2729 3.5526 3.5420 3.5256 3.5614 3.5404 3.5629 3.6013 23 South Korea/won 784.66 805.75 806.93 801.98 799.46 794.81 793.08 793.19 781.81 24 Spain/peseta 102.38 127.48 133.88 126.34 128.34 132.31 132.62 130.52 128.58 25 Sri Lanka/rupee 44.013 48.211 49.170 49.112 49.163 49.531 49.870 49.895 49.627 26 Sweden/krona 5.8258 7.7956 7.7161 7.2631 7.3637 7.5161 7.4774 7.3914 7.2787 27 Switzerland/franc 1.4064 1.4781 1.3667 1.2648 1.2956 1.3289 1.2863 1.2715 1.1709 28 Taiwan/dollar 25.160 26.416 26.465 26.132 26.188 26.381 26.300 26.339 26.102 29 Thailand/baht 25.411 25.333 25.161 25.001 24.992 25.109 25.133 25.020 24.760 30 United Kingdom/pound2 176.63 150.16 153.19 160.64 158.92 155.87 157.46 157.20 160.02 MEMO 31 United States/dollar3... 86.61 93.18 91.32 86.66 87.71 89.64 88.30r 87.29 83.69 1. Averages of certified noon buying rates in New York for cable transfers. Data in this world trade of that country divided by the average world trade of all ten countries table also appear in the Board's G.5 (405) monthly statistical release. For ordering combined. Series revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 address, see inside front cover. (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 the 1972-76 average Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

67 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 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 1994 August 1994 A68 August 1994 November 1994 A68 November 1994 February 1995 A68 February 1995 May 1995 A68 Assets and liabilities of U.S. branches and agencies of foreign banks March 31,1994 August 1994 All June 30,1994 November 1994 All September 30,1994 February 1995 All December 31, 1994 May 1995 All 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 All Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • May 1995 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, February 6-10, 19951 Commercial and Industrial Loans Characteristic A ( o t f h m l o d o o u o a u s l n n a la s n t r d o s) s f A ( o v t f h e r o d a u o g s l a e la n r s d s iz s ) e W m av a e e t i u g r h a ri g t t e y e d 2 W av e L e ig r o h a a g t n e e d r ate (pe S r t c a e n n d t a ) r d c s o L e l c l o b a u a t y r e n e r s d a l Lo c a o u m n m n s e d m n m e t i r t a - de pa ( t p P io e a r n r c t i e l c o n i a - t) n s Days effective3 (percent) (percent) ALL BANKS 1 Overnight6 13,341,829 8,469 2 One month or less (excluding overnight) 12,874,605 1,755 7.15 20.3 58.9 7.2 3 Fixed rate 10,566,420 2,657 7.00 15.2 53.1 7.5 4 Floating rate 2,308,185 687 7.82 43.9 85.4 6.0 5 More than one month and less than one year 10,119,116 194 157 8.18 40.1 78.9 6.9 6 Fixed rate 4,307,767 198 121 7.48 26.9 76.8 9.2 7 Floating rate 5,811,348 191 183 8.70 49.9 80.5 5.1 8 Demand7 15,875,734 298 8.00 57.9 62.7 3.8 9 Fixed rate 4,786,759 987 6.74 20.1 54.5 3.9 10 Floating rate 11,088,976 229 8.54 74.1 66.2 3.7 11 Total short-term 52,211,284 456 7.49 32.4 63.1 12 Fixed rate (thousands of dollars) 33,002,622 1,025 24 6.89 14.5 57.5 5.6 13 1-99 310,131 12 155 9.33 83.1 45.9 .5 14 100-499 327,143 220 69 8.36 61.4 71.5 4.9 15 500-999 494,935 677 53 7.89 43.0 73.0 5.5 16 1,000-4,999 4,706,479 2,310 39 7.32 26.4 72.2 4.7 1 1 8 7 5 1 , 0 0 ,0 0 0 0 0 -9 o ,9 r 9 m 9 ore 21 5 , , 9 2 0 5 4 9 , , 2 7 0 2 8 6 20 6 , , 2 6 2 1 0 6 2 1 7 8 7 6 . . 0 7 0 0 18.2 7 5 1 0 . . 6 5 9 5 . . 4 0 19 Floating rate (thousands of dollars) 19,208,662 234 137 8.50 63.2 72.8 4.4 20 1-99 1,580,027 26 159 10.30 82.0 85.1 2.8 21 100-499 3,325,193 200 155 9.86 77.3 85.6 5.7 2 2 2 3 5 1 0 ,0 0 0 - 0 9 - 9 4 9 ,9 99 4 1 , , 1 6 4 6 2 3 , , 3 7 2 7 6 9 1, 6 9 6 7 9 3 1 14 7 9 2 9 8 . . 5 7 4 6 6 62 9 . . 0 6 8 8 1 5 . . 2 8 5 8 . .0 5 2 2 4 5 5 1 , 0 0 , 0 00 0 0 -9 o ,9 r 9 m 9 ore 6 1 , , 5 9 8 0 7 9 , , 7 5 6 7 1 7 21 6 , , 9 6 2 1 8 8 1 1 3 1 1 0 7 7 . . 1 7 8 7 4 5 1 7 . . 2 0 7 51 8 . . 7 0 3 2. . 0 5 26 Total long-term 6,729,813 270 8.80 70.1 75.1 27 Fixed rate (thousands of dollars).. 1,655,151 157 8.20 66.6 64.5 3.9 28 1-99 191,827 22 9.82 94.7 33.0 .3 29 100-499 208,452 180 9.13 90.0 68.1 .7 30 500-999 165,819 590 8.07 74.6 64.4 .8 31 1,000 or more 1,089,055 3,841 7.75 56.0 69.4 5.6 32 Floating rate (thousands of dollars) 5,074,661 351 9.00 71.2 78.5 5.5 33 1-99 301,207 32 10.12 90.3 66.0 8.8 34 100-499 751,404 222 9.69 81.3 78.7 9.9 35 500-999 590,225 686 9.62 79.3 79.7 6.7 36 1,000 or more 3,431,825 3,723 8.65 65.9 79.4 4.0 Loan rate (percent) Days Effective3 Nominal8 LOANS MADE BELOW PRIME1" 37 Overnight6 13,143,078 9,645 6.63 6.42 7.1 55.0 3.7 38 One month or less (excluding overnight) 12,299,429 3,849 15 7.01 6.78 18.0 58.3 7.5 39 More than one month and less than one yeat 6,697,003 717 14*7 7.18 7.01 24.4 80.4 7.6 40 Demand 9,523,128 2,093 6.77 6.68 45.0 44.1 2.7 41 Total short-term 41,662,637 2,259 37 6.68 21.8 57.6 42 Fixed rate 31,960,291 2,707 22 6.79 6.61 13.0 57.4 5.6 43 Floating rate 9,702,347 1,462 119 7.08 6.92 50.7 58.2 3.7 Months 44 Total long-term 3,000,086 7.40 55.1 4.5 45 Fixed rate 1,034,466 321 7.18 7.07 52.0 61.4 6.2 46 Floating rate ... 1,965,619 1,050 7.52 7.38 56.7 88.4 3.6 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A69 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, February 6-10, 1995—Continued Commercial and industrial loans—Continued Weighted Loan rate (percent) Loans Loans made Amount of Average size average secured under Partici- ( o t f h o l d o u o a s l n a la s n r d s) s ( o t f h o d u o s l a la n r d s s ) ma D tu ay ri s t y2 W e a ff v e e e i c g r t h a i g v te e e d 3 Standard c (p ol e l r b a c t y e e n ra t) l ( c p o m e m r e c m n en t it t - ) pa (p ti e o r n c e l n oa t) n s LARGE BANKS 1 Overnight6 9,248,362 7,895 1.7 2 One month or less (excluding overnight) 10,580,960 4,902 7.14 21.2 58.3 8.4 3 Fixed rate 8,597,986 5,969 7.02 16.0 51.5 8.9 4 Floating rate 1,982,974 2,761 7.67 43.5 87.7 6.2 5 More than one month and less than one year 6,074,930 871 143 7.82 32.5 80.5 8.4 6 Fixed rate 2,852,024 2.741 109 7.43 26.5 77.7 13.7 7 Floating rate 3,222,907 543 174 8.15 37.8 82.9 3.7 8 Demand7 10,271,619 478 7.67 55.5 53.0 4.8 9 Fixed rate 3,483,230 3,203 6.58 10.2 46.0 4.5 10 Floating rate 6,788,389 333 8.23 78.7 56.6 4.9 11 Total short-term 36,175,871 1,137 7.30 29.7 60.2 12 Fixed rate (thousands of dollars) 24,181,601 5,102 21 6.90 13.7 56.0 6.1 13 1-99 17,863 27 87 8.72 71.6 76.1 2.8 14 100-499 169,551 250 67 8.03 55.2 75.7 3.7 15 500-999 308,828 670 48 7.67 41.0 85.1 7.4 16 1,000-4,999 3,401,799 2,290 34 7.29 25.3 69.6 6.0 17 5,000-9,999 3,953,181 6.742 20 7.07 17.8 67.7 9.1 18 10,000 or more 16,330,379 18,857 18 6.75 9.2 49.5 5.4 19 Floating rate (thousands of dollars) 11,994,269 443 116 8.11 61.9 68.8 4.8 20 1-99 541,999 32 151 10.21 80.7 89.0 1.7 21 100-499 1,465,990 202 156 9.76 75.3 90.4 4.4 22 500-999 765,789 661 172 9.38 67.1 90.1 6.9 23 1,000-4,999 2,334,432 2,013 143 8.63 57.0 84.8 10.8 24 5,000-9,999 1,233,250 6,509 99 7.45 42.0 79.4 5.5 25 10,000 or more 5,652,810 24,274 97 7.24 62.3 49.5 2.3 26 Total long-term 4,115,294 734 8.67 63.6 82.7 3.9 27 Fixed rate (thousands of dollars).. 719,774 1,040 7.75 65.0 86.4 8.6 28 1-99 9,924 30 9.71 89.0 57.3 .0 29 100-499 40,573 209 8.46 67.1 80.5 .6 30 500-999 35,711 657 7.52 43.1 95.0 .0 31 1,000 or more 633,565 5,572 7.68 65.8 86.8 9.7 32 Floating rate (thousands of dollars) 3,395,520 691 8.86 63.2 81.9 2.9 33 1-99 71,099 34 9.75 86.9 86.3 2.9 34 100-499 394,557 235 9.60 76.0 86.1 6.6 35 500-999 329,831 683 9.39 73.6 83.6 5.4 36 1,000 or more 2,600,033 3,868 8.66 59.3 80.9 2.0 Loan rate (percent) Days Effective Nominal LOANS MADE BELOW PRIME1" 37 Overnight6 9,089,995 8,949 6.70 6.49 7.9 56.4 1.7 38 One month or less (excluding overnight) 10,245,228 6,279 15 7.04 6.81 19.7 58.1 8.6 39 More than one month and less than one year 4,690,086 3,018 13*5 7.12 6.94 24.9 80.1 9.2 40 Demand7 7,119,522 4,006 6.73 6.62 47.7 35.1 3.0 41 Total short-term 31,144,831 5,209 33 23.4 55.7 5.4 42 Fixed rate 23,679,074 5,916 20 6.84 6.64 12.9 55.9 6.0 43 Floating rate 7,465,757 3,778 102 7.03 6.85 56.8 54.8 3.5 44 Total long-term 1347,959 2,148 7.24 45 Fixed rate 528,088 1,811 7.16 7.07 57.8 86.5 11.7 46 Floating rate ... 1,319,870 2,320 7.27 7.10 42.3 96.9 2.8 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • May 1995 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, February 6-10, 1995'—Continued Commercial and industrial loans—Continued Characteristic A (th m o lo o u a u s n n a s n t d o s f A ( v th er o a u g sa e n s d iz s e W m av a e e t i u g r h a ri g t t e y e d 2 We L ig o h a t n e d r ate (percent) s L ec o b u a y r n e s d Lo c a o u n m n s d m e m i r t a - de pat P io a n rt i l c o i a - ns of dollars) of dollars) average collateral ment (percent) Days effective3 (percent) (percent) OTHER BANKS 1 Overnight6 4,093,467 10,130 52.3 2 One month or less (excluding overnight) 2,293,645 443 7.19 16.4 61.9 1.6 3 Fixed rate 1,968,434 776 6.93 11.4 60.3 1.0 4 Floating rate 325,211 123 46.2 71.3 4.8 5 More than one month and less than one year 4,044,186 90 176 8.73 51.6 76.6 4.6 6 Fixed rate 1,455,744 70 145 7.58 27.8 74.9 .3 7 Floating rate 2,588,442 106 194 9.38 64.9 77.5 6.9 8 Demand7 5,604,116 176 8.61 62.2 80.5 2.0 9 Fixed rate 1,303,529 347 7.18 46.7 77.4 2.3 10 Floating rate 4,300,587 153 9.04 66.9 81.4 1.9 11 Total short-term 16,035,413 194 72 7.90 38.7 69.6 4.1 12 Fixed rate (thousands of dollars) 8,821,020 321 32 6.87 16.9 61.5 4.3 13 1-99 292,268 12 158 9.37 83.8 44.1 .3 14 100-499 157,592 195 72 8.71 68.0 66.8 6.2 15 500-999 186,107 690 64 8.25 46.5 52.9 2.4 16 1,000-4,999 1,304,679 2,363 55 7.41 29.5 78.8 1.1 17 5,000-9,999 1,306,545 6,263 49 6.78 19.1 83.4 10.5 18 10,000 or more 5,573,829 25,657 16 6.54 7.4 53.4 3.9 19 Floating rate (thousands of dollars) 7,214,393 131 175 9.15 65.3 79.6 3.8 20 1-99 1,038,028 24 161 10.34 82.7 83.1 3.3 21 100-499 1,859,203 199 155 9.93 78.9 81.8 6.7 22 500-999 897,989 676 172 9.68 71.8 73.7 4.4 23 1,000-4,999 1,807,894 1,924 162 8.92 68.4 87.1 4.4 24 5,000-9,999 676,327 6,827 204 8.35 39.8 75.4 .0 25 10,000 or more 934,951 13,840 330 6.79 24.8 65.0 .0 26 Total long-term 2,614,518 135 9.02 803 63.2 27 Fixed rate (thousands of dollars).. 935,378 95 8.55 67.8 47.7 .3 28 1-99 181,902 21 9.83 95.0 31.7 .3 29 100-499 167,879 174 9.29 95.6 65.1 .7 30 500-999 130,107 574 8.23 83.3 56.0 1.0 31 1,000 or more 455,490 2,682 7.85 42.4 45.3 .0 32 Floating rate (thousands of dollars) 1,679,141 176 9.29 87.3 71.8 10.7 33 1-99 230,107 32 10.24 91.4 59.7 10.6 34 100-499 356,847 210 9.79 87.1 70.5 13.5 35 500-999 260,394 689 9.91 86.6 74.7 8.4 36 1,000 or more 831,792 3,334 8.62 86.5 74.8 10.1 Loan rate (percent) Days Effective3 Nominal8 LOANS MADE BELOW PRIME10 37 Overnight6 4,053,083 11,685 6.46 6.26 5.2 51.8 8.1 38 One month or less (excluding overnight) 2,054,201 1,314 13 6.85 6.63 9.5 59.3 1.7 39 More than one month and less than one year 2,006,916 258 177 7.33 7.17 23.1 81.1 4.0 40 Demand7 2,403,605 867 6.90 6.87 37.3 70.8 1.8 41 Total short-term 10,517,806 6.80 6.65 16.8 63.2 4.6 42 Fixed rate 8,281,217 1,061 29 6.68 6.50 13.2 61.5 4.6 43 Floating rate 2,236,590 480 183 7.27 7.17 30.1 69.5 4.7 44 Total long-term 1,152,127 272 46 68.4 3.1 45 Fixed rate 506,378 173 7.20 7.06 46.0 35.1 .5 46 Floating rate ... 645,749 495 8.03 7.97 86.1 71.0 5.1 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A71 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, February 6-10, 1995—Continued NOTES 1. The survey of terms of bank lending to business collects data on gross loan 4. The chances are about two out of three that the average rate shown would differ by extensions made during the first full business week in the mid-month of each quarter by a less than the amount of the standard error from the average rate that would be found by a sample of 340 commercial banks of all sizes. A sample of 250 banks reports loans to complete survey of lending at all banks. farmers. The sample data are blown up to estimate the lending terms at all insured 5. The rate used to price the largest dollar volume of loans. Base pricing rates include commercial banks during that week. The estimated terms of bank lending are not intended the prime rate (sometimes referred to as a bank's "basic" or "reference" rate); the federal for use in collecting the terms of loans extended over the entire quarter or residing in the funds rate; domestic money market rates other than the federal funds rate; foreign money portfolios of those banks. Construction and land development loans include both unsecure market rates; and other base rates not included in the foregoing classifications. loans and loans secured by real estate. Thus, some of die construction and land develop- 6. Overnight loans mature on the following business day. ment loans would be reported on the statement of condition as real estate loans and the 7. Demand loans have no stated date of maturity. remainder as business loans. Mortgage loans, purchased loans, foreign loans, and loans of 8. Nominal (not compounded) annual interest rate calculated from the stated rate and less that $1,000 are excluded from the survey .As of September 30, assets of most of the other terms of the loans and weighted by loan size. large banks were at least $7.0 billion. For all insured banks, total assets averaged $275 9. Calculated by weighting the prime rate reported by each bank by the volume of million. loans reported by that bank, summing the results, and then averaging over all reporting 2. Average maturities are weighted by loan size; excludes demand loans. banks. 3. Effective (compounded) annual interest rate calculated from the stated rate and other 10. The proportion of loans made at rates below the prime may vary substantially from terms of the loans and weighted by loan size. the proportion of such loans outstanding in banks' portfolios. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Special Tables • May 1995 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 31, 19941—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm in I c T B lu o F t d a s i l n 3 g o IB nl F y s 3 inc T I l B u ot F d a i s l n g I o B n F ly s inc T I l B u ot F d a i s l n g I o B n F ly s inc T I l B u o F t d a i s l n g I o B n F ly s 1 Total assets4 750,044 333,929 583,311 275,995 70,820 32,047 56,718 17,644 2 Claims on nonrelated parties 673,163 192,311 521,178 162,193 65,259 13,862 55,967 11,161 3 Cash and balances due from depository institutions 155,467 128,944 138,309 113,805 5,862 5,276 9,870 9,128 4 Cash items in process of collection and unposted debits 2,577 0 2,407 0 7 0 108 0 5 Currency and coin (US. and foreign) 24 n.a. 17 n.a. 1 n.a. 1 n.a. 6 Balances with depository institutions in United States 94,842 74,381 84,132 65,237 4,138 33,,661144 55,,777755 55,,222255 7 U.S. branches and agencies of other foreign banks (including IBFs) 89,469 71,466 79,345 62,411 3,853 3,552 5,674 5,200 8 Other depository institutions in United States (including IBFs) 5,373 2,914 4,788 2,826 284 62 101 25 9 Balances with banks in foreign countries and with foreign central banks 57,208 54,564 51,054 48,568 1,680 1,663 3,978 3,903 10 Foreign branches of U.S. banks 1,755 1,513 1,686 1,445 11 10 41 41 11 Other banks in foreign countries and foreign central banks . 55,453 53,051 49,368 47,123 1,670 1,652 3,937 3,862 12 Balances with Federal Reserve Banks 816 n.a. 699 n.a. 35 n.a. 9 n.a. 13 Total securities and loans 379,705 52,377 260,652 38,665 53,802 7,788 37,380 1,707 14 Total securities, book value 85,577 12,239 77,936 11,049 4,368 663 2,607 503 15 U.S. Treasury 24,650 n.a. 23,460 n.a. 660 n.a. 427 n.a. 16 Obligations of U.S. government agencies and corporations ... 20,414 n.a. 19,851 n.a. 341 n.a. 35 n.a. 17 Other bonds, notes, debentures, and corporate stock (including state and local securities) 40,514 12,239 34,626 11,049 3,367 663 2,146 503 18 Federal funds sold and securities purchased under agreements to resell 60,159 5,856 56,368 5,362 1,038 299 2,216 110 19 U.S. branches and agencies of other foreign banks 11,205 3,774 9,876 3,562 514 102 626 100 20 Commercial banks in United States 17,404 250 15,984 165 280 0 796 10 21 Other 31,550 1,832 30,508 1,635 244 197 795 0 22 Total loans, gross 294,254 40,147 182,797 27,620 49,462 7,128 34,780 1,205 23 LESS: Unearned income on loans 127 8 81 4 27 2 7 0 24 EQUALS: Loans, net 294,127 40,139 182,716 27,616 49,435 7,125 34,773 1,204 Total loans, gross, by category 25 Real estate loans 39,699 286 22,484 118 12,006 167 3,195 0 26 Loans to depository institutions 39,170 25,358 25,946 16,337 7,416 5,328 1,697 784 27 Commercial banks in United States (including IBFs) 18,954 9,462 11,562 5,042 5,583 3,684 1,408 554 28 U.S. branches and agencies of other foreign banks 16,099 9,021 9,636 4,692 5,442 3,629 758 544 29 Other commercial banks in United States 2,855 441 1,926 350 142 55 650 10 30 Other depository institutions in United States (including IBFs) 22 0 22 0 0 0 0 0 31 Banks in foreign countries 20,194 15,897 14,363 11,295 1,833 1,644 289 230 32 Foreign branches of U.S. banks 460 424 446 420 6 3 0 0 33 Other banks in foreign countries 19,734 15,473 13,917 10,876 1,827 1,641 289 230 34 Loans to other financial institutions 24,801 762 20,470 629 1,538 28 2,214 72 35 Commercial and industrial loans 171,183 10,991 98,243 8,003 27,599 1,526 25,573 329 36 U.S. addressees (domicile) 151,044 58 84,030 47 24,981 3 24,755 0 37 Non-U.S. addressees (domicile) 20,139 10,933 14,213 7,957 2,617 1,523 818 329 38 Acceptances of other banks 891 80 716 72 65 0 65 0 39 U.S. banks 327 0 283 0 25 0 3 0 40 Foreign banks 564 80 433 72 40 0 62 0 41 Loans to foreign governments and official institutions (including foreign central banks) 3,901 2,450 3,244 2,266 201 78 88 20 42 Loans for purchasing or carrying securities (secured and unsecured) 8,326 30 7,938 30 196 0 83 0 43 All other loans 5,103 151 2,579 126 441 0 1,861 0 44 Assets held in trading accounts 9,886 68 8,739 63 35 5 1,110 0 45 All other assets 67,945 5,066 57,110 4,297 4,521 494 5,390 216 46 Customers' liabilities on acceptances outstanding 12,422 n.a. 8,724 n.a. 2,716 n.a. 482 n.a. 47 U.S. addressees (domicile) 9,367 n.a. 6,094 n.a. 2,548 n.a. 458 n.a. 48 Non-U.S. addressees (domicile) 3,055 n.a. 2,630 n.a. 168 n.a. 24 n.a. 49 Other assets including other claims on nonrelated parties 55,523 5,066 48,387 4,297 1,805 494 4,908 216 50 Net due from related depository institutions3 76,882 141,618 62,133 113,803 5,561 1188,,118855 751 66,,448833 51 Net due from head office and other related depository institutions5 76,882 n.a. 62,133 n.a. 5,561 n.a. 751 n.a. 52 Net due from establishing entity, head offices, and other related depository institutions5 n.a. 141,618 n.a. 113,803 n.a. 18,185 n.a. 6,483 53 Total liabilities4 750,044 333,929 583,311 275,995 70,820 32,047 56,718 17,644 54 Liabilities to nonrelated parties 628,668 307,851 522,747 255,769 53,739 31,675 33,180 13,968 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A73 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 31, 19941—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T I l B o u F t d a i s l n g I o B n F ly s exc T I l B o u t F d a i s l n g I o B n F ly s exc T I l B o u t F d a i s l n g I o B n F ly s 55 Total deposits and credit balances 151,728 237,893 128,473 219,681 5,218 5,966 8,132 7,153 56 Individuals, partnerships, and corporations 100,466 13,111 81,689 8 856 4,534 551 6,113 20 57 U.S. addressees (domicile) 86,591 152 73,954 152 2,611 0 5,267 0 58 Non-U.S. addressees (domicile) 13,875 12,959 7,735 8 704 1,924 551 847 20 59 Commercial banks in United States (including IBFs) 28,146 71,327 25,498 66,485 365 2,612 1,835 1,935 60 U.S. branches and agencies of other foreign banks 15,032 65,611 13,954 61,450 134 2,149 591 1,733 61 Other commercial banks in United States 13,114 5,716 11,544 5,036 231 463 1,244 202 62 Banks in foreign countries 9,395 134,143 8 954 127,100 96 2,211 121 4,001 63 Foreign branches of U.S. banks 2,809 5,673 2,709 5,340 0 82 100 228 64 Other banks in foreign countries 6,586 128,469 6,245 121,760 96 2,129 21 3,773 65 Foreign governments and official institutions (including foreign central banks) 5,044 19,208 4,711 17,134 189 592 2 1,197 66 All other deposits and credit balances 8,319 104 7,322 104 8 0 53 0 67 Certified and official checks 359 300 25 8 68 Transaction accounts and credit balances (excluding IBFs).... 8,376 6,677 440 331 69 Individuals, partnerships, and corporations 6,304 4,983 302 318 70 U.S. addressees (domicile) 4,561 3,917 237 312 71 Non-U.S. addressees (domicile) 1,743 1,066 65 5 72 Commercial banks in United States (including IBFs) 90 80 6 0 73 U.S. branches and agencies of other foreign banks 19 17 0 0 74 Other commercial banks in United States 71 63 5 0 75 Banks in foreign countries 1,048 796 96 1 76 Foreign branches of U.S. banks 9 9 0 0 77 Other banks in foreign countries 1,039 787 96 1 78 Foreign governments and official institutions (including foreign central banks) 484 444 5 2 79 All other deposits and credit balances 90 74 8 2 80 Certified and official checks 359 300 25 8 81 Demand deposits (included in transaction accounts and credit balances) 7,854 6,450 372 319 82 Individuals, partnerships, and corporations 5,925 4,866 245 305 83 U.S. addressees (domicile) 4,415 3,860 190 300 84 Non-U.S. addressees (domicile) 1,510 1,006 54 5 85 Commercial banks in United States (including IBFs) 61 n.a. 56 n.a. 0 n.a. 0 n.a. 86 U.S. branches and agencies of other foreign banks 19 16 0 0 87 Other commercial banks in United States 42 39 0 0 88 Banks in foreign countries 1,000 754 95 1 89 Foreign branches of U.S. banks 9 9 0 0 90 Other banks in foreign countries 990 745 95 1 91 Foreign governments and official institutions (including foreign central banks) 469 443 4 2 92 All other deposits and credit balances 40 32 2 2 93 Certified and official checks 359 300 25 8 94 Nontransaction accounts (including MMDAs, excluding IBFs) 143,353 121,796 4,778 7,801 95 Individuals, partnerships, and corporations 94,161 76,707 4,233 5,796 96 U.S. addressees (domicile) 82,030 70,038 2,374 4,954 97 Non-U.S. addressees (domicile) 12,132 6,669 1,859 841 98 Commercial banks in United States (including IBFs) 28,055 25,418 360 1,835 99 U.S. branches and agencies of other foreign banks 15,012 13,937 134 591 100 Other commercial banks in United States 13,043 11,480 226 1,244 101 Banks in foreign countries 8,347 8,158 0 120 102 Foreign branches of U.S. banks 2,800 2,700 0 100 103 Other banks in foreign countries 5,548 5,458 0 20 104 Foreign governments and official institutions (including foreign central banks) 4,560 4,267 185 0 105 All other deposits and credit balances 8,229 7,248 0 51 106 IBF deposit liabilities 237,893 219,681 5,966 7.153 107 Individuals, partnerships, and corporations 13.111 8.856 551 20 108 U.S. addressees (domicile) 152 152 0 0 109 Non-U.S. addressees (domicile) 12,959 8,704 551 20 110 Commercial banks in United States (including IBFs) 71,327 66,485 2,612 1,935 111 U.S. branches and agencies of other foreign banks 65,611 61,450 2,149 1,733 112 Other commercial banks in United States n a. 5,716 n.a. 5,036 n a. 463 n.a. 202 113 Banks in foreign countries 134,143 127,100 2.211 4,001 114 Foreign branches of U.S. banks 5,673 5,340 82 228 115 Other banks in foreign countries 128.469 121.760 2.129 3.773 116 Foreign governments and official institutions (including foreign central banks) 19.208 17.134 592 1.197 117 All other deposits and credit balances 104 104 0 0 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • May 1995 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 31, 19941—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm in I c T B lu o F t d a s in l 3 g o IB nl F y s 3 inc T I l B u o F t d a i s n l g I o B n F ly s inc T I l B u o F t d a i s n l g I o B n F ly s inc T I l B u o F t d a i s n l g I o B n F ly s 118 Federal funds purchased and securities sold under agreements to repurchase 66,592 12,220 58,828 8,255 4,257 2,059 3,200 1,814 119 U.S. branches and agencies of other foreign banks 9,897 2,835 7,498 1,324 1,516 973 740 449 120 Other commercial banks in United States 6,226 291 4,107 47 1,555 194 486 50 121 Other 50,469 9,094 47,222 6,884 1,186 892 1,973 1,315 122 Other borrowed money 109,460 52,871 62,585 23,684 34,232 23,144 9,756 4,833 123 Owed to nonrelated commercial banks in United States (including IBFs) 36,256 19,838 15,352 5,600 16,678 11,987 2,717 1,650 124 Owed to U.S. offices of nonrelated U.S. banks 8,587 2,134 4,769 687 2,899 1,184 506 215 125 Owed to US. branches and agencies of nonrelated foreign banks 27,669 17,703 10,583 4,913 13,779 10,803 2,211 1,435 126 Owed to nonrelated banks in foreign countries 32,963 31,086 18,089 16,481 11,077 10,909 3,136 3,086 127 Owed to foreign branches of nonrelated U.S. banks 1,364 1,269 645 586 459 449 191 191 128 Owed to foreign offices of nonrelated foreign banks 31,599 29,818 17,444 15,895 10,618 10,460 2,945 2,895 129 Owed to others 40,241 1,947 29,143 1,603 6,477 247 3,903 97 130 All other liabilities 62,995 4,867 53,181 4,149 4,067 506 4,939 168 131 Branch or agency liability on acceptances executed and outstanding 12,910 n.a. 9,126 n.a. 2,730 n.a. 517 n.a. 132 Other liabilities to nonrelated parties 50,085 4,867 44,054 4,149 1,338 506 4,422 168 133 Net due to related depository institutions3 121,376 26,078 60,564 20,226 17,080 372 23,537 3,676 134 Net owed to head office and other related depository institutions3 121,376 n.a. 60,564 n.a. 17,080 n.a. 23,537 n.a. 135 Net owed to establishing entity, head office, and other related depository institutions n.a. 26,078 20,226 372 3,676 MEMO 136 Non-interest-bearing balances with commercial banks in United States 1,175 0 890 0 127 0 39 0 137 Holding of commercial paper included in total loans 1,304 1,258 11 15 138 Holding of own acceptances included in commercial and industrial loans 4,557 33,,443399 998 26 139 Commercial and industrial loans with remaining maturity of one year or less 103,368 58,314 16,495 16,857 140 Predetermined interest rates 59,115 n.a. 33,341 n.a. 9,535 n.a. 11,316 n.a. 141 Floating interest rates 4444,,225533 24,973 66,,996600 55,,554411 142 Commercial and industrial loans with remaining maturity of more than one year 67,815 39,930 11,104 8,716 143 Predetermined interest rates 18,746 10,781 3,307 3,306 144 Floating interest rates 49,069 29,149 7,797 5,410 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A75 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 31, 19941—Continued Millions of dollars, except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T I l B o u t F d a i s l n g I o B n F ly s exc T I l B o u t F d a s i l n g I o B n F ly s exc T I l B o u t F d a s i l n g I o B n F ly s 111144445555 CCCCoooommmmppppoooonnnneeeennnnttttssss ooooffff ttttoooottttaaaallll nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ttttoooottttaaaallll ddddeeeeppppoooossssiiiittttssss aaaannnndddd ccccrrrreeeeddddiiiitttt bbbbaaaallllaaaannnncccceeeessss ooooffff nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddiiiinnnngggg IIIIBBBBFFFFssss 146,538 n.a. 125,535 n.a. 5,268 n.a. 7,945 n.a. 111144446666 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 109,146 n.a. 93,532 n.a. 3,021 n.a. 5,567 n.a. 111144447777 OOOOtttthhhheeeerrrr ttttiiiimmmmeeee ddddeeeeppppoooossssiiiittttssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 28,822 n.a. 24,921 n.a. 1,270 n.a. 1,968 n.a. 111144448888 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee wwwwiiiitttthhhh rrrreeeemmmmaaaaiiiinnnniiiinnnngggg mmmmaaaattttuuuurrrriiiittttyyyy ooooffff mmmmoooorrrreeee tttthhhhaaaannnn 11112222 mmmmoooonnnntttthhhhssss 8,570 n.a. 7,082 n.a. 977 n.a. 411 n.a. All states2 New York California Illinois inc T I l B u o F t d a i s l n g I o B n F ly s inc T I l B u o F t d a i s l n g I o B n F ly s inc T I l B u o F t d a i s l n g I o B n F ly s inc T I l B u ot F d a i s l n g I o B n F ly s 111144449999 MMMMaaaarrrrkkkkeeeetttt vvvvaaaalllluuuueeee ooooffff sssseeeeccccuuuurrrriiiittttiiiieeeessss hhhheeeelllldddd 0 0 0 0 0 0 0 0 111155550000 IIIImmmmmmmmeeeeddddiiiiaaaatttteeeellllyyyy aaaavvvvaaaaiiiillllaaaabbbblllleeee ffffuuuunnnnddddssss wwwwiiiitttthhhh aaaa mmmmaaaattttuuuurrrriiiittttyyyy ggggrrrreeeeaaaatttteeeerrrr tttthhhhaaaannnn oooonnnneeee ddddaaaayyyy iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ooootttthhhheeeerrrr bbbboooorrrrrrrroooowwwweeeedddd mmmmoooonnnneeeeyyyy 64,457 n.a. 31,000 n.a. 27,419 n.a. 4,620 n.a. 111155551111 NNNNuuuummmmbbbbeeeerrrr ooooffff r r r reeeeppppoooorrrrttttssss f f f fiiiilllleeeedddd5555 541 0 255 0 124 0 47 0 1. Data are aggregates of categories reported on the quarterly form FFIEC 002, item, either because the item is not an eligible IBF asset or liability or because that level "Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks." The of detail is not reported for IBFs. From December 1981 through September 1985, IBF form was first used for reporting data as of June 30,1980, and was revised as of December data were included in all applicable items reported. 31,1985. From November 1972 through May 1980, U.S. branches and agencies of foreign 4. Total assets and total liabilities include net balances, if any, due from or owed to banks had filed a monthly FR 886a report. Aggregate data from that report were available related banking institutions in the United States and in foreign countries (see note 5). On through the Federal Reserve statistical release G.l 1, last issued on July 10,1980. Data in the former monthly branch and agency report, available through the G.ll statistical this table and in the G.ll tables are not strictly comparable because of differences in release, gross balances were included in total assets and total liabilities. Therefore, total reporting panels and in definitions of balance sheet items. IBF, international banking asset and total liability figures in this table are not comparable to those in the G. 11 tables. facility. 5. Related depository institutions includes the foreign head office and other U.S. and 2. Includes the District of Columbia. foreign branches and agencies of a bank, a bank's parent holding company, and majority- 3. Effective December 1981, the Federal Reserve Board amended Regulations D and Q owned banking subsidiaries of the bank and of its parent holding company (including to permit banking offices located in the United States to operate international banking subsidiaries owned both directly and indirectly). facilities (IBFs). Since December 31,1985, data for IBFs have been reported in a separate 6. In some cases two or more offices of a foreign bank within the same metropolitan column. These data are either included in or excluded from the total columns as indicated area file a consolidated report. in the headings. The notation "n.a." indicates that no IBF data have been reported for that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 Index to Statistical Tables References are to pages A3-A75 although the prefix 'A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits Agricultural loans, commercial banks, 21, 22 Banks, by classes, 18-23 Assets and liabilities (See also Foreigners) Ownership by individuals, partnerships, and Banks, by classes, 18-22 corporations, 23 Domestic finance companies, 36 Turnover, 17 Federal Reserve Banks, 11 Depository institutions Financial institutions, 28 Reserve requirements, 9 Foreign banks, U.S. branches and agencies, 23, 72-75 Reserves and related items, 4, 5, 6, 13 Automobiles Deposits (See also specific types) Consumer installment credit, 39 Banks, by classes, 4, 18-22, 24 Production, 47, 48 Federal Reserve Banks, 5, 11 Interest rates, 16 Turnover, 17 BANKERS acceptances, 10, 22, 26 Discount rates at Reserve Banks and at foreign central banks and Bankers balances, 18-22, 72-75. (See also Foreigners) foreign countries (See Interest rates) Bonds (See also U.S. government securities) Discounts and advances by Reserve Banks (See Loans) New issues, 35 Dividends, corporate, 35 Rates, 26 Branch banks, 23 Business activity, nonfinancial, 45 EMPLOYMENT, 45 Business expenditures on new plant and equipment, 35 Eurodollars, 26 Business loans (See Commercial and industrial loans) CAPACITY utilization, 46 FARM mortgage loans, 38 Capital accounts Federal agency obligations, 5, 10, 11, 12, 31, 32 Banks, by classes, 18 Federal credit agencies, 33 Federal Reserve Banks, 11 Federal finance Central banks, discount rates, 65 Debt subject to statutory limitation, and types and ownership Certificates of deposit, 26 of gross debt, 30 Commercial and industrial loans Receipts and outlays, 28, 29 Commercial banks, 21 Treasury financing of surplus, or deficit, 28 Weekly reporting banks, 21-23 Treasury operating balance, 28 Commercial banks Federal Financing Bank, 28, 33 Assets and liabilities, 18-22, 68-71 Federal funds, 7, 19, 21, 22, 23, 26, 28 Commercial and industrial loans, 18-23 Federal Home Loan Banks, 33 Consumer loans held, by type and terms, 39 Federal Home Loan Mortgage Corporation, 33, 37, 38 Deposit interest rates of insured, 16 Federal Housing Administration, 33, 37, 38 Loans sold outright, 21 Federal Land Banks, 38 Nondeposit funds, 72-75 Federal National Mortgage Association, 33, 37, 38 Real estate mortgages held, by holder and property, 38 Federal Reserve Banks Terms of lending, 68-71 Condition statement, 11 Time and savings deposits, 4 Discount rates (See Interest rates) Commercial paper, 24, 26, 36 U.S. government securities held, 5, 11, 12, 30 Condition statements (See Assets and liabilities) Federal Reserve credit, 5, 6, 11, 12 Construction, 45, 49 Federal Reserve notes, 11 Consumer installment credit, 39 Federally sponsored credit agencies, 33 Consumer prices, 45, 46 Finance companies Consumption expenditures, 52, 53 Assets and liabilities, 36 Corporations Business credit, 36 Nonfinancial, assets and liabilities, 35 Loans, 39 Profits and their distribution, 35 Paper, 24, 26 Security issues, 34, 65 Financial institutions, loans to, 21, 22, 23 Cost of living (See Consumer prices) Float, 5 Credit unions, 39 Flow of funds, 40, 42, 43, 44 Currency in circulation, 5, 14 Foreign banks, assets and liabilities of U.S. branches and Customer credit, stock market, 27 agencies, 22, 23, 72-75 Foreign currency operations, 11 Foreign deposits in U.S. banks, 5, 11, 21, 22 DEBITS to deposit accounts, 17 Foreign exchange rates, 66 Debt (See specific types of debt or securities) Foreign trade, 54 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

77 Foreigners Production, 45, 47 Claims on, 55, 58, 59, 60, 62 Profits, corporate, 35 Liabilities to, 22, 54, 55, 56, 61, 63, 64 REAL estate loans GOLD Banks, by classes, 21, 22, 38 Certificate account, 11 Terms, yields, and activity, 37 Stock, 5, 54 Type of holder and property mortgaged, 38 Government National Mortgage Association, 33, 37, 38 Repurchase agreements, 7, 21-23 Gross domestic product, 51 Reserve requirements, 9 Reserves HOUSING, new and existing units, 49 Commercial banks, 18 Depository institutions, 4, 5, 6, 13 INCOME, personal and national, 45, 51, 52 Federal Reserve Banks, 11 Industrial production, 45, 47 U.S. reserve assets, 54 Installment loans, 39 Residential mortgage loans, 37 Insurance companies, 30, 38 Retail credit and retail sales, 39, 40, 45 Interest rates Bonds, 26 SAVING Commercial banks, 68-71 Flow of funds, 40, 42, 43, 44 Consumer installment credit, 39 National income accounts, 51 Deposits, 16 Savings and loan associations, 38, 39, 40 Federal Reserve Banks, 8 Savings banks, 38, 39 Foreign central banks and foreign countries, 66 Savings deposits (See Time and savings deposits) Money and capital markets, 26 Securities (See also specific types) Mortgages, 37 Federal and federally sponsored credit agencies, 33 Prime rate, 25 Foreign transactions, 63 International capital transactions of United States, 53-65 New issues, 34 International organizations, 55, 56, 58, 61, 62 Prices, 27 Inventories, 51 Special drawing rights, 5, 11, 53, 54 Investment companies, issues and assets, 35 State and local governments Investments (See also specific types) Deposits, 21, 22 Banks, by classes, 18-23 Holdings of U.S. government securities, 30 Commercial banks, 4, 18-23 New security issues, 34 Federal Reserve Banks, 11, 12 Ownership of securities issued by, 21, 22 Financial institutions, 38 Rates on securities, 26 Stock market, selected statistics, 27 LABOR force, 45 Stocks (See also Securities) Life insurance companies (See Insurance companies) New issues, 34 Loans (See also specific types) Prices, 27 Banks, by classes, 18—23 Commercial banks, 4, 18-23 Student Loan Marketing Association, 33 Federal Reserve Banks, 5, 6, 8, 11, 12 Financial institutions, 38 TAX receipts, federal, 29 Insured or guaranteed by United States, 37, 38 Thrift institutions, 4. (See also Credit unions and Savings and loan associations) MANUFACTURING Time and savings deposits, 4, 14, 16, 18-23 Capacity utilization, 46 Trade, foreign, 54 Production, 46, 48 Treasury cash, Treasury currency, 5 Margin requirements, 27 Treasury deposits, 5, 11, 28 Member banks (See also Depository institutions) Treasury operating balance, 28 Federal funds and repurchase agreements, 7 UNEMPLOYMENT, 45 Reserve requirements, 9 U.S. government balances Mining production, 48 Commercial bank holdings, 18-23 Mobile homes shipped, 49 Treasury deposits at Reserve Banks, 5, 11, 28 Monetary and credit aggregates, 4, 13 U.S. government securities Money and capital market rates, 26 Bank holdings, 18-23, 30 Money stock measures and components, 4, 14 Dealer transactions, positions, and financing, 32 Mortgages (See Real estate loans) Federal Reserve Bank holdings, 5, 11, 12, 30 Mutual funds, 35 Foreign and international holdings and Mutual savings banks (See Thrift institutions) transactions, 11, 30, 64 Open market transactions, 10 NATIONAL defense outlays, 29 Outstanding, by type and holder, 28, 30 National income, 51 Rates, 25 U.S. international transactions, 53-66 OPEN market transactions, 10 Utilities, production, 48 PERSONAL income, 52 VETERANS Administration, 37, 38 Prices Consumer and producer, 45, 50 WEEKLY reporting banks, 22-24 Stock market, 27 Wholesale (producer) prices, 45, 50 Prime rate, 25 Producer prices, 45, 50 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ALAN S. BLINDER, Vice Chairman LAWRENCE B. LINDSEY 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 THOMAS A. CONNORS, Assistant Director DIANE E. WERNEKE, Special Assistant to the Board PETER HOOPER III, Assistant Director PORTIA W. THOMPSON, Equal Employment Opportunity KAREN H. JOHNSON, Assistant Director Programs Adviser CATHERINE L. MANN, 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, Deputy Secretary MARTHA S. SCANLON, Deputy Associate Director BARBARA R. LOWREY, Associate Secretary PETER A. TINSLEY, Deputy Associate Director DAY W. RADEBAUGH, JR., Assistant Secretary1 FLINT BRAYTON, Assistant Director DAVID S. JONES, Assistant Director DIVISION OF BANKING STEPHEN A. RHOADES, Assistant Director SUPERVISION AND REGULATION CHARLES S. STRUCKMEYER, Assistant Director RICHARD SPILLENKOTHEN, Director ALICE PATRICIA WHITE, Assistant Director STEPHEN C. SCHEMERING, Deputy Director JOYCE K. ZICKLER, Assistant Director DON E. KLINE, Associate Director JOHN J. MINGO, Senior Adviser GLENN B. CANNER, Adviser WILLIAM A. RYBACK, Associate Director FREDERICK M. STRUBLE, Associate Director DIVISION OF MONETARY AFFAIRS HERBERT A. BIERN, Deputy Associate Director ROGER T. COLE, Deputy Associate Director DONALD L. KOHN, Director JAMES I. GARNER, Deputy Associate Director DAVID E. LINDSEY, Deputy Director HOWARD A. AMER, Assistant Director BRIAN F. MADIGAN, Associate Director GERALD A. EDWARDS, JR., Assistant Director RICHARD D. PORTER, Deputy Associate Director JAMES D. GOETZINGER, Assistant Director VINCENT R. REINHART, Assistant Director STEPHEN M. HOFFMAN, JR., Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board LAURA M. HOMER, Assistant Director JAMES V. HOUPT, Assistant Director DIVISION OF CONSUMER JACK P. JENNINGS, Assistant Director AND COMMUNITY AFFAIRS MICHAEL G. MARTINSON, Assistant Director GRIFFITH L. GARWOOD, Director RHOGER H PUGH, Assistant Director GLENN E. LONEY, Associate Director SIDNEY M. SUSSAN, Assistant Director DOLORES S. SMITH, Associate Director MOLLY S. WASSOM, Assistant Director MAUREEN P. ENGLISH, Assistant Director WILLIAM SCHNEIDER, Project Director, IRENE SHAWN MCNULTY, Assistant Director National Information Center 1. On loan from the Division of Information Resources Management Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

79 SUSAN M. PHILLIPS JANET L. YELLEN OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PA YMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director SHEILA CLARK, EEO Programs Director DAVID L. ROBINSON, Deputy Director (Finance and Control) DIVISION OF HUMAN RESOURCES LOUISE L. ROSEMAN, Associate Director MANAGEMENT CHARLES W. BENNETT, Assistant Director DAVID L. SHANNON, Director JACK DENNIS, JR., Assistant Director JOHN R. WEIS, Associate Director EARL G. HAMILTON, Assistant Director ANTHONY V. DIGIOIA, Assistant Director JEFFREY C. MARQUARDT, Assistant Director JOHN H. PARRISH, Assistant Director JOSEPH H. HAYES, JR., Assistant Director FLORENCE M. YOUNG, Assistant Director FRED HOROWITZ, Assistant Director OFFICE OF THE INSPECTOR GENERAL OFFICE OF THE CONTROLLER GEORGE E. LIVINGSTON, Controller BRENT L. BOWEN, Inspector General STEPHEN J. CLARK, Assistant Controller (Programs and DONALD L. ROBINSON, Assistant Inspector General Budgets) BARRY R. SNYDER, Assistant Inspector General 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 ELIZABETH B. RIGGS, Assistant Director RICHARD C. STEVENS, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 Federal Reserve Bulletin • May 1995 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman ALAN S. BLINDER LAWRENCE B. LINDSEY MICHAEL H. MOSKOW THOMAS M. HOENIG THOMAS C. MELZER SUSAN M. PHILLIPS EDWARD W. KELLEY, JR. CATHY E. MINEHAN JANET L. YELLEN ALTERNATE MEMBERS EDWARD G. BOEHNE ROBERT D. MCTEER GARY H. STERN JERRY L. JORDAN JAMES H. OLTMAN STAFF DONALD L. KOHN, Secretary and Economist WILLIAM G. DEWALD, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary WILLIAM C. HUNTER, Associate Economist JOSEPH R. COYNE, Assistant Secretary DAVID E. LINDSEY, Associate Economist GARY P. GILLUM, Assistant Secretary FREDERIC S. MISHKIN, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel LARRY J. PROMISEL, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel CHARLES J. SIEGMAN, Associate Economist MICHAEL J. PRELL, Economist LAWRENCE SLIFMAN, Associate Economist EDWIN M. TRUMAN, Economist DAVID J. STOCKTON, Associate Economist LYNN E. BROWNE, Associate Economist CARL E. VANDER WILT, Associate Economist THOMAS E. DAVIS, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL ANTHONY P. TERRACCIANO, President MARSHALL N. CARTER, Vice President MARSHALL N. CARTER, First District ROGER L. FITZSIMONDS, Seventh District WALTER V. SHIPLEY, Second District ANDREW B. CRAIG, III, Eighth District ANTHONY P. TERRACCIANO, Third District RICHARD M. KOVACEVICH, Ninth District FRANK V. CAHOUET, Fourth District CHARLES E. NELSON, Tenth District RICHARD G. TILGHMAN, Fifth District CHARLES R. HRDLICKA, Eleventh District CHARLES E. RICE, Sixth District EDWARD A. CARSON, Twelfth District HERBERT V. PROCHNOW, Secretary Emeritus JAMES ANNABLE, Co-Secretary WILLIAM J. KORSVIK, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

81 CONSUMER ADVISORY COUNCIL JAMES L. WEST, Tijeras, New Mexico, Chairman KATHARINE W. MCKEE, Washington, D.C., Vice Chairman D. DOUGLAS BLANKE, St. Paul, Minnesota THOMAS L. HOUSTON, Dallas, Texas THOMAS R. BUTLER, Riverwoods, Illinois TERRY JORDE, Cando, North Dakota ROBERT A. COOK, Baltimore, Maryland EUGENE I. LEHRMANN, Madison, Wisconsin ALVIN J. COWANS, Orlando, Florida RONALD A. PRILL, Minneapolis, Minnesota MICHAEL FERRY, St. Louis, Missouri LISA RICE-COLEMAN, Toledo, Ohio ELIZABETH G. FLORES, Laredo, Texas JOHN R. RINES, Detroit, Michigan EMANUEL FREEMAN, Philadelphia, Pennsylvania JULIA M. SEWARD, Richmond, Virginia NORMA L. FREIBERG, New Orleans, Louisiana ANNE B. SHLAY, Philadelphia, Pennsylvania DAVID C. FYNN, Cleveland, Ohio REGINALD J. SMITH, Kansas City, Missouri LORI GAY, LOS Angeles, California JOHN E. TAYLOR, Washington, D.C. ROBERT G. GREER, Houston, Texas LORRAINE VANETTEN, Troy, Michigan KENNETH R. HARNEY, Chevy Chase, Maryland GRACE W. WEINSTEIN, Englewood, New Jersey GAIL K. HILLEBRAND, San Francisco, California LILY K. YAO, Honolulu, Hawaii RONALD A. HOMER, Boston, Massachusetts ROBERT O. ZDENEK, Greenwich, Connecticut THRIFT INSTITUTIONS ADVISORY COUNCIL CHARLES JOHN KOCH, Cleveland, Ohio, President STEPHEN D. TAYLOR, Miami, Florida, Vice President E. LEE BEARD, Hazleton, Pennsylvania DAVID F. HOLLAND, Burlington, Massachusetts JOHN E. BRUBAKER, San Mateo, California JOSEPH C. SCULLY, Chicago, Illinois MALCOLM E. COLLIER, Lakewood, Colorado JOHN M. TIPPETS, DFW Airport, Texas GEORGE L. ENGELKE, JR., Lake Success, New York LARRY T. WILSON, Raleigh, North Carolina BEVERLY D. HARRIS, Livingston, Montana WILLIAM W. ZUPPE, Spokane, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 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.) $200.00 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Rates for subscribers outside the United States are as follows 1994.157 pp. and include additional air mail costs: ANNUAL REPORT. Federal Reserve Regulatory Service, $250.00 per year. ANNUAL REPORT: BUDGET REVIEW, 1994-95. Each Handbook, $90.00 per year. FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- $2.50 each in the United States, its possessions, Canada, COUNTRY MODEL, May 1984. 590 pp. $14.50 each. and Mexico. Elsewhere, $35.00 per year or $3.00 each. WELCOME TO THE FEDERAL RESERVE. March 1989. 14 pp. ANNUAL STATISTICAL DIGEST: period covered, release date, INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. number of pages, and price. 440 pp. $9.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1982 December 1983 266 pp. $ 7.50 December 1986. 264 pp. $10.00 each. 1983 October 1984 264 pp. $11.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1984 October 1985 254 pp. $12.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1985 October 1986 231 pp. $15.00 1986 November 1987 288 pp. $15.00 1987 October 1988 272 pp. $15.00 EDUCATION PAMPHLETS 1988 November 1989 256 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1980-89 March 1991 712 pp. $25.00 available without charge. 1990 November 1991 185 pp. $25.00 1991 November 1992 215 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1992 December 1993 215 pp. $25.00 Consumer Handbook to Credit Protection Laws 1993 December 1994 281 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small Businesses Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES The Board of Governors of the Federal Reserve System OF CHARTS. Weekly. $30.00 per year or $.70 each in the The Federal Open Market Committee United States, its possessions, Canada, and Mexico. Else- Federal Reserve Bank Board of Directors where, $35.00 per year or $.80 each. Federal Reserve Banks Organization and Advisory Committees THE FEDERAL RESERVE ACT and other statutory provisions A Consumer's Guide to Mortgage Lock-Ins affecting the Federal Reserve System, as amended through A Consumer's Guide to Mortgage Settlement Costs August 1990. 646 pp. $10.00. A Consumer's Guide to Mortgage Refinancings REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Home Mortgages: Understanding the Process and Your Right RESERVE SYSTEM. to Fair Lending ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— How to File a Consumer Complaint Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. Making Deposits: When Will Your Money Be Available? Vol. 11 (Irregular Transactions). 1969. 116 pp. Each vol- Making Sense of Savings ume $2.25. SHOP: The Card You Pick Can Save You Money 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

83 STAFF STUDIES: Only Summaries Printed in the 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM BULLETIN MORTGAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Studies and papers on economic and financial subjects that are of general interest. Requests to obtain single copies of the full 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, text or to be added to the mailing list for the series may be sent Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary to Publications Services. Ann Taylor. March 1992. 37 pp. 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by Staff Studies 1-157 are out of print. James T. Fergus and John L. Goodman, Jr. July 1993. 20 pp. 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, PRODUCTS, by Mark J. Warshawsky with the assistance of by Gregory E. Elliehausen and John D. Wolken. Septem- Dietrich Earnhart. September 1989. 23 pp. ber 1993. 18 pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSID- 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, IARIES OF BANK HOLDING COMPANIES, by Nellie Liang by Mark Carey, Stephen Prowse, John Rea, and Gregory and Donald Savage. February 1990. 12 pp. Udell. January 1994. Ill pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by BANKING, 1980-93, AND AN ASSESSMENT OF THE "OPER- Gregory E. Elliehausen and John D. Wolken. September ATING PERFORMANCE" AND "EVENT STUDY" METHOD- 1990. 35 pp. OLOGIES, by Stephen A. Rhoades. July 1994. 37 pp. 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, 1980-90, by Margaret Hastings Pickering. May 1991. 21pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 Maps of the Federal Reserve System 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. Digitized for FRAtSoErRie s as follows: the New York Bank serves the http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

85 > 2-B 3-C 4-D Pittsburgh NV CT i ': •QHpffiaati JGfc Butlalo | DE \ MA NJ NY CT RI BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H _ .;#fjjHMRe Birmingmham-^ ; ville lpteo He ^NS^Wleani ATLANTA CHICAGO ST. LOUIS 9-1 MINNEAPOLIS 10-J 12-L KANSAS CITY 11-K DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 Jerome H. Grossman Cathy E. Minehan William C. Brainard Paul M. Connolly NEW YORK* 10045 Maurice R. Greenberg William J. McDonough David A. Hamburg James H. Oltman Buffalo 14240 Joseph J. Castiglia Carl W. Turnipseed1 PHILADELPHIA 19105 James M. Mead Edward G. Boehne Donald J. Kennedy William H. Stone, Jr. CLEVELAND* 44101 A. William Reynolds Jerry L. Jordan G. Watts Humphrey, Jr. Sandra Pianalto Cincinnati 45201 John N. Taylor, Jr. Charles A. Cerino1 Pittsburgh 15230 Robert P. Bozzone Harold J. Swart1 RICHMOND* 23219 Henry J. Faison J. Alfred Broaddus, Jr. Claudine B. Malone Jimmie R. Monhollon Baltimore 21203 Michael R. Watson Ronald B. Duncan1 Charlotte 28230 James O. Roberson Walter A. Varvel1 Culpeper 22701 Julius Malinowski, Jr.2 ATLANTA 30303 Leo Benatar Robert P. Forrestal Hugh M. Brown JJaacckk GGuuyynnnn Donald E. Nelson1 Birmingham 35283 Patricia B. Compton FredR. Herr1 Jacksonville 32231 Lana Jane Lewis-Brent James D. Hawkins1 Miami 33152 Michael T. Wilson James T. Curry III Nashville 37203 James E. Dalton, Jr. Melvyn K. Purcell New Orleans 70161 Jo Ann Slaydon Robert J. Musso CHICAGO* 60690 Robert M. Healey Michael H. Moskow Richard G. Cline William C. Conrad Detroit 48231 John D. Forsyth Roby L. Sloan1 ST. LOUIS 63166 Robert H. Quenon Thomas C. Melzer John F. McDonnell James R. Bowen Little Rock 72203 Janet M. Jones Karl W. Ashman Louisville 40232 Daniel L. Ash Howard Wells Memphis 38101 Woods E. Eastland John P. Baumgartner MINNEAPOLIS 55480 Gerald A. Rauenhorst Gary H. Stern Jean D. Kinsey Colleen K. Strand Helena 59601 Matthew J. Quinn John D. Johnson KANSAS CITY 64198 Herman Cain Thomas M. Hoenig A. Drue Jennings Richard K. Rasdall Denver 80217 Sandra K. Woods Kent M. Scott1 Oklahoma City 73125 Ernest L. Holloway Mark L. Mullinix Omaha 68102 Sheila Griffin Harold L. Shewmaker DALLAS 75201 Cece Smith Robert D. McTeer, Jr. Roger R. Hemminghaus Tony J. Salvaggio El Paso 79999 W. Thomas Beard III Sammie C. Clay Houston 77252 Isaac H. Kempner III Robert Smith, III1 San Antonio 78295 Carol L. Thompson James L. Stull1 SAN FRANCISCO .... 94120 Judith M. Runstad Robert T. Parry James A. Vohs Patrick K. Barron Los Angeles 90051 Anita E. Landecker John F. Moore1 Portland 97208 Ross R. Runkel A. Kenneth Ridd Salt Lake City 84125 Gerald R. Sherratt Andrea P. Wolcott Seattle 98124 George F. Russell, Jr. Gordon Werkema1 •Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; East Rutherford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. 1. Senior Vice President. 2. Assistant Vice President. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT PUBLICATIONS The Federal Reserve Board publishes a series of Three booklets on the mortgage process are also pamphlets covering individual credit laws and topics, available: A Consumer's Guide to Mortgage Lock-Ins, as pictured below. The series includes such subjects A Consumer's Guide to Mortgage Refinancings, and as how the Equal Credit Opportunity Act protects A Consumer's Guide to Mortgage Settlement Costs. women against discrimination in their credit dealings, These booklets were prepared in conjunction with the how to use a credit card, and how to resolve a billing Federal Home Loan Bank Board and in consultation error. with other federal agencies and trade and consumer The Board also publishes the Consumer Handbook groups. to Credit Protection Laws, a complete guide to con- Copies of consumer publications are available free sumer credit protections. This forty-four-page booklet of charge from Publications Services, mail stop 127, explains how to shop and obtain credit, how to main- Board of Governors of the Federal Reserve System, tain a good credit rating, and how to dispute unfair Washington, DC 20551. Multiple copies for classcredit transactions. room use are also available free of charge. Business A Consumer's Credit Guide to tor Women, Mortgage Minorities, and Lock-Ins Small Businesses Consumer Handbook to Credit Protection Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE REGULATORY SERVICE To promote public understanding of its regulatory of marginable OTC stocks and its list of foreign functions, the Board publishes the Federal Reserve margin stocks. Regulatory Service, a four-volume loose-leaf service The Consumer and Community Affairs Handbook containing all Board regulations as well as related contains Regulations B, C, E, M, Z, AA, BB, and DD, statutes, interpretations, policy statements, rulings, and associated materials. and staff opinions. For those with a more specialized The Payment System Handbook deals with expeinterest in the Board's regulations, parts of this ser- dited funds availability, check collection, wire transvice are published separately as handbooks pertaining fers, and risk-reduction policy. It includes Regulato monetary policy, securities credit, consumer affairs, tions CC, J, and EE, related statutes and commenand the payment system. taries, and policy statements on risk reduction in the These publications are designed to help those who payment system. must frequently refer to the Board's regulatory mate- For domestic subscribers, the annual rate is $200 rials. They are updated monthly, and each contains for the Federal Reserve Regulatory Service and $75 citation indexes and a subject index. for each Handbook. For subscribers outside the The Monetary Policy and Reserve Requirements United States, the price including additional air mail Handbook contains Regulations A, D, and Q, plus costs is $250 for the Service and $90 for each Handrelated materials. book. All subscription requests must be accompanied The Securities Credit Transactions Handbook con- by a check or money order payable to the Board of tains Regulations G, T, U, and X, dealing with exten- Governors of the Federal Reserve System. Orders sions of credit for the purchase of securities, together should be addressed to Publications Services, mail with related statutes, Board interpretations, rulings, stop 127, Board of Governors of the Federal Reserve and staff opinions. Also included are the Board's list System, Washington, DC 20551. GUIDE TO THE FLOW OF FUNDS ACCOUNTS A recent Federal Reserve publication, Guide to the dures as seasonal adjustment, extrapolation, and Flow of Funds Accounts, explains in detail how the interpolation. U.S. financial flow accounts are prepared. The The balance of the Guide contains explanatory accounts, which are compiled by the Division of tables corresponding to the tables of financial flows Research and Statistics, are published in the Board's data that appeared in the September 1992 Z.l release. quarterly Z.l statistical release, "Flow of Funds These tables give, for each data series, the source of Accounts, Flows and Outstandings." The Guide the data or the methods of calculation, along with updates and replaces Introduction to Flow of Funds, annual data for 1991 that were published in the published in 1980. September 1992 release. The 670-page Guide begins with an explanation of Guide to the Flow of Funds Accounts is available the organization and uses of the flow of funds for $8.50 per copy from Publications Services, Board accounts and their relationship to the national income of Governors of the Federal Reserve System, Washand product accounts prepared by the U.S. Depart- ington, DC 20551. Orders must include a check or ment of Commerce. Also discussed are the individual money order, in US. dollars, made payable to the data series that make up the accounts and such proce- Board of Governors of the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Statistical Releases Available on the Commerce Department's Economic Bulletin Board The Board of Governors of the Federal Reserve scription. For further information regarding a System makes some of its statistical releases avail- subscription to the economic bulletin board, able to the public through the U.S. Department of please call (202) 482-1986. The releases transmitted Commerce's economic bulletin board. Computer to the economic bulletin board, on a regular basis, access to the releases can be obtained by sub- are the following: Reference Number Statistical release Frequency of release H.3 Aggregate Reserves Weekly/Thursday H.4.1 Factors Affecting Reserve Balances Weekly/Thursday H.6 Money Stock Weekly/Thursday H.8 Assets and Liabilities of Insured Domestically Chartered Weekly/Monday and Foreign Related Banking Institutions H.10 Foreign Exchange Rates Weekly/Monday H.15 Selected Interest Rates Weekly/Monday G.5 Foreign Exchange Rates Monthly/end of month G.17 Industrial Production and Capacity Utilization Monthly/midmonth G.19 Consumer Installment Credit Monthly/fifth business day Z.7 Flow of Funds Quarterly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis