Federal Reserve Bulletin, 1996-01

VOLUME 82 • NUMBER 1 • JANUARY 1996 FEDERAL RESERVE BULLETIN BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • S. David Frost • Griffith L. Garwood • Donald L. Kohn • J. Virgil Mattingly, Jr. • Michael J. Prell • Richard Spillenkothen • Edwin M. Truman The Federal Reserve Bulletin is issued monthly under the direction of the staff publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, the Graphics Center under the direction of Peter G. Thomas, and Publications Services supervised by Linda C. Kyles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents L TRENDS IN THE STRUCTURE OF FEDERALLY having fallen 0.3 percent in October. Capacity INSURED DEPOSITORY INSTITUTIONS, utilization edged down about 0.1 percentage 1984-94 point, to 83.1 percent. Between 1984 and 1994, the number of federally insured depository institutions declined consider- 31 STATEMENTS TO THE CONGRESS ably. Institution failure contributed significantly \ to the decrease, but an even more important Alan Greenspan, Chairman, Board of Governors factor was mergers and acquisitions stimulated of the Federal Reserve System, discusses the by relaxed restrictions on geographic expansion. issues raised by the events relating to the U.S. Deposits also became considerably more concen- operations of Daiwa Bank and says that the Fedtrated at the national and state levels, with larger eral Reserve has sought to determine whether the firms increasing their deposit share relative to supervision of Daiwa should have proceeded on smaller firms. However, the concentration of a different basis and how such problems, to the deposits within local banking markets increased extent feasible, might be avoided in the future, only slightly. before the Senate Committee on Banking, Housing, and Urban Affairs, November 27, 1995. (Similar testimony was presented on December 5, 16 A REVISION TO INDUSTRIAL PRODUCTION 1995, to the Subcommittee on Financial Institu- AND CAPACITY UTILIZATION, 1991-95 tions and Consumer Credit of the House Commit- The Federal Reserve's index of industrial produc- tee on Banking and Financial Services.) tion and its related measures of capacity and 35 Chairman Greenspan presents the views of the utilization for January 1991 onward have been Board on securities margin requirements and says revised to incorporate updated or additional data, that the Board believes that federal oversight of revised seasonal factors through mid-1995, and securities credit extensions by broker-dealers updated productivity relationships for input-based should be left to self-regulatory organizations and estimates. The updated measures continue to paint to the Securities and Exchange Commission, the same broad picture of recovery in industrial which would necessitate the repeal of sections 7 activity from the 1990 recession through 1994, and 8(a) of the Securities and Exchange Act of followed by a slowdown in early 1995. 1934, and that this plan would allow banking regulators to develop an approach to oversight 26 STAFF STUDIES of bank securities credit that is more compatible with their overall approach to bank safety and In The Economics of the Private Equity Market, soundness, before the Subcommittee on Telecomthe authors examine the economic foundations of munications and Finance of the House Committhe market for private equity and discuss the tee on Commerce, November 30, 1995. major participants in the market and their interactions with each other. They also analyze the reasons for the market's extraordinary growth in 39 ANNOUNCEMENTS recent years, highlight the main characteristics of that growth, and discuss the major influences on Appointments of Chairmen and Deputy Chairreturns to private equity investors. men of the Federal Reserve Banks. Issuance of a report on public disclosure of inter- 28 INDUSTRIAL PRODUCTION AND CAPACITY national trading and derivatives activities by UTILIZATION FOR NOVEMBER 1995 banks and securities firms. Industrial production rose 0.2 percent in Novem- Availability of new fee schedules for services ber, to 122.8 percent of its 1987 average, after provided by the Federal Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A decrease in the net transaction accounts to AI FINANCIAL AND BUSINESS STATISTICS which a 3 percent reserve requirement will apply These tables reflect data available as of in 1996. November 28, 1995. Proposed definition of "capital stock and surplus" for purposes of section 23A of the Federal A3 GUIDE TO TABULAR PRESENTATION Reserve Act. A4 Domestic Financial Statistics Publication of the Annual Statistical Digest, 1994. A45 Domestic Nonfinancial Statistics A53 International Statistics Errata in a table in the November 1995 issue of the Federal Reserve Bulletin. A67 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES 42 MINUTES OF THE FEDERAL OPEN MARKET COMMITTEE MEETING HELD ON A70 INDEX TO STATISTICAL TABLES SEPTEMBER 26, 1995 At its meeting on September 26, 1995, the Com- A72 BOARD OF GOVERNORS AND STAFF mittee adopted a directive that called for maintaining the existing degree of pressure on reserve A74 FEDERAL OPEN MARKET COMMITTEE AND positions and that did not include a presumption about the likely direction of any adjustments to STAFF; ADVISORY COUNCILS policy during the intermeeting period. A76 FEDERAL RESERVE BOARD PUBUCATIONS 49 LEGAL DEVELOPMENTS Various bank holding company, bank service cor- A78 MAPS OF THE FEDERAL RESERVE SYSTEM poration, and bank merger orders; and pending A80 FEDERAL RESERVE BANKS, BRANCHES, cases. AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 Dean F. Amel, of the Board's Division of Research The use of deposits as the measure of change in the and Statistics, prepared this article. Michael T. size of depository institutions ignores changes in the Howell provided research assistance. volume of nondeposit liabilities and off-balancesheet activity. Most, though not all, nondeposit liabili- On September 29, 1995, bank holding companies ties are used by institutions to fund their wholesale were given the right to purchase banks throughout the activities. Changes in the structure of the wholesale United States for the first time since passage of the banking industry are not addressed in the article Bank Holding Company Act in 1956. The Riegle- because of the greater number of competitors in Neal Interstate Banking and Branching Efficiency wholesale markets and the greater expertise and Act of 1994, which permitted the expansion, will knowledge about financial services of wholesale cusalso, by June 1997, allow banks to branch across state tomers. The wholesale banking industry includes a lines. Full implementation of this legislation is likely large number of investment banks, foreign banks, and to lead to a continuation of the consolidation of the other financial institutions that fund large corpora- U.S. banking industry that has occurred over the past tions and international institutions in national, and in ten years. many cases global, markets. Because of its focus on From 1984 through 1994, the number of federally deposits, this article does not attempt to provide a insured depository institutions of all types—banking complete picture of the activity of depository instituorganizations (bank holding companies and indepen- tions. Although the volume of federally insured dent banks), thrift institutions (savings and loan asso- deposits is very large ($3.3 trillion) and increased ciations and savings banks), and credit unions— 26 percent over the ten years covered here, the rate of declined considerably. This consolidation of deposi- increase of deposit liabilities was much smaller than tory institutions resulted mainly from mergers and the rate of increase of U.S. financial assets. Insured acquisitions, many made possible by or stimulated by deposits constitute a unique financial product, but relaxed legal constraints on the geographic expansion it is a product of declining importance to the U.S. of depository institutions, and from failures of deposi- economy. tory institutions. Regulatory policies affecting the Deposits are far from a perfect measure of retail expansion of credit union membership also played a banking, but they are the best measure of the retail role. activity of depository institutions available at the This article looks at changes in the number and national, state, and local levels. Although deposits size of federally insured depository institutions over include a large uninsured component (deposits in the past ten years.1 The focus is on retail banking— excess of $100,000) and are used to fund some nonthe sector of activity that deals mainly with small retail activity, these factors should not appreciably businesses and households in local banking markets. affect the structural analysis. ->> The structure of the retail banking industry is of The article begins with a discussion of the major interest because these firms serve large numbers of causes of recent structural change among federally consumers within local markets and changes in struc- insured depository institutions. Changes in number, ture could affect firm performance and competition in size, and deposit concentration at the national, state, some markets. Deposits serve as the measure of firm and local levels are then analyzed. The data reveal size. large increases in deposit concentration at the national and state levels but only small increases in 1. The data presented in this article cover only federally insured local banking markets, where fewer competitors institutions. Some uninsured credit unions, and a few uninsured banks, would be most likely to affect competition. Concludcontinue to operate in this country. However, these firms tend to be ing the article is a discussion of the possible consevery small, and their omission should not have a substantive effect on quences of these changes. the data presented. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • January 1996 CAUSES OF RECENT STRUCTURAL CHANGE The rise in mergers and acquisitions most likely had numerous causes; empirical work attempting to A major cause of structural change among federally determine the reasons for merger activity has found insured depository institutions over the past ten years no clear single motivating factor. One set of possible has been mergers and acquisitions. Other important causes reflects the interests of stockholders in reducreasons for changes have been unusually high rates of ing costs, increasing profits, and maximizing the failure among depository institutions and relaxed value of the firm. Competition from nondepository constraints on credit union membership. institutions, much of it brought about by technological change, may have increased the need to reduce costs. For example, technology has broadened access Mergers and Acquisitions to the commercial paper market, reducing the role of among Depository Institutions commercial banks in lending to large corporations. Technology has also produced economies of scale in During 1984—94, the pace of mergers and acquisi- some back-office operations, reducing costs for large tions among depository institutions in the United firms relative to small firms. In addition, acquisitions States reached a level not seen in at least fifty years.2 may have been seen as a way to increase stockholder Acquisitions of healthy banking organizations by value by increasing profits through increased market other healthy domestic banking organizations, for share and market power. Finally, interstate acquisiexample, resulted in a decline of 4,509 in the number tions may have been viewed as a means of reducing of banking organizations. The annual number of the risk of failure by diversifying a firm's loan risk. acquisitions of healthy firms was relatively steady Another set of possible reasons for increased throughout the period, ranging from a high of 649 in merger and acquisition activity reflects the interests 1987 to a low of 345 in 1991. The total number of of managers more than those of stockholders. For acquisitions was greater than the net decrease in the example, problems resulting from dispersed stocknumber of banking organizations over the decade holdings and lack of stockholder control over managbecause of a steady influx of new banking organiza- ers may have allowed managers to pursue growth as tions, which partly offset the decline in the number of an objective, whether or not that growth increased the banks due to acquisitions and failures. firm's value. The extent of mergers and acquisitions among Regardless of the reasons for individual mergers depository institutions can be seen in the data on and acquisitions, much of the activity clearly could acquisitions of the largest firms: Of the 200 largest not have occurred without legislative and regulatory firms at the end of 1984, only 99 existed ten years changes that allowed greater geographic expansion later; the remaining 101 had been acquired, many of by banking organizations and thrift institutions. Many them thrift institutions that the federal government of these changes occurred at the state level and were had taken over because of poor financial condition. prompted by pressure from firms that sought to Of the one hundred largest depositories in 1984, only acquire or to be acquired. In a few states, widefifty-seven survived as independent firms ten years spread financial difficulties in the late 1980s necessilater; eighteen of the fifty largest firms and nine of tated the entry of out-of-state firms, which were the the twenty-five largest had been absorbed by com- only potential acquirers for troubled depository petitors by year-end 1994. institutions. The increased merger and acquisition activity over the past ten years has mostly involved domestic depository institutions; acquisitions by foreign corpo- Legislative Changes Affecting rations of banks chartered in the United States have Interstate Expansion been limited. Foreign banks have greatly expanded their role in wholesale banking in recent years, but Passage of the McFadden Act in 1927 effectively they have not made major inroads into the U.S. retail restricted national banks from establishing branches banking industry. For example, the percentage of across state lines. The act subjected national banks to insured U.S. deposits held by foreign organizations the same branching restrictions faced by statehas increased only a small amount since 1984, from 4.5 percent of all deposits to 5.3 percent.3 and U.S. branches and agencies of foreign banks has more than 2. The terms merger and acquisition are used interchangeably. doubled in the past ten years. Indeed, by 1994 these foreign-owned 3. Although foreign banks have made only limited inroads into institutions accounted for more than 40 percent of the dollar volume U.S. retail banking, the total volume of assets held by U.S. subsidiaries of all business loans made by banking offices in the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 3 chartered banks, and because no state allowed out-of- ing company expansion and by initiating interstate state banks to open branches within its borders, the banking in Hawaii as of September 1995. As a result act in effect prohibited interstate branching. Until of state legislative changes, the share of deposits 1956, however, no law prevented bank holding com- controlled by firms headquartered in states other than panies from expanding across state borders through the state of deposit rose from 4.7 percent to 27.2 perthe formation of separate banking subsidiaries in cent between year-end 1984 and year-end 1994. other states. Passage of the Bank Holding Company Act of 1956 limited that route of expansion by allowing bank holding companies to own banking subsidi- Legislative Changes Affecting aries only in the state in which they were headquar- Expansion by Branching tered unless other states expressly permitted their entry. Bank holding companies that had expanded At the same time that restrictions on bank holding across state lines before 1956 were grandfathered company expansion were being eased, states were under the act, but there were few such firms. Though also relaxing restrictions on intrastate branching by states could allow out-of-state bank holding compa- state-chartered banks. By the end of 1994, states were nies to own banks in their states, no state did so until also beginning to permit interstate branching by Maine passed enabling legislation in 1975. Thrift banking organizations, thus granting them the geoinstitutions were also restricted, by federal regulators, graphic freedom that thrift institutions had gained in to operating in only one state. Credit unions were not 1992. legally prohibited from operating across state lines, but they were limited to serving members having a Intrastate Bank Branching. At the end of 1984, common bond. This limitation tended to restrict the seven states still prohibited full-service branches; in interstate activities of credit unions to a few large these "unit banking" states, a banking organization institutions serving the armed forces or large, multi- that wanted to open more than one full-service office state corporations. was required to form a multibank holding company, In the 1970s and 1980s, states began to relax their which could then control two or more separately geographic restrictions on banking organizations. By chartered banks. By year-end 1994, no unit banking the end of 1984, eight states had enacted legislation states remained, and only two states still prohibited that allowed entry by banking organizations head- statewide branching. However, some states allowed quartered in other states. Six of the eight required statewide expansion only through acquisition and reciprocity by the state in which the entering banking restricted de novo expansion to a part of the state, firm was headquartered; that is, an out-of-state bank such as within the county of a bank's head office; in holding company was allowed to acquire an existing these states, a bank or holding company could branch bank only if banking organizations in that bank's statewide only by acquiring existing banks or state were allowed to do so in the home state of the branches or by chartering new banks and then conacquiring firm. Also, five of the eight states restricted verting them to branches. entry to banking organizations headquartered in a Many states did not restrict intrastate branching by region around the acting state; only three states per- thrift institutions as they did such expansion by mitted entry from any other state. As a result of the banks; some states that restricted bank branching small number of states allowing interstate banking allowed thrifts to branch throughout the state. The and the restrictions imposed by these states, interstate Office of the Comptroller of the Currency (OCC), the expansion before 1985 was quite limited. federal regulator of national banks, relied on this Within ten years, by the end of 1994, every state different treatment to relax restrictions on branching but Hawaii had enacted laws allowing some degree by national banks and thereby to spur passage of less of interstate banking. Although many states still re- restrictive state branching laws. The OCC ruled that quired reciprocity, that requirement had become less national banks compete with state-chartered thrift restrictive as more states passed nationwide interstate institutions and therefore, under the McFadden Act, banking laws. Twelve states still had regional restric- could branch to the same extent. In February 1987, a tions, but thirty-seven allowed entry from any other federal appeals court upheld the Comptroller's ruling state having a reciprocal law, and three of the twelve that national banks in Mississippi could branch statewith regional restrictions had passed legislation wide because thrifts in that state were allowed to allowing entry from all other states after a trigger branch statewide; in the following April, Texas date in 1995 or 1996. Passage of the Riegle-Neal Act became the first of several states in which national in 1994 completed the move to nationwide banking banks sought to expand statewide on the same by overriding all remaining restrictions on bank hold- grounds. Two months later, the U.S. Supreme Court Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4 Federal Reserve Bulletin • January 1996 let the appeals court ruling stand. Many states institutions be allowed to branch into any three states responded to this endorsement of the OCC's rulings, of their choice. As the thrift institution crisis worsor to fears that the OCC would apply the same ened, the Congress formed the Resolution Trust Correasoning to their states, by relaxing their restrictions poration (RTC) to dispose of the assets and liabilities on intrastate branching by state-chartered banks. of failed thrifts. In July 1990, in a case involving a Without such action, state-chartered banks in these New Mexico thrift institution, a federal appeals court states would have faced more stringent branching upheld the RTC's right to allow purchasing banks to restrictions than the national banks with which they convert failed thrifts into branches, even if the concompeted. version violated state branching laws. In May 1992 the Office of Thrift Supervision, successor agency to Interstate Bank Branching. Rulings by the OCC the Federal Home Loan Bank Board, acted to allow also spurred states to relax restrictions on interstate nationwide branching by all thrift institutions. Thus, branching. Under a long-standing rule, a national thrift institutions achieved interstate branching rights bank was allowed to move its head office up to thirty in 1992 that most banking organizations will not miles and to maintain the previous head office as a achieve until 1997. branch. In February 1985, the Comptroller first used this "thirty-mile rule" to facilitate interstate branching: A national bank that had an office within thirty miles of a state line could make that its head office Changes in Credit Union and use the rule to branch into the adjacent state. The Membership Regulations rule was used sparingly until 1994, but after surviving court challenges, it has since been used by some Unlike other depository institutions, credit unions bank holding companies for branching across state were not, over 1984-94, directly affected by legislalines despite an absence of state laws allowing such tive changes concerning their geographic distribubranching. A few bank holding companies have tion. Throughout the period, credit unions were merged banks in more than two states by repeatedly allowed to expand nationwide so long as they met moving their banks' head offices near a state border, the requirement of the Federal Credit Union Act then across the border (but less than thirty miles), that members of a single credit union "be limited then across the new "home" state to within thirty to groups having a common bond of occupation or miles of another state border. This practice has association." The structure of credit unions—both encouraged some states to allow interstate branching their size and their geographic location—has, howby state banks before the 1997 date set by the Riegle- ever, been affected by rulings by the National Credit Neal Act so that state-chartered banks are not at a Union Administration (NCUA), regulator of federally disadvantage relative to national banks that branch chartered credit unions. interstate. Although the Riegle-Neal Act allows In 1982 the NCUA, in an expansive interpretation states to prohibit interstate branching after 1997, only of the common bond requirement, ruled that in some Texas has taken advantage of this "opt out" provi- cases a single credit union could serve more than one sion to date. unrelated group, each of which shared a common bond. This ruling, which has survived many court Branching by Thrift Institutions. In contrast to challenges, led to credit union mergers and to an interstate expansion by banking organizations, which expansion of the definition of "common bond." was initiated mainly by the states, interstate expan- Though a court in one case ruled that a proposed sion by thrift institutions was begun in large part by common bond was too ephemeral to qualify under federal regulators. The greater federal involvement the act (a credit union asserted that individuals over arose from the difficulties of and, in many cases, the the age of fifty living within twenty-five miles of failure of a large number of thrift institutions whose Houston had a common bond), the courts have generdeposits were insured by the federal government. The ally looked favorably upon attempts by credit unions limited number of potential acquirers of these to expand their memberships. troubled thrifts in many states posed a problem for Another regulatory change had the effect of federal regulators, who sought to sell the firms at the encouraging the geographic expansion of credit least cost to the thrift deposit insurance fund. unions. In 1991, the NCUA began to allow credit In April 1986 the Federal Home Loan Bank Board, unions to share branches, giving them an inexpensive which at the time was the federal regulator of thrift way of expanding their geographic coverage as well institutions, proposed that buyers of failing thrift as their appeal to potential members. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 5 Failures of Depository Institutions Failures played a prominent role in the decline in the number of thrift institutions. Between 1984 and In the late 1980s and early 1990s, failures of deposi- 1994, 1,129 thrifts failed, more than three quarters of tory institutions rose to levels not seen since the the decline of 1,466 in the number of thrift institudepression of the 1930s. For example, 1,276 banks tions over the period. Overall, however, mergers and failed during 1984-94, according to the Federal acquisitions among healthy depository institutions Deposit Insurance Corporation. This number over- appear to have played a greater role in the consolidastates the net loss of banking organizations, however, tion of depository institutions than did failures. partly because in some cases more than one bank owned by the same multibank holding company failed. Also, some failed banks were reopened by investors who were not operating a banking organiza- AGGREGATE STRUCTURAL CHANGE tion at the time, so the failure did not result in a reduction in the number of banks. In fact, the actual Structural change can be measured by changes in the decrease in the number of banking organizations number of depository institutions and the redistriburesulting from bank failures is likely less than one- tion of deposits among these institutions. It can also fourth as large as the decline attributable to mergers be seen in the movement of depository institutions and acquisitions of healthy banking organizations among size classes and in changes in the concenduring the ten-year period. tration of deposits among the largest depository Credit union failures during 1984-94 totaled 987 institutions. and accounted for 27 percent of the net decline in credit union numbers over the period. Because the formation of new credit unions during the ten years Changes in Number and Deposits partly offset the decline resulting from failures and mergers, however, failures accounted for a lesser Between year-end 1984 and year-end 1994, the numpercentage of the total decline of credit unions. Merg- ber of federally insured thrift institutions declined ers were the primary cause of the loss of credit nearly 40 percent, the number of banking organizaunions during 1984-94. However, the line between tions more than 30 percent, and the number of credit credit union mergers and failures can be murky be- unions more than 20 percent. At the end of 1994, cause many credit union mergers have been prompted more than half of all federally insured depository by the poor financial condition of one of the firms institutions were credit unions and fewer than oneinvolved. tenth were thrifts (table 1). 1. Distribution of federally insured depository institutions by type of institution, 1984 and 1994 1984 1994 Mean Mean TTyyppee ooff iinnssttiittuuttiioonn Number Percent Deposits Percent deposits Number Percent Deposits Percent deposits (billions per firm (billions per firm of of of of of of of (millions of (millions firms total deposits firms total deposits dollars) of dollars) of dollars) dollars) Banking organizations 11,342 38.0 1,613.7 61.4 142.3 7,898 36.1 2,382.7 71.7 301.7 Independent banks 5,698 19.1 209.9 8.0 36.8 2,634 12.0 170.0 5.1 64.5 One-bank holding companies 4,926 16.5 467.7 17.8 94.9 4,464 20.4 523.0 15.7 117.2 Multibank holding companies 718 2.4 936.1 35.6 1,303.7 800 3.7 1,689.6 50.9 2,112.1 Thrift institutions 3,414 11.4 929.8 35.4 272.3 2,058 9.4 684.5 20.6 332.6 Savings and loan associations 2,882 9.6 697.5 26.5 242.0 776 3.5 147.2 4.4 189.7 Federal savings banks 264 .9 121.6 4.6 460.6 756 3.5 357.5 10.8 472.9 State savings banks 268 .9 110.7 4.2 413.0 526 2.4 179.8 5.4 341.8 Credit unions 15,126 50.6 84.1 3.2 5.6 11,927 54.5 254.0 7.6 21.3 Total 29,882 100.0 2,627.6 100.0 87.9 21,883 100.0 3^21.2 100.0 151.8 NOTE. The data in this table are, to the extent possible, aggregated within individuals but not legally affiliated—are not consolidated, owing to data categories. Thus, banks that are part of the same multibank holding company are limitations. aggregated into one banking organization. Banking organizations and thrift Data in tables 1-4 are as of year-end. In this and subsequent tables, compoinstitutions that are affiliated are counted separately, as are any combinations of nents may not sum to totals, and calculations may not yield the percentages the three different types of thrift institution that are under common ownership. shown, because of rounding. "Chain banking" organizations—banks owned by an individual or a group of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 Federal Reserve Bulletin • January 1996 Within the banking industry, the number of inde- thrift institutions, savings and loans lost 80 percent of pendent banks (banks not owned by a bank holding their deposit share, going from more than 25 percent company) dropped more than 50 percent, not only of all deposits to less than 5 percent. In contrast, because of acquisitions and failures but also because federal savings banks more than doubled their share, some independent banks converted to one-bank hold- and state-chartered savings banks increased their ing companies (most conversions were for tax pur- share slightly; combined, the groups hold about poses and did not reflect an inability of independent 15 percent of total deposits. banks to compete). Nevertheless, the number of one- Historically, the average thrift institution has been bank holding companies also declined. Because the larger than the average banking organization (as meadecline was smaller than that for all depository insti- sured by deposits), probably owing in part to less tutions, however, one-bank holding companies as a restrictive geographic limitations on thrift branching. proportion of all insured depositories increased, to This size differential decreased over the past ten more than 20 percent. The number of multibank years: The average size of banking organizations holding companies increased over the period, to 800, more than doubled while the average size of thrift though the opposite might have been expected, as the institutions increased just 22 percent. In fact, because relaxation of intrastate branching laws allowed multi- the percentage increase for thrift institutions was less bank holding companies to merge their subsidiary than inflation over 1984-94 (38.6 percent as meabanks into one bank. The increase indicates that this sured by the implicit gross domestic product deflaeffect was more than offset by an increase in the tor), the average thrift institution's deposits shrank number of such companies resulting from mergers in real terms. The average size of credit unions and acquisitions among banking organizations; for nearly quadrupled over the decade, but credit unions example, because of the widespread prohibition on remain much smaller than other types of depository interstate branching during the period, interstate institutions. banking tended to increase the number of multibank Multibank holding companies had the greatest holding companies. absolute increase in size over the ten years and the Among thrift institutions, the number of savings third largest percentage increase among all types of and loan associations declined markedly while the depository institutions, behind credit unions and number of federal and state savings banks increased. independent banks. At the other extreme, both sav- The number of savings and loans fell almost three- ings and loan associations and state-chartered savings fourths, owing mainly to failures or acquisitions by banks were smaller, on average, at year-end 1994 banks or other thrifts. The decline was also due to the than at year-end 1984. conversions of some savings and loans to savings banks, many of which were undertaken because of differences in fees and regulations applied to the two Changes in Size Distributions types of institutions. The number of federal savings banks nearly tripled, and that of state savings banks Between year-end 1984 and year-end 1994, federally almost doubled, but both types of institution insured depository institutions tended to grow larger remained relatively uncommon. (as measured by deposits): The percentage of institu- The extent of the decline of thrift institutions rela- tions in all size groups but the smallest rose whereas tive to other depository institutions can be seen the percentage in the smallest size group fell, from clearly in the data on deposits (table 1). The share of 26 percent to 12 percent (table 2). Institutions conall deposits held by federally insured thrifts fell from trolling less than $5 billion in deposits tended to lose 35 percent in 1984 to just over 20 percent in 1994. deposit share whereas those controlling more than Over the same period, the share held by banking $5 billion gained share, from about 30 percent to organizations increased from about 60 percent to more than 50 percent. more than 70 percent, and the share held by credit When 1994 deposits are deflated to account for unions more than doubled, to almost 8 percent. inflation and the growth in deposits resulting from a Among banking organizations, multibank holding growing economy, so that total 1994 "adjusted" companies gained deposit share while independent deposits equal total 1984 nominal deposits, the picbanks and one-bank holding companies lost share. ture is slightly different: The percentage of institu- By the end of 1994, multibank holding companies tions in the smallest size group again shrinks, from controlled more than 50 percent of all deposits of 26 percent to less than 15 percent, but the percentage federally insured depository institutions, compared of institutions in the medium and large size groups— with only 5 percent for independent banks. Among $500 million to $5 billion in deposits—also drops Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 7 slightly. The decrease in the number of medium and resulted from the many acquisitions by very large large firms may herald the development of a two- interstate depository institutions. Although smaller tiered distribution, with a large number of smaller firms—those with $1 million to $500 million in depositories and a small number of very large deposi- deposits—are increasing as a percentage of all tories. Such a two-tiered distribution may have depository institutions, they generally are not main- 2. Distribution of federally insured depository institutions based on nominal and growth-adjusted deposits, 1984 and 1994 1984 1994 Nominal deposits Adjusted deposits DDDeeepppooosssiiitttsss TToottaall (((mmmiiilllllliiiooonnnsss ooofff NNuummbbeerr PPeerrcceenntt ddeeppoossiittss PPeerrcceenntt Total Total dddooollllllaaarrrsss))) ooff ooff ((bbiilllliioonnss ooff Number Percent deposits Percent Number Percent deposits Percent ffiirrmmss ttoottaall ooff ddeeppoossiittss of of (billions of of of (billions of ddoollllaarrss)) firms total of deposits firms total of deposits dollars) dollars) ALL DEPOSITORY INSTITUTIONS Less than 1 7,812 26.2 2.8 .1 2,668 12.3 1.2 • 3,146 14.5 1.4 .1 1-5 4,924 16.5 12.1 .5 3,942 18.1 10.3 .3 4,140 19.0 10.7 .4 5-10 2,475 8.3 18.3 .7 2,071 9.5 15.0 .5 2,186 10.0 15.9 .6 10-50 8,816 29.5 221.0 8.4 6,811 31.3 177.7 5.3 7,113 32.7 182.2 6.9 50-100 2,785 9.3 194.2 7.4 2,889 13.3 204.5 6.2 2,525 11.6 177.9 6.8 100-500 2,328 7.8 468.0 17.8 2,772 12.7 549.0 16.5 2,158 9.9 420.1 16.0 500-1,000 344 1.2 241.9 9.2 278 1.3 192.9 5.8 218 1.0 150.4 5.7 1,000-5,000 319 1.1 687.0 26.1 231 1.1 476.8 14.4 1% .9 417.6 15.9 5,000-10,000 39 .1 279.1 10.6 52 .2 364.4 11.0 42 .2 288.1 11.0 10,000-50,000 24 .1 438.4 16.7 40 .2 873.9 26.3 32 .1 686.4 26.1 50,000-100,000 ... 1 * 64.7 2.5 5 * 328.7 9.9 3 • 176.5 6.7 More than 100,000 . 0 1 • 126.8 3.8 1 * 100.3 3.8 Total 29,867 100.0 2,627.6 100.0 21,760 100.0 3,321.2 100.0 21,760 100.0 2,627.6 100.0 BANKING ORGANIZATIONS Less than 1 14 .1 ** * 21 .3 ** m 22 .3 ** * 1-5 379 3.3 1.4 .1 54 .7 .2 * 105 1.3 .4 * 5-10 1,203 10.6 9.2 .6 294 3.7 2.3 .1 489 6.2 3.8 .2 10-50 6,463 57.0 162.8 10.1 3,671 46.5 103.4 4.3 4,151 52.6 112.1 5.9 50-100 1,861 16.4 128.2 7.9 1,943 24.6 137.9 5.8 1,683 21.3 118.2 6.3 100-500 1,081 9.5 204.6 12.7 1,577 20.0 300.1 12.6 1,170 14.8 222.8 11.8 500-1,000 131 1.2 94.3 5.8 145 1.8 101.6 4.3 104 1.3 70.3 3.7 1,000-5,000 163 1.4 396.2 24.6 115 1.5 247.8 10.4 109 1.4 236.6 12.5 5,000-10,000 26 .2 192.3 11.9 36 .5 252.6 10.6 32 .4 222.5 11.8 10,000-50,000 20 .2 360.0 22.3 37 .5 833.5 35.0 29 .4 623.1 33.1 50,000-100,000 ... 1 * 64.7 4.0 4 .1 278.1 11.7 4 .1 275.4 14.6 More than 100,000 . 0 1 • 125.1 5.3 0 Total 11,342 100.0 1,613.7 100.0 7,898 100.0 2,382.7 100.0 7,898 100.0 1,885.1 100.0 THRIFT INSTITUTIONS Less than 1 8 .2 ** * 4 .2 m** * * 4 .2 ** * 1-5 36 1.1 .1 * 12 .6 * 19 .9 ** • * 5-10 100 2.9 .8 .1 33 1.6 .2 i • 58 2.8 .4 .1 10-50 1,006 29.5 29.8 3.2 534 25.9 16.1 2.4 655 31.8 19.3 3.6 50-100 725 21.2 52.3 5.6 459 22.3 33.0 4.8 456 22.2 32.5 6.0 100-500 1,151 33.7 246.9 26.6 781 37.9 169.2 24.7 676 32.8 140.2 25.9 500-1,000 211 6.2 145.8 15.7 106 5.2 73.1 10.7 94 4.6 67.4 12.4 1,000-5,000 161 4.7 304.3 32.7 111 5.4 229.3 33.5 85 4.1 182.9 33.8 5,000-10,000 12 .4 79.8 8.6 14 .7 92.2 13.5 8 .4 50.4 9.3 10,000-50,000 4 .1 70.0 7.5 4 .2 71.3 10.4 3 .1 48.3 8.9 Total 3,414 100.0 929.8 100.0 2,058 100.0 684.5 100.0 2,058 100.0 541.6 100.0 CREDIT UNIONS Less than 1 7,790 51.5 2.8 3.4 2,644 22.2 1.2 .5 3,121 26.2 1.4 .7 1-5 4,509 29.8 10.6 12.6 3,877 32.5 10.0 4.0 4,017 33.7 10.3 5.1 5-10 1,173 7.8 8.3 9.9 1,746 14.6 12.4 4.9 1,641 13.8 11.7 5.8 10-50 1,349 8.9 28.4 33.8 2,635 22.1 59.0 23.2 2,341 19.6 51.8 25.8 50-100 204 1.3 14.1 16.8 516 4.3 35.8 14.1 416 3.5 29.3 14.6 100-500 98 .6 16.8 20.0 462 3.9 88.9 35.0 360 3.0 66.6 33.1 500-1,000 2 * 1.5 1.7 35 .3 23.1 9.1 23 .2 14.8 7.4 1,000-5,000 1 • 1.5 1.8 11 .1 17.2 6.8 8 .1 15.3 7.6 5,000-10,000 0 1 • 6.3 2.5 0 Total 15,126 100.0 84.1 100.0 11,927 100.0 254.0 100.0 11,927 100.0 201.0 100.0 NOTE. Adjusted deposits were calculated by deflating 1994 total nominal * Less than 0.05 percent, deposits for all depository institutions to equal 1984 total deposits. ** Less than $50,000,000. Depository institutions that are under common ownership are consolidated ... Not applicable, within the category of depository institution examined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8 Federal Reserve Bulletin • January 1996 taining their share of deposits: The share controlled than $10 million) become relatively less common, by firms with less than $500 million in deposits small and medium-sized thrifts (deposits of $10 mildeclined between 1984 and 1994 while the share lion to $100 million) more common, larger thrifts controlled by firms with more than $5 billion in (deposits of $100 million to $5 billion) less common, deposits increased, from less than one-third to nearly and the largest thrifts more common. This pattern of one-half. change suggests that thrift institutions may be devel- A breakdown of the data by depository type gives oping a two-tiered distribution, with a small number a picture of the elements of the structural change. The of very large firms and a large number of mediumoverall changes appear to result from the growth of sized firms. very large banks and a few very large thrifts (the The data also indicate that a bifurcated pattern acquirers in interstate banking) combined with an in the distribution of deposit shares may be developincrease in the number of moderate-sized thrifts and ing for thrift institutions. The deposit shares for all credit unions. size groups controlling less than $1 billion in 1994 nominal deposits declined. When 1994 deposits are Banking Organizations. The proportion of very adjusted for deposit growth, however, thrifts controlsmall banking organizations increased slightly over ling less than $100 million in deposits gain share or the ten years, but the total number remains quite hold their own, those controlling $100 billion to small. The proportion of somewhat larger banking $1 billion in deposits lose share, and those above organizations—those controlling $1 million to $1 billion gain share. The latter pattern is, in part, the $50 million in deposits—decreased whereas the result of the rapid interstate expansion by large thrifts proportion in every larger size category increased. in recent years: Those large thrifts that survived the Banking organizations with less than $10 billion in industry shakeout in the 1980s have grown through deposits tended to lose deposit share while larger acquisitions of both healthy and struggling rivals, and banking organizations tended to gain share. the quickest route to expansion has been the acquisi- When 1994 deposits are adjusted to control for the tion of a few relatively large institutions rather than growth of deposits, the picture of changes in the of numerous smaller firms. distribution of banking organizations is similar: The proportion of firms controlling $1 million to $50 mil- Credit Unions. The changes in the distribution of lion in deposits declines whereas the proportion in credit unions by size between year-end 1984 and other size categories increases. Changes in the distri- year-end 1994 are similar to the changes among bution of deposit share are also similar, with firms banking organizations, though credit unions are much controlling $10 billion or more in deposits increasing smaller, on average, than banking organizations: All their share and those in all smaller size categories but the smallest credit unions became relatively continuing to lose share. These numbers indicate more common, whether 1994 deposits are measured that large banks have gained and small banks have in nominal or adjusted terms. The deposit share for lost, and they give no hint that a two-tiered distribu- credit unions controlling up to $100 million in depostion is developing within the banking industry. its declined whereas the share for larger credit unions Economies of scale provide one possible explana- increased, from less than one-quarter to more than tion for this trend. A number of studies have found one-half (just under one-half for 1994 adjusted deposeconomies of scale in the banking industry up to the its). The share controlled by the largest credit level of roughly $100 million. The removal of geo- unions—those with more than $500 million in graphic barriers to entry is another, complementary, deposits—more than quadrupled. explanation. In summary, the data for size distributions of Thrift Institutions. Small thrift institutions—those depository institutions in terms of the number of controlling less than $50 million in deposits— institutions and deposit share show that larger bankconstituted a smaller proportion of all thrift institu- ing organizations and credit unions have gained relations at year-end 1984 than at year-end 1994, as did tive to small firms and that among thrift institutions a thrifts with $500 million to $1 billion in deposits. two-tiered structure may be emerging, with a small Thrifts in other small and medium categories, number of very large thrifts and a large number of however—those controlling $50 million to $500 mil- medium-sized thrifts. Because credit unions are so lion in deposits—and large thrifts—those controlling much smaller, on average, than other depositories, more than $1 billion in deposits—became relatively the growth of large credit unions over 1984-94 has more common. When 1994 deposits are adjusted for increased the proportion and deposit share of deposit growth, the smallest thrifts (deposits of less medium-sized depository institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 9 Changes in Distribution of Deposits Changes in Deposit Shares Held by the Largest Institutions Among federally insured depository institutions, very large firms are clearly gaining control of an increas- A breakdown of the data for just the 200 largest ing share of all deposits. A breakdown of deposi- depository institutions shows that the pattern of tories by percentile class allows a closer look at this change in deposit concentration within this group of trend (table 3). very large depositories was similar to that for deposi- From year-end 1984 to year-end 1994, the share of tory institutions as a whole: The largest 100 deposifederally insured deposits controlled by the largest 1 percent of depository institutions (about 300 firms in 1984 and 220 in 1994) increased from 52 percent 3. Distribution of deposits by size class of federally insured depository institution, 1984 and 1994 to 61 percent. Almost all the increase came at the expense of other very large firms: The share for firms 1984 1994 in the largest decile but not in the largest percentile SSiizzee ccllaassss fell from 30 percent to 22 percent. Depositories in the ppeerrcceennttiillee (b D il e l p io o n s s it s o f Percent of (b D il e l p io o n s s it s o f Percent of total total second-, third-, and fourth-largest deciles also lost dollars) dollars) share, but to a much smaller extent. Depositories in ALL DEPOSITORY the six smallest deciles gained share, though their INSTITUTIONS 99 1,371.1 52.2 2,029.8 61.1 share of total deposits remained very small. This 90-98 801.3 30.5 736.9 22.2 80-89 207.7 7.9 233.2 7.0 pattern is similar to that seen in the data in table 2, 70-79 111.9 4.3 131.6 4.0 with the largest firms and the smaller firms showing 60-69 66.4 2.5 82.1 2.5 50-59 38.6 1.5 51.6 1.6 relatively greater growth. 40-49 19.1 .7 30.1 .9 30-39 7.2 .3 15.3 .5 The picture for banking organizations is somewhat 20-29 2.8 .1 7.1 .2 10-19 1.1 * 2.9 .1 different. Like depository institutions as a whole, 0-9 .3 * .7 banking organizations in the largest percentile Total 2,627.6 100.0 3,321.2 100.0 increased their deposit share substantially, and the BANKING remainder of the organizations in the largest decile ORGANIZATIONS 99 853.3 52.9 1,494.2 62.7 lost share. However, banking organizations in all 90-98 427.3 26.5 484.9 20.3 deciles below the largest also lost share. Thus, 80-89 100.8 6.2 123.5 5.2 70-79 64.8 4.0 78.0 3.3 only the largest 1 percent of banking organizations 60-69 47.3 2.9 57.1 2.4 50-59 36.2 2.2 43.7 1.8 (about 100 firms) grew faster than the mean growth 40-49 28.0 1.7 33.7 1.4 rate among such organizations between 1984 and 30-39 21.6 1.3 26.2 1.1 20-29 16.3 1.0 19.9 .8 1994. 10-19 11.7 .7 13.9 .6 0-9 6.4 .4 7.7 .3 Thrift institutions in all deciles but the largest also Total 1,613.7 100.0 2,382.7 100.0 lost share. However, in contrast to banking organizations, thrifts in the entire largest decile, not just those THRIFT INSTITUTIONS in the largest percentile, gained share. Thus, unlike 99 227.7 24.5 177.7 26.0 90-98 350.5 37.7 275.6 40.3 the largest banking organizations, the largest thrift 80-89 129.2 13.9 81.8 11.9 70-79 73.1 7.9 47.6 7.0 institutions grew not by taking deposit share from 60-69 48.3 5.2 32.6 4.8 firms almost as large as they were, but rather by 50-59 34.2 3.7 23.2 3.4 40-49 24.5 2.6 16.8 2.5 taking share from smaller ones. 30-39 17.8 1.9 12.4 1.8 20-29 12.6 1.4 8.7 1.3 Credit unions generally did not show a great 10-19 8.1 .9 5.8 .8 change in concentration of deposits at the decile 3.7 .4 2.4 .3 level. Firms in the largest decile and the two smallest Total 929.8 100.0 684.5 100.0 deciles lost a little deposit share, and firms in all other CREDIT UNIONS 99 24.3 28.9 72.6 28.6 deciles gained share. 90-98 36.5 43.4 106.4 41.9 Combining these trends for banking organizations, 80-89 10.8 12.8 33.6 13.2 70-79 5.1 6.1 16.8 6.6 thrift institutions, and credit unions, the change in 60-69 2.9 3.5 9.7 3.8 50-59 1.8 2.2 6.1 2.4 the structure of depository institutions over 1984-94 40-49 1.1 1.3 3.9 1.5 is one of consolidation, with very large banks buy- 30-39 .7 .8 2.4 1.0 20-29 .4 .5 1.4 .6 ing large banks and very large thrifts buying 10-19 .2 .3 .7 .3 0-9 .1 .1 .2 .1 smaller thrifts, and of rapid growth by medium-sized credit unions, which resulted in an increase in the Total 84.1 100.0 254.0 100.0 share held by the smallest 60 percent of depository NOTE. All depository institutions that are under common ownership are consolidated within the type of depository institution examined. institutions. * Less than 0.05 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

10 Federal Reserve Bulletin • January 1996 tories gained deposit share between year-end 1984 The increase in concentration among depository and year-end 1994 while the next-largest 100 deposi- institutions can also be seen by comparing the tories lost share (table 4). Also, the percentage amounts of deposits held by depository institutions of increase in deposit share over the ten years was the same rank in 1984 and 1994 (not shown in table). largest for the largest firms: The share of deposits The 164 largest depositories were larger in 1994 than controlled by the ten largest depository institutions in 1984; however, the depositories ranked 165 and increased 68 percent; the share for those ranked lower (some 21,719 institutions) were smaller in 11 through 25, 55 percent; for those ranked 26 1994, even in nominal dollars, than the firms of the through 50, 33 percent; and for those ranked same rank in 1984—despite inflation and the growth 51 through 100, 7 percent. The next-largest 100 of the economy, which would tend to lead to larger depositories lost 13 percent of their deposit share depository institutions. For example, the largest over the ten years. depository institution in 1994 controlled $126.76 bil- Among the 200 largest banking organizations, the lion in deposits (in nominal dollars), the largest in 50 largest gained deposit share while the others lost 1984, $64.65 billion; and the 100th largest depository share. As for depository institutions as a whole, the institution in 1994 controlled $4.86 billion in deposrate of increase in deposit share was greatest for the its, the 100th largest in 1984, $3.75 billion. However, largest banking organizations and was progressively the 165th largest firm in 1994 controlled $2.35 billion smaller for smaller banking organizations. The pic- in deposits, down from $2.36 billion in 1984; the ture for the 200 largest thrift institutions was some- 250th largest firm controlled $1.44 billion in 1994, what different: All subsets of the 200 largest firms down from $1.63 billion in 1984; and the 500th gained share, though the gain for firms ranked largest firm controlled $623.4 million in 1994, down 101 through 200 was marginal. Also, the percentage from $757.4 million in 1984. This pattern is consisincrease in deposit share was not uniformly greater tent with the conclusions drawn from the data in the larger the firm: Thrifts ranked 26 through 50 grew table 3: Consolidation has involved the acquisition of at a faster rate than larger thrifts. Credit unions firms in the second tier by the very largest firms. showed the same general pattern as banking organiza- Acquisitions by very large depository institutions of tions, with larger firms growing most rapidly, though other, merely "large" institutions reduced the numdifferences among the subsets were smaller. ber of firms that control a few billion dollars of deposits. For example, the number of firms controlling between $2 billion and $5 billion in deposits dropped from 140 in 1984 to 90 in 1994. 4. Shares of deposits controlled by the largest federally These data showing the concentration of deposits insured depository institutions, 1984 and 1994 among the largest depository institutions likely under- Percent state the true extent of the increase in the concentra- Share of deposits tion of resources among depositories. By focusing on RRaannkk CChhaannggee,, ((bbyy vvoolluummee ooff ddeeppoossiittss)) 11998844--9944 deposits, this article focuses on retail activities and 1984 1994 ignores the rapid growth of some wholesale and other ALL DEPOSITORY nondepository activities of the largest depository in- INSTITUTIONS 1-10 10.9 18.3 67.8 stitutions. The rate of growth of nondeposit liabilities 11-25 7.8 12.0 55.0 and off-balance-sheet activity, which is concentrated 26-50 7.6 10.0 32.5 51-100 9.4 10.0 6.7 among the largest firms, has been greater than the 101-200 10.4 9.1 -12.5 rate of growth of deposits. BANKING ORGANIZATIONS 1-10 17.4 25.6 46.8 11-25 11.2 16.4 46.8 26-50 10.5 12.9 22.4 51-100 11.7 11.2 -4.2 101-200 11.3 7.1 -37.3 THRIFT INSTITUTIONS STRUCTURAL CHANGE AT THE STATE LEVEL 1-10 12.4 17.0 37.1 11-25 8.7 11.8 34.9 26-50 8.4 12.1 44.9 51-100 10.4 12.2 17.9 The increase in the nationwide concentration of 101-200 12.3 12.5 1.6 deposits clearly is due, at least in part, to the inter- CREDIT UNIONS state expansion of depository institutions over the 1-10 6.8 8.5 23.9 11-25 4.4 4.9 11.7 past decade. Shifts in the proportion of deposits con- 26-50 5.0 5.5 10.4 trolled by the three major categories of depository 51-100 7.2 7.4 3.0 101-200 9.7 10.0 2.6 institutions—banking organizations, thrift institu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 11 tions, and credit unions—and changes in deposit con- deposits in thirty-one states, with a low of 0.2 percent centration also occurred at the state level.4 of deposits in Wisconsin. By 1994, the distribution of deposits had changed considerably. The percentage of deposits at thrift Deposit Shares Held, institutions had declined in every state except by Type of Depository Institution New Hampshire and Rhode Island. The share held by thrifts exceeded that held by banking organizations Data on the distribution of deposits in each of the only in Connecticut and New Hampshire, and in both fifty states and the District of Columbia show that states there were large thrifts that were controlled by although the importance of the three types of institu- bank holding companies. In many states the decline tion varies considerably from state to state, the in thrift deposits was precipitous. For example, decline of thrift institutions and the growth of credit thrifts' share fell roughly 90 percent in both Arizona unions over 1984-94 occurred throughout the coun- and Delaware. The decline in Arizona was due pritry (table 5). marily to the failure of the state's large thrift institu- In 1984, the percentage of deposits within a state tions, whereas the decline in Delaware was connected held by banking organizations ranged from a high of to an increase in size of the state's credit card banks. 83 percent in South Dakota to a low of 36 percent in The number of states in which thrifts controlled more Connecticut. The high percentages for two of the than 40 percent of deposits fell from eight in 1984 to three states in which banking organizations con- two in 1994, with New Hampshire's thrifts, at 55 pertrolled more than 80 percent of the state's deposits— cent of deposits, topping the list. The number of Delaware and South Dakota—were due in large part states in which thrifts held less than 20 percent of to an unusually large presence of credit card banks in deposits rose from eight in 1984 to thirty-one (plus those states.5 However, many other states were domi- the District of Columbia) in 1994, and the number in nated by banking organizations to nearly the same which they held less than 10 percent of deposits grew extent: In thirteen states, banking organizations con- from one to thirteen. trolled 70 percent to 80 percent of all deposits; in As the importance of thrift institutions declined, only six states did banking organizations control less the importance of both banking organizations and than 50 percent of all deposits. credit unions grew. In 1994, the share of deposits In 1984, the share of deposits controlled by thrift within a state held by banking organizations ranged institutions ranged from a high of 61 percent in from 96 percent in Delaware to 37 percent in Connecticut to a low of 9 percent in Alaska. In five New Hampshire. Banking organizations held 80 perstates—Connecticut, Florida, Maine, New Hamp- cent or more of deposits in nineteen states, up from shire, and New Jersey—thrift institutions held a three in 1984, and less than 70 percent of deposits in greater share of deposits than did banks, and in only fourteen states (plus the District of Columbia), California the two types of depository were nearly down from thirty-four states (and the District) in equal in importance. Thrifts controlled more than 1984. 40 percent of deposits in eight states and less than The growth of credit unions was as uniform across 20 percent of deposits in eight. states as the decline of thrifts: The deposit share The presence of credit unions was small in almost controlled by credit unions increased in every state all states in 1984. In Alaska, credit unions controlled but Delaware, a result that again is due to the growth 18 percent of all deposits; Utah was the only other of credit card banks in that state. By 1994, credit state in which they exceeded a 10 percent deposit unions' shares ranged from 29 percent in Alaska to share. Credit unions controlled less than 5 percent of 2 percent in Delaware. The number of states in which credit unions controlled at least 10 percent of state deposits rose from two to fourteen (plus the District of Columbia), and the number in which they held less than 5 percent of deposits fell from thirty-one to 4. Because of data limitations, all credit union deposits are eight. assigned to the state and local market in which the credit union is headquartered, so deposits in any interstate branches are assigned incorrectly. However, because interstate credit unions control a very small share of all deposits, incorrect assignment should not materially affect the data. Concentration of Deposits 5. A credit card bank is a bank with a commercial bank charter that specializes in processing credit card accounts, usually from through- The increase in concentration of deposits seen at the out the nation, and does not compete with local retail banks for other types of retail banking business. national level also occurred at the state level. One Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12 Federal Reserve Bulletin • January 1996 measure of concentration at the state level is the substantial. For example, it tripled in Louisiana and percentage of deposits controlled by the three largest more than doubled in Florida, Indiana, Kansas, and depository institutions in the state—the three-firm West Virginia. The ratio increased more than 20 perconcentration ratio. From 1984 to 1994, the three- centage points in five states—Alaska, Arizona, firm concentration ratio increased in every state but Florida, Louisiana, and West Virginia—and at least South Dakota (table 6). The anomalous decline in 10 percentage points in an additional seventeen states. South Dakota was due largely to the relative decline A second measure of concentration of deposits is in the size of a large credit card bank. In some states the Herfindahl-Hirschman Index (HHI)—the meathe increase in the three-firm concentration ratio was sure used by federal antitrust authorities to examine 5. Distribution of deposits among federally insured depository institutions, by state, 1984 and 1994 Shares in percent; change in percentage points Banking organizations Thrift institutions Credit unions State Change, Change, Change, 1984 1994 1984 1994 1984 1994 1984-94 1984-94 1984-94 Alabama 71.8 85.2 13.4 21.6 4.8 -16.8 6.6 10.0 3.4 Alaska 72.7 67.9 -4.8 9.0 3.5 -5.6 18.3 28.6 10.4 Arizona 61.2 87.7 26.5 33.7 2.9 -30.8 5.1 9.4 4.3 Arkansas 66.7 88.4 21.7 32.0 8.9 -23.1 1.3 2.7 1.4 California 48.3 58.3 10.0 48.0 31.1 -16.9 3.7 10.6 6.9 Colorado 58.3 72.2 13.9 35.6 15.8 -19.8 6.1 12.0 5.9 Connecticut 35.5 41.6 6.1 60.6 52.8 -7.8 3.8 5.5 1.7 Delaware 80.7 96.3 15.6 16.5 1.7 -14.9 2.8 2.1 -.7 District of Columbia 64.0 67.4 3.4 27.9 14.6 -13.4 8.1 18.0 9.9 Florida 47.9 69.3 21.4 49.2 23.8 -25.4 3.0 6.9 3.9 Georgia 66.8 85.6 18.8 29.1 6.9 -22.2 4.2 7.6 3.4 Hawaii 62.7 56.7 -6.1 28.8 27.1 -1.6 8.5 16.2 7.7 Idaho 77.4 82.6 5.3 17.6 8.5 -9.1 5.1 8.9 3.8 Illinois 64.8 71.8 7.0 33.0 22.8 -10.2 2.2 5.4 3.2 Indiana 71.2 73.9 2.7 23.0 16.2 -6.8 5.8 9.9 4.1 Iowa 74.3 81.8 7.5 22.8 12.5 -10.2 2.9 5.7 2.8 Kansas 65.9 71.8 6.0 30.8 23.1 -7.7 3.4 5.1 1.7 Kentucky 74.5 82.1 7.6 23.1 13.3 -9.8 2.5 4.6 2.2 Louisiana 68.9 82.5 13.5 28.3 10.3 -18.0 2.7 7.2 4.5 Maine 43.3 50.0 6.6 48.7 37.1 -11.6 8.0 13.0 5.0 Maryland 61.7 65.3 3.6 33.4 25.0 -8.5 4.9 9.7 4.8 Massachusetts 61.1 55.9 -5.2 36.1 35.5 -.6 2.8 8.6 5.8 Michigan 67.8 70.2 2.4 24.9 16.3 -8.6 7.3 13.5 6.3 Minnesota 73.2 81.2 8.0 23.2 10.8 -12.4 3.6 8.0 4.4 Mississippi 79.3 88.4 9.1 18.1 6.8 -11.3 2.6 4.8 2.2 Missouri 65.0 80.9 15.9 32.0 14.0 -18.0 3.0 5.1 2.1 Montana 77.5 73.9 -3.7 16.7 15.0 -1.7 5.7 11.1 5.4 Nebraska 68.7 82.1 13.3 28.4 13.4 -15.0 2.8 4.5 1.7 Nevada 59.6 72.9 13.3 33.5 17.5 -16.1 6.8 9.6 2.8 New Hampshire 46.0 36.8 -9.2 48.5 54.9 6.4 5.5 8.3 2.8 New Jersey 45.2 59.2 14.0 52.6 36.4 -16.2 2.2 4.3 2.2 65.3 79.4 14.1 28.9 7.8 -21.2 5.8 12.9 7.1 New York 60.0 72.4 12.4 38.3 23.5 -14.9 1.6 4.1 2.5 North Carolina 65.0 80.0 15.0 29.8 10.6 -19.2 5.2 9.4 4.2 North Dakota 65.9 72.2 6.3 29.9 21.4 -8.5 4.2 6.4 2.2 Ohio 55.6 70.8 15.2 41.5 23.8 -17.7 2.9 5.4 2.5 Oklahoma 74.7 80.2 5.5 21.0 10.9 -10.1 4.3 8.9 4.6 Oregon 57.9 73.1 15.2 35.9 13.9 -22.0 6.1 13.0 6.9 Pennsylvania 70.5 77.7 7.2 26.4 15.7 -10.6 3.1 6.6 3.4 Rhode Island 67.9 64.0 -3.9 27.7 29.3 1.6 4.4 6.7 2.3 South Carolina 51.2 71.7 20.5 42.9 20.0 -22.9 5.8 8.3 2.4 South Dakota 83.4 88.8 5.4 14.4 7.0 -7.4 2.3 4.2 1.9 Tennessee 72.4 82.2 9.8 24.0 9.2 -14.8 3.7 8.6 5.0 Texas 69.5 77.6 8.1 27.4 12.2 -15.2 3.1 10.2 7.1 Utah 69.3 74.1 4.8 18.8 5.0 -13.8 12.0 20.9 8.9 Vermont 69.8 66.9 -2.8 26.2 25.7 -.5 4.0 7.4 3.4 Virginia 64.3 72.0 7.7 26.2 10.5 -15.8 9.5 17.6 8.1 Washington 56.1 58.7 2.6 38.0 27.8 -10.2 5.9 13.5 7.6 West Virginia 83.1 86.4 3.3 14.0 6.8 -7.1 3.0 6.8 3.8 Wisconsin 68.2 67.1 -1.1 31.6 24.0 -7.6 .2 8.9 8.7 Wyoming 74.0 80.3 6.3 22.8 12.5 -10.3 3.2 7.1 4.0 NOTE. In this and subsequent tables, data on banking organizations and thrift institutions are as of June 30 rather than December 31 for both 1984 and 1994 because data on deposits at branches are collected only once a year, on June 30. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 13 concentration in local banking markets and in mar- est firms, the HHI incorporates information on the kets in other industries. The HHI for a state is deter- deposit shares held by all firms operating in a state. mined by calculating the percentage of deposits held Measuring concentration with the HHI yields by every depository institution in the state, then results similar to those for the three-firm concentrasquaring these numbers and summing the results. If tion ratio. Between 1984 and 1994, the HHI increased all deposits in a state were controlled by a single in every state but three—Hawaii (which had been the depository institution, the HHI for the state would be second most concentrated state in 1984), Montana, 10000 (100 percent squared); as the number of firms and South Dakota; in all three states the decline was increases and their deposit shares become more equal, less than 100 points. The increases in the HHI tended the HHI decreases toward its lower bound of zero. to be larger than these decreases. For example, the Unlike the share of deposits held by the three larg- HHI increased more than fourfold in Louisiana and 6. Concentration of deposits at federally insured depository institutions, by state, 1984 and 1994 Percent held by 3 largest firms Herfindahl- Change, 1984-94 Hirschman Index State (percentage (index 1984 1994 points) 1984 1994 31.2 45.9 14.7 453 819 366 Alaska 38.2 65.0 26.8 835 1684 850 Arizona 49.6 70.7 21.2 1153 1800 647 Arkansas ... 20.5 26.8 6.3 227 357 130 California .. 31.0 42.1 11.0 522 825 303 Colorado ... 23.8 36.5 12.7 395 578 183 Connecticut 25.7 34.1 8.4 342 539 1% Delaware .. 38.1 43.7 5.6 871 920 49 District of Columbia 45.2 47.8 2.6 965 1024 59 Florida 19.3 39.5 20.1 215 465 Georgia 31.0 32.9 1.9 437 532 95 Hawaii 60.0 62.6 2.7 1608 1575 -33 Idaho 57.4 63.6 6.1 1359 1676 317 19.2 19.2 0 192 210 18 Indiana 12.4 27.4 14.9 90 255 Iowa 14.9 19.3 4.3 129 193 64 Kansas ... 11.9 25.0 13.1 94 299 205 Kentucky 18.8 29.5 10.8 174 368 194 10.4 34.4 24.0 96 472 376 Maine 28.4 42.3 13.9 477 709 232 Maryland .... 26.0 34.4 8.3 418 570 151 Massachusetts 30.7 31.8 1.1 475 494 20 Michigan .... 28.3 38.0 9.7 437 661 223 Minnesota.... 42.3 42.5 .2 722 46 23.1 36.6 13.4 282 586 305 Missouri 20.3 35.5 15.2 274 582 308 32.9 34.0 1.1 535 501 -34 Nebraska 20.4 30.0 9.6 224 393 169 Nevada 54.3 60.2 5.8 1413 1503 90 New Hampshire 23.7 35.2 11.4 345 613 268 New Jersey — 16.1 19.0 2.9 197 273 76 New Mexico .. 30.9 37.4 6.5 509 677 168 New York 25.3 36.4 11.1 362 580 218 North Carolina 35.9 38^8 2.8 550 731 181 North Dakota.. 29.2 32.2 2.9 443 506 63 21.9 31.9 10.0 257 465 208 Oklahoma ... 17.8 19.2 1.4 153 205 53 Oregon 48.7 52.0 3.3 970 1201 231 Pennsylvania 24.2 35.7 11.5 301 571 271 Rhode Island 67.2 77.6 10.4 1970 2175 204 South Carolina 28.4 38.4 10.0 437 669 232 South Dakota.. 44.4 41.2 -3.1 909 817 -92 Tennessee 25.4 31.0 5.6 318 492 174 Texas 19.8 28.6 8.8 245 346 101 Utah 42.5 48.6 6.1 810 1093 283 Vermont 33.3 43.6 10.3 659 883 224 29.0 31.5 2.5 453 568 114 Washington ... 35.5 40.1 4.6 563 762 199 West Virginia . 11.7 32.8 21.1 122 559 437 Wisconsin 20.2 31.6 11.4 204 403 199 Wyoming 29.4 33.1 3.7 446 636 190 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

14 Federal Reserve Bulletin • January 1996 West Virginia; more than tripled in Florida, Indiana, Given in table 7 are average HHIs for local marand Kansas; and more than doubled in Alaska, Ken- kets in 1984 and 1994 and the changes in these tucky, Mississippi, and Missouri. The number of averages over the period. To simplify the calculation, states with an HHI greater than 1000 increased from urban banking markets are assumed to be Metropolifive in 1984 to nine in 1994. Despite these sizable tan Statistical Areas (MSAs) and rural markets, nonincreases in concentration, however, deposits remain MSA counties. The mean HHI for deposits increased relatively unconcentrated in most states. for every category of market, although many of the increases were not large. For local deposit markets as a group, the average HHI rose 143 points, from 3291 STRUCTURAL CHANGE AT THE LOCAL LEVEL to 3434. Because this overall average covers about 300 urban markets and nearly 2,600 rural markets, Analyses at the national and state levels show how it is useful to examine the two types of markets financial resources in the aggregate are concentrated. separately. Analyses of competition among depository institu- The average HHI for urban markets increased tions usually focus on concentration within local 181 points during the ten years, from 1119 in 1984 to markets. Empirical evidence indicates that, despite 1300 in 1994. Despite this increase, the average technological developments allowing depository ser- urban market remained moderately concentrated in vices to be provided by mail, telephone, home com- 1994. The average HHI tended to be lower in larger puter, and automated teller machine and despite the urban markets than in smaller urban markets in both growth of nondepository financial firms, most house- years, reflecting the fact that larger markets typically holds and small businesses continue to rely on local have more depository institutions, each of which depository institutions when they seek depository would tend to have a smaller market share than services. This continued preference for local provid- would the relatively few firms in smaller markets. ers is reflected in data on the number of offices The average HHI for the largest urban markets was maintained by banking organizations and thrift insti- 939 in 1994, while the average HHI for the smallest tutions: Between 1984 and 1994, the number of such urban markets was nearly twice as high. These smalloffices decreased by a much smaller percentage than est urban areas constituted the only group of urban did the number of such firms (8 percent compared markets that were, on average, highly concentrated. with 33 percent). Further, the number of banks and However, the increase in the HHI over 1984-94 was bank branches rose 5 percent, despite a 30 percent smaller for these small urban areas as a group than decrease in the number of banking organizations. for any other group of urban markets. Theory and empirical evidence suggest that an The average concentration also rose in rural marincrease in local market concentration may reduce kets: The average rural market had an HHI of 3724 in competition among providers of depository services. For this reason, antitrust authorities tend to focus on the number and size of other depository institutions 7. Mean Herfindahl-Hirschman Index for local markets in the local market when they analyze the effects on based on deposits at federally insured depository institucompetition of proposed mergers and acquisitions tions, 1984 and 1994 among depository institutions. Specifically, they look at the market's HHI and the change in the HHI that Change, 1984-94 would arise from the proposed merger.6 Standard Local market population 1984 1994 (index points) benchmarks are that a market with an HHI below 1000 is unconcentrated, a market with an HHI All local maikets 3291 3434 143 between 1000 and 1800 is moderately concentrated, Urban markets and a market with an HHI above 1800 is highly All 1119 1300 181 More than 1 million 717 939 221 concentrated. The greater the existing concentration 500,000-1 million 1066 1183 116 250,000-500,000 1017 1241 224 in the market, the more serious an increase in the 100,000-250,000 1286 1460 174 HHI resulting from a merger is considered. Less than 100,000 1715 1810 95 Rural markets All 3584 3724 140 More than 100,000 1403 1568 166 50,000-100,000 1816 1952 136 6. In an antitrust analysis of a proposed merger among depository 25,000-50,000 2271 2381 110 institutions, a careful assessment would be made of the geographic 10,000-25,000 3319 3478 159 Less than 10,000 5419 5616 197 extent of the local market and the extent to which banks, thrifts, and credit unions compete with each other in the provision of financial NOTE. Urban markets are defined as Metropolitan Statistical Areas, and rural services. markets as non-MSA counties. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Trends in the Structure of Federally Insured Depository Institutions, 1984-94 15 1994, 140 points higher than in 1984. Concentration the national and state levels and, to a small extent, at is considerably greater in rural markets than in urban the local level. Between year-end 1984 and year-end markets. This is to be expected, as less populous 1994, the number of thrift institutions and the share areas cannot support as many competitors as can of deposits held by these firms declined considerably larger markets. Nevertheless, concentration levels in while the share held by credit unions more than rural and urban markets of comparable size were doubled. Larger firms generally increased their share about the same: Just as urban markets with popula- of deposits relative to smaller firms; however, there is tions of more than 100,000 were moderately concen- some evidence that a two-tiered size distribution is trated, on average, the average rural market with developing, with a small number of very large firms more than 100,000 residents also was moderately and a large number of moderate-sized firms. The concentrated. The very high average HHI for rural intense merger activity of the past decade led to the markets as a group is the result of the large number of acquisition of a sizable percentage of all depository rural counties with less than 25,000 residents; most institutions, even among the largest such firms. of these markets have only a few depository institu- The concentration of deposits will probably contions and thus are very highly concentrated. tinue to increase. The recent enactment of the Riegle- The increase in local market concentration over the Neal Act will likely spur more and larger interstate past ten years is probably due in large part to the bank acquisitions and result in the first truly national decline in the number of thrift institutions operating depository institutions in the nation's history. The in these markets. Analyses of bank deposits only (not recent trend toward increasing dominance of the reported here) do not show the increase in local banking industry by multibank holding companies market concentration that is found when deposits at may be reversed as these firms convert their banking all types of depository institution are examined. subsidiaries into branches and become one-bank Even the increase in local market concentration holding companies. The Congress has made some reported here is modest relative to the changes at the changes to reduce distinctions between banks and national and state levels. There are at least three thrift institutions and is considering additional legisreasons for the difference. First, most mergers have lation that would have the effect of inducing further been between firms operating primarily in different consolidation. Large thrifts will likely contribute to banking markets. Such mergers increase national or concentration; these firms have rebounded from the statewide concentration but not local market concen- industry's shakeout and began, in 1994, to resume tration. Second, smaller banks have been able to their growth. retain their market share and profitability in competi- Although the past decade has seen an increase in tion with larger banks in the same market. Finally, the concentration of deposits at the national and state constraints imposed by antitrust laws have limited levels, the extent of aggregate concentration of deposincreases in concentration at the local level. its is still much less than for many nonfinancial industries. A continuation of the recent small increases in the concentration of deposits in rural and CONCLUSIONS small urban banking markets could, because of the already-high levels of concentration in these markets, The concentration of deposits at federally insured lead to concerns about competitiveness in those marinstitutions increased considerably over the past ten kets. However, the implementation of antitrust laws years owing to the ongoing consolidation of the will likely limit any future increases in local market industry. The increase in concentration occurred at concentration. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

16 A Revision to Industrial Production and Capacity Utilization, 1991-95 Richard D. Raddock, of the Board's Division of estimated. For 1995, the level of the revised produc- Research and Statistics, prepared this article. tion indexes for both major aggregates are, on balance, about the same as previously reported. Capacity The Federal Reserve's index of industrial production growth, however, is now estimated to have been a (IP) and its related measures of capacity and utiliza- fraction of a percentage point higher over the period tion for January 1991 onward have been revised of the revision. As a result, the rates of capacity (tables l.A. and l.B). The updated indexes for total utilization last summer for total IP and for manufac- IP and for manufacturing show slower growth for turing are slightly lower than previously reported. 1993 and faster growth for 1994 than was previously The updated measures continue to paint the same l.A. Revised data for industrial production, capacity, and utilization for total industry, 1988-95 Seasonally adjusted data, except as noted Quarter Annual Year Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct Nov. Dec. avg.1 Industrial production (percentage change) 1988 .3 .2 .0 .8 -.3 .0 .6 .6 -.5 .3 .6 .6 3.8 3.0 2.9 3.0 4.4 1989 .3 -.5 .9 .0 -.3 -.3 -1.0 .5 -.4 -.4 .4 .7 3.9 .3 -4.4 -.2 1.5 1990 -.5 .5 .3 -.7 .7 .2 -.2 .3 .0 -.5 -1.3 -.4 2.1 1.1 1.6 -5.2 .0 1991 -.5 -1.0 -.8 .3 .8 1.1 .2 .3 .8 .1 -.1 -.5 -8.4 1.1 6.7 2.0 -1.8 1992 -.1 .6 .9 .7 .5 -.3 .8 -.2 .2 .7 .6 .2 .8 7.0 3.1 4.9 3.4 1993 .3 .4 .0 .2 -.5 .2 .6 .0 .7 .1 .7 .9 3.7 .5 3.2 5.5 3.5 1994 .4 .8 .8 .3 .5 .5 .2 .5 .1 .7 .5 .8 8.4 7.0 4.6 6.4 5.9 1995 .3 -.1 .1 -.4 .0 .1 .1 1.1 .1 -.4 3.9 -1.4 3.6 Industrial production 1988 103.2 103.4 103.4 104.3 104.0 104.0 104.6 105.2 104.7 105.0 105.6 106.3 103.3 104.1 104.8 105.6 104.4 1989 106.6 106.2 107.1 107.1 106.7 106.4 105.3 105.8 105.4 105.0 105.4 106.1 106.6 106.7 105.5 105.5 106.0 1990 105.5 106.1 106.4 105.7 106.5 106.7 106.5 106.8 106.8 106.3 105.0 104.5 106.0 106.3 106.7 105.3 106.0 1991 104.0 102.9 102.1 102.4 103.2 104.3 104.5 104.8 105.7 105.8 105.6 105.1 103.0 103.3 105.0 105.5 104.2 1992 105.0 105.6 106.5 107.3 107.8 107.5 108.4 108.2 108.4 109.2 109.8 110.0 105.7 107.5 108.3 109.7 107.7 1993 110.4 110.8 110.8 111.1 110.6 110.8 111.4 111.4 112.2 112.3 113.1 114.1 110.7 110.8 111.7 113.2 111.5 1994 114.6 115.5 116.4 116.8 117.5 118.1 118.4 118.9 119.1 119.9 120.5 121.5 115.5 117.5 118.8 120.6 118.1 1995 121.8 121.7 121.9 121.4 121.3 121.4 121.5 122.9 123.0 122.5 121.8 121.4 122.5 Capacity 1988 123.9 124.1 124.2 124.4 124.5 124.7 124.8 125.0 125.1 125.3 125.4 125.5 124.1 124.5 125.0 125.4 124.7 1989 125.7 125.9 126.1 126.3 126.5 126.7 126.9 127.1 127.3 127.5 127.7 127.9 125.9 126.5 127.1 127.7 126.8 1990 128.1 128.3 128.5 128.7 128.9 129.1 129.3 129.5 129.7 129.9 130.1 130.3 128.3 128.9 129.5 130.1 129.2 1991 130.5 130.7 130.9 131.1 131.3 131.5 131.7 131.9 132.1 132.3 132.5 132.7 130.7 131.3 131.9 132.5 131.6 1992 132.9 133.2 133.4 133.6 133.9 134.1 134.3 134.6 134.8 135.1 135.3 135.5 133.2 133.9 134.6 135.3 134.2 1993 135.8 136.0 136.3 136.5 136.7 137.0 137.2 137.5 137.7 137.9 138.2 138.4 136.0 136.7 137.5 138.2 137.1 1994 138.7 139.1 139.5 139.8 140.2 140.5 140.9 141.3 141.7 142.0 142.4 142.8 139.1 140.2 141.3 142.4 140.8 1995 143.2 143.6 144.1 144.5 145.0 145.5 145.9 146.4 146.9 147.3 143.7 145.0 146.4 Utilization 1988 83.2 83.3 83.2 83.8 83.5 83.4 83.8 84.2 83.7 83.8 84.2 84.6 83.3 83.6 83.9 84.2 83.7 1989 84.8 84.3 84.9 84.8 84.3 83.9 83.0 83.3 82.8 82.3 82.5 82.9 84.7 84.3 83.0 82.6 83.7 1990 82.4 82.7 82.8 82.1 82.6 82.6 82.4 82.5 82.4 81.8 80.7 80.2 82.6 82.5 82.4 80.9 82.1 1991 79.7 78.7 78.0 78.1 78.6 79.3 79.4 79.4 80.0 79.9 79.7 79.2 78.8 78.7 79.6 79.6 79.2 1992 78.9 79.3 79.9 80.3 80.5 80.2 80.7 80.4 80.4 80.8 81.2 81.2 79.4 80.3 80.5 81.0 80.3 1993 81.3 81.5 81.4 81.4 80.9 80.9 81.2 81.1 81.5 81.4 81.8 82.4 81.4 81.0 81.2 81.9 81.4 1994 82.6 83.0 83.5 83.6 83.8 84.0 84.0 84.2 84.0 84.4 84.6 85.1 83.0 83.8 84.1 84.7 83.9 1995 85.1 84.7 84.6 84.0 83.7 83.5 83.3 83.9 83.7 83.2 84.8 83.7 83.6 NOTE. Estimates from August 1995 through October 1995 are subject to 1. Annual averages of industrial production are calculated from not seasonfurther revision in the upcoming monthly releases. ally adjusted indexes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

17 broad picture of recovery in industrial activity from sion included revised seasonal factors, which were the 1990 recession through 1994, followed by a slow- calculated using the X-ll ARIMA program from down in early 1995 (chart 1). Statistics Canada, through mid-1995, and the updating of the productivity relationships that are applied to input-based estimates. The weights used since PRODUCTION 1992 to aggregate the series continue to be propor- The new estimates of production incorporate addi- tions based on value added by industries in 1992. The tional or updated figures from several sources. Re- production and capacity indexes continue to be vised annual figures include the following: data from expressed as percentages of output in 1987. the 1992 Census of Manufactures, preliminary results Despite noticeable changes in some component of the 1993 Annual Survey of Manufactures, physical series, the indexes for the output of business equipdata on mining for 1994, and data for 1994 reported ment and durable materials continue to show the in selected Current Industrial Reports published by strong upward trends that emerged in 1991 (chart 2). the Bureau of the Census. The revision also incorpo- The sustained, exceptionally rapid growth in output rated updated monthly source data. The downward of high technology goods has been a major factor in revision to IP growth for 1993 largely resulted from these trends. The indexes for consumer durables and incorporating the data from the Annual Survey of construction supplies still show a substantial falloff Manufactures (table 2). However, the inclusion of the from the beginning of 1995, although the production new annual and monthly data produced higher esti- of consumer durables is now estimated to have been mates of growth for 1994. Other aspects of the revi- at a higher level before beginning its drop. The l.B. Revised data for industrial production, capacity, and utilization for manufacturing industries, 1988-95 Seasonally adjusted data, except as noted Quarter AAnnnnuuaall YYeeaarr JJaann.. FFeebb.. MMaarr.. AApprr.. MMaayy JJuunnee JJuullyy AAuugg.. SSeepptt.. OOcctt.. NNoovv.. DDeecc.. aavvgg..11 1 2 3 4 Industrial production (percentage change) 1988 .2 .1 .2 .7 -.1 .0 .5 .4 .0 .1 .9 .6 3.6 3.3 3.0 4.4 4.7 1989 .8 -.9 .6 .2 -.5 -.2 -1.2 .4 -.4 -.5 .3 .2 4.3 -.3 -5.3 -1.3 1.6 1990 -.1 .9 .4 -.9 .5 .0 -.3 .5 -.1 -.6 -1.2 -.5 3.7 .2 1.0 -5.5 -.3 1991 -.9 -.9 -.9 .3 .7 1.3 .3 .3 1.0 .1 -.2 -.4 -9.8 1.0 8.1 2.5 -2.1 1992 .1 .8 .9 .6 .6 .0 .8 -.1 .1 .6 .6 .0 2.3 7.6 3.8 4.3 4.2 1993 .8 .3 .0 .4 -.4 .0 .6 -.1 .9 .0 .8 1.1 4.6 1.2 3.0 6.0 3.9 1994 .2 .9 1.0 .6 .6 .3 .4 .6 .2 .9 .6 .9 8.9 8.5 5.1 7.9 6.6 1995 .3 -.2 .1 -.4 -.3 .1 .0 .9 .5 -.3 3.9 -2.2 3.1 Industrial production 1988 103.2 103.4 103.6 104.3 104.2 104.2 104.7 105.1 105.2 105.3 106.2 106.8 103.4 104.2 105.0 106.1 104.7 1989 107.7 106.7 107.3 107.6 107.1 106.8 105.5 106.0 105.6 105.1 105.4 105.6 107.2 107.2 105.7 105.4 106.4 1990 105.5 106.5 107.0 106.0 106.6 106.6 106.3 106.9 106.8 106.2 104.9 104.4 106.3 106.4 106.6 105.1 106.1 1991 103.4 102.5 101.5 101.8 102.5 103.8 104.2 104.5 105.6 105.7 105.5 105.1 102.5 102.7 104.8 105.4 103.8 1992 105.1 105.9 106.9 107.6 108.2 108.1 109.0 108.9 109.0 109.7 110.4 110.3 106.0 108.0 109.0 110.1 108.2 1993 111.2 111.5 111.5 112.0 111.6 111.6 112.3 112.2 113.2 113.2 114.1 115.3 111.4 111.7 112.5 114.2 112.3 1994 115.5 116.6 117.8 118.5 119.1 119.5 120.0 120.7 120.9 122.0 122.7 123.8 116.6 119.0 120.5 122.8 119.7 1995 124.1 123.9 124.0 123.5 123.2 123.3 123.3 124.5 125.0 124.7 124.0 123.3 124.3 Capacity 1988 124.1 124.3 124.5 124.7 124.9 125.1 125.3 125.5 125.7 125.9 126.0 126.2 124.3 124.9 125.5 126.0 125.2 1989 126.5 126.7 127.0 127.2 127.4 127.7 127.9 128.2 128.4 128.7 128.9 129.2 126.7 127.4 128.2 128.9 127.8 1990 129.4 129.6 129.8 130.1 130.3 130.5 130.7 130.9 131.2 131.4 131.6 131.8 129.6 130.3 130.9 131.6 130.6 1991 132.0 132.2 132.5 132.7 132.9 133.1 133.3 133.5 133.7 133.9 134.2 134.4 132.2 132.9 133.5 134.2 133.2 1992 134.6 134.9 135.2 135.5 135.7 136.0 136.3 136.6 136.8 137.1 137.4 137.7 134.9 135.7 136.6 137.4 136.1 1993 138.0 138.2 138.5 138.8 139.1 139.4 139.7 139.9 140.2 140.5 140.8 141.1 138.2 139.1 139.9 140.8 139.5 1994 141.5 141.9 142.3 142.7 143.1 143.6 144.0 144.4 144.9 145.3 145.7 146.2 141.9 143.1 144.4 145.7 143.8 1995 146.6 147.2 147.7 148.2 148.7 149.2 149.8 150.3 150.9 151.4 147.2 148.7 150.3 Utilization 1988 83.2 83.1 83.2 83.6 83.4 83.3 83.6 83.8 83.7 83.7 84.3 84.6 83.2 83.5 83.7 84.2 83.6 1989 85.2 84.2 84.6 84.6 84.0 83.7 82.5 82.7 82.2 81.7 81.8 81.8 84.6 84.1 82.5 81.7 83.2 1990 81.6 82.2 82.4 81.5 81.8 81.7 81.3 81.6 81.4 80.8 79.7 79.2 82.0 81.7 81.4 79.9 81.3 1991 78.3 77.5 76.6 76.8 77.2 78.0 78.2 78.3 78.9 78.9 78.6 78.2 77.5 77.3 78.5 78.6 78.0 1992 78.1 78.5 79.1 79.4 79.7 79.5 80.0 79.8 79.7 80.0 80.3 80.1 78.6 79.6 79.8 80.2 79.5 1993 80.6 80.6 80.5 80.7 80.2 80.0 80.4 80.2 80.7 80.6 81.0 81.7 80.6 80.3 80.4 81.1 80.6 1994 81.7 82.2 82.8 83.0 83.2 83.2 83.3 83.6 83.5 83.9 84.2 84.7 82.2 83.2 83.4 84.3 83.3 1995 84.6 84.2 84.0 83.3 82.8 82.6 82.3 82.8 82.9 82.3 84.3 82.9 82.7 For notes, see table l.A. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18 Federal Reserve Bulletin • January 1996 1. Revised and earlier industrial production, capacity, and indexes for nondurable consumer goods and business utilization, 1985-95 supplies, which had grown at below average rates over the 1991-95 period, are now somewhat lower and show less growth in 1993 and 1995. The cumulative drop in the output of defense and space equipment is about the same—about a third from early 1991 through October 1995. Among the major industry groups, the bulk of the revisions to the index for 1993 and 1994 were concentrated in manufacturing (table 3). Most notably, the growth in output of computer and office equipment was revised down sharply in 1993 and raised significantly in 1994 and 1995. In other manufacturing industries, the revision also produced some changes: The growth in electrical machinery and in chemicals in 1993 is now noticeably lower than previously estimated; however, the growth rates for these industries were revised up in 1994. The small downward revision to growth of total IP in 1995 reflected sizable revisions to both mining and utilities as well as a slight reduction in the growth in manufacturing. CAPACITY AND UTILIZATION The new estimates of capacity and utilization also incorporate new data as well as the revised production indexes. The new data include preliminary survey data on manufacturing utilization rates, typically 2. Revised rates of growth in industrial production, by major market group, 1991-95 Revised rate of growth1 Difference between revised and earlier growth rates (percent) MMaarrkkeett ggrroouupp (percentage points) 1991 1992 1993 1994 1995 1991 1992 1993 1994 1995 Total index .2 4.0 3.2 6.6 2.0 .0 .0 -.4 .6 -.2 Products, total -.3 4.1 2.5 5.6 1.6 -.2 -.2 -.4 .6 —.5 Final products .3 4.4 2.5 5.4 2.4 -.3 -.2 -.3 .8 .5 Consumer goods 2.7 3.4 1.9 4.1 1.0 .2 .0 -.2 .7 .4 Durable 5.9 6.9 10.6 6.1 -2.5 .5 .4 2.4 1.0 .6 Automotive products 6.7 11.4 14.4 7.3 -2.4 1.4 -.5 2.9 .0 1.3 Other durable goods 5.3 3.2 7.3 4.9 -2.5 -.1 .9 1.9 1.8 .0 Nondurable 1.8 2.6 -.2 3.5 2.0 .0 .0 -.9 .6 -.6 Equipment, total -2.8 5.8 3.5 7.5 4.4 -.8 -.5 -.4 1.1 -.6 Business equipment .1 8.2 5.9 11.4 6.3 -.7 -.8 -1.0 1.8 -.4 Industrial -6.9 4.4 5.9 8.6 4.0 -.2 .9 -.1 -.1 -.7 Information processing and related — 3.7 14.9 7.5 17.8 13.2 -.8 -1.6 -3.1 4.1 .6 Transit 5.8 .5 .9 2.6 -2.3 -2.1 -.6 3.6 2.4 -3.0 Other -5.4 4.8 10.0 7.9 -3.2 -.1 -1.9 -1.8 -2.5 -1.2 Defense and space equipment -9.3 -5.8 -7.0 -10.4 -6.6 -1.2 .2 2.8 -1.0 -1.1 Intermediate products -2.2 3.2 2.6 6.3 -.8 .3 -.1 -.8 .0 -.5 Construction supplies -3.6 4.0 6.0 8.0 -2.5 .0 -.3 -.2 -.4 -.2 Business supplies -1.4 2.7 .6 5.3 .3 .5 -.1 -1.3 .2 -.6 Materials .9 3.7 4.2 8.1 2.6 .2 .0 -.4 .6 .2 Durable 1.5 6.2 7.2 11.2 4.6 .6 .0 -.2 .5 .2 Nondurable .4 2.3 2.3 6.9 -2.2 -.3 .2 -1.7 1.3 1.1 Energy .1 .0 -.5 1.9 2.3 -.1 .1 .4 .1 -1.0 Aggregates, excluding computer and office equipment Total index .0 3.3 2.8 6.1 1.2 .0 -.1 -.3 .5 -.4 Business equipment -1.2 4.8 3.5 8.6 1.7 -.8 -.5 -.3 .7 -1.3 1. Growth rates are calculated as the percentage change in the seasonally of the year specified in the column heading. For 1995, the annual growth rates adjusted index from the fourth quarter of the previous year to the fourth quarter are calculated from the fourth quarter of 1994 to the third quarter of 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A Revision to Industrial Production and Capacity Utilization 19 at the two-digit level in the Standard Industrial Clas- lower operating rates imply that capacity growth was sification (SIC), for the fourth quarters of 1993 and much higher. Among nondurable goods, capacity 1994 from the Bureau of the Census and updated growth is now higher for textiles, apparel, and paper information on physical capacity and utilization in products, but lower for chemicals and products. selected industries for 1994 and 1995 as reported As a result of the revisions to the production and mainly by trade associations. In estimating capacity capacity indexes, capacity utilization—the ratio of for most manufacturing industries, the annual growth output to capacity—is a fraction of a percentage point is related to the growth in the industry's capital lower than the earlier estimate for the 1993-95 period input. The estimates of capital input were revised as (table 5). For the third quarter of 1995, capacity a result of the inclusion of investment data from the utilization in manufacturing is estimated at 82.7 per- 1993 Annual Survey of Manufactures and updated cent, 0.3 percentage point below the rate previously results from the 1995 Investment Plans Survey by the estimated. Besides the large downward revision in Bureau of the Census. the operating rate for the computer industry, the Industrial capacity is now estimated to have revisions lowered the estimates of utilization rates for expanded a bit faster over 1991-95. As before, sharp the plastics materials and the electrical machinery increases in actual and planned investment spending industries. Within manufacturing, the downward led to an estimated acceleration of capacity growth in revision to utilization is sizable, both for durable 1994 and 1995. The annual rate of growth of indus- manufacturing and for advanced-processing industrial capacity increased from 2.1 percent in 1992 and tries. Among primary-processing industries, operat- 1993 to 3.6 percent over the first three quarters of ing rates were altered little, on balance, in 1994 and 1995. The upward revision occurred in 1994 and was 1995; upward revisions to primary metals and to concentrated in durable goods manufacturing, nota- petroleum products offset downward revisions in bly for steel, motor vehicles and parts, and office and other categories. computing equipment (table 4). Survey results sug- The capacity growth estimate for mining revised gest that operating rates in the computer industry up a bit, and utilization was 0.8 percentage point were much lower than those previously estimated, lower in the third quarter of 1995. The utilization and given the revised estimates for production, the rate for utilities was raised largely because the 2. Industrial production by market groups, 1989-95 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20 Federal Reserve Bulletin • January 1996 North American Electric Reliability Council reported significant methodological change was the use of a slower growth in generating capacity. The strong different method of aggregation to estimate measures demand for electricity to operate air conditioners of industry capital input, which are used in estimating during last summer's heat wave increased the operat- capacity. ing rate at electric utilities to a relatively high level. Weighting of the Indexes METHODOLOGICAL ASPECTS OF THE REVISION To combine individual series into market or industry aggregates, the individual indexes are multiplied by The revision to the IP index and measures of capacity their proportionate contribution to industrial value involved some small modifications to value-added added in 1992. As in the revision a year ago, the 1992 weights, changes in series structure, and updating of Census of Manufactures and the 1992 Census of monthly data on inputs to production. The most Mineral Industries were used for measures of value 3. Revised rates of growth in industrial production, by major industry group, 1991-95 Revised rate of growth2 Difference between revised and earlier growth rates IInndduussttrryy ggrroouupp cc SS oo II dd CC ee11 (percent) (percentage points) 1991 1992 1993 1994 1995 1991 1992 1993 1994 1995 Total index .2 4.0 3.2 6.6 2.0 .0 .0 -.4 .6 -.2 Manufacturing .3 4.5 3.7 7.6 1.6 .1 -.1 -.5 .7 -.1 Primary processing -.6 4.0 4.3 7.0 -1.7 .0 .2 -.8 .6 .5 Advanced processing .6 4.7 3.4 7.8 3.0 .0 -.3 -.3 .7 -.3 .0 5.5 6.2 9.3 3.3 .0 -.3 -.1 .8 .0 Lumber and products 24 -.5 5.8 3.9 5.7 -2.0 -.3 -1.5 -1.8 1.6 1.0 Furniture and fixtures 25 -.5 4.9 5.2 7.3 -3.0 .5 -.6 .7 -.7 -2.3 Stone, clay, and glass products 32 -5.7 3.8 4.2 4.0 -1.8 1.1 -1.9 -.8 -1.5 .5 Primary metals 33 -3.1 1.0 7.5 9.8 -4.3 -.2 -.1 .7 1.0 .5 Iron and steel 331,2 -5.4 1.1 9.1 8.3 -3.0 -.2 -.5 .9 .7 1.7 Raw steel -8.5 1.6 5.8 6.4 4 -.3 -.1 -.1 .0 1.2 Nonfenous 333-6,9 .4 .9 5.4 11.8 -6.0 -.2 .6 .3 1.4 -1.1 Fabricated metal products 34 -1.8 5.1 3.9 8.4 .8 -.4 .6 -1.0 .8 -.5 Industrial machinery and equipment 35 -1.6 10.4 12.9 14.9 10.7 -.4 -.9 -1.2 1.7 1.8 Computer and office equipment 357 5.5 28.0 26.7 29.6 32.7 -.1 -2.6 -6.8 9.4 4.6 Electrical machinery 36 5.3 9.9 8.2 17.7 12.5 1.3 -1.5 -4.9 1.2 -.5 Transportation equipment 37 .8 2.9 4.9 3.2 -3.3 -.4 .6 4.4 .7 -.5 Motor vehicles and parts 371 10.0 10.7 16.8 8.6 -3.4 -.2 -1.0 2.8 .7 1.5 Autos and light trucks 12.3 8.8 15.7 6.0 -3.9 -.4 .0 .8 -.1 2.1 Aerospace and miscellaneous 372-6,9 -6.3 -4.3 -7.9 -4.1 -3.2 -.5 2.0 6.5 1.5 -3.8 Instruments 38 .0 1.0 -1.1 4.0 .9 -.7 .5 1.0 .8 .2 Miscellaneous 39 .3 2.1 6.0 6.2 .0 -.2 1.5 2.2 .1 1.4 Nondurable .6 3.2 .9 5.5 -.6 .1 .0 -.9 .5 -.2 Foods 20 .9 1.6 2.6 3.6 1.2 .1 -.3 .5 .1 -1.1 Tobacco products 21 -11.8 5.6 -19.6 24.7 4.3 .3 -4.4 -4.1 -2.2 4.5 Textile mill products 22 5.0 6.3 4.6 5.0 -6.3 -.6 1.9 3.2 -.5 2.2 Apparel products 23 5.8 .9 1.3 4.0 -9.1 -.1 .9 2.5 1.3 .6 Paper and products 26 2.0 .4 6.8 4.2 -2.6 .2 .8 -.4 .3 -.7 Printing and publishing 27 -1.9 2.3 -1.4 2.6 -1.1 .5 .2 -1.2 .0 .4 Chemicals and products 28 .2 4.4 -1.0 7.0 1.4 -.3 .0 -4.0 2.3 -1.0 Petroleum products 29 -1.6 3.6 3.1 .0 2.7 .4 .3 .6 -.4 1.6 Rubber and plastics products 30 3.4 8.7 6.7 10.4 -1.6 .2 .3 .7 .3 .1 Leather and products 31 -4.5 5.1 -2.6 -3.2 -9.4 1.2 -.2 2.2 -1.7 1.5 Mining -3.1 .3 -.5 1.2 .4 .0 .0 .3 .4 -1.4 Metal mining 10 -.4 6.1 2.5 -2.8 7.5 -.6 .3 1.8 2.3 -.9 Coal mining 12 -2.0 -.5 -3.2 9.1 .5 .5 .2 .1 -.1 1.1 Oil and gas extraction 13 -3.5 -.5 -.6 -.7 -1.0 -.2 .1 .3 .4 -2.1 Stone and earth minerals 14 -4.5 4.5 2.9 6.4 4.8 .6 -.3 .2 -.4 -1.5 Utilities 2.7 2.0 1.5 .2 9.1 .1 .1 .4 .0 -1.1 Electric 491,3pt 1.6 1.9 .9 1.8 8.4 .1 .0 .3 -.1 -1.1 Gas 492,3pt 7.0 2.1 3.9 -6.0 11.9 .2 .2 .7 .0 -.9 Aggregates, excluding computer and office equipment Manufacturing .0 3.7 3.2 7.0 .6 .0 -.1 -.3 .5 -.2 1. Standard Industrial Classification. of the year specified in the column heading. For 1995, the annual growth rates 2. Growth rates are calculated as the percentage change in the seasonally are calculated from the fourth quarter of 1994 to the third quarter of 1995. adjusted index from the fourth quarter of the previous year to the fourth quarter Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A Revision to Industrial Production and Capacity Utilization 21 added by individual manufacturing and mining indus- preliminary Census of Mineral Industries. In additries. Value-added estimates for electric and gas utili- tion, weights for detailed series (typically product ties were compiled from income and expense infor- series or series split according to market group) mation published by the Department of Energy, the below the four-digit SIC level were adjusted to reflect Edison Electric Institute, and the American Gas some data on the 1992 value of product that were not Association. available for the 1994 revision. Although the overall 1992 value-added weights This revision updates the supplementary series on were essentially unchanged in this revision, the the gross value of products. The gross value series weights of some series were modified to reflect small are derived from production indexes for products, changes to value-added data as initially reported in and they exclude materials series to avoid double the 1992 preliminary Census of Manufactures and counting. Formerly in 1987 dollars, the gross value 4. Revised rates of growth in capacity, by major industry group, 1991-95 Revised rate of growth2 Difference between revised and earlier growth rates Industry group SIC (percent) (percentage points) 1991 1992 1993 1994 1995 1991 1992 1993 1994 1995 Total index 1.8 2.1 2.1 3.1 3.6 -.1 .0 .0 .4 .0 Manufacturing 1.9 2.4 2.5 3.5 4.1 -.2 .0 .1 .5 .1 Primary processing 1.2 1.4 1.5 2.2 2.6 .0 .0 .1 .2 -.1 Advanced processing ... 2.4 2.9 2.9 4.1 4.7 -.1 .0 .1 .6 .1 Durable. 2.3 2.5 3.1 4.6 5.3 -.2 -.1 .5 .9 .1 Lumber and products 24 .0 .6 1.2 .9 1.6 .3 .3 .5 -.6 -.9 Furniture and fixtures 25 .5 .9 1.9 1.9 2.7 -.4 -.7 -.5 -.9 .3 Stone, clay, and glass products 32 .6 .7 .3 .9 1.4 .4 .2 -.7 -.7 -.2 Primary metals 33 -.8 -1.2 -.3 1.8 1.5 -.2 -.2 .3 1.2 -1.7 Iron and steel 331,2 -1.2 -2.3 -1.0 2.8 2.0 .0 .0 .0 1.7 -2.3 Raw steel -1.6 -3.0 -4.2 .9 .9 .0 -.4 -.5 3.1 -3.1 Nonferrous 333-6,9 .1 .4 .5 .6 1.0 -.3 -.3 .5 .6 -.9 Fabricated metal products — 34 -.2 .3 1.1 1.9 2.0 -.6 -.6 .2 .9 .3 Industrial machinery and equipment 35 5.1 4.1 5.8 8.7 9.9 -.4 -.7 1.4 3.0 .3 Computer and office equipment .. 357 14.1 14.0 18.6 24.9 25.0 -1.3 -1.6 4.2 9.5 3.4 Electrical machinery 36 4.8 6.4 7.3 9.7 12.0 -.9 -.2 -.2 .2 .1 Transportation equipment 37 1.5 2.0 2.0 3.4 3.1 .2 .5 1.5 1.6 .3 Motor vehicles and parts 371 2.9 3.8 4.5 6.6 5.8 -.1 .6 2.0 2.2 -.1 Autos and light trucks 1.0 2.4 2.7 5.8 3.9 .0 .0 1.9 1.2 -.8 Aerospace and miscellaneous 372-6,9 -.1 .2 -.8 -.3 -.1 .1 .5 .8 .9 .7 Instruments 38 1.2 1.3 .9 .9 1.0 .0 .1 -.4 -.5 -.3 Miscellaneous 39 2.6 4.8 3.7 3.9 4.0 1.1 1.3 .5 .3 2.2 Nondurable 1.8 2.3 1.8 2.1 2.5 .1 .1 -.4 -.2 .1 20 1.7 2.2 2.1 2.0 2.0 -.2 .0 -.1 -.1 -.3 Tobacco products —. 21 -2.1 -1.0 .4 2.5 2.6 -1.6 -.3 -.6 2.0 1.0 Textile mill products 22 1.5 2.5 3.4 3.1 3.1 1.0 1.3 1.7 1.0 .7 Apparel products 23 -.5 2.1 2.5 1.0 1.0 -.1 1.2 2.5 .5 -.2 26 2.7 2.3 2.2 2.1 2.6 .4 .4 .6 .3 .3 Printing and publishing . 27 .8 .9 -.8 1.6 2.3 -.5 -.8 -2.5 .5 1.5 Chemicals and products 28 3.1 4.0 2.6 2.2 2.4 .5 .5 -.7 -1.5 -1.3 Petroleum products — 29 -.8 -1.3 -.5 .3 .5 .0 .0 .0 .7 .1 30 3.5 4.2 4.1 4.6 6.5 .0 -.2 -.3 -.1 1.5 31 -4.3 -2.7 -2.2 -2.5 -1.7 -.5 -.3 .5 -.3 1.2 Mining. -.3 -1.1 -1.0 -.1 .1 .0 .0 .4 .1 .2 Metal mining 10 2.2 2.5 1.7 -.4 .3 -.1 .0 .0 -.9 .2 Coal mining 12 2.1 1.0 1.1 1.1 1.1 .0 .0 .0 .0 .0 Oil and gas extraction 13 -1.0 -2.1 -1.9 -.6 -.6 .0 .0 .5 .0 -.1 Stone and earth minerals ... 14 -.5 .5 .8 1.5 2.6 .0 .0 .8 1.7 2.6 Utilities .. 1.3 1.2 .6 .5 .9 .0 .0 -.5 -.7 -.5 Electric 491,3pt 1.8 1.5 .7 .5 1.0 .0 .0 -.7 -1.0 -.6 Gas ... 492,3pt .0 .0 .2 .5 .6 .0 .0 .2 .2 .0 Aggregates, excluding computer and office equipment Total index .... 1.4 1.9 1.8 2.5 3.0 -.1 -.1 Manufacturing. 1.6 2.1 2.1 2.9 3.4 .0 -.1 NOTE. Primary processing manufacturing includes textile mill products, computer equipment, electrical machinery, transportation equipment, instrupaper and products, industrial chemicals, synthetic materials, and fertilizers, ments, and miscellaneous manufactures. petroleum products, rubber and plastics products, lumber and products, primary 1. Standard Industrial Classification. metals, fabricated metals, and stone, clay, and glass products. Advanced process- 2. Growth rates are calculated as the percentage change in the seasonally ing manufacturing includes foods, tobacco products, apparel products, printing adjusted index from the fourth quarter of the previous year to the fourth quarter and publishing, chemical products and other agricultural chemicals, leather and of the year specified in the column heading. For 1995, the annual growth rates products, furniture and fixtures, industrial and commercial machinery and are calculated from the fourth quarter of 1994 to the third quarter of 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

22 Federal Reserve Bulletin • January 1996 series are now expressed in 1992 dollars. The dollar data for three other series were modified. With the weights that are applied to individual manufacturing changes, the proportion of the IP series derived from series are derived from the value of products figures physical product data rises 2 percentage points, in from the 1992 Census of Manufactures. 1992 value-added terms, to 41 percent. Industrial organic chemicals (SIC 286), formerly an input-based series, is now derived from quarterly Changes in Series Structure production data reported by the National Petroleum Refiners Association. These data cover major petro- The series structure of the index of industrial produc- chemicals, such as benzene, ethylene, propylene, and tion, which now comprises 260 individual series, styrene. The production quantity of each chemical is remains basically the same. To improve coverage and multiplied by an estimate of value added per unit in reliability, a net of five series were added and source 1992. 5. Revised capacity utilization rates, by major industry group Difference between revised Revised rate and earlier growth rates (percentage of capacity) SSIICC (percentage points) IInndduussttrryy ggrroouupp ccooddee11 1967-94 1989-90 1991-92 1991-92 avg. high low 1993:Q4 1994:Q4 1995:Q3 low 1993:Q4 1994:Q4 1995:Q3 Total index 81.8 84.9 78.0 81.9 84.7 83.6 .0 -.4 -.2 -.4 Manufacturing 81.1 85.2 76.6 81.1 84.3 82.7 .0 -.4 -.2 -.3 Primary processing 82.4 89.0 77.9 85.2 89.3 86.4 .0 -.6 -.2 .2 Advanced processing 80.5 83.5 76.1 79.3 82.1 81.1 .0 -.4 -.4 -.6 Durable 78.9 84.0 73.7 80.2 83.8 82.6 -.1 -.5 -.7 -.7 Lumber and products 24 83.0 91.1 76.1 86.4 90.6 88.0 -.3 ^t.O -2.1 -.7 Furniture and fixtures 25 81.5 84.7 72.2 81.7 86.0 82.9 1.2 1.8 2.1 1.1 Stone, clay, and glass products 32 78.0 83.8 71.0 78.4 80.8 78.8 -.5 -1.0 -1.8 -1.3 Primary metals 33 80.3 92.8 74.2 88.4 95.3 91.3 .2 .4 .1 1.6 Iron and steel 331,2 80.0 95.7 72.0 90.1 94.9 90.9 -.1 .1 -.9 1.1 Raw steel 79.6 89.9 71.5 90.6 95.5 95.4 .1 .3 -2.7 .3 Nonferrous 333-6,9 81.1 88.5 75.2 86.2 95.8 90.7 .2 .6 1.2 1.1 Fabricated metal products 34 77.2 82.0 71.3 79.7 84.8 84.5 -.4 .1 -.1 -.1 Industrial machinery and equipment ... 35 80.6 84.0 71.8 82.5 87.2 87.6 -.7 -2.4 -3.7 -2.9 Computer and office equipment 357 80.2 80.0 64.5 79.5 82.5 85.6 -.1 -7.1 -7.7 -8.3 Electrical machinery 36 80.3 84.2 77.0 81.6 87.7 87.6 1.5 -2.8 -2.2 -2.6 Transportation equipment 37 74.8 84.4 69.7 77.4 77.3 73.8 -.5 1.8 1.2 .7 Motor vehicles and parts 371 76.0 85.1 56.6 83.6 85.1 79.7 -1.0 -.8 -2.1 -1.0 Autos and light trucks2 89.1 55.6 85.0 85.2 80.8 -2.1 -1.4 -2.4 -.4 Aerospace and miscellaneous 372-6,9 74.9 88.4 75.6 70.4 67.8 66.2 1.2 4.9 5.2 3.0 Instruments 38 81.8 80.8 76.4 75.6 78.0 78.5 -.3 .9 1.9 2.8 Miscellaneous 39 75.1 79.8 72.1 74.1 75.8 73.4 -.8 .3 .2 -.4 Nondurable 83.4 86.7 80.3 82.0 84.7 82.8 -.1 -.4 .1 .0 Foods 20 82.2 83.3 80.8 81.6 82.9 82.3 .3 .6 .7 .0 Tobacco products 21 90.8 102.4 76.7 71.1 86.5 86.3 -.4 -4.5 -9.0 -7.9 Textile mill products 22 86.1 92.1 78.8 88.9 90.5 84.3 -.1 .4 -.9 .3 Apparel products 23 80.9 82.3 75.0 78.9 81.3 74.8 -.1 -.2 .3 .6 Paper and products 26 89.8 94.6 86.7 91.9 93.8 90.1 .2 -.6 -.6 -1.3 Printing and publishing 27 86.0 90.4 78.9 81.2 82.0 79.9 .7 2.5 2.2 1.5 Chemicals and products 28 79.9 85.5 78.5 77.1 80.7 80.1 -.4 -3.6 -.7 -.6 Petroleum products 29 85.4 91.4 84.6 93.0 92.7 94.1 .9 1.2 .2 1.2 Rubber and plastics products 30 84.1 90.5 78.0 88.8 93.7 88.0 -.4 1.4 1.8 .8 Leather and products 31 82.0 84.9 76.0 85.4 84.8 79.5 1.3 3.1 1.9 1.8 Mining 87.6 89.5 85.6 88.1 89.3 89.5 -.1 .0 .3 -.8 Metal mining 10 78.5 88.8 80.0 86.4 84.4 88.6 -.6 1.3 4.0 3.6 Coal mining 12 86.7 93.5 82.6 80.2 86.6 86.2 .3 .7 .7 1.4 Oil and gas extraction 13 88.4 90.7 86.0 90.3 90.2 90.0 .1 -.2 .3 -1.1 Stone and earth minerals 14 84.3 90.0 79.4 86.2 90.3 91.6 .0 -.5 -2.4 -5.3 Utilities 86.5 92.6 83.1 87.3 87.1 92.2 -.1 .9 1.4 1.2 Electric 491,3pt 88.5 94.8 84.4 88.3 89.5 94.3 -.4 .9 1.7 1.5 Gas 492,3pt 82.3 85.5 71.2 83.6 78.2 84.7 -.2 .7 .6 .1 Aggregates, excluding computer and office equipment Total index 81.5 85.0 78.3 81.9 84.7 83.5 .0 -.2 .0 -.2 Manufacturing 80.7 85.3 76.9 81.0 84.2 82.4 .0 -.4 -.2 -.3 NOTE. The "high" columns refer to periods in which utilization generally 1. Standard Industrial Classification peaked; the "low" columns refer to recession years in which utilization gener- 2. Series begins in 1977. ally bottomed out. The monthly highs and lows are specific to each series, and all did not occur in the same month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A Revision to Industrial Production and Capacity Utilization 23 Before the current revision, three unpublished industrial production. These measures, either monthly series represented service industry machines production worker hours or kilowatt-hours of elec- (SIC 358). As part of the revision, six individual IP tricity consumed by industry, were revised in three series, four of which are new, were used to construct main ways. First, the monthly production worker a new aggregate index for the industry's largest four- hours data were revised by the Bureau of Labor digit component, heating and refrigeration equipment Statistics to reflect the benchmarking of monthly (SIC 3585). The following new series were added to employment data to the number of employees covthe existing series on room air conditioners and uni- ered by unemployment insurance in March 1994. As tary air conditioners: (1) an estimate of air condition- a result of the benchmarking, employment in manuers for motor vehicles that uses motor vehicle assem- facturing rose and employment in mining declined blies as a monthly indicator and that is based on the slightly. Second, as part of a major revision of the annual output in units reported by the Census Bureau; electric power data collected by the Federal Reserve, (2) an index for warm air furnaces based on data in revised kilowatt-hour data on the sales of electric units reported by the Gas Appliance Manufacturers power to industries since 1990 have been introduced Association; (3) an estimate of commercial heating in this revision. The new estimates more accurately and cooling equipment developed from annual output account for cogeneration and are benchmarked to in units reported by the Census Bureau; and (4) an electric power use reported in the Census and Annual estimate of compressors, condensers, and other parts Survey of Manufactures. After the completion of for heating and cooling equipment (including home review and documentation, the revised electric power appliances) based on unit output of the assembled series back to 1972 will be published in a supplement equipment. to the Federal Reserve's statistical release G.17 The plumbing and heating products group "Industrial Production and Capacity Utilization." (SIC 343), which had been covered by one input- Third, new productivity factors were applied to input based series, has been split into three series. The first data since 1991, based on productivity trends derived is plumbing fixtures (SIC 3431,2), which is based on from annual input and output data. monthly kilowatt hours. The other two series cover Monthly physical output measures in tons, barrels, SIC 3433: (1) boilers, unit heaters, and furnaces, and so on were also updated. In many cases, the except warm air, a series based on units reported by monthly product data are not comprehensive and may the Gas Appliance Manufacturers Association, and cover only part of the output of an industry. In such (2) burners and parts for boilers, water heaters, and instances, the updated monthly product data are furnaces, a series based on source data for related IP adjusted to annual levels based on more comprehenindexes. sive annual indexes of output, such as those provided The monthly series on household audio and video by the Bureau of the Census and the Bureau of equipment (SIC 3651) is now based solely on units Mines. of direct-view color television sets, with screens Seasonal factors based on the X-l 1 ARIMA model that measure at least 19 inches, as reported by the were calculated through mid-1995. When appropri- Electronic Industries Association, less comparable ate, the original observations are modified before imports. Monochromatic TVs and smaller color TVs applying the X-ll program so that abrupt changes are no longer produced in the United States. due to business cycles or other causes do not distort Formerly, the output of carpets (SIC 227) was the factors. Moreover, each of the main types of represented by two series based on shipments of monthly data involves some custom handling. For woven and tufted carpets. Because the Carpet and example, physical product data are expressed as daily Rug Institute has discontinued issuing data on woven averages before seasonal adjustment to adjust for the carpets, this small series has been dropped. In the different numbers of working days per week in differrevised IP index, the carpet industry is now repre- ent industries. sented by only production of tufted carpets, which Seasonal adjustment of the series for production accounts for the bulk of carpet output. worker hours—the product of employment and the length of the workweek—requires some special treatment because the monthly BLS employment survey New Monthly Data and Seasonal Factors covers only the pay period that includes the twelfth of in the Production Indexes the month. Two special kinds of preadjustments are made before using X-ll ARIMA. The length of the Series based on input measures are used to estimate workweek is affected by holidays that fall within the monthly production indexes for more than half of survey period because overtime hours are typically Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

24 Federal Reserve Bulletin • January 1996 reduced. Thus an adjustment to the workweek is index number is an estimate of sustainable potential made when a holiday such as Easter or Labor Day output expressed as a percentage of output in 1987 falls in the survey week. Adjustments are also made and gives the general level and trend of capacity.2 to account for the interval between surveys, which The annual movements of the preliminary capacity may be either four or five weeks. The size of the indexes are then adjusted to give consideration to interval adjustment tends to be larger at times when alternative indicators of annual capacity change; monthly movements in the unadjusted hours series these alternatives include capacity data in physical are particularly large. units and estimates of capital input. In general, the Seasonal factors for the electric power data were adjusted estimates of capacity are the fitted values reestimated on the basis of data through March 1995. from regressions that recalibrate the physical capac- In estimating the seasonal factors for the revised ity or capital input estimates to the trend growth path kilowatt-hour series, the original observations were of the preliminary implied capacities: initially modified to remove abrupt changes that might distort the factors. The modified series were (IC = IP/U ).3 t t Sjt then seasonally adjusted by the X-ll ARIMA program. After the first adjustment, the seasonal factors In this revision, the capital measures used to calcufor individual series within two-digit SIC groups late many series on manufacturing capacity have were pooled to more efficiently estimate common been reconfigured. As before, estimates are made of seasonal patterns. The seasonal factors for individual each industry's real net capital stock of a diverse set series resulting from the joint seasonal estimation of assets. These real net capital stocks continue to be technique exhibit reduced sensitivity to random estimated by the perpetual inventory method. Eleshocks and are less prone to revision when new data ments included in these estimations are (1) time are added.1 series of investments in new equipment and structures by three-digit manufacturing industries; (2) corresponding decompositions of the annual investments Revised Estimates of Industrial Capacity into twenty-nine asset types; (3) asset-type deflators and service lives; and (4) estimates of losses in The revised capacity indexes, which are designed to capital efficiency because of discards and economic accompany the production indexes, incorporate the decay as assets age.4 new IP indexes as well as updated measures of capital input and the latest utilization rates from various sources. The latest Census survey of manufacturing plant utilization, a major source of new 2. For a discussion of the calculation of the utilization rates pubdata, provided preliminary utilization rates through lished by the Federal Reserve, see the appendix in Richard D. Raddock, "Recent Developments in Industrial Capacity and Utilization," 1993 and 1994, mainly at the two-digit SIC level. For Federal Reserve Bulletin, vol. 76 (June 1990), pp. 424-35. those industries that provide utilization rates as well 3. The fitted values from a regression of the equation below give an as output and capacity data expressed in physical estimate of the difference in the trends of the implied capacity and the annual capacity indicator. units, the data were updated for such items as raw steel, copper, plastics resins, automobiles and light log (IC/KJ = a + I.bfft) + e, t i t truck assembly, and generation of electricity. where As a first step in estimating the capacity indexes, preliminary end-of-year indexes of industrial capac- IC, = implied capacity index in period t ity (.IQ are calculated by dividing a production index K, = annual capacity indicator (IP) by a utilization rate obtained from a survey (U) s for that end-of-year period. Thus IC t = IP t IU s t . These fj(i) = specified functions of time preliminary indexes are indirect, or implied, estimates of capacity and are expressed, like the indexes a, b t = parameters to be estimated of industrial production, as percentages of production e = error term. t in a base year, currently 1987. Each implied capacity The refined capacity estimates are taken to be the annual capacity indicators multiplied by the antilogarithms of the fitted values from the equation. 1. Eric J. Bartelsman and William P. Cleveland, "Joint Seasonal 4. M.F. Mohr and C.E. Gilbert, "Capital Stock Estimates for Manu- Adjustment of Economic Time Series," Finance and Economics Dis- facturing Industries: Methods and Data" (Industrial Output Section, cussion Series No. 93-28 (August 1993), Board of Governors of the Division of Research and Statistics, Board of Governors of the Fed- Federal Reserve System, Washington, D.C. eral Reserve System, December 1995, unpublished). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A Revision to Industrial Production and Capacity Utilization 25 tors, by asset type, for 1994 through the second Data Availability quarter of 1995; and revised estimates of 1995 investment by manufacturing industries in new plant and Current data are published monthly in the Federal equipment from the latest Investment Plans Survey. Reserve's statistical release G.17 "Industrial Production Taken together, this new information led to lower and Capacity Utilization." The release as well as diskestimates of the growth of the real capital stock over ettes containing either historical data (through 1985) or 1993-94 and about the same rate of growth in 1995 more recent data (1986 through those most recently pubas previously indicated. lished in the G.17 statistical release) are available from Formerly, the real net stocks of specific assets, Publications Services, Board of Governors of the Federal Reserve System, Washington, DC 20551 (202-452-3245). such as computers, metalworking machinery, and Files containing the revised data and the text and tables industrial buildings, were simply summed to obtain from the current release are also available through the an industry's total net capital stock. In this revision, a Economic Bulletin Board of the Department of Com- different method of aggregation was used to estimate merce; for information call 202-482-1986. industry capital input. The new capital input mea- A document with printed tables of the revised esti- sures, which are calculated using a Tornqvist index mates of series shown in the G.17 release is also avail- number formula, weight growth rates in the net stocks able on written request to the Industrial Output Section, of individual assets by an estimate of that asset's Mail Stop 82, Division of Research and Statistics, Board share of the aggregate marginal product of the indusof Governors of the Federal Reserve System, Washingtry's capital.5 Following standard practice, assetton, DC 20551. specific rental prices were constructed and used to approximate the profile of each asset's marginal prod- Revisions to the growth in the constant-dollar net uct over time. • capital stocks for the different assets since 1990 are the result of incorporating new data from several sources. The data used were current-dollar expendi- 5. This method is similar to the one used by the Bureau of Labor Statistics to calculate multifactor productivity. The BLS capital input tures on new capital, by industry, from the revised measures are documented in appendix C of Trends in Multifactor 1992 Census of Manufactures and the preliminary Productivity, 1948-81, Bulletin 2178 (U.S. Department of Labor, 1993 Annual Survey of Manufactures; revised esti- Bureau of Labor Statistics, 1983). For an early application of this method, see L.R. Christensen and D.W. Jorgenson, "The Measuremates by the Bureau of Economic Analysis of both ment of U.S. Real Capital Input, 1929-67," Review of Income and current-dollar new investment and related price defla- Wealth, Series 15 (December 1969), pp. 293-320. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

26 Staff Studies The staff members of the Board of Governors of the necessarily indicate concurrence by the Board of Federal Reserve System and of the Federal Reserve Governors, by the Federal Reserve Banks, or by Banks undertake studies that cover a wide range of members of their staffs. economic and financial subjects. From time to time Single copies of the full text of each study are the studies that are of general interest are published available without charge. The titles available are in the Staff Studies series and summarized in the shown under "Staff Studies" in the list of Federal Federal Reserve Bulletin. The analyses and con- Reserve Board publications at the back of each clusions set forth are those of the authors and do not Bulletin. STUDY SUMMARY THE ECONOMICS OF THE PRIVATE EQUITY MARKET George W. Fenn, Nellie Liang, and Stephen Prowse The private equity market has become an important tions, and financial institutions that invested directly source of funds for start-up firms, private middle- in issuing firms. Much of the investment since 1980, market firms, firms in financial distress, and public by contrast, has been undertaken by professional firms seeking buyout financing. Between 1980 and private equity managers on behalf of institutional 1994, the amount of private equity outstanding rose investors. The vehicle for organizing this activity is from less than $5 billion to $100 billion. Despite the the limited partnership, with the institutional invesmarket's extraordinary growth and its importance to tors serving as limited partners and investment manmany types of firms, it has received little attention in agers as general partners. the financial press or the academic literature. The emergence of the limited partnership as the This study examines the economic foundations of dominant form of intermediary is a result of the the private equity market and discusses in detail the extreme information asymmetries and potential inmarket's organizational structure. Drawing on pub- centive problems that arise in the private equity marlicly available data and extensive fieldwork, it de- ket. The specific advantages of limited partnerships scribes the major issuers, intermediaries, investors, are rooted in the ways in which they address these and agents in the market and their interactions with problems. The general partners specialize in finding, each other. It examines the reasons for the market's structuring, and managing equity investments in explosive growth over the past fifteen years and closely held private companies. Because they are highlights the main characteristics of that growth. among the largest and most active shareholders, part- Finally, the study provides data on returns to private nerships have significant means of exercising both equity investors and analyzes the major secular and formal and informal control, and thus they are able to cyclical influences on returns. direct companies to serve the interests of their share- The study emphasizes two major themes. One is holders. At the same time, partnerships use organizathat the growth of private equity is a classic example tional and contractual mechanisms to align the interof the way organizational innovation, aided by regu- ests of the general and limited partners. latory and tax changes, can ignite activity in a par- The second theme of the study is that the growth of ticular market. In this case, the innovation was the the private equity market has expanded access to widespread adoption of the limited partnership. Until outside equity capital for both classic start-up compathe late 1970s, private equity investments were under- nies and established private companies. Some observtaken mainly by wealthy families, industrial corpora- ers have characterized the growth of non-venture Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

27 private equity as a shift away from traditional venture both types of investment have grown rapidly. We capital. They attribute the shift of investment funds to argue that the increase in non-venture private equity several factors, including the presence of large insti- investment has been due principally to an abundance tutional investors that do not want to invest in small of profitable investment opportunities. Moreover, the funds or small deals, a change in the culture of available data on returns on private equity investprivate equity firms, and a decline in venture opportu- ments indicate that during the 1980s, non-venture nities. Although these factors may have played a role, investing generated higher returns than did venture the argument that non-venture private equity has investing, suggesting that private equity capital has driven out venture capital seems insupportable, as flowed to its most productive uses. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

28 Industrial Production and Capacity Utilization for November 1995 Released for publication December 14 ber, small gains in production occurred in consumer goods, equipment, and materials. At 122.8 percent of Industrial production rose 0.2 percent in November its 1987 average, industrial production in November after having fallen 0.3 percent in October. The strike was 1.9 percent higher than it was in November at a major aircraft producer reduced the growth rate 1994. Capacity utilization edged down about 0.1 perfor total output about 0.2 percentage point in October centage point, to 83.1 percent. and about 0.1 percentage point in November; the When analyzed by market group, the data show effects of the strike were concentrated in business that among consumer goods, the output of durables equipment and in durable goods materials. In Novem- rose 1.0 percent as light truck production rebounded Industrial production indexes Twelve-month percent change Twelve-month percent change 10 Materials Products 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 = 100 140 — Manufacturing Capacity — 140 120 ^ ^ ^ —- 120 _ 110000 110000 --»»——^^ PPrroodduuccttiioonn 80 80 1 1 1 1 1 1 1 1 1 1 1 1 1 Percent of capacity Manufacturing Utilization 1 I I I I L _L 1981 1983 1985 1987 1989 1991 1993 1995 1981 1983 1985 1987 1989 1991 1993 1995 All series are seasonally adjusted. Latest series, November. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

29 Industrial production and capacity utilization, November 1995 Industrial production, index, 1987= 100 Percentage change CCaatteeggoorryy 11999955 19951 NNoovv.. 11999944 ttoo Aug/ Sept.r Oct.r NOV.P Aug.r Sept.r Oct/ NOV.P NNoovv.. 11999955 Total 122.7 122.9 122.5 122.8 1.0 .2 -.3 .2 1.9 Previous estimate 122.9 123.0 122.5 1.1 .1 -.4 Major market groups Products, total2 119.2 119.4 118.7 119.0 1.0 .2 -.5 .2 1.3 Consumer goods 115.9 115.9 115.4 115.8 1.1 .0 -.4 .3 .8 Business equipment 157.5 158.3 156.8 157.6 1.1 .5 -1.0 .5 4.9 Construction supplies 107.0 108.8 108.5 108.0 -.3 1.8 -.3 -.5 -.7 Materials 128.1 128.3 128.4 128.7 1.0 .2 .1 .3 2.8 Major industry groups Manufacturing 124.2 124.9 124.7 124.9 .7 .6 -.2 .2 1.7 Durable 133.2 134.5 133.8 134.3 1.3 1.0 -.5 .4 3.7 Nondurable 114.3 114.3 114.5 114.4 .0 .0 .2 -.2 -.7 Mining 100.0 100.0 98.9 98.8 -.8 .1 -1.2 .0 -1.1 Utilities 128.8 123.1 122.5 124.1 5.0 -4.5 -.4 1.3 6.3 Capacity utilization, percent MEMO Capacity, percentage 1994 1995 change, Average, Low, High, Nov. 1994 1967-94 1982 1988-89 Nov. Aug. Sept. Oct.r NOV.P Nov. t o 1 995 Total 82.0 71.8 84.9 84.6 83.8 83.7 83.2 83.1 3.8 Previous estimate 83.9 83.7 83.2 Manufacturing 81.3 70.0 85.2 84.2 82.6 82.8 82.3 82.2 4.3 Advanced processing 80.7 71.4 83.5 82.1 81.2 81.1 80.7 80.5 4.8 Primary processing . 82.5 66.8 89.0 89.1 86.1 86.8 86.4 86.0 2.8 Mining 87.4 80.6 86.5 89.2 89.2 89.3 88.2 88.2 .1 Utilities 86.7 76.2 92.6 87.0 95.3 90.9 90.5 91.5 1.0 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. and appliance output increased. The production of materials rose noticeably as a weather-related nondurable consumer goods increased 0.2 percent, increase in utility production and an increase in crude reflecting a weather-related jump in utility output for oil output more than offset another sharp decline in residential use; in other categories of this sector, coal mining. production again was little changed, held down by When analyzed by industry group, the data show continuing weakness in the output of clothing. The that manufacturing output rose 0.2 percent after havproduction of business equipment increased 0.5 per- ing dipped the same amount in October. The produccent, led by another substantial rise in the output of tion of durables increased 0.4 percent, boosted by information processing equipment, particularly com- another large gain in the output of industrial machinputers. The production of industrial equipment, which ery and computer equipment; the only significant had eased in September and October, picked up. The decline among the major industries was in the strikedecline in the output of transit equipment mainly affected aerospace industry. The output of nondurable reflected a further strike-related loss in aircraft and goods remained sluggish overall because of ongoing parts. The production of construction supplies weakness in paper, apparel, and textiles; over the past declined on average about 0.4 percent in the past two few months, only chemicals and rubber and plastic months, reversing about half the sharp gain in Sep- products have, on balance, posted noticeable gains. tember. Materials output rose 0.3 percent, held down In mining, output was flat, while production at utiliby weakness in nondurable materials, mainly paper. ties rose in response to the unusually cold weather. The production of durables materials rose 0.5 per- The utilization rate in manufacturing eased 0.1 percent, led by gains in the output of parts for the centage point in November, to 82.2 percent. Utilizahigh-technology industries. The output of energy tion rates declined a bit in both the primary- and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

30 Federal Reserve Bulletin • January 1996 advanced-processing industries. Among the primary- The revision to capacity and utilization reflects the processing industries, the drop in utilization was revised production indexes and the incorporation of concentrated in paper and in lumber. Among the preliminary results of the Census Bureau's 1994 Suradvanced-processing industries, the utilization rate in vey of Plant Capacity, updated manufacturing capital aerospace and miscellaneous transportation equip- stocks, and new data on physical capacity and utilizament fell sharply; changes in most other industries tion for selected industries. The estimates of capital were relatively small. Since the beginning of 1995, stocks incorporate data on manufacturing investment utilization rates for most manufacturing industries in 1993 from the Annual Survey of Manufactures as have eased with the exception of industrial machin- well as investment plans for 1994 and 1995 reported ery and computer equipment. In mining, the utiliza- in the Census Bureau's Investment Plans Survey. tion rate was unchanged in November, while the Diskettes containing either historical data (through operating rates at utilities moved higher at both elec- 1985) or more recent data (1986 to those most tric and gas plants. recently published in the G. 17 statistical release) are available from Publications Services, Board of Governors of the Federal Reserve System, Washington, NOTICE DC 20551 (202-452-3245). Files containing the re- An annual revision to the measures of industrial vised data and the text and tables from this release production, capacity, and capacity utilization was are also available through the Economic Bulletin published on November 30, 1995. The revisions to Board of the Department of Commerce; for informathe production indexes begin with January 1991 and tion, call 202-482-1986. incorporate updated figures from the 1992 Census of A document with printed tables of the revised Manufactures, new results from the 1993 Annual estimates of series shown in the G.17 release is Survey of Manufactures, more comprehensive physi- available upon written request to the Industrial Outcal data on mining and utilities for 1994, and updated put Section, Mail Stop 82, Division of Research and monthly source data, seasonal factors, and productiv- Statistics, Board of Governors of the Federal Reserve ity relationships. System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

31 Statements to the Congress Statement by Alan Greenspan, Chairman, Board of ties on such matters of U.S. interest. We have been Governors of the Federal Reserve System, before the assured that the ministry is taking steps to implement Committee on Banking, Housing, and Urban Affairs, this pledge. In addition, we have been pleased that U.S. Senate, November 27, 1995 once the Daiwa problem was disclosed, the Japanese authorities have fully cooperated with U.S. super- I appreciate the opportunity to discuss with you today visors in dealing with the consequences. the issues raised by the recent events relating to the On October 9, Daiwa also announced that its sepa- U.S. operations of Daiwa Bank and to provide you rate federally insured bank subsidiary in New York with our preliminary conclusions on these issues. I had incurred losses of approximately $97 million as a believe the basic facts are known and need not be result of trading activities, at least some of them recounted in detail. A short chronology is provided in unauthorized, between 1984 and 1987. These losses an attachment, and I will briefly summarize the key should have been reflected in the books and records events.1 Of course, I would be pleased to answer, to and financial statements of the subsidiary but were the extent that I can, any questions that you might not. Instead, the losses were concealed from federal wish to ask regarding these events. and state regulatory authorities through a device that Very briefly, as background, on September 18, transferred the losses to offshore affiliates, apparently 1995, Daiwa Bank met with a Federal Reserve repre- with the knowledge of senior management. sentative and reported that Daiwa's New York branch On October 2, 1995, the New York Superintendent had incurred losses of $1.1 billion from trading of Banks and the Federal Deposit Insurance Corporaactivities undertaken by Toshihide Iguchi, a branch tion (FDIC), together with the Federal Reserve official, over a period of eleven years. These losses Board, issued cease-and-desist orders against Daiwa were not reflected in the books and records of the requiring a virtual cessation of trading activities in bank or in its financial statements, and their existence the United States. On November 2, Daiwa was was concealed through liquidations of securities held indicted on federal criminal charges. At the same in the bank's custody accounts and falsification of its time, the Federal Reserve, the FDIC, the New York custody records. Although Daiwa indicates that its Superintendent, and a number of other state banking senior management learned about these trading losses authorities jointly issued consent orders under which in July, they concealed the losses from U.S. banking Daiwa must terminate its banking operations in the regulators for almost two months thereafter. More- United States by February 1996. over, they directed Mr. Iguchi to continue transac- This matter has troubling implications for supervitions during the two-month period that avoided the sion and regulation in a world of multinational bankdisclosure of the losses. ing and increasing interrelationships of financial sys- We understand that some officials at the Japanese tems. Not only were bank employees able to conceal Ministry of Finance were informed in early August massive losses over an extended period of time, but about Daiwa's losses. They did not instruct Daiwa to senior management of Daiwa also took steps to coninform the U.S. authorities; nor did they themselves ceal the events in question from U.S. regulatory do so. This lapse on the part of the Ministry of authorities. This is particularly disturbing given that Finance is regrettable because open communication it would obviously have been in the best interest of and close cooperation among supervisory authorities both the bank and its management to have dealt with are essential to the maintenance of the integrity of the the problems openly and in compliance with host international financial system. Finance Minister Take- country regulations and operational standards. mura has acknowledged the ministry's failure in this The action taken by the Federal Reserve and the regard and has pledged that in the future the ministry other regulatory authorities in terminating the US. will promptly and appropriately contact U.S. authori- operations of Daiwa was quite stern, particularly given that no U.S. depositor or U.S. counterparty 1. The attachment to this statement is available from Publications ultimately lost any money. We, however, were united Services, Mail Stop 127, Board of Governors of the Federal Reserve in the belief that this supervisory response was neces- System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

32 Federal Reserve Bulletin • January 1996 sary because actions such as Daiwa's carry the threat nent resident examiners would be necessary to assure of significant damage to a major asset of our nation— that the operations of a bank are conducted in a the integrity of our financial system. manner that is safe and sound and otherwise consis- Trust is a principle of central importance to all tent with the requirements of law. Such an approach effective financial systems. Our system is strong and to supervision clearly would be counterproductive to vibrant in large part because we demand that finan- the desired support of a vibrant, innovative banking cial institutions participating in our markets operate system. For a supervisor to become a bank's internal with integrity and that any information made avail- auditor would either stifle the independence of manable to depositors and investors be accurate. When agement in the bank or create an unacceptably adverconfidence in the integrity of a financial institution is sarial supervisory process. shaken or its commitment to the honest conduct of In this context, we have sought to review the business is in doubt, public trust erodes and the entire examinations in question in an effort to determine system is weakened. whether the supervision of Daiwa should have pro- The need to trust other participants is essential in a ceeded on a different basis and how such problems, complex marketplace. For example, on the basis of to the extent that it is feasible, might be avoided in trust, counterparties typically trade millions of dollars the future. Accordingly, we have reviewed the steps on an oral commitment that may not be formalized taken to implement the authority vested in the Fedfor hours. A breach of that trust by failure to honor eral Reserve Board in December 1991 in the Foreign such commitments—presumably because markets Bank Supervision Enhancement Act (FBSEA) with turn adverse—would inevitably lead to an institution regard to the examination and supervision of the being drummed out of the marketplace. No set of operations of foreign banks in the United States. We statutes can ensure the effective functioning of a have carefully reviewed the examination reports and market if a critical mass of financial counterparties is other relevant documents that are presently available deemed untrustworthy. Any risk that counterparties to seek to determine what, if anything, could or will not honor their obligations will be reflected in a should have been done differently that might have widening of bid-ask spreads, a reduction in liquidity brought to light the events in question at an earlier and, as a consequence, a less efficient financial sys- date. tem. Consequently, actions such as I have recounted A review of the Federal Reserve's three examinain the Daiwa case cannot be tolerated. The potential tions of Daiwa's New York branch in the period cost to our financial system and hence to our econ- between 1992 and 1994 indicates that the examiners omy is too large. identified and instructed management to address a What is true for the financial system in general is number of internal control weaknesses at the branch. particularly true for the supervision of financial insti- Specifically, when the examiners learned that a single tutions. Indeed, the whole system of supervision pro- person, Mr. Iguchi, was responsible for both securiceeds upon the basis of trust, whether in terms of the ties trading and custody operations and some related veracity of representations or reports filed by man- back office functions, branch management was told agement or transparency with regard to any material that his duties should be separated. The examiners developments affecting the financial condition of the explored whether Mr. Iguchi was able to use his institution. Supervisors need to trust the ability of position as overseer of the custody account to gain bank management to carry out their duties in a improper advantage in carrying out the bank's own responsible and honest manner with adherence to trading activities. The examiners, however, did not systems and operational controls designed to ensure focus on the possibility that this breakdown in interthe safe and sound conduct of business. nal controls had the potential for the misappropria- This is not to say that supervision can be based tion of customer and bank funds. solely on trust. Supervisors must test a bank and its The Federal Reserve accepted statements by management in its compliance with law and sound branch management that the basic internal control business practice. This is, after all, one reason for the problems, which in retrospect helped Mr. Iguchi to conduct of on-site examinations. An appropriate bal- carry out his illegal activities, had been corrected. ance, however, must be struck between a supervisor's Obviously, the examiners and their supervisors did reliance on the institution's systems and management not at the time believe that employees of Daiwa's to function properly and the need to verify that its New York branch would be engaged in criminal systems are being appropriately implemented and activities. that management is addressing any significant prob- With the benefit of hindsight, there were some lems. Without reliance on trust, an army of perma- clues that were missed in the examination of Daiwa. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 33 With a more robust follow-up, the problem might uniform, and timely manner. The program was forhave been found sooner. Our examinations were con- mally adopted earlier this year, and the implementaducted after the passage of FBSEA in the context of a tion phase is now under way. rapid buildup of examination staff in 1992 and 1993 The new supervisory program also emphasizes to meet our new responsibilities under that act. It is enhanced contacts between U.S. supervisors and the possible that we had not yet developed adequate home country supervisors of foreign banks. This case experience to implement our new responsibilities. and the effect that it has had on Daiwa's activities, The Federal Reserve was still in the process of devel- both in the United States and abroad, illustrate that oping improved examination procedures and assess- problems of a bank in one market ultimately will ment systems (including, as I discuss below, an affect its operations globally, including in its home improved supervisory program, rating system, and country. In the end, there will be a mutuality of examination manual). This was being done, follow- interest between home and host country supervisors ing enactment of the legislation, to ensure that the that underscores the need for effective communica- U.S. banking operations of foreign banks are super- tion and increased cooperation. In this regard, vised with the same attention to safety and soundness although there were delays in the disclosure of issues as are domestic banks. Nonetheless, the bot- Daiwa's problems to the U.S. authorities, once the tom line is that we did not succeed in unearthing matter was disclosed there was effective cooperation Daiwa's transgressions where we might have. Hope- among U.S. and Japanese regulatory authorities in fully, this event will stiffen our resolve. dealing with the consequences in an orderly man- While internal controls have long been a focus of ner that avoided losses to customers and systemic examinations, the growth in bank trading activities in disruption. the early 1990s also led to Federal Reserve initiatives I believe that, like ourselves, supervisors throughto enhance our examination of trading activities. A out the world recognize that more needs to be done to number of these examination procedures address the ensure better coordination and timely communication need to have a proper separation of duties between of material information. The Basle Committee on the front office and the back office, as well as effec- Banking Supervision has emphasized the importance tive audit procedures. In the aftermath of Barings and of such international cooperation through issuance of Daiwa, our supervisory sensitivities have been international standards for supervision of multinaheightened to the potential magnitude of the risks tional banking organizations and is discussing ways associated with a combination of trading and back to broaden further and strengthen lines of communioffice functions. Barings confirmed the importance of cation. We will support those efforts and will conthe increasing emphasis the Federal Reserve's super- ' tinue our own initiatives to improve communication visory staff had been placing upon the review of with foreign supervisors under the new supervisory foreign bank's internal controls and risk management program. systems. The circumstances of the Daiwa case rein- The Federal Reserve has also committed extensive force the need to pay close attention to these areas resources over the past few years to enhancing the during examinations and to take heed of potential red supervisory tools available to examiners and financial flags that might suggest the possibility of rogue em- analysts to improve further our supervision of the ployees or a breakdown of internal controls. Both U.S. operations of foreign banks. In 1994, the federal cases demonstrate the need, once serious deficiencies and state banking supervisory agencies adopted a in internal controls are identified, to ensure that rele- new uniform examination rating system for U.S. vant books and records are reconciled and verified in branches and agencies of foreign banks that places an expeditious and thorough manner. higher priority on the effectiveness of risk manage- In the past two years, the Federal Reserve has ment processes and operational controls. The new implemented a number of initiatives that address rating system, commonly referred to as the ROCA these concerns. The Federal Reserve, together with system, focuses on the following elements: Risk manthe state banking departments and other federal regu- agement, Operational controls, Compliance with U.S. lators, has worked to coordinate better and enhance laws and regulations, and Asset quality. The first further the supervision of the U.S. activities of for- three of these components evaluate the major activieign banks. To that end, we have developed a new ties or processes of a branch or agency that may raise supervisory program for the U.S. operations of for- supervisory concerns. The ROCA system will direct eign banks. One important aspect of this program is examiners' attention to the combination of front- and to ensure that the information available to the U.S. back-office duties, such as occurred in Daiwa, as a supervisors is utilized and disseminated in a logical, significant flaw in internal controls. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

34 Federal Reserve Bulletin • January 1996 Another new supervisory tool is the Examination I believe that there are valuable lessons to be Manual for the U.S. Branches and Agencies of For- learned by bankers and supervisors from this unfortueign Banking Organizations. The Federal Reserve, in nate case. The loss of more than $1 billion suffered cooperation with state and other federal banking by Daiwa and the catastrophic losses suffered by agencies, has developed the manual for conducting Barings in Singapore because of a rogue trader illusindividual examinations of the U.S. branches and trate the enormity of the damage that can be incurred agencies of foreign banks. The manual serves as a by global trading banks when internal control sysprimary, comprehensive reference source for exami- tems are less than adequate. These losses and the nation guidelines and procedures and is beneficial to institutional injury incurred are far greater than the both new and experienced examiners. The manual is losses banks have encountered from their authorized also being widely used as a reference tool by the proprietary risk-taking positions. The lesson forceforeign banking community in the United States to fully taught by these cases is that management must improve its own internal systems of controls. pay as much attention to such seemingly mundane In addition, in 1994, the Federal Reserve adopted a tasks as back-office settlement and internal audit new Trading Activities Manual. Although the manual functions as to the more exotic high-technology fronthas been developed primarily for U.S. commercial end trading systems. Banks that neglect making the banks, it also applies to the U.S. branches and agen- requisite investments in these areas do so at their cies of foreign banks, many of which are actively peril. While the adequacy of internal controls has engaged in transactions involving trading activities. long been a point of major emphasis of supervisors, This manual includes detailed examination proce- these recent events reinforce the need for supervisors dures for evaluating controls in trading activities and to pursue rigorously the expeditious correction of emphasizes the importance of separation of duties in internal control deficiencies in financial institutions. a trading operation such as Daiwa's. Moreover, in an era of mergers and aggressive cost The Federal Reserve has also taken steps to control, supervisors must clearly emphasize to bank enhance training of examiners. For example, we have officials that key control and processing areas in developed an internal controls school that was banks must remain fully staffed by competent and designed initially for examiners of branches and experienced personnel. agencies of foreign banks and expanded to meet the Looking more broadly at the supervisory system needs of other examiners. We are also initiating a and its functions within the international banking comprehensive capital markets examiner training system, I would like to conclude by discussing a few program covering risk assessment, trading exposure general points that are raised by this case. No supermanagement, and advanced derivative products. This visory system can, nor should endeavor to, stop all program addresses skill needs at a variety of levels losses. Any system that attempted to be fail-safe and utilizes instructors from the financial sector to would impose intolerable costs on the public and the supply expertise to train our examiners in these spe- banking industry and almost certainly would stifle cialized areas. legitimate financial innovation. Moreover, in any Even given the new supervisory program and tools supervisory regime, the ultimate responsibility for the as well as our heightened sensitivity to possible red protection of a privately owned bank must rest with flags, no system of supervision will uncover all fraud. the top management of the bank and its directors. As the Board stated in 1991 in support of FBSEA, After all, it is in their long-term interest to operate the fraud is very hard for any regulatory authority to bank in a safe and sound manner and to obey the law. detect, especially when bank employees actively con- Supervisors must, to some extent, rely on this mutualspire to prevent official scrutiny. But if, after the ity of interest in performing their tasks. While good fraud is discovered, swift and stern corrective action examiners are not naive and do not expect bankers to is taken by the supervisory authorities, financial insti- bare their souls, normally they must rely on a basic tutions will hopefully recognize that deception pays trust that they will not be deceived as they raise no dividend. The FBSEA legislation was designed to issues through successive layers of management. An minimize the potential for illegal activities by estab- assumption that most bankers are truthful should lishing uniform standards for entry by foreign banks, remain the rule, not the exception. However, when a and, if illegal activities are suspected, to provide as bank has shown through repeated actions that it many regulatory and supervisory tools as possible to cannot be trusted, even at the highest levels of the investigate and enforce compliance. The Daiwa mat- corporation, supervisors should resort to extraorter illustrates that the 1991 legislation provided the dinary regulatory measures. appropriate remedial tools to address serious failures In such circumstances, the Congress has provided to comply with law and regulation. the supervisors with what I believe to be a full and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 35 appropriate range of powers, including cease-and- extent to which more specific guidance can be given desist authority, civil money penalties, and, in the to examiners for purposes of evaluating the adequacy case of foreign banks, the authority to terminate their of audit coverage. Consideration also will be given to U.S. operations. This episode demonstrates that the requiring targeted external audits in banking institusupervisors will use these powers when, through a tions, whether foreign or domestic, when deficiencies pattern of unacceptable behavior, the basic bond of in operations or concerns over the adequacy of trust that needs to exist between banks and their internal audit have not been addressed. regulators is irreparably broken. However, if our fur- Clearly, we also need to fully implement our ther review of the events in question suggests addi- enhanced supervisory program in an expeditious tional authority is needed, we will of course convey manner. In doing so, the Federal Reserve will be that view to this committee. reviewing the Daiwa case, Barings, and other major We are considering a number of initiatives that international banking events to identify further spemay be implemented at an administrative level, espe- cific improvements to the supervisory process as it cially with respect to internal and external audit applies to both foreign and U.S. banks, as well as our standards. For example, we are presently reviewing existing statutory authority. We will report to the our general policies in this area to determine the Congress on the conclusions of our review. Statement by Alan Greenspan, Chairman, Board of that is more compatible with their overall system for Governors of the Federal Reserve System, before the overseeing bank safety and soundness. Subcommittee on Telecommunications and Finance, We understand that implementation of this Committee on Commerce, US. House of Representa- approach raises many important issues that would tives, November 30, 1995 take some time to resolve. The Securities and Exchange Commission (SEC) has expressed con- Thank you for this opportunity to present the views cerns about the interplay of margin with other finanof the Federal Reserve Board on securities margin cial responsibility rules for broker-dealers, comperequirements. The Board commends the subcommit- tition between market participants, the solvency of tee for its willingness to reconsider the public policy financial institutions, and systemic issues. We look objectives of margin regulation and to consider forward to working with the SEC and with other amendments to the relevant statutes. Today, I shall members of the Working Group on Financial Markets present the Board's views on the objectives of Fed- to determine what other regulatory changes would be eral Reserve margin regulation and the need for statu- necessitated by repeal of sections 7 and 8(a). In tory amendments to promote those objectives. As I addition, the SROs would need to work with the SEC shall discuss, the Board has concluded that federal to modify their margin rules, a process that likely oversight of securities credit is appropriate as part of would take some time. Therefore, if the Congress comprehensive systems of oversight of safety and decides to repeal sections 7 and 8(a), it may wish to soundness of certain lenders—broker-dealers and consider delaying the effective date of such action. banks. However, the Board is not convinced that the existing statutes authorizing Federal Reserve margin regulations—section 7 and subsection 8(a) of the OBJECTIVES OF MARGIN REGULATION Securities Exchange Act of 1934—effectively serve the purposes that apparently motivated their passage. As I noted, the statutory basis for federal margin Consequently, as it has for many years, the Board regulation is contained in the Securities Exchange continues to believe that self-regulatory organiza- Act of 1934, which gives the Federal Reserve Board tions should be given greater responsibility for mar- the authority to regulate margins—that is, the minigin regulation. Repeal of sections 7 and 8(a) of the mum downpayments or, equivalently, the maximum Securities and Exchange Act of 1934 would leave collateral values for loans—on all securities other federal oversight of securities credit extensions by than government securities and other "exempted" broker-dealers to securities regulators, including self- securities. Reflecting views that were widely held regulatory organizations (SROs). It would also allow when the 1934 act was passed, the Congress apparbanking regulators to develop an approach to pruden- ently intended this margin regulation to achieve three tial oversight of securities credit extensions by banks main objectives: (1) to constrain the diversion of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

36 Federal Reserve Bulletin • January 1996 credit from productive uses in commerce, industry, broader systems to ensure the safety and soundness and agriculture to "speculation" in the stock market; of financial institutions such as broker-dealers and (2) to protect unsophisticated investors from using banks. Safety and soundness oversight necessarily margin credit to establish excessively risky positions; must address all sources of risk to those institutions. and (3) to forestall excessive fluctuations in stock When such institutions make loans against collateral prices. in the form of securities, the margin required is an The Board believes that experience and regulatory important element in the risks they face and, as such, changes during the six decades since the passage of is an appropriate object of prudential supervision and the 1934 act support the conclusion that margin regu- regulation. lation is not the best way to achieve those objectives. As I shall discuss later, however, the most effective Concerns about a diversion of credit, which appar- approach to prudential oversight of securities credit ently weighed most heavily in 1934, were exagger- depends on the nature of the overall safety and soundated. It is now widely recognized that the use of ness regime applied to the financial institution. credit to finance securities does not materially reduce Indeed, there are several regulatory models for the amount of credit available for other uses. The achieving safety and soundness—all potentially borrowed funds do not disappear; rather, they are effective. U.S. authorities take quite different transferred to the seller, who reinvests the proceeds. approaches to ensuring the safety and soundness of Customer protection concerns today are more reli- broker-dealers and banks, for example. Different ably addressed by other regulations and policies approaches to oversight of securities credit may well applicable to the issuance and distribution of securi- be desirable. In any event, the best approaches to ties and to the conduct of broker-dealers. These prudential oversight do not appear compatible with include disclosure requirements, sales practices rules, the statutory framework of sections 7 and 8(a) of the and investor education efforts such as those recently 1934 act, which, as I have noted earlier, was designed initiated by the SEC. for entirely different purposes. Finally, the view that the existing margin statutes are necessary to control stock price volatility is not supported by empirical evidence that has accumu- THE MARGIN PROVISIONS OF H.R.2131 lated since 1934. Numerous statistical studies of the relationship between margins and stock price volatil- The Board has evaluated the margin provisions of the ity have been conducted, and the preponderance of Capital Markets Deregulation and Liberalization Act that evidence suggests that changes in margins have of 1995 (H.R.2131) against the view that the objecnot affected price volatility in any measurable way. tive of margin oversight should be the safety and To be sure, experience with the effects of changes in soundness of financial institutions subject to compresecurities margin requirements is both limited and hensive prudential oversight. H.R.2131 would repeal dated (initial margin requirements on equities have section 8(a) of the 1934 act and amend section 7 changed only about twenty times since 1934 and substantially. The Board believes that repeal of sechave not changed at all since 1974). But the view that tion 8(a) is consistent with safety and soundness but changes in margin requirements do not affect asset has difficulty reconciling the amendments to secprice volatility is also supported by numerous studies tion 7 with that objective. of exchange-traded futures and options, including Section 8(a) restricts broker-dealers from borrowcontracts on equities and equity indexes. ing from lenders other than broker-dealers and banks The Federal Reserve Board also has doubts about when using exchange-listed equity securities as colthe effectiveness of margin regulation for achieving lateral. Removal of these financing constraints would the purposes of sections 7 and 8(a) of the 1934 act. promote the safety and soundness of broker-dealers The underlying assumption is that the ability of inves- by permitting more financing alternatives and hence tors to leverage can be restricted by regulating mar- more effective liquidity management. gins on loans collateralized by securities. Although in Section 7 is the section that provides the Board 1934 many investors may have had no other means of with authority to regulate securities credit. Among borrowing funds to invest in securities, today inves- the amendments to the section contained in tors have many alternatives. With these alternatives H.R.2131, the Board views the restrictions on the available, margin requirements cannot effectively authority of SROs to impose margin requirements on limit leverage. their members as fundamentally inconsistent with In the Federal Reserve Board's view, federal over- prudential objectives. The inclusion of these provisight of securities credit makes sense only as part of sions in the bill evidently reflects dissatisfaction by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 40 some firms with their SRO's administration of mar- incorporated SRO rules into its margin regulations gin requirements on debt instruments traded in the for some debt instruments and securities options. over-the-counter markets. If there have been prob- Whenever possible, the SROs have set margin lems in this area, those problems should be resolved requirements that better reflect the credit risks to by the members of the SROs, if necessary with the lenders than the uniform and arbitrary initial requireassistance of the SEC. The Board does not believe ments that currently apply to equities. The Board that the solution to these problems is to abandon the would expect that if the SROs were given responsibilprinciple of self-regulation of broker-dealers. ity for initial margins on equities, they would replace Although we support a lowering of regulatory bur- the existing requirements with more risk-sensitive dens in general, the Board finds it difficult to support standards. The self-interest of the SROs in the safety the various exclusions from margin regulation that and soundness of their members and the integrity of the bill would provide. These proposed exclusions their markets should ensure that such changes are would appear to reflect a view that the objective of consistent with safety and soundness. If these incenmargin regulation should be customer protection, an tives proved inadequate, the SEC would have the objective that I have indicated the Board believes is authority to enforce changes in SRO oversight. far more effectively addressed through other regula- Just as oversight of the safety and soundness of tions and initiatives. SROs is best left to the SROs and the SEC, prudential Ultimately, the Board has concluded that, because oversight of banks is best left to the respective banksection 7 was originally enacted for completely dif- ing regulators. If section 7 were repealed, the Board ferent purposes, margin regulation cannot be success- would expect to work with the other federal banking fully reoriented toward prudential objectives through regulators to develop a framework for the oversight amendments to that statute. Although regulatory bur- of bank securities credit that is consistent with the dens associated with the statute could be reduced overall framework of banking supervision and regulathrough amendments, the residual framework would tion. From its perspective as a banking regulator, the continue to impose compliance costs and would not Board sees existing margin regulations under seceffectively serve any public policy purpose. tions 7 and 8(a) as an anomaly, reflecting the nonprudential purposes underlying the existing margin statutes and regulations. These margin regulations AN ALTERNATIVE APPROACH involve a regulatory assignment of a maximum col- TO MARGIN REFORM lateral value (or, equivalently, a minimum loan-tovalue ratio) for securities. Banks make far larger Instead, the Board believes that the safety and sound- volumes of real estate loans and auto loans than ness objective that is appropriate for margin over- securities loans. But, except in limited instances sight could best be achieved by repealing both sec- required by statute, banking regulators do not regution 7 and subsection 8(a) of the 1934 act. I have late collateral values (or, equivalently, loan-to-value already discussed the case for repeal of subsection ratios) for such assets. Banking regulators typically 8(a). Repeal of section 7 would promote safety and leave such judgments to bank management and seek, soundness by leaving responsibility for oversight of through general policy guidance and on-site review securities credit to those entities responsible for com- of loans, to ensure that the banks' judgments are prehensive oversight of financial institutions. Specifi- consistent with safety and soundness. cally, securities credit extended by broker-dealers Given the opportunity, we would urge banking would be overseen by the SEC and their respective regulators to take a similar approach to the supervi- SROs. Securities credit extended by banks would be sion and regulation of loans against securities collatsupervised by their respective primary banking regu- eral. General guidance on prudential considerations lators. Extensions of securities credit by other entities with respect to such lending might be provided in the would be subject to federal oversight only if their form of a supervisory policy statement. Examiners overall safety and soundness is subject to such could then ensure that lending decisions by banks oversight. were consistent with those prudential considerations. In the case of broker-dealers, the Federal Reserve This approach would allow banks discretion in set- Board sees no public policy purpose in it being ting collateral requirements to take account of factors involved in overseeing their securities credit exten- such as the price volatility and market liquidity of the sions. The SROs and the SEC are much more likely securities, the time period allowed for borrowers to to develop an oversight regime that is most consistent eliminate collateral deficiencies, and the general creditwith their overall approach. The Board has already worthiness of the borrower. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

38 Federal Reserve Bulletin • January 1996 The Board sees no compelling public policy reason be serious if securities and banking regulators do for federal oversight of securities credit extended by not handicap broker-dealers and banks by requirlenders that are not subject to comprehensive federal ing margin levels higher than necessary for safety safety and soundness oversight. In any event, with and soundness. More fundamentally, the Board is the exception of loans involving employee stock concerned by the implications of a view that the ownership plans (ESOPs), securities credit exten- notion of a level playing field requires federal oversions by lenders other than broker-dealers and banks sight of all providers of services that compete with currently are negligible (most recent data show credit services provided by regulated financial institutions. extensions by such lenders totaled just over $400 mil- So long as we have a limited safety net for banking lion). Credit extensions that are part of ESOPs have institutions, there will inevitably be some disparities already been exempted from most requirements of in the competitive environment for financial institumargin regulations, including minimum initial mar- tions. However, we believe that their impact on overgins. Other lenders have been important in the past, all competition is minor and that the endeavor to but generally only when margin requirements have rectify them is far more costly than any perceived been set higher than currently and well above levels benefits. necessary for prudential reasons. If broker-dealers In conclusion, the Board believes that the primary and banks are not required to set margins at levels objective of federal oversight of securities credit higher than necessary for safety and soundness, it should be the safety and soundness of institutions, seems unlikely that other lenders would again play a such as broker-dealers and banks, which are subject prominent role. to comprehensive prudential regulation. Subsequent Some may argue that the approach to margin regu- experience, analysis, and regulatory and market lation that the Board is advocating would not provide developments support the conclusion that section 7 a level playing field for all providers of securities and subsection 8(a) of the 1934 act may not effeccredit. It is not clear how relevant an issue that would tively serve the purposes for which they were origibe, if so. The Board does not believe that competitive nally enacted. Repeal of these sections would leave equity requires that an identical oversight regime be federal oversight of securities credit extensions by applied to all players in a marketplace, provided broker-dealers to their SROs and the SEC and would competition from whatever source ensures adequate allow banking regulators to develop an approach to customer choice. Banks and broker-dealers already oversight of bank securities credit that is more comcompete effectively with one another in a wide range patible with their overall approach to bank safety and of markets, including markets for credit secured by soundness. government securities, despite fundamental differ- The Board looks forward to working with the SEC ences in approaches to prudential oversight of the and other members of the Working Group on Finantwo types of entities. In any event, the Board would cial Markets to determine what other regulatory expect that the repeal of section 7 would over time changes would be necessitated by repeal of sections 7 lead both the SROs and the banking regulators to and 8(a). If the Congress decides to repeal sections 7 adopt more flexible and more compatible approaches and 8(a), it may wish to consider delaying the effecto prudential oversight of credit extensions collateral- tive date of such action to allow time for such interized by securities. agency discussions and time for the SROs to modify With respect to competition from other lenders, their margin rules. • as I have argued, such competition is unlikely to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

39 Announcements APPOINTMENTS OF CHAIRMEN AND DEPUTY Robert L. Strickland, Chairman, Lowe's Companies, Inc., Winston-Salem, North Carolina, Deputy Chairman. CHAIRMEN OF THE FEDERAL RESERVE BANKS Atlanta The Federal Reserve Board announced on Novem- Hugh M. Brown, President and Chief Executive Officer, ber 21, 1995, the appointments of Chairmen and BAMSI, Inc., Titusville, Florida, Chairman. Deputy Chairmen of the twelve Federal Reserve Daniel E. Sweat, Jr., Program Director, The America Banks for 1996. Project, Atlanta, Deputy Chairman. Each Reserve Bank has a Board of Directors of nine members. The Board of Governors in Washing- Chicago ton appoints three of these directors and designates Robert M. Healey, Member, Illinois State Labor Relations one of its appointees as Chairman and a second as Board, Chicago, renamed Chairman. Deputy Chairman. Lester H. McKeever, Jr., Managing Partner, Washington, Following are the names of the Chairmen and Pittman & McKeever, Chicago, Deputy Chairman. Deputy Chairmen appointed by the Board for 1996: St. Louis Boston John F. McDonnell, Chairman, McDonnell Douglas Corp., Jerome H. Grossman, Chairman of the Outcomes and St. Louis, Chairman. Health Services Research and Development Center, Susan S. Elliott, President, Systems Service Enterprises, Boston, renamed Chairman. Inc., St. Louis, Deputy Chairman. William C. Brainard, Professor of Economics and Chairman of the Department of Economics, Minneapolis Yale University, New Haven, Connecticut, Jean D. Kinsey, Professor, Consumption and Consumer renamed Deputy Chairman. Economics, Department of Applied Economics, University of Minnesota, St. Paul, Chairman. New York David A. Koch, Chairman and Chief Executive Officer, John C. Whitehead, Chairman, AEA Investors Inc., Graco, Inc., Golden Valley, Minnesota, Deputy New York City, Chairman. Chairman. Thomas W. Jones, President and Chief Operating Officer, Teachers Insurance and Annuity Association- Kansas City College Retirement Equities Fund, New York City, Herman Cain, Chairman and Chief Executive Officer, Deputy Chairman. Godfather's Pizza, Inc., Omaha, renamed Chairman. A. Drue Jennings, Chairman, President, and Chief Philadelphia Executive Officer, Kansas City Power and Light Donald J. Kennedy, Business Manager, International Company, Kansas City, renamed Deputy Brotherhood of Electrical Workers, Local Union Chairman. No. 269, Trenton, Chairman. Joan Carter, President and Chief Operating Officer, Dallas UM Holdings Ltd., Haddonfield, New Jersey, Cece Smith, General Partner, Phillips-Smith Specialty Deputy Chairman. Retail Group, Dallas, renamed Chairman. Roger R. Hemminghaus, Chairman, President, and Chief Cleveland Executive Officer, Diamond Shamrock, Inc., A. William Reynolds, Chief Executive, Old Mill Group, San Antonio, renamed Deputy Chairman. Hudson, Ohio, renamed Chairman. G. Watts Humphrey, Jr., President, GWH Holdings, Inc., San Francisco Pittsburgh, renamed Deputy Chairman. Judith M. Runstad, Partner, Foster Pepper and Shefelman, Seattle, renamed Chairman. Richmond James A. Vohs, Chairman Emeritus, Kaiser Foundation Claudine B. Malone, President, Financial & Management Health Plan, Inc., and Kaiser Foundation Hospitals, Consulting Inc., McLean, Virginia, Chairman. Oakland, renamed Deputy Chairman. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

40 Federal Reserve Bulletin • January 1996 ISSUANCE OF A REPORT ON PUBLIC AVAILABILITY OF NEW FEE SCHEDULES DISCLOSURE OF INTERNATIONAL TRADING AND FOR SERVICES PROVIDED BY THE FEDERAL DERIVATIVES ACTIVITIES BY BANKS AND RESERVE BANKS SECURITIES FIRMS The Federal Reserve Board announced on Novem- A joint report on the public disclosure of trading and ber 3, 1995, the 1996 fee schedules for services derivatives activities of banks and securities firms provided by the Federal Reserve Banks. The fees worldwide has been issued by the Basle Committee became effective January 2, 1996. on Banking Supervision and the Technical Commit- The fees apply to the check, automated clearingtee of the International Organisation of Securities house, funds transfer and net settlement, book-entry Commissions (IOSCO). securities, noncash collection, and special cash ser- This joint report provides an overview of the dis- vices, as well as electronic connections to the Federal closures about trading and derivatives activities in the Reserve. The 1996 fees are available from the 1994 annual reports of a sample of the largest, inter- Reserve Banks. nationally active banks and securities firms in the In 1996, total costs for priced services, including Group of Ten countries and also notes improvements float, a portion of special project costs, and the prisince 1993. The analysis builds, in part, on a frame- vate sector adjustment factor (PSAF), are projected to work used by the Federal Reserve in analyzing the be $749.3 million. Total revenue is projected to be trading and derivatives disclosures of major U.S. $791.6 million, resulting in net income of $42.3 milbanking organizations. lion, compared with a targeted return on equity of The sample that was reviewed comprised seventy- $36.7 million. nine institutions, in total, representing more than At the same time, the Board has approved the 1996 $12 trillion in total assets and more than $62 trillion PSAF for Reserve Bank priced services of $85.8 milin notional amounts of derivative instruments. lion, a decrease of $8.9 million, or 9.4 percent com- The analysis revealed that there have been general pared with the 1995 PSAF of $94.7 million. improvements as well as significant voluntary inno- The PSAF is an allowance for the taxes and other vations in the annual report disclosures of a number imputed costs that would have been paid and the of large, internationally active banks and securities return on capital that would have been earned had the firms. However, despite encouraging advances in dis- Federal Reserve's priced services been provided by a closure practices by a number of institutions in the private business firm. G-10 countries, many institutions continued to disclose very little about their trading and derivatives activities. A DECREASE IN THE NET TRANSACTION In addition, the report makes recommendations for ACCOUNTS TO WHICH A 3 PERCENT RESERVE further improvements in disclosures of qualitative REQUIREMENT WILL APPLY IN 1996 and quantitative information about institutions' involvement in trading and derivatives activities, The Federal Reserve Board on November 16, 1995, including their risk exposures and risk management announced a decrease from $54.0 million to policies, and the effect of these activities on earnings. $52.0 million in the net transaction accounts to which The report's recommendations draw on concepts a 3 percent reserve requirement will apply in 1996. developed in the Discussion Paper on Public Disclo- The Board also changed from $4.2 million to sure of Market and Credit Risks by Financial Inter- $4.3 million the amount of reservable liabilities of mediaries released by the Euro-currency Standing each depository institution that is subject to a reserve Committee of the G-10 central banks in September requirement of 0 percent. 1994 and in the joint report of the Basle Committee Additionally, the Board increased the deposit cutand the IOSCO Technical Committee, Framework off levels that are used in conjunction with the for Supervisory Information About the Derivatives exemption level to determine the frequency and detail Activities of Banks and Securities Firms, issued in of deposit reporting required for each institution from May 1995. $55.4 million to $57.0 million for nonexempt deposi- The joint report, including an executive summary, tory institutions and from $45.1 million to $46.4 milis available on request from Publications Services, lion for exempt depository institutions. Mail Stop 127, Board of Governors of the Federal The effective date of these actions was Decem- Reserve System, Washington, DC 20551. ber 19, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 41 PROPOSED ACTION for 1970-79, for 1980-89, and yearly issues. A Concordance of Statistics will be included with all orders. The Federal Reserve Board on November 22, 1995, The Concordance provides a guide to tables that requested public comment on a proposed definition cover the same material in the current and the previof "capital stock and surplus" for purposes of sec- ous single-year issues of the Digest, the ten-year tion 23A of the Federal Reserve Act. Comments were Digest for 1980-89, and the Bulletin. requested by January 2, 1996. Copies of the Digest at $25.00 each are available from Publications Services, Mail Stop 127, Board of Governors of the Federal Reserve System, Washing- PUBLICATION OF THE ton, DC 20551. ANNUAL STATISTICAL DIGEST, 1994 The Annual Statistical Digest, 1994 is now available. BULLETIN TABLE: ERRATA This one-year Digest is designed as a compact source of economic, and especially financial, data. In table 2 of "Credit Risk and the Provision of The Digest provides a single source of historical Mortgages to Lower Income and Minority Homebuycontinuations of the statistics carried regularly in ers," Federal Reserve Bulletin, vol. 81 (November the Federal Reserve Bulletin. 1995), p. 999, some of the data in the "Total" col- This issue of the Digest covers only 1994 unless umns were incorrect. The corrected data, shown in data were revised for earlier years. It serves to main- bold below, in most cases differ only slightly from tain the historical series first published in Banking the published data and in no case affect the concluand Monetary Statistics, 1941-1970, and the Digest sions in the text. 2. Mortgage loans, grouped by size and distributed by type of holder and use of insurance, 1994 FHA-eligible GSEO-eligible Jumbo Total TTyyppee ooff hhoollddeerr aanndd iinnssuurraannccee ssttaattuuss Number Percent Number Percent Number Percent Number Percent GOVERNMENT INSURED FHA 367,397 24.1 25,656 4.4 258 .2 393,311 173 VA 104,591 6.9 50,183 8.7 188 .1 154,962 6.8 WITHOUT MORTGAGE INSURANCE Originators1 Depository institution 357,450 23.5 126,382 21.9 68,919 40.1 552,751 24.3 Independent mortgage company 31,881 2.1 12,769 2.2 6,849 4.0 51,499 2.3 Purchasers Fannie Mae or Freddie Mac 258,606 17.0 135,623 23.5 3,961 2.3 398,190 17.5 Bank or savings association not affiliated with a mortgage originator 14,777 1.0 9,437 1.6 5,083 3.0 29,297 13 Other2 101,969 6.7 44,836 7.8 44,663 26.0 191,468 8.4 Affiliate, from an independent mortgage company 13,537 .9 4,455 .8 7,451 4.3 25,443 1.1 Affiliate, from a depository institution or its subsidiary 47,566 3.1 22,221 3.9 12,579 7.3 82,366 3.6 WITH PRIVATE MORTGAGE INSURANCE Originators1 Depository institution 56,583 3.7 34,610 6.0 8,075 4.7 99,268 4.4 Independent mortgage company 8,360 .5 5,523 1.0 1,187 .7 15,070 .7 Purchasers Fannie Mae or Freddie Mac 111,988 7.3 70,152 12.2 680 .4 182,820 8.0 A bank or savings association not affiliated with a mortgage originator 5,056 .3 4,081 .7 1,130 .7 10,267 .5 Other2 24,365 1.6 17,887 3.1 7,689 4.5 49,941 2.2 Affiliate, from an independent mortgage company 2,763 .2 2,155 .4 749 .4 5,667 .2 Affiliate, from a depository institution or its subsidiary 17,365 1.1 11,061 1.9 2,283 1.3 30,709 1.4 Total3 1,524,254 100 577,031 100 171,744 100 2,273,029 100 NOTE. See general note to table 1. 3. Totals differ from totals in table 1 because, for a few loans, status of 1. Covers mortgages originated in 1994 and not sold to a secondary market purchaser was not reported. purchaser in that year. SOURCE. 1994 HMDA data and PMI data from FFIEC. 2. Life insurance companies, pension funds, and other private-sector purchasers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

42 Minutes of the Federal Open Market Committee Meeting Held on September 26,1995 A meeting of the Federal Open Market Committee Mr. Ramm,1 Section Chief, Division of Research was held in the offices of the Board of Governors of and Statistics, Board of Governors Ms. Low, Open Market Secretariat Assistant, the Federal Reserve System in Washington, D.C., on Division of Monetary Affairs, Board of Tuesday, September 26,1995, at 9:00 a.m. Governors Present: Ms. Pianalto, First Vice President, Federal Reserve Mr. Greenspan, Chairman Bank of Cleveland Mr. McDonough, Vice Chairman Mr. Blinder Messrs. Lang, Rolnick, Sniderman, and Mr. Hoenig Ms. Tschinkel, Senior Vice Presidents, Mr. Kelley Federal Reserve Banks of Philadelphia, Mr. Lindsey Minneapolis, Cleveland, and Atlanta respectively Mr. Melzer Ms. Minehan Messrs. Cox, Hetzel, Judd, and McNees, Mr. Moskow Vice Presidents, Federal Reserve Banks of Ms. Phillips Dallas, Richmond, San Francisco, and Boston Ms. Yellen respectively Messrs. Boehne, Jordan, McTeer, and Stern, Ms. Meulendyke, Adviser, Federal Reserve Bank of Alternate Members of the Federal Open New York Market Committee By unanimous vote, the minutes of the meeting Messrs. Broaddus, Forrestal, and Parry, Presidents of the Federal Open Market Committee held on of the Federal Reserve Banks of Richmond, August 22, 1995, were approved. Atlanta, and San Francisco respectively The Manager of the System Open Market Account Mr. Kohn, Secretary and Economist reported on developments in foreign exchange mar- Mr. Bernard, Deputy Secretary kets since the August meeting. There were no trans- Mr. Coyne, Assistant Secretary actions in these markets for the System Account Mr. Gillum, Assistant Secretary during this period, and thus no vote was required of Mr. Mattingly, General Counsel Mr. Prell, Economist the Committee. Mr. Truman, Economist The Manager also reported on developments in domestic financial markets and on System open mar- Messrs. Davis, Dewald, Hunter, Lindsey, Mishkin, ket transactions in government securities and federal Slifman, and Stockton, Associate Economists agency obligations during the period August 22, 1995, through September 25, 1995. By unanimous Mr. Fisher, Manager, System Open Market Account vote, the Committee ratified these transactions. Mr. Winn, Assistant to the Board, Office of Board The Committee then turned to a discussion of the Members, Board of Governors economic and financial outlook and the implementa- Mr. Ettin, Deputy Director, Division of Research and tion of monetary policy over the intermeeting period Statistics, Board of Governors ahead. A summary of the economic and financial Mr. Madigan, Associate Director, Division of information available at the time of the meeting and Monetary Affairs, Board of Governors Mr. Simpson, Associate Director, Division of of the Committee's discussion is provided below, Research and Statistics, Board of Governors Mr. Hooper and Ms. Johnson, Assistant Directors, Division of International Finance, 1. Attended portion of meeting relating to the Committee's eco- Board of Governors nomic discussion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

43 followed by the domestic policy directive that was homes in July (latest data) reached their highest approved by the Committee and issued to the Federal levels in more than a year, and housing starts edged Reserve Bank of New York. up in August after a substantial rise in July. The information reviewed at this meeting sug- Shipments of nondefense capital goods fell appregested that economic activity was expanding at a ciably in July after having risen rapidly over the first moderate rate in the current quarter. Consumer spend- half of the year, and sales of heavy trucks also were ing appeared to be advancing somewhat further after down substantially. New orders for nondefense capia sizable gain in the second quarter; housing demand tal goods declined steeply in July; however, the stillhad strengthened in response to earlier reductions in large backlog of outstanding orders, coupled with the mortgage rates; and business investment remained on favorable effects on the user cost of capital of lower a solid uptrend. Although business efforts to pare interest rates and higher equity prices this year, inventories apparently were still in progress, both pointed to further substantial expansion of spending production and employment were advancing moder- on business equipment over coming months. Nonresiately. After having increased at elevated rates in the dential construction posted another sizable gain in early part of the year, consumer and producer prices July. Outlays for office, industrial, and institutional had risen more slowly in recent months. structures registered healthy increases, but other commercial building activity was unchanged. Private nonfarm payroll employment increased considerably in August after changing little in July. Business inventory accumulation slowed in June Much of the rise reflected a pickup in hiring in the and July from a very rapid rate earlier in the year; services industry, notably in business services. Manu- stockpiling continued at a brisk pace in manufacturfacturing payrolls were up modestly in August; the ing and wholesale trade, but retail stocks were drawn gain followed substantial declines in the previous down. In manufacturing, stocks increased in July at four months. Construction employment changed little about the average rate seen in the second quarter; on balance over July and August, with only small however, the stocks-to-shipments ratio rose somechanges being posted each month. The civilian unem- what, reflecting in part a reduction in shipments that ployment rate edged down to 5.6 percent in August, might have been exaggerated by difficulties of searemaining in the narrow range that had prevailed sonal adjustment. Wholesale inventories also since late 1994. advanced at about the second-quarter pace, and the Industrial production jumped in August to a level inventory-to-sales ratio for this sector moved up to moderately above its average for the second quarter. the upper end of its range for recent years. At the Manufacturing output rose sharply, posting its first retail level, reduced stocks at automotive dealers increase since January; a surge in the production of accounted for much of the July decline in inventories; motor vehicles and parts accounted for some of the the ratio of inventories to sales edged lower but advance, but the output of non-automotive consumer remained near the middle of the range for recent goods in August more than reversed a sizable drop in years. July, and the production of business equipment re- The nominal deficit on U.S. trade in goods and corded another robust gain. A steep rise in electricity services widened slightly in July from its average rate generation associated with unusually hot weather in the second quarter. The value of both exports and over much of the country more than offset a decline imports decreased. For exports, the largest decline in mining production. Total utilization of industrial was in aircraft and automotive products. The decrease capacity moved higher in August but remained below in imports was concentrated in automotive products the average rate for the first quarter. and gold. Available indicators of economic activity Retail sales were up slightly on balance over July suggested that expansion was continuing in most of and August after having risen appreciably in the the major foreign industrial countries in the third previous two months. Abstracting from the volatile quarter and that the average rate of growth remained sales of motor vehicles during this period, spending near the subdued pace of the first half of the year. on goods changed little on balance over the two As in other recent months, consumer prices rose months, as increased outlays for durable goods were more slowly in August than in the early months of offset by flagging purchases of apparel. Spending on the year. Sizable declines in energy prices were a services rose in July (latest data available), in part contributing factor, but price increases also had modbecause of elevated demand for energy-related erated for nonfood, non-energy items; the moderation services during that month's unseasonably warm largely reflected a downturn in automobile finance weather. Housing market activity increased further in charges and used-car prices along with smaller July and August. Sales of both new and existing increases in airline fares. For the twelve months Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

44 Federal Reserve Bulletin • January 1996 ending in August, nonfood, non-energy prices rose come a weaker yen. The dollar reversed course late by the same amount as in the year-earlier period. At in the intermeeting period, however, following the the producer level, prices of finished goods edged announcement of a new Japanese fiscal package and lower in August after being unchanged in July. emerging uncertainties about the prospects for Euro- Although declines in prices of finished energy goods pean monetary union. On balance over the period, the held down the overall index in both months, prices of dollar moved lower against most European currenfinished goods other than food and energy rose more cies while appreciating significantly further against slowly than in the early months of the year; for the the yen. twelve months ending in August, nonfood, non- After further strong expansion in August, M2 and energy prices of finished goods increased slightly M3 appeared to be growing at a somewhat more more than in the comparable year-earlier period. moderate rate in September. The still-brisk demand At its meeting on August 22, 1995, the Committee for M2 assets was associated with the lower market adopted a directive that called for maintaining the interest rates now prevailing and the related decline existing degree of pressure on reserve positions and in the opportunity costs associated with holding these that did not include a presumption about the likely assets. The relatively robust growth of M3 reflected direction of any adjustments to policy during the inflows to institution-only money market funds as intermeeting period. The directive stated that in the well as bank acquisitions of wholesale funds to meet context of the Committee's long-run objectives for loan demand. For the year through August, M2 price stability and sustainable economic growth, and expanded at a rate somewhat below the upper end of giving careful consideration to economic, financial, its range for 1995 and M3 grew at a rate appreciably and monetary developments, slightly greater reserve above its range. Total domestic nonfinancial debt had restraint or slightly lesser reserve restraint would grown at a rate around the midpoint of its monitoring be acceptable during the intermeeting period. The range in recent months. reserve conditions associated with this directive were The staff forecast prepared for this meeting sugexpected to be consistent with more moderate growth gested that growth in economic activity over the of M2 and M3 over coming months. forecast horizon would be higher than the weak pace Open market operations were directed toward of the second quarter. The process of bringing invenmaintaining the existing degree of pressure on re- tories into better alignment with sales was well under serve positions throughout the intermeeting period. way, and the favorable wealth and interest-cost Adjustment plus seasonal borrowing and the federal effects of the extended rally in the debt and equity funds rate generally were in line with expectations, markets would tend to support moderate expansion of with the funds rate averaging close to 5 3A percent. final sales. Consumer spending was expected to grow Other market interest rates fell appreciably over much at a pace generally in line with incomes; the favorof the period, though these declines were partially able effects on spending of higher prices for financial reversed near the end of the period. Further evidence assets held by households would be offset to a degree of subdued price pressures, indications that the in this forecast by less robust labor market conditions rebound in growth of GDP would be modest, and and the difficulties that growing numbers of houseincreasing confidence that significant reductions in holds would encounter in servicing their enlarged federal deficits might be in train contributed to the debts. Homebuilding was expected to be somewhat drop in rates. The lower interest rates, optimistic stronger in response to the earlier decline in mortgage assessments of corporate earnings, and the brisk pace rates and the related improvement in housing affordof merger announcements and share buybacks helped ability. In anticipation of slower growth of sales and lift major indexes of equity prices to new record profits, business investment in new equipment and levels during the period, though they ended the period structures was projected to slow from the very rapid below those highs. pace of the past few years, although the lower cost of In foreign exchange markets, the trade-weighted capital and the ready availability of financing would value of the dollar in terms of the other G-10 curren- help to sustain appreciable expansion in such investcies declined over the intermeeting period. The dollar ment. Export growth would pick up in response to moved higher over most of the period, partly in some expected strengthening in the economies of response to monetary easing actions in Germany, major trading partners. A great deal of uncertainty which were quickly followed by similar steps in other surrounded the fiscal outlook, but the staff continued European countries, and in Japan. The policy easing to build a considerable degree of fiscal restraint into in Japan was accompanied, inter alia, by statements its forecast. In the staff's judgment, the prospects for by U.S. and Japanese officials that they would wel- some further easing of pressures on labor and other Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 45 resources suggested that price inflation likely would restrained by cyclically waning pent-up demands for not deviate significantly from recent trends. consumer durables, especially motor vehicles; still In the Committee's discussion of current and widespread concerns about job security associated prospective economic developments, members com- with ongoing business restructuring and downsizing mented that the information available since the activities; and higher consumer debt loads. August meeting had tended to confirm earlier indica- Housing demand was continuing to respond to tions of a pickup in the expansion after a period of more attractive mortgage rates, as evidenced by sluggish growth during the spring. The economy did nationwide data and anecdotal reports from many not display uniform strength across industries or parts of the country. Increases in construction activity regions, but it appeared on balance to have consider- were lagging the improvement in housing demand able and desirable expansionary momentum. Growth and had been limited thus far, but considerable at a pace averaging close to, or perhaps slightly strength in homebuilding activity could be expected below, the economy's potential was viewed as the over the next several months. The extent of further most likely prospect for the year ahead. The outlook lagged responses to reduced mortgage rates could not for economic activity remained subject to a variety of be foreseen with any degree of certainty, and in any uncertainties, including the still unsettled course of event housing demand would depend on broad ecothe federal budget, and many members saw the risks nomic developments such as trends in employment of a shortfall from expectations as slightly greater and income. Housing activity appeared to have weakthan those of significantly faster growth. With regard ened over recent months in one major market where to inflation, the slower increases in key measures of economic conditions were described as relatively consumer and producer prices since earlier in the sluggish. In many other areas, however, persons in year were a welcome development, and a number of the real estate industry were reported to be optimistic members commented that inflation was likely to about the outlook for housing. remain contained, given likely developments. Many Business fixed investment remained a strongly expressed concern, however, that significant further positive factor in the economy and was expected to progress toward achieving stable prices might not be provide further impetus to growth over the next sevmade over the next year or two. eral quarters. The contribution of this sector could be In keeping with indicators of nationwide economic expected to lessen, however, as capital spending was performance, anecdotal and other reports on regional adjusted to expectations of a maturing expansion activity suggested somewhat uneven business condi- characterized by the emergence of slower growth in tions in different parts of the country, but collectively final demand and business profits. In particular, the the reports pointed to moderate overall growth. Busi- outsized growth in business spending for equipment ness activity in most regions had tended to improve did not appear to be sustainable under foreseeable or to remain firm during the summer months, though economic conditions. declining growth or very sluggish activity character- Diminished growth in inventories still seemed to ized some areas. The level of business confidence be retarding the expansion in overall business activgenerally appeared to have stayed high, but several ity, as evidenced in part by continuing reports of members indicated that they sensed from their con- efforts by various business firms to bring their inventacts that business expectations were somewhat frag- tories into better balance with sales. Nonetheless, ile and vulnerable to adverse developments. such adjustments now appeared to have been largely In their discussion of developments in key sectors completed, or were expected to be completed over of the economy, members generally viewed compara- the months immediately ahead, so that inventory tively moderate growth in consumer spending as a investment could be expected to have little effect on likely prospect over the forecast period. After record- the course of the economy during 1996. It was noted, ing sizable gains in late spring, retail sales had been however, that projections of inventory behavior were well maintained in recent months, with some subject to a high degree of uncertainty. strengthening in the motor vehicles sector in August A number of members commented that fiscal polapparently carrying over to September. Favorable icy developments constituted a major uncertainty in factors in the outlook for consumer spending included the outlook for economic activity. While measures the increases that had occurred in the value of finan- incorporating substantial reductions in spending from cial assets and the demand for household appliances current trends were widely expected to be enacted and other durables that was expected to be generated into law, it was not possible to predict the outcome of by stronger housing activity. On the other hand, over- the continuing debate on the federal budget in the all gains in consumer spending were likely to be Congress and the Administration. Further complicat- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

46 Federal Reserve Bulletin • January 1996 ing any efforts to assess the potential damping influ- from the latter source might well lessen over coming ence of prospective fiscal policy were uncertainties quarters as the most easily implemented reductions in regarding the time frame during which the new the costs of providing medical care were achieved. expenditure and tax measures would be put in Moreover, the rise in worker compensation had been place—including the extent to which they would be unusually restrained in recent years in relation to the implemented over the year ahead—and the effects of strong demand for workers, evidently reflecting the the new fiscal measures on economic incentives and effects of worker concerns about job security in a financial markets. Favorable business and financial period of business restructurings and downsizings, market reactions would tend to mitigate, at least for a but continued strength in the demand for labor time, the restraining effects of fiscal measures on might be expected to induce more rapid increases in aggregate demand. On the other hand, if the deficit labor compensation over time. Some members comreduction measures that eventually were enacted were mented, however, that the underlying factors affectto fall substantially short of current expectations, ing employment costs were not likely to change there would be adverse repercussions in financial greatly over the forecast period. In addition, the prosmarkets and possibly on business confidence. pect that intense competitive pressures would persist The nation's trade deficit was expected to diminish in many markets under projected economic condisomewhat over the next several quarters and in the tions suggested that business firms would continue to process to exert less restraint on domestic economic find it very difficult to pass on rising costs through activity. The better trade performance was projected higher prices. It also was possible that the rates of to result from a number of factors, including the capacity utilization and employment associated with improved competitive position of U.S. producers and a steady rate of inflation had changed in the direction the lagged effects of earlier declines in the value of of providing the economy greater leeway to operate the dollar in foreign exchange markets. It also was at a somewhat higher level without generating more associated with forecasts of somewhat stronger inflation. growth in economic activity abroad than in the In the Committee's discussion of policy for the United States. While there were continuing anecdotal intermeeting period ahead, all the members supported reports of expanding export markets, some members a proposal to maintain an unchanged degree of presexpressed reservations about the extent to which the sure on reserve positions. The expansion seemed for economies of major foreign trading partners would now to have a desirable and sustainable momentum strengthen over the forecast period and the related that did not call for any change in policy. Furtherprospects for growth of foreign demand for U.S. more, the outlook remained clouded by the uncertaingoods and services. ties stemming from the ongoing federal budget Views on the outlook for inflation centered on debate. In any event, the Committee would need to forecasts of little change or some slight decline in the remain alert to a broader range of developments that rate of increase in consumer prices over the year might warrant a policy change at some point. In this ahead. The appreciable moderation in inflation in connection, several members expressed the opinion recent months had checked the deteriorating trend that policy might have to be eased eventually in light that seemed to be emerging during the early months of the downside risks that they saw in the economy of the year, but the members generally believed that and a current policy stance that they viewed as recent developments did not point to a significant slightly restrictive. However, the current performance further decline in inflation. Pressures on producer of the economy suggested that the timing of an easing resources had eased since the early part of the year, action was not an immediate concern. Other membut the labor market remained tight and capacity bers who preferred an unchanged policy placed more utilization was still above its historical average. In emphasis on current forecasts of little or no progress this connection, a few members commented that cur- in reducing inflation from recent levels. They thought rent forecasts were subject to a range of error that it would be premature to ease policy without greater included a risk of some intensification of inflationary assurance that inflation had been contained in the pressures. current cyclical expansion and that prospects for sig- One uncertainty bearing on the outlook for infla- nificant further progress toward the long-run objection was the extent to which potentially greater pres- tive of price level stability had improved. Indeed, the sures on labor costs would be translated into higher direction of the next policy move was not clear in the prices. Increases in labor expenses had been held view of some members, and they believed that any down by markedly reduced advances in the costs of easing should await a firm indication that the outlook benefits, notably medical benefits. The economies for economic activity was becoming less favorable Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 47 or that inflation was decreasing more rapidly than Committee meeting on August 22. In foreign exchange expected. markets, the trade-weighted value of the dollar in terms of the other G-10 currencies has declined over the intermeet- With regard to possible adjustments to policy ing period, with most of the decline occurring over the past during the intermeeting period, the members all several days. endorsed a proposal to retain an intermeeting instruc- M2 and M3 continued to register sizable increases in tion in the directive that did not incorporate any bias August but growth of those aggregates appears to have concerning the direction of possible intermeeting pol- moderated somewhat in September. For the year through August, M2 expanded at a rate somewhat below the upper icy changes. At this juncture, there was no specific end of its range for 1995 and M3 grew at a rate appreciably reason to anticipate developments that would call for above its range. Total domestic nonfinancial debt has an adjustment to policy during the weeks ahead. grown at a rate around the midpoint of its monitoring range While a change in policy certainly could not be ruled in recent months. out, the reasons for the change likely would involve The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and sensitive issues that would warrant Committee conpromote sustainable growth in output. In furtherance of sultation regardless of the intermeeting instruction. these objectives, the Committee at its meeting in July At the conclusion of the Committee's discussion, reaffirmed the range it had established on January 31all the members indicated a preference for a directive February 1 for growth of M2 of 1 to 5 percent, measured that called for maintaining the existing degree of from the fourth quarter of 1994 to the fourth quarter of 1995. The Committee also retained the monitoring range of pressure on reserve positions and that did not include 3 to 7 percent for the year that it had set for growth of total a presumption about the likely direction of any domestic nonfinancial debt. The Committee raised the 1995 adjustments to policy during the intermeeting period. range for M3 to 2 to 6 percent as a technical adjustment Accordingly, in the context of the Committee's long- to take account of changing intermediation patterns. For run objectives for price stability and sustainable eco- 1996, the Committee established on a tentative basis the same ranges as in 1995 for growth of the monetary aggrenomic growth, and giving careful consideration to gates and debt, measured from the fourth quarter of 1995 to economic, financial, and monetary developments, the the fourth quarter of 1996. The behavior of the monetary Committee decided that slightly greater or slightly aggregates will continue to be evaluated in the light of lesser reserve restraint would be acceptable during progress toward price level stability, movements in their the intermeeting period. The reserve conditions con- velocities, and developments in the economy and financial markets. templated at this meeting were expected to be consis- In the implementation of policy for the immediate future, tent with growth in M2 and M3 over the balance of the Committee seeks to maintain the existing degree of the year at a pace near that experienced in recent pressure on reserve positions. In the context of the Commonths. mittee's long-run objectives for price stability and sustain- The Federal Reserve Bank of New York was autho- able economic growth, and giving careful consideration to economic, financial, and monetary developments, slightly rized and directed, until instructed otherwise by the greater reserve restraint or slightly lesser reserve restraint Committee, to execute transactions in the System would be acceptable in the intermeeting period. The con- Account in accordance with the following domestic templated reserve conditions are expected to be consistent policy directive: with growth in M2 and M3 over the balance of the year near the pace of recent months. The information reviewed at this meeting suggests that Votes for this action: Messrs. Greenspan, McDonough, economic activity is expanding at a moderate rate in the Blinder, Hoenig, Kelley, Lindsey, Melzer, Ms. Minehan, current quarter. Nonfarm payroll employment increased Mr. Moskow, Mses. Phillips and Yellen. Votes against considerably in August after essentially no growth in July; this action: None. the civilian unemployment rate edged down to 5.6 percent in August. Industrial production posted a large increase in August to a level moderately above the average of the second quarter. Total nominal retail sales rose slightly on DISCUSSION OF PROPOSED LEGISLATION balance over July and August after registering appreciable gains in the prior two months. Housing starts were up a At this meeting, the Committee discussed a bill, titled little in August after increasing sharply in July. Orders for the "Economic Growth and Price Stability Act of non-defense capital goods have softened but still point to substantial expansion of spending on business equipment 1995," that recently had been introduced in the U.S. over coming months; nonresidential construction has been Senate. The bill would make price stability the pristrong of late. The nominal deficit on U.S. trade in goods mary long-run policy goal of the Federal Reserve and and services widened slightly in July from its average rate require the Federal Reserve to establish a numerical in the second quarter. After increasing at elevated rates in the early part of the year, consumer and producer prices definition of price stability and to implement a policy have risen more slowly in recent months. that would effectively promote such stability over Market interest rates have fallen somewhat since the time. It would repeal the Full Employment and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

48 Federal Reserve Bulletin • January 1996 Balanced Growth Act of 1978 (the "Humphrey- tively. Many members felt that in the context of Hawkins Act") and certain related provisions in the seeking and maintaining price stability, monetary pol- Employment Act of 1946 and the Congressional Bud- icy should have the flexibility to react to short-run get Act of 1974. The Federal Reserve had not yet fluctuations in output and employment, and they been asked its views of the bill, but testimony was believed the bill would be improved if its intent in likely at some point and a preliminary discussion this regard were clarified. A few members expressed would help to identify important issues. strong reservations about the part of the bill that The members had not had time to review the bill in would delete the employment objectives set forth in detail or to consider fully all its implications. None- the Employment Act of 1946. theless, their initial reaction was favorable in regard It was agreed that the next meeting of the Committo the overall thrust of the bill's monetary policy tee would be held on Wednesday, November 15, provisions. These would make clear that price stabil- 1995. ity was the primary long-run objective of monetary The meeting adjourned at 1:20 p.m. policy and would restructure the monetary policy reporting requirements to permit the Congress to Donald L. Kohn carry out its oversight responsibilities more effec- Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

49 Legal Developments that begins Tuesday, December 19, 1995, and on the corre- FINAL RULE—AMENDMENT TO REGULATION D sponding reserve maintenance period that begins Thursday, The Board of Governors is amending 12 C.F.R. Part 204, January 18, 1996. For all depository institutions, the deits Regulation D (Reserve Requirements of Depository posit cutoff levels will be used to screen institutions in the Institutions), to decrease the amount of transaction ac- second quarter of 1996 to determine the reporting frecounts subject to a reserve requirement ratio of three quency for the twelve month period that begins in Septempercent, as required by section 19(b)(2)(C) of the Federal ber 1996. Reserve Act, from $54.0 million to $52.0 million of net transaction accounts. This adjustment is known as the low Part 204—Reserve Requirements of Depository reserve tranche adjustment. The Board has increased from Institutions (Regulation D) $4.2 million to $4.3 million the amount of reservable liabilities of each depository institution that is subject to a 1. The authority citation for Part 204 continues to read as reserve requirement of zero percent. This action is required follows: by section 19(b)(ll)(B) of the Federal Reserve Act, and the adjustment is known as the reservable liabilities exemp- Authority. 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, tion adjustment. The Board is also increasing the deposit and 3105. cutoff levels that are used in conjunction with the reservable liabilities exemption to determine the frequency of 2. In section 204.9, paragraph (a) is revised to read as deposit reporting from $55.4 million to $57.0 million for follows: nonexempt depository institutions and from $45.1 million to $46.4 million for exempt institutions. (Nonexempt insti- Section 204.9—Reserve requirement ratios. tutions are those with total reservable liabilities exceeding the amount exempted from reserve requirements while (a)(1) Reserve percentages. The following reserve ratios exempt institutions are those with total reservable liabiliare prescribed for all depository institutions, Edge and ties not exceeding the amount exempted from reserve Agreement corporations, and United States branches requirements.) Thus nonexempt institutions with total deand agencies of foreign banks: posits of $57.0 million or more will be required to report weekly while nonexempt institutions with total deposits less than $57.0 million may report quarterly, in both cases on form FR 2900. Similarly, exempt institutions with total Category Reserve requirement1 deposits of $46.4 million or more will be required to report Net transaction accounts quarterly on form FR 2910q while exempt institutions with $0 to $52.0 million 3 percent of amount. over $52.0 million $1,560,000 plus 10 percent of total deposits less than $46.4 million may report annually $52.0 million. on form FR 2910a. Nonpersonal time deposits 0 percent. Effective December 19, 1995, 12 C.F.R. Part 204 is Eurocurrency liabilities. . . 0 percent. amended as follows. 1 Before deducting the adjustment to be made by the paragraph (a)(2) of this Compliance dates: For depository institutions that report section. weekly, the low reserve tranche adjustment and the reservable liabilities exemption adjustment will apply to the (2) Exemption from reserve requirements. Each deposireserve computation period that begins Tuesday, Decem- tory institution, Edge or agreement corporation, and U.S. ber 19, 1995, and on the corresponding reserve mainte- branch or agency of a foreign bank is subject to a zero nance period that begins Thursday, December 21, 1995. percent reserve requirement on an amount of its transac- For institutions that report quarterly, the low reserve tion accounts subject to the low reserve tranche in paratranche adjustment and the reservable liabilities exemption graph (a)(1) of this section not in excess of $4.3 million adjustment will apply to the reserve computation period determined in accordance with section 204.3(a)(3). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

50 Federal Reserve Bulletin • January 1996 ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT Federal Deposit Insurance Corporation ("FDIC"), and the Office of the Comptroller of the Currency ("OCC") as Orders Issued Under Section 3 of the Bank Holding required by the Bank Merger Act. The time for filing Company Act comments has expired, and the Board has considered the applications and notices and all comments received in light Fleet Financial Group, Inc. of the factors set forth in the BHC Act, the Bank Merger Providence, Rhode Island Act, and the Federal Reserve Act. Fleet, with total consolidated assets of approximately Order Approving the Acquisition of a Bank Holding $51.3 billion, operates subsidiary banks in Rhode Island, Company, Merger of Banks, Establishment of Branches, Massachusetts, Connecticut, New York, New Hampshire, and Engaging in Nonbanking Activities and Maine.4 Fleet is the 16th largest commercial banking organization in the United States, controlling approxi- Fleet Financial Group, Inc., Providence, Rhode Island mately 1.3 percent of total banking assets in the United ("Fleet"), a bank holding company within the meaning of States. Fleet also engages in a number of permissible the Bank Holding Company Act ("BHC Act"), and certain nonbanking activities nationwide. Shawmut, with total conof its affiliates have filed applications under section 3 of the solidated assets of approximately $36.3 billion, operates BHC Act (12 U.S.C. § 1842), section 5(d)(3) of the Federal subsidiary banks with branches in Connecticut, Massachu- Deposit Insurance Act (the "FDI Act") (12 U.S.C. setts, New York, New Hampshire, and Rhode Island. § 1815(d)(3)), section 18(c) of the FDI Act (12 U.S.C. Shawmut is the 25th largest commercial banking organiza- § 1828(c)) ("Bank Merger Act"), and section 9 of the tion in the United States, controlling approximately 1 per- Federal Reserve Act (12 U.S.C. § 321),1 and notices under cent of total banking assets in the United States. Upon section 4 of the BHC Act (12 U.S.C. § 1843),2 in connec- consummation of the proposal, Fleet would become the tion with Fleet's proposal to acquire all the voting shares of tenth largest commercial banking organization in the Shawmut National Corporation, Hartford, Connecticut, and United States, with total consolidated assets of approxi- Boston, Massachusetts ("Shawmut"), and thereby indi- mately $86.2 billion, and would control approximately rectly acquire its banking and nonbanking subsidiaries.3 2.3 percent of total banking assets in the United States and Notice of the proposal, affording interested persons an 1.7 percent of the total deposits in banks and savings opportunity to submit comments, has been published associations insured by the FDIC.5 (60 Federal Register 37,642 and 39,394 (1995)). The Board extended the public comment period in this case, Interstate Analysis providing interested persons approximately 60 days to submit written comments on this proposal (Press Release Section 3(d) of the BHC Act, as amended by Section 101 dated July 27, 1995). In light of the size and geographic of the Riegle-Neal Interstate Banking and Branching Effiscope of the organization that would result from consum- ciency Act of 1994, allows the Board to approve an applimation of this proposal, and the extensive public interest in cation by a bank holding company to acquire control of a it, the Board also held public meetings at three sites to bank located in a state other than the home state of such permit interested persons an opportunity to present written bank holding company, if certain conditions are met.6 information and oral testimony to members of the Federal These conditions are met in this case.7 In view of all the Reserve System's staff. The meetings were held, beginning on August 26, 1995, in Boston, Massachusetts; Hartford, Connecticut; and Albany, New York. 4. Asset and deposit data are as of June 30, 1995. 5. Asset and deposit data take into account Fleet's commitments to The Board received comments on the proposal from divest certain assets and deposits, which are discussed in this order. approximately 278 commenters. Of these commenters, 161 6. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding testified at the public meetings. Written comments were company's home state is that state in which the operations of the bank received from approximately 117 commenters who did not holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank testify at the public meetings and from 21 commenters who holding company, whichever is later. For purposes of the BHC Act, testified at the meetings. the home state of Fleet is Rhode Island. Reports on the competitive effects of the merger were 7. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). requested from the United States Attorney General, the Fleet is adequately capitalized and adequately managed. Shawmut's subsidiary banks in Connecticut and New Hampshire have been in existence and continuously operated for the minimum period of time required under applicable state law. In addition, upon consummation 1. These applications are described in Appendix A, and the branches of this proposal, Fleet and its affiliates would control less than to be established pursuant to section 9 of the Federal Reserve Act are 10 percent of the total amount of deposits of insured depository listed in Appendix B. institutions in the United States, and less than 30 percent of the total 2. The nonbanking subsidiaries to be acquired by Fleet are listed in amount of deposits of insured depository institutions, or the applicable Appendix C. state deposit limit, in Connecticut, Massachusetts, New Hampshire, 3. In connection with the proposal, Fleet and Shawmut each have and New York. Fleet would control over 30 percent of the total applied to acquire options to purchase up to 19.9 percent of the voting deposits in depository institutions in Rhode Island after the merger. shares of the other. These options would become moot upon consum- However, the Rhode Island Director of the Department of Business mation of Fleet's application to acquire Shawmut. Regulation has indicated that the transaction is permissible under Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 51 facts of record, the Board is permitted to approve this In 14 banking markets, consummation of this proposal proposal under section 3(d) of the BHC Act. would not exceed Department of Justice ("DOJ") guidelines.13 In 12 other banking markets,14 the increase in the Competitive Considerations concentration of market deposits, as measured by the HHI, indicates that the combination of Fleet and Shawmut, with- Fleet and Shawmut both operate subsidiary banks with out divestitures, could result in significantly adverse combranches in Connecticut, Massachusetts, New Hampshire, petitive effects. In order to mitigate the potential that this New York, and Rhode Island.8 Fleet and Shawmut com- proposal may result in adverse competitive effects in these pete directly in 26 banking markets in these states.9 The markets, Fleet has committed to divest branches in each of Board has carefully considered the effects that consumma- these banking markets to one or more acquirors, whose tion of this proposal would have on competition in these purchase of branches would not substantially lessen combanking markets, in light of all the facts of record, includ- petition in these markets.15 After consummation of this ing the characteristics of these markets, the increase in the proposal and the divestiture of branches in these markets, concentration of total deposits in depository institutions10 the competitive effect of this proposal would be consistent in these markets ("market deposits") as measured by the with the DOJ Merger Guidelines and the parameters ap- Herfindahl-Hirschman Index ("HHI"),11 and commitments made by Fleet to divest certain branches. In evaluating the competitive factors in this case, the Board also has (1) Fleet's resulting market share in Connecticut and Massachusetts carefully considered the information and views presented would result in or lead to the creation of a monopoly; and by commenters.12 (2) The variety, convenience, and quality of banking services would decrease and the price would increase. 13. These markets and the HHI increases are as follows. In Connectrelevant Rhode Island law. Accordingly, in this case, the acquisition icut, Bridgeport (169 points to 1970), Danielson (287 points to 1692), by Fleet of deposits in Rhode Island is permitted under section Fairfield (303 points to 1309), New Haven (190 points to 1053), New 3(d)(2)(D) of the BHC Act (12 U.S.C. § 1842(d)(2)(D)). London (277 points to 1466), Torrington (208 points to 1431), and 8. The deposit size, percentage of deposits, and ranking for Fleet Waterbury (7 points to 1729). In Massachusetts, Boston (164 points to and Shawmut in each of these states are listed in Appendix D. 952), and Springfield (291 points to 1197). In New Hampshire, 9. A description of these banking markets is contained in Concord (132 points to 1536), Hanover-Lebanon (178 points to 1030), Appendix E. Laconia (106 points to 2481), and Portsmouth-Dover-Rochester (137 10. Market deposit data are as of June 30, 1994. In this context, points to 1524). In New York, Albany (306 points to 1484). depository institutions include commercial banks, savings banks, and A commenter contended that the Board should separately consider savings associations. Based on the particular characteristics of the the competitive effects of this proposal on small business borrowers institutions and markets involved, the Board previously has deter- and other particular segments of the Albany market and other relevant mined that certain savings associations in Maine and Connecticut offer banking markets, in light of an article reviewing a year of call report significant competition to commercial banks in the provision of the data on small business lending in the Federal Reserve System's Tenth full range of financial services, and has weighted the deposits of these District. The commenter asserted that the article indicates that multisavings associations at more than 50 percent in calculating market state bank holding companies tend to lend less to small businesses share. See FleetlNorstar Financial Group, Inc., 11 Federal Reserve than small single-state bank holding companies. For reasons explained Bulletin 750 (1991); Cenvest, Inc., 74 Federal Reserve Bulletin 807 in previous orders, the Board continues to believe that the competitive (1988); Hartford National Corporation, 73 Federal Reserve Bulletin analysis of banking expansionary proposals should be based on the 720 (1987). The Board has determined to include the deposits of availability of the cluster of banking services to a range of customers savings associations in Connecticut, Massachusetts, Rhode Island, and in the local banking market. See, e.g., First Hawaiian, Inc., 77 New Hampshire banking markets at up to 100 percent, based on a Federal Reserve Bulletin 52 (1991); see also United States v. Philadelnumber of factors indicating their commitment to commercial lending, phia National Bank, 374 U.S. 321 (1963). In addition, the Board notes that the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) including their ratio of commercial and industrial loans (other than ("CRA") requires that every bank, including a bank owned by a those secured by real estate) to total assets, percentage of small multi-state bank holding company, be examined and rated regularly on business loans in the market, resources committed to commercial its performance in helping to meet the credit needs of its community. lending, and the legal authority of the association to make commercial loans. 14. These banking markets are as follows. In Connecticut, Hartford 11. Under the revised Department of Justice Merger Guidelines, 49 and Old Saybrook. In Massachusetts, Amherst-Northampton, Federal Register 26,823 (June 29, 1984), a market in which the Fitchburg-Leominster, Greenfield, New Bedford, Southbridge, Taunpost-merger HHI is above 1800 is considered to be highly concen- ton, and Worcester. In New Hampshire, Littleton and Manchester. In trated. In such markets, the Department of Justice (the "DOJ") is Rhode Island, Providence. likely to challenge a merger that increases the HHI by more than 15. Fleet has entered into agreements to sell these branches either to 50 points. The DOJ has informed the Board that a bank acquisition or organizations that do not currently operate in these markets or to merger generally will not be challenged (in the absence of other competitors already operating in the markets whose resulting market factors indicating anti-competitive effects) unless the post-merger share would not cause the HHI to exceed DOJ guidelines, except as HHI is at least 1800 and the merger or acquisition increases the HHI further discussed in this order. In addition, Fleet has committed that if by at least 200 points. The DOJ has stated that the higher than normal it is unsuccessful in completing these divestitures within six months of threshold for anti-competitive effects implicitly recognizes the com- consummation of this proposal, it will transfer the unsold branches to petitive effect of limited-purpose lenders and other non-depository an independent trustee that will be instructed to sell the branches financial entities. promptly. See BankAmerica Corporation, 78 Federal Reserve Bulletin 12. The Board received comments from several groups and individ- 338 (1992); United New Mexico Financial Corporation, 11 Federal Reserve Bulletin 484 (1991). Fleet also has committed to submit to the uals who expressed concern that the proposed transaction would have Board, prior to consummation of the acquisition, an executed trust a significantly adverse effect on competition or the concentration of agreement acceptable to the Board stating the terms of these divestiresources in various banking markets. These comments included tures. allegations that: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

52 Federal Reserve Bulletin • January 1996 plied by the Board in previous decisions in all markets, tion in the Old Saybrook banking market, Fleet has entered except the Hartford and Old Saybrook banking markets.16 into an agreement to divest two branches and approxi- Hartford Banking Market. Fleet currently is the second mately $32.3 million in deposits to a depository institution largest depository institution in the Hartford banking mar- in the market. Upon consummation of the proposed divesket. Upon acquiring Shawmut, Fleet would become the titure, the HHI in the market would increase by no more largest depository institution in the market, controlling than 298 points to 1904. approximately $9.5 billion in deposits, representing The potential adverse competitive effects of this pro- 47.8 percent of market deposits. To mitigate the potential posal are substantially mitigated, however, by consideranti-competitive effects of this acquisition in the Hartford ation of certain factors in the Old Saybrook banking marbanking market, Fleet has entered into divestiture agree- ket.18 First, six other depository institutions would remain ments to sell 25 branches and approximately $1.6 billion of in the market, three of which would control 10 percent or deposits to two, full-service depository institutions that more of market deposits. Two of the remaining competialready operate in the market. This divestiture would in- tors are multi-billion dollar bank holding companies. Secclude approximately $62.4 million of loans to small busi- ond, the Board has previously determined that many of the nesses.17 Upon consummation of the proposed divestiture, thrift institutions in the Old Saybrook banking market the HHI in the Hartford banking market would increase by provide a full range of commercial banking services in no more than 469 points to 1827. addition to offering traditional thrift products.19 Third, the A number of additional factors indicate, however, that Old Saybrook banking market is surrounded by three Rathe increase in concentration levels in the Hartford banking nally Metropolitan Areas and is in close proximity to two market, as measured by the HHI, tends to overstate the other central business districts, which presents an unusucompetitive effects of this proposal. For example, as a ally large number of commercial, employment, and bankresult of the proposed divestiture, one depository institu- ing alternatives to residents of this very small banking tion in the market would acquire approximately $1.3 bil- market. More than 30 percent of the Old Saybrook banking lion of deposits and control approximately 9.7 percent of market work force commutes to work outside the banking market deposits, becoming the second largest depository market. institution in the market. A second depository institution in The Board has sought comments from the DOJ on the the market would acquire approximately $300 million of competitive effects of this proposal in all the banking deposits and control approximately 4.2 percent of market markets in which Fleet and Shawmut compete. The DOJ deposits, becoming the fourth largest depository institution has advised the Board that, in light of the proposed divestiin the market. In addition, upon consummation of this tures, the proposal would not have a significantly adverse proposal, 49 depository institutions would remain in the effect on competition in any relevant banking market. market, including 18 commercial banks. The Hartford Based on all the facts of record, and taking into considerbanking market, moreover, is relatively attractive for entry. ation the views expressed by commenters on the potential The market is more than twice as large as any other competitive effects of this proposal, and for the reasons banking market in Connecticut, and three multi-billion discussed in this order, the Board concludes that consumdollar bank holding companies have entered the market mation of this proposal is not likely to have a significantly since 1990. Several other very large bank holding compa- adverse effect on competition or on the concentration of nies have entered other banking markets in Connecticut resources in any relevant banking market.20 This determisince 1993, and their proximity to the Hartford banking market may affect the competitive behavior of depository institutions in the market. 18. The Board previously has discussed the factors that would tend Old Saybrook Banking Market. Fleet currently is the to reduce the adverse competitive effects of a combination of deposifourth largest depository institution in the Old Saybrook tory institutions in this banking market. See Hartford National Corpobanking market. Upon the acquisition of Shawmut, Fleet ration, 73 Federal Reserve Bulletin 720 (1987). would become the largest depository institution in the 19. Id. at 721. 20. A commenter contended that the Board's broad definition of the market, controlling approximately $167 million of depos- Albany banking market and its inclusion of all savings association its, representing 33.2 percent of market deposits. To mitideposits in the market at more than 20 percent understated the gate the potential anti-competitive effects of this acquisi- concentration of resources in the market that would result from consummation of this proposal. The commenter suggested that the definition of the market should be the same as what Shawmut's New 16. Based on the divestiture agreements into which Fleet has York subsidiary bank has defined as its delineated community under entered, the HHI in these banking markets (other than Hartford and the CRA. A bank's delineated community under the CRA, however, Old Saybrook) would increase as follows. In Massachusetts, Amherst- identifies the bank's primary service area, and does not necessarily Northampton (213 points to 1742), Fitchburg-Leominster (no in- take into account the presence of other banks, access by the bank's crease), Greenfield (no increase), New Bedford (116 points to 2284), customers to banks located in other communities, or economic and Southbridge (99 points to 2096), Taunton (148 points to 2493), and demographic factors that contribute to competition. See St. Joseph Worcester (43 points to 2216). In New Hampshire, Littleton (48 points Valley Bank, 68 Federal Reserve Bulletin 673 (1982). The Albany to 2458), and Manchester (no increase). In Rhode Island, Providence banking market, as considered by the Board, includes six counties that (75 points to 2965). constitute the Albany Metropolitan Statistical Area ("MSA") and six 17. In this context, loans to small businesses include loans in the counties that are closely linked to it by commuting patterns and other amount of $ 1 million or less. factors. Even if the counties outside the Albany MSA were excluded Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 53 nation is subject to completion of the divestitures proposed ceived in connection with this proposal,23 and has conby Fleet in connection with these applications.21 cluded that based on all the facts of record, including examination reports and other supervisory information, Financial, Managerial and Future Prospects managerial factors are consistent with approval.24 Considerations The Board has concluded that the other supervisory factors that the Board must consider under section 3 of the The Board has reviewed the financial resources of the BHC Act, the Bank Merger Act, and section 9 of the companies and banks involved in this proposal and the Federal Reserve Act are consistent with approval of this effect of the proposed acquisition on the future prospects of proposal.25 these organizations. The Board notes that both Fleet and Shawmut and their subsidiary banks are adequately capitalized, and that Fleet's consolidated capital ratios would be at the "well capitalized" threshold on consummation of this transaction. In addition, this proposal involves an exchange of stock, and no new debt would be incurred. Based on all the facts of record, including all comments 23. Some commenters suggested that allegations relating to the that have been received relating to the financial factors in convenience and needs factor also raise adverse managerial concerns. this proposal, the Board concludes that financial consider- For the reasons discussed in reviewing the convenience and needs ations, including the future prospects of Fleet, are consis- considerations, the Board concludes that these comments do not warrant denial of this proposal under managerial considerations. tent with approval.22 The Board also has reviewed the The Board also received a copy of a lawsuit recently filed against managerial resources of Fleet in light of comments re- Fleet's subsidiary bank operating in Rhode Island in connection with alleged breaches of a collective bargaining agreement in violation of the Labor Management Relations Act and the Employee Retirement from the definition of this banking market, the resulting HHI would Income Security Act. The Board notes that the civil courts are empownot violate the DOJ Merger Guidelines. ered to provide an appropriate remedy if plaintiffs' claims can be The Board has regularly included savings association deposits in the substantiated. calculation of market share on a 50 percent weighted basis. See e.g., 24. One commenter raised issues involving the loan collection and Comerica, Inc., 81 Federal Reserve Bulletin 476 (1995); First Hawai- servicing practices of RECOLL, including foreclosure by RECOLL ian, Inc., 11 Federal Reserve Bulletin 52 (1991). On average, savings on property owned by commenter. These comments were reviewed associations in the Albany banking market are engaged more exten- previously by the Board in connection with another application, and sively in commercial and industrial lending and consumer lending for the reasons explained in the Board's order, did not warrant denial than are savings associations nationwide. of the proposal. See Fleet Financial Group, Inc., 80 Federal Reserve 21. The Board has carefully considered comments suggesting that Bulletin 818 (1994). The Board also notes that a pending lawsuit Fleet should be required to divest branch assets in Connecticut to against Fleet Bank of Maine and RECOLL, cited by the commenter as small, community development banks that can better serve the needs an adverse managerial factor, involves a dispute concerning whether of minorities and low- to moderate-income communities. The pro- Fleet properly "put" a loan back to the FDIC. Fleet has denied any posed divestitures in Connecticut have been structured to maintain wrongdoing and the Board notes that the FDIC reviewed the transacsignificant competition to Fleet in providing banking products and tion before accepting the "put." This suit is still pending, and there services in the relevant banking markets. The Board notes, moreover, has been no finding of wrongdoing on the part of Fleet. This comthat there is no evidence in the record to suggest that this proposal menter also objected to Shawmut's refusal to let him distribute a flyer would prevent the establishment of any other bank to serve minority opposing the merger at a Shawmut shareholder meeting. Shawmut's and low- to moderate-income communities or impair the ability of actions do not appear to violate relevant Federal securities laws or existing banks to serve such communities. Furthermore, the Board state corporate law. notes that the CRA requires it to carefully consider how banks making Another commenter criticized Fleet's managerial resources on the acquisitions have fulfilled their responsibilities under the CRA. As basis of a loan made to the campaign committee of a New York City discussed in this order, the Board has carefully considered Fleet's official when Fleet was bidding to provide municipal bond services to record in helping to meet the credit needs of the communities that it the City. The Board has reviewed these comments in light of all the serves, including minority and low- to moderate-income communities. facts of record, including confidential supervisory information, and a 22. Several commenters expressed concerns about Fleet's financial report on this matter by the New York City Department of Investigaresources, including concerns that Fleet has not accurately stated its tion, and concluded that they do not warrant denial of this proposal. financial condition in light of the dollar amount of CRA-related This commenter also contended, without any substantiation, that the commitments that it has made, the contingent liabilities stemming selection of Fleet to provide banking services to Albany County, New from various lawsuits filed against it, and the loss of fee income from York, was improper. Finance officials for the County have indicated the anticipated termination of its agreement to manage FDIC assets in publicly that Fleet's bid to provide these services was the most New England through its subsidiary, RECOLL Management Corpora- attractive when all factors were considered. tion, Boston, Massachusetts ("RECOLL"). Some commenters also 25. The Board also received comments alleging that the proposal alleged that Fleet has misstated its financial condition by understating would result in substantial job losses among Fleet's and Shawmut's the number of delinquent loans and foreclosures in the portfolio of its employees and would have adverse effects on the New England consumer finance subsidiary, Fleet Finance, Inc. ("FFI"). The Board economy, particularly in Connecticut. Fleet has taken several steps to has reviewed these comments in light of the overall financial condi- minimize any adverse effects on employment or the economy. As tion of Fleet and its subsidiaries and all other facts of record in this discussed in this order, Fleet has entered into an agreement with case, including the examination reports by appropriate federal supervi- the Connecticut Office of the Attorney General to establish a sors and other supervisory information. Based on this review and all $207.5 million economic development program, which includes initifacts of record, including Fleet's current capital level and the level of atives to encourage job retention and support for small- to mediumcapital that would result from consummation of this proposal, the sized businesses. In addition, Fleet has reported that the proposed earnings of Fleet and Shawmut, and other facts, the Board concludes acquirors of Fleet's divested branches have indicated that they intend that these comments do not warrant denial of this proposal. to retain existing Fleet or Shawmut personnel in the branches. 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54 Federal Reserve Bulletin • January 1996 Convenience and Needs Considerations Many of the commenters favoring the proposal or supporting the CRA performance records of Fleet or Shawmut In acting on applications under the relevant banking stat- commended Fleet's sponsorship of community developutes, the Board must consider the convenience and needs ment activities through intermediaries and loan pools, parof the communities to be served and take into account the ticipation in programs providing home mortgage financing records of the relevant depository institutions under the for low- to moderate-income residents, and financial sup- Community Reinvestment Act (12 U.S.C. § 2901 et seq.) port of nonprofit organizations engaged in these activities. ("CRA"). The CRA requires the federal financial supervi- Various commenters also praised Fleet's economic develsory agencies to encourage financial institutions to help opment activities, including support for the development of meet the credit needs of the local communities in which minority businesses. Some commenters commended they operate, consistent with their safe and sound opera- Fleet's participation with community-based and nonprofit tion. To accomplish this end, the CRA requires the appro- organizations in homebuyer, consumer credit, small busipriate federal supervisory authority to "assess the institu- ness, and other educational programs. Other commenters tion's record of meeting the credit needs of its entire related their favorable experiences with specific loan procommunity, including low- to moderate-income neighbor- grams and banking services offered by Fleet or Shawmut. hoods, consistent with the safe and sound operation of such Commenters objecting to the proposal criticized the institution," and to take that record into account in its CRA performance record of Fleet or Shawmut in helping evaluation of bank expansion proposals.26 to meet the credit needs of low- to moderate-income neighborhoods and communities with predominately minority A. Public Comments on Convenience and Needs populations in Massachusetts, Connecticut, New York, Rhode Island, and New Hampshire. In general, these com- The Board provided an extended period of time for com- menters maintained that: ment in this case and, as previously noted, held three (1) Fleet has a poor record of lending to minorities and public meetings at which interested persons could present residents of low- to moderate-income communities; testimony on the convenience and needs factors and the (2) Data reported under the Home Mortgage Disclosure CRA performance records of the depository institutions in Act ("HMDA")29 suggest illegal discrimination; this case. The Board received comments related to the (3) Fleet should make more home mortgage and small convenience and needs aspects of the proposal from more business loans in minority, low- to moderate-income, than 260 commenters, including individuals, representa- inner-city, and rural communities; tives of community-based and nonprofit organizations, (4) Fleet engages in inadequate ascertainment and outsmall business owners, members of Congress, and local reach efforts for minority, low- to moderate-income, and state government officials. inner-city, and rural communities;30 Approximately 167 commenters supported the proposal (5) Fleet has not participated sufficiently in developing or commented favorably about the CRA performance affordable housing for low- to moderate-income resirecords of Fleet or Shawmut.27 More than 95 commenters either opposed the merger, raised concerns about the CRA performance of Fleet or Shawmut, or requested that the Board approve the merger subject to conditions proposed by the commenters.28 (2) Connecticut—a local coalition of small business and community groups, a local economic development corporation, and a city treasurer; 26. 12 U.S.C. § 2903. (3) New York—a statewide coalition of community groups and 27. The commenters included: several community-based and nonprofit organizations; (1) Massachusetts—community development corporations, afford- (4) Rhode Island—a community reinvestment association and an able housing organizations, and one member of Congress; affordable housing organization; (2) Connecticut—local urban leagues, a purchasing council for (5) New Hampshire—a community reinvestment association and a minority-owned businesses, and an economic development corpora- state legislator; and tion; (6) Michigan—a local advocacy group for the elderly. (3) New York—a business association for minority women, a rural 29. 12 U.S.C. § 2801 et seq. development advisory organization, an alliance of minority minis- 30. Some commenters also maintained that Fleet charges higher ters, an affordable housing partnership, and several members of fees for basic banking services in some states than in certain other Congress; states and higher fees, in general, than Shawmut. While the Board has (4) Rhode Island—a representative of a national community devel- recognized that banks help serve the banking needs of their communiopment corporation and several members of Congress; and ties by making available basic banking services at nominal or no (5) New Hampshire—a business development corporation, an charge, the CRA does not require that banks limit the fees that are affordable housing organization, and a local economic development charged for services. As explained in this order, Fleet provides a full organization. range of banking services throughout its delineated communities, 28. The commenters included: including lending services to assist low- to moderate-income resi- (1) Massachusetts—several affordable housing organizations and dents, and it offers basic banking accounts with reduced charges in advocacy groups, a municipal housing and community develop- some states. There is no evidence in the record of this case that higher ment office, a Latino community organization, a member of Con- fees charged by Fleet for certain services are based in any manner on a gress, and a state senator; factor prohibited under antidiscrimination laws. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 55 dents ("affordable housing"), or in community develop- standing" or "satisfactory" ratings at the most recent ment and economic development projects;31 examinations of their CRA performance by their primary (6) Fleet lacks a sufficient number of branches located in federal supervisors.35 Examiners found no evidence of or that serve low- to moderate-income and minority prohibited discrimination or other illegal credit practices at communities, and that it should not be permitted to close any of Fleet's subsidiary banks, or practices intended to any branches in those underserved communities; and discourage applications for the types of credit listed in the (7) Fleet subsidiaries have a record of violating the banks' CRA statements. All of Shawmut's subsidiary Equal Credit Opportunity Act (15 U.S.C. § 1691 ^ seq.) banks received at least "satisfactory" ratings from their ("ECOA") and the Fair Housing Act (42 U.S.C. § 3601 primary federal supervisors in the most recent examinaet seq.) ("FHA") (collectively, "fair lending laws"). tions of their CRA performance, and no evidence of illegal discrimination was noted in their examinations.36 The Board has carefully reviewed the CRA performance Fleet Bank, Albany, New York ("Fleet-New York"), records of Fleet and Shawmut, and their subsidiary deposi- Fleet's subsidiary bank operating in New York, has been tory institutions, the comments and testimony presented at examined and rated for compliance under New York comthe public meetings and in written submissions, Fleet's munity reinvestment laws (N.Y. Banking Law § 28-b).37 responses to those comments, and all other relevant facts of Fleet-New York received a "satisfactory" rating from the record in light of the CRA, the fair lending laws and other New York State Banking Department in its most recent relevant credit-related laws, the Board's regulations, and off-site CRA assessment report, as of December 31, 1994.38 the Statement of the Federal Financial Supervisory Agen- Corporate CRA Programs and Policies. Fleet has implecies Regarding the Community Reinvestment Act ("Agen- mented a variety of corporate programs and policies that cy CRA Statement").32 This review has considered the assist its subsidiary banks in helping to meet the credit overall aspects of Fleet's performance record as well as the needs of all their communities, including low- to moderateperformance records of Fleet's subsidiary banks in their income areas, consistent with the CRA. In late 1993, Fleet respective states.33 established a separate department in the holding company to provide a coordinated approach to community development and reinvestment efforts of its subsidiary banks. B. Overview of Fleet's CRA Performance Record Banking policies and practices that address the credit needs of communities are established and implemented through Examination Evaluation of CRA Performance. The Agency this corporate department, in consultation with Fleet's sub- CRA Statement provides that a CRA examination is an sidiary banks and their banking communities. The departimportant and often controlling factor in the consideration ment has a steering committee made up of senior and of an institution's CRA record and that reports of these mid-level managers from different corporate departments. examinations will be given great weight in the applications process.34 All of Fleet's subsidiary banks received "out- This committee meets quarterly to address community development and fair lending issues. In addition, Fleet 31. Several commenters also expressed concern that, after the merger, Fleet would not provide sufficient financial support for 35. The CRA performance examination ratings for Fleet's subsidcommunity-based and nonprofit organizations and their affordable iary banks in Massachusetts, Connecticut, New York, Rhode Island, housing, community development, and economic development activi- and New Hampshire are discussed in detail in this order as part of the ties. state-by-state performance evaluations. In addition, Fleet Bank of 32. 54 Federal Register 13,742 (1989). Several commenters con- Maine, Portland, Maine, was rated "satisfactory" by the Federal tended that Fleet representatives have been uncooperative in meeting Reserve Bank of Boston, as of August 8, 1994. with community-based organizations and unwilling to reach agree- 36. The following Shawmut subsidiary banks received a "satisfacments to provide loans, grants or assistance in specific amounts, or to tory" rating: participate in particular programs or projects. The Board previously (1) Shawmut Bank, N.A., Boston, Massachusetts, and Shawmut has stated that, while communication by depository institutions with Bank Connecticut, N.A., Hartford, Connecticut, both as of Decemcommunity groups provides a valuable method of assessing and ber 31, 1993, from the OCC; and determining how best to address the credit needs of the community, (2) Shawmut Bank NH, Manchester, New Hampshire, as of neither the CRA nor the Agency CRA Statement requires depository April 11, 1994, from the FDIC. institutions to enter into agreements with particular organizations. Shawmut Bank, F.S.B., Boca Raton, Florida, was acquired from the Accordingly, in reviewing this proposal, the Board has focused on the Resolution Trust Corporation in July 1994, and Shawmut Bank New programs and policies that Fleet has in place to serve the credit needs York, N.A., Schenectady, New York, began operations in June 1995. of its entire community. See Chase Manhattan Corporation, 81 Fed- Neither depository institution has been examined for CRA perforeral Reserve Bulletin 467 (1995). mance by its primary federal supervisor since it was acquired or 33. Several commenters believed that Fleet should acquire more established by Shawmut. goods and services from small businesses and businesses owned by 37. In connection with this proposal, the Board has taken into women and minorities. Fleet responded that it participates in purchas- account Fleet's record of compliance with applicable state community ing programs designed to assist minority-owned businesses in Massa- reinvestment laws. chusetts and Connecticut. While the Board fully supports programs 38. In reaching this assessment, the New York State Banking designed to stimulate and create economic opportunity for all mem- Department reviewed, among other things, the bank's community bers of society, the Board believes that consideration of Fleet's delineation, ascertainment of community credit needs, civic involvethird-party contracting activities are beyond the scope of the CRA and ment, affordable housing and community development activities, other relevant banking statutes. HMDA data and lending programs, marketing activities, and compli- 34. Agency CRA Statement at 13,745. ance with applicable consumer laws and regulations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

56 Federal Reserve Bulletin • January 1996 senior management has adopted a "corporate functional from low- to moderate-income borrowers to ensure that strategy" for 1995 through 1997, with a stated goal of every consideration is given to approve a loan,41 and increasing Fleet's market share in all its communities affordable housing development initiatives, whereby subthrough lending, investment, and other banking services, sidiary banks participate in affordable housing programs particularly in low- to moderate-income communities.39 for low- to moderate-income individuals in their local To further coordinate its community reinvestment activ- communities. ity, Fleet implemented its INCITY series of initiatives Fleet's INCITY economic revitalization initiatives focus ("INCITY") in February 1994. This three-year, $8 billion on the needs of small businesses through special loan plan focuses on credit, economic revitalization and com- programs and other activities. For example, Fleet's small munity development, and provides a centrally coordinated business micro-loan program provides loan assistance to set of programs and products for low- to moderate-income small businesses located in or serving low- to moderateindividuals and communities. The initiatives include an income neighborhoods, particularly focusing on minorities advisory board, made up of Fleet senior officers and indi- and women who are operating small businesses. These viduals active in business and community development in loans range from $10,000 to $500,000, and provide lower the Northeast and nationally, that meets regularly to review pricing and more flexible underwriting guidelines than and provide input on issues relating to lending to small and standard small business loan products.42 In April 1994, minority-owned businesses and community development.40 Fleet introduced its "easy business banking" program, The INCITY credit initiatives include a commitment to which is available to small businesses with sales below affordable mortgage lending under a Fleet affordable hous- $1 million. This program provides loans of $100,000 or ing program and a mortgage program conducted in coordi- less under a streamlined application process, including a nation with a community-based group in Boston. Both guaranteed loan decision within three business days. Fleet programs offer products designed to accommodate low- to also participates in government-sponsored programs, inmoderate-income borrowers through low or no down pay- cluding programs sponsored by the Federal Small Business ments or closing costs and/or flexible underwriting criteria. Administration ("SBA"). In May 1995, Fleet became the Fleet's affordable housing program is operated by Fleet first banking organization to be designated an SBA re- Mortgage Group, Inc. ("Fleet Mortgage"), which provides gional preferred lender, which allows all of its subsidiary borrowers with access to a variety of secondary market banks to process loan applications more quickly and promortgage products, including Federal Housing Authority vide direct approval of SBA-guaranteed loans. ("FHA") and Veterans Administration ("VA") loans, Fed- As part of INCITY, Fleet established the Fleet Commueral National Mortgage Association ("FNMA") Community Development Corporation ("CDC") in November nity Homebuyer Program loans, loans under state housing 1994, to provide financial assistance to small businesses agency programs, and bank portfolio loans through the located in or serving residents of low- to moderate-income low- to moderate-income residential mortgage product. areas. The CDC offers low-interest loans, long-term loans, This portfolio loan product is available to first-time homeequity investments, and small grants to not-for-profit combuyers as well as current homeowners. The INCITY credit munity projects and programs. Loans in amounts from initiatives also include a consumer loan program, which $1,500 to $500,000 are available to small businesses, and provides a closer review of consumer loan applications the CDC can apply flexible underwriting criteria for start-up businesses that may not be eligible for a more standard banking product43 39. Several commenters maintained that Fleet's centralization would In an effort to address commenter's concerns about the limit the decision-making authority of local bank and branch manage- loss of Shawmut's support of community groups and their ment, making its banks less responsive to the needs of local communiprograms, Fleet has committed that it will maintain Fleet's ties. Other commenters believed that branch employees with special knowledge of the local communities' credit needs would not retain and Shawmut's aggregate 1994-1997 commitments for aftheir jobs after the merger. Although Fleet provides corporate over- fordable housing and economic development. In addition, sight and support of CRA activities, the boards of directors, commu- Fleet will maintain, through 1997, Fleet's and Shawmut's nity development steering committees, and community development aggregate charitable and sponsorship contributions at their officers at each subsidiary bank participate in developing and imple- 1994 level of approximately $11 million per year. menting Fleet's community reinvestment initiatives on a local level, including modifying these initiatives as required to meet the credit needs of each specific community. Fleet's subsidiary banks would continue to operate in this manner after the proposed merger. 40. Several commenters criticized INCITY as being a public relations campaign rather than a means of providing new funding or 41. Underwriting criteria under this program allow for lower minicreating new programs focused on low- to moderate-income neighbor- mum loan amounts, longer loan terms, and higher debt-to-income hoods. Fleet indicated that 90 percent of this initiative is devoted to ratios. new funding for existing programs and 10 percent will be devoted to 42. One commenter contended that INCITY's $500,000 limit for a entirely new products and programs. Fleet also stated that several new micro-loan is too high and noted that Fleet did not consider the record loan products have been developed as a result of INCITY, which have of service of organizations in low- to moderate-income census tracts increased Fleet's level of lending in low- to moderate- income census before awarding grants under INCITY. tracts. Fleet noted, for example, that small business lending, which is 43. During its start-up phase, the CDC has closed a total of $199,000 an important aspect of INCITY, increased by approximately 40 per- in loans and $80,325 in grants. The CDC is active in Connecticut, cent from 1993 to 1994. Rhode Island, Maine, and Massachusetts. 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Legal Developments 57 C. State-by-State Assessment of Fleet's CRA originating more than twice the level of mortgages as the Performance Records second largest mortgage lender in the market. Fleet also offers special mortgage products to assist in 1. Massachusetts meeting housing-related credit needs of low- to moderateincome individuals in Massachusetts. Through its ascer- Commenters focused on disparities in HMDA data that tainment efforts, Fleet developed a portfolio mortgage varied by race and income for the number of applications product that offers reduced pricing and more flexible underfrom and the number of loans made to residents of Boston. writing standards to low- to moderate-income borrowers. Other commenters believed that Fleet44 should increase its Fleet provided $82 million in portfolio mortgage loans in lending in minority and low- to moderate-income commu- Massachusetts in 1994, and $17.5 million of these mortnities in Somerville, Worcester, City of Lynn, Jamaica gage loans in the first quarter of 1995. Fleet also originated Plain, and any other community in Massachusetts that has more than $20 million in mortgages under the mortgage been neglected by the banking industry. Some commenters program conducted in cooperation with a Boston-based expressed concern about the loss of Shawmut as an inde- community group 46 In addition, Fleet offers FHA and VA pendent provider of services and maintained that Shaw- mortgages and loan products under programs sponsored by mut's record of addressing community banking needs was FNMA, the Massachusetts Housing Finance Agency, and superior to Fleet's, particularly in Somerville. the Massachusetts Affordable Housing Alliance Fleet Bank of Massachusetts, N.A., Boston, Massachu- ("MAHA").47 setts ("Fleet-Massachusetts"), received an overall CRA Fleet participates in the Soft Second First-Time Homeperformance rating of "satisfactory" from the OCC, its buyers Program sponsored by MAHA for low- to primary federal supervisor, at its most recent examination moderate-income families, which provides public subsifor CRA performance, as of March 31, 1995. Examiners dies to make monthly mortgage payments affordable for favorably noted the formal CRA program in place at the first-time, low- to moderate-income homebuyers. Fleet has bank, and concluded that the bank's community delinea- provided more than $12 million in mortgages under this tion was reasonable and did not arbitrarily exclude low- to program to homebuyers in Boston. Fleet also participates moderate-income neighborhoods. The geographic distribu- in other soft second programs, providing $2 million in tion of credit extensions, applications, and denials for mortgages through the Housing Allowance Project in Fleet-Massachusetts were also considered by examiners to Springfield, $500,000 in the Northampton/Amherst region demonstrate a reasonable penetration of all segments of the through the Valley Community Development Corp., and delineated community. $500,000 in Chelsea. In addition, Fleet committed $1 mil- HMDA Data and Lending Activities. The Board has lion each to the Soft Second Programs in Worcester and the carefully reviewed 1993 and 1994 HMDA data for the City of Lynn. Fleet also participates in the Buy Worcester Fleet affiliates that originate mortgage loans in all the Program, a local community-based program that provides Metropolitan Statistical Areas ("MSAs") in Massachu- financing for the rehabilitation of houses that are sold to setts45 These data generally indicate that Fleet has pro- first-time homebuyers. vided housing-related loans to minority and low- to Fleet-Massachusetts originated $117 million in small moderate-income individuals and neighborhoods through- business loans in 1994, and an additional $92 million in out the communities it serves in Massachusetts. For exam- small business loans were closed during the first eight ple, in 1994, more than 16 percent of HMDA-reportable months of 1995. Over $74 million of those loans were applications in Massachusetts were from African-American made under the bank's preferred pricing program for small and Hispanic applicants, which is almost twice their repre- businesses in low- to moderate-income areas, established sentation in the population of the state's MSAs, and was an as part of INCITY. The bank also encourages small busiincrease over the 7.6 percent received in 1993. In addition, Fleet has increased its lending to minorities and in low- to moderate-income census tracts in Boston. For example, from 1993 to 1994, mortgage originations to African 46. These loans were made under Fleet's three-year commitment to Americans increased from 267 to 435, and originations to provide $36 million in mortgages to low- to moderate-income home- Hispanics increased from 88 to 173. From 1993 to 1994, buyers and owners under this program that began in 1994. originations to borrowers in low- to moderate-income cen- 47. One commenter alleged that Fleet financed the purchase of rehabilitated residential property in the Dorchester area of Boston at sus tracts increased from 600 to 765. Fleet indicates that it inflated prices, resulting in excessive debt service for minority and was the largest mortgage lender in Somerville for 1994, low- to moderate-income purchasers of these properties. Fleet has denied any complicity with redevelopers in these transactions and maintains that all loans were made on the basis of independent appraisals. Fleet also is working with a community-based organization to investigate certain transactions that have occurred in this area, and 44. For purposes of discussing CRA-related activities in the state- has arranged to have several properties reappraised and inspected. by-state performance evaluations, references to "Fleet" include the Fleet also has initiated additional steps to verify the fair market value holding company and its bank and nonbank affiliates. of future rehabilitated properties financed in the Dorchester area. 45. The affiliates include Fleet-Massachusetts, Fleet Mortgage and Based on all the facts of record, the Board concludes that these Fleet National Bank, Providence, Rhode Island ("Fleet-RI"). allegations do not warrant denial of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

58 Federal Reserve Bulletin • January 1996 ness lending through its "easy business banking" program, products. For example, the bank committed $2 million to a and is an SBA preferred lender.48 loan pool sponsored by the Southeastern Economic Devel- Affordable Housing and Community Development. Fleet- opment Corporation, an SBA-certified nonprofit corpora- Massachusetts participates in various affordable mortgage tion serving small businesses, and $2.5 million to a loan programs and community development activities. In 1992, pool designed to provide financing for companies and for example, Fleet-Massachusetts made a $63.7 million commercial businesses in Lawrence, Massachusetts. Fleetmulti-year commitment to the Massachusetts Housing Part- Massachusetts also committed $667,000 to the New Bednership to provide long-term financing for the rehabilita- ford Corporation Loan Fund, which provides below-market tion of low- to moderate-income rental housing. The bank loans to fishermen and suppliers in the fishing industry. recently offered enhanced pricing on $10 million of the Ascertainment and Marketing. The bank's 1995 perforcommitment to further facilitate the development of hous- mance examination found that Fleet-Massachusetts effecing for low-to moderate-income individuals49 Fleet- tively ascertains community credit needs through call pro- Massachusetts provided the Massachusetts Housing Invest- grams, consumer surveys, and contacts with community ment Corporation ("MHIC") with a $10 million line of groups and civic leaders and organizations. Fleetcredit to finance the construction of affordable housing in Massachusetts and Fleet Mortgage conducted 85 low- to Massachusetts. In collaboration with MHIC, Fleet- moderate-income homebuyer seminars in Massachusetts in Massachusetts also provided $10.4 million in equity to 1994, many in Spanish. Fleet-Massachusetts conducted 13 projects throughout Massachusetts that have produced a other presentations throughout the state on such topics as total of 633 affordable housing units in Springfield, Chi- "easy business banking;" INCITY; and basic banking, copee, Amherst, Worcester, Holyoke, and the Boston budgeting and credit. The bank also sponsors community neighborhoods of Chinatown, Fenway, South Boston, loan days for low- to moderate-income individuals. People Dorchester, and Jamaica Plain.50 Fleet-Massachusetts also who attend these events can open accounts, inquire about provided $3.5 million in bridge financing for the rehabilita- mortgages and other loan products, and meet with Fleet tion of 75 units of affordable rental housing in the South bankers to discuss their personal banking needs. End of Boston, and has provided equity to the National Branches and Products. Fleet-Massachusetts offers its Equity Fund National Partnership, which invests in afford- products and services through 188 branches in Massachuable rental housing developments sponsored by community setts. In addition to offering access to a full range of bank development corporations. services, public assistance checks can be cashed at every During 1994 and 1995, Fleet-Massachusetts extended branch, and food stamps are issued at more than half of the $1.9 million in loans to the Housing Assistance Corpora- branches. Fleet-Massachusetts also participates in the Mastion, which operates four housing shelters in Hyannis and sachusetts Community and Banking Council's "Basic Falmouth, and $393,000 to convert an existing property Banking for Massachusetts" program, offering low-cost into a shelter for homeless families with children. Fleet- checking and savings accounts to low-income customers.52 Massachusetts intends to introduce several purchaserehabilitation programs on a trial basis in Somerville in 2. Connecticut early 1996 to assist low- to moderate-income home purchasers. Connecticut commenters criticized Fleet's record of lend- Fleet-Massachusetts also provided a $2.7 million line of ing to minorities and low- to moderate-income and innercredit to the Boston Local Development Corporation to city communities in Connecticut, particularly Hartford, and support its role as a lender to Boston small businesses that have requested that Fleet commit to provide more home provide jobs to Boston residents,51 and $1 million in equity mortgage and small business loans in these communities, and a $3 million line of credit to the Massachusetts Minor- and increase funding for community development purity Enterprise Investment Corporation. In addition, the poses. The commenters alleged that HMD A data show bank participates in a number of loan pools in Massachu- disparities in lending by race and income in Hartford, and setts that are designed to provide credit to small businesses said that Fleet should increase its ascertainment and lendthat may not qualify for traditional small business banking ing efforts directed to small businesses (including minorityowned small businesses) and inner-city residents. Other commenters expressed concern about the impact of the loss 48. The bank also participates in the Stafford and Parent Plus of Shawmut's corporate headquarters in Hartford, the adgovernment-guaranteed student loan programs, originating $96 mil- verse impact of this proposal on small businesses, and the lion in student loans in 1994, and $38 million in the first five months of 1995. 49. Under this commitment, the bank has funded a total of $18.5 million, including $7.8 million in 1994, to finance 714 housing units. 52. A few commenters submitted copies of a newspaper article 50. The bank also committed $2 million in 1994 and $2.8 million in alleging that Fleet Mortgage violates Massachusetts insurance law by 1995 to a housing equity fund operated by the Massachusetts Housing receiving service fees in connection with the collection of credit- Equity Corporation, Inc., an affiliate of MHIC. related mortgage insurance premiums for an unaffiliated insurance 51. The bank also provided a $250,000 line of credit to this company. The Board has been informally advised by the Massachuorganization's small business fund, which provides loans of up to setts Insurance Division that it has reviewed these allegations and $15,000 to local businesses. found no violations of applicable state law. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 59 availability of banking products and services at reasonable homes in Hartford. The bank also committed $ 1 million to cost. the Urban League of Greater Hartford Affordable Mort- Fleet Bank, N.A., Hartford, Connecticut ("Fleet- gage Program, which provides affordable mortgages with Connecticut"), received an "outstanding" rating from the flexible underwriting guidelines to first-time homebuyers. OCC, its primary federal supervisor, at its most recent Fleet committed $1 million each to the New Haven examination for CRA performance, as of March 31, 1995. Department of Housing Program for Homebuyers, a mort- Examiners found that the bank's board of directors and gage program for low- to moderate-income homebuyers, management were actively involved in administering and and the New Haven Anti-Blight Program, which provides monitoring its CRA program, and that management pro- mortgages to low- to moderate-income individuals who vided a high level of ongoing and meaningful support for purchase a fully renovated home in New Haven. In 1994, community development projects and programs throughout Fleet committed $250,000 to the Bridgeport Neighborhood the state. In addition, examiners found that the bank and its Trust Home Ownership Initiative Program, which assists affiliates addressed a substantial portion of identified credit first-time homebuyers in purchasing rehabilitated homes in needs, and that the bank's credit extensions, applications, Bridgeport. Fleet-Connecticut committed $1 million to the and denials were reasonably distributed throughout the Norwalk Redevelopment Agency Affordable Mortgage bank's delineated community, which is the entire state of Program, which is designed to assist low- to moderate- Connecticut. income, first-time homebuyers with low down payments, HMDA Data and Lending Activities. The Board has flexible underwriting, and homebuying study courses.56 In carefully reviewed 1993 and 1994 HMDA data for the addition, Fleet committed $500,000 to a mortgage assis- Fleet affiliates that originate loans in all MSAs in Connect- tance program sponsored by South side Institutions Neighicut.53 These data generally indicate that Fleet has provided borhood Alliance, which helps employees of participating housing-related loans to minority and low- to moderate- organizations purchase homes in the South End of Hartincome individuals and neighborhoods throughout the ford. As noted above, Fleet also has committed to maintain communities it serves in Connecticut. For example, despite the Fleet/Shawmut 1994 combined level of affordable a sharp decline in overall mortgage loan activity in 1994, housing and economic development commitments through Fleet's mortgage loan originations to minorities and in 1997. This includes Shawmut's commitment to the low- to moderate-income areas increased as a percentage "Affordable Home Ownership Made Easy" program sponof total loans.54 In Hartford, from 1993 to 1994, Fleet sored by the Citizens for Action in New Britain. This increased its percentage of loan originations to African program provides affordable mortgages to low- to Americans and Hispanics from 7 percent to 11.1 percent, moderate-income residents by offering zero-point mortand to borrowers in low- to moderate-income census tracts gages at reduced interest rates and closing costs and profrom 7.9 percent to 10.7 percent. vides homebuyer counseling. In 1993, Fleet developed an affordable mortgage product Fleet-Connecticut originated $104 million in small busiwith low down payments and flexible underwriting criteria, ness loans in 1994, and an additional $141 million in small which increased the percentage of applications and loan business loans were closed during the first eight months of originations in low- to moderate-income areas. Fleet also 1995. Approximately $37 million of the small business participates in government lending programs, including loans made in 1994 were originated under INCITY, which programs sponsored by the VA, FHA, FNMA, and the focuses on businesses in low- to moderate-income areas, Connecticut Housing Finance Authority. and $51 million of the small business loans made during Fleet has participated in various affordable housing pro- the first eight months of 1995 were originated under this grams in Connecticut, including programs that benefit resi- initiative. In Hartford County, Fleet-Connecticut has exdents of cities in Connecticut. Fleet committed $10 million tended $48 million in loans to businesses in low- to to the Connecticut Homebuyers Affordable Mortgage Pro- moderate-income communities. Approximately $47 milgram, which offers mortgage loans with flexible underwrit- lion of the bank's small business loans made in 1994, and ing standards and affordable pricing.55 Fleet committed $92 million of the small business loans made during the $4 million to the HART/Frog Hollow First Time Home- first eight months of 1995, were originated under Fleet's buyers Program, which has provided loans to 33 first-time, "easy business banking" program. low- to moderate-income borrowers for the purchase of The bank worked with the Connecticut Development Authority to develop the Connecticut Works business loan program,57 and has been involved in the Authority's 53. The affiliates include Fleet-Connecticut, Fleet Mortgage, and URBANK program, which is designed to provide small Fleet-RI. loans and technical assistance to small- and medium-sized 54. For example, from 1993 to 1994, loans to African-American and Hispanic borrowers increased from 6.1 percent to almost 14 percent of total loans, and loans to borrowers in low- to moderate-income census tracts increased from 8.2 percent to 13.1 percent. The 1994 percentage of HMDA-reportable loans to African-American and Hispanic bor- 56. To date, Fleet has funded mortgages totaling $470,000 under rowers is roughly equal to their representation in the state. this program. 55. The bank funded approximately $1 million in affordable mort- 57. Fleet has funded 29 loans aggregating $89.7 million under this gage loans under this program, before it was discontinued due to a program, with $7 million of these loans made in Hartford, including lack of state funds. $3 million in an enterprise zone in the North End. 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60 Federal Reserve Bulletin • January 1996 businesses in urban areas. Through URBANK, Fleet- financing for Amistad Court in Hartford's North End. This Connecticut has provided 23 loans totalling $2.5 million, cooperative residence provides housing for 14 families. with $1.3 million in direct loans made to small businesses Fleet-Connecticut has a $1 million participation in the in Hartford.58 Greater New Haven Community Loan Fund, which Affordable Housing and Community Development. Fleet- finances the construction and rehabilitation of affordable Connecticut has a variety of programs designed to promote housing units. In addition, the bank committed $1 million affordable housing and community development initiatives to the Bridgeport Neighborhood Fund, which provides in Connecticut. In addition, Fleet has entered into an agree- loans to developers and not-for-profit agencies for affordment with the Connecticut Office of the Attorney General able housing.61 to establish a $207.5 million economic development pro- Fleet-Connecticut provided $1 million in equity in 1994 gram designed to promote home ownership, encourage job to the Community Economic Development Fund, a Conretention and creation, and help small- to medium-size necticut government program that provides financing and businesses in Connecticut. The program includes $90 mil- technical assistance for small businesses in Connecticut's lion in loans to small- and medium-size companies through major cities. Fleet also is an equity participant in the the Connecticut Works loan guarantee program (which will Hartford Economic Development Corporation, which be in addition to loans in an amount equivalent to the works to provide small business loans and create and retain average annual combined Fleet and Shawmut level of jobs in economically depressed areas.62 Finally, Fleetparticipation over the past two years); $3 million in small Connecticut committed $10 million to the Community business loans through the URBANK program to help Investment Loan Program, a loan partnership developed create and retain jobs in urban centers and distressed with municipal officials from Enfield, Manchester, East regions (which will be in addition to loans in an amount Hartford, and West Haven, which provides small business equivalent to the average annual combined Fleet and Shawloans on flexible terms to revitalize the downtown areas of mut level of participation over the past two years); a these communities.63 $25 million initial capital contribution to a fund that will Ascertainment and Marketing. The bank's 1995 examiprovide short-term and permanent financing for the acquination concluded that Fleet-Connecticut effectively ascersition, rehabilitation, and new construction of single-family tained the credit needs of its community through outreach, and rental housing units for low- to moderate-income famsurveys, and demographic research, and that those needs ilies; and $50 million to purchase Connecticut Housing are addressed in the bank's strategic plan, with comprehen- Finance Authority bonds to provide funding for existing sive action steps and measurable goals set out in the plan. low- to moderate-income housing programs. Examiners also found that marketing programs effectively Fleet-Connecticut also has committed $5 million to the informed all segments of the bank's community of avail- Affordable Housing Fund for Connecticut, which provides able products and services. affordable housing to low- to moderate-income families.59 Fleet-Connecticut uses a variety of advertising and other Fleet-Connecticut has committed $1.3 million to programs methods to publicize its products and services to all segsponsored by the Capital Housing Corporation in Hartford, ments of its delineated community64 For example, the which was organized to increase the quality and availabil- bank and Fleet Mortgage held 76 seminars for low- to ity of affordable housing.60 The Jefferson/Seymour project moderate-income homebuyers in 1994, and 15 more semiin Hartford, sponsored by Broad Park Development Corpo- nars in the first quarter of 1995. The bank also gave various ration, received $1.1 million of construction and long-term presentations on its "easy business banking" program, financing from Fleet-Connecticut to provide 30 housing INCITY, and basic banking, budgeting, credit and homeunits for low- to moderate-income families. In addition, buyer education. The bank held community loan days in Fleet-Connecticut participated in the pre-development Bridgeport and other cities in Connecticut to familiarize low- to moderate-income individuals with Fleet's products and services. Branches and Products. Fleet-Connecticut has 58. Several commenters criticized certain aspects of Fleet's small 134 branches in Connecticut, including 30 in low- to business lending, including allegations that: the loan process is too lengthy; the $10,000 minimum requirement for micro-loans is too moderate-income communities. Fleet-Connecticut employs high; more small business lending is needed for certain inner-city Spanish-speaking staff in various branches and brochures areas, including the Blue Hills section of Hartford; and small business needs in the Upper Albany and Clay Hill sections of Hartford should be surveyed. Fleet generally responded that increased small business 61. This fund, which focuses on providing affordable housing, has lending activity will continue to be a significant focus of INCITY, and helped develop 195 new housing units and rehabilitate 171 units. that one of Fleet's goals is to expedite processing of these loans. Fleet 62. Fleet-Connecticut contributed $240,000 in equity to this organialso noted that small business loans, including loans for start-up zation, and Fleet's CDC participated with this organization in a loan businesses, are available from its CDC in amounts as low as $1,500. to a small business in Hartford. 59. This fund has developed 429 units of affordable housing in five 63. Thirty-four loans totaling $1.6 million are outstanding under years. Its projects include the rehabilitation of the New Haven YMCA this program. for use as single-occupancy residences and development of projects in 64. The marketing plan for 1995 includes strategies designed to Hartford and Bridgeport. achieve community development loan goals, promote low- to 60. This Corporation has built or rehabilitated 2,600 units of afford- moderate-income credit products, and increase the bank's market able housing in the last ten years. share among low- to moderate-income households. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 61 describing bank products and services are available in addition, examiners found no evidence of prohibited dis- Spanish. In addition, Fleet-Connecticut cashes public assis- crimination or illegal credit practices, or practices intended tance checks in each of its 134 branches, and issues food to discourage applications for the types of credit listed in stamps in 96 of them. the bank's CRA statement.69 HMDA Data and Lending Practices. The Board has 3. New York carefully reviewed 1993 and 1994 HMDA data for the Fleet affiliates that originate loans in all MSAs in New Based on HMDA data, commenters alleged that Fleet-New York.70 These data generally indicate that Fleet is provid- York has failed to meet the housing-related credit needs of ing housing-related loans to low- to moderate-income comlow- to moderate-income and minority borrowers through- munities, and that it has increased its housing-related lendout New York State, and that it denies a higher percentage ing to minorities in New York. For example, although Fleet of housing-related loan applications from minorities than experienced an overall decline in applications received from non-minorities in all MSAs in New York, including from all potential borrowers in 1994, Fleet's 1994 data Albany, Rochester, and Buffalo. In addition, some com- indicate an increase in the number of applications received menters maintained that Fleet-New York offered fewer from, and loan originations to, African Americans and products and services, engaged in less community develop- Hispanics in New York. In addition, these data indicate ment activity, and made fewer loans, including INCITY that Fleet received a higher percentage of its loan applicaloans, in New York than in other states where Fleet subsid- tions from low- to moderate-income census tracts in New iary banks operate.65 Several commenters also contended York in 1994 than in 1993, and that Fleet's percentage of that Fleet had an inadequate number of branches in low- to applications from such census tracts exceeded the percentmoderate-income and minority neighborhoods in New age for lenders in the aggregate in 1994. In the Albany, York, particularly in Rochester, Syracuse, Buffalo, Albany, Buffalo, and Syracuse MSAs, Fleet increased its percent- Binghamton, and the Bronx and Harlem sections of New age of loan applications from, and originations to, African York City.66 Americans, Hispanics, and residents of low- to moderate- Fleet-New York received a "satisfactory" rating at its income census tracts from 1993 to 1994, and these percentmost recent CRA performance examination by the Federal ages in 1994 exceeded the percentages for lenders in the Reserve Bank of New York ("NY Reserve Bank"), as of aggregate in these MSAs. The 1994 performance examina- January 1994.67 Examiners found that Fleet-New York had tion also found that the geographic distribution of Fleet's undertaken significant efforts to meet the credit needs of its HMDA data indicated reasonable penetration of low- to communities through the development of a variety of spe- moderate-income communities, and noted that the number cial loan products. Examiners also concluded that Fleet- of mortgage applications received by Fleet from low- to New York's community delineation was reasonable, did moderate-income census tracts was representative of the not arbitrarily exclude any low- to moderate-income areas, available owner-occupied housing stock within these and was supported by a geographic analysis of Fleet's tracts.71 HMDA data and small business loan applications.68 In deposit interest rates, and loan minimums. Nevertheless, examiners 65. Some commenters asserted that Fleet-New York held over determined that the overall performance rating of the bank was SI billion of deposits in Erie County, but originated less than "satisfactory." Examiners also noted that Fleet-New York had taken $72 million in housing-related loans in the county in 1994. Fleet measures to address concerns about its reduced marketing efforts, responded that it held $1.3 billion in deposits and $1.3 billion in loans including the implementation of CRA-related marketing initiatives, of all types in the Buffalo MSA (which includes Erie County), as of and had developed specific loan products for low- to moderate-income December 31, 1994. borrowers. Fleet also hired a community development officer for the 66. A few commenters alleged that the distribution of Fleet's Central/Mohawk Valley Region, improved its program for community branches in New York violates the fair lending laws, or that Fleet's development ascertainment calls, and increased substantially its combranches in low- to moderate-income and minority communities gen- munity development marketing budget. The Board notes that the steps erally provide fewer services and are not as well maintained as taken by Fleet-New York to address concerns noted in the 1994 branches in more affluent areas. performance examination will be evaluated in future CRA perfor- 67. Fleet-New York was formed in July 1994, through the merger of mance examinations. Fleet Bank of New York, Albany, New York, and Fleet Bank, 69. The bank's 1994 examination noted some violations of the Melville, New York. The 1994 performance examination reviewed the reporting requirements under Regulation C, the requirements relating CRA record of performance of Fleet Bank of New York in its to the maintenance of public files under Regulation BB, and the delineated community, which included most of New York State, failure to issue adverse action notices under Regulation B. Examiners except for New York City and Long Island. Fleet Bank (Melville), found that Fleet-New York took appropriate action before the close of which operated in Long Island and New York City prior to the merger, the examination to correct these violations and to implement adequate received an "outstanding" rating from the NY Reserve Bank at its controls and procedures to ensure future compliance. Although the most recent examination for CRA performance, as of May 1992 NYC Performance Examination also noted violations of Regulation B, ("NYC Performance Examination"). examiners concluded that these violations were isolated and that they 68. Several commenters highlighted discrete portions of the bank's did not involve any discriminatory practices. 1994 performance examination, including examiner concerns about 70. The affiliates include Fleet-New York, Fleet Mortgage, and the bank's ascertainment efforts in the Central/Mohawk Valley and Fleet-RI. other upstate regions, marketing efforts, small business lending and 71. Some commenters criticized Fleet-New York's 1994 perforthe number of automated teller machines ("ATMs") in rural counties, mance examination for providing a tabular analysis of home improve- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

62 Federal Reserve Bulletin • January 1996 Fleet-New York has taken steps to increase its lending to government contracting work.75 In 1994, Fleet provided a low- to moderate-income and minority borrowers, which total of over $263 million in small business loans in New included the development of several housing-related prod- York, including over $58 million in low- to moderateucts specifically designed to meet the credit needs of these income areas through INCITY.76 Many of the small busiborrowers. Although Fleet does not offer the no down ness loan products offered by Fleet in other states, includpayment/no-fee mortgage in New York that it makes avail- ing the "easy business banking" and INCITY micro-loan able in other states, in 1993, Fleet introduced its low- to programs, also are available in New York.77 moderate-income residential mortgage product in New Affordable Housing and Community Development. The York to assist low- to moderate-income borrowers by offer- 1994 performance examination found that Fleet-New York ing flexible underwriting criteria, reduced down payment had developed productive relationships with government, minimums, and no private mortgage insurance requirement nonprofit, and private sector organizations that resulted in for loans with at least a 95 percent loan-to-value ratio.72 many affordable housing and community revitalization ini- Fleet-New York also offers a community revitalization tiatives throughout the bank's community. Examiners mortgage program for low- to moderate-income homebuy- noted that, as of January 1994, Fleet-New York had a total ers. This program, which was developed in conjunction of $55.8 million in loans, lines of credit, and commitments with Neighborhood Housing Services, is offered through to support affordable housing and economic development.78 participating community housing organizations and pro- Fleet-New York invested $2 million in the New York vides 98 percent loan-to-value mortgages with substan- Equity Fund, which purchases limited partnership interests tially reduced fees to borrowers purchasing property in in development projects organized by community housing areas selected by the participating community organiza- and development organizations throughout the state. Fleet tions.73 In 1994, Fleet affiliates originated 146 mortgage also provided a $1.4 million construction line of credit and loans for over $12 million under this program. a $2.9 million permanent line of credit to the Community Fleet also introduced in 1993 a home equity/home im- Lending Corporation, which seeks to rehabilitate and conprovement loan product and an unsecured consumer install- struct affordable housing units in upstate New York. In ment loan product designed specifically for low- to Buffalo, Fleet provided an $8 million loan to finance conmoderate-income individuals in New York. Both products struction of the Ellicott Town Center project.79 Fleet also are available to borrowers with incomes of 95 percent or provided a $2.8 million construction loan to finance 126 less of the state's non-metropolitan median income, and units of rental housing for low-income senior citizens in they use non-traditional underwriting guidelines, including Buffalo. Furthermore, in 1994, Fleet-New York established a debt-to-income ratio of 45 percent. The minimum loan a $1 million mortgage loan pool to provide home mortgage amounts for the home equity/home improvement loan and and home equity loans to members of the Seneca Nation of the consumer installment loan are $4,000 and $500, respec- Indians that live on tribal lands. The Orange County Rural tively. Advisory Corporation reported that Fleet has committed to The credit needs of small businesses in New York also provide permanent financing to support two of its affordare addressed by several Fleet programs. Fleet is an active able housing developments with a total of 77 units. participant in SBA loan programs, and Fleet-New York Fleet-New York has committed $2.5 million to the was the leader in SBA loan originations during 1992 and Affordable Housing Partnership and its funding division 1993 among New York banks.74 In 1993, Fleet-New York for below-market rate mortgages to low- to moderatealso developed a $3 million minority contractor loan guar- income homebuyers and developers of affordable housing antee program in conjunction with the New York State Urban Development Corporation ("UDC"), which pro- 75. UDC guarantees up to 80 percent of the loans made to eligible vides working capital loans at the bank's prime rate to businesses owned by minorities and women. businesses owned by women and minorities to support 76. A few commenters contended that the Board should not consider aggregate data provided by Fleet on its small business lending activities, because Fleet refused to provide the commenters with small business loan data broken down into geographical sub-units. Fleet responded that it does not maintain the data in the format requested by ment HMDA lending only. The text of the examination, however, the commenters. The aggregate small business lending data submitted makes clear that examiners reviewed all categories of Fleet's HMDA by Fleet, while not as detailed as requested by commenters, is relevant lending in connection with their performance examination, and, as to the convenience and needs factor that the Board must consider discussed above, the Board independently reviewed certain HMDA under applicable statutes, and the Board has reviewed such data in data for New York. light of all the facts of record. 72. In 1994, Fleet originated 4,027 mortgage loans totalling 77. In 1994, Fleet made 218 INCITY micro-loans to small busi- $319.7 million in New York under INCITY, which includes this nesses in New York, totalling $12.9 million. affordable mortgage product. 78. Fleet also contributed more than $1.5 million to charitable and 73. Fleet waives all points, application fees, and credit report fees non-profit organizations throughout the state in 1994. on community revitalization program mortgages. In addition, the 79. The first phase of this project involves the renovation of two program requires that only $500 of the minimum down payment must vacant public housing towers to create over 120 rental units for be provided from the borrower's own funds. persons with incomes of 60 percent or less of the area's median 74. During the SBA's 1992-1993 fiscal year, Fleet-New York origi- income. The project eventually will provide 500 rental and townhouse nated 232 SBA-guaranteed loans, and it received the SBA's New York units for low- to moderate-income families, and it is the initial stage of State Top Lender Award in 1992. a program to revitalize an area in downtown Buffalo. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 63 in the Albany region. Rental units built with Partnership Fleet offers in other states where it is located. For example, loans must be leased at rents that are affordable to low- to Fleet intends to operate its CDC, which was initiated in moderate-income families.80 Fleet participates in similar some states on a trial basis, in New York in the near future. housing partnerships in Rochester, Syracuse, and Utica.81 Fleet also notes that in 1994, borrowers in New York Fleet also provided more than $21 million in 1994 to received the largest amount of INCITY mortgage, confinance construction of 279 low-income housing units in sumer, and small business lending, in terms of both the Brooklyn and the Bronx.82 In addition, Fleet has supported number of loans and dollar volume. the Long Island Housing Partnership by providing con- Ascertainment and Marketing. Fleet's 1994 performance struction loans for Partnership projects, and has supported evaluation concluded that Fleet-New York has undertaken the Bellport Hagerman East Patchogue Alliance by provid- significant efforts to ascertain the credit needs of its coming a line of credit to support the Alliance's housing munity.83 Examiners also noted that Fleet-New York used rehabilitation program. In 1993 and 1994, Fleet-New York market research tools to determine the effectiveness of its sponsored several affordable housing conferences in New loan penetration in minority communities, and, based on York, including conferences organized by the Governor's such analyses, had concentrated its marketing and outreach Housing Conference, Neighborhood Preservation Coalition efforts on these communities. The bank's outreach program of New York State, and the New York State Rural Housing is primarily implemented through its call program and Coalition. regional CRA officers, who make direct contact with repre- Fleet also provides credit and technical assistance to sentatives from housing, economic development, business, small businesses in New York through its support of re- and government organizations. To supplement the direct gional and local organizations. For example, Fleet invested call program, Fleet-New York appointed an affordable $200,000 in Ibero-American Investors Corporation, a small housing officer with responsibility for determining commubusiness investment company in Rochester that provides nity housing needs throughout the state. The credit needs equity and debt financing for businesses owned by minori- of small businesses also are ascertained through the stateties and women. Fleet also provided working capital and wide community banking CRA manager and regional comgrants to the Pace-Harlem Small Business Development munity bankers of the community banking group. Finally, Corporation, which provides technical assistance to small examiners noted that Fleet-New York uses a variety of business owners in Harlem and East Harlem. In 1994, Fleet market research tools as an effective means to ascertain committed $13 million to 23 projects sponsored by the consumer credit needs. These research tools included the Long Island Development Corporation, an SBA develop- use of an outside consultant to analyze the geographic ment company. Finally, Fleet has funded or co-sponsored distribution of the bank's HMDA data and loans and conferences and workshops held by the Brooklyn Minority deposits, and focus groups composed of community resi- Business Development Center ("MBDC"), the Bronx dents, including minorities. Examiners credited these ascer- MBDC, and the Nassau-Suffolk MBDC that provide infor- tainment efforts with Fleet's development of new affordmation to businesses owned by minorities and women able housing programs, including the community regarding government and bank programs and contract revitalization program. opportunities. Examiners also found that Fleet had implemented ade- In addition to Fleet's existing lending, affordable hous- quate marketing and advertising programs to inform its ing and community development activities, Fleet intends to communities of the credit products it offered. In 1993, introduce other CRA-related activities in New York that Fleet established a marketing program for its low- to moderate-income consumer products using newspaper and radio advertisements focusing on minorities. Fleet has taken measures to address concerns expressed by examin- 80. Fleet also acts as agent bank for the Affordable Housing Partnerers about the significant decrease in Fleet's credit-related ship's funding corporation. 81. Fleet participated in a $5 million capitalization loan to the advertisements in 1993, especially through the implemen- Greater Rochester Housing Partnership, which seeks to leverage these tation of CRA-related marketing initiatives.84 In addition, funds to build or rehabilitate 500 units of low- to moderate-income housing. Fleet is one of eight banks that committed a total of $4.9 million in below-market rate loans to the Syracuse Housing Partnership for the rehabilitation and construction of affordable homes. 83. The NYC Performance Examination also concluded that Fleet Fleet also will provide $300,000 to the Utica Housing Partnership's Bank had a strong and effective ascertainment program in New York $2.1 million mortgage loan pool to assist low-income mortgage appli- City and Long Island that included ongoing and meaningful contact cants in that city. In addition, Fleet participates in the Affordable with numerous and diverse organizations. Examiners found that Fleet Housing Program of the Fulton Community Development Agency. Bank and Fleet Mortgage had been especially responsive to the needs 82. A few commenters contended that Fleet's lending activities of low- to moderate-income neighborhoods, as evidenced by their through government-guaranteed loan programs and the New York level of mortgage loans made in support of affordable housing initia- City Housing Partnership ("NYCHP") should not be accorded full tives and their substantial volume of indirect home improvement weight under the CRA. The Agency CRA Statement, however, specif- lending in low- to moderate-income areas. ically notes that financial institutions may seek to fulfill their CRA 84. A few commenters claimed that the CRA performance examinaresponsibilities by participating in government-insured lending pro- tions of Fleet Bank (Melville) and Fleet Bank of New York should not grams, such as programs sponsored by the FHA, VA, and SBA. be given significant weight in these applications because the examina- Moreover, the NYC Performance Examination favorably noted Fleet's tions took place prior to the merger of these two banks to form participation in the NYCHP programs. Fleet-New York, and that Fleet's record of performance in New York Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

64 Federal Reserve Bulletin • January 1996 in 1994, Fleet introduced special advertising campaigns in closings.89 In 1994, examiners reviewed Fleet-New York's the areas in which it operated that highlighted the mort- branch closings in Upstate New York during 1992 and gage, small business, and consumer loan products available 1993,90 and concluded that the branch closings in low- to through INCITY.85 moderate-income neighborhoods were reasonable, and that Branches and Products. Fleet-New York offers a "basic comparable banking services were available within a short checking" account that requires a $25 opening balance and distance of the closed branches.91 no subsequent minimum balance, is subject to a $3 monthly fee, and permits depositors to make eight free transactions 4. Rhode Island a month.86 As of January 1994, Fleet-New York had over 52,000 basic checking accounts. The 1994 performance Several commenters alleged that HMDA data and other examination also noted that Fleet offered a senior checking lending data show disparities by race in Fleet's lending in account for individuals 60 years or older. The senior Rhode Island and claimed that neither Fleet nor Shawmut account requires no minimum balances, and imposes no are meeting the credit needs of low- to moderate-income per check or monthly service charges. neighborhoods in Providence. In addition, commenters al- Fleet-New York has 335 branches in New York, includ- leged that Fleet: ing 71 in low- to moderate-income census tracts and 12 in (1) Has a poor record of mortgage loan processing and minority census tracts.87 The 1994 performance examina- servicing in Rhode Island;92 tion found that Fleet-New York's branches were reasonably accessible to all segments of its community, including low- to moderate-income communities, and that the bank's 89. Certain New York commenters objected to Fleet-New York's products and services were accessible throughout its delin- June 1995 closure of its Genesee Street-Michigan Avenue branch in eated community.88 Fleet-New York also maintains a for- Buffalo, and its October 1994 closure of the Water Street and Erie mal branch closing policy that provides for communication Plaza branches in Elmira. Commenters also contended that Fleet representatives failed to meet with community leaders before closing with community groups and civic leaders prior to branch the Buffalo branch. Fleet responded that branches of 26 financial institutions, including three Fleet branches, remained within one mile of the Buffalo branch at the time of its closing. In addition, Fleet City and Long Island has not been reviewed since 1992. The Board indicated that savings from the closure of the Buffalo branch were notes that the most recent CRA performance examination of Fleet used to install ATMs in two other branches located in low- to Bank of New York was completed as of January 1994, and reviewed moderate-income census tracts in Buffalo, including one branch that is most of the operations acquired by Fleet-New York. The Board has only half a mile from the closed branch. Fleet also stated that, before it considered the limitations of these examinations in reviewing this closed the branch, its representatives met with 11 local government proposal, and also has considered the HMDA data discussed in this and community leaders, including several city council members. Fleet order and Fleet-New York's activities since the most recent CRA stated that the Elmira branches had experienced a significant decline examination. in aggregate deposits over the past few years, and that the deposits of 85. In 1994, Fleet initiated two corporate INCITY marketing cam- these branches were transferred to a new branch with drive-up bankpaigns that used more than 100 newspapers and 20 radio stations ing facilities and increased parking. throughout New England and New York, including numerous newspa- 90. Several commenters alleged that Fleet-New York improperly pers and radio programs intended for minority audiences. Each adver- closed its only branch in Binghamton, and removed Broome County tisement included Fleet's 24-hour toll-free number, and many of the (which includes Binghamton) from its CRA-delineated community in advertisements were in Spanish, Portuguese, Chinese, or Cambodian. February 1993. Examiners reviewed the closure of Fleet's Bingham- 86. Some commenters contended that Fleet-New York's branch ton branch during the 1994 performance examination, and noted that, network has fewer ATMs, including bilingual ATMs, than Fleet's at the time of the closing, 20 branches of other financial institutions branch networks in other states. Fleet has 231 ATMs in New York, were located within a four mile radius of the closed branch. Fleet also including 80 with bilingual capability. Fleet indicated that it has indicated that, at the time of the closing, the branch controlled less installed ATMs in eight branches in low- to moderate-income neigh- than 1 percent of total deposits in the Binghamton market. In addition, borhoods this year. As noted in this order, the 1994 performance in 1994, examiners reviewed Fleet-New York's community delineaexamination found that the bank's products and services were accessi- tion in upstate New York, and found that it was reasonable, did not ble throughout its delineated community. arbitrarily exclude any low- to moderate-income areas, and was sup- 87. Two of Fleet-New York's three branches in Albany are located ported by a geographic analysis of Fleet's HMDA data and small in low- to moderate-income census tracts. In Rochester, three of business loan applications. Examiners noted that the bank received Fleet-New York's five branches are located in low- to moderate- less than 1 percent of its HMDA-reportable loan applications in 1993 income census tracts. Certain commenters contended that various from the five New York counties (including Broome County) that Fleet branches located in downtown low- to moderate-income census were not included in the bank's delineated community. tracts in New York do not, in fact, serve low- to moderate-income 91. A few commenters also objected to Fleet Bank's 1991 closure of neighborhoods, and that Fleet-New York has no branches in minority its branch on the Grand Concourse in the Bronx, New York. The NYC neighborhoods in Albany. As discussed in this order, examiners found Performance Examination reviewed this closure, and noted that, at the that Fleet-New York used various means to ascertain the credit needs time of the closing, nine branches of other financial institutions were of low- to moderate-income and minority borrowers in New York, and located within a half-mile radius of the branch. Examiners also noted that its lending programs, including programs for low- to moderate- that Fleet had unsuccessfully attempted to find an alternative site for income and minority borrowers, were available throughout its delin- the branch. eated community. The Board also notes that each census tract in 92. One commenter alleged that Fleet has not sufficiently assisted Albany with a minority population of 50 percent or greater is adjacent mortgage customers experiencing financial difficulties. Fleet denied to a census tract with a Fleet branch. this allegation, noting that it has worked with the commenter to 88. The NYC Performance Examination also concluded that the resolve the customers' cases. This commenter also alleged, without bank's branches in New York City and Long Island were reasonably providing specific facts, that Fleet failed to honor certain commitaccessible to all segments of the community. ments in CRA agreements that it made with the commenter in 1986 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 65 (2) Has not actively ascertained the credit needs of low- Island Housing and Mortgage Finance Corporation to moderate-income areas of Providence; and ("RIHMFC"): (3) Has an insufficient number of branches serving low- (1) The First Home Program, which offers first mortgage to moderate-income neighborhoods in South Providence. loans with below-market interest rates, low down payments, and flexible underwriting standards to first-time Fleet National Bank, Providence, Rhode Island ("Fleet- homebuyers; and RI"), received a "satisfactory" rating from the OCC (2) The JumpStart program, through which creditworthy at its most recent CRA performance examination, as of low- to moderate-income borrowers receive down pay- March 31, 1995.93 Examiners found that Fleet-RI's com- ment assistance and mortgage financing at below market munity delineation was reasonable and did not exclude interest rates for purchases of 1—4 family ownerlow- to moderate-income areas, and that the bank affirma- occupied residences.97 tively solicited credit applications from all segments of its community, including low- to moderate-income and minor- The 1995 performance examination characterized Fleet as ity census tracts. a leader among Rhode Island financial institutions in origi- HMDA Data and Lending Activities. The Board has nating loans through RIHMFC programs in 1994,98 with carefully reviewed 1993 and 1994 HMDA data for the 406 such loans totalling $31.2 million, including 139 Jump- Fleet affiliates that originate loans in all MSAs in Rhode Start loans totalling more than $9.6 million 99 Examiners Island.94 These data indicate that the percentages of home- also found that, during 1993 and 1994, Fleet made 377 related loan applications from and loans by Fleet to Afri- FHA loans totalling more than $39 million and 178 VA can Americans, Hispanics, and residents in low- to loans totalling almost $19 million in Rhode Island.100 In moderate-income census tracts increased from 1993 to 1994, Fleet also conducted a direct mail program on a trial 1994. basis in Providence that offered pre-approved, consumer In addition, examiners in the 1995 performance exami- installment loans to residents of low- to moderate-income nation noted that although the 1993 and 1994 HMDA data neighborhoods of Providence, which generated more than indicated that Fleet's loan approval rates for residents in 400 new loans totalling $1.3 million. low- to moderate-income census tracts remained well be- To address the credit needs of small businesses in Rhode low approval rates for applicants living in higher income Island, Fleet-RI provides small business loans through census tracts, Fleet had approximately doubled the number Fleet's "easy business banking" program and its commuand volume of HMDA-reportable loan originations in low- nity banking program, which includes loans ranging from to moderate-income census tracts between 1993 and $100,000 to $500,000 to businesses with sales of less than 1994 95 Examiners also found that, in 1994, the percentage $5 million. The 1995 performance examination noted that, of all HMDA reportable applications from minority appli- during 1994 and the first five months of 1995, Fleet-RI cants (approximately 11 percent) was generally equivalent made 465 "easy business banking" loans totalling approxto minority representation in Rhode Island's population. imately $21.5 million and more than 300 community bank- Fleet-RI has taken steps to strengthen its record of ing loans totalling approximately $58.7 million. In addihelping to meet the housing-related credit needs in low- to tion, the report of examination found that Fleet led the state moderate-income communities in Rhode Island. In addi- in SBA loans in 1993 and 1994, with 126 loans totalling tion to offering its portfolio mortgage loans,96 Fleet partici- $25.7 million. pates in the following programs sponsored by the Rhode Affordable Housing and Community Development. To help meet the needs of low- to moderate-income residents, Fleet-RI also provides financing for the construction and renovation of rental and owner-occupied housing units in and 1989. Fleet responded that it is in substantial compliance with the coordination with RIHMFC and local and national non- 1986 agreement, but that it has no record of any 1989 written profit housing organizations. For example, OCC examiners agreement with the commenter. The Board notes, moreover, that agreements between banking organizations and community groups are private arrangements that are not enforceable by the Board. 93. The Board also carefully considered the most recent CRA 97. Under the JumpStart program, RIHMFC provides first and performance examination of Shawmut Bank Connecticut, National second mortgage financing, and Fleet provides unsecured financing to Association ("Shawmut Bank-CT"), which has branches in Rhode support down payment and closing costs at below market rates. Island, by its primary federal supervisor, the OCC. The OCC rated 98. A commenter alleged that Fleet has made very few mortgages in Shawmut Bank-CT "satisfactory," as of December 31, 1993. The South Providence under the RIHMFC's low-income housing program. Board also notes that, in order to address the competitive issues raised Fleet responded that, as of July 31, 1995, it had 106 RIHMFC loans in by this proposal, Fleet will divest all but one of Shawmut Bank-CT's its servicing portfolio with outstanding balances totalling more than branches in Rhode Island. $6 million in four low- to moderate-income census tracts in South 94. The affiliates include Fleet-RI and Fleet Mortgage. Providence. 95. The HMDA reportable loans in the OCC's analysis included 99. In 1994, Shawmut Mortgage Company ("Shawmut Mortgage") purchase money residential mortgages, residential refinance loans, and made 205 RIHMFC loans totalling more than $16 million. home improvement loans. 100. Fleet reported that it made 749 mortgage loans totalling 96. Fleet reported that it made 152 loans totalling $11 million in $61.3 million under the INCITY credit initiatives in 1994, including Rhode Island in 1994 under its special portfolio loan program for low- portfolio loans, RIHMFC program loans, FHA and VA loans, and to moderate-income borrowers. FNMA Homebuyer loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 Federal Reserve Bulletin • January 1996 noted that, since 1993, Fleet has provided $749,000 in credit needs were for affordable mortgage loans and small financing for the construction of 43 units of affordable business loans, Fleet developed and introduced its portfolio single-family housing in Providence and assisted RIHMFC loan and "easy business banking" programs. In addition, in financing a 27-unit affordable housing project in South examiners concluded that Fleet-RI aggressively publicized Providence. Fleet-RI also provided a $100,000 loan to the its products and services throughout its delineated commu- Stop Wasting Abandoned Property Gallup Street Project to nity, using a variety of media and other means. help rehabilitate four homes in South Providence to be sold Branches and Products. The OCC's 1995 examination to low-income residents. In addition, Fleet-RI is one of found Fleet-RI's branches to be reasonably accessible to four lenders participating in the Providence Plan Housing all segments of its delineated community, including low- to Corporation's Bank Lines Program, a $30 million mort- moderate-income areas.102 Examiners noted that Fleet-RI gage program designed to provide homeownership oppor- operates 57 branches and 104 automated teller machines, tunities for low- to moderate-income households in Provi- many of which offer service in Spanish, French, and Portudence. Fleet-RI also has made a commitment to provide guese. Examiners further noted that Fleet's corporate level $750,000 in financing for the East Providence Neighbor- branch closing policy was satisfactory, and that Fleet-RI hood Housing Service's affordable housing program. Un- had followed the policy in closing or consolidating ten der this program, the bank provides first mortgage financ- branches since January 1993. Examiners added that each of ing subject to flexible underwriting guidelines and these closings was related to an acquisition and involved participates in a loan pool with other lenders for second consolidation with nearby branches. mortgage financing. Moreover, Fleet-RI made a capitalization deposit pledge of $200,000 to Oasis Community De- 5. New Hampshire velopment Federal Credit Union, a new credit union being formed to serve residents of South Providence. New Hampshire commenters contended that Fleet has not Fleet-RI introduced special loan programs totalling more made a sufficient number of loans to low-income residents than $20 million under the Northern Rhode Island Initia- in New Hampshire's rural communities or adequately partive to address needs arising from the region's depressed ticipated in affordable housing projects, particularly those economic conditions, including a reduced rate home projects eligible for low-income housing tax credits.103 equity/home improvement loan, a no-down-payment first Fleet Bank-NH, Nashua, New Hampshire ("Fleet-NH"), mortgage for first-time homebuyers, and a commercial received an "outstanding" rating from the Federal Reserve mortgage for financing 5-to-15 unit investment proper- Bank of Boston ("Boston Reserve Bank") at its most ties.101 Fleet-RI also has committed $1 million to a low- recent examination for CRA performance, as of August 8, interest housing fund that provides below-market interest 1994. The examination found that Fleet-NH's community rate loans to Rhode Island non-profit housing agencies for delineation was reasonable, that it included most of the development costs. In addition, Fleet-RI participates in the populated areas of the state, and that it did not exclude Minority Contractor Program of the Rhode Island Depart- low- to moderate-income neighborhoods. Examiners also ment of Transportation ("RIDOT") through which firms noted that, although Fleet's lending activity was weaker in that are owned by women and minorities that are awarded several rural counties than in the state's more urban coun- RIDOT contracts receive short-term working capital loans ties, its 1993 HMDA data indicated that 63 percent of its from Fleet. Fleet also made a $500,000 equity investment HMDA-reportable loan applications came from rural areas in the Minority Investment Development Corporation, outside the state's three MS As, and that low- to moderatewhich provides loans, equity investments, and technical income applicants were treated consistently throughout the state. assistance for businesses owned by minorities. Ascertainment and Marketing. The 1995 performance Examiners also concluded that Fleet's home mortgage examination concluded that Fleet-RI had a good record of and small business lending were reasonably distributed activities to ascertain community credit needs. Examiners throughout the state. In addition, examiners found that the found that Fleet-RI ascertains credit needs through bank affirmatively solicited credit applications from all community-based contacts, a formal branch manager call segments of its community. The 1994 performance examiprogram, open house programs at which community and nation concluded that the bank's branches were accessible civic leaders meet with Fleet's senior management, peri- to all segments of its delineated community. odic meetings with local community groups to discuss their concerns and the performance of Fleet's INCITY initiatives, use of outside consultants, and other ongoing working relationships with governmental and private sec- 102. Commenters alleged that only one Fleet branch serves the lowtor representatives. Examiners also noted that after ascer- to moderate-income neighborhoods of South Providence. Fleet retaining that Rhode Island communities' most significant ported that it has ten branches in low- to moderate-income census tracts in Rhode Island, including five in Providence, and noted that three of the branches serve low- to moderate-income neighborhoods in South Providence. 101. Fleet-RI introduced a similar series of loan programs in the 103. In addition, commenters argued that Fleet should cash govern- Bristol County area and in the Attleboro and New Bedford communi- ment checks for customers and non-customers at all its branches in ties in Rhode Island. New Hampshire. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 67 Lending Activities. Fleet-NH has taken a number of steps pates in several multi-bank loan pools designed to assist in to improve its record of helping to meet the housing- the rehabilitation and development of permanent affordable related credit needs in low- to moderate-income areas housing. For example, Fleet-NH has committed financial throughout its designated communities. For example, and staff support to the New Hampshire Community Rein- Fleet-NH and its affiliates offer several loan products to vestment Corporation's $30 million loan pool that is being low- to moderate-income borrowers, including a portfolio formed to finance affordable housing projects, and it exhome mortgage loan that requires a 5 percent down pay- pects to provide the third largest share of this pool. In ment, half of which can be a gift, grant or seller conces- addition, Fleet-NH provided $500,000 to the Concord sion. The 1994 performance examination noted that for the Community Housing Investment Pool, $1 million to the first seven months of 1994, the bank made $7.4 million of Seacoast Community Banking Council's loan pool, and mortgages under this program. Examiners found that, dur- $200,000 to the MNHS loan pool. Fleet-NH also particiing 1993 and the first six months of 1994, Fleet's mortgage pated in the formation of a grant pool through the NH lending in New Hampshire included 52 New Hampshire Charitable Foundation, which will provide operating capi- Housing Finance Authority ("NHHFA") loans for low- to tal to affordable housing groups, and provided operating moderate-income families totalling $4.3 million, 335 FHA funds directly to MNHS and French Hill Neighborhood loans totalling $34.5 million, and 363 VA loans totalling Housing Services. The bank also donated $40,000 to the $45.2 million.104 In addition, examiners noted that New Hampshire Community Loan Fund, which helps resi- Fleet-NH offers a home improvement loan that permits dents of mobile home parks and apartment buildings behigher-than-usual loan-to-value and debt-to-income ratios, come homeowners.107 In addition, Fleet-NH provided a and an unsecured personal loan that permits a higher-than- $125,000 line of credit to The Working Capital Program, usual debt-to-income ratio and a longer repayment term. which is a peer lending program that extends credit to self-employed business owners throughout New Hamp- As part of its small business lending activities in New shire. Most borrowers in this program are women who Hampshire, Fleet-NH provides SBA-sponsored loan prodoperate home-based businesses. Fleet-NH also has agreed ucts, including loans through the Granite State Economic to participate in the Governor's Loan Pool for Economic Development Corporation/SBA 504 Loan Program, and Development throughout the state.108 loans sponsored by the New Hampshire Business Finance Authority ("BFA"). The 1994 performance examination found that the bank approved 80 SBA loans totalling D. Other Convenience and Needs Considerations $32.9 million and 20 BFA loans totalling more than $9 million in the first nine months of 1994.105 In addition, HMDA Data In General. In addition to the state-specific examiners noted that Fleet-NH extended 99 "easy business HMDA data discussed above, the Board has reviewed, on banking" loans totalling $3.2 million during the first nine an aggregate basis, 1993 and 1994 HMDA data reported by months of 1994. Fleet reported that it approved 411 such Fleet affiliates in Massachusetts, Connecticut, New York, loans totalling $22 million during 1994 and the first eight Rhode Island, New Hampshire, and Maine, and in certain months of 1995. MS As identified by the commenters.109 These data indicate Affordable Housing and Community Development. that Fleet has generally improved its lending record of Fleet-NH also participates in various affordable housing housing-related loans to residents of low- to moderateand community development projects, including low- income census tracts and African-American and Hispanic income housing tax credit investments. For example, borrowers. For example, HMDA data for Fleet subsidiaries Fleet-NH made a $950,000 low-income housing tax credit investment in Merrimack Place, a 16-unit townhouse housing tax credit projects throughout the state with the New Hampproject for low- to moderate-income residents in the Center shire Community Reinvestment Corporation. City area of Manchester sponsored by the Manchester 107. One commenter criticized Fleet Bank-NH for not becoming a Neighborhood Housing Service ("MNHS"), a non-profit member of the Federal Home Loan Bank of Boston ("FHLBB") and organization dedicated to the revitalization of Manches- thereby increasing its access to low-costs funds to finance affordable ter's inner-city neighborhoods.106 Fleet-NH also partici- housing. This commenter also commended Shawmut Bank NH for its membership in the FHLBB. Fleet has indicated that it recently reached an agreement with the FHLBB to gain access to its affordable housing funds. 104. Fleet reported that it originated NHHFA mortgages totalling 108. Under this program, Fleet Bank-NH has committed that more that $5.7 million during 1994 and the first eight months of 1995. $20 million of its total loan production will be comprised of SBA and 105. Fleet reported that Fleet-NH was the leading bank participant BFA program loans. in the various SBA programs in New Hampshire as of September 30, 109. The MSAs include Boston, Hartford, Providence, and all the 1994. Fleet also noted that 93 small business loans, totalling MSAs in New York. One commenter contended that Fleet also has a $10 million, were made in low- to moderate-income communities poor record of lending to African Americans in Milwaukee, Wisconduring the first eight months of 1995. sin, Chicago, Illinois, and Oakland, California. The Board notes that 106. A commenter maintained that Fleet has established minimum Fleet has no banks serving these cities, and that special mortgage limits for investing in low-income housing tax credit projects and that programs are not currently available from Fleet's mortgage subsidiary this policy has the effect of excluding small projects in rural and small that operates in these areas. Fleet's mortgage subsidiary, however, is urban communities. Fleet denied that it has such a policy, noting that in the process of forming a national low- to moderate-income lending each proposal is evaluated individually. Fleet also stated that it is unit to develop products that address the needs of low- to moderatecurrently discussing a pooled approach to investments in low-income income borrowers and an outreach program to reach those borrowers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 Federal Reserve Bulletin • January 1996 indicate that, while the overall number of applications with predominately low- to moderate-income and minority generally declined from 1993 to 1994, the percentage of residents. applications from and originations to residents of low- to Branch Closings. A number of commenters have raised moderate-income census tracts and African-American and concerns that branch closures that would result from con- Hispanic borrowers increased. In some categories and ar- solidating the operations of Fleet and Shawmut would have eas, Fleet's subsidiaries lend at a level that equals or a material adverse effect on low- to moderate-income exceeds that of their peers. In other categories and areas in neighborhoods. Fleet has represented that it does not have these states and MSAs, the data show a low number of a final branch closing plan but stated its intent to remain in housing-related loans to minorities and low- to moderate- all communities where Fleet and Shawmut currently operincome applicants, and disparities in the declination rates ate branches, except where divestiture is required to adfor minorities compared to those for non-minority appli- dress the competitive issues raised by this proposal. cants. The Board has carefully reviewed Fleet's branch closing The Board is concerned when an institution's record policy, which has been implemented at all Fleet subsidiary indicates disparities in lending to minority applicants, and banks, in light of these comments. Under this policy, the it believes that all banks are obligated to ensure that their bank is required to assess and consider the impact of any lending practices are based on criteria that assure not only branch closures on the banking convenience and needs of safe and sound lending, but also equal access to credit by the public in the communities in which such branches are creditworthy applicants regardless of race. The Board rec- located. Fleet also is required under this policy to evaluate ognizes, however, that HMDA data alone provide an in- alternatives to closure, such as changing services offered complete measure of an institution's lending in its commu- and hours of service, upgrading facilities, and increasing nity. The Board also recognizes that HMDA data have automation. Examiners found the branch closing policy to limitations that make the data an inadequate basis, absent be satisfactory and determined that Fleet's subsidiary banks other information, for conclusively determining that an have followed this policy in closing or consolidating institution has engaged in illegal discrimination in making branches since the previous CRA performance examinalending decisions. tions. No materially adverse effects on low- to moderate- As discussed above, the most recent CRA examinations income neighborhoods from branch closings were identiof Fleet's subsidiary banks found no evidence of illegal fied in any performance examination. discrimination or policies that discourage applicants from Recent amendments to the FDI Act require an insured pursuing credit applications. Fleet also has implemented a depository institution to submit a notice of any proposed comprehensive corporate program designed to help ensure branch closing to the appropriate federal banking agency equal treatment of loan applicants and compliance with fair no later than 90 days before the date of the proposed lending laws and other credit-related laws by all its subsid- branch closing.111 Customers of the insured depository iaries. This program includes a second review of all mort- institution also must be notified. The Joint Agency Policy gage, consumer, and small business loan applications rec- Statement on Branch Closings ("Joint Policy Statement") ommended for denial from low- to moderate-income requires that the notice: applicants or applicants located in low- to moderate- (1) Identify the branch to be closed and specify the income areas. proposed date of closing; This program also includes policies and procedures for (2) Provide a detailed statement of the reasons for the compliance with those laws, as well as compliance and decision to close the branch; and diversity training for all management officials, loan offic- (3) Provide statistical or other information in support of ers, and any staff members who have contact with the such reasons consistent with the institution's written public. Fleet has implemented management reviews of policy for branch closings.112 compliance and self-evaluation systems to analyze lending patterns and compliance,110 including self-testing proce- Based on all the facts of record, and in light of the dures as part of regularly scheduled consumer compliance requirements imposed by Fleet's branch closing policy and reviews. Fleet also has established a fair lending policy the Joint Policy Statement, which both afford interested committee to oversee the corporation's fair lending activi- persons notice of branch closings, the Board believes that ties and to manage compliance with applicable federal and concerns about branch closures do not warrant denial of state laws and regulations. Furthermore, Fleet has taken a variety of steps discussed above at its subsidiary banks that assist in meeting the housing-related credit needs in areas 111. See section 228 of the Federal Deposit Insurance Corporation Improvement Act of 1991, which added a new section 42 to the FDI Act (12 U.S.C. § 183 lr-1). 112. 58 Federal Register 49,083 (1993). The Joint Policy Statement also provides that the branch closing notice procedure does not apply 110. The Board notes that in 1993, Fleet implemented a corporate to the movement of branches within the same immediate neighbor- HMDA compliance program that uses an automated collection, man- hood that does not substantially affect the nature of the business or the agement, and reporting system. With this system, management can customers served. Such occurrences involving only short distances are analyze lending patterns in all its communities and use these analyses viewed essentially as branch consolidations or relocations under the to monitor progress in meeting its CRA and fair lending goals. Joint Policy Statement. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 69 this proposal. The Board's action on these applications and this civil action is in its preliminary stages and that no notices is conditioned on Fleet submitting quarterly reports conclusions of wrongdoing have been determined.116 In on all branch closings to the appropriate Reserve Bank for addition, this proceeding would provide parties who were 18 months after consummation of this proposal. These injured by FFI's practices with an adequate remedy if the reports must include the underlying reasons and statistical allegations of improper practices could be substantiated. If information supporting the decision to close the branch, a court determines, or an examination finds, that Fleet or and detail the efforts made by Fleet to minimize the impact any of its subsidiaries has engaged in illegal activities, or of any closure in low- to moderate-income neighborhoods. that the Fleet initiatives described below are insufficient, The Board also notes that any branch closings by Fleet, the Board or the primary federal supervisor of a Fleet particularly in low- to moderate-income neighborhoods, subsidiary retains jurisdiction and full supervisory authorwill be assessed by examiners as part of the institution's ity to take appropriate action. CRA performance evaluation, and will be reviewed by the Fleet and FFI have taken a number of steps to address Board in future applications to acquire a depository facil- the issues raised by the allegations concerning FFI's lendity. ing practices. These steps, which were reviewed by the Compliance with Fair Lending Laws and Other Credit- Board in the Fleet New York Order, include discontinuing Related Laws. Several commenters have cited past and the practice of purchasing individual loans from third parpending lawsuits against Fleet's nonbanking lending sub- ties (except for bulk loan packages from regulated financial sidiaries alleging violations of fair lending laws and other institutions, certain institutional investors, or a federal credit-related laws, that previously have been considered agency) and making significant changes in senior manageby the Board.113 In particular, the Board has carefully ment and managerial practices, including management rereviewed past and pending lawsuits filed against, and state view and oversight, at both the holding company and the investigations of, Fleet and its nonbanking finance subsid- subsidiary. Fleet also has complied with its commitment to iary, Fleet Finance, Inc. ("FFI"), in Fleet Bank of New inform the Board promptly of each material development York.UA in any litigation involving FFI.117 A few commenters raised new compliance issues related In connection with its examination of a nonbank mortto Fleet's lending and debt collection practices in Michi- gage subsidiary of Fleet, the Board reviewed a loan pricing gan. These allegations form the basis of a recently filed policy used by the mortgage company as a means of class action lawsuit against FFI.115 The Board notes that maximizing earnings and compensating loan officers, to determine if this policy was being applied in a manner consistent with the fair lending laws. The policy under 113. One commenter also filed a complaint with the United States review allowed employees of the mortgage company to Department of Housing and Urban Development ("HUD") alleging share with the mortgage company any excess in origination that Shawmut's subsidiary bank in Massachusetts treated minority charges or interest rates above the mortgage company's "testers" in a disparate manner. The Board believes that HUD and the base rates that the employee was able to charge the bor- DOJ, under a Consent Decree filed December 13, 1993, in the case styled United States v. Shawmut Mortgage Company, Civ. No. rower. This practice is commonly referred to in the indus- 3:93CV-2453 (D. Conn.), have adequate authority to address any try as "overages" and involves customers who have been violations that the commenter can substantiate. Moreover, after the granted credit by the mortgage company. proposed merger, Fleet would become subject to the Consent Decree, Based on statistical analyses of overages in connection for its remaining term with respect to the operations of Shawmut Mortgage acquired by Fleet. The Board notes that, since this Consent with loans that closed during a six-month period in 1993 Decree was entered, Shawmut's subsidiary banks and Shawmut Mort- and an on-site inspection, the Board identified concerns gage have undergone fair lending examinations by the OCC, which under the fair lending laws regarding the implementation found that all the Shawmut subsidiaries were in compliance with the of the overage policy of the mortgage company at two of substantive provisions of antidiscrimination laws and regulations and the mortgage company's offices regarding loans to African revealed no evidence of illegal discrimination or prescreening of loan applicants. Americans and Hispanics. The analyses did not raise con- 114. Fleet Bank of New York, 80 Federal Reserve Bulletin 170 cerns at the other offices of the mortgage company. Upon (1994) ("Fleet New York Order"); see also Fleet Financial Group, notification of these concerns, Fleet terminated this prac- Inc., 80 Federal Reserve Bulletin 818 (1994). This review included a tice at all of the offices of its mortgage subsidiary. Fleet number of complaints filed in Georgia and other states against Fleet and FFI. The Board noted that Fleet had entered into settlement agreements with the Attorneys General of Georgia and Massachusetts concerning FFI's mortgage lending practices in those states. Some of the Board under the "fair use" exception in the Copyright Act of 1976 those cases have been settled, including a racial discrimination case in (17 U.S.C. § 107). See Harper & Row, Publishers, Inc. v. Nation Georgia, a Virginia case involving premium payments to third party Enterprises, 471 U.S. 539. 549 (1985). loan brokers, and mortgage escrow account and adjustable rate mort- 116. The Michigan Office of the Attorney General also is reviewing gage overcharge cases in a number of states. In other cases, courts the allegations in this complaint. found Fleet's practices to be consistent with applicable law. Several 117. One commenter also alleged that Fleet participated in the credit cases are still pending trial. decisions made by the NYCHP, but failed to provide adverse action 115. Noel v. Fleet Finance, Inc., No. 95-73457 (E.D. Mich, filed notices to applicants who were denied credit or to report such denials August 25, 1995). These allegations were also raised in television in HMDA data. As discussed below, the Boston Reserve Bank renews reports that profiled some Michigan homeowners who were cently completed an examination of the Fleet mortgage subsidiary adversely affected by FFI's alleged improper practices. A videotape of engaged in this lending program, and has full supervisory authority to the news reports has been made part of this record and considered by ensure compliance with applicable notice and reporting requirements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 Federal Reserve Bulletin • January 1996 also has cooperated with the Board in its review of this eluding low- to moderate-income neighborhoods, are genmatter. erally satisfactory. The Board brought this matter to the attention of the The Board recognizes that the record compiled in these DOJ and provided the DOJ with the data and analyses applications points to areas for improvement in the CRA compiled by the Board. The matter is under review by the performance of Fleet. As noted in this order, Fleet has DOJ and the Board. taken steps to implement and strengthen its record of In view of the circumstances noted above, the corrective CRA-related activities, including implementation of its actions taken by Fleet, and the limited number of offices INCITY lending program to low- to moderate-income araffected, the Board has determined that this matter does not eas. The Board believes that these initiatives demonstrate warrant denial of Fleet's applications to acquire Shawmut Fleet's ability and willingness to help to meet the credit or delay pending resolution of the matter. The Board has needs of its communities, including low- to moderateauthority to take supervisory action, if appropriate, upon income neighborhoods, and could help Fleet's subsidiary any resolution of this matter. The Board's action on the banks improve their CRA performance and address the applications in this case is conditioned on continuation of weaknesses described by commenters. the commitment previously given by Fleet not to resume After carefully considering all the facts of record, includthe practice of overaging without Board approval. ing the testimony at the public meetings, the comments received, Fleet's responses, and relevant reports of exami- Conclusion Regarding Convenience and Needs nation, the Board concludes that the convenience and needs Considerations considerations, including the CRA records of performance of Fleet and Shawmut, are consistent with approval of The Board has carefully considered the entire record, in- these applications. The Board expects Fleet to continue to cluding the substantial public comment in this case, in strengthen its CRA performance through its initiatives, and reviewing the convenience and needs factors under the will monitor Fleet's progress and its compliance with the relevant banking statutes.118 A number of commenters conditions discussed in this order in future applications to raised specific and general concerns about the adequacy of acquire deposit-taking facilities.119 Fleet's existing CRA record and the effect of this proposal on the future availability of banking products and services Other Considerations in low- to moderate-income areas. Other commenters indicated that Fleet's current CRA programs by Fleet were Fleet also has filed notice under section 4(c)(8) of the BHC very productive in their communities and expressed their Act to operate a savings association and engage in trust belief that their communities would benefit by the merger company, investment advisory, and data processing activiof Fleet and Shawmut. Based on a review of the entire ties. In addition, Fleet has filed notice to increase its record of performance, including information provided by ownership interest in a joint venture with other banking the commenters, and the performance examinations by the organizations that operates a retail electronic funds transfer banks' primary supervisors, the Board believes that efforts network. The Board has determined by regulation that the by Fleet and Shawmut to help meet the credit needs of all operation of a savings association and trust company, insegments of the communities served by these banks, in- vestment advisory, and data processing activities are closely related to banking for purposes of section 4(c)(8) of the BHC Act.120 The Board also has determined that the 118. Some commenters suggested that the Board delay consider- activities of the joint venture in which Fleet proposes to ation of, or extend the public comment period for, this proposal in increase its investment are so closely related to banking as order that more information could be considered, including results of a to be a proper incident thereto within the meaning of new CRA examination of Fleet-New York (especially for New York section 4(c)(8) of the BHC Act.121 Moreover, the Federal City and Long Island) requested by commenters, results of a fair lending examination of Fleet's mortgage operations requested by Reserve System previously has approved applications by commenters, resolution of pending litigation, detailed information on Shawmut to engage in all the proposed activities. Applibranch closings, and additional data on small business, rural, and cants have committed that they will conduct these activiother lending activities by county or branch. The Board is required under applicable law and its processing procedures to act on applications submitted under the BHC Act and the Bank Merger Act within specified time periods. The Board notes, moreover, that the commenters and Fleet have had an extended opportunity, including three public meetings, to submit information for the record and have, in fact, 119. The Board received comments from several individuals and provided substantial submissions. As discussed above, the Board has small business owners relating to specific loan applications or transaccarefully reviewed the record in this case, including information tions with several Fleet subsidiary banks. These comments related to provided by commenters and Fleet about its CRA performance since private disputes arising out of individual transactions that, in light of the most recent performance examinations of its subsidiary banks and all the facts of record, do not warrant denial of this proposal. The information relating to the prospective effects of this merger on the Board has provided copies of these comments to the appropriate convenience and needs of the communities to be served. Based on all federal agency responsible for supervising the relevant Fleet subsidthe facts of record, the Board concludes that the record is sufficient to iary. act on this proposal at this time, and that delay or denial of this 120. See 12 C.F.R. 225.25(b)(3), (b)(4), (b)(7), and (b)(9). proposal on the grounds of informational insufficiency is not war- 121. The Bank of New York Company, Inc., 80 Federal Reserve ranted. Bulletin 1107 (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 71 ties in accordance with the Board's regulations and orders commitments made in connection with these applications approving these activities for bank holding companies.122 and notices as well as the conditions discussed in this In order to approve these notices, the Board also must order. determine that the acquisition of Shawmut's nonbanking The Board's determination as to the nonbanking activisubsidiaries and performance of the proposed activities by ties to be conducted by Fleet is subject to all the conditions Fleet "can reasonably be expected to produce benefits to in the Board's Regulation Y, including those in sections the public . . . that outweigh possible adverse effects, such 225.7 and 225.23(g) (12 C.F.R. 225.7 and 225.23(g)), and as undue concentration of resources, decreased or unfair to the Board's authority to require such modification or competition, conflicts of interests, or unsound banking termination of the activities of a holding company or any practices."123 Consummation of the proposal would ex- of its subsidiaries as the Board finds necessary to assure pand the products and services that Fleet offers its custom- compliance with, or to prevent evasion of, the provisions ers. The record in this case indicates that there are numer- and purposes of the BHC Act and the Board's regulations ous providers of these nonbanking services, and there is no and orders issued thereunder. The commitments and condievidence in the record to indicate that consummation of tions relied on by the Board in reaching this decision are this proposal is likely to result in any significantly adverse deemed to be conditions imposed in writing by the Board effects, such as undue concentration of resources, de- in connection with its findings and decision, and as such creased or unfair competition, conflicts of interests, or may be enforced in proceedings under applicable law. unsound banking practices that would outweigh the public The acquisition of Shawmut's subsidiary banks shall not benefits of this proposal. Accordingly, the Board has deter- be consummated before the fifteenth calendar day followmined that the balance of public interest factors it must ing the effective date of this order, and the banking and consider under section 4(c)(8) of the BHC Act is favorable nonbanking transactions shall not be consummated later and consistent with approval. than three months following the effective date of this order, In addition, the Board has considered the specific factors unless such period is extended for good cause by the Board it must review under section 5(d)(3) of the FDI Act, and or by the Boston Reserve Bank or the NY Reserve Bank, the record in this case shows that: acting pursuant to delegated authority. (1) The transaction will not result in the transfer of any By order of the Board of Governors, effective Noveminsured depository institution's federal deposit insurance ber 14, 1995. from one federal deposit insurance fund to the other; (2) Fleet-New York currently meets, and upon consum- Voting for this action: Chairman Greenspan, Vice Chairman mation of the proposed transaction will continue to Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. meet, all applicable capital standards; and (3) The proposed transaction would comply with the JENNIFER J. JOHNSON Deputy Secretary of the Board interstate banking provisions of the BHC Act (12 U.S.C. § 1842(d)) if Shawmut Bank New York, N.A. was a state bank that Fleet was applying to acquire directly.124 Appendix A Fleet Financial Group, Inc., Providence, Rhode Island Conclusion ("Fleet"), Fleet Bank-NH, Nashua, New Hampshire ("Fleet-NH"), and Fleet Bank, Albany, New York ("Fleet- Based on the foregoing, including the commitments made NY"), have filed the following applications in connection to the Board by Fleet in connection with these applications with Fleet's proposal to acquire Shawmut National Corpoand notices, and in light of all the facts of record, the Board ration, Boston, Massachusetts, and Hartford, Connecticut has determined that these applications and notices should be, and hereby are, approved.125 The Board's approval is ("Shawmut"): (1) Fleet to acquire Shawmut by merging Shawmut with specifically conditioned on compliance by Fleet with all and into Fleet, pursuant to section 3 of the BHC Act, and thereby indirectly acquire Shawmut New Hampshire Corporation ("SNHC"), and its bank subsidiary, Shaw- 122. Applicants also have committed that they will not reactivate mut Bank NH ("Shawmut-NH"), both of Manchester, any currently inactive subsidiaries of Shawmut without the Board's New Hampshire; Shawmut New York Corporation, and prior approval. 123. 12 U.S.C. § 1843(c)(8). 124. See 12 U.S.C. § 1815(d)(3). 125. Several commenters also alleged that Fleet and its subsidiary (1) File annual reports with the Equal Employment Opportunity banks have not appointed a sufficient number of African Americans Commission; and and other minorities to positions in senior management and that they (2) Have in place a written affirmative action compliance program discriminate against minorities in their employment practices. Other which states efforts and plans to achieve equal opportunity in the commenters allege that the proposal would result in a loss of jobs that employment, hiring, promotion, and separation of personnel. currently are held by minorities. The Board notes that, because Fleet's See 41 C.F.R. 60-1.7(a), 60-1.40. The Board also notes that, pursusubsidiary banks employ more than 50 people, serve as depositories of ant to regulations of the Department of Labor, Fleet, as the parent government funds, and act as agents in selling or redeeming U.S. company, also is required to file an annual report with the Equal savings bonds and notes, they are required by regulations of the Employment Opportunity Corporation covering all employees in its Department of Labor to: entire corporate structure. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

72 Federal Reserve Bulletin • January 1996 its bank subsidiary, Shawmut Bank New York, N.A. 30 Pines Place, Concord, NH ("Shawmut-NY"), both of Schenectady, New York; 39 Main Street, Pittsfield, NH Shawmut Bank, N.A., Boston, Massachusetts; and Pentucket Shopping Center, Plaistow, NH Shawmut Bank Connecticut, N.A., Hartford, Connecti- Hatch Plaza, Plymouth, NH cut. 82 Congress Street, Portsmouth, NH (2) Fleet to merge SNHC with and into Indian Head 150 Mirona Road, Portsmouth, NH Banks, Inc., Nashua, New Hampshire, pursuant to sec- 125 Main Street, Salem, NH tion 3 of the BHC Act; 489 Lafayette Road, Seabrook, NH (3) Fleet-NH to merge with Shawmut-NH, pursuant to One John Parsons Drive, Somersworth, NH section 18(c) of the FDI Act (12 U.S.C. § 1828(c)); (4) Fleet-NH to establish branches at each of the loca- New York tions where Shawmut-NH now operates a branch, pursuant to section 9 of the Federal Reserve Act (12 U.S.C. 900 Central Avenue, Albany, NY §321); Amsterdam Mall, Amsterdam, NY** (5) Fleet-NY to merge with Shawmut-NY, pursuant to 15 Park Avenue, Clifton Park, NY sections 5(d)(3) and 18(c) of the FDI Act (12 U.S.C. 98 Wolf Road, Colonie, NY §§ 1815(d)(3), 1828(c)); and 579 Troy-Schenectady Road, Latham, NY (6) Fleet-NY to establish branches at each of the loca- 800 New Loudon Road, Latham, NY tions where Shawmut-NY now operates a branch, pursu- 501 East Columbia Turnpike, East Greenbush, NY ant to section 9 of the Federal Reserve Act (12 U.S.C. Glenmont Plaza, Route 9W, Glenmont, NY § 321). 14 La Rose Street, Glens Falls, NY 200 Saratoga Road, Scotia, NY Appendix B 475 Shaker Road, Loudonville, NY 211 Park Avenue, Mechanicville, NY Branches to be Established Pursuant to Section 9 of the 420 Balltown Road, Schenectady, NY Federal Reserve Act 189 Ballston Avenue, Saratoga Springs, NY 500 State Street, Schenectady, NY New Hampshire 2525 Broadway, Schenectady, NY 13 Maple Road, Vorheesville, NY Route 101 and Chestnut Street, Bedford, NH* * Designates branches to be divested. Belknap Mall, Belmont, NH ** Shawmut-NY has filed an application with the OCC to 100 Loudon Road, Concord, NH relocate this branch to Samford Farms Shopping Center, 27 North State Street, Concord, NH Route 30, Amsterdam, NY. D.W. Highway South, Connell's Shopping Center, Merrimack, NH Main Street, Contoocook, NH Appendix C Crystal Avenue, Derry, NH Route 302, Globe Shopping Center, Littleton, NH Fleet has filed the following notices under section 4(c)(8) 542 Mast Road, Goffstown, NH of the BHC Act to acquire nonbanking subsidiaries of 177 Main Street, Gorham, NH Shawmut and/or to increase the investment in an existing 369 Lafayette Road, Hampton, NH nonbanking subsidiary of Fleet: 44-46 South Main Street, Hanover, NH (1) To acquire Shawmut Bank, FSB, Boca Raton, Flor- 9 Ash Street, Hollis, NH ida, and thereby operate a savings association pursuant 1090 D.W. Highway North, Hooksett, NH to section 225.25(b)(9) of the Board's Regulation Y Hudson Mall, Hudson, NH (12 C.F.R. 225.25(b)(9)); 277 Union Avenue, Laconia, NH (2) To acquire Hartford National Corporation, Hartford, Route 112, Lincoln, NH Connecticut, and its direct and indirect subsidiaries, 85 Main Street, Littleton, NH* Shawmut National Trust Company, Stuart, Florida, and 175 Mammoth Road, Londonderry, NH Shawmut Trust Company, New York, New York, and 2626 Brown Avenue, Manchester, NH thereby engage in operating trust companies pursuant to 135 D.W. Highway North, Manchester, NH section 225.25(b)(3) of Regulation Y (12 C.F.R. 1155 Main Street, Manchester, NH 225.25(b)(3)); 156 Hanover Street, Manchester, NH* (3) To acquire Shawmut Corporation, Boston, Massa- 31 Harrison Street, Manchester, NH chusetts ("Shawmut Corp."), and its subsidiary, Shaw- 1255 South Willow Street, Manchester, NH* mut Investment Advisers, Inc., Hartford, Connecticut, 105 D.W. Highway South, Merrimack, NH and thereby engage in asset management and investment 223 Main Street, Nashua, NH advisory services pursuant to section 225.25(b)(4) of 4 Northwest Boulevard, Nashua, NH* Regulation Y (12 C.F.R. 225.25(b)(4)); Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 73 (4) To acquire Business Benefits Administrators, Inc., deposits of approximately $13.1 billion, representing Boston, Massachusetts, and its subsidiary, Interpay, Inc., 13.1 percent of state deposits, and would remain the sec- Mansfield, Massachusetts, and thereby engage in trust ond largest depository institution in the state. and data processing services (including payroll processing and related activities) pursuant to sections New Hampshire 225.25(b)(3) and (b)(7) of Regulation Y (12C.F.R. 225.25(b)(3) and (b)(7)); Fleet controls deposits of approximately $1.3 billion, repre- (5) To acquire the following inactive subsidiaries of senting 10 percent of state deposits, and is the third largest Shawmut Corp., Nobility Hill Realty Corporation, depository institution. Shawmut controls deposits of ap- Worcester, Massachusetts; Shawmut Association Incor- proximately $1.5 billion, representing 11.7 percent of state porated, Shawmut Credit Corp., and Shawmut Financial deposits, and is the second largest depository institution. Corporation, all of Boston, Massachusetts; and Shawmut Upon consummation of this proposal, Fleet would control Life Insurance Company, Inc., Phoenix, Arizona; and deposits of approximately $2.8 billion, representing (6) To increase its ownership interest in Infinet Payment 21.7 percent of state deposits, and would become the Systems, Inc., Hackensack, New Jersey, a joint venture largest depository institution in the state. Upon completion with other banking organizations, to 21.1 percent, and of the proposed branch divestitures, Fleet would control thereby engage in operating retail electronic funds trans- deposits of approximately $2.6 billion, representing fer networks and engage in data processing and related 18 percent of state deposits, and would remain the largest activities pursuant to section 225.25(b)(7) of Regula- depository institution in the state. tion Y (12 C.F.R. 225.25(b)(7)) and previous Board orders. New York Appendix D Fleet controls deposits of approximately $10.4 billion, representing 2.9 percent of state deposits, and is the sev- Deposit Size, Percentage of Deposits, and Ranking for enth largest depository institution. Shawmut controls de- Fleet and Shawmut in the States Where They Compete1 posits of approximately $1.4 billion, representing less than 1 percent of state deposits, and is the 32d largest depository Connecticut institution. Upon consummation of this proposal, Fleet would control deposits of approximately $11.8 billion, Fleet controls deposits of approximately $5.9 billion, repre- representing 3.3 percent of state deposits, and would resenting 10.8 percent of all deposits in depository institu- main the seventh largest depository institution in the state. tions in the state ("state deposits"), and is the second No branches in New York would be divested. largest depository institution. Shawmut controls deposits of approximately $9.3 billion, representing 16.9 percent of Rhode Island state deposits, and is the largest depository institution. Upon consummation of this proposal, Fleet would control Fleet controls deposits of approximately $4.6 billion, repredeposits of approximately $15.2 billion, representing senting 32.2 percent of state deposits, and is the second 27.7 percent of state deposits, and would become the largest depository institution. Shawmut controls approxilargest depository institution in the state. Upon completion mately $470 million of deposits, representing 3.3 percent of the proposed branch divestitures, Fleet would control of state deposits, and is the fourth largest depository instideposits of approximately $13.7 billion, representing tution. Upon consummation of this proposal, Fleet would 24.9 percent of state deposits, and would remain the largest control deposits of approximately $5 billion, representing depository institution in the state. 35.5 percent of state deposits, and would become the largest depository institution in the state. Upon completion Massachusetts of the proposed branch divestitures, Fleet would control deposits of approximately $4.6 billion, representing Fleet controls deposits of approximately $5.8 billion, repre- 32.4 percent of state deposits, and would be the second senting 5.9 percent of state deposits, and is the fifth largest largest depository institution in the state. depository institution. Shawmut controls deposits of approximately $8 billion, representing 8.1 percent of state Appendix E deposits, and is the third largest depository institution. Upon consummation of this proposal, Fleet would control Description of Local Banking Markets in Which Fleet and deposits of approximately $13.8 billion, representing Shawmut Compete: 14 percent of state deposits, and would become the second largest depository institution in the state. Upon completion Connecticut of the proposed branch divestitures, Fleet would control Bridgeport Bridgeport RMA 1. State deposit data are as of June 30, 1994. Danielson City of Putnam and the townships of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 Federal Reserve Bulletin • January 1996 Brooklyn, Danielson, Eastford, Killingly, New Hampshire Pomfret, Thompson, and Woodstock in Windham County Fairfield Connecticut portion of the New York Concord Concord RMA, the city of Franklin, and Ranally Metro Area ("RMA") and the the towns of Barnstead in Belknap townships of Kent, Roxbury, Warren, and County and Andover, Bradford, Canter- Washington in Litchfield County bury, Dunbarton, Henniker, Hill, Loudon, Hartford Hartford RMA and the townships of Hart- Salisbury, Warner, and Webster in Merriland in Hartford County, Ashford in mack County Windham County, and Union in Tolland Hanover- Towns of Canaan, Enfield, Grafton, County Lebanon Hanover, Lebanon, Lyme, Orange, Or- New Haven New Haven RMA ford, and Piermont in Grafton County, New London New London RMA and the townships of Grantham and Plainfield in Sullivan Lyme and Voluntown in New London County, Bradford, Corinth, Fairlee, Straf- County and Plainfield and Sterling in ford, Thetford, Vershire, and West Fairlee Windham County in Orange County, Vermont, and Hart- Old Say brook Townships of Chester, Essex, Old Say- ford, Hartland, Norwich, Sharon, West brook, Say brook, and Westbrook in Windsor, and Windsor in Windsor Middlesex County County, Vermont Torrington Torrington RMA and the townships of Laconia Belknap County, other than the town of Colebrook, Goshen, and Norfolk in Litch- Barnstead, and the towns of Northfield in field County Merrimack County and Moultonboro and Waterbury Waterbury RMA Sandwich in Carroll County Littleton Towns of Bethlehem, Easton, Franconia, Landaff, Lisbon, Littleton, and Lyman in Grafton County and Carroll, Dalton, and Massachusetts Whitefield in Coos County Manchester Manchester RMA and the towns of New Boston and Weare in Hillsborough Amherst- Amherst RMA, Northampton RMA, and County and Chester, Deerfield, and Ray- Northampton the towns of Deerfield, Shutesbury, and mond in Rockingham County Whately in Franklin County, and Chester- Portsmouth- Portsmouth-Dover-Rochester RMA and field, Cummington, Goshen, Plainfield, Dover- the towns of Wakefield in Carroll County, and Westhampton in Hampshire County Rochester Brookfield, Epping, Freemont, Hampton Boston Boston RMA and the towns of Green- Falls, Kensington, Northwood, and Notville, Lyndeborough, Mason, and New tingham in Rockingham County, and Ipswich in Hillsborough County in New Middleton Corners, New Durham, and Hampshire Strafford in Strafford County, and Leba- Fitchburg- Fitchburg-Leominster RMA non in York County in Maine Leominster Greenfield Franklin County, other than the towns of Deerfield, Leverett, Monroe, New Salem, Orange, Shutesbury, Sunderland, War- New York wick, and Whately New Bedford New Bedford RMA and the town of Wareham in Plymouth County Albany Counties of Albany, Columbia, Fulton, Southbridge Towns of Southbridge and Sturbridge in Greene, Hamilton, Montgomery, Rens- Worcester County and Brimfield, selaer, Saratoga, Schenectady, Schoharie, Holland, and Wales in Hampden County Warren, and Washington Springfield Springfield RMA and the towns of Otis in Berkshire County, Blandford, Chester, Granville, and Tolland in Hampden County, Ware and Worthington in Hamp- Rhode Island shire County, and Hardwick and Warren in Worcester County Taunton Taunton RMA Providence Providence-Warwick RMA and the towns Worcester Worcester RMA and the towns of Hub- of Charlestown in Washington County bardston, New Braintree, Oakham, and and West Greenwich Center in Kent West Brookfield in Worcester County County Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 75 Premier Bancorp, Inc. institutions under the Community Reinvestment Act Baton Rouge, Louisiana (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires the federal financial supervisory agencies to encourage finan- Order Approving the Merger of Bank Holding cial institutions to help meet the credit needs of the local Companies communities in which they operate, consistently with their safe and sound operation. To accomplish this end, the CRA Premier Bancorp, Inc., Baton Rouge, Louisiana ("Pre- requires the appropriate federal supervisory authority to mier"), a bank holding company within the meaning of the "assess the institution's record of meeting the credit needs Bank Holding Company Act ("BHC Act"), has applied of its entire community, including low- and moderateunder section 3 of the BHC Act (12 U.S.C. § 1842) to income neighborhoods, consistent with the safe and sound merge with HNB Corporation ("HNB"), and thereby indi- operation of such institution," and to take that record into rectly acquire Homer National Bank ("Homer Bank"), account in its evaluation of bank expansion proposals.3 both of Homer, Louisiana.1 The Board received comments from the Plaisance Devel- Notice of the application, affording interested persons an opment Corporation ("Protestant") maintaining that Preopportunity to submit comments, has been published mier and its subsidiary bank have failed to meet the bank- (60 Federal Register 43,151 (1995)). The time for filing ing needs of all segments of its communities, especially comments has expired, and the Board has considered the African-American neighborhoods,4 and have failed to comapplication and all comments received in light of the ply with fair lending laws.5 Protestant also contends that factors set forth in section 3 of the BHC Act. the rates of home-related loan applications from and loan Premier, with total consolidated assets of $5.5 billion, is originations to African Americans, compared with those the third largest commercial banking organization in Loui- for white residents, indicate illegal discrimination by Presiana, controlling one subsidiary bank with aggregate de- mier Bank. posits of $4.3 billion, representing approximately 12 per- The Board has carefully reviewed the CRA performance cent of the total deposits in commercial banking records of Premier, Premier Bank, HNB, and Homer Bank; organizations in the state.2 HNB, with total consolidated all comments received on this application; all responses to assets of $98 million, is the 57th largest commercial bank- those comments; and all other relevant facts of record in ing organization in Louisiana, controlling deposits of light of the CRA, the Board's regulations, and the State- $88.4 million, representing less than 1 percent of the total ment of the Federal Financial Supervisory Agencies Redeposits in commercial banking organizations in the state. garding the Community Reinvestment Act ("Agency CRA Upon consummation of this proposal, Premier would re- Statement").6 main the third largest commercial banking organization in Louisiana, controlling deposits of $4.4 billion, representing Record of Performance Under the CRA approximately 12.3 percent of the total deposits in commercial banking organizations in the state. Premier and A. CRA Performance Examinations HNB do not compete in any banking market. Based on all the facts of record, the Board has concluded that consum- The Agency CRA Statement provides that a CRA examinamation of this proposal would not result in a significantly tion is an important and often controlling factor in the adverse effect on competition or the concentration of bankconsideration of an institution's CRA record and that reing resources in any relevant banking market. ports of these examinations will be given great weight in The Board also has concluded that the financial and managerial resources and future prospects of Premier, 3. 12 U.S.C. § 2903. HNB, and their respective subsidiaries, are consistent with 4. In particular, Protestant alleges that Premier and Premier Bank approval of this proposal, as are all other supervisory have failed to: factors that the Board must consider under section 3 of the (1) Provide capital and financing to African-American homeown- BHC Act. ers; (2) Provide funds, grants, and loans to African-American community organizations; Convenience and Needs Considerations (3) Provide capital to businesses owned by African Americans; (4) Participate in community development projects to improve In acting on an application to acquire a depository institu- economic opportunities in the African-American community; tion under the BHC Act, the Board must consider the (5) Locate branches in African-American communities; and (6) Develop and implement adequate CRA policies. convenience and needs of the communities to be served, 5. With respect to this allegation, Protestant maintains that Premier and take into account the records of the relevant depository and Premier Bank employ few African-American loan officers; use a compensation program for lending officers that provides incentives to solicit and originate mortgages only on higher-priced homes; fail to 1. Premier proposes to merge Homer Bank with and into Premier's use media and images oriented to the African-American community in subsidiary bank, Premier Bank National Association, Baton Rouge, advertising its loan products; and fail to adequately market its Federal Louisiana ("Premier Bank"). On August 3, 1995, Premier Bank's Housing Administration ("FHA"), Veterans Administration ("VA"), primary supervisor, the Office of the Comptroller of the Currency and Small Business Administration ("SBA") loan products in the ("OCC"), approved this merger. African-American community. 2. Asset and deposit data are as of June 30, 1995. 6. 54 Federal Register 13,742 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 Federal Reserve Bulletin • January 1996 the applications process.7 The Board notes that Premier practices, such as practices or policies that would tend to Bank received a "satisfactory" rating from its primary discourage credit applications.10 The CRA Examination federal supervisor, the OCC, at its most recent examination also found that Premier Bank had implemented policies, for CRA performance as of March 31, 1994 ("CRA Exam- procedures, and training programs that effectively address ination"). Homer Bank also received a performance rating fair lending issues and the requirements of the Equal Credit of "satisfactory" from the OCC at its most recent CRA Opportunity Act, the Fair Housing Act, and other fair examination as of October 13, 1993. lending laws. Steps developed to ensure equal treatment included fair lending and cultural diversity training and B. HMDA Data and Lending Activities implementation of a second review process for residential real estate applications that have received an initial denial The Board has carefully reviewed data submitted by Pre- recommendation. The CRA Examination found no substanmier Bank under the Home Mortgage Disclosure Act tive violations of any fair lending laws or regulations. ("HMDA") for 1993 and 1994 in light of Protestant's Examiners found that applications for credit were generally comments. These data show that, since 1993, the total solicited from all segments of Premier Bank's delineated number of loans made to African Americans by Premier community, and that the bank's community delineation Bank increased for all categories of loans reported under was reasonable and did not arbitrarily exclude low- and HMDA.8 These data also show that, since 1993, Premier moderate-income areas. In addition, Premier Bank's man- Bank increased the overall number of applications from agement annually analyzes annually the geographic distribution of its HMDA credit extensions, applications, and and originations to African Americans in its delineated denials, and reports the results of this analysis to the bank's community. Premier Bank also decreased its denial rates to board of directors. African-American credit applicants, and the ratio of denials of African-American applicants compared to white Examiners also concluded that Premier Bank effectively applicants also fell from 1993 to 1994. HMDA data also addresses a portion of the community's housing-related show that Premier Bank's loans to African Americans, on a credit needs through the origination of residential mortpercentage basis, approximates that of the aggregate of all gages and by traditional and non-traditional banking prodlenders in its delineated community. In addition, at Premier ucts and services. In addition to offering traditional home Bank's mortgage company subsidiary, Premier Mortgage mortgage products, Premier has instituted a Community Company, Baton Rouge, Louisiana ("Premier Mortgage"), Home Buyers Program that offers long-term, fixed-rate the number of applications by African Americans in- mortgages to qualified low- and moderate-income borrowcreased from 1993 to 1994, and the denial rate of African- ers.11 This program offers up to 95 percent loan-to-value American credit applicants compared to white applicants financing, increased maximum debt-to-income ratios, and decreased.9 non-traditional verification of closing funds and credit ref- These HMDA data, however, also reflect disparities in erences.12 the rate of loan originations, denials, and applications by Premier Bank and Premier Mortgage also participate in racial group and income level. The Board is concerned government-sponsored lending programs, such as those when the record of an institution indicates disparities in offered by the SBA, FHA, VA, and Farmers Home Adminlending to minority applicants, and it believes that all istration, as well as guaranteed student loans. The CRA banks are obligated to ensure that their lending practices Examination found that in 1992 and 1993, Premier Bank are based on criteria that assure not only safe and sound funded 40 SBA loans for a total of approximately lending, but also equal access to credit by creditworthy $11.6 million. In 1994, Premier Bank was the leading SBA applicants regardless of race. The Board recognizes, how- lender in Louisiana in terms of the total dollar amount of ever, that HMDA data alone provide an incomplete mea- loans outstanding, and second in the number of credits sure of an institution's lending in its community. The originated. Premier Mortgage also has made FHA and VA Board also recognizes that HMDA data have limitations loans, which comprise 24 percent of all loans made in 1994 that make the data an inadequate basis, absent other infor- by Premier Mortgage. During that period, Premier Mortmation, for concluding that an institution has engaged in gage's FHA and VA lending to members of minority illegal discrimination in making lending decisions. The Board has carefully reviewed Protestant's allegations in light of information from the OCC, Premier Bank's 10. The examination included a fair-lending review of more than primary supervisor. The CRA Examination found no evi- 400 conventional and government-guaranteed purchase money residence of prohibited discriminatory or other illegal credit dential mortgage loan applications received over a period of 12 months. These applications were dispersed throughout Premier Bank's communities. 7. Id. at 13,745. 11. Premier Mortgage also provides an incentive program to loan 8. Under HMDA, lenders are required to report data about home officers making affordable housing loans to low- and moderate-income improvement loans, conventional home purchase loans, refinancings borrowers by compensating loan officers on a basis other than the of home purchase loans, and loans made under government-sponsored dollar amount of the loan. home mortgage programs. 12. Examiners noted that in the first year of this program Premier 9. The Board notes that Premier made 638 loans to African Ameri- Bank approved and funded more than $300,000 of mortgages through cas in 1993 and 702 loans in 1994. this program. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 77 groups accounted for approximately 39 percent of its loans C. Other Aspects of CRA Performance to minority applicants that were reportable under HMDA. The CRA Examination noted that Premier actively par- Ascertainment and Marketing Efforts. The CRA Examinaticipated in the SBA Loan Program and that Premier was a tion noted that Premier Bank had regular contact with a certified SBA lender for the entire state of Louisiana. wide range of individuals, neighborhood groups and Premier Bank also provides technical assistance and vari- community-based organizations to ascertain community ous education programs to small businesses and businesses credit needs. The examination found that Premier had owned by women and minorities throughout its communi- implemented an officer call program through which a subties. Its involvement in small business lending programs stantial number of officer calls were made to ascertain the benefitting low- and moderate-income communities was community's credit needs. Premier also had contacted a cited by examiners as having created or helped support significant number of neighborhood and local government existing jobs in those communities. In 1993, Premier devel- organizations, including organizations representing relioped a new business loan product to provide small busi- gious and minority groups and civic or neighborhood coanesses with lines of credit, and Premier approved 83 lines litions. of credit under this program with total commitments of The CRA Examination found that Premier had particiover $1.5 million in the first year. As of August 1995, pated throughout the state in seminars and workshops 486 business lines had been established under this pro- designed to provide education about the bank's products gram, with total commitments of $13.8 million. and services and to assist customers in understanding the The CRA Examination also noted that Premier Bank loan application process and requirements. Since the previwas involved in a variety of community development pro- ous CRA examination, Premier's management contracted grams designed to benefit its communities, including low- an outside research firm to conduct group meetings in and moderate-income and African-American residents. For seven locations throughout the state to identify ways for example, Premier has invested $350,000 in the Gulf Coast Premier to serve its customers better and to ascertain what Business and Industrial Development Corporation, a new products were needed. minority-owned organization that provides financing to The CRA Examination found that Premier's marketing minority-owned small businesses in distressed areas. Pre- program was designed to reach all segments of its delinmier Bank also has invested $135,000 in the New Orleans eated community. Premier was found to have used tradi- Small Business and Industrial Development Corporation tional marketing methods effectively to reach all sections ("SBIDCO"). SBIDCO provides financial and technical of its community, including advertising in several minoritysupport to small businesses and businesses owned by owned newspapers that focus on communities with prewomen and minorities in designated industries and areas in dominantly minority populations.15 The CRA Examination New Orleans. Premier also participates in various state and also noted that Premier complemented its traditional marlocal economic development programs, such as the Louisi- keting efforts with non-traditional methods such as Premier ana Economic Development Corporation and the Lafayette Bank's Community Home Buyers Workshop.16 Neighborhood Economic Development Corporation. Branch Locations. The CRA Examination concluded In Baton Rouge, Premier Bank participates in the Local that Premier Bank had a satisfactory record of opening, Initiatives Support Corporation ("LISC"). Premier contrib- closing, and relocating its offices, and that the bank's uted $75,000 to assist this organization in establishing a branches were reasonably accessible to all segments of its program in Baton Rouge and a representative of Premier communities. Examiners found that Premier Bank had Bank serves on its local board of directors.13 Premier also developed a good distribution of branch locations, espehas contributed $30,000 to the Southern University Educa- cially in low- and moderate-income areas. At the time of tion & Counseling Center, a non-profit credit education and the CRA Examination, Premier Bank had 109 full-service counseling center that provides financial counseling ser- branches throughout the communities it services. More vices primarily to minority and disadvantaged people. In than 40 percent of these branches were located in lowaddition, Premier participates in the Southern University income census tracts. Community Development Project ("SUCDP"), a program Policies and Programs. The CRA Examination found that assists low- and moderate-income families to purchase that Premier Bank's directors and senior management had homes.14 15. In 1994, the Premier Bank formulated and adopted a comprehensive and specific African-American marketing policy and strategy that 13. The CRA Examination favorably noted that LISC will work to includes the use of African-American models in advertisements porestablish and assist six locally-based community development corpo- traying customers and bank employees. rations with affordable housing and commercial development projects 16. This workshop was designed to prepare low- and moderatein low-income neighborhoods in Baton Rouge. income individuals for participation in Premier's Community Home 14. Premier Bank agreed to participate in loans for up to five Buyers Program. The workshop provides an overview of the home qualified families, and to waive origination fees for these loans. A purchase process, including credit related matters such as the loan representative of the bank serves on SUCDP's Finance Advisory and application process, understanding a credit report, and the importance Project Advisory committees. of a good credit history. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 Federal Reserve Bulletin • January 1996 actively participated in CRA-related matters and provided By order of the Board of Governors, effective Novemoversight through policy review, self-assessments, and in- ber 9, 1995. ternal audits. CRA training was provided throughout the bank on an on-going basis to all persons in contact with the Voting for this action: Chairman Greenspan, Vice Chairman public, members of management, and lending staff. The Blinder, and Governors Kelley and Phillips. Absent and not voting: Governors Lindsey and Yellen. CRA Examination also found that Premier performed regular self-assessments and other reviews to ensure satisfac- JENNIFER J. JOHNSON tory CRA performance. In addition to this self-assessment, Deputy Secretary of the Board the Audit Division performs comprehensive reviews of the bank's compliance with the technical requirements of Union Planters Corporation CRA. Memphis, Tennessee D. Conclusion on Convenience and Needs Order Approving Merger of Bank Holding Companies Considerations Union Planters Corporation, Memphis, Tennessee ("Union On the basis of all the facts of record, including informa- Planters"), a bank holding company within the meaning of tion provided by the Protestant, Premier's responses, and the Bank Holding Company Act ("BHC Act"), has applied relevant reports of examination, the Board has concluded under section 3 of the BHC Act (12 U.S.C. § 1842) to that convenience and needs considerations, including the merge with Capital Bancorporation, Inc., Cape Girardeau; overall CRA performance records of the institutions in- Maryland Avenue Bancorporation, Clayton; and Century volved in this proposal, are consistent with approval of this State Bancshares, Jackson, all in Missouri (collectively, application. "Capital"), and thereby indirectly acquire Capital's subsid- Based on the foregoing, and in light of all the facts of iary banks listed in the Appendix.1 record, the Board has determined that this application Notice of the proposal, affording interested persons an should be, and hereby is, approved.17 The Board's approval opportunity to submit comments, has been published is specifically conditioned on compliance by Premier with (60 Federal Register 44,891 (1995)). The time for filing all commitments made in connection with this application. comments has expired, and the Board has considered the The commitments and conditions relied on by the Board applications and notice and all comments received in light are deemed to be conditions imposed in writing by the of the factors set forth in section 3 of the BHC Act. Board in connection with its findings and decision, and, as Union Planters, with total consolidated assets of such, may be enforced in proceedings under applicable $9.7 billion, operates subsidiary banks in Alabama, Arkanlaw. sas, Kentucky, Louisiana, Mississippi, and Tennessee.2 This proposal shall not be consummated before the fif- Capital, with total consolidated assets of $1 billion, is the teenth calendar day following the effective date of this ninth largest commercial banking organization in Missouri, order, or later than three months following the effective controlling deposits of $912.3 million, representing date of this order, unless such period is extended for good 1.6 percent of total deposits in commercial banking organicause by the Board or by the Federal Reserve Bank of zations in the state. Atlanta, acting pursuant to delegated authority. Interstate Analysis Section 3(d) of the BHC Act, as amended by Section 101 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such a 17. Protestant implies that Premier discriminates against African Americans in its employment practices. The Board notes that, because Premier Bank employs more than 50 people, serves as a depository of 1. Union Planters would acquire Capital by merger with an interim government funds, and acts as agent in selling or redeeming U.S. bank holding company, CBI Acquisition Company, Inc., Memphis, savings bonds and notes, it is subject to Department of Labor regula- Tennessee ("Interim"). Interim, as the surviving entity, would be tions that require: named Capital Bancorporation, Inc., and has applied under section 3 (1) The filing of annual reports with the Equal Employment Oppor- to become a second tier bank holding company. Union Planters also tunity Commission; and would acquire Capital Bank, FSB, Jonesboro, Arkansas, a subsidiary (2) A written affirmative action compliance program which states savings association of Capital ("Capital Savings Bank"), by merger its efforts and plans to achieve equal opportunity in the employ- with its subsidiary bank, Union Planters Bank of Northeast Arkansas, ment, hiring, promotion, and separation of personnel. Jonesboro, Arkansas. This acquisition would occur simultaneously See 41 C.F.R. 60-1.7(a), 60-1.40. The Board notes that, pursuant to with the merger with Capital, and at no time would Union Planters Department of Labor regulations, Premier as the parent company, also operate Capital Savings Bank as a thrift institution. Union Planters has is required to file an annual report with the Equal Employment committed not to acquire Capital Savings Bank until all appropriate Opportunity Commission covering all employees in its entire corpo- federal and state regulators have given their approval. rate structure. 2. Asset and state deposit data are as of June 30, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 79 bank holding company, if certain conditions are met.3 numerous competitors would remain in this market. Based These conditions are met in this case.4 In view of all the on all the facts of record, the Board concludes that consumfacts of record, the Board is permitted to approve this mation of this proposal would not result in any signifiproposal under section 3(d) of the BHC Act. cantly adverse effect on competition or concentration of banking resources in the Jonesboro or any other relevant Competitive Considerations banking market. Union Planters and Capital compete directly in the Jones- Convenience and Needs Considerations boro, Arkansas, banking market ("Jonesboro banking market").5 Union Planters is the largest banking or thrift In acting on an application to acquire a depository instituorganization ("depository institution") in the Jonesboro tion under the BHC Act, the Board must consider the banking market, controlling deposits of $232.9 million, convenience and needs of the communities to be served, representing approximately 21.9 percent of total deposits and take into account the records of the relevant depository in depository institutions in the market ("market depos- institutions under the Community Reinvestment Act its").6 Capital is the sixth largest depository institution in (12 U.S.C § 2901 et seq.) ("CRA"). The CRA requires the the Jonesboro banking market, controlling deposits of federal financial supervisory agencies to encourage finan- $62.7 million, representing approximately 5.9 percent of cial institutions to help meet the credit needs of the local market deposits. On consummation of this proposal, Union communities in which they operate, consistent with their Planters would remain the largest depository institution in safe and sound operation. To accomplish this end, the CRA the market, controlling deposits of $295.6 million, repre- requires the appropriate federal supervisory authority to senting approximately 27.8 percent of market deposits. The "assess the institution's record of meeting the credit needs market would remain moderately concentrated, as mea- of its entire community, including low- and moderatesured by the Herfindahl-Hirschman Index ("HHI"),7 and income neighborhoods, consistent with the safe and sound operation of such institution," and to take that record into account in its evaluation of bank expansion proposals.8 3. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding The Board has received comments from the Mid-South company's home state is that state in which the operations of the bank Peace and Justice Center, Memphis, Tennessee ("Protesholding company's banking subsidiaries were principally conducted tant"), criticizing the CRA performance of Union Planters on July 1, 1966, or the date on which the company became a bank in helping to meet the credit needs of its entire community. holding company, whichever is later. For purposes of the BHC Act, the home state of Union Planters is Tennessee. In particular, Protestant maintains that data filed under the 4. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Home Mortgage Disclosure Act ("HMDA")9 demonstrate Union Planters is adequately capitalized and adequately managed. that Union Planters's lead subsidiary bank, Union Planters Upon consummation, Union Planters and its affiliates would control National Bank, Memphis, Tennessee ("UPNB"), has not less than 10 percent of the total amount of deposits of insured increased its housing-related lending in low- and moderatedepository institutions in the United States and less than 30 percent of the total amount of deposits in Missouri. Capital's banks have been in income neighborhoods and neighborhoods with predomiexistence and continuously operated for the minimum period of time nantly African-American populations in Memphis since required under Missouri law. All other requirements of section 3(d) of 1990. Protestant also contends that UPNB's branches do the BHC Act would also be met on consummation of this proposal. not serve the credit needs of low- and moderate-income 5. The Jonesboro, Arkansas, banking market is approximated by and minority customers. Craighead and Poinsett Counties, Arkansas. 6. Market data are as of June 30, 1994. Market share data are based The Board has carefully reviewed the CRA performance on calculations in which the deposits of thrift institutions, except the records of Union Planters, Capital, and their respective deposits of Capital Savings Bank, are included at 50 percent. The subsidiary banks and thrifts; all comments received on this Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial proposal, responses to those comments submitted by Union banks. See Midwest Financial Group, 75 Federal Reserve Bulletin Planters; and all other relevant facts of record, in light of 386 (1989); National City Corporation, 70 Federal Reserve Bulletin the CRA, the Board's regulations, and the Federal Finan- 743 (1984). Thus, the Board has regularly included thrift deposits in cial Supervisory Agencies Regarding the Community Reinthe calculation of market share on a 50-percent weighted basis. See, vestment Act ("Agency CRA Statement").10 e.g., First Hawaiian Inc., 11 Federal Reserve Bulletin 52 (1991). Because the deposits of Capital Savings Bank are controlled by a commercial banking organization, and would be controlled by a commercial banking organization after consummation of the proposal, lenged (in the absence of other factors indicating anticompetitive they have been included at 100 percent in the calculation of the market effects) unless the post-merger HHI is at least 1800 and the merger share of Union Planters before and after consummation of the pro- increases the HHI by more than 200 points. The Justice Department posed merger. See Norwest Corporation, 78 Federal Reserve Bulletin has stated that the higher than normal threshold for an increase in the 452 (1992); First Banks, Inc., 76 Federal Reserve Bulletin 669, 670 HHI when screening bank mergers and acquisitions for anticompetin. 9(1990). tive effects implicitly recognizes the competitive effect of limited- 7. On consummation of this proposal, the HHI would increase by purpose lenders and other non-depository financial entities. 285 points to 1647. Under the revised Department of Justice Merger 8. 12 U.S.C. § 2903. Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in 9. 12 U.S.C. § 2801 etseq. which the post-merger HHI is between 1000 and 1800 is considered 10. 54 Federal Register 13,742 (1989). Protestant also commented moderately concentrated. The Justice Department has informed the on matters that are not related to the factors considered under the BHC Board that a bank merger or acquisition generally will not be chal- Act. Protestant criticized the Board for denying only a small number Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 Federal Reserve Bulletin • January 1996 Record of Performance Under the CRA A. HMDA Data and Lending Practices In the First State Order, the Board reviewed the CRA The Board also has considered supplemental data and performance of Union Planters, taking into account sub- information on Union Planters's CRA performance since stantially similar comments from Protestant. In evaluating the First State Order that were included in this application. that proposal, the Board carefully considered the CRA In particular, the Board has carefully reviewed the HMDA performance record of Union Planters, and in particular, data reported by Union Planters for the period 1990 the record of UPNB in helping to meet the credit needs of through 1994, in light of Protestant's comments that UPNB communities of low- and moderate-income and minority has not increased its lending to minority residents of Memresidents in the Memphis area. For the reasons discussed in phis since 1990. detail in the First State Order, and incorporated herein by In general, HMDA data reflect reasonable efforts by reference, the Board concluded that the convenience and UPNB to assist in meeting the credit needs of communities needs factor, including the CRA performance record of with low- and moderate-income and minority residents in UPNB, was consistent with approval of an acquisition the Memphis area. For example, the percentage of the total under the BHC Act. number of applications received by UPNB from African The UPNB performance record reviewed in the First Americans has increased every year since 1992. In addi- State Order included the bank's "satisfactory" rating in its tion, since 1992, UPNB has received a greater percentage most recent CRA performance evaluation by its primary of loan applications from, and originated a greater percentfederal supervisor, the Office of the Comptroller of the age of loans to, African Americans than the aggregate Currency ("OCC") as of October 1994 ("1994 Examina- average of banking institutions in the Memphis MSA. tion").11 Examiners found that UPNB had made sufficient Despite a decline of 38.3 percent in the absolute number of efforts to address a significant portion of the credit needs of applications received by UPNB, the number of applicaits communities by offering several types of loan products. tions it received from African Americans increased slightly In addition, the 1994 Examination concluded that the from 1993 to 1994. bank's distribution of loans, applications, and denials were The data, however, also reflect some disparities in the reasonable. The examination also concluded that UPNB rate of loan originations, denials, and applications by racial had a satisfactory record of ascertaining community credit group or income level. The Board is concerned when the needs and that the bank's marketing program effectively record of an institution indicates disparities in lending to informed all segments of its delineated community of the minority applicants and believes that all banks are obliavailability of credit products and services. All of Union gated to ensure that their lending practices are based on Planters's other subsidiary banks and thrifts that have been criteria that assure not only safe and sound lending, but examined for CRA performance received an "outstand- also assure equal access to credit by creditworthy appliing" or "satisfactory" rating from their primary federal cants regardless of race. The Board recognizes, however, supervisory in their most recent examination for CRA that HMDA data alone provide an incomplete measure of performance.12 an institution's lending in its community. The Board also recognizes that HMDA data have limitations that make the data an inadequate basis, absent other information, for concluding that an institution has engaged in illegal discrimination in making lending decisions. The Board has carefully reviewed Protestant's allegations of illegal discriminatory practices in UPNB's lending of applications on the basis of CRA performance and criticized the activities, in light of publicly available and other informa- Office of the Comptroller of the Currency ("OCC") for rating only a small number of institutions "needs to improve" under the CRA. In tion from the OCC. The 1994 Examination found no eviaddition, Protestant complained that the Federal Deposit Insurance dence of prohibited discrimination or other illegal credit Corporation ("FDIC") and the Board have failed to investigate Prot- practices.13 Examiners also found no evidence of practices estant's allegations of wrongdoing at a Mississippi state nonmember intended to discourage applications for the types of credit bank acquired by Union Planters. These allegations were referred to the FDIC, the bank's primary supervisor, for investigation and appro- listed in the bank's CRA statements. priate supervisory action, if Protestant's allegations are substantiated. The 1994 Examination also concluded that UPNB ex- See Union Planters Corporation, 81 Federal Reserve Bulletin 800 tended credit throughout its community, and that the bank (1995) ("First State Order"). has generally been responsive to the community's credit 11. The Agency CRA Statement provides that a CRA examination needs. For example, UPNB has initiated a number of steps is an important and often controlling factor in the consideration of an institution's CRA record, and that reports of these examinations will to strengthen its record of meeting consumer, small busibe given great weight in the applications process. See 54 Federal Register 13,745 (1989). 12. On July 1, 1994, Union Planters established four de novo banks 13. Examiners conducted a review of all first mortgage and home in Chattanooga, Jackson, Knoxville, and Nashville, all in Tennessee. improvement loan applications for the first six months of 1994, which None of these banks has been examined for CRA or consumer included a comparison of white applicants whose loans were approved compliance. All of Capital's subsidiary banks received "satisfactory" with African-American applicants whose loans were denied. The or better ratings from their primary federal supervisors in their most review disclosed no instances, practices or policies to indicate that recent CRA performance examinations. customers were treated in an illegal or prohibited manner. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 81 ness, commercial, and housing-related credit needs in low- attempts to minimize the impact of any reduction in serto moderate-income areas. UPNB instituted a "second vices. Examiners found that UPNB had an acceptable look" program for its retail and mortgage loan divisions record of opening and closing branch offices.16 and instituted sensitivity and diversity training for bank personnel. In addition, UPNB offers a special "buy-down" C. Conclusion Regarding Convenience and Needs loan to home buyers in the low- and moderate-income Factors areas of Shelby County, Tennessee, which includes Memphis. Under this program, the bank subsidizes the discount The Board has carefully considered the entire record in its points necessary to reduce the permanent interest rate on a review of the convenience and needs factors under the loan by one percent. As of December 31, 1994, 31 loans, BHC Act.17 Based on this review, which took into considtotalling $1.1 million, were made under this program. eration information provided by Protestant and Union UPNB, in conjunction with the Division of Housing and Planters, the CRA performance examinations and other Community Development of the City of Memphis, also information from the FDIC and the OCC, and the review in participates in a down payment assistance program.14 the First Bank Order, the Board believes that the efforts of UPNB's lending efforts in low- to moderate-income Union Planters to help meet the credit needs of all segareas also have been enhanced through the appointment of ments of the communities served by its subsidiary banks an Urban Banking Officer, who serves as a manager of one and thrifts, including low- and moderate-income neighborof UPNB's branches in a low- and moderate-income area hoods, are consistent with approval. For these reasons, and of Memphis. The Urban Banking Officer is responsible for for the reasons discussed in the First Bank Order, and reviewing loan packages, counseling prospective loan ap- based on all the facts of record, the Board concludes that plicants, assisting with applications and referring applica- convenience and needs considerations, including the CRA tions. In 1994, UPNB's Urban Banking Officer received performance records of the companies and banks involved approximately 42 applications and approved 40 percent of in this proposal, are consistent with approval of this applithem. cation. UPNB also participates in loans guaranteed by the Federal Housing Administration ("FHA"), Veterans Administration ("VA"), Tennessee Housing Development Authority ("THDA"), and Small Business Administration ("SBA"). In 1994, UPNB made 298 VA loans totalling $17.9 million within its delineated community. Also in 16. Protestant alleged that communities have been adversely af- 1994, UPNB originated over $4 million in SBA loans and fected by the branch closings that resulted from Union Planters 1994 its Small Business Lending Department approved, commit- acquisition of Grenada Sunburst Corporation. See Union Planters Corporation, 81 Federal Reserve Bulletin 49 (1995). Union Planters ted, or renewed $29 million of small business loans, of noted that nine branches have been sold as a result of this acquisition, which 31 percent, or $8.9 million were in low- to including seven divestitures that were required to address competitive moderate-income census tracts. concerns raised by the Grenada acquisition. Four other branches have been consolidated into existing branches, including two branches located in low- and moderate-income neighborhoods. Union Planters B. Branch Locations anticipates nine additional branch consolidations by the end of 1995, including three branches located in low- and moderate-income areas. The OCC reviewed UPNB's record of providing services All branch closings have been conducted in accordance with Union at its branches and found that UPNB operated full-service Planters's branch closing policy, and the Joint Policy Statement on branches, limited service branches and automated teller Branch Closings, 58 Federal Register 49,083 (1993), implementing section 228 of the Federal Deposit Insurance Corporation Improvemachines ("ATMs") at locations reasonably accessible to ment Act of 1991. all segments of its community, including low- to moderate- 17. Protestant maintained that this proposal does not serve the income neighborhoods. UPNB operates 35 branches convenience and needs of the community because it involves the throughout Shelby County and 13 of the branches were acquisition of a Missouri bank by an out-of-state bank holding comdesignated "Home Buyer Centers."15 One of UPNB's pany. In support of this contention, Protestant cites a general report on retail fees and services of depository institutions that suggested that seven branches in low- and moderate- income areas is a out-of-state banks charge higher average fees than in- state banks. The Home Buyer Center. In addition, seven of the bank's 54 study also found, however, that out-of-state banks were more likely to ATMs are located in low- and moderate-income areas. offer free checking accounts and to require lower minimum balances for their accounts. The 1994 Examination also noted that the bank had a Convenience and needs considerations, including an institution's comprehensive branch closing/service reduction policy that record of performance under the CRA, focus on local communities served by a banking organization. These considerations do not require that the pricing of services be comparable between geographic re- 14. As of December 31, 1994, 101 loans had been originated under gions. As discussed above, Union Planters's record of lending to all its this program. communities in Tennessee has been determined by the OCC to be 15. Home Buyer Centers have employees with particular knowledge "satisfactory" as of October 1994, and there is no evidence that of all the bank's mortgage products, including special housing-related Union Planters's fees are disproportionately high or that it discrimilending programs. UPNB has an incentive plan for managers of its nates in any manner on a basis prohibited by law. Based on all the Home Buyer Centers that encourages them to focus on property facts of record, the Board concludes that these comments do not located in low- and moderate-income areas. warrant denial of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 Federal Reserve Bulletin • January 1996 Other Considerations Orders Issued Under Section 4 of the Bank Holding Company Act The Board also has concluded that the financial and mana- First National of Nebraska, Inc. gerial resources and future prospects of Union Planters, Omaha, Nebraska Capital, and their respective subsidiaries, are consistent with approval of this proposal, as are the other supervisory Order Approving Notice to Provide Computer Network factors the Board must consider under section 3 of the Advice and Assistance to Insured Depository Institutions BHC Act. First National of Nebraska, Inc., Omaha, Nebraska ("Applicant"), a bank holding company within the meaning of Conclusion the Bank Holding Company Act ("BHC Act"), has given notice under section 4(c)(8) of the BHC Act (12 U.S.C. Based on all the facts of record, the Board has determined § 1843(c)(8)) and section 225.23(a) of the Board's Regulathat this application should be, and hereby is, approved. tion Y (12 C.F.R. 225.23(a)) to engage de novo through its The Board's approval is specifically conditioned on com- wholly owned subsidiary, First Technology Solutions, Inc., pliance by Union Planters with all commitments made in Omaha, Nebraska ("Company"), in providing certain data connection with this application. For purposes of this ac- processing and data transmission services to insured depostion, these commitments and conditions will be considered itory institutions, such as banks and savings associations, conditions imposed in writing and, as such, may be en- nationwide, pursuant to section 225.25(b)(7) of Reguforced in proceedings under applicable law. lation Y (12 C.F.R. 225.25(b)(7)). In particular, Company The acquisition shall not be consummated before the would provide advice and assistance to unaffiliated insured fifteenth calendar day following the effective date of this depository institutions in the design, selection, acquisition, order, or later than three months after the effective date of installation, and operation of computer networks as described in the Appendix.1 this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of St. Louis, Notice of this proposal, affording interested persons an acting pursuant to delegated authority. opportunity to submit comments, has been published By order of the Board of Governors, effective Novem- (60 Federal Register 54,503 (1995)). The time for filing ber 20, 1995. comments has expired, and the Board has considered the notice and all comments received in light of the factors set Voting for this action:. Chairman Greenspan, Vice Chairman forth in section 4(c)(8) of the BHC Act. Blinder, and Governors Kelley, Lindsey, and Phillips. Absent and not Applicant, with approximately $5.7 billion in consolivoting: Governor Yellen. dated assets, operates ten subsidiary banks in Nebraska, South Dakota, Kansas, and Colorado, and engages through JENNIFER J. JOHNSON its subsidiaries in a variety of nonbanking activities.2 Ap- Deputy Secretary of the Board plicant is the largest commercial banking organization in Nebraska, controlling approximately $3.2 billion of deposits in the state.3 Company has received approval to engage Appendix in the development of software to process banking, financial, or economic data for insured depository institutions and other clients, pursuant to section 225.25(b)(7) of Regu- Bank Subsidiaries of Capital Bancorporation lation Y. Section 4(c)(8) of the BHC Act provides that a bank holding company may, with Board approval, engage in any 1. Capital Bank of Cape Girardeau County, Cape activity that the Board determines to be "so closely related Girardeau, Missouri. to banking or managing or controlling banks as to be a 2. Capital Bank of Southwest Missouri, Ozark, Missouri. proper incident thereto."4 The Board previously has deter- 3. Capital Bank of Sikeston, Sikeston, Missouri. mined by regulation that certain data processing and trans- 4. Capital Bank of Perryville, N.A., Perryville, Missouri. Bank Subsidiary of Maryland Avenue Bancorporation (Second-tiered Subsidiary of Capital Bancorporation) 1. Company also proposes to provide this advice and assistance, as an incidental activity, to affiliates of an insured depository institution if these services also are provided to the related insured depository 1. Capital Bank and Trust, Clayton, Missouri. institution, if the affiliates' use of the computer network constitutes a relatively small portion of the computer network's operations, and if it Bank Subsidiary of Century State Bancshares is not feasible to provide these services to the insured depository institution separately. (Second-tiered Subsidiary of Capital Bancorporation) 2. Asset data are as of June 30, 1995. 3. Deposit data are as of June 30, 1994. 1. Capital Bank of Columbia, Columbia, Missouri. 4. 12 U.S.C. § 1843(c)(8). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 83 mission activities are closely related to banking and per- Applicant contends that, for marketing, customer service, missible for bank holding companies under section 4(c)(8) and technological reasons, computer networks that it proof the BHC Act. Regulation Y permits bank holding com- vides to its clients must perform these related nonfinancial panies to provide data processing and data transmission functions in addition to its primary financial functions. services, facilities, data bases, or access to such services, Applicant would provide advice and assistance related to facilities, or data bases by any technological means, if the the processing and transmission of nonfinancial data, howdata to be processed or furnished are "financial, banking, ever, only as a relatively small part of a larger package of or economic" in nature.5 Applicant would provide advice services to insured depository institutions, and Applicant and assistance to support data processing and transmission would not offer these services on a stand-alone basis or to activities of insured depository institutions.6 Because of the customers other than insured depository institutions. specialized operations of insured depository institutions, The Board previously has permitted a bank holding these activities generally would involve data that is finan- company to process and transmit electronic data for unaffilcial, banking, or economic in nature and, therefore, would iated insured depository institutions. In BNCCORP, the be permissible activities under section 4(c)(8) of the BHC Board recognized that, while data processing services for Act and the Board's regulations.7 In addition, as a result of financial institutions relate largely to financial and banking Applicant's experience establishing and operating com- data, financial institutions must also process some nonfiputer networks for its subsidiary banks, Applicant has nancial information to support their internal operations.8 particular expertise and knowledge of the specialized data Because nonfinancial information represented a relatively processing and transmission requirements of insured de- small percentage of the data processed as part of the pository institutions, which should equip it particularly services provided by the bank holding company to unaffiliwell to provide the proposed services to unaffiliated in- ated insured depository institutions, the Board found that sured depository institutions. processing nonfinancial data was a necessary part of pro- In connection with providing these services, Applicant viding general data processing services to such institutions also proposes to provide advice and assistance to insured and, as such, was permissible under section 4 of the BHC depository institutions in obtaining and operating facilities Act and Regulation Y as an incidental activity.9 for the processing and transmission of nonfinancial data. In this light, the Board concludes that the advice and Specifically, computer networks that are operated within assistance related to nonfinancial data processing and data insured depository institutions may be used for processing transmission that Applicant proposes to provide are a necand transmitting nonfinancial data, such as personnel infor- essary part of providing advice and assistance to insured mation, that the institutions use in their internal operations, depository institutions regarding the data processing refor nonfinancial functions, such as word processing and quirements of such institutions. Accordingly, these aspects electronic mail, that support the primarily financial data of Company's proposal are incidental to its primary activiprocessing and transmission needs of these institutions. ties, and, therefore, are permissible under section 4 of the BHC Act and Regulation Y.10 In order to approve this proposal, the Board also must 5. See 12 C.F.R. 225.25(b)(7). Regulation Y also requires that the determine that the proposed activity is a proper incident to services be provided pursuant to a written agreement and places banking that "can reasonably be expected to produce benecertain limitations on the facilities and hardware provided with the fits to the public, such as greater convenience, increased data processing services. In particular, the facilities must be designed, marketed, and operated for the processing and transmission of finan- competition, or gains in efficiency, that outweigh possible cial, banking, or economic data; hardware must be provided only in adverse effects, such as undue concentration of resources, conjunction with permissible software; and general purpose hardware decreased or unfair competition, conflicts of interests, or must not constitute more than 30 percent of the cost of any packaged unsound banking practices."11 The record indicates that offering. Id. Applicant has committed to the Board that Company will Company's de novo entry into this market would enhance comply with these limitations in providing services under this proposal. competition and provide greater services and convenience Company would maintain a small inventory of computer hardware to insured depository institutions. There is no evidence in that it would make available to its clients as "loaners" to replace the record to indicate that the proposed activity would lead defective computer network hardware on a temporary basis. The to any undue concentration of resources, conflicts of inter- Board has determined that a bank holding company or its subsidiary ests, unsound banking practices, or other adverse effects,12 may engage in any incidental activities that are necessary to carry on an approved nonbanking activity. The Board finds that providing computer hardware in this context would be incidental to Company's primary proposal to provide computer network advice and assistance, and, therefore, is permissible under section 4 of the BHC Act and 8 .Id. Regulation Y. See 12 C.F.R. 225.21(a)(2); National Courier Associa- 9. Id. tion v. Board of Governors, 516 F.2d 1229, 1239-41 (D.C. Cir. 1975). 10. See 12 C.F.R. 225.21(a)(2). 6. Company's services would not include providing management 11. 12 U.S.C. § 1843(c)(8). advice or assistance to any unaffiliated insured depository institution, 12. Applicant has committed that Company will not disclose any and Company would not make lending or credit decisions for its confidential information it may obtain concerning its clients and its clients or provide software or services that incorporate the underwrit- clients' customers to Applicant or its affiliates without the client's ing or credit standards of any affiliated bank. express consent, or to any other person without the client's express 7. See BNCCORP, Inc., 81 Federal Reserve Bulletin 295, 296 consent, or as necessary to fulfill its contractual obligations to the (1995) {"BNCCORP"). client. Company also is prohibited by the Board's regulations from Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 Federal Reserve Bulletin • January 1996 and financial and managerial considerations are consistent graphic activity tracking; application tracking and conwith approval.13 Accordingly, the Board has determined sumer compliance monitoring; large cash transaction that the balance of the public interest factors it is required reporting; general ledger accounting; fixed asset acto consider under the proper incident to banking standard counting; tax accounting and producing customer tax of section 4(c)(8) of the BHC Act is favorable and consis- forms; analyzing bank and branch profitability; autotent with approval of this notice. mated clearing house transactions; wire transfers; and Based on all the facts of record, the Board has deter- telephone and electronic funds transfers initiated by mined that the notice should be, and hereby is, approved. customers; and determining what hardware and software The Board's approval is specifically conditioned on com- are available to satisfy these needs; pliance with the commitments made in connection with (2) Recommending combinations of hardware and softthis notice and with the conditions referred to in this order. ware that could be assembled to perform the required The Board's determination also is subject to all the condi- data processing and transmission functions, such as tions set forth in Regulation Y, including those in sec- those described in paragraph (1) above; tions 225.7 and 225.23(g) of Regulation Y, and to the (3) Developing a plan for the orderly and timely acquisi- Board's authority to require such modification or termina- tion and assembly of computer network components by tion of the activities of a bank holding company or any of the client, and assisting the client in acquiring these its subsidiaries as the Board finds necessary to ensure components;1 compliance with, and to prevent evasion of, the provisions (4) Setting up individual personal computers and other of the BHC Act and the Board's regulations and orders workstations, such as teller stations and personal banker issued thereunder. For purposes of this action, these condi- stations, on the client's computer network; connecting tions and commitments are deemed to be conditions im- these components to the computer network; installing posed in writing by the Board in connection with its and testing software components of the computer netfindings and decision, and, as such, may be enforced in work; and training the client in the use of the computer proceedings under applicable law. network;2 and This transaction shall not be consummated later than (5) Providing telephone support to help the client rethree months after the effective date of this order, unless solve computer network operating problems; isolating such period is extended for good cause by the Board or by and identifying hardware or software defects in the the Federal Reserve Bank of Kansas City, acting pursuant computer network; and helping the client obtain service to delegated authority. for these computer network defects from the appropriate By order of the Board of Governors, effective Novem- vendor or other maintenance provider. ber 27, 1995. Keystone Financial, Inc. Voting for this action: Chairman Greenspan, Vice Chairman Harrisburg, Pennsylvania Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. Order Approving Application to Acquire a Nonbanking JENNIFER J. JOHNSON Company and Engage in Certain Investment Advisory Deputy Secretary of the Board Activities Appendix Keystone Financial, Inc., Harrisburg, Pennsylvania ("Applicant"), a bank holding company within the meaning of List of Computer Network Services the Bank Holding Company Act ("BHC Act"), has applied (1) Evaluating the client's needs in processing banking, for the Board's approval under section 4(c)(8) of the BHC financial, or economic data, such as deposit account Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the processing (including account opening, calculating de- Board's Regulation Y (12 C.F.R. 225.23) to acquire all the posits, withdrawals, interest and fees, and generating voting shares of Martindale Andres & Company, Inc., West statements and reports); loan processing (including pre- Conshohocken, Pennsylvania ("Company"). Applicant paring application forms and disclosures and calculating proposes that Company continue serving as investment advances, payments, interest, and fees); item processing; adviser to investment companies and providing portfolio check imaging; lockbox processing; safe deposit box investment advice and management services, including accounting; asset/liability monitoring and management; credit bureau reporting; collecting call report data; geo- 1. Other than a limited amount of software that Company may develop for use in an individual client's computer network, Compatying the provision of its services to an extension of credit or the sale ny's clients would acquire hardware and software directly from third or lease of any other product or service of its bank affiliates. See parties. Company would not be a vendor or distributor of any hard- 12 C.F.R. 225.7. ware or software or an agent of any third party provider of hardware 13. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 or software. Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 2. Installation services would not include laying local area or wide Federal Reserve Bulletin 155 (1987). area telecommunications cables. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 85 discretionary investment management services, to institu- limitations,5 the provision of discretionary investment adtional customers, pursuant to sections 225.25(b)(4)(ii) and vice to non-institutional customers is so closely related to (iii) of Regulation Y.1 Applicant also proposes that Com- banking as to be a proper incident thereto within the pany continue to provide limited discretionary investment meaning of section 4(c)(8) of the BHC Act.6 management services to customers who may not qualify as In every case involving a nonbanking acquisition under institutional customers under Regulation Y.2 section 4 of the BHC Act, the Board also must consider the Notice of the application, affording interested persons an financial condition and resources of the applicant and its opportunity to submit comments on the proposal, has been subsidiaries and the effect of the proposal on these resourcpublished (59 Federal Register 47,585 (1995)). The time es.7 Based on all the facts of record, the Board has confor filing comments has expired, and the Board has consid- cluded that financial and managerial considerations are ered the application and all comments received in light of consistent with approval of this proposal. the factors set forth in section 4(c)(8) of the BHC Act. The Board also expects that Company's conduct of the Applicant, with total consolidated assets of $4.7 billion, proposed activities would enable Applicant to provide operates commercial banking organizations in Pennsylva- added convenience and services to its customers, and nia, West Virginia, and Maryland.3 Applicant engages would not significantly reduce the level of competition through its subsidiaries in a broad range of banking and among existing providers of these services. Accordingly, permissible nonbanking activities. Company is registered based on all of the facts of record, including the commitas an investment adviser under the Investment Advisers ments provided by Applicant, the Board has concluded that Act of 1940 (15 U.S.C. § 80b-1 et seq.) ("Investment Ad- the performance of the proposed activities by Company visers Act"). can reasonably be expected to produce public benefits that Section 4(c)(8) of the BHC Act provides that a bank would outweigh possible adverse effects under the proper holding company may, with Board approval, engage in any incident to banking standard of section 4(c)(8) of the BHC activity that the Board determines to be "closely related to Act. banking or managing or controlling banks." The Board Based on the foregoing and all the facts of record, also must determine that the activity is a proper incident to including the commitments discussed above and all other banking. In judging whether the performance of an activity commitments made in connection with the application, the meets the proper incident to banking test, the Board must Board has determined to, and hereby does, approve the determine whether the proposed activity may be reason- application.8 The Board's approval is specifically condiably expected to produce public benefits that outweigh any tioned upon compliance with the commitments made in possible adverse effects. connection with this application and with the conditions The Board previously has determined by regulation that referred to in this order. The Board's determination also is acting as investment adviser to registered investment com- subject to all the terms and conditions set forth in Regulapanies and providing portfolio investment advice are tion Y, including those in sections 225.4(d) and 225.23(g) closely related to banking.4 The Board also previously has determined that, subject to a number of commitments and 5. In particular, Applicant has committed that no transactions on behalf of discretionary investment advisory accounts for non- institutional customers would be excuted by Applicant or any of its affiliates. Applicant also has committed that the fees charged by Company for its discretionary advisory accounts for non-institutional customers would not be based upon the number of account transactions executed. 1. Applicant proposes to effect the acquisition by organizing a 6. CoreStates Financial Corp., 80 Federal Reserve Bulletin 644 first-tier subsidiary, KFMA Subsidiary, and merging KFMA Subsid- (1994) ("CoreStates Order"). Applicant has committed that Company iary with and into Company, with KFMA Subsidiary as the surviving will conduct these activities pursuant to the conditions and limitations corporation. KFMA Subsidiary, however, would change its name to specified in the Board's regulations and the CoreStates Order, with Martindale Andres & Company, Inc. one exception. Applicant proposes to permit employees of the trust 2. 12 C.F.R. 225.2(g). Customers who may not qualify as institu- departments of its subsidiary banks also to be employees of Company. tional customers are participants in asset management programs spon- These employees would continue to provide investment advice to trust sored by various unaffiliated broker-dealers or financial consultants customers and would provide advice to institutional customers and to ("wrap accounts"). In connection with these wrap accounts, Com- customers through wrap accounts. Applicant has indicated that these pany provides discretionary investment advisory services to clients of employees would not engage in general marketing on behalf of these unaffiliated broker-dealers, who offer investment advisory and Company and would not have contact with non-institutional customrelated services for a single, all inclusive or "wrap" fee. Company has ers of the banks for purposes unrelated to trust business. Based on all indicated that its fee for managing the assets in a wrap account is the facts of record, the Board has determined that this is consistent based on a percentage of assets under management and is paid by the with the BHC Act. unaffiliated broker-dealer. Applicant and its affiliates will not execute 7. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 transactions for the wrap accounts and the wrap fees are not based on Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 transactions. Because wrap accounts are managed by an independent Federal Reserve Bulletin 155 (1987). third party broker that deals directly with customers, the third party 8. This approval is limited to Applicant's proposal to acquire broker monitors activities in wrap accounts and can replace the Company and for Company to engage in providing discretionary adviser anytime if the adviser engages in transactions that are not in investment management services subject to the terms and conditions the best interests of the broker's customers. of this order. This order does not otherwise authorize Applicant to 3. Asset data are as of June 30, 1995. engage in providing discretionary investment management services to 4. See 12 C.F.R. 225.25(b)(4)(ii) and (iii). non-institutional customers without prior Board approval. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 Federal Reserve Bulletin • January 1996 of Regulation Y, and to the Board's authority to require holding companies conform their direct and indirect activisuch modification or termination of the activities of a bank ties to those permitted for bank holding companies under holding company or any of its subsidiaries as the Board section 4 of the BHC Act. Mercantile has committed to finds necessary to ensure compliance with, and to prevent conform all activities of Security to the requirements of evasion of, the provisions of the BHC Act and the Board's section 4 of the BHC Act and Regulation Y.2 regulations and orders issued thereunder. For purposes of this action, these commitments and conditions are deemed Competitive Considerations to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be Mercantile, with total consolidated assets of $16 billion, enforced in proceedings under applicable law. controls banks in Missouri, Illinois, Iowa, Kansas, and This transaction shall not be consummated later than Arkansas. Mercantile is the third largest bank holding three months after the effective date of this order, unless company in Arkansas, controlling total deposits of such period is extended for good cause by the Board or by $1.3 billion,3 representing approximately 4.5 percent of the Federal Reserve Bank of Philadelphia, acting pursuant total deposits in depository institutions in the state.4 Secuto delegated authority. rity is the 76th largest depository institution in Arkansas, By order of the Board of Governors, effective Novem- controlling deposits of approximately $80.7 million, repreber 6, 1995. senting less than 1 percent of total deposits in depository institutions in the state. Upon consummation of this pro- Voting for this action: Chairman Greenspan, Vice Chairman posal, Mercantile would remain the third largest depository Blinder, and Governors Kelley, Lindsey, and Phillips. Absent and not institution in the state, controlling approximately $1.4 bilvoting: Governor Yellen. lion in deposits, representing 4.8 percent of total deposits in depository institutions in the state. JENNIFER J. JOHNSON Mercantile and Security compete directly in the Faulkner Deputy Secretary of the Board County banking market5 and the Conway County banking market.6 In the Faulkner County banking market, Mercan- Mercantile Bancorporation Inc. tile is the smallest of six competitors, controlling deposits St. Louis, Missouri of $9.7 million, representing 1.9 percent of total deposits in depository institutions in the market ("market deposits").7 Order Approving the Acquisition of a Savings Association Mercantile Bancorporation Inc., St. Louis, Missouri ("Mercantile"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has given 2. Security engages in certain securities and real estate activities that are impermissible for bank holding companies under the BHC Act. notice under section 4(c)(8) of the BHC Act (12 U.S.C. Mercantile has committed that: § 1843(c)(8)) and section 225.23 of the Board's Regulation (1) All impermissible real estate activities will be divested or Y (12 C.F.R. 225.23)) of its proposal to acquire Security terminated within two years of consummation of the proposal; Bank of Conway, F.S.B., Conway, Arkansas ("Security"), (2) No new impermissible projects or investments will be undera savings association for the purposes of the BHC Act.1 taken; and (3) Capital adequacy guidelines will be met excluding specified real Notice of this proposal, affording interested persons an estate investments. opportunity to submit comments, has been published Mercantile also has committed that any impermissible securities activ- (60 Federal Register 52,917 (1995)). The time for filing ities conducted by Security will cease on or before consummation of comments has expired, and the Board has considered the the proposal. 3. All banking data are as of June 30, 1994. Deposit data are notice and all comments received in light of the public adjusted to reflect commercial bank mergers consummated, bank interest factors set forth in section 4(c)(8) of the BHC Act. holding company acquisitions approved, and thrift mergers through The Board has determined that the operation of a savings September 15, 1995. association by a bank holding company is closely related to 4. In this context, depository institutions include commercial banks, banking and permissible for bank holding companies. savings banks, and savings associations. 5. The Faulkner County banking market is approximated by 12 C.F.R. 225.25(b)(9). In making this determination, the Faulkner County, Arkansas. Board requires that savings associations acquired by bank 6. The Conway County banking market is approximated by Conway County, Arkansas. 7. Market share data before consummation are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become significant competitors of 1. Upon consummation, Twin City Bank, North Little Rock, Arkan- commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin sas, and Mercantile Bank of Conway, N.A., Morrilton, Arkansas, two 788 (1990); National City Corporation, 70 Federal Reserve Bulletin subsidiary banks of Mercantile's wholly owned, second-tier bank 743 (1984). Because the deposits of Security would be transferred to a holding company, Mercantile Bancorporation, Inc. of Arkansas, commercial banking organization under this proposal, they are in- St. Louis, Missouri, would acquire the assets and assume the liabilities cluded at 100 percent in the calculation of pro forma market share. See of Security. Norwest Corporation, 78 Federal Reserve Bulletin 458 (1992). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 87 Security is the fourth largest depository institution in the Other Considerations market, controlling deposits of $75.6 million, representing 7.5 percent of market deposits. On consummation of this proposal, competition as measured by the Herfindahl- The financial and managerial resources of Mercantile, Se- Hirschman Index ("HHI") would not increase.8 curity, and the respective subsidiaries are consistent with Mercantile is the largest of four depository institutions approval. Because Security would be merged into Mercanthat operate in the Conway County banking market, con- tile 's subsidiary banks, Security's customers would have trolling deposits of $73.2 million, representing 42.1 per- access to Mercantile's products and services, including cent of market deposits. Security is the smallest depository commercial loans, which Security has not emphasized in institution in the market, controlling $5.1 million in depos- the Conway County banking market. The record does not its, representing 1.5 percent of market deposits. Upon indicate that consummation of this proposal is likely to consummation of this proposal, Mercantile would control result in any significantly adverse effects, such as undue 44.3 percent of market deposits, and the HHI for the concentration of resources, decreased or unfair competi- Conway County market would increase by 147 points to tion, conflicts of interests, or unsound banking practices 3540. This increase in market concentration as measured that are not likely to be outweighed by the public benefits by the HHI would not exceed the Department of Justice of this proposal.11 Accordingly, the Board has determined Merger Guidelines. Three competitors would remain in the that the balance of public interest factors it must consider market, including the two largest bank holding companies under section 4(c)(8) of the BHC Act is favorable and in Arkansas.9 In addition, the market may be attractive for consistent with approval. entry to new competitors, because data indicate that the per Based on all the facts of record, including all the comcapita income and growth of deposits in the market is mitments made by Mercantile, the Board has determined higher than average for rural counties in Arkansas.10 that the notice should be, and hereby is, approved. The The Board sought comments from the United States Board's approval is specifically conditioned on Mercan- Attorney General, the Office of the Comptroller of the tile's compliance with all the commitments made in con- Currency, and the Office of Thrift Supervision on the nection with this notice. The Board's determination also is competitive effects of the proposal. Neither the Attorney subject to all the conditions set forth in Regulation Y, General nor any federal supervisory agency objected to the including those in sections 225.7 and 225.23(g), and to the proposal. Board's authority to require such modification or termina- For the reasons discussed above, and based on all the tion of the activities of a bank holding company or any of facts of record, the Board concludes that consummation of its subsidiaries as the Board finds necessary to assure this proposal would not have a significantly adverse effect compliance with, and to prevent evasion of, the provisions on competition or the concentration of banking resources of the BHC Act and the Board's regulations and orders in the Faulkner County and Conway County banking mar- issued thereunder. For purposes of this action, the commitkets or in any other relevant market. ments and conditions relied on 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 proceedings under applicable law. This transaction shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of St. Louis, acting pursuant to 8. The post-merger HHI would be 3021 points. Under the revised delegated authority. Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is above 1800 By order of the Board of Governors, effective Novemis considered highly concentrated. The Justice Department has in- ber 29, 1995. formed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompeti- Voting for this action: Chairman Greenspan, Vice Chairman tive effects) unless the post-merger HHI is at least 1800 and the Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. merger increases the HHI by more than 200 points. The Justice Department has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recog- JENNIFER J. JOHNSON nize the competitive effect of limited-purpose lenders and other non- Deputy Secretary of the Board depository financial entities. 9. Boatmen's Bancshares, Inc., St. Louis, Missouri, and First Commercial Corporation, Little Rock, Arkansas, both operate in the market. 10. 1989 income data indicate that the per capital income for Conway County was $9,126 compared to the average of $8,983 for all rural counties in the state. U.S. Department of Commerce County Book 1994 (13th Edition). From 1991 through 1994, total deposits in the Conway County banking market increased by 3.9 percent while deposits for other rural markets in Arkansas increased by only 3.4 percent. 11. 12 U.S.C. § 1843(c)(8). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 Federal Reserve Bulletin • January 1996 Orders Issued Under Sections 3 and 4 of the ciency Act of 1994, allows the Board to approve an appli- Bank Holding Company Act cation by a bank holding company to acquire control of a bank located in a state other than the home state of such Banc One Corporation bank holding company, if certain conditions are met.4 The Columbus, Ohio conditions are met in this proposal,5 and in view of all the facts of record, the Board is permitted to approve this Premier Acquisition Corporation proposal under section 3(d) of the BHC Act. Columbus, Ohio Competitive and Other Considerations Order Approving the Acquisition of a Bank Holding Company Banc One and Premier do not compete in any banking market. On the basis of these considerations and all other Banc One Corporation, Columbus, Ohio ("Banc One"), a facts of record, the Board has concluded that consummabank holding company within the meaning of the Bank tion of this proposal would not result in any significantly Holding Company Act ("BHC Act"), has applied under adverse effect on competition or the concentration of banksection 3 of the BHC Act (12 U.S.C. § 1842) to form ing resources in any relevant banking market. The Board Premier Acquisition Corporation, Columbus, Ohio also has concluded in light of all facts of record that the ("PAC"), and through PAC, to acquire Premier Bancorp, financial and managerial resources and future prospects of Inc. ("Premier"), thereby indirectly acquiring Premier's Banc One, Premier, and their respective subsidiaries, and subsidiary bank, Premier Bank, N.A. ("Premier Bank"), other supervisory factors the Board must consider under both of Baton Rouge, Louisiana.1 section 3 of the BHC Act, are consistent with approval.6 Banc One and PAC have also provided notice pursuant to section 4 of the BHC Act (12 U.S.C. § 1843) and Convenience and Needs Considerations section 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) to acquire Premier Securities Corporation, Baton In acting on an application to acquire a depository institu- Rouge, Louisiana, and thereby engage in discount securi- tion under the BHC Act, the Board must consider the ties brokerage activities as provided in Regulation Y.2 convenience and needs of the communities to be served, Notice of this proposal, affording interested persons an and take into account the records of the relevant depository opportunity to submit comments, has been published institutions under the Community Reinvestment Act (60 Federal Register 52,184 (1995)). The time for filing (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires the comments has expired, and the Board has considered the federal financial supervisory agencies to encourage finanproposal and all comments received in light of the factors cial institutions to help meet the credit needs of the local set forth in sections 3 and 4 of the BHC Act. communities in which they operate, consistent with their Banc One, with total consolidated assets of approxi- safe and sound operation. To accomplish this end, the CRA mately $87.1 billion, operates subsidiary banks in Ohio, requires the appropriate federal supervisory authority to Indiana, Wisconsin, Illinois, Texas, Colorado, Kentucky, West Virginia, Arizona, Oklahoma, and Utah.3 Banc One is the tenth largest commercial banking organization in the 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding United States, controlling approximately 2.7 percent of company's home state is that state in which the operations of the bank total banking assets in the United States. Banc One also holding company's banking subsidiaries were principally conducted engages through its subsidiaries in a broad range of permis- on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. For purposes of the BHC Act, sible nonbanking activities in the United States. Premier, the home state of Banc One is Ohio. with total consolidated assets of $5.5 billion, is the third 5. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). largest commercial banking organization in Louisiana, con- Banc One is adequately capitalized and adequately managed. Upon trolling $4.3 billion in deposits, representing approxi- consummation of this proposal, Banc One and its affiliates would mately 12 percent of the total deposits in commercial control less than 10 percent of the total amount of deposits of insured depository institutions in the United States and less than 30 percent of banking organizations in the state. the total amount of deposits in Louisiana. Premier Bank has been in existence and continuously operated for the minimum period of time Interstate Analysis required under Louisiana law. All other requirements of section 3(d) of the BHC Act would also be met upon consummation of this proposal. Section 3(d) of the BHC Act, as amended by Section 101 6. The Board received comments from an individual who has filed a of the Riegle-Neal Interstate Banking and Branching Effi- lawsuit now pending against Premier that describe events which preceded Premier's acquisition of the subsidiary bank involved in this dispute. This individual does not oppose this transaction. The Board 1. Banc One proposes to merge Premier with and into PAC, with received comments that criticized Banc One for assuming that this PAC as the survivor, to be named "Banc One Louisiana Corporation." proposal would be consummated and for focusing on future acquisi- PAC also has applied under section 3 of the BHC Act to become a tions. The Board has carefully considered these comments in light of bank holding company. all the facts of record, including reports of examination assessing the 2. See 12 C.F.R. 225.25(b)(15)(i). financial and managerial resources of the organizations, and concludes 3. Asset and deposit data are as of June 30, 1995. that these comments do not warrant denial of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 89 "assess the institution's record of meeting the credit needs The Board has carefully reviewed the CRA performance of its entire community, including low- and moderate- records of Banc One, Premier, and their respective subsidincome neighborhoods, consistent with the safe and sound iary banks, as well as all comments received on these operation of such institution," and to take that record into applications, Banc One's responses to those comments, account in its evaluation of bank holding company applica- and all other relevant facts of record, in light of the CRA, tions.7 the Board's regulations, and the Statement of the Federal The Board received comments on this proposal from two Financial Supervisory Agencies Regarding the Community organizations8 and an individual affiliated with one of those Reinvestment Act ("Agency CRA Statement").12 organizations (collectively, "Protestants") opposing this proposal. On the basis of data collected under the Home Records of Performance Under the CRA Mortgage Disclosure Act ("HMDA"),9 Protestants alleged that Banc One; Banc One Mortgage Corporation, Indianap- A. CRA Performance Examinations olis, Indiana ("BOMC"), and Premier have illegally discriminated against minorities in violation of the Equal The Agency CRA Statement provides that a CRA examina- Credit Opportunity Act and the Fair Housing Act (collec- tion is an important and often controlling factor in the tively, "fair lending laws").10 Protestants also maintain consideration of an institution's CRA record, and that that Banc One has generally failed to meet its responsibili- reports of these examinations will be given great weight in ties under the CRA by not making sufficient outreach the applications process.13 The Board notes that all 60 of efforts to communities with predominately minority popu- Banc One's subsidiary banks that have been examined for lations ("minority communities") and by failing to provide CRA performance since public ratings became available a plan to improve Premier's alleged discriminatory lending received either "outstanding" or "satisfactory" ratings activities. Protestants also alleged that Premier has failed to from their primary federal supervisors at their most recent perform satisfactorily under the CRA, particularly in the examinations, and that, in addition, 29 of the banks, reprelow- and moderate-income and minority communities of senting approximately 40 percent of Banc One's total North and East Baton Rouge, and has not (1) established banking assets, received "outstanding" ratings. Moreover, enough branches or made enough loans in these communi- Banc One's lead subsidiary bank, Bank One, Columbus, ties, (2) made enough small business loans, or (3) suffi- N.A., Columbus, Ohio ("Columbus Bank"), received an ciently marketed credit products to all of its communities.11 "outstanding" rating from its primary federal supervisor, the Office of the Comptroller of the Currency ("OCC"), at its most recent examination for CRA performance as of 7. 12 U.S.C. § 2903. 8. The organizations are Inner City Press/Community on the Move and its members and affiliates ("ICP"), and the Louisiana Association bank with a poor performance record could be controlled by an of Community Organizations for Reform Now ("Louisiana organization that does not own all of its outstanding voting stock. ICP ACORN"). ICP questioned the fees charged by Banc One for the also alleged that Banc One has illegally exercised control over Preproduction and duplication of certain HMDA-related data, call re- mier under the 1992 agreements. In particular, ICP contended that ports, and the public portion of CRA examination reports. Applicable Banc One's warrants, and other features of the agreements that were regulations do not prohibit an institution from charging a reasonable reviewed by the Board, indicate that Banc One has imposed a penalty fee for reproduction of documents, and, in the case of HMDA data, an on the cancellation of the acquisition, and thereby exercised control institution is expressly authorized to charge a reasonable fee. See over Premier. After reviewing a restructured proposal by Banc One in 12 C.F.R. 203.5(d). Banc One's fees appear to be consistent with 1992, including these features, the Board found that Banc One would similar fees charged by other organizations for producing and dupli- not control Premier by virtue of the passive investment it proposed to cating this type of information. The Board also notes that Banc One make at that time. See Letter from William W. Wiles, Secretary of the furnished copies of all the documents requested for a substantial Board, to Mark A. Weiss, Esq. (January 22, 1992). ICP has not number of Banc One's subsidiary banks within five days of ICP's provided any evidence to indicate that Banc One did, in fact, control request, and indicated that if certain of those documents were returned Premier after the agreements were entered into in 1992. After consumby ICP after use by ICP, there would be no charge. In light of these mation of this proposal, Banc One would control Premier, and would considerations and all the facts of record, the Board has determined be responsible for the CRA performance of Premier's subsidiary that the fees assessed by Banc One for producing and duplicating the banks. Based on these and other facts of record, the Board does not documents were reasonable. Based on all the facts of record, the believe that ICP's comments on this matter warrant denial of this Board does not believe that ICP's objections on the basis of the fees or proposal. access to the information requested warrant denial of this proposal. 12. 54 Federal Register 13,742 (1989). Louisiana ACORN alleged 9. 12 U.S.C. §2903. that Premier and Banc One have refused to address adequately or 10. Protestants particularly alleged that BOMC's record of market- negotiate issues concerning minority outreach. The Board has indiing to communities with predominately minority populations is inade- cated in previous orders and in the Agency CRA Statement that quate, the number of applications received from minorities is low, and communication by depository institutions with community groups the percentage of these applications that are withdrawn or denied is provides a valuable method of assessing and determining how best to high. ICP has requested that a fair lending examination of BOMC be address the credit needs of the community. Neither the CRA nor the conducted. Agency CRA Statement, however, requires depository institutions to 11. ICP also has maintained that alleged deficiencies in Premier's enter into agreements with particular organizations. Accordingly, the record of CRA performance reflect adversely on Banc One in light of Board's review has focused on the programs and policies that Banc Banc One's 1992 agreements to purchase a subordinated capital note One and Premier have in place to assist in meeting the credit needs of of Premier, receive warrants, and, in the future, acquire all of Pre- their entire communities. See Third Bancorp, 80 Federal Reserve mier's outstanding stock. In addition, ICP argued that such "two- Bulletin 838 (1994). step" acquisitions inhibit effective enforcement of the CRA because a 13. Id. at 13,745. 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90 Federal Reserve Bulletin • January 1996 January 31, 1995. Premier Bank also received a "satisfac- student loans.15 In addition, OCC examiners found that tory" rating from its primary federal supervisor, the OCC, Columbus Bank actively engages in small business lendat its most recent examination for CRA performance as of ing, and noted that the bank has become one of the largest March 31, 1994. producers of SBA loans in its district, making approximately 8 percent of the total SBA loans. B. Corporate CRA Policies of Banc One The 1995 Examination found the marketing program of Columbus Bank to be comprehensive, employing a wide The Board notes that Banc One has the types of policies range of media sources and marketing techniques, includand programs in effect and working well that assist in ing those designed to reach minorities and low- and providing an effective record of CRA performance. Upon moderate-income census tracts. Columbus Bank also was consummation of this proposal, Premier would be inte- noted as having placed advertising in several newspapers grated into the Banc One corporate CRA structure, and and a radio station with predominately minority audiences. Banc One's CRA policies and practices would be imple- During 1994, Columbus Bank established a new banking mented at Premier Bank. group, the Community Development Division ("CDD"), Banc One provides management supervision of CRA to help serve the needs of low- and moderate-income compliance at both the affiliate and the corporate levels. individuals, small businesses in low- and moderate-income Banc One has established a Corporate CRA Committee and minority census tracts, businesses owned by minorities that monitors community reinvestment performance and women, and non profit businesses.16 CDD staff memthroughout the Banc One organization that reports directly bers also identify and coordinate complex community deto Banc One's Board of Directors. The Committee is velopment projects.17 composed of CRA officers of several of Banc One's statewide bank holding companies and senior corporate man- C. HMDA Data and Lending Activities of Banc agement representatives. The Committee reviews and up- One dates corporate CRA policy, monitors local issues that might become significant throughout the organization, and The Board has carefully reviewed HMDA data submitted conducts CRA training. The record indicates that all of by BOMC and Banc One for 1993 and 1994 in light of Banc One's subsidiary banks have implemented policies Protestant's comments.18 HMDA data for BOMC indicate and programs designed to help meet the community credit that the proportion of applications received from and loans needs of their delineated communities. made to African Americans increased from 1993 to 1994 Banc One also has established a community develop- as a percentage of total applications and loans. The dollar ment corporation ("CDC") whose resources are available amount of loans made to African Americans also increased to all Banc One subsidiaries. The CDC helps these subsid- as a percentage of total loan volume over the same period. iaries finance projects designed to promote community Overall, BOMC made 1,885 purchase money mortgage development, and most of the CDC's investments have loans to African Americans in 1994, for a total of more been for the acquisition and rehabilitation of affordable housing for low- and moderate-income individuals. 15. During 1994, Columbus Bank made loans under SBA programs The effectiveness of these policies and programs is retotalling approximately $12.8 million, FmHA loans totalling approxiflected in the CRA record of performance of Banc One's mately $1.2 million, FHA loans totalling approximately $2.7 million, lead bank, Columbus Bank. The OCC's CRA performance and VA loans totalling approximately $2.3 million. In each category examination for Columbus Bank ("1995 Examination") except FHA and VA loans, Columbus Bank's 1994 loan data demonfound that the bank, directly or through BOMC, offered a strate an increase in lending over 1993 data. OCC examiners attributed the decrease in FHA/VA loans to the introduction of the Easy wide array of conventional and government-insured loans Mortgage product and to higher interest rates. The 1995 Examination for home purchase and home renovation. One such afford- found that the bank's lending under all government-sponsored loan able home loan product for low- and moderate-income programs was $24.5 million in 1994, a 9 percent increase over 1993 borrowers, called the "Easy Mortgage," was developed in lending. 16. The CDD made 23 small business loans totalling $2.4 million in response to the need for a more flexible mortgage product its first quarter of operation. Of these loans, 57 percent were in lowwith a low down payment.14 Columbus Bank also actively and moderate-income areas, with approximately 43 percent to busiparticipates in all types of government-sponsored lending nesses owned by minorities and approximately 13 percent to busiprograms, such as those offered by the Small Business nesses owned by women. Administration ("SBA"), Federal Housing Administration 17. During 1993 and 1994, Columbus Bank made loans totalling $51 million for 33 community development projects, including ("FHA"), Veterans Administration ("VA"), and Farmers $23 million for new construction or the refinancing of existing afford- Home Administration ("FmHA") as well as guaranteed able housing in low- and moderate-income areas. These loans included $7 million for economic development projects, 18 of which were in low- and moderate-income areas or neighborhoods designated by the city of Columbus for revitalization or job creation opportunities. 18. Under HMDA, lenders are required to report data about home 14. The Easy Mortgage is marketed by special loan originators in improvement loans, conventional home purchase loans, refinancings low- and moderate-income areas, and the bank and BOMC made 182 of home mortgage loans, and loans made under government-sponsored Easy Mortgage loans totalling $8.9 million in 1994. home mortgage programs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 91 than $120 million. HMDA data also show that the disparity discourage applications for the types of credit listed in the between the denial rate for African-American credit appli- banks' CRA statements. cants and that for non-minority applicants decreased from Banc One's compliance with fair lending laws are effec- 1993 to 1994 for both refinancings and purchase money tively overseen by its corporate compliance department, mortgage loans. which has implemented new training and monitoring pro- Aggregate HMDA data for all of Banc One's subsidiary cedures to address areas such as fair lending and HMDA banks for 1993 and 1994 show that the disparity in the data reporting. Banc One's corporate audit department also denial rates for African-American credit applicants and has responsibility for identifying weaknesses at affiliate non-minority applicants remained constant in some lending banks, and assisting the compliance department in monitorcategories and that it decreased for other types of loans.19 ing for compliance with consumer lending laws and regula- Overall, Banc One's subsidiary banks made over 5,500 tions. HMDA-related loans to African Americans in 1994 (pri- In addition, Banc One has established a "Fair Lending marily in the category of home improvement loans). From Steering Committee" with responsibilities for implement- 1993 to 1994, the number of applications received from ing Banc One's fair lending programs at its subsidiaries, and loans made to African Americans increased as a per- including second review programs,22 fair lending training, centage of the total in the categories of refinancings and and fair lending testing. In 1994, the Fair Lending Training home improvement loans.20 Subcommittee, a subcommittee of the Fair Lending Steer- These HMDA data, however, also reflect disparities in ing Committee, developed a training program entitled, the rate of loan originations, denials, and applications by "Fair Lending—Just Good Business."23 racial group and income level. The Board is concerned These corporate fair lending policies and procedures are when the record of an institution indicates disparities in followed at nonbanking lending subsidiaries like BOMC, lending to minority applicants, and it believes that all and BOMC has implemented several types of fair lending banks are obligated to ensure that their lending practices programs.24 A second review program at BOMC applies to are based on criteria that assure not only safe and sound all applications denied in the initial underwriting process, lending, but also equal access to credit by creditworthy as well as all withdrawn applications, to ensure the uniform applicants regardless of race. The Board recognizes, how- treatment of all applicants. Underwriters receive regular ever, that HMDA data alone provide an incomplete mea- feedback from the second review process. BOMC also sure of an institution's lending in its community. The conducts a mystery shopper "Fair Lending Shopping Pro- Board also recognizes that HMDA data have limitations gram" through a third party vendor to identify any disparithat make the data an inadequate basis, absent other infor- ties in the quality of service or information in the applicamation, for concluding that an institution has engaged in tion process. illegal discrimination in making lending decisions. The Board has carefully reviewed all the facts of record D. CRA Performance Record of Premier in light of HMDA data and Protestant's allegations. The most recent CRA performance examinations conducted by The Board recently reviewed the CRA performance record Banc One's primary federal supervisors found no substan- of Premier, in connection with its application to acquire tive evidence of prohibited discrimination or other illegal HNB Corporation, and Homer National Bank, both of credit practices at any of Banc One's subsidiary banks.21 Examiners also found no evidence of practices intended to 22. The Columbus Bank has implemented two types of second review programs. One program covers applications for real-estate- 19. For example, the denial disparity ratio remained at 1.9 for home related consumer loans that otherwise might be denied in which the improvement loans and decreased from 1.7 to 1.2 for purchase money applicant has an income of less than $35,000. This program uses a mortgage loans. credit scoring model developed to improve the approval rate for low- 20. In the category of purchase money mortgage loans, the number and moderate-income applicants. Another second review program of loans made to African Americans remained constant as a percent- involves applications by businesses located in low- and moderateage of the total, while the dollar volume of loans decreased slightly, income census tracts that otherwise might be denied. The purpose of and the number of applications received decreased by approximately this program is to ensure that underwriting guidelines have been 25 percent. properly applied and that government lending programs and financing 21. The 1994 CRA Examination for Bank One, Green Bay, Green alternatives have been fully considered. The 1995 Examination also Bay, Wisconsin, with assets of approximately $522 million, noted an favorably noted the bank's compliance monitoring and internal testing apparent violation of the Fair Housing regulation for the bank's failure for loan discrimination. to obtain monitoring information from certain withdrawn applications. 23. This program provided training in fair lending laws, appropriate An isolated violation of the Fair Housing regulation was also cited at customer contact and lending practices, and checklists to increase fair this examination. OCC examiners also noted in a 1993 CRA Examina- lending effectiveness. Banc One also provides diversity training to tion of Bank One, Bloomington, N.A., Bloomington, Indiana, which combat stereotyping. had assets of approximately $540 million, that the bank failed to 24. BOMC participates in Banc One's Fair Lending training procomply with a provision of the Equal Credit Opportunity Act, but that gram, and approximately 1,200 BOMC employees have participated senior management and the board of directors of the bank took in this program since 1994. BOMC also requires diversity training for appropriate corrective actions when this matter was identified. Exam- its managers, supervisors, and other salaried employees, and the iners also noted that this practice was not widespread. training also is available to non-salaried employees. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92 Federal Reserve Bulletin • January 1996 Homer, Louisiana.25 In evaluating that proposal, the Board still some disparities in the rate of loan originations, denicarefully considered Premier's CRA performance record, als, and applications by racial group and income level.28 in particular, its record in helping to meet the credit needs Premier Bank's CRA performance examination found no of residents of low- and moderate-income and minority evidence of prohibited discriminatory or other illegal credit communities. For reasons discussed in detail in the practices, such as practices or policies that would tend to Premier/HNB Order, and incorporated herein by reference, discourage credit applications. Examiners also found that the Board concluded that the convenience and needs factor, Premier Bank had implemented policies, procedures, and including the CRA performance record of Premier, was training programs that effectively addressed fair lending consistent with approval of an acquisition under the BHC issues and the requirements of fair lending laws. Act. The performance record that was reviewed in the E. Conclusion Regarding Convenience and Needs Premier/HNB Order included Premier Bank's "satisfacto- Factors ry" rating at its most recent evaluation for CRA performance. Examiners found that Premier Bank effectively On the basis of all the facts of record, including informaaddresses a portion of the community's housing-related tion provided by the Protestants, Banc One's responses, credit needs through the origination of residential mort- and relevant reports of examination, the Board has congages and by traditional and non-traditional banking prod- cluded that convenience and needs considerations, includucts and services. The examination also noted that Premier ing the overall CRA performance records of the institu- Bank participated in government-sponsored lending pro- tions involved in this proposal, are consistent with approval grams, such as those offered by the SBA, FHA, VA and of these applications.29 FmHA, as well as guaranteed student loans. Premier Bank actively participates in the SBA Loan Program, and its Nonbanking Activities involvement in small business lending programs benefitting low- and moderate-income communities was cited by Banc One and PAC have also given notice, pursuant to examiners as having created or helped to support existing section 4(c)(8) of the BHC Act, to acquire Premier Securijobs in those communities. ties Corporation, Baton Rouge, Louisiana ("PSC"), and Premier Bank's ascertainment efforts included contact thereby engage in discount securities brokerage activities. with a wide range of individuals, neighborhood groups and Section 4(c)(8) of the BHC Act provides that a bank community-based organizations, and examiners found that its marketing programs were designed to reach all segments of its delineated community and to inform its com- 28. The data for Baton Rouge indicate that the number and percentmunity about Bank's products and services. Premier age of applications from African Americans substantially increased between 1993 and 1994, while the disparity in denial rates between Bank's CRA performance examination also noted that the African Americans and non-minorities decreased during this same bank was involved in a variety of community development period. programs designed to benefit its communities, including 29. Protestants asserted that communities are adversely affected in low- and moderate-income and African-American resi- general by a lessening of competition from the loss of smaller statedents.26 wide banks, and that the remaining multi-state banking organizations would tend to serve more affluent customers, charge higher fees for Examiners concluded that Premier Bank had a satisfacbanking services, and provide less competitive loan rates. As a general tory record of opening, closing, and relocating its offices. matter, the Board does not believe that one form of corporate organi- The examination found that the bank had developed a good zation provides superior services to the public over another. See The distribution of branch locations, especially in low- and Bank of New York Company, Inc., 74 Federal Reserve Bulletin 251 (1988). The Board also notes that convenience and needs considermoderate-income areas, and that those branches offered a ations, including an institution's record of performance under the full range of banking products and services. In East Baton CRA, focus on local communities served by a banking organization. Rouge, five of its 24 branches (21 percent) are located in Under the CRA, any bank, including a bank owned by an out-of-state low- and moderate-income census tracts, and four branches bank holding company, must be examined regularly and rated on its performance in helping to meet the credit needs of its community. The (17 percent) are located in integrated or predominantly Board also notes that any diminution of CRA-related activities resultminority census tract.27 ing from this proposal would be reviewed by federal supervisors in The Premier/HNB Order also carefully reviewed Pre- future performance examinations, and by the Board in future applicamier Bank's HMDA data for 1993 and 1994, noting that tions to acquire a depository facility under the BHC Act. The Board the data reflect some improving trends but that there were also notes that convenience and needs considerations do not require that the pricing of services be comparable among geographic regions. As discussed above, Banc One's record of helping to meet the credit needs of all its communities, including low- and moderate-income 25. Premier Bancorp, Inc., 82 Federal Reserve Bulletin 75 (1996) neighborhoods, through its subsidiary banks has been rated "satisfac- ("Premier/HNB Order"). tory" or "outstanding" in the most recent CRA performance examina- 26. In Baton Rouge, Premier Bank participates in the Local Initia- tions, and there is no evidence that Banc One's fees are disproportiontives Support Corporation ("LISC"). The bank contributed $75,000 to ately high or that Banc One discriminates on any basis prohibited by assist in establishing a LISC program, and a representative of Premier law. In addition, as noted above, this proposal would not result in any Bank serves on its local board of directors. significantly adverse effect on competition in any relevant banking 27. Premier has closed four branches since Premier Bank's 1994 market. Based on all the facts of record, the Board concludes that examination, none of which were in East Baton Rouge. these comments do not warrant denial of this proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 93 holding company may, with Board approval, engage in any including those in sections 225.7 and 225.23(g) of Regulaactivity that the Board determines to be "so closely related tion Y, and to the Board's authority to require such modifito banking or managing or controlling banks as to be a cation or termination of the activities of a bank holding proper incident thereto". The Board previously has deter- company or any of its subsidiaries as the Board finds mined by regulation that the proposed discount securities necessary to ensure compliance with, or to prevent evabrokerage activities are closely related to banking within sions of, the provisions of the BHC Act and the Board's the meaning of section 4(c)(8) of the BHC Act.30 Banc One regulations and orders issued thereunder. These commithas committed that PSC will conduct these activities in ments and conditions shall be deemed to be conditions accordance with Regulation Y. imposed in writing by the Board in connection with its In order to approve this proposal, the Board also must findings and decision, and, as such, may be enforced in determine that the proposed activities represent a proper proceedings under applicable law. incident to banking, that is, that the proposed transaction The banking acquisition shall not be consummated be- "can reasonably be expected to produce benefits to the fore the fifteenth calendar day following the effective date public, such as greater convenience, increased competition, of this order, and this proposal shall not be consummated or gains in efficiency, that outweigh possible adverse ef- later than three months after the effective date of this order, fects, such as undue concentration of resources, decreased unless such period is extended for good cause by the Board or unfair competition, or unsound banking practices."31 On or by the Federal Reserve Bank of Cleveland, acting pursuthe basis of the record, the Board believes that this pro- ant to delegated authority. posal should enable PSC to provide greater convenience By order of the Board of Governors, effective Novemand improved services to its customers. In addition, while ber 29, 1995. Banc One operates subsidiaries that engage in these activities in competition with PSC, the market for securities Voting for this action: Chairman Greenspan, Vice Chairman brokerage services is unconcentrated, and there are numer- Blinder, and Governors Kelley, Lindsey, Phillips, and Yellen. ous providers of these services. As a result, consummation of this proposal would have a de minimis effect on compe- JENNIFER J. JOHNSON tition for these services, and the Board concludes that this Deputy Secretary of the Board proposal would not have a significantly adverse effect on competition in any relevant market. Financial and manage- NBD Bancorp, Inc. rial considerations also are consistent with approval.32 On Detroit, Michigan the basis of these considerations and all other facts of record, the Board has determined that there is no evidence Order Approving Merger of Bank Holding Companies in the record to indicate that consummation of this proposal is likely to result in any adverse effects, such as NBD Bancorp, Inc., Detroit, Michigan ("NBD"), a bank undue concentration of resources, decreased or unfair com- holding company within the meaning of the Bank Holding petition, conflicts of interests, or unsound banking prac- Company Act ("BHC Act"), has applied under section 3 tices, that would not be outweighed by the public benefits of the BHC Act (12 U.S.C. § 1842) to merge with First reasonably to be expected to result from this proposal. Chicago Corporation and American National Corporation, Accordingly, the Board has concluded that the balance of both of Chicago, Illinois (collectively, "First Chicago"), the public interest factors it must consider under section and thereby indirectly acquire First Chicago's subsidiary 4(c)(8) of the BHC Act is favorable and consistent with banks: First National Bank of Chicago ("FNB-Chicago"), approval of Banc One's proposal to acquire PSC. American National Bank & Trust Company ("American National"), both of Chicago, Illinois, and FCC National Bank, Wilmington, Delaware.1 In addition, NBD has given Conclusion notice under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Regula- Based on the foregoing and all other facts of record, tion Y (12 C.F.R. 225.23) of its proposal to acquire the including all the commitments provided by Banc One in nonbanking subsidiaries of First Chicago listed in the connection with this proposal, the Board has determined Appendix and thereby engage nationwide in permissible that the applications and notices should be, and hereby are, nonbanking activities.2 approved. The Board's approval is expressly conditioned NBD also proposes to acquire, pursuant to section 211.5 upon compliance by Banc One with all the commitments of the Board's Regulation K (12 C.F.R. 211.5), all of First made by Banc One in connection with this proposal and with the conditions referred to in this order. The Board's determinations on the proposed nonbanking activities also are subject to all the conditions set forth in Regulation Y, 1. After consummation of the merger, NBD would change its name to First Chicago NBD Corporation and would relocate its corporate headquarters from Detroit to Chicago. 2. NBD and First Chicago also have applied for the Board's 30. See 12 C.F.R. 225.25(b)(15)(i). approval to exercise cross-options to purchase up to 19.9 percent of 31 .See 12 U.S.C. § 1843(c)(8). the voting shares of the other banking organization. These options 32. See 12 C.F.R. 225.24(b). would become moot upon consummation of this proposal. 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94 Federal Reserve Bulletin • January 1996 Chicago's subsidiaries, joint ventures, and portfolio invest- record, the Board is permitted to approve this proposal ments relating to activities outside the United States pursu- under section 3(d) of the BHC Act. ant to section 4(c)(13) of the BHC Act (12 U.S.C. § 1843(c)(13)). In addition, NBD has given notice, pursu- Competitive Considerations ant to sections 211.4 and 211.5 of Regulation K (12 C.F.R. 211.4 and 211.5) to acquire First Chicago International, NBD and First Chicago compete directly with other bank- Chicago International Finance Corporation, and First Chi- ing and savings organizations ("depository institutions")6 cago Overseas Investment Corporation, all of Chicago, in the Chicago, Elgin, and Joliet, Illinois, banking mar- Illinois, which are corporations chartered pursuant to sec- kets.7 Upon consummation of this proposal, all these banktion 25(a) of the Federal Reserve Act (the "Edge Act") ing markets would remain unconcentrated or moderately (12 U.S.C. §§ 611-13). concentrated as measured by the Herfindahl-Hirschman Notice of the proposal, affording interested persons an Index ("HHI"),8 and numerous competitors would remain opportunity to submit comments, has been published in each market. (60 Federal Register 46,126 (1995)). The time for filing The Board sought comments from the United States comments has expired, and the Board has considered the Attorney General, the Office of the Comptroller of the applications and all comments received in light of the Currency ("OCC"), and the Federal Deposit Insurance factors set forth in sections 3 and 4 of the BHC Act and the Corporation ("FDIC") on the competitive effects of this Edge Act. proposal. The Attorney General has indicated that the NBD, with approximately $48.1 billion in consolidated proposed transaction would not have a significantly adassets, is the 18th largest banking organization in the verse effect on competition. The OCC and the FDIC have United States.3 NBD operates subsidiary banks in Florida, not objected to consummation of the proposal or indicated Illinois, Indiana, Michigan, and Ohio, and controls approx- that it would have any significantly adverse competitive imately 1.3 percent of total banking assets of insured effects in any relevant banking market. Based on all the commercial banks ("total banking assets") in the United facts of record, including the relatively small increase in States. NBD also engages in a number of permissible nonbanking activities nationwide. First Chicago, with approximately $75.3 billion in consolidated assets, is the depository institutions in the United States and less than 30 percent of tenth largest banking organization in the United States. the total amount of deposits in Illinois, the only state in which both NBD and First Chicago operate. This transaction would meet applica- First Chicago controls approximately 1.2 percent of total ble minimum age requirements imposed by all relevant states, includbanking assets in the United States. Upon consummation ing Delaware, Florida, Indiana, and Wisconsin. All other requirements of this proposal, NBD would become the seventh largest of section 3(d) of the BHC Act would also be met on consummation banking organization in the country, with consolidated of this proposal. assets of approximately $123.4 billion, and would control 6. Market data are as of June 30, 1994. Market concentration calculations include deposits of thrift institutions at 50 percent. The approximately 2.5 percent of total banking assets in the Board has previously indicated that thrift institutions have become, or United States. have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin Interstate Analysis 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market concentration on a 50-percent weighted Section 3(d) of the BHC Act, as amended by Section 101 basis. See e.g., First Hawaiian, Inc., 11 Federal Reserve Bulletin 52 of the Riegle-Neal Interstate Banking and Branching Effi- (1991). 7. The Chicago banking market is approximated by Cook, Lake, and ciency Act of 1994, allows the Board to approve an appli- DuPage Counties, all in Illinois. The Elgin banking market is approxication by a bank holding company to acquire control of a mated by Marengo, Seneca, Nunda, Riley, Coral, Grafton, and Algonbank located in a state other than the home state of such quin townships in McHenry County; and portions of Kane County, all bank holding company, if certain conditions are met.4 The in Illinois. The Joliet banking market is approximated by Will County conditions are met in this case.5 In view of all the facts of except for Florence, Wilmington, Reed, Custer, and Wesley townships; Aux Sable township in Grundy County; and Naausay and Seward townships in Kendall County, all in Illinois. 8. The HHI would increase in these banking markets as follows: 3. Asset and ranking data are as of June 30, 1995. Chicago (106 points to 733); Elgin (108 points to 981); and Joliet (94 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding points to 1230). Under the revised Department of Justice Merger company's home state is that state in which the operations of the bank Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in holding company's banking subsidiaries were principally conducted which the post-merger HHI is less than 1000 is considered unconcenon July 1, 1966, or the date on which the company became a bank trated, and a market in which the post-merger HHI is between 1000 holding company, whichever is later. For purposes of the BHC Act, and 1800 is considered moderately concentrated. The Justice Departthe home state of NBD is Michigan. Under the circumstances pre- ment has informed the Board that a bank merger or acquisition sented in this proposal, the Board has also conducted the interstate generally will not be challenged (in the absence of other factors analysis as if First Chicago, with a home state of Illinois, were indicating anticompetitive effects) unless the post-merger HHI is at acquiring NBD. least 1800 and the merger increases the HHI by more than 200 points. 5. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). The Justice Department has stated that the higher than normal HHI NBD and First Chicago are adequately capitalized and adequately thresholds for screening bank mergers for anticompetitive effects managed. Upon consummation, NBD and its affiliates would control implicitly recognize the competitive effect of limited-purpose lenders less than 10 percent of the total amount of deposits of insured and other non-depository financial institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 95 concentration as measured by the HHI and the number of Affordable Housing Commission, Neighborhood Housing remaining competitors in these markets, and after carefully Services of Lake County, DuPage Homeownership Center, considering public comments on the competitive factor,9 and a member of the United States Senate, commented the Board concludes that consummation of the proposal favorably on the CRA performance records of NBD and would not result in a significantly adverse effect on compe- First Chicago. These commenters commended the assistition in any relevant banking market.10 tance of both organizations in community redevelopment Based on all the facts of record, the Board also con- activities, noted that both NBD and First Chicago have cludes that the financial and managerial resources11 and strong records of reinvesting in their communities, and future prospects of the institutions involved are consistent indicated their belief that the proposed merger should with approval, as are the other supervisory factors that the benefit the communities that would be served by the com- Board is required to consider under section 3 of the BHC bined entity. Act.12 Three commenters ("Protestants") objected to this proposal and criticized the CRA performance records of NBD Convenience and Needs Considerations and First Chicago.14 On the basis of data filed under the Home Mortgage Disclosure Act ("HMDA"),15 Protestants In acting on an application to acquire a depository institu- maintained that the subsidiary banks of both organizations tion under the BHC Act, the Board must consider the illegally discriminate in their housing-related lending activconvenience and needs of the communities to be served, ities.16 Protestants also contended that both institutions and take into account the records of the relevant depository have deficiencies in their CRA performance records, ininstitutions under the Community Reinvestment Act cluding housing-related and small business lending;17 as- (12 U.S.C. § 2901 et seq.) ("CRA"). The CRA requires the certainment and marketing; community development activfederal financial supervisory agencies to encourage finan- ities and support of community-based organizations;18 and cial institutions to help meet the credit needs of the local communities in which they operate, consistent with their safe and sound operation. To accomplish this end, the CRA 14. Protestants include: Inner City Press/Community on the Move, requires the appropriate federal supervisory authority to Bronx, New York; Positive Systematic Transformations, Inc., Wauke- "assess the institution's record of meeting the credit needs gan, Illinois ("PST"); and an individual from Evanston, Illinois, representing several community-based groups. In addition, the Board of its entire community, including low- and moderatereceived a number of submissions supporting PST's comments. income neighborhoods, consistent with the safe and sound 15. 12 U.S.C. § 2801 etseq. operation of such institution," and to take that record into 16. These allegations included NBD's mortgage subsidiary, NBD account in its evaluation of applications.13 Mortgage Company, Detroit, Michigan ("NBD Mortgage"). 17. On the basis of an article concluding that multi-state bank The Board received comments supporting and opposing holding companies tend to lend less to small businesses than banks the proposal. Thirteen commenters, including Lake County controlled by small single-state bank holding companies, one Protestant contended that this proposal would have a generally adverse effect on small business lending in Detroit and other areas served by NBD. 9. An individual submitted comments maintaining that the merger The article reviewed one year of call report data from the Federal of NBD and First Chicago would result in significant anticompetitive Reserve System's Tenth District and did not consider the record of the effects in Chicago due to the market share and size of the two organizations involved in this proposal. As explained above, the organizations. Board has carefully reviewed the records of both NBD and First 10. A commenter maintained that First Chicago's passive invest- Chicago in ascertaining and serving the needs of their communities, ment in Indecorp, Inc. ("Indecorp"), and The Shorebank Corporation and making loans, including small business loans, in their communi- ("Shorebank"), both of Chicago, Illinois, would permit NBD to ties. Based on all the facts of record, and for the reasons discussed eliminate competition from other banks, particularly banks owned by above, the Board does not believe that Protestant's comments warrant minorities. The Board carefully considered the effect of the invest- denial of this proposal. The Board notes that the CRA requires that ment by First Chicago in Shorebank in the Board's review of Shore- every bank, including a bank owned by an out-of- state bank holding bank's proposal to acquire Indecorp. NBD and First Chicago do not company, be regularly examined and rated on its performance in propose to change the investment in Shorebank from the passive helping to meet the credit needs of its community. The Board also investment permitted by the Board. For the reasons stated in the notes that any diminution in CRA-related activities resulting from this Board's order approving Shorebank's acquisition of Indecorp, and proposal would be reviewed by federal supervisors in future perforincorporated herein, the Board has concluded that no adverse compet- mance examinations as well as by the Board in future applications to itive effects would result from this passive investment. See The acquire a depository facility under the BHC Act. Shorebank Corporation, 81 Federal Reserve Bulletin 1107 (1995). 18. One Protestant also criticized First Chicago for not accepting its 11. The Board also received a comment from an individual object- proposal for investment in Lake County. The Board has indicated in ing to severance packages offered to the senior executives of both previous orders and in the Statement of the Federal Financial Supervi- NBD and First Chicago in connection with this transaction. Based on sory Agencies Regarding the Community Reinvestment Act ("Agency all the facts of record, including the recent approval of the severance CRA Statement") that communication by depository institutions with packages by the shareholders of NBD and First Chicago, and the community groups provides a valuable method of assessing and current level of compensation for these officers, the Board does not determining how best to address the credit needs of the community. believe that these comments raise issues that would warrant denial However, neither the CRA nor the Agency CRA Statement requires under the factors required to be considered under the BHC Act. depository institutions to enter into agreements with particular organi- 12. The Board considered all of Protestants' comments in assessing zations. Accordingly, the Board's review has focused on the programs these factors and concluded that none of these comments warrant and policies that NBD and First Chicago have in place to assist in denial of this proposal. meeting the credit needs of their entire communities. See Fifth Third 13. See 12 U.S.C. § 2903. Bancorp, 80 Federal Reserve Bulletin 838 (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

96 Federal Reserve Bulletin • January 1996 the number of branches serving low- and moderate-income B. HMDA Data areas and areas with predominately minority populations ("minority areas"). These allegations focus on NBD's The Board has reviewed the 1993 and 1994 HMDA data performance in Detroit, and both organizations' perfor- reported by NBD's bank subsidiaries and NBD Mortgage mance in Chicago, and in the greater Chicago area includ- in light of Protestants' comments.24 These data generally ing Lake County and Evanston, Illinois. indicate that NBD has improved its record of home mort- The Board has carefully reviewed the CRA performance gage lending in low- to moderate-income and minority records of NBD and First Chicago and their respective neighborhoods throughout the communities served by subsidiaries, in light of the CRA, the Agency CRA State- NBD-Detroit. In particular, 1994 HMDA data for areas ment,19 and all comments received and the response of served by NBD-Detroit indicate an increase in the number NBD and First Chicago to these comments. of loan applications received from, and loans extended to, low- to moderate-income individuals, Hispanics, and Afri- Record of CRA Performance can Americans.25 NBD also has shown improvement in its record of home mortgage lending to Hispanics in the A. Evaluation of CRA Performance communities served by NBD-Illinois. The Board also reviewed the 1993 and 1994 HMDA data The Agency CRA Statement provides that a CRA examina- reported by FNB-Chicago and American National, in light tion is an important and often controlling factor in the of Protestants' comments. These data generally indicate consideration of an institution's CRA record, and that that First Chicago has improved its record of home mortreports of these examinations will be given great weight in gage lending in low- to moderate-income areas and to the applications process.20 The Board notes that all the minority applicants.26 Based on 1993 and 1994 HMDA subsidiary banks of NBD and First Chicago received "out- data, FNB-Chicago's loan origination rate for low- to standing" or "satisfactory" ratings at the most recent moderate-income areas and minorities exceeded the averexaminations of their CRA performance. NBD's lead bank age origination rate for all the lending institutions in the subsidiary, NBD Bank, Detroit, Michigan ("NBD- Chicago MSA combined.27 Detroit"), received an "outstanding" rating at the most However, HMDA data for First Chicago and NBD, as recent examination for CRA performance from the OCC, well as NBD Mortgage, also indicate some disparities in as of March 1993.21 First Chicago's lead bank subsidiary, FNB-Chicago, received a "satisfactory" rating from the OCC at its most recent examination for CRA performance was considered satisfactory by the examiners, although certain areas as of November 1993.22 The Board has carefully consid- were identified for improvement. The Board also notes that NBD- Florida was acquired in connection with the sale of a failed thrift and ered the results of these performance evaluations in reviewrepresents less than 1 percent of NBD's consolidated assets. In addiing this proposal.23 tion, NBD has responded to the issues raised by the examination, and the Board expects NBD to implement fully programs responsive to examiners' comments. FNB-Chicago's record of performance is re- 19. 54 Federal Register 13,742 (1989). viewed above in light of this examination and its more recent activi- 20. Id. at 13,745. ties. 21. NBD Bank, N.A., Indianapolis, Indiana (formerly known as 24. The Board notes that NBD conducts most of its housing-related INB National Bank), received an "outstanding" rating from the OCC lending through NBD Mortgage. Accordingly, the Board has considat its most recent examination as of April 1993. NBD Bank, Wheaton, ered HMDA data reported by NBD Mortgage for areas served by Illinois ("NBD-Illinois"), and NBD Bank, Columbus, Ohio, also NBD's bank subsidiaries. received "outstanding" ratings from their primary federal supervisor, 25. For example, in the Metropolitan Statistical Areas ("MSAs") the FDIC, at their most recent examinations for CRA performance, as served by NBD-Detroit, applications from African Americans inof October 1993 and May 1994, respectively. In addition, NBD Bank, creased from 1,109 in 1993 to 1,935 in 1994, and applications from Elkhart, Indiana; NBD Bank, Venice, Florida (formerly known as Hispanics increased from 156 to 282. In addition, applications from NBD Bank, FSB) ("NBD-Florida"); and NBD Skokie Bank, N.A., individuals in low- to moderate-income census tracts increased from Skokie, Illinois ("NBD- Skokie"), received "satisfactory" ratings 2,008 to 3,702. from the Federal Reserve Bank of Chicago as of June 1993; the Office 26. The number of loan applications FNB-Chicago received from of Thrift Supervision as of June 1994; and the OCC as of March 1995. African Americans increased from 858 in 1993 to 868 in 1994, despite NBD's remaining bank subsidiary, National Bank of Detroit- an overall decrease in applications received. In addition, the number Dearborn, Dearborn, Michigan, a limited purpose bank engaged in of loan applications received by FNB-Chicago from low- to moderateasset management, does not accept deposits or make loans, and has income census tracts increased from 1,398 in 1993 to 1,523 in 1994. not been examined for CRA performance by the OCC since 1987. No 27. FNB-Chicago's origination rates of 77 percent in 1993 and CRA performance examination report is publicly available for this 70.1 percent in 1994 in low- to moderate-income census tracts in the bank. Chicago MSA exceeded the origination rates of aggregate lenders in 22. In addition, American National received a "satisfactory" rating the community (68.8 percent and 61.2 percent in 1993 and 1994, from the OCC at its most recent examination for CRA performance, respectively) during the same time periods. FNB-Chicago's originaas of February 1995; and FCC National Bank, Wilmington, Delaware, tion rates of 77.3 percent in 1993 and 74.6 percent in 1994 for African received an "outstanding" rating from the OCC at its most recent Americans, as well as origination rates of 83.4 percent in 1993 and examination for CRA performance, as of April 1995. 77.8 percent in 1994 for Hispanics, also exceeded those of its compet- 23. One Protestant maintained that the "satisfactory" performance itors in the Chicago MSA. The average origination rates for aggregate ratings of FNB-Chicago and NBD-Florida are contradicted by weak- lenders in the Chicago MSA were 69.7 percent in 1993 and nesses in performance discussed in the public sections of these exam- 65.8 percent in 1994 for African Americans, and 78.7 percent in 1993 inations. The Board notes that each institution's overall performance and 76.1 percent in 1994 for Hispanics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 97 the rate of loan originations, denials, and applications by with the Alliance for Fair Banking Practices, a Detroitracial group and income levels. The Board is concerned based coalition of community organizations. The plan, when an institution's record indicates disparities in lending which reflects a proposed investment of $678 million in to minority applicants and it believes that all banks are Detroit over the next three years, establishes targets for obligated to ensure that their lending practices are based on small business, mortgage, consumer, business, commercriteria that assure not only safe and sound lending, but cial, and real estate lending. In addition, NBD-Detroit also assure equal access to credit by creditworthy appli- introduced the 97 Plus Mortgage Program to its communicants regardless of race. The Board recognizes, however, ties in January 1993 to respond to an ascertained need for that HMDA data alone provide an incomplete measure of affordable mortgage products. This program, which rean institution's lending in its community, and have limita- quires borrowers to complete a homebuyer education protions that make the data an inadequate basis, absent other gram in order to qualify, provides for a loan of up to information, for concluding that an institution has engaged 97 percent of the value of a property, with a separate in illegal discrimination in making lending decisions. 10-year fixed rate loan at a below-market rate to finance up The Board notes that the most recent CRA performance to $3,000 of down payment and closing costs.30 examinations for all the subsidiary banks of NBD and First NBD-Detroit also offers home equity loans in amounts Chicago found no evidence of prohibited discrimination or as low as $500 through its Community Pride Loan Proother illegal credit practices.28 The examinations also found gram. This program, which provides unsecured financing no evidence of practices intended to discourage applica- to low- to moderate-income individuals for renovations tions for the types of credit listed in the banks' CRA and improvements of residential dwellings, has a maxistatements.29 mum loan amount of $5,000, and permits debt-to-income The bank subsidiaries of First Chicago and NBD, and ratios as high as 50 percent. NBD-Detroit originated 122 NBD Mortgage, have instituted a formal second review Community Pride loans totalling over $410,000 in the procedure for all initial denials of home mortgage applica- Detroit area in 1994, and 311 loans totalling over tions. In addition, in early 1993, FNB-Chicago's manage- $1 million as of August 1995. ment developed and implemented a diversity training pro- NBD-Detroit also participates in programs designed to gram to discuss the concept of disparate treatment of meet the small business credit needs of its delineated applicants and to promote fair lending. All bank employees communities. NBD-Detroit actively participates in governwere required to attend the training. Furthermore, in 1995, mentally sponsored programs, such as those of the Small NBD instituted a fair lending training process for all branch Business Administration ("SBA") and the Michigan Strateoffices, including post-training testing to confirm its effec- gic Fund Capital Access Program ("Capital Access Protiveness. gram").31 NBD-Detroit originated 113 SBA loans totalling approximately $31.6 million in 1994, including 11 loans C. NBD's Record of Performance in Detroit totalling approximately $2.2 million in Detroit; and 137 loans totalling approximately $45.2 million, as of Septem- Lending Activities. The 1993 CRA performance examina- ber 1995, including 9 loans totalling approximately tion for NBD-Detroit considered the bank's record of lend- $1.3 million in Detroit. In addition, NBD-Detroit origiing to be outstanding and found that the bank offered a nated 247 Capital Access Program loans totalling approxirange of lending products to its communities, including mately $14.7 million in 1994, including 37 loans totalling products specifically for low- and moderate-income indi- approximately $2.4 million in Detroit; and 70 Capital viduals. Examiners also commended NBD-Detroit's record Access Program loans totalling approximately $9.8 milof originating and purchasing housing-related and small lion, as of August 1995, including 28 loans totalling apbusiness loans within its delineated community, and favor- proximately $1.3 million in Detroit. ably noted NBD-Detroit's efforts to increase applications Marketing and Outreach Activities. The bank's 1993 from low- and moderate-income areas. CRA performance examination found that NBD-Detroit NBD-Detroit has taken additional steps to assist in meet- used mass media to reach all its communities, including ing the housing-related credit needs of its communities, low- to moderate-income areas. The OCC examiners also including low- to moderate-income and minority areas. For noted that, in addition to regularly employing standard example, in February 1995, NBD-Detroit announced a mass-media such as general circulation newspapers and comprehensive strategic plan developed in cooperation radio stations, NBD-Detroit regularly advertised its prod- 28. In addition, the fair lending examinations of NBD-Detroit and 30. The 97 Plus Program is specifically for low- and moderate- NBD-Indiana, which comprise more than 85 percent of NBD's assets, income applicants in urban areas throughout Michigan. NBD-Detroit each included a review of sample loan files from NBD Mortgage for originated 49 loans totalling approximately $1.7 million in Southeast HMDA- related loans originated in the banks' delineated communi- Michigan under this program in 1994, and 70 loans totalling approxities. mately $2.6 million as of October 1995. 29. FNB-Chicago was cited for noncompliance with certain record 31. Under the Capital Access Program, a reserve fund is established keeping requirements of the Equal Credit Opportunity Act ("ECOA") through funds paid by the borrower, and matched by the bank and the and HMDA. Since its 1993 CRA performance examination, FNB- program. This fund is used to offset any loan losses, with the bank at Chicago has implemented procedures to address the OCC's concerns. risk for amounts in excess of the fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

98 Federal Reserve Bulletin • January 1996 ucts and services in minority publications such as the maintains ATMs at 31 of its 35 branch locations, including Michigan Chronicle, the Arab American, and El Central. 21 in low- to moderate-income areas.34 NBD-Detroit also sponsors specialized programs to in- NBD-Detroit has adopted a Branch Closing Policy that form its community of its credit products. For example, requires a formal evaluation of the impact of closing or NBD-Detroit is currently sponsoring a "Bank at Work" reducing services at any branch offices. The OCC conprogram in Southeast Michigan to introduce small busi- cluded that the branch closing policy is consistent with nesses and their employees to NBD's products and ser- current regulatory guidelines, and that this policy includes vices. Under this program, NBD-Detroit representatives consideration of input from local community groups and visit offices during working hours to take loan applications, political leaders in order to minimize any impact a closing open savings and checking accounts, and assist in financial would have on an area.35 In addition, the 1993 CRA planning. In addition, in a monthly publication entitled performance examination noted that branch office closings "NBD in the Community," NBD-Detroit informs its com- have not materially reduced the services available to the munity leaders and organizations of ongoing outreach plans bank's communities.36 and programs. The edition for the bank's Southeast Region, which includes Detroit, has a circulation of 27,000, D. First Chicago's Record of Performance in including 4,000 community, business, and religious lead- Chicago ers.32 Community Development Activities. NBD engages in a Lending Activities. The 1993 CRA performance examinanumber of community development activities to help meet tion for FNB- Chicago found that the bank extended credit the credit needs of its communities. For example, NBD throughout its community and has generally been respon- Community Development Corporation, Detroit, Michigan sive to the community's credit needs. Although weak- ("NBD-CDC"), has been an active equity partner in hous- nesses in the bank's mortgage lending to minorities and the ing partnerships that acquire and renovate foreclosed or effectiveness of its small business lending program were abandoned single and multifamily homes for low-income noted, examiners also noted that a significant amount of residents. In NBD-Detroit's Southeast Michigan region, credit had been extended for the rehabilitation of single NBD-CDC has participated in projects in Pontiac, Wyan- and multi-family housing by FNB-Chicago. FNB-Chicago dotte, Ann Arbor, and six neighborhoods in the City of also has taken a number of steps to strengthen its record of Detroit. As of June 1995, NBD-CDC held a portfolio of meeting consumer, small business, commercial, and community development loans, commitments, and invest- housing-related credit needs in low- to moderate-income ments aggregating $11.3 million.33 areas. For example, in March 1995, FNB-Chicago an- In addition, NBD-Detroit participates in the Business nounced a plan to invest $2 billion in low- to moderate- Consortium Fund established by the National Minority income neighborhoods in its delineated community by the Supplier Development Council. The fund purchases up to a year 2000. This plan calls for investing $500 million for 75 percent participation in loans to finance expenses or single-family mortgages, $700 million in small businesses purchases related to specific business orders or contracts in loans,37 $350 million in commercial loans, and $250 milwhich minority-owned vendors supply goods or services to lion in consumer loans. corporations. NBD-Detroit also is active in the Detroit Business Retention and Expansion Program which is geared toward retention of existing Detroit businesses and 34. NBD-Detroit also maintains a Telephone Banking Center, further expansion of new businesses into downtown De- through which customers conduct routine banking transactions. troit. 35. The Board also has considered the comments of one Protestant who believes that this proposal would have adverse effects in Union- Branch Locations and Closings. The OCC reviewed dale and New York City, both of New York, where First Chicago's NBD-Detroit's record of providing services at its branch trust company and credit card service subsidiaries operate. This same offices and concluded that the bank had demonstrated a Protestant also notes that the proposed transaction would result in strong record of maintaining accessible offices with equita- layoffs and branch closures in the areas served by First Chicago and NBD. In considering these comments, in addition to the other factors ble services. The bank has 35 branches in Detroit, includnoted in this order, the Board has considered that NBD and First ing 24 in low- to moderate-income areas. In addition, NBD Chicago are each developing new severance policies for employees that will become effective as of the date of consummation of the proposed transaction. 36. Examiners noted that since its last examination, NBD-Detroit closed four branches, two of which were located in low- and moderate-income areas ("low- to moderate-income branches"). The 32. In addition, the bank's Small Business Development Office bank retained its branch in a supermarket across the street from one of provides educational workshops and seminars to assist the small the closed branches and retained a drive-through facility on a corner business customer, and provides information on special loan pro- adjacent to the other. In addition, two low- to moderate-income grams. branches closed their drive-through facilities, and one low- to 33. NBD-CDC also helped a number of community groups become moderate-income branch (with only a drive-through facility) was eligible to participate in the Federal National Mortgage Association converted to an off-site ATM. ("Fannie Mae") Community Lending Initiative Program, which en- 37. The head of the City of Chicago's empowerment zone initiative ables low-income families to buy homes under a lease-purchase has also invited First Chicago to participate in the city's efforts. agreement. Neighborhood-based small business centers established in the empow- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 99 Marketing and Outreach. As noted in the 1993 CRA Community Development Activities. FNB-Chicago charperformance examination, FNB-Chicago has used various tered The First Chicago Neighborhood Development Cormethods, including print, television, radio, and direct mail poration ("Development Corp") in 1979 to expand its advertisements in an attempt to reach all members of its capacity to participate in community development initiadelineated communities.38 Advertisements for the bank's tives. As of June 1995, Development Corp's assets totalled products and services were placed in over 90 daily newspa- $3.2 million, including investments in equity funds, direct pers, local weekly news and trade publications throughout loans, and investments secured by note receivables. FNBthe bank's delineated community, including some journals Chicago also has committed nearly $200,000 to the Northand special audience publications that focus on specific ern Cook County Microloan Lending Program 41 minority groups. FNB-Chicago also advertises on a num- Since 1985, FNB-Chicago has invested $250,000 annuber of ethnic radio stations to reach members of the minor- ally in the Chicago Equity Fund, which has created over ity community. 3,600 units of housing in low- to moderate-income neigh- Since 1992, FNB-Chicago has mailed over a million borhoods. FNB-Chicago also extends loans for community direct mail solicitations of its unsecured line of credit and development purposes through its Neighborhood Banking over 50,000 direct mail solicitations of its installment loan Department, which was created in 1984 as part of the products to individuals residing in low-income census tract Neighborhood Lending Program, a multi-bank community areas.39 FNB-Chicago also created a special CRA market- lending agreement. As part of this program FNB-Chicago ing group in mid-1992 in order to attract additional minor- made a commitment to lend $225 million over 10 years for ity mortgage applicants to FNB-Chicago.40 qualifying developments in low- to moderate-income neighborhoods. FNB-Chicago has exceeded its $225 million goal and continues to make loans under this program. FNB-Chicago also has committed to provide approxierment zones would be operated jointly by the SBA and community mately $100 million over six years to the Community representatives. Investment Corporation ("CIC"), a partnership of major 38. One Protestant, however, also contends that FNB-Chicago marfinancial institutions and corporations dedicated to the purkets a special service, the First Direct program, primarily to affluent non- minority customers. This program, which is designed to retain chase and/or rehabilitation of single and multi-family resicustomers who move out of the Chicago area, permits customers to dential units.42 In addition, FNB-Chicago's $2 billion inengage in certain banking transactions and purchase several banking vestment plan also calls for the donation of approximately products by telephone or computer, including opening a checking or $17 million in direct grants to community groups and savings account; transferring funds from one account to another; agencies. purchasing certificates of deposit; applying for credit cards, personal loans and mortgages; and purchasing a range of investment products. Branch Locations and Closings. The OCC examination The Board notes that FNB-Chicago offers these services to all custom- reviewed FNB-Chicago's record of providing services at ers, regardless of account balance, who move from the Chicago area, its branch offices and concluded that the bank's entire and markets these services in mass media newspapers serving communities outside the Chicago area. delineated community had reasonable access to FNB- 39. FNB-Chicago has extended credit to more than 3 percent of the Chicago's branch offices. In addition, examiners noted that 50,000 individuals solicited for installment loan products. FNB-Chicago has adopted a Branch Closing Policy that 40. First Chicago recently implemented a program that charges requires a formal evaluation of the impact of closing or customers a $3.00 fee for certain transactions done with a teller's reducing services at any branch offices. The OCC examinaassistance unless the customer maintains a specified minimum account balance with First Chicago. Several Protestants claim that First tion concluded that the branch closing policy is consistent Chicago's fees in general, and this teller fee in particular, discriminate with current regulatory guidelines. against low- and moderate-income individuals and minority customers The 1993 examination noted, however, that the bank's and indicate that First Chicago is not adequately serving the banking branch offices were less accessible from certain areas of its needs of its community. The Board believes that the information provided by Protestant on delineated community. In recent years, FNB-Chicago has First Chicago's fees, including its teller fees, provides an incomplete picture. The teller fee addressed by the Protestants is charged for routine transactions that may be conducted at an ATM or through another means. Customers continue to receive free teller assistance on While the Board has recognized that banks help serve the banking a number of banking matters, including inquiring about account needs of their communities by making available basic banking serstatements, submitting loan payments, seeking assistance to solve vices at a nominal or no charge, the CRA does not require that banks errors in or problems with an account, depositing coins, making limit the fees that are charged for services. As explained above, First change, and purchasing consumer payment instruments (such as Chicago provides a full range of banking services in its delineated money orders and cashier's checks). In addition, customers may community, including substantial lending services, and offers access obtain free teller assistance or equivalent services under other account to a full range of retail banking services through various accounts. programs offered by First Chicago. For example, FNB-Chicago's There is no evidence in the record in this case that the teller fees or Choice Checking Account requires a $250 minimum balance and any other fees charged by First Chicago for certain accounts are based allows the customer four transactions per month, including teller- in any way on any factor that is prohibited by law, such as race, assisted transactions, before a fee is imposed. Thus, all banking gender, ethnicity or religion. services ordinarily offered through a teller continue to be available to 41. First Chicago, along with nine other Chicago area banks, all customers of First Chicago at nominal or no charge in some form, supports its small business initiatives through the Northern Cook either through a teller, at an ATM, at a deposit facility, or by phone, County Microloan Lending Program. and teller access continues to be available at no charge for services 42. FNB-Chicago also has provided CIC with a $7.5 million line of that require individual attention. credit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

100 Federal Reserve Bulletin • January 1996 addressed this situation in several ways. FNB-Chicago borrower may borrow up to $15,000 (minimum loan opened four new full-service branches in 1993, including a amount of $3,000), with a maximum loan-to-value ratio of branch in an African-American community on the South- 100 percent. In 1994, NBD-Illinois originated 100 Minieast side of Chicago. FNB-Chicago also recently opened a Equity loans totalling over $900,000, including 18 loans branch in a supermarket in Chatham, another predomi- totalling over $180,000 in Lake County. In addition, as of nantly African-American neighborhood on the Southside June 1995, NBD-Illinois had originated 113 Mini-Equity of Chicago, and plans to open three more branches in 1996 loans totalling over $1.3 million, including 24 loans totalin African-American communities on the Southside or the ling over $300,000 in Lake County. South suburbs of Chicago.43 The 1993 CRA performance examination for NBD- Illinois noted with approval the bank's advertising program E. Records of Performance in the Greater Chicago and special credit-related programs. The examiners also Area noted that the bank advertises its credit products in a wide variety of newspapers circulated throughout its delineated NBD-Illinois. NBD-Illinois, headquartered in Wheaton and community.47 In addition, in March 1994, the Chicago operating in the central business district of Chicago and the branch of NBD-Illinois launched a home equity sale under surrounding north and western suburbs, has a number of which NBD-Illinois offered a low rate no fee home equity programs designed to increase its lending to low- and loan product, with the bank paying the customer's first moderate-income residents in the Chicago area, including month's interest payment up to $200. As a result of this Evanston and Lake County.44 For example, NBD-Illinois campaign, the Chicago branch increased its home equity recently introduced a First-Time Homebuyer's Program to loan originations from 2,181 loans totalling approximately assist in addressing the need for affordable mortgage prod- $119 million in 1994 to 3,032 loans totalling approxiucts for first-time homebuyers. In 1994, NBD-Illinois orig- mately $189.9 million in 1994.48 NBD-Illinois also sponinated 286 First-Time Home Buyer loans totalling approxi- sored educational workshops on home financing at 11 mately $28.3 million, including 27 loans totalling locations throughout Illinois, including Evanston and Lake approximately $2.9 million in Lake County, and 11 loans Zurich in Lake County. The seminars, which were attended totalling approximately $1 million in Evanston. In addi- by a total of 170 people, focused on the mortgage pretion, as of June 1995, NBD-Illinois had originated 248 approval process, first-time homebuyer products, and other First-Time Home Buyer loans totalling approximately mortgage products available through NBD-Illinois. $24.4 million, including 25 loans totalling approximately NBD-Illinois also actively participates in outreach and $2.6 million in Lake County, and 5 loans totalling almost educational efforts for small businesses in Lake County. In $450,000 in Evanston 45 recent years, these efforts have included an annual seminar NBD-Illinois also offers a number of home equity prod- on alternative financing co-sponsored in conjunction with ucts to meet the credit needs of low- to moderate-income the Economic Development Council of Lake County, and a individuals. For example, NBD-Illinois introduced a Mini- seminar entitled "Start Small Grow Big," sponsored in Equity Loan Program in 1993.46 Under this program a conjunction with the Service Corps of Retired Executives.49 NBD's community development activities in the greater Chicago area include Evanston and Lake County. In the 43. One of the Protestants alleged that the subsidiary banks of First Chicago and NBD have placed their ATMs in such a manner as to Lake County area, NBD has worked with the Neighborhave a disparate impact on racial minorities. The Board notes that hood Housing Services of Lake County ("NHS") and the ATMs are but one component in the systems that depository institu- Lake County Affordable Housing Commission tions use to deliver their products and are not used in the credit extension process. As noted above, NBD and First Chicago have branches throughout their delineated communities. NBD-Detroit, for example, maintains a majority of its branches in Detroit in low- to moderate-income areas. As discussed above, both organizations engage in outreach, ascertainment, and lending throughout their communities. dard NBD Home Equity Loan Product because of insufficient home 44. NBD-Illinois has a branch in Evanston, and ten branch offices in equity. Lake County, including three branch offices acquired through the July 47. For example, the Lake Zurich Branch of NBD-Illinois regularly 1995 acquisition of Deerfield Federal Savings and Loan Association. advertises its credit products in the Lakeland Newspaper, which serves These programs also are available at NBD-Skokie which operates in Wauconda, Island Lake, Lake Zurich, Libertyville, Mundelein, and the northern part of the greater Chicago area. Vernon Hills, all in Lake County. 45. In addition, NBD-Illinois began offering the NBD Community 48. In addition, in the Fall of 1994, the Evanston branch of NBD- Home Buyer and NBD Community Home Buyer with 3/2 Option Illinois actively promoted a special package of banking services for Programs in 1993 in response to ascertained need for affordable students at Northwestern University, Loyola University and other area mortgage programs for low- to moderate-income individuals. Both colleges. The package included an offer of free financial counseling on programs provide for flexible underwriting standards, with the NBD student loans; a credit card application; and a regular checking ac- Community Home Buyer with 3/2 Option permitting borrowers to count with no minimum balance, no monthly maintenance fee, and no make down payments as low as 3 percent. These programs are both per-check charge. available in Evanston and Lake County. 49. In addition, in April 1994, the Evanston branch of NBD-Detroit 46. This program responded to a need for a home improvement loan participated in the Evanston Chamber of Commerce Small Business product for borrowers who would not typically qualify for the stan- Trade Show. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 101 ("LCAHC").50 This collaboration has led to NBD's fund- ing Initiative ("SBLI"), a program designed for businesses ing $115,000 of a $1.3 million line of credit. NBD also with annual sales of less than $2.5 million and with credit participates in the annual Affordable Housing Commission needs of less than $250,000.53 First Chicago's bank subsid- Symposium sponsored by LCAHC.51 iaries are also participants in the Main Street Area Loan FNB-Chicago. In addition to the CRA-related activities Pool Program, a program created to help businesses in in Chicago discussed above, First Chicago engages in a Lake County improve and maintain the exterior of their number of activities in the greater Chicago area.52 For office buildings. example, FNB-Chicago and American National extended 132 mortgages to low- to moderate-income individuals in F. Conclusion on Convenience and Needs 1993 and 1994. Twenty-seven mortgages were extended to Considerations low- to moderate-income individuals in the first six months of 1995. In addition, many of the housing-related lending The Board has carefully considered all the facts of record, and credit initiatives undertaken by FNB-Chicago, also including the comments received from all commenters and benefit Lake County. Through the Chicago Equity Fund, responses to those comments and the CRA performance FNB-Chicago has helped create 222 new affordable hous- records of the subsidiary banks of NBD and First Chicago, ing units in Waukegan, Illinois, and invested in the only including relevant reports of examination from their pritwo developments qualifying for Low Income Housing Tax mary federal supervisors. Based on a review of the entire Credits in Waukegan and North Chicago during the 1990s. record, the Board concludes that convenience and needs FNB-Chicago also has provided over $3 million in debt considerations, including the CRA records of performance financing, in addition to equity financing, through the Chiof both organizations' subsidiary banks, are consistent with cago Equity Fund, for a venture sponsored by the Lake approval of this proposal. County Community Action Project involving the redevelopment of 150 housing units for low- to moderate-income Nonbanking Activities individuals. A similar combination of equity and debt financing was provided by FNB-Chicago to assist the Lake Section 4(c)(8) of the BHC Act provides that a bank County Urban League in converting abandoned properties holding company may, with the Board's approval, engage into over 70 new affordable housing units in downtown in any activity that the Board determines to be "so closely Waukegan, Illinois. The debt financing for the Lake County related to banking or managing or controlling banks, as to Urban League project was in excess of $980,000. FNBbe a proper incident thereto." The Board must also deter- Chicago is also a participant in the Lake County Affordable mine that the performance of the proposed activities by an Housing Commission's first-time homebuyers program and applicant "can reasonably be expected to produce benefits continues to assist customers in the renovation of homes, to the public . . . that outweigh possible adverse effects, apartments and mixed-use properties through the bank's such as undue concentration of resources, decreased or Neighborhood Banking Division. unfair competition, conflicts of interests, or unsound bank- FNB-Chicago also made $8.2 million in small business ing practices." loans in Lake County during this period. In addition, FNB-Chicago and its affiliate, American National, have A. Electronic Funds Transfer Activities created a special program designed to specifically meet the credit needs of small businesses in Lake County. In mid- After consummation of this proposal, NBD would own 1994, FNB-Chicago introduced its Small Business Lend- 25 percent or more of two ATM and point of sale ("POS") networks54 in the north-central United States: ML Inc., Detroit, Michigan, doing business as "Magic Line,"55 and 50. NHS is an outgrowth of a consortium of banks which chartered the Lake County Community Investment Program in 1990 to promote low- and moderate-income housing development in the area. 51. LCAHC was established to advocate affordable housing 53. Six loans totalling $151,480 have been extended under SBLI to throughout Lake County through educational efforts, liaison with date. governmental officials and other groups, as well as direct programs to 54. In general, an ATM network is an arrangement whereby more plan, design, finance, and produce affordable housing. NBD also than one ATM and more than one depository institution (or the sponsored an exhibit at LCAHC's May 1995 Homebuyer Fair, present- depository records of such institutions) are connected by electronic or ing a seminar entitled "How to Apply for a Mortgage" to a group of telecommunications means to one or more computers, processors, or first-time homebuyers. switches for the purpose of providing ATM services to retail custom- 52. Protestants have alleged that FNB-Chicago re-delineated its ers of depository institutions. POS terminals are generally located in service community to exclude arbitrarily Lake County's low- to the establishments of merchants. They accept ATM or similar cards, moderate-income and minority areas. In its examination of FNB- and using the ATM network or a parallel POS-only network, access Chicago, the OCC reviewed this new delineation, which is based on the cardholder's account to transfer funds to the merchant's account. lending at its branch locations, and preliminarily concluded that it is The Board has previously determined that operating an ATM and POS reasonable. After consummation of this proposal, the new organiza- network is an activity closely related to banking within the meaning of tion would control 17 branch offices offering banking products and section 4 of the BHC Act. See Banc One Corporation, et at., 81 services in the Lake County area. The Board notes that the delineation Federal Reserve Bulletin 491 (1995) ("Banc One/EPS Order"). of FNB-Chicago and its NBD affiliates would effectively include all of 55. Magic Line is the resulting network from the 1993 merger of Lake County after consummation of this proposal. Magic Line, Network One and Money Mover. 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102 Federal Reserve Bulletin • January 1996 Cash Station, Inc., Chicago, Illinois, doing business as cessing services to third parties and neither network re- "Cash Station."56 stricts a member's choice for obtaining processing services In order to determine whether a particular transaction is from a number of processors competing in this product likely to decrease competition, the Board traditionally has line. Based on all the facts of record, the Board concludes considered the area of effective competition between the that NBD's acquisition of the proposed interests in Magic parties. The area of effective competition has been defined Line and Cash Station would not result in an undue concenby reference to the line of commerce, or product market, tration of resources or decreased or unfair competition.61 and a geographic market. The Board previously has identified three separate product lines that are relevant to an B. Other Nonbanking Activities assessment of competition between ATM networks. These products lines are: NBD also has provided notice pursuant to section 4 of the (1) Network access (access to an ATM network identi- BHC Act to acquire the nonbanking subsidiaries of First fied by a common trademark or logo displayed on ATMs Chicago.62 The Board has determined by regulation or and ATM cards); order, subject to certain prudential limitations approving (2) Network services (the switching functions for the these activities, that each of the activities of First Chicanetwork); and go's subsidiaries is permissible for bank holding compa- (3) ATM processing (the data processing and telecom- nies under section 4(c)(8) of the BHC Act.63 NBD has munications facilities used to operate, monitor, and sup- committed to conduct these activities in accordance with port a bank's ATMs). the Board's regulations and the commitments made by First Chicago, as well as the conditions and limitations The Board has also previously concluded that the market imposed by the Board in the orders approving these activifor network access is an area significantly larger than local ties. banking markets, and that the markets for network services NBD operates subsidiaries engaged in nonbanking activand ATM processing are at least regional in nature.57 ities that compete with the nonbanking activities of First Magic Line and Cash Station both operate "shared" Chicago. In each case, the markets for these nonbanking networks58 in different areas and there is little competition services are unconcentrated, and there are numerous profor ATM network access between the networks.59 Numer- viders of these services. As a result, consummation of this ous competitors would remain to provide ATM network proposal would have a de minimis effect on competition access services, including many of the nation's largest for these services, and the Board concludes that the pro- ATM networks. In addition, Magic Line and Cash Station posal would not result in a significantly adverse effect on currently use different third-party organizations to provide competition in any relevant market. network services and numerous providers of these services would remain.60 Finally, neither Magic Line nor Cash C. Public Interest Factor Station (nor NBD and First Chicago) provide ATM pro- There is also no evidence in the record to indicate that consummation of this proposal is likely to result in any 56. One Protestant also alleges that NBD's resulting control of significantly adverse effects, such as undue concentration Magic Line and Cash Station would lead to anticompetitive effects in the ATM and POS product markets, including network servicing and network processing. This Protestant also contends that NBD's control of both Magic Line and Cash Station would lead to the likely merger 61. The Board also has considered the competitive effect of this of the two networks, which Protestant asserts would adversely affect proposal on POS or debit card activities. Neither NBD nor First competition for electronic funds services in the Midwest. The Board Chicago is a significant participant in providing POS services and has carefully considered the effects that consummation of this pro- there is little direct overlap in the geographic scope of their POS posal would have on competition in these product markets, in light of activities. The Board notes, moreover, that there are numerous providall the facts of record, including Protestant's comments, NBD's re- ers of POS services, and that advances in technology have permitted sponses to these comments, and the characteristics of these product some providers to operate on a national level. In this light, and based markets. on all the facts of record, the Board concludes that this proposal would 57. See Banc One/EPS Order and the data and precedent cited not result in significant anticompetitive effects on the provision of therein. POS or debit card services. 58. A shared network generally is accessible to cardholders of many 62. One Protestant contends that NBD has not received Board unaffiliated institutions that elect to become members of the network, approval to acquire the following nonbanking subsidiaries it currently and is often a joint venture owned by some or all of the network's owns: NBD Equity Corporation ("Equity"), Woodward Asset Manmembers. agement Corporation ("Woodward"), and Sacore Capital Manage- 59. Magic Line's member institutions are headquartered primarily ment Ltd ("Sacore"). Equity is an investment company (that is not a in Michigan (83 percent), with other members headquartered primar- bank holding company) that is engaged only in the business of ily in Indiana (17 percent). Cash Station's member institutions are investing in securities that do not include more than 5 percent of the almost all headquartered in Illinois (98 percent), with the remaining voting shares of any company. Section 4(c)(6) of the BHC Act permits 2 percent of members headquartered primarily in Indiana (seven NBD to control Equity without obtaining Board approval. Woodward members) and Michigan (two members). and Sacore are inactive subsidiaries, and NBD has committed to 60. NBD provides switching services to Magic Line and EDS notify the Board prior to activating any inactive subsidiary so the provides switching services to Cash Station. The 12 ATM networks Board can determine whether a notice or application is necessary. operating in the north central United States use 10 different firms to 63. See e.g., First Chicago Corporation, 74 Federal Reserve Bulleswitch their transactions. tin 706 (1988); 80 Federal Reserve Bulletin 448 (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 103 of resources, decreased or unfair competition, conflicts of the bank to be acquired makes a timely written recommeninterests, or unsound banking practices that would out- dation of denial of the application. In this case, the Board weigh the public benefits of this proposal, such as an has not received such a recommendation from any state or increased selection of services to retail and business cus- federal supervisory authority. Under section 4 of the BHC tomers and added convenience to users of electronic funds Act, the Board may order a hearing on an application "if transfer services. Accordingly, the Board has determined there are disputed issues of material fact that cannot be that the balance of public interest factors it must consider resolved in some other manner." 12 C.F.R. 225.23(g). In under section 4(c)(8) of the BHC Act is favorable and addition, under the Board's rules, the Board may, in its consistent with approval of NBD proposed electronic funds discretion, hold a public hearing or meeting on an applicatransfer activities and First Chicago's nonbanking subsid- tion to clarify factual issues related to the application and iaries. to provide an opportunity for testimony, if appropriate. NBD also has given notice of its intent to acquire First 12 C.F.R. 262.3(e) and 262.25(d). The Board has carefully Chicago International Finance Corporation, First Chicago considered these requests in light of all the facts of record. International, and First Chicago Overseas Investment Cor- In the Board's view, Protestants have had ample opportuporation, corporations of First Chicago, chartered pursuant nity to submit their views, and have in fact submitted to the Edge Act. Based on all the facts of record, and for numerous materials that have been considered by the Board the reasons discussed in this order, the Board concludes in acting on this application. Protestants' requests fail to that the financial and managerial resources of NBD are demonstrate why their substantial written submissions do consistent with the acquisition of these corporations. The not adequately present their allegations. After a careful acquisition would also result in the continuation of the review of all the facts of record, the Board concludes that international services currently provided, and would be in Protestants' requests dispute the weight that should be the pubic interest. Accordingly, the Board finds that the accorded to, and the conclusions that may be drawn from, continued operation of these corporations upon acquisition the existing facts of record, but do not identify any genuine by NBD is consistent with the Edge Act and Regulation K. dispute about facts that are material to the Board's deci- The Board also concludes that the acquisition of all the sion. Based on all the facts of record, the Board has investments held by First Chicago under section 4(c)(13) determined that a public hearing or meeting is not necesof the BHC Act and Regulation K are consistent with the sary to clarify the factual record in this application, or relevant factors specified therein. Based on all the facts of otherwise warranted in this case, and the requests for a record, the Board has determined that disapproval of these public hearing or meeting on this application are denied.65 investments is not warranted. Conclusion Other Considerations The Board has considered all of the issues raised in public In every case involving a nonbanking acquisition under comments filed in connection with this proposal in light of section 4 of the BHC Act, the Board also must consider the the factors that the Board is required to consider under the financial condition and resources of the applicant and its BHC Act. Based on the foregoing and all the facts of subsidiaries and the effect of the proposal on these resourc- record, the Board has determined that this transaction es.64 Based on all the facts of record, the Board has should be, and hereby is, approved. The Board's approval concluded that financial and mangerial considerations are of this proposal is specifically conditioned on compliance consistent with approval of this proposal. by NBD with all the commitments made in connection with this proposal and with the conditions referenced in Request for a Hearing this order. The Board's determination on the proposed nonbanking activities also is subject to all the conditions Protestants have requested that the Board hold a public hearing or meeting in connection with this proposal. Protestants contend that a hearing is necessary to discuss First 65. One Protestant also has raised a question about whether ex parte Chicago's implementation of a $3.00 teller fee for certain communications may have been made by members of the Federal transactions done with a teller's assistance; to provide a Reserve System to First Chicago. Protestant bases this allegation on forum for community groups in the midwest to comment statements made by First Chicago in a filing with the Securities and Exchange Commission concerning advice First Chicago received upon the applications and notices; and to examine the about the expected timing of the Board's action on this proposal. First relationship between Federal Reserve System staff and the Chicago has stated that the advice it received regarding timing came parties to this transaction. Section 3(b) of the BHC Act not from the Federal Reserve System but from its attorneys. This does not require the Board to hold a public hearing on an advice was based on the date that the application was accepted for application unless the appropriate supervisory authority for processing and the schedule for processing applications of this type that is set forth in the Board's Regulation Y. First Chicago stated that the advice was given to assist First Chicago in complying with certain requirements of the Investment Company Act of 1940. Board staff also conducted an informal investigation and found that System staff did not inform applicants when this proposal would be scheduled for 64. See 12 C.F.R. 225.24. Board action. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

104 Federal Reserve Bulletin • January 1996 set forth in Regulation Y, including those in sec- company pursuant to section 225.25(b)(3) of the Board's tions 225.4(d) and 225.23(g) of Regulation Y, and to the Regulation Y; Board's authority to require such modification or termina- (7) First Chicago Capital Markets, Inc., Chicago, Illition of the activities of a bank holding company or any of nois, and thereby engage in providing financial and its subsidiaries as the Board finds necessary to ensure transaction advice, in providing full-service securities compliance with, and to prevent evasion of, the provisions brokerage services, and in underwriting and dealing in of the BHC Act and the Board's regulations and orders securities that state member banks are permitted to unissued thereunder. For purposes of this action, these com- derwrite and deal in pursuant to section 225.25(b)(4), mitments and conditions shall be deemed to be conditions (15), and (16), of the Board's Regulation Y as well as imposed in writing by the Board in connection with its the following: underwriting and dealing, to a limited findings and decision, and, as such, may be enforced in extent, in certain debt securities that a state member proceedings under applicable law. bank may not underwrite or deal in, purchasing and The acquisition of First Chicago's subsidiary banks may selling securities as a "riskless principal," and acting as not be consummated before the fifteenth calendar day after an agent in the private placement of securities, all pursuthe elfective date of this order, and this proposal may not ant to First Chicago Corporation, 74 Federal Reserve be consummated later than three months after the effective Bulletin 706 (1988), and First Chicago Corporation, 80 date of this order, unless such period is extended by the Federal Reserve Bulletin 448 (1994); Board or by the Federal Reserve Bank of Chicago, acting (8) Palo Verde Lease Holdings, Inc., Chicago, Illinois, pursuant to delegated authority. and thereby engage in commercial leasing activities By order of the Board of Governors, elfective Novem- pursuant to section 225.25(b)(5) of the Board's Regulaber?, 1995. tion Y; (9) First Chicago Lease Holding, Inc., Chicago, Illinois, Voting for this action: Chairman Greenspan, Vice Chairman and thereby engage in commercial leasing activities Blinder, and Governors Kelley, Lindsey, Phillips. Absent and not pursuant to section 225.25(b)(5) of the Board's Regulavoting: Governor Yellen. tion Y; (10) Cash Station, Inc., Chicago, Illinois, and thereby JENNIFER J. JOHNSON engage in data processing activities pursuant to section Deputy Secretary of the Board 225.25(b)(7) of the Board's Regulation Y; (11) G-W Life Insurance Company, Phoenix, Arizona, Appendix and thereby engage in underwriting credit life, accident and health insurance related to certain extensions of Nonbanking Subsidiaries of First Chicago to be Acquired credit pursuant to section 225.25(b)(8) (i) of the Board's by NBD: Regulation Y. (1) ANB Mezzanine Corporation, Chicago, Illinois, and thereby engage in making, acquiring, and servicing loans or other extensions of credit pursuant to section ORDERS ISSUED UNDER INTERNATIONAL BANKING ACT 225.25(b)(1) of the Board's Regulation Y; (2) First Chicago Capital Corporation, Chicago, Illinois, Credit Communal de Belgique S.A. and thereby engage in making, acquiring, and servicing Brussels, Belgium loans or other extensions of credit pursuant to section 225.25(b)(1) of the Board's Regulation Y; Order Approving Establishment of a Branch (3) First Chicago Investment Corporation, Chicago, Illinois, and thereby engage in making, acquiring, and servicing loans or other extensions of credit pursuant to Credit Communal de Belgique S.A. ("Bank"), Brussels, section 225.25(b)(1) of the Board's Regulation Y; Belgium, a foreign bank within the meaning of the Interna- (4) First Chicago Realty Services Corporation, Chicago, tional Banking Act ("IBA"), has applied under section 7(d) Illinois, and thereby engage in making, acquiring, and of the IBA (12 U.S.C. § 105(d)) to establish a stateservicing loans or other extensions of credit pursuant to licensed branch in New York, New York. The Foreign section 225.25(b)(1) of the Board's Regulation Y; Bank Supervision Enhancement Act of 1991 ("FBSEA"), (5) First Chicago Leasing Corporation, Chicago, Illinois, which amended the IBA, provides that a foreign bank must and thereby engage in making, acquiring, and servicing obtain the approval of the Board to establish a branch in loans, or other extensions of credit, commercial leasing the United States. activities, and community development activities pursu- Notice of the application, affording interested persons an ant to section 225.25(b)(1), (5), and (6) of the Board's opportunity to submit comments, has been published in a Regulation Y; newspaper of general circulation in New York, New York (6) First Chicago Trust Company of New York, New {The Daily News, February 13, 1995). The time for filing York, New York, and thereby engage in performing comments has expired and all comments have been considfunctions and activities that may be performed by a trust ered. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 105 Bank has total consolidated assets of approximately assess the overall financial condition of the foreign bank $100 billion.1 Bank's shares are held by ten Belgian pro- and its compliance with law and regulation (12 C.F.R. vincial and 589 Belgian municipal authorities. The City of 211.24(c)(1)).3 In making its determination under this stan- Antwerp, Belgium, which owns 6.4 percent of Bank's dard, the Board has considered the following information. shares, is the only entity with an ownership interest of Bank is supervised and regulated by the BFC.4 The BFC greater than 5 percent. is responsible for the prudential supervision and regulation Bank, which operates numerous local agencies through- of credit institutions. In addition, the National Bank of out Belgium, also owns 51 percent of the shares of Banque Belgium ("NBB"), in its capacity as Belgium's central Internationale a Luxembourg ("BIL") and 100 percent of bank and lender of last resort, has limited oversight authorthe shares of Cregem International Bank S.A. ("Cregem"), ity. both in Luxembourg. In addition, Bank operates ten subsid- The BFC may obtain any information required to assess iaries and affiliates in Belgium, Ireland, The Netherlands the bank's compliance with law and regulation, the accuand Luxembourg.2 Bank's current U.S. activities consist of racy of financial statements, the soundness of its operatwo wholly owned commercial paper issuing subsidiaries tions, and the adequacy of internal control systems. Bank in Delaware, Cregem North America, Inc., and BIL North must report to the BFC on its financial condition on a America, Inc., and the New York representative office of consolidated basis. Bank submits monthly, quarterly, semi- BIL. annual and annual reports including information on: Bank's primary purpose for establishing the branch is to (i) Financial statements, engage in municipal bond financing in the U.S. market. The (ii) Solvency ratios, branch also would conduct corporate lending and project (iii) Large exposures and problem risks, finance activities. Bank would be a qualifying foreign (iv) Exchange position in foreign currencies, and banking organization within the meaning of Regulation K (v) Positions in securities and other financial instruafter establishing the proposed branch. 12 C.F.R. ments. 211.23(b). Bank has received approvals to establish the proposed Based on an analysis of this information with respect to branch from the Belgian Banking and Finance Commission Bank, as well as information available from Bank's exter- ("BFC") and the New York State Banking Department. nal auditor, the BFC may require follow-up examinations In order to approve an application by a foreign bank to by its examiners. In addition, the BFC maintains regular establish a branch in the United States, the IBA and Regu- direct contact with Bank, including formal and informal lation K require the Board to determine that the foreign meetings. bank applicant engages directly in the business of banking While the BFC has its own powers of on-site inspection, outside of the United States, and has furnished to the Board to monitor the financial condition and operations of Belthe information it needs to adequately assess the application. The Board also must determine that the foreign bank is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor 3. In assessing this standard, the Board considers, among other factors, the extent to which the home country supervisors: (12 U.S.C. § 3105(d)(2)). The Board may also take into (i) Ensure that the bank has adequate procedures for monitoring account additional standards as set forth in the IBA and controlling its activities worldwide; (12 U.S.C. § 3105(d)(3)-(4)) and Regulation K (12 C.F.R. (ii) Obtain information on the condition of the bank and its 211.24(c)). subsidiaries and offices through regular examination reports, audit reports, or otherwise; Bank engages directly in the business of banking outside (iii) Obtain information on the dealings with and relationship of the United States through its commercial banking operabetween the bank and its affiliates, both foreign and domestic; tions in Belgium. Bank also has provided the Board with (iv) Receive from the bank financial reports that are consolidated the information necessary to assess the application through on a worldwide basis, or comparable information that permits submissions that address the relevant issues. analysis of the bank's financial condition on a worldwide consolidated basis; Regulation K provides that a foreign bank will be con- (v) Evaluate prudential standards, such as capital adequacy and sidered to be subject to comprehensive supervision or risk asset exposure, on a worldwide basis. regulation on a consolidated basis if the Board determines These are indicia of comprehensive, consolidated supervision. No that the bank is supervised and regulated in such a manner single factor is essential and other elements may inform the Board's determination. that its home country supervisor receives sufficient infor- 4. In addition to supervision by the BFC, Bank's operations are mation on the foreign bank's worldwide operations, includ- reviewed by two government commissioners appointed by the King of ing the relationship of the foreign bank to any affiliate, to Belgium, after consultation with the Minister of Finance and the Minister of the Interior. The commissioners attend meetings of the administrative and supervisory bodies of Bank and participate in an advisory capacity. Commissioners are charged with monitoring the Bank's activities for compliance with the law, the Bank's articles, and 1. All data are as of December 31, 1994. the public interest. Each commissioner may appeal any decision of the 2. Activities of these ten companies include holding investment board within three days of the decision to the appropriate Ministers, vehicles for tax and other purposes, insurance sales, reinsurance, and with the appeal having a suspending effect on such decision until a home mortgage lending. ruling has been made by the Belgian government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

106 Federal Reserve Bulletin • January 1996 gian banks, it relies primarily on the review of reports including the information described above, the Board conprepared by Bank's statutory auditor, and on the required cludes that Bank is subject to comprehensive supervision periodic financial and regulatory reports. Bank's external on a consolidated basis by its home country supervisor. auditors must be accredited by the BFC. The external The Board has also taken into account the additional auditor is appointed by Bank with the prior consent of the standards set forth in section 7 of the IB A (See 12 U.S.C. BFC and must collaborate with the BFC in its prudential §3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). Bank has prosupervision. As part of their accreditation requirements and vided the Board with the information necessary to assess their bank review functions, the external auditors meet the application through submissions that address the releregularly with the BFC. In general, as mandated by the vant issues. As noted above, Bank has received the consent BFC, the external auditor reviews the reports of and coor- of the BFC to establish the proposed state-licensed branch. dinates with Bank's internal auditors with respect to In addition, the BFC may share information on Bank's Bank's asset quality, internal controls and dealings with operations with other supervisors, including the Board. affiliates. However, the external auditor will, if necessary, Belgium is a signatory to the Basle risk-based capital conduct its own reviews directly and independently. Spe- standards, and Belgian risk-based capital standards meet cifically, the external auditors' duties include: those established by the Basle Capital Accord and the (i) Verification of periodic reports on administrative, European Union. Bank's capital is in excess of the miniaccounting and internal control systems; mum levels that would be required by the Basle Capital (ii) Verification of compliance with law; Accord and is considered equivalent to capital that would (iii) Semiannual reporting to the BFC on major devel- be required of a U.S. banking organization. Managerial and opments relating to the organization, its activities and other financial resources of Bank also are considered confinancial structure; and sistent with approval, and Bank appears to have the experi- (iv) Immediate reporting to the BFC on violations or ence and capacity to support the proposed branch. Bank irregularities.5 has established controls and procedures for the proposed branch in order to ensure compliance with U.S. law, as well The frequency and scope of internal audits of domestic as controls and procedures for its worldwide operations in and foreign offices and subsidiaries depend on the type of general. operation involved. All activities of Bank and its subsidiar- Finally, the Board has reviewed the restrictions on ies are considered for audit purposes, including complidisclosure in Belgium and Luxembourg and has comance, general operations, financial operations, internal conmunicated with relevant government authorities about trols, and EDP systems. Audits performed by the internal access to information. Bank has committed that it will auditors of subsidiaries are reviewed by the audit departmake available to the Board such information on the operment of the parent bank. When there is no audit function in ations of Bank and any affiliate of Bank that the Board a subsidiary, the audits are performed by the internal audit deems necessary to determine and enforce compliance with team of the parent bank.6 Bank is also required to provide the IBA, the Bank Holding Company Act of 1956, as annual reports to the BFC concerning certain of its relationamended, and other applicable federal law. To the extent ships with subsidiaries and affiliates, including breakdowns that the provision of such information is prohibited or of intercompany assets, liabilities, contingencies, and inimpeded by law, Bank has committed to cooperate with the come and expense items. Based on all the facts of record, Board to obtain any necessary consents or waivers that might be required from third parties in connection with disclosure of certain information. In addition, subject to certain conditions, the BFC may share information on Bank's operations with other supervisors, including the Board. In light of these commitments and other facts of 5. The BFC has the authority to enforce the Belgian banking laws record, and subject to the condition described below, the through intervention or imposition of other penalties. When a bank is Board concludes that Bank has provided adequate assurfound to be experiencing problems, the BFC will first attempt to find a solution by consulting with a bank's management. If the problem is ances of access to any necessary information the Board not corrected within a certain period of time, the BFC may appoint a may request. special inspector, suspend certain of the bank's activities, replace On the basis of all the facts of record, and subject to the managers or directors, or revoke the bank's license. 6. BIL and Cregem are also directly supervised by the Institut commitments made by Bank, as well as the terms and Monetaire Luxembourgeois ("IML"). Bank states that the IML shares conditions set forth in this order, the Board has determined information with the BFC concerning the financial condition and that Bank's application to establish a state-licensed branch operations of BIL and Cregem and that the IML makes regular visits should be, and hereby is, approved. Should any restrictions to Belgium to discuss the Belgian banks that have operations in Luxembourg. BIL and Cregem also have adopted the management on access to information on the operations or activities of reporting and planning systems used by Bank. BIL's board of direc- Bank and its affiliates subsequently interfere with the tors includes four representatives from Bank, including Bank's chair- Board's ability to obtain information to determine and man and vice- chairman. In addition, a liaison committee has been enforce compliance by Bank or its affiliates with applicable established and includes Bank's four representatives on BIL's board of directors. The liaison committee supervises all matters concerning federal statutes, the Board may require termination of any policies and management of BIL. of the Bank's direct or indirect activities in the United Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 107 States. Approval of this application is also specificallycon- in proceedings under 12 U.S.C. § 1818 or 12 U.S.C. § 1847 ditioned on Bank's compliance with the commitments against Bank, its office, and its affiliates. made in connection with this application, and with the By order of the Board of Governors, effective Novemconditions in this order.7 The commitments and conditions ber 20, 1995. referred to above are conditions imposed in writing by the Board in connection with its decision, and may be enforced Voting for this action: Chairman Greenspan, Vice Chairman Blinder, and Governors Kelley, Lindsey, and Phillips. Absent and not voting: Governor Yellen. JENNIFER J. JOHNSON 7. The Board's authority to approve the establishment of the pro- Deputy Secretary of the Board posed branch parallels the continuing authority of the State of New York to license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York, proposed branch of Bank in accordance with any terms or conditions and its agent, the New York State Banking Department, to license the that the State of New York may impose. INDEX OF ORDERS ISSUED OR ACTIONS TAKEN BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (JULY 1, 1995-SEPTEMBER 30, 1995) Bulletin Merged or Acquired Bank Date of Volume Applicant or Activity Approval and Page Bank Austria Aktiengesellschaft, To establish a representative office in the August 16, 1995 81, 979 Vienna, Austria United States BOK Financial Corporation, Liberty Bancorp, Inc., September 11, 1995 81,1052 Tulsa, Oklahoma Oklahoma City, Oklahoma Liberty Bank and Trust Company of Oklahoma City, N.A., Oklahoma City, Oklahoma Liberty Bank and Trust Company of Tulsa, N.A., Tulsa, Oklahoma Caisse Nationale de Credit Agricole, To establish a representative office in September 5, 1995 81, 1055 Paris, France Houston, Texas Canadian Imperial Bank of Commerce, The Argosy Securities Group, L.P., Toronto, Ontario, Canada New York, New York July 31, 1995 81, 878 The Argosy Group, L.P., New York, New York The Chase Manhattan Corporation, U.S. Trust Company of Wyoming, July 24, 1995 81, 883 New York, New York Cody, Wyoming Mutual Funds Service Company, Boston, Massachusetts The Chase Manhattan Corporation, U.S. Trust Corporation, July 24, 1995 81, 883 New York, New York New York, New York United States Trust Company of New York, New York, New York The Fifth Third Bank, PNC Bank, Ohio, N.A., August 23, 1995 81, 976 Cincinnati, Ohio Cincinnati, Ohio First Commerce Corporation, Central Corporation, September 25, 1995 81, 1033 New Orleans, Louisiana Monroe, Louisiana Central Bank, Monroe, Louisiana First Union Corporation, Education Financing Services, LLC, September 25, 1995 81,1042 Charlotte, North Carolina Winston-Salem, North Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

108 Federal Reserve Bulletin • January 1996 Bulletin Merged or Acquired Bank Date of Volume Applicant or Activity Approval and Page NationsBank Corporation, Charlotte, North Carolina Southern National Corporation, Winston-Salem, North Carolina Wachovia Corporation, Winston-Salem, North Carolina Fulton Financial Corporation, Delaware National Bankshares August 14, 1995 81, 970 Lancaster, Pennsylvania Corporation, Georgetown, Delaware Delaware National Bank, Georgetown, Delaware Henderson Bancshares, Inc., Troy Bank & Trust Company, July 24, 1995 81, 873 Troy, Alabama Troy, Alabama The Charles Henderson Trust, Troy Alabama The Hongkong and Shanghai Banking To establish a representative office in July 20, 1995 81, 902 Corporation, Limited, Dallas, Texas Hong Kong HSBC Holdings pic, United Northern Bancorp, Inc., September 11, 1995 81, 1044 London, United Kingdom Watertown, New York HSBC Holdings BV, United Northern Federal Savings Bank, Amsterdam, The Netherlands Watertown, New York Marine Midland Banks, Inc., Buffalo, New York Liu Chong Hing Bank Limited, To establish a state-licensed branch in July 20, 1995 81, 905 Hong Kong San Francisco, California Marine Midland Bank, United Northern Federal Savings Bank, September 11, 1995 81, 1045 Buffalo, New York Watertown, New York Mercantile Bankshares Corporation, The Sparks State Bank, September 22, 1995 81, 1034 Baltimore, Maryland Sparks, Maryland Norwest Corporation, Orlandi Valuta, August 28, 1995 81, 974 Minneapolis, Minnesota Los Angeles, California Orlandi Valuta Nacionale, Boulder City, Nevada Pilot Bancshares, Inc., The Terrace Bank of Florida, July 3, 1995 81, 874 Tampa, Florida Tampa, Florida The Provident Bank, Heritage Savings Bank, July 31, 1995 81, 907 Cincinnati, Ohio Cincinnati, Ohio Republic Bank, To establish a branch at 233 Lancaster August 16, 1995 81, 977 Philadelphia, Pennsylvania Avenue, Ardmore, Pennsylvania Societe Generale, Brody, White & Company, Inc., July 14, 1995 81, 880 Paris, France New York, New York FIMAT Futures USA, Inc., Chicago, Illinois State Street Boston Corporation, Boston Financial Data Services, Inc., September 25, 1995 81, 1049 Boston, Massachusetts Quincy, Massachusetts BancBoston State Street Investor Services, L.P., Canton, Massachusetts The First National Bank of Boston, N.A., Boston, Massachusetts Terrace Bank of Florida, University State Bank, July 3, 1995 81, 874 Tampa, Florida Tampa, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 109 Bulletin Merged or Acquired Bank Date of Volume Applicant or Activity Approval and Page Totalbank Corporation of Florida, Florida International Bank, July 12, 1995 81, 876 Miami, Florida Perrine, Florida U.S. Trust Corporation, Order approving the formation of a bank July 24, 1995 81, 893 New York, New York holding company, merger of banks, United States Trust Company of New establishment of branches, membership York, in the Federal Reserve System, and New York, New York notice to engage in nonbanking New USTC Holdings Corporation, activities New York, New York New U.S. Trust Company of New York, New York, New York Wells Fargo & Company, Wells Fargo HSBC Trade Bank, N.A., September 18, 1995 81, 1037 San Francisco, California San Francisco, California HSBC Holdings pic, London, United Kingdom HSBC Holdings BV, Amsterdam, The Netherlands Marine Midland Banks, Inc., Buffalo, New York Westamerica Bank, Bank of America, NT & SA, July 31, 1995 81, 900 San Rafael, California San Francisco, California APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551 Section 3 Effective Applicant(s) Bank(s) Date Doniphan Bancshares, Inc., Bank of Doniphan, November 9, 1995 Doniphan, Nebraska Doniphan, Nebraska Union Planters Corporation, First Bancshares of Eastern Arkansas, Inc., November 21, 1995 Memphis, Tennessee West Memphis, Arkansas Union Planters Corporation, First Bancshares of N.E. Arkansas, Inc., November 21, 1995 Memphis, Tennessee Osceola, Arkansas Section 4 Effective Applicant(s) Bank(s) Date First National of Nebraska, Inc., Integrated Planning Systems, Inc., November 30, 1985 Omaha, Nebraska Bellevue, Nebraska Keystone Financial, Inc., National Security American Life November 16, 1995 Harrisburg, Pennsylvania Insurance Company, Towanda, Pennsylvania Whitney Holding Corporation, WCDC, Inc., November 24, 1995 New Orleans, Louisiana New Orleans, Louisiana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

110 Federal Reserve Bulletin • January 1996 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 Effective Applicant(s) Bank(s) RReesseerrvvee BBaannkk Date American Bank Shares, Inc., American State Bank of Rapid City, Minneapolis October 26, 1995 Rapid City, South Dakota Rapid City, South Dakota Area Bancshares Corporation, Citizens Deposit Bancshares, Inc., St. Louis November 1, 1995 Owensboro, Kentucky Calhoun, Kentucky ASB Corporation, American State Bank, St. Louis November 15, 1995 Osceola, Arkansas Osceola, Arkansas BANKFIRST Corporation, Inc., BANKFIRST, N.A., Minneapolis November 22, 1995 Sioux Falls, South Dakota Sioux Falls, South Dakota Berkshire Bancorp, Berkshire County Savings Bank, Boston October 27, 1995 Pittsfield, Massachusetts Pittsfield, Massachusetts Bren-Mar Properties, Inc., Jack's Fork Bancorporation, Inc., St. Louis November 13, 1995 Columbia, Missouri Columbia, Missouri BT Financial Corporation, The Huntington National Bank of Philadelphia November 21, 1995 Johnstown, Pennsylvania Pennsylvania, Uniontown, Pennsylvania Century South Banks, Inc., Bank of Danielsville, Atlanta November 16, 1995 Dahlonega, Georgia Danielsville, Georgia Coronado, Inc., Lyons Bankshares, Inc., Kansas City November 22, 1995 Sterling, Kansas Lyons, Kansas First Financial Bankshares, Inc., Citizens Equity Corporation, Dallas November 20, 1995 Abilene, Texas Weatherford, Texas First Financial Bankshares of Delaware, Inc., Wilmington, Delaware First National Security Company, First National Bank of Lewisville, St. Louis November 20, 1995 DeQueen, Arkansas Lewisville, Arkansas First United Bancorp, Inc., First United Bank of Hopkins County, St. Louis November 14, 1995 Madisonville, Kentucky Inc., Madisonville, Kentucky Greene County Bancshares, Inc., Premier Bancshares, Inc., Atlanta November 3, 1995 Greeneville, Tennessee Niota, Tennessee Hillister Enterprises II, Inc., Umphrey II Family Limited Partnership, Dallas November 16, 1995 Beaumont, Texas Beaumont, Texas Southeast Texas Bancshares, Inc., Beaumont, Texas Community Bank of Texas, Beaumont, Texas Magnolia Partnership Investments, First of Groves Corporation, Dallas November 2, 1995 Ltd., Groves, Texas Beaumont, Texas First Bank & Trust Company, Groves, Texas First National Bank, Silsbee, Texas Mercantile Bancorporation Inc., First Sterling Bancorp, Inc., St. Louis November 13, 1995 St. Louis, Missouri Sterling, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 111 Section 3—Continued Effective Applicant(s) Bank(s) Reserve Bank Date Mercantile Bancorporation Inc., Hawkeye Bancorporation, St. Louis November 10, 1995 St. Louis, Missouri Des Moines, Iowa Milton Bancshares, Inc., Bank of Milton, Chicago November 3, 1995 Milton, Wisconsin Milton, Wisconsin Mountain West Financial Corp., Mountain West Bank of Great Falls, Minneapolis November 1, 1995 Helena, Montana N.A., Great Falls, Montana Naperville Bancorp, Inc., Naperville Bank, Chicago October 26, 1995 Naperville, Illinois Naperville, Illinois NEMO Bancshares, Inc., Madison-Hunnewell Bank, St. Louis November 8, 1995 Madison, Missouri Madison, Missouri Norcon Financial Corp., The First National Bank of Conway Kansas City November 14, 1995 Conway Springs, Kansas Springs, Conway Springs, Kansas The Farmers State Bank of Norwich, Norwich, Kansas Norwest Corporation, The Bank of Robstown, Minneapolis November 21, 1995 Minneapolis, Minnesota Robstown, Texas Pan American Bancshares, Inc., Pan American Bank, Chicago October 27, 1995 Chicago, Illinois Chicago, Illinois Parkers Prairie Bancshares, Inc., Waubun Bancshares, Inc., Minneapolis November 22, 1995 Parkers Prairie, Minnesota Waubun, Minnesota The Queensborough Company, Ogeechee Valley Bank, Atlanta November 10, 1995 Lousiville, Georgia Millen, Georgia SNBNY Holdings Limited, Safra National Bank of New York, New York November 10, 1995 Marina Bay, City of Gibraltar New York, New York Star Valley Banc Shares, Inc., The Bank of Star Valley, Kansas City November 20, 1995 Afton, Wyoming Afton, Wyoming Texas Financial Bancorporation, Inc., United Commerce Bank of Highland Dallas November 9, 1995 Minneapolis, Minnesota Village, N.A., First Bancorp, Inc., Highland Village, Texas Denton, Texas First Delaware Bancorp, Inc., Dover, Delaware UMB Financial Corporation, First Sooner Bancshares, Inc., Kansas City November 9, 1995 Kansas City, Missouri Oklahoma City, Oklahoma Umphrey II Family Limited Southeast Texas Bancshares, Inc., Dallas November 16, 1995 Partnership, Beaumont, Texas Beaumont, Texas Community Bank of Texas, Beaumont, Texas Westfield Mutual Holding Company, Westfield Savings Bank, Boston November 2, 1995 Westfield, Massachusetts Westfield, Massachusetts Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

112 Federal Reserve Bulletin • January 1996 Section 4 Effective AApppplliiccaanntt((ss)) Nonbanking Activity/Company Reserve Bank Date Barnett Banks, Inc., First Financial Bancshares of Polk Atlanta November 6, 1995 Jacksonville, Florida County, Inc., Lake Wales, Florida CNB Bancshares, Inc., Citizens Trust Company of Indiana, St. Louis November 6, 1995 Evansville, Indiana N.A., Evansville, Indiana Community First Bankshares, Inc., Boelke Insurance Agency, Minneapolis November 9, 1995 Fargo, North Dakota Hankinson, North Dakota Community Bank Shares of Indiana, Heritage Bank of Southern Indiana, St. Louis November 1, 1995 Inc., Jeffersonville, Indiana New Albany, Indiana DFC Acquisition Corporation Two, UMB Financial Corporation, Kansas City November 7, 1995 Kansas City, Missouri Kansas City, Missouri Dickinson Financial Corporation, Kansas City, Missouri First Western Bancorp, Inc., Owen Johnson Insurance Agency, Inc., Minneapolis November 10, 1995 Huron, South Dakota Hill City, South Dakota Independence Community Bank Bay Ridge Bancorp, Inc., New York November 6, 1995 Corp., Brooklyn, New York Brooklyn, New York National Bank of Canada, Levesque Beaubien Geoffrion Ltd., New York November 1, 1995 Montreal, Quebec, Canada New York, New York National Westminster Bank Pic, Gleacher & Co., Inc., New York November 22, 1995 London, England New York, New York National Westminster Bank Pic, To engage in making equity investments New York November 22, 1995 London, England in corporations or projects designed primarily to promote community welfare South Florida Banking Corporation, First National Bank of Florida at Bonita Atlanta November 14, 1995 Bonita Springs, Florida Springs, Bonita Springs, Florida Susquehanna Bancshares, Inc., Fairfax Financial Corporation, Philadelphia November 21, 1995 Lititz, Pennsylvania Baltimore, Maryland UJB Financial Corp., Berkeley Federal Bank and Trust, FSB, New York October 31, 1995 Princeton, New Jersey Palisades Park, New Jersey Waterhouse Investor Services, Inc., National Investor Services Corp., New York October 27, 1995 New York, New York New York, New York Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 113 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. Effective Applicant(s) Bank(s) Reserve Bank Date Byron Center State Bank, First of America-Michigan, National Chicago October 27, 1995 Byron Center, Michigan Association, Grand Rapids, Michigan Central Trust Company, Buffalo Investment Corporation, Kansas City November 10, 1995 Lander, Wyoming Edina, Minnesota Marine Midland Bank, Hang Seng Bank Limited, New York November 21, 1995 Buffalo, New York Hong Kong Republic Security Bank, Banyan Bank, Atlanta November 22, 1995 West Palm Beach, Florida Boca Raton, Florida Board order dated March 1, 1995, approving notices by PENDING CASES INVOLVING THE BOARD OF Bank One Corporation, Columbus, Ohio; CoreStates Finan- GOVERNORS cial Corp., Philadelphia, Pennsylvania; PNC Bank Corp., This list of pending cases does not include suits against the Pittsburgh, Pennsylvania; and KeyCorp, Cleveland, Ohio, Federal Reserve Banks in which the Board of Governors is not to acquire certain data processing assets of National City named a party. Corporation, Cleveland, Ohio, through a joint venture subsidiary. The Board's brief was filed November 16, 1995. Menick v. Greenspan, No. 95-CV-01916 (D. D.C., filed Octo- Oral argument is scheduled for February 2, 1996. ber 10, 1995). Complaint alleging sex, age, and handicap Jones v. Board of Governors, No. 95-1142 (D.C. Cir., filed discrimination in employment. March 3, 1995). Petition for review of a Board order dated Kuntz v. Board of Governors, No. 95-1495 (D.C. Cir., filed February 2, 1995, approving the applications by First Com- September 21, 1995). Petition for review of Board order merce Corporation, New Orleans, Louisiana, to merge with dated August 23, 1995, approving the applications of The City Bancorp, Inc., New Iberia, Louisiana, and First Bank- Fifth Third Bank, Cincinnati, Ohio, to acquire certain assets shares, Inc., Slidell, Louisiana. Petitioner filed a motion for and assume certain liabilities of 12 branches of PNC Bank, injunctive relief and for a stay of the Board's order on April 3, 1995. On August 17, 1995, the court denied the motion. Ohio, N.A., Cincinnati, Ohio, and to establish certain Oral argument on the petition for review is scheduled for branches. The Board's motion to dismiss was filed on February 27, 1996. October 26, 1995. Lee v. Board of Governors, No. 94-4134 (2nd Cir., filed In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed August 22, 1995). Petition for review of Board orders dated January 6, 1995). Action to enforce subpoena seeking pre- July 24, 1995, approving certain steps of a corporate reorga- decisional supervisory documents sought in connection with nization of U.S. Trust Corporation, New York, New York, an action by Bank of New England Corporation's trustee in and the acquisition of U.S. Trust by Chase Manhattan bankruptcy against the Federal Deposit Insurance Corpora- Corporation, New York, New York. On September 12, tion. The Board filed its opposition on January 20, 1995. 1995, the court denied petitioners' motion for an emergency Oral argument on the motion was held July 14, 1995. stay of the Board's orders. Beckman v. Greenspan, No. 95-35473 (9th Cir., file May 4, Jones v. Board of Governors, No. 95-1359 (D.C. Cir., filed 1995). Appeal of dismissal of action against Board and July 17, 1995). Petition for review of a Board order dated others seeking damages for alleged violations of constitu- June 19, 1995, approving the application by First Com- tional and common law rights. The appellants' brief was merce Corporation, New Orleans, Louisiana, to acquire filed on June 23, 1995; the Board's brief was filed on Lakeside Bancshares, Lake Charles, Louisiana. On Novem- July 12, 1995. ber 15, 1995, the court granted the Board's motion to Board of Governors v. Ghaith R. Pharaon, No. 91-CIV-6250 dismiss. (S.D. New York, filed September 17, 1991). Action to Money Station, Inc. v. Board of Governors, No. 95-1182 freeze assets of individual pending administrative adjudica- (D.C. Cir., filed March 30, 1995). Petition for review of a tion of civil money penalty assessment by the Board. On Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

114 Federal Reserve Bulletin • January 1996 September 17, 1991, the court issued an order temporarily poration, Voorhees, New Jersey, and the Glendale National restraining the transfer or disposition of the individual's Bank of New Jersey, Voorhees, New Jersey; and the former assets. chairman of the board of the Glendale Bank of Pennsylvania, Upper Darby, Pennsylvania. FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD OF GOVERNORS TERMINATION OF ENFORCEMENT ACTIONS Constantinos I. Costalas Piedmont Trust Bank Voorhees, New Jersey Martinsville, Virginia The Federal Reserve Board announced on November 27, The Federal Reserve Board announced on November 3, 1995, the issuance of a combined Order of Prohibition and 1995, the termination of the following enforcement action: Order of Assessment of a Civil Money Penalty against Piedmont Trust Bank, Martinsville, Virginia — Cease and Constantinos I. Costalas, the former chairman of the board, Desist Order dated August 5, 1993; terminated October 3, president, and chief executive officer of Glendale Bancor- 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance A28 Federal fiscal and financing operations DOMESTIC FINANCIAL STATISTICS A29 U.S. budget receipts and outlays A30 Federal debt subject to statutory limitation Money Stock and Bank Credit A30 Gross public debt of U.S. Treasury— Types and ownership A4 Reserves, money stock, liquid assets, and debt A31 U.S. government securities measures dealers—Transactions A5 Reserves of depository institutions, Reserve Bank A32 U.S. government securities dealers— credit Positions and financing A6 Reserves and borrowings—Depository A3 3 Federal and federally sponsored credit institutions agencies—Debt outstanding A7 Selected borrowings in immediately available funds—Large member banks Securities Markets and Corporate Finance Policy Instruments A34 New security issues—Tax-exempt state and local governments and corporations A8 Federal Reserve Bank interest rates A35 Open-end investment companies—Net sales A9 Reserve requirements of depository institutions and assets A10 Federal Reserve open market transactions A35 Corporate profits and their distribution A35 Nonfarm business expenditures on new Federal Reserve Banks plant and equipment All Condition and Federal Reserve note statements A36 Domestic finance companies—Assets and A12 Maturity distribution of loan and security liabilities, and consumer, real estate, and business holdings credit Monetary and Credit Aggregates Real Estate A13 Aggregate reserves of depository institutions A37 Mortgage markets and monetary base A3 8 Mortgage debt outstanding A14 Money stock, liquid assets, and debt measures A16 Deposit interest rates and amounts outstanding— Consumer Installment Credit commercial and BIF-insured banks A17 Bank debits and deposit turnover A39 Total outstanding A39 Terms Commercial Banking Institutions Flow of Funds A18 Assets and liabilities, Wednesday figures A40 Funds raised in U.S. credit markets Weekly Reporting Commercial Banks— A42 Summary of financial transactions A43 Summary of credit market debt outstanding Assets and liabilities A44 Summary of financial assets and liabilities A21 Large reporting banks A23 Branches and agencies of foreign banks DOMESTIC NONFINANCIAL STATISTICS Financial Markets Selected Measures A24 Commercial paper and bankers dollar acceptances outstanding A45 Nonfinancial business activity— A25 Prime rate charged by banks on short-term Selected measures business loans A45 Labor force, employment, and unemployment A26 Interest rates—money and capital markets A46 Output, capacity, and capacity utilization A27 Stock market—Selected statistics A47 Industrial production—Indexes and gross value Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • January 1996 DOMESTIC NONFINANCIAL STATISTICS- Reported by Nonbanking Business CONTINUED Enterprises in the United States A61 Liabilities to unaffiliated foreigners Selected Measures—Continued A62 Claims on unaffiliated foreigners A49 Housing and construction A50 Consumer and producer prices Securities Holdings and Transactions A51 Gross domestic product and income A52 Personal income and saving A63 Foreign transactions in securities A64 Marketable U.S. Treasury bonds and notes—Foreign transactions INTERNATIONAL STATISTICS Summary Statistics Interest and Exchange Rates A53 U.S. international transactions—Summary A65 Discount rates of foreign central banks A54 U.S. foreign trade A65 Foreign short-term interest rates A54 U.S. reserve assets A66 Foreign exchange rates A54 Foreign official assets held at Federal Reserve Banks A55 Selected U.S. liabilities to foreign official A67 GUIDE TO STATISTICAL RELEASES AND institutions SPECIAL TABLES Reported by Banks in the United States A68 Pro forma balance sheet and income A55 Liabilities to and claims on foreigners statement for priced service operations, A56 Liabilities to foreigners September 30, 1995 A58 Banks' own claims on foreigners A59 Banks' own and domestic customers' claims on foreigners A70 INDEX TO STATISTICAL TABLES A59 Banks' own claims on unaffiliated foreigners A60 Claims on foreign countries— Combined domestic offices and foreign branches Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GNMA Government National Mortgage Association n.a. Not available GDP Gross domestic product n.e.c. Not elsewhere classified HUD Department of Housing and Urban P Preliminary Development r Revised (Notation appears on column heading IMF International Monetary Fund when about half of the figures in that column 10 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 of include not fully guaranteed issues) as well as direct obligafounding. tions of the Treasury. "State and local government" also in- Minus signs are used to indicate (1) a decrease, (2) a negative cludes municipalities, special districts, and other political figure, or (3) an outflow. subdivisions. "U.S. government securities" may include guaranteed issues of U.S. government agencies (the flow of funds figures also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Financial Statistics • January 1996 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1994 1995 1995 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q4 Q1 Q2 Q3 June July Aug. Sept. Oct. Reserves of depository institutions2 1 Total -3.3 -3.7 -8.0 -1.2 -8.5 6.3 -2.9 -3.1 -11.5 2 Required -3.0 -4.0 -7.0 -2.3 -10.4 3.8 -.8 -2.3 -14.4 3 Nonborrowed -2.1 -2.4 -8.6 -2.2 -11.1 4.3 -1.1 -3.0 -10.8 4 Monetary base3 6.9 6.4 6.3 1.0 -2.6 -.3 3.3 1.1 3.3 Concepts of money, liquid assets, and debt4 5 Ml -1.2 .0 -.9 -1.0r .9 1.0r - 1.6r —3.9r -10.4 6 M2 -.3 1.7 4.4 7.7 11.9 6.2 8.3 4.4r -.7 7 M3 1.7 4.4 7.1 8.8 12.8 8.4 1.1' 4.3 3.3 8 L 2.2 6.4 7.6 9.2 8.3 11.5 7.9r 8.9 n.a. 9 Debt 5.3r 5.4r 6.7 4.5 5.3r 3.5r 3.7r 3.1 n.a. Nontransaction components 10 In M25 .2 2.5 6.9 11.7r 16.9r 8.5 12.8r 8.0r 3.5 11 In M3 only6 12.3r 18.5 20.6r 14.1r 17.4r 18.8r 5.0r 3.6r 22.7 Time and savings deposits Commercial banks 12 Savings, including MMDAs -8.5 -13.2 -7.3 10.3 18.2 4.3 14.5 11.7 11.2 13 Small time7 16.0 24.3 23.4 9.8r 13.4 10.0r 5.5r 1.9 1.5 14 Large time8,9 17.7 12.7 15.8 14.6r 12.9 19.6 5.6 10.3r 42.4 Thrift institutions 15 Savings, including MMDAs -17.6 -20.5 -14.5 —5.8r -4.0 -7.6 -7.0r -.3 .0 16 Small time7 10.9 21.5 26.6 3.7r 2.7 ,3r 2.0r 2.3r 2.7 17 Large time8 14.1 23.3 14.6 13.4 6.8 30.5 9.9 8.2 17.9 Money market mutual funds 18 General purpose and broker-dealer 7.5 7.9 18.1 43.3 61.6 44.5 37.7 17.6 9.9 19 Institution-only 7.3 10.0 27.1 29.3 66.5 39.7 -9.0 15.4 12.9 Debt components4 20 Federal 5.9 5.3 5.3 4.4 8.4 4.1 1.9 .7 n.a. 21 Nonfederal 5.1r 5.5r 7.2 4.5 4.2r 3.3r 4.4r 4.0 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts outstand- funds. Excludes amounts held by depository institutions, the U.S. government, money market ing during preceding month or quarter. funds, and foreign banks and official institutions. Also excluded is the estimated amount of 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with overnight RPs and Eurodollars held by institution-only money market funds. Seasonally regulatory changes in reserve requirements. (See also table 1,20.) adjusted M3 is computed by adjusting its non-M2 component as a whole and then adding this 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally result to seasonally adjusted M2. adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury component of the money stock, plus (3) (for all quarterly reporters on the "Report of securities, commercial paper, and bankers acceptances, net of money market fund holdings of Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters whose these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted between current vault cash and the amount applied to satisfy current reserve requirements. 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 nonfinancial Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of sectors—the federal sector (U.S. government, not including government-sponsored enterdepository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all prises or federally related mortgage pools) and the nonfederal sectors (state and local commercial banks other than those owed to depository institutions, the U.S. government, and governments, households and nonprofit organizations, nonfinancial corporate and nonfarm foreign banks and official institutions, less cash items in the process of collection and Federal noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, which are derived from the Federal Reserve Board's flow of funds accounts, are breakcredit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted (that is, discontinuities in the data have been smoothed into the series) and adjusted Ml is computed by summing currency, travelers checks, demand deposits, and month-averaged (that is, the data have been derived by averaging adjacent month-end levels). OCDs, each seasonally adjusted separately. 5. Sum of (1) overnight RPs and overnight Eurodollars, (2) money market fund balances M2: Ml plus (1) overnight (and continuing contract) repurchase agreements (RPs) issued (general purpose and broker-dealer), (3) savings deposits (including MMDAs), and (4) small by all depository institutions and overnight Eurodollars issued to U.S. residents by foreign time deposits. branches of U.S. banks worldwide, (2) savings (including MMDAs) and small time deposits 6. Sum of (1) large time deposits, (2) term RPs, (3) term Eurodollars of U.S. residents, (time deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in and (4) money market fund balances (institution-only), less (5) a consolidation adjustment both taxable and tax-exempt general-purpose and broker-dealer money market funds. Ex- that represents the estimated amount of overnight RPs and Eurodollars held by institutioncludes individual retirement accounts (IRAs) and Keogh balances at depository institutions only money market funds. This sum is seasonally adjusted as a whole. and money market funds. Also excludes all balances held by U.S. commercial banks, money 7. Small time deposits—including retail RPs—are those issued in amounts of less than market funds (general purpose and broker-dealer), foreign governments and commercial $100,000. All IRA and Keogh account balances at commercial banks and thrift institutions banks, and the U.S. government. Seasonally adjusted M2 is computed by adjusting its non-M 1 are subtracted from small time deposits. component as a whole and then adding this result to seasonally adjusted M1. 8. Large time deposits are those issued in amounts of $100,000 or more, excluding those M3: M2 plus (1) large time deposits and term RP liabilities (in amounts of $100,000 or 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 Kingdom depository institutions, the U.S. government, and foreign banks and official institutions. and Canada, and (3) balances in both taxable and tax-exempt, institution-only money market 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 Aug. Sept. Sept. 13 Sept. 20 Sept. 27 Oct. 4 Oct. 11 Oct. 18 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 409,402 410,892r 410,695 411,208 413,459 410,395 411,744 U.S. government securities2 2 Bought outright—System account 371,942 371,068 370,901 371,236 371,826 371,349 369,583 371,478 371,359 3 Held under repurchase agreements 133 4,206 3,227 4,540 5,880 2,487 4,742 3,551 4,112 Federal agency obligations 4 5 6 Ac B H ce o e p u ld t g a h n u t c n e d o s e u r t ri r g e h p t u rchase agreements 3,01 5 9 20 2,9 1 3 0 2 06 2, 4 8 7 7 9 6 0 2,9 3 4 2 1 70 2,941 0 0 2,92 2 1 10 2,89 3 5 20 2,8950 0 2, 4 89 0 5 00 Loans to depository institutions 7 Adjustment credit 112 28 45 2 23 75 121 22 9 8 E Se x a te s n o d n e a d l c c r r e e d d i i t t 2590 2540 2040 2430 2550 2670 2550 2240 2170 10 Float 291 408 537 295 652 476 348 942 381 11 Other Federal Reserve assets 33,595 31,890' 32,425 31,618 31,904 32,093 32,465 32,533 32,469 12 Gold stock 11,053 11,052 11,051 11,053 11,053 11,052 11,051 11,051 11,051 13 Special drawing rights certificate account 10,518 10,366 10,168 10,518 10,368 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 23,623 23,72 f 23,799 23,704r 23,726r 23,747r 23,769 23,783 23,797 ABSORBING RESERVE FUNDS 15 Currency in circulation 410,420 41 l,003r 411,565 412,575r 410,777r 409,302r 410,131 412,617 412,499 16 Treasury cash holdings 310 322 315 318 332 322 321 317 313 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,257 6,850 5,384 4,903 10,002 6,651 6,829 5,630 4,941 18 Foreign 184 179 179 182 174 181 186 168 181 19 Service-related balances and adjustments . . 4,599 4,688 4,874 4,643 4,693 4,759 4,766 4,743 4,829 20 Other 289 348 386 339 362 329 345 349 546 21 Other Federal Reserve liabilities and capital , 12,758 12,176 12,938 11,876 12,241 12,694 12,998 12,963 12,813 22 Reserve balances with Federal Reserve Banks 20,779 20,466r 20,070 21,648 20,024 20,368 19,807 19,959 20,748 End-of-month figures Wednesday figures Aug. Sept. Sept. 13 Sept. 20 Sept. 27 Oct. 4 Oct. 11 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 410,266r 420,340 410,408 414,886 409,976 U.S. government securities 2 Bought outright—System account 369,818 367,669 371,227 372,102 370,992 369,652 371,264 372,427 370,980 3 Held under repurchase agreements 3,055 6,445 2,290 8,175 13,020 6,487 3,080 4,833 4,112 Federal agency obligations 4 5 6 Ac B H ce o e p u ld t g a h n u t c n e o d s u e r t ri r g e h p t u rchase agreements 2,9 1 4 0 1 00 2,89 7 5 50 2,8 2 1 1 2 0 0 2 1 , , 9 2 4 0 1 9 0 2,9410 0 2,8 1 9 5 5 00 2,8950 0 2,8950 0 2, 4 8 0 9 0 5 0 7 Lo A an d s j u to s tm de e p n o t s c it r o e r d y i t institutions 4 160 1 3 1 70 3 834 9 8 E Se x a te so n n d a e l d c c r r e e d d i i t t 2660 2610 1230 246 0 2660 2700 2340 2260 2130 10 Float 686 73 830 -25 611 651 605 1,246 -1.038 11 Other Federal Reserve assets 31,592 32,687r 32,334 32,018 32,509 32,150 32,327 32,426 32,405 12 Gold stock 11,053 11,051 11,051 11,053 11,053 11,051 11,051 11,051 11,051 13 Special drawing rights certificate account 10,518 10,168 10,168 10,518 10,168 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 23,682 23,769r 23,825 23,704r 23,726' 23,747' 23,769 23,783 23,797 ABSORBING RESERVE FUNDS 15 Currency in circulation 410,984 409,275r 411,767 412,625' 410,856' 410,225' 411,794 413,758 412,491 16 Treasury cash holdings 316 322 314 334 322 322 318 313 313 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 4,767 8,620 7,018 6,086 17,499 6,553 5,779 5,092 5,710 18 Foreign 166 201 275 177 167 170 170 164 162 19 Service-related balances and adjustments .. 4,612 4,766r 5,009 4,643 4,693 4,759 4,766 4,743 4,829 20 Other 298 332 375 339 330 331 353 346 349 21 Other Federal Reserve liabilities and capital , 11,438 13,088 13,073 12,084 12,323 12,663 12,796 12,645 12,562 22 Reserve balances with Federal Reserve Banks' 21,134 18,650r 17,041 25,654 19,097 22,268 19,419 22,826 18,574 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 Financial Statistics • January 1996 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1992 1993 1994 1995 Dec. Dec. Dec. Apr. May June July Aug. Sept. Oct. 1 Reserve balances with Reserve Banks2 25,368 29,374 24,658 24,217 21,476 21,058 20,840 20,565 20,519 20,054 2 Total vault cash3 34,541 36,818 40,365 38,099 39,038 39,839 40,522 40,177 40,648 40,561 3 Applied vault cash4 31,172 33,484 36,682 34,657 35,281 35,986 36,550 36,255 36,640 36,345 4 Surplus vault cash5 3,370 3,334 3,683 3,442 3,757 3,853 3,971 3,923 4,008 4.216 5 Total reserves6 56,540 62,858 61,340 58,874 56,757 57,044 57,390 56,819 57,159 56,400 6 Required reserves 55,385 61,795 60,172 58,120 55,877 56,079 56,300 55,832 56,209 55,319 7 Excess reserve balances at Reserve Banks7 1,155 1,063 1,168 753 880 964 1,090 988 950 1,081 8 Total borrowings at Reserve Banks8 124 82 209 111 150 272 371 282 278 245 9 Seasonal borrowings 18 31 100 82 137 172 231 258 252 199 10 Extended credit9 1 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1995 July 5 July 19 Aug. 2 Aug. 16 Aug. 30 Sept. 13 Sept. 27 Oct. 11 Oct. 25 Nov. 8 1 Reserve balances with Reserve Banks2 20,546 21,733 19,920 20,793 20,395 21,029 20,182 19,886' 20,496 19,332 2 Total vault cash3 39,724 40,411 40,983 40,889 39,324 40,554 40.628 41,153 39,855 41,123 3 Applied vault cash4 35,930 36,491 36,878 36,898 35,491 36,693 36,556 36,805 35,770 36,847 4 Surplus vault cash5 3,794 3,920 4,106 3,991 3,833 3,862 4,072 4,348 4,086 4,276 5 Total reserves6 56,476 58,224 56,798 57,691 55,886 57,722 56,738 56,690r 56,265 56,179 6 Required reserves 55,462 57,334 55,443 56,491 55,153 56,879 55,781 55,312 55,406 55,129 7 Excess reserve balances at Reserve Banks7 1,014 890 1,354 1,200 733 843 957 l,378r 860 1,051 8 Total borrowings at Reserve Banks8 336 293 478 250 288 268 274 338 227 121 9 Seasonal borrowings 214 224 245 247 272 245 261 240 204 116 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 1. Data in this table also appear in the Board's H.3 (502) weekly statistical release. For 5. Total vault cash (line 2) less applied vault cash (line 3). ordering address, see inside front cover. Data are not break-adjusted or seasonally adjusted. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash 2. Excludes required clearing balances and adjustments to compensate for float and (line 3). includes other off-balance-sheet "as-of" adjustments. 7. Total reserves (line 5) less required reserves (line 6). 3. Total "lagged" vault cash held by depository institutions subject to reserve 8. Also includes adjustment credit. requirements. Dates refer to the maintenance periods during which the vault cash may be used 9. Consists of borrowing at the discount window under the terms and conditions estabto satisfy reserve requirements. The maintenance period for weekly reporters ends sixteen lished for the extended credit program to help depository institutions deal with sustained days after the lagged computation period during which the vault cash is held. Before Nov. 25, liquidity pressures. Because there is not the same need to repay such borrowing promptly as 1992, the maintenance period ended thirty days after the lagged computation period. with traditional short-term adjustment credit, the money market effect of extended credit is 4. All vault cash held during the lagged computation period by "bound" institutions (that similar to that of nonborrowed reserves. is, those whose required reserves exceed their vault cash) plus the amount of vault cash applied during the maintenance period by "nonbound" institutions (that is, those whose vault cash exceeds their required reserves) to satisfy current reserve requirements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A7 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks1 Millions of dollars, averages of daily figures 1995, week ending Monday SSoouurrccee aanndd mmaattuurriittyy Sept. 4 Sept. 11 Sept. 18 Sept. 25 Oct. 2 Oct. 9 Oct. 16 Oct. 23 Oct. 30 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 80,287 79,342 77,611 74,600 81,613 83,098 80,898 80,764 87,443 2 For all other maturities 1188,,008866 16,701 16,473 16,001 1166,,112200 15,150 14,701 15,224 15,906 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 24,256 23,443 22,768 26,575 22,771 20,172 23,263 21,530 18,531 4 For all other maturities 27,651 27,431 25,979 24,595 23,101 23,104 23,054 22,142 22,598 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 19,873 19,126 18,285 18,985 21,188 18,310 20,503 17,911 17,892 6 For all other maturities 34,723 33,827 35,204 33,489 29,906 33,907 34,083 36,211 36,216 All other customers 7 For one day or under continuing contract 42,318 41,470 40,377 39,681 40,403 38,988 40,657 40,997 42,351 8 For all other maturities 19,004 i 8,585 18,440 17,692 17,869 18,266 17,335 17,254 16,833 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 58,363 55,344 55,844 55,159 59,325 53,810 55,932 59,787 61,281 10 To all other specified customers2 29,034 29,813 32,721 28,334 26,019 29,275 28,075 28,031 27,924 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 banks Data in this table also appear in the Board's H.5 (507) weekly statistical release. For and official institutions, and U.S. 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 • January 1996 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit' Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 12 O /8 n /9 5 Effective date Previous rate 12 O /8 n /9 5 Effective date Previous rate 12 O /8 n /9 5 Effective date Previous rate Boston 5.25 2/1/95 4.75 5.75 12/7/95 5.75 6.25 12/7/95 6.25 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 5.75 12/7/95 5.75 6.25 12/7/95 6.25 Range of rates for adjustment credit in recent years4 Range (or F.R. Bank Range (or F.R. Bank Range (or level)—All of level)—All of level)—All F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks 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. 2 9 0 6 6 -6 .5 .5 6 6 . . 5 5 Dec. 4 12 12 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. 16 .... ... . 4.5-5 4.5 Sept. 19 10.5-11 11 4.5 4.5 21 11 11 1984—Apr. 9 8.5-9 Dec. 20 ... . 3.5-4.5 3.5 Oct. 8 11-12 12 13 9 24 .... 3.5 3.5 10 12 12 Nov. 21 8.5-9 26 8.5 1992—July 12 ....... . 3-3.5 3 1980—Feb. 15 12-13 13 Dec. 24 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 16 11 11 1986—Mar. 7 7-7.5 18 .... 4 4 July 28 10-11 10 10 7 Nov. 15 4-4.75 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 Dec. 8, 1995 5.25 5.25 14 14 1. Available on a short-term basis to help depository institutions meet temporary needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate established flexible rate somewhat above rates charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans of unusual size ordinarily is reestablished on the first business day of each two-week reserve maintenance that result from a major operating problem at the borrower's facility. period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs for points. funds that arise from a clear pattern of intrayearly movements in their deposits and loans and 4. For earlier data, see the following publications of the Board of Governors: Banking and that cannot be met through special industry lenders. The discount rate on seasonal credit takes Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, 1970into account rates charged by market sources of funds and ordinarily is reestablished on the 1979. first business day of each two-week reserve maintenance period; however, it is never less than In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment-credit the discount rate applicable to adjustment credit. borrowings by institutions with deposits of $500 million or more that had borrowed in 3. May be made available to depository institutions when similar assistance is not successive weeks or in more than four weeks in a calendar quarter. A 3 percent surcharge was reasonably available from other sources, including special industry lenders. Such credit may in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 percent was reimposed be provided when exceptional circumstances (including sustained deposit drains, impaired on Nov. 17, 1980; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and to access to money market funds, or sudden deterioration in loan repayment performance) or 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, practices involve only a particular institution, or to meet the needs of institutions experiencing and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the difficulties adjusting to changing market conditions over a longer period (particularly at times surcharge was changed from a calendar quarter to a moving thirteen-week period. The of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is surcharge was eliminated on Nov. 17, 1981. charged on extended-credit loans outstanding less than thirty days; however, at the discretion 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 deposit2 Net transaction accounts' 1 $0 million-$52.0 million. . 12/19/95 2 More than $52.0 million4 . 12/19/95 3 Nonpersonal time deposits5 12/27/90 4 Eurocurrency liabilities6. .. 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve Banks The Monetary Control Act of 1980 requires that the amount of transaction accounts against or vault cash. Nonmember institutions may maintain reserve balances with a Federal which the 3 percent reserve requirement applies be modified annually by 80 percent of the Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For percentage change in transaction accounts held by all depository institutions, determined as of previous reserve requirements, see earlier editions of the Annual Report or the Federal June 30 of each year. Effective Dec. 19, 1995 the amount was decreased from $54.0 million to Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions $52.0 million. include commercial banks, mutual savings banks, savings and loan associations, credit 4. The reserve requirement was reduced from 12 percent to 10 percent on unions, agencies and branches of foreign banks, and Edge Act corporations. Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that 2. Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the report quarterly. amount of reservable liabilities subject to a zero percent reserve requirement each year for the 5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits succeeding calendar year by 80 percent of the percentage increase in the total reservable with an original maturity of less than 1 '/z years was reduced from 3 percent to 1 V4 percent for liabilities of all depository institutions, measured on an annual basis as of June 30. No the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that corresponding adjustment is made in the event of a decrease. Effective Dec. 19, 1995, the began Dec. 27, 1990. The reserve requirement on nonpersonal time deposits with an original exemption was raised from $4.2 million to $4.3 million. The exemption applies only to maturity of 1 years or more has been zero since Oct. 6, 1983. accounts that would be subject to a 3 percent reserve requirement. For institutions that report quarterly, the reserve requirement on nonpersonal time deposits 3. Transaction accounts include all deposits against which the account holder is permitted with an original maturity of less than 1 years was reduced from 3 percent to zero on Jan. 17, to make withdrawals by negotiable or transferable instruments, payment orders of with- 1991. drawal, and telephone and preauthorized transfers for the purpose of making payments to 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to zero third persons or others. However, money market deposit accounts (MMDAs) and similar in the same manner and on the same dates as was the reserve requirement on nonpersonal accounts subject to the rules that permit no more than six preauthorized, automatic, or other time deposits with an original maturity of less than 11/2 years (see note 5). transfers per month, of which no more than three may be checks, are savings deposits, not transaction accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic NonfinancialS tatistics • January 1996 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1995 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 14,714 17,717 17,484 0 0 0 4,470 0 433 409 2 Gross sales 1,628 0 0 0 0 0 0 0 0 0 3 Exchanges 308,699 332,229 376,277 36,449 30,983 31,663 42,983 25,213 39,195 30,333 4 Redemptions 1,600 0 0 0 0 0 0 0 00 0 Others within one year 5 Gross purchases 1,096 1,223 1,238 0 0 0 0 0 0 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 36,662 31,368 0 4,802 2,993 7,174 2,177 2,063 8,717 0 8 Exchanges -30,543 -36,582 -21,444 -2,096 0 -7,374 -1,392 -562 -7,805 0 y Redemptions 0 0 0 0 370 0 0 300 00 0 One to five years 10 Gross purchases 13,118 10,350 9,168 0 2,549 0 0 0 0 100 li Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -34,478 -27,140 -6,004 -4,802 -477 -6,694 -2,177 -2,063 -7,873 0 13 Exchanges 25,811 0 17,801 1,050 0 5,374 1,392 562 44,,990055 0 Five to ten years 14 Gross purchases 2,818 4,168 3,818 0 839 0 0 0 0 0 li Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts -1,915 0 -3,145 0 -2,516 -1,248 0 0 -319 0 17 Exchanges 3,532 0 22,,990033 11,,004466 0 22,,000000 0 0 11,,880000 0 More than ten years 18 Gross purchases 2,333 3,457 3,606 0 1,138 0 0 0 0 100 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts -269 0 -918 0 0 -1,728 0 0 -525 0 21 Exchanges 1,200 0 775 0 0 0 0 0 11,,110000 0 All maturities 22 Gross purchases 34,079 36,915 35,314 0 4,526 0 4,470 0 433 609 23 Gross sales 1,628 0 0 0 0 0 0 0 0 0 24 Redemptions 1,600 767 2,337 0 370 0 0 300 0 0 Matched transactions 25 Gross purchases 1,480,140 1,475,941 1,700,836 168,800 148,306 155,027 170,083 166,674 179,130 195,830 2B Gross sales 1,482,467 1,475,085 1,701,309 170,724 147,616 153,534 171,959 163,490 185,270 198,587 Repurchase agreements 27 Gross purchases 378,374 475,447 309,276 22,070 36,314 35,158 40,989 8,527 4,130 43,286 28 Gross sales 386,257 470,723 311,898 16,477 39,157 34,377 28,196 24,851 1,075 39,896 29 Net change in U.S. Treasury securities 20,642 41,729 29,882 3,669 2,004 2,274 15,387 -13,141 -2,651 1,241 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 83 20 30 262 333 122 46 Repurchase agreements 33 Gross purchases 14,565 35,063 52,696 4,926 4,415 6,155 1,941 711 1,610 1,434 34 Gross sales 14,486 34,669 52,696 3,821 5,020 5,955 2,180 1,172 1,510 1,459 35 Net change in federal agency obligations -554 -380 -1,002 1,022 -625 170 -501 -794 -22 -71 36 Total net change in System Open Market Account... 20,089 41,348 28,880 4,691 1,379 2,444 14,886 -13,935 -2,673 1,170 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 A11 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1995 1995 Sept. 27 Oct. 4 Oct. 11 Oct. 18 Oct. 25 Aug. 31 Sept. 30 Oct. 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,051 11,051 11,051 11,051 11,051 11,053 11,051 11,051 2 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,518 10,168 10,168 3 405 421 429 451 459 369 435 460 Loans 4 To depository institutions 340 237 1,059 222 296 269 421 124 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 2,895 2,895 2,895 2,895 2,812 2,941 22,,889955 22,,881122 8 Held under repurchase agreements 150 0 0 400 975 100 75 210 9 Total U.S. Treasury securities 376,139 374,344 377,260 375,092 377,953 372,873 374,114 373,517 10 Bought outright2 369,652 371,264 372,427 370,980 370,173 369,818 367,669 371,227 11 Bills 179,076 180,688 181,851 180,889 180,082 179,441 177,093 181,136 1? Notes 147,904 147,904 147,904 147,418 147,418 147,804 147,904 147,418 N Bonds 42,673 42,673 42,673 42,673 42,673 42,573 42,673 42,673 14 Held under repurchase agreements 6,487 3,080 4,833 4,112 7,780 3,055 6,445 2,290 15 Total loans and securities 379,524 377,476 381,214 378,608 382,036 376,183 377,505 376,663 16 Items in process of collection 5,594 6,236 9,782 5,468 5,069 3,929 3,978 8,015 17 Bank premises 1,112 1,114 1,117 1,118 1,140 1,107 1,114 1,139 Other assets 18 Denominated in foreign currencies3 21,405 21,659 21,317 21,329 21,340 21,473 21,653 21,376 19 All other4 9,599 9,476 9,888 9,900 10,525 8,948 9,814 9,876 20 Total assets 438,858 437,600 444,966 438,094 441,787 433,580 435,717 438,748 LIABILITIES 21 Federal Reserve notes 387,204 388,763 390,718 389,458 388,378 387,987 386,263 388,715 22 Total deposits 34,323 30,610 33,475 30,894 35,812 30,316 32,585 29,911 23 Depository institutions 27,269 24,308 27,873 24,672 29,881 25,086 23,432 22,284 24 U.S. Treasury—General account 6,553 5,779 5,092 5,710 5,336 4,767 8,620 7,018 25 Foreign—Official accounts 170 170 164 162 269 166 201 275 26 Other 331 353 346 349 326 298 332 375 ?7 Deferred credit items 4,668 5,431 8,128 5,180 4,874 3,839 3,781 7,049 28 Other liabilities and accrued dividends5 4,623 4,423 4,382 4,270 4,425 4,697 4,617 4,432 29 Total liabilities 430,818 429,227 436,702 429,802 433,489 426,839 427,247 430,107 CAPITAL ACCOUNTS 30 Capital paid in 3,918 3,917 3,922 3,923 3,924 3,910 3,915 3,923 31 Surplus 3,617 3,674 3,683 3,683 3,683 2,832 3,624 3,683 32 Other capital accounts 505 782 658 686 691 0 931 1,034 33 Total liabilities and capital accounts 438,858 437,600 444,966 438,094 441,787 433,580 435,717 438,748 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 479,346 484,600 485,542 481,636 482,862 479,521 484,601 488,911 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 472,233 473,758 475,149 477,968 480,298 470,405 472,874 482,369 36 LESS: Held by Federal Reserve Banks 85,029 84,995 84,431 88,510 91,920 82,418 86,611 93,654 37 Federal Reserve notes, net 387,204 388,763 390,718 389,458 388,378 387,987 386,263 388,715 Collateral held against notes, net 38 Gold certificate account 11,051 11,051 11,051 11,051 11,051 11,053 11,051 11,051 39 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,518 10,168 10,168 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 365,985 367,544 369,499 368,239 367,159 366,417 365,044 367,496 42 Total collateral 387,204 388,763 390,718 389,458 388,378 387,987 386,263 388,715 1. Some of the data in this table also appear in the Board's H.4.1 (503) weekly statistical 3. Valued monthly at market exchange rates. release. For ordering address, see inside front cover. 4. Includes special investment account at the Federal Reserve Bank of Chicago in Treasury 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities pledged with bills maturing within ninety days. Federal Reserve Banks—and excludes securities sold and scheduled to be bought back under 5. Includes exchange-translation account reflecting the monthly revaluation at market 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 Nonfinancial Statistics • January 1996 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 1995 1995 Sept. 27 Oct. 4 Oct. 11 Oct. 18 Oct. 25 Aug. 31 Sept. 30 Oct. 31 1 Total loans 340 237 1,059 222 296 299 421 124 2 Within fifteen days' 306 50 877 197 270 262 273 48 3 Sixteen days to ninety days 35 187 182 24 26 37 149 76 4 Total US. Treasury securities 376,139 374,344 377,260 375,092 377,953 369,818 367,669 371,227 5 Within fifteen days' 15,187 17,507 20,071 19,232 18,124 2,215 2,645 11,078 6 Sixteen days to ninety days 88,437 85,383 86,243 90,792 90,561 86,645 92,851 88,044 7 Ninety-one days to one year 121,022 120,565 120,056 114,553 118,753 129,665 120,681 121,873 8 One year to five years 85,870 85,268 85,268 84,893 84,893 85,770 85,870 84,610 9 Five years to ten years 29,992 29,992 29,992 29,992 29,992 29,992 29,992 29,992 10 More than ten years 35,630 35,630 35,630 35,630 35,630 35,530 35,630 35,630 11 Total federal agency obligations 3,045 2,895 2,894 3,295 3,787 2,941 2,895 2,812 12 Within fifteen days' 335 0 83 607 1,099 265 185 224 13 Sixteen days to ninety days 747 987 904 780 780 658 747 680 14 Ninety-one days to one year 431 376 476 476 538 479 431 538 15 One year to five years 1,081 1,081 981 981 918 1,098 1,081 918 16 Five years to ten years 427 427 427 427 427 417 427 427 17 More than ten years 25 25 25 25 25 25 25 25 1. Holdings under repurchase agreements are classified as maturing within fifteen days in NOTE. Total acceptances data have been deleted from this table because data are no longer accordance with maximum maturity of the agreements. available. 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 1995 IItteemm DD 1199 ee 99 cc 11 .. DD 1199 ee 99 cc 22 .. DD 1199 ee 99 cc 33 .. DD 1199 ee 99 cc 44 .. Mar. Apr. May June July Aug. Sept. Oct. Seasonally adjusted AAAADDDDJJJJUUUUSSSSTTTTEEEEDDDD FFFFOOOORRRR CCCCHHHHAAAANNNNGGGGEEEESSSS IIIINNNN RRRREEEESSSSEEEERRRRVVVVEEEE RRRREEEEQQQQUUUUIIIIRRRREEEEMMMMEEEENNNNTTTTSSSS2222 1111 TTTToooottttaaaallll rrrreeeesssseeeerrrrvvvveeeessss3333 45.54 54.35 60.50 59.34 58.55 57.96 57.76 57.35 57.66 57.52 57.37 56.82 2222 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss4444 45.34 54.23 60.42 59.13 58.48 57.85 57.61 57.08 57.28 57.23 57.09 56.58 3333 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss pppplllluuuussss eeeexxxxtttteeeennnnddddeeeedddd ccccrrrreeeeddddiiiitttt5555 45.34 54.23 60.42 59.13 58.48 57.85 57.61 57.08 57.28 57.23 57.09 56.58 4444 RRRReeeeqqqquuuuiiiirrrreeeedddd rrrreeeesssseeeerrrrvvvveeeessss 44.56 53.20 59.44 58.17 57.76 57.20 56.88 56.39 56.57 56.53 56.42 55.74 5555 MMMMoooonnnneeeettttaaaarrrryyyy bbbbaaaasssseeee6666 317.43 351.12 386.60 418.22 425.35 428.13 430.69 429.76 429.66 430.86 43I.25r 432.43 Not seasonally adjusted 6666 TTTToooottttaaaallll rrrreeeesssseeeerrrrvvvveeeessss7777 46.98 56.06 62.37 61.13 57.62 58.93 56.82 57.13 57.49 56.93 57.29 56.54 7777 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss 46.78 55.93 62.29 60.92 57.55 58.82 56.68 56.85 57.12 56.65 57.01 56.30 8888 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss pppplllluuuussss eeeexxxxtttteeeennnnddddeeeedddd ccccrrrreeeeddddiiiitttt5555 46.78 55.93 62.29 60.92 57.55 58.82 56.68 56.85 57.12 56.65 57.01 56.30 9999 RRRReeeeqqqquuuuiiiirrrreeeedddd rrrreeeesssseeeerrrrvvvveeeessss8888 46.00 54.90 61.31 59.96 56.83 58.18 55.95 56.16 56.40 55.95 56.34 55.46 11110000 MMMMoooonnnneeeettttaaaarrrryyyy bbbbaaaasssseeee9999 321.07 354.55 390.59 422.51 423.27 428.74 429.29 430.26 431.30 431.08 431.62' 431.57 NNNNOOOOTTTT AAAADDDDJJJJUUUUSSSSTTTTEEEEDDDD FFFFOOOORRRR CCCCHHHHAAAANNNNGGGGEEEESSSS IIIINNNN RRRREEEESSSSEEEERRRRVVVVEEEE RRRREEEEQQQQUUUUIIIIRRRREEEEMMMMEEEENNNNTTTTSSSS11110000 11111111 TTTToooottttaaaallll rrrreeeesssseeeerrrrvvvveeeessss"""" 55.53 56.54 62.86 61.34 57.58 58.87 56.76 57.04 57.39 56.82 57.16 56.40 11112222 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss 55.34 56.42 62.78 61.13 57.51 58.76 56.61 56.77 57.02 56.54 56.88 56.15 11113333 NNNNoooonnnnbbbboooorrrrrrrroooowwwweeeedddd rrrreeeesssseeeerrrrvvvveeeessss pppplllluuuussss eeeexxxxtttteeeennnnddddeeeedddd ccccrrrreeeeddddiiiitttt5555 55.34 56.42 62.78 61.13 57.51 58.76 56.61 56.77 57.02 56.54 56.88 56.15 11114444 RRRReeeeqqqquuuuiiiirrrreeeedddd rrrreeeesssseeeerrrrvvvveeeessss 54.55 55.39 61.80 60.17 56.79 58.12 55.88 56.08 56.30 55.83 56.21 55.32 11115555 MMMMoooonnnneeeettttaaaarrrryyyy bbbbaaaasssseeee11112222 333.61 360.90 397.62 427.25 427.56 432.79 433.47 434.57 435.56 435.59 436.20' 436.33 11116666 EEEExxxxcccceeeessssssss rrrreeeesssseeeerrrrvvvveeeessss11113333 .98 1.16 1.06 1.17 .79 .75 .88 .96 1.09 .99 .95 1.08 11117777 BBBBoooorrrrrrrroooowwwwiiiinnnnggggssss ffffrrrroooommmm tttthhhheeee FFFFeeeeddddeeeerrrraaaallll RRRReeeesssseeeerrrrvvvveeee .19 .12 .08 .21 .07 .11 .15 .27 .37 .28 .28 .25 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly 8. To adjust required reserves for discontinuities that are due to regulatory changes in statistical release. Historical data starting in 1959 and estimates of the effect on required reserve requirements, a multiplicative procedure is used to estimate what required reserves 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. Break- Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve adjusted required reserves include required reserves against transactions deposits and nonper- System, Washington, DC 20551. sonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), plus changes in reserve requirements. (See also table 1.10.) (2) the (unadjusted) currency component of the money stock, plus (3) (for all quarterly 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- reporters on the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all adjusted required reserves (line 4) plus excess reserves (line 16). those weekly reporters whose vault cash exceeds their required reserves) the break-adjusted 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, difference between current vault cash and the amount applied to satisfy current reserve break-adjusted total reserves (line 1) less total borrowings of depository institutions from the requirements. Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with no 5. Extended credit consists of borrowing at the discount window under the terms and adjustments to eliminate the effects of discontinuities associated with regulatory changes in conditions established for the extended credit program to help depository institutions deal reserve requirements. with sustained liquidity pressures. Because there is not the same need to repay such 11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve borrowing promptly as with traditional short-term adjustment credit, the money market effect requirements. of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) total 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally reserves (line 11), plus (2) required clearing balances and adjustments to compensate for float adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency at Federal Reserve Banks, plus (3) the currency component of the money stock, plus (4) (for component of the money stock, plus (3) (for all quarterly reporters on the "Report of all quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Cash" and for all those weekly reporters whose vault cash exceeds their required reserves) the whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference between current vault cash and the amount applied to satisfy current reserve difference between current vault cash and the amount applied to satisfy current reserve requirements. Since the introduction of contemporaneous reserve requirements in February requirements. 1984, currency and vault cash figures have been measured over the computation periods 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus excess ending on Mondays. 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 • January 1996 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES1 Billions of dollars, averages of daily figures 1995 Jit em 1991 1992 1993 1994 Dec. Dec. Dec. Dec. July Aug.r Sept.r Oct. Seasonally adjusted Measures2 1 Ml 897.3 1,024.4 1,128.6 1,148.0 1,144.9' 1,143.4 1,139.7 1,129.8 2 M2 3,457.9 3,515.3 3,583.6 3,616.9r 3,717.8r 3,743.5 3,757.3 3,755.1 3 M3 4,176.0 4,182.9 4,242.3 4,304. r 4,490.6r 4,519.6 4,535.7 4,548.2 4 L 4,989.8 5,059.3 5,145.7r 5,269.9r 5,524.2 5,560.5 5,601.9 n.a. 5 Debt 11,179.9 11,719.6 12,341.5 12,961.0r 13,415.0r 13,456.9 13,492.0 n.a. Ml components 6 Currency3 267.4 292.8 322.1 354.5 367.1r 368.3 369.1 370.5 7 Travelers checks4 7.7 8.1 7.9 8.4 8.9 8.9 8.8 8.7 8 Demand deposits5 289.5 338.9 383.9 382.2 389.5 390.0 389.7 387.2 9 Other checkable deposits6 332.7 384.6 414.7 402.9 379.4r 376.2 372.0 363.4 Nontransaction components 10 In M27 2,560.6 2,490.9 2,455.0 2,468.9r 2,572.8r 2,600.2 2,617.6 2,625.3 11 In M3 only8 718.1 667.6 658.7 687. r 772.9r 776.1 778.4 793.1 Commercial banks 12 Savings deposits, including MMDAs 665.6 754.7 785.8 752.3 730.7 739.5 746.7 753.7 13 Small time deposits9 602.5 508.1 468.6 502.6 567. lr 569.7 570.6 571.3 14 Large time deposits10, 11 333.3 286.7 271.2 296.6 323.7 325.2 328.0 339.6 Thrift institutions 15 Savings deposits, including MMDAs 375.6 428.9 429.8 391.9 360.7 358.6 358.5 358.5 16 Small time deposits9 464.1 361.1 316.5 318.3 357.4r 358.0 358.7 359.5 17 Large time deposits10 83.3 67.1 61.6 64.9 72.6 73.2 73.7 74.8 Money market mutual funds 18 General purpose and broker-dealer 374.2 356.9 360.1 389.0 442.0 455.9 462.6 466.4 19 Institution-only 180.0 200.2 198.1 180.8 212.4 210.8 213.5 215.8 Debt components 20 Federal debt 2,763.6 3,068.3 3,328.0 3,497.4 3,614.4 3,620.0 3,622.1 21 Nonfederal debt 8,416.3 8,651.2 9,013.5r 9,463.7r 9,800.6r 9,836.9 9,869.9 n.a. Not seasonally adjusted Measures2 22 Ml 916.0 1,046.0 1,153.7 1,173.7 l,143.9r 1,137.0 1,135.7 1,129.4 23 M2 3,472.7 3,533.6 3,606.1 3,640.5r 3,717.2' 3,736.6 3,747.1 3,752.2 24 M3 4,189.4 4,201.4 4,266.1 4,330.2r 4,483.9r 4,513.4 4,523.2 4,543.6 25 L 5,014.2 5,088.9 5,180.2r 5,307.5r 5,510.7 5,549.6 5,580.6 n.a. 26 Debt 11,176.9 11,720.2 12,333.6r 12,953.lr 13,360.1r 13,395.1 13,445.9 n.a. Ml components 27 Currency3 269.9 295.0 324.8 357.6 369.0 369.0 369.2 369.9 28 Travelers checks4 7.4 7.8 7.6 8.1 9.5 9.5 9.3 8.9 29 Demand deposits5 302.4 354.4 401.8 400.3 388.7 386.5 388.1 390.7 30 Other checkable deposits6 336.3 388.9 419.4 407.6 376.8 372.0 369.1 359.8 Nontransaction components 31 In M27 2,556.6 2,487.7 2,452.5 2,466.8r 2,573.3r 2,599.6 2,611.4 2,622.8 32 In M3 only8 716.7 667.7 660.0 689.7 766.7r 776.8 776.0 791.4 Commercial banks 33 Savings deposits, including MMDAs 664.0 752.9 784.3 751.1 732.6 740.8 746.8 753.9 34 Small time deposits9 601.9 507.8 468.2 502.2 567.8r 570.3 571.1 571.9 35 Large time deposits10, " 332.6 286.2 270.8 296.3 322.3 326.6 329.2 340.5 Thrift institutions 36 Savings deposits, including MMDAs 374.8 427.9 429.0 391.2 361.6 359.3 358.6 358.6 37 Small time deposits9 463.7 360.9 316.2 318.1 357.9 358.3 359.0 359.9 38 Large time deposits10 83.1 67.0 61.5 64.8 72.3 73.6 74.0 75.0 Money market mutual funds 39 General purpose and broker-dealer 372.2 355.1 358.3 387.1 438.9 452.6 454.9 459.1 40 Institution-only 180.8 201.7 200.0 183.1 206.6 209.3 209.0 212.9 Repurchase agreements and Eurodollars 41 Overnight and continuing 79.9 83.2 96.5 117.2r 114.4r 118.2 120.9 119.4 42 Term 132.7 127.8 143.9 157.9 178.5r 180.4 177.1 176.0 Debt components 43 Federal debt 2,765.0 3,069.8 3,329.5 3,499.0 3,588.8 3,602.2 3,606.8 n.a. 44 Nonfederal debt 8,411.9 8,650.4 9,004.2 9,454. lr 9,771.3r 9,792.9 9,839.1 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) weekly these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term statistical release. Historical data starting in 1959 are available from the Money and Reserves Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve separately, and then adding this result to M3. System, Washington, DC 20551. Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinanciai 2. Composition of the money stock measures and debt is as follows: sectors—the federal sector (U.S. government, not including government-sponsored enter- Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of prises or federally related mortgage pools) and the nonfederal sectors (state and local depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all governments, households and nonprofit organizations, nonfinanciai corporate and nonfarm commercial banks other than those owed to depository institutions, the U.S. government, and noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and foreign banks and official institutions, less cash items in the process of collection and Federal corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of which are derived from the Federal Reserve Board's flow of funds accounts, are breakwithdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, adjusted (that is, discontinuities in the data have been smoothed into the series) and credit union share draft accounts, and demand deposits at thrift institutions. Seasonally month-averaged (that is, the data have been derived by averaging adjacent month-end levels). adjusted Ml is computed by summing currency, travelers checks, demand deposits, and 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of depository OCDs, each seasonally adjusted separately. institutions. M2: Ml plus (1) overnight (and continuing contract) repurchase agreements (RPs) issued 4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issuers. by all depository institutions and overnight Eurodollars issued to U.S. residents by foreign Travelers checks issued by depository institutions are included in demand deposits. branches of U.S. banks worldwide, (2) savings (including MMDAs) and small time deposits 5. Demand deposits at commercial banks and foreign-related institutions other than those (time deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in owed to depository institutions, the US. government, and foreign banks and official instituboth taxable and tax-exempt general purpose and broker-dealer money market funds. Ex- tions, less cash items in the process of collection and Federal Reserve float. cludes individual retirement accounts (IRAs) and Keogh balances at depository institutions 6. Consists of NOW and ATS account balances at all depository institutions, credit union and money market funds. Also excludes all balances held by U.S. commercial banks, money share draft account balances, and demand deposits at thrift institutions. market funds (general purpose and broker-dealer), foreign governments and commercial 7. Sum of (1) overnight RPs and overnight Eurodollars, (2) money market fund balances banks, and the U.S. government. Seasonally adjusted M2 is computed by adjusting its non-Mi (general purpose and broker-dealer), (3) savings deposits (including MMDAs), and (4) small component as a whole and then adding this result to seasonally adjusted Ml. 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 Kingdom that represents the estimated amount of overnight RPs and Eurodollars held by institutionand Canada, and (3) balances in both taxable and tax-exempt, institution-only money market only money market funds. funds. Excludes amounts held by depository institutions, the U.S. government, money market 9. Small time deposits—including retail RPs—are those issued in amounts of less than funds, and foreign banks and official institutions. Also excluded is the estimated amount of $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are overnight RPs and Eurodollars held by institution-only money market funds. Seasonally subtracted from small time deposits. adjusted M3 is computed by adjusting its non-M2 component as a whole and then adding this 10. Large time deposits are those issued in amounts of $100,000 or more, excluding those result to seasonally adjusted M2. 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 holdings of 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

A16 Domestic Nonfinancial Statistics • January 1996 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1995 Item 1993 1994 Dec/ Dec. Feb. Mar. Apr. May June July Aug. Sept.r Oct. Interest rates (annual effective yields)' INSURED COMMERCIAL BANKS 2 1 S N a e v g i o n t g i s a b d l e e p o o r s d it e s r 3 of withdrawal accounts 2 1 . . 4 8 6 6 2 1 . . 9 9 1 6 3 2. . 0 0 1 9 3 2 . . 1 0 4 0 3 1 . . 1 9 7 5 3 1 . . 2 9 0 6 3 1 . . 1 9 9 4 3 1 . . 1 9 5 1 3 1 . . 1 9 2 3 3 1 . . 1 9 4 4 3 1 . . 1 9 1 3 Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.65 3.81 4.19 4.24 4.28 4.25 4.19 4.17 4.10 4.10 4.11 4 92 to 182 days 2.91 4.44 4.83 4.97 4.94 4.93 4.81 4.77 4.77 4.75 4.75 5 6 M 18 o 3 r e d a t y h s a n t o 1 1 y e y a e r a r t o 2[/l years 3 3 . . 1 5 3 5 5 5 . . 1 7 2 4 5 6. . 1 5 2 7 5 6. . 1 6 2 0 5 6. . 0 6 5 0 5 5. . 8 4 3 9 5 5. . 5 2 3 7 5 5 . . 1 3 8 8 5 5 . . 1 3 5 9 5 5 . . 1 3 4 2 5 5. . 3 1 1 5 7 More than 2 vi years 4.28R 6.30 6.52 6.45 6.37 6.11 5.79 5.62 5.63 5.60 5.56 BIF-INSURED SAVINGS BANKS4 9 8 N Sa e v g i o n t g ia s b d le e p o o r s d i e ts r 3 of withdrawal accounts 2 1 . . 6 8 3 7 2 1 . . 8 9 8 5 2 2 . . 9 0 5 4 2 1 . . 9 9 4 9 2 1 . . 9 9 3 9 2 2 . . 9 0 5 0 2 1 . . 9 9 7 8 2 1 . . 9 9 7 6 2 1 . . 9 9 5 8 2 1 . . 9 9 6 8 2 1 . . 9 9 7 7 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 2.8 LR 3.80 4.17 4.21 4.18 4.24 4.24 4.28 4.34 4.29 4.34 11 92 to 182 days 3.02 4.89 5.33 5.37 5.38 5.31 5.22 5.16 5.12 5.08 5.07 1 1 2 3 M 18 o 3 r e d a th ys a n t o 1 1 y e y a e r a r t o 2 x/l years 3 3. . 6 31 7 R 5 6 . . 5 0 2 9 5 6. . 3 9 7 4 5 6. . 3 9 2 4 5 6. . 2 8 5 7 5 6. . 0 8 8 3 5 5 . . 6 7 1 8 5 5. . 6 4 2 7 5 5 . . 4 6 5 0 5 5. . 5 3 1 5 5 5. . 5 3 1 2 14 More than 2V5 years 4.62 6.43 6.75 6.68 6.59 6.32 5.98 5.82 5.78 5.74 5.70 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 305,237r 303,724 290,188 292,811 286,987 274,281 274,573 271,777 266,715 253,174 258,097 16 Savings deposits3 767,035r 734,519 714,955 713,440 698,963 714,989 718,393 723,302 733,011 744,839 746,419 17 Personal 598,276r 578,459 564,877 564,086 550,674 560,563 563,795 567,624 572,916 584,239 586,044 18 Nonpersonal 168,759r 156,060 150,078 149,354 148,289 154,426 154,599 155,678 160,096 160,600 160,375 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 29,362' 32,375 31,777 31,623 31,530 31,472 32,140 32,950 3300,,772222 29,804 29,809 20 92 to 182 days 109,050' 95,901 98,248 95,583 94,368 93,188 91,999 91,347 8899,,889966 92,220 93,792 21 183 days to 1 year 145,386' 161,831 169,103 176,657 179,625 184,560 187,185 186,716 187,141 189,338 187,697 22 More than 1 year to 2 l/l years 139,781' 162,486 176,877 183,275 189,652 194,963 198,541 201,761 203,466 203,548 205,400 23 More than 2 w years 180,461' 190,897 191,383 194,722 194,426 192,542 195,024 194,500 199,944 200,182 199,101 24 IRA and Keogh plan deposits 144,011' 143,428 145,040 145,959 146,679 146,842 148,894 148,878 149,320 149,570 150,328 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts 11,191' 11,317 10,950 11,218 11,005 11,019 11,354 11,262 11,104 11,408 11,329 26 Savings deposits3 80,376' 70,642 69,982 68,595 67,453 67,322 67,185 66,706 66,776 69,752 69,755 27 Personal 77,263' 67,673 67,144 65,692 64,204 64,484 63,966 63,524 63,483 66,403 66,316 28 Nonpersonal 3,113' 2,969 2,837 2,902 3,248 2,838 3,219 3,182 3,293 3,349 3,439 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 2,746' 2,166 2,086 1,943 1,780 1,885 1,567 1,784 1,873 1,739 1,779 30 92 to 182 days 12,974' 11,793 11,953 11,707 11,245 11,449 11,025 11,131 11,183 11,258 11,298 31 183 days to 1 year 17,469' 18,753 19,979 20,277 21,051 20,956 21,702 22,157 22,488 24,837 25,184 32 More than 1 year to 2x/l years 16,589' 17,842 21,870 22,648 23,445 24,014 24,658 25,141 25,296 27,825 27,937 33 More than 2 V2 years 20,501' 21,600 22,275 22,446 22,671 22,819 22,935 22,930 22,780 23,351 23,600 34 IRA and Keogh plan accounts 19,791' 19,325 20,099 20,221 20,388 20,236 20,499 20,568 20,531 21,913 21,892 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 day 4. Includes both mutual and federal savings banks. 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 1995 Mar. Apr.r Mayr Juner Julyr Aug. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 313,128.1 334,784.1 369,029.1 393,325.4r 367,823.2 423,264.5 413,088.5 391,048.2 407,358.0 2 Major New York City banks 165,447.7 171,224.3 191,168.8 197,666.4 185,842.3 217,587.7 203,342.1 197,712.2 206,835.9 3 Other banks 147,680.4 163,559.7 177,860.3 195,659.0r 181,981.0 205,676.7 209,746.3 193,336.1 200,522.1 4 Other checkable deposits4 3,780.3 3,481.5 3,798.6 4,044.4 3,707.7 4,236.4 4,005.4 3,591.0 4,236.1 5 Savings deposits (including MMDAs)5 3,309.1 3,497.4 3,766.3 3,889.3 3,565.4 4,022.4 4,413.5 4,018.1 4,778.2 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 825.9 785.9 817.4 880.4 817.2 943.3 905.5 849.2 887.8 7 Major New York City banks 4,795.3 4,198.1 4,481.5 4,754.1 4,553.3 5,170.7 4,780.2 4,625.9 4,970.9 8 Other banks 428.7 424.6 435.1 482.9 444.6 505.8 507.1 462.8 480.6 9 Other checkable deposits4 14.4 11.9 12.6 13.9 12.7 15.0 14.4 12.9 15.5 10 Savings deposits (including MMDAs)5 4.7 4.6 4.9 5.4 5.0 5.6 6.1 5.5 6.5 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 313,344.9 334,899.2 369,121.8 412,197.lr 362,784.7 412,762.0 425,601.0 390,221.1 421,842.7 12 Major New York City banks 165,595.0 171,283.5 191,226.0r 209,255.5 180,169.1 207,259.8 209,349.5 196,873.1 213,958.6 13 Other banks 147,749.9 163,615.7 177,895.7 202,941.6r 182,615.6 205,502.2 216,251.5 193,348.0 207,884.1 14 Other checkable deposits4 3,783.6 3,481.7 3,795.6 4,083.4r 3,918.1 4,070.1 4,120.8 3,522.7 4,203.2 15 Savings deposits (including MMDAs)5 3,310.0 3,498.3 3,764.4 3,989.3 3,726.8 3,982.3 4,521.4 4,086.1 4,782.9 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 826.1 786.1 818.2 946.3 805.8 936.5 945.2 848.0 936.6 17 Major New York City banks 4,803.5 4,197.9 4,490.3 5,145.1 4,459.5 5,095.1 5,037.0 4,658.7 5,343.0 18 Other banks 428.8 424.8 435.3 513.9 445.6 513.6 529.1 462.7 506.6 19 Other checkable deposits4 14.4 11.9 12.6 14.0 13.2 14.5 15.0 12.9 15.6 20 Savings deposits (including MMDAs)5 4.7 4.6 4.9 5.6 5.2 5.6 6.2 5.6 6.5 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 automatic Publications Section, Division of Support Services, Board of Governors of the Federal transfer to demand deposits (ATSs) and negotiable order of withdrawal (NOW) accounts, Reserve System, Washington, DC 20551. were expanded to include telephone and preauthorized transfer accounts. This change Data in this table also appear in the Board's G.6 (406) monthly statistical release. For 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 • January 1996 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS' Billions of dollars Monthly averages Wednesday figures Account 1994 1995r 1995 Oct/ Apr. May June July Aug. Sept. Oct. Oct. 4 Oct. 11 Oct. 18 Oct. 25 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,295.4 3,456.1 3,483.4 3,499.0 3,516.2 3,531.3 3,552.2 3,555.0 3,547.8 3,552.0 3,550.5 3,561.8 2 Securities in bank credit 964.4 980.8 976.7 973.4 964.4 971.5 977.1 975.8 978.4 975.1 972.9 981.0 3 U.S. government securities 740.4 710.8 713.7 711.5 705.9 710.3 707.7 712.5 711.7 712.8 709.9 714.6 4 Other securities 224.0 270.0 263.0 261.9 258.5 261.2 269.4 263.2 266.7 262.4 263.0 266.4 5 Loans and leases in bank credit2 .. . 2,331.0 2,475.3 2,506.7 2,525.6 2,551.8 2,559.8 2,575.2 2,579.2 2,569.5 2,576.9 2,577.6 2,580.8 6 Commercial and industrial 632.8 681.1 689.1 691.9 697.4 698.7 702.6 703.5 701.0 701.9 701.8 704.3 7 Real estate 986.1 1,037.0 1,042.6 1,051.6 1,062.6 1,067.8 1,071.7 1,074.3 1,072.4 1,075.1 1,073.9 1,074.6 8 Revolving home equity 74.4 76.5 77.2 77.6 78.0 78.4 78.7 78.7 78.5 78.7 78.6 78.8 9 Other 911.6 960.4 965.5 974.0 984.6 989.4 993.0 995.6 993.9 996.4 995.3 995.9 10 Consumer 441.2 471.2 473.0 478.1 481.1 486.3 489.2 489.1 488.0 489.3 489.2 489.2 11 Security3 74.5 78.5 90.1 89.9 89.3 84.6 87.1 84.7 82.1 83.5 85.7 84.1 12 Other 196.5 207.6 211.9 214.0 221.4 222.3 224.6 227.6 225.9 227.1 226.9 228.7 13 Interbank loans4 164.0 180.2 185.0 187.1 194.7 191.7 195.5 199.5 190.5 199.1 194.2 209.6 14 Cash assets5 208.9 208.7 210.8 211.3 214.2 208.9 212.4 220.5 217.8 228.6 199.9 224.7 15 Other assets6 220.2 226.2 225.2 225.4 225.8 225.6 230.0 229.0 232.7 227.6 228.1 227.2 16 Total assets7 3,831.8 4,0143 4,047.5 4,065.9 4,093.9 4,100.8 4,133.4 4,147.4 4,132.2 4,150.7 4,115.9 4,166.7 Liabilities 17 Deposits 2,526.3 2,554.7 2,567.3 2,584.5 2,608.5 2,614.6 2,628.1 2,642.8 2,635.3 2,648.1 2,618.9 2,653.5 18 Transaction 804.6 788.6 785.3 781.2 793.4 784.9 782.4 780.0 777.3 790.2 758.5 787.8 19 Nontransaction 1,721.7 1,766.1 1,782.0 1,803.3 1,815.1 1,829.8 1,845.7 1,862.8 1,858.0 1,857.9 1,860.4 1,865.7 20 Large time 354.9 388.6 392.9 395.9 400.8 407.3 414.0 423.3 420.5 419.0 424.7 424.0 21 Other 1,366.8 1,377.5 1,389.2 1,407.4 1,414.3 1,422.5 1,431.7 1,439.6 1,437.5 1,438.9 1,435.7 1,441.7 22 Borrowings 584.0 682.3 688.6 676.1 691.2 671.6 676.0 674.1 677.5 672.6 667.1 682.4 23 From banks in the U.S 165.1 186.1 187.6 187.6 201.5 197.0 200.7 205.6 192.5 204.7 201.3 219.4 24 From nonbanks in the U.S 418.9 496.2 500.9 488.5 489.7 474.6 475.3 468.5 484.9 467.9 465.8 463.0 25 Net due to related foreign offices 214.9 234.8 239.8 244.8 236.4 248.0 253.9 259.2 249.3 248.7 257.0 269.4 26 Other liabilities8 178.8 218.2 213.9 212.7 203.9 206.5 215.6 211.8 208.7 214.7 213.9 210.0 27 Total liabilities 3,504.0 3,689.9 3,709.7 3,718.1 3,740.0 3,740.8 3,773.7 3,788.0 3,770.7 3,784.0 3,756.8 3,815.2 28 Residual (assets less liabilities)9 327.8 324.4 337.9 347.8 353.8 360.0 359.7 359.4 361.4 366.7 359.1 351.4 Not seasonally adjusted Assets 29 Bank credit 3,295.5 3,457.5 3,475.1 3,495.5 3,503.1 3,521.4 3,547.3 3,553.4 3,543.1 3,546.4 3,552.3 3,551.4 30 Securities in bank credit 963.2 987.4 978.0 974.2 959.9 969.0 972.6 973.5 973.7 972.0 971.8 975.5 31 U.S. government securities 739.8 715.1 712.8 711.2 702.1 711.0 709.4 711.2 710.9 710.1 709.7 712.3 32 Other securities 223.3 272.3 265.2 263.0 257.9 258.0 263.2 262.3 262.8 261.9 262.1 263.2 33 Loans and leases in bank credit2 . .. 2,332.4 2,470.1 2.497.1 2,521.3 2,543.1 2,552.4 2,574.6 2,579.9 2,569.4 2,574.4 2,580.5 2,575.9 34 Commercial and industrial 630.6 685.6 692.2 693.9 696.7 695.3 698.8 701.0 700.0 698.5 699.4 700.2 35 Real estate 988.7 1,032.8 1,041.0 1,051.4 1,061.9 1,067.1 1,073.0 1,077.0 1,074.8 1,078.1 1,076.9 1,076.4 36 Revolving home equity 75.1 76.0 77.0 77.7 78.0 78.5 79.1 79.4 79.2 79.3 79.3 79.4 37 Other 913.6 956.8 963.9 973.7 983.9 988.6 993.9 997.6 995.7 998.8 997.6 997.0 38 Consumer 441.2 468.0 471.5 475.5 478.8 485.8 490.3 489.1 488.4 488.4 489.3 489.4 39 Security3 74.1 79.3 83.9 85.9 83.9 81.5 85.4 84.1 77.3 81.3 86.4 83.1 40 Other 197.7 204.5 208.6 214.6 221.8 222.6 227.1 228.7 229.0 228.1 228.5 226.8 41 Interbank loans4 162.2 179.8 179.4 184.1 190.6 187.0 191.9 197.9 190.3 199.4 193.3 200.8 42 Cash assets5 209.3 205.0 208.3 209.5 211.1 201.3 213.9 220.9 213.8 239.3 205.2 208.5 43 Other assets6 222.0 222.4 224.4 224.0 225.4 227.4 230.5 230.8 234.8 231.0 228.1 225.6 44 Total assets7 3,832.6 4,008.0 4,030.4 4,056.1 4,073.5 4,080.2 4,126.5 4,146.6 4,125.3 4,159.7 4,122^ 4,129.9 Liabilities 45 Deposits 2,521.9 2,557.7 2,558.3 2,581.6 2,599.4 2,600.5 2,624.5 2,638.4 2,642.6 2,660.3 2,618.3 2,609.4 46 Transaction 801.9 793.5 774.1 775.6 784.1 768.8 779.6 777.7 784.3 800.7 760.8 749.9 47 Nontransaction 1,720.0 1,764.2 1,784.1 1,806.0 1,815.3 1,831.7 1,844.9 1,860.7 1,858.2 1,859.6 1,857.5 1,859.5 48 Large time 352.8 387.2 397.1 398.4 400.2 408.0 413.9 421.0 419.0 417.2 421.5 422.1 49 Other 1,367.2 1,377.0 1,387.0 1,407.6 1,415.1 1,423.7 1,430.9 1,439.6 1,439.2 1,442.3 1,435.9 1,437.4 50 Borrowings 591.9 663.5 674.4 683.1 692.1 680.6 686.0 681.4 681.1 682.4 680.0 677.1 51 From banks in the U.S 163.2 182.5 182.1 187.5 197.8 194.8 198.7 203.1 195.6 204.7 198.6 206.1 52 From nonbanks in the U.S 428.7 481.1 492.2 495.6 494.3 485.8 487.3 478.3 485.5 477.6 481.4 471.1 53 Net due to related foreign offices 214.7 237.0 245.2 238.9 233.9 243.2 247.5 258.4 239.6 247.9 255.3 276.0 54 Other liabilities8 180.7 213.2 212.1 208.0 201.2 205.8 215.2 213.5 209.9 214.9 213.8 211.6 55 Total liabilities 3,509.1 3,671.4 3,689.9 3,711.6 3,726.6 3,730.1 3,773.2 3,791.7 3,773.2 3,805.5 3,1613 3,774.1 56 Residual (assets less liabilities)9 323.5 336.6 340.5 344.5 346.9 350.2 353.4 354.9 352.1 354.3 355.2 355.8 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A19 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1—Continued Billions of dollars Monthly averages Wednesday figures Account 1994 1995r 1995 Oct.' Apr. May June July Aug. Sept. Oct. Oct. 4 Oct. 11 Oct. 18 Oct. 25 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 2,944.4 3,057.1 3,081.7 3,099.1 3,110.6 3,123.8 3,139.1 3,146.4 3,136.4 3,145.1 3,141.3 3,152.5 58 Securities in bank credit 878.2 862.6 860.2 858.5 849.4 852.6 857.3 856.6 857.9 856.7 852.5 861.1 59 U.S. government securities 675.1 645.5 647.0 647.0 641.6 643.2 643.3 648.5 647.3 649.9 646.1 650.6 60 Other securities 203.1 217.1 213.1 211.6 207.8 209.4 213.9 208.1 210.6 206.9 206.4 210.6 61 Loans and leases in bank credit2 2,066.1 2,194.5 2,221.5 2,240.6 2,261.2 2,271.2 2,281.9 2,289.8 2,278.5 2,288.4 2,288.7 2,291.3 62 Commercial and industrial 473.6 510.5 516.6 519.0 523.6 524.6 526.8 529.3 527.0 528.1 527.7 529.8 63 Real estate 944.8 997.9 1,004.3 1,013.4 1,024.7 1,030.9 1,035.2 1,037.4 1,035.3 1,037.9 1,036.8 1,037.9 64 Revolving home equity 74.4 76.5 77.2 77.6 78.0 78.4 78.7 78.7 78.5 78.7 78.6 78.8 65 Other 870.4 921.4 927.1 935.8 946.7 952.5 956.5 958.7 956.8 959.3 958.2 959.1 66 Consumer 441.2 471.2 473.0 478.1 481.1 486.3 489.2 489.1 488.0 489.3 489.2 489.2 67 Security3 45.5 45.5 54.0 55.4 52.1 50.4 50.8 50.4 47.2 50.2 50.7 50.4 68 Other 161.0 169.4 173.6 174.6 179.7 179.1 179.9 183.6 180.9 182.9 184.3 184.1 69 Interbank loans4 139.4 157.9 160.6 164.4 172.8 165.2 168.1 168.0 163.8 171.2 166.4 174.0 70 Cash assets5 185.2 182.5 182.6 184.5 187.5 182.7 187.1 194.1 191.6 201.5 174.3 198.4 71 Other assets6 166.5 173.4 170.6 170.3 172.5 172.0 174.2 175.5 180.0 173.8 174.1 175.1 72 Total assets7 3378.8 3,514.0 3,538.7 3,561-3 3,5863 3,586.9 3,611.9 3,6273 3,6153 3,635.0 33993 3,643.4 Liabilities 73 Deposits 2,371.2 2,398.6 2,409.5 2,424.2 2,447.5 2,448.3 2,457.3 2,468.1 2,461.0 2,474.1 2,443.8 2,478.3 74 Transaction 794.7 778.7 775.9 771.9 784.0 775.5 773.4 770.9 768.6 780.9 749.5 778.5 75 Nontransaction 1,576.5 1,619.9 1,633.6 1,652.2 1,663.5 1,672.8 1,683.9 1,697.2 1,692.4 1,693.2 1,694.3 1,699.7 76 Large time 213.4 244.4 247.1 247.6 247.9 248.9 252.6 258.4 254.3 253.8 257.9 261.0 77 Other 1,363.1 1,375.5 1,386.6 1,404.6 1,415.6 1,423.9 1,431.4 1,438.7 1,438.2 1,439.4 1,436.4 1,438.7 78 Borrowings 485.0 565.1 569.6 563.2 572.7 555.6 561.6 565.0 569.3 561.1 555.8 575.0 79 From banks in the U.S 149.4 165.3 164.9 168.2 181.9 178.9 182.6 186.5 176.3 184.3 180.5 200.1 80 From nonbanks in the U.S 335.6 399.9 404.8 395.0 390.8 376.7 379.0 378.5 393.0 376.8 375.4 374.9 81 Net due to related foreign offices .... 65.4 82.0 84.0 90.2 82.1 91.0 93.4 94.7 90.2 95.0 96.9 97.8 82 Other liabilities8 133.4 151.9 147.4 146.7 139.2 139.3 146.2 143.8 142.0 145.2 145.0 143.2 83 Total liabilities 3,055.0 3,197.7 3,210.5 3,2243 3,241.5 3,234.2 3,258.5 3,271.6 3,2623 3,275.4 3,2413 3,294.2 84 Residual (assets less liabilities)9 323.9 316.2 328.2 337.0 344.8 352.7 353.4 355.9 352.8 359.6 357.8 349.2 Not seasonally adjusted Assets 85 Bank credit 2,946.4 3,061.4 3,080.1 3,100.0 3,100.9 3,115.7 3,137.5 3,147.4 3,138.4 3,144.0 3,144.8 3,144.9 86 Securities in bank credit 876.6 870.5 862.6 861.6 845.8 850.4 854.3 853.9 854.4 853.1 850.7 855.6 87 U.S. government securities 674.2 650.9 647.9 647.9 638.6 644.2 645.6 647.0 647.4 647.3 645.4 647.9 88 Other securities 202.3 219.6 214.7 213.7 207.2 206.1 208.7 206.8 207.0 205.8 205.3 207.7 89 Loans and leases in bank credit2 2,069.8 2,190.9 2,217.5 2,238.4 2,255.1 2,265.3 2,283.3 2,293.5 2,284.0 2,290.9 2,294.1 2,289.3 90 Commercial and industrial 472.4 514.8 520.5 520.8 522.4 520.8 523.5 527.9 526.4 526.1 526.6 527.3 91 Real estate 947.5 994.1 1,002.7 1,013.2 1,024.1 1,030.0 1,036.2 1,040.1 1,037.7 1,041.0 1,039.9 1,039.7 92 Revolving home equity 75.1 76.0 77.0 77.6 78.0 78.5 79.1 79.4 79.2 79.3 79.3 79.4 93 Other 872.4 918.1 925.7 935.6 946.1 951.4 957.1 960.7 958.5 961.7 960.6 960.3 94 Consumer 441.2 468.0 471.5 475.5 478.8 485.8 490.3 489.1 488.4 488.4 489.3 489.4 95 Security5 46.0 46.8 51.9 54.2 50.1 49.3 50.9 51.1 47.1 50.3 52.2 49.9 96 Other 162.7 167.2 171.0 174.6 179.7 179.4 182.4 185.3 184.5 185.1 186.1 183.0 97 Interbank loans4 136.7 157.7 155.4 162.7 168.4 161.6 163.5 165.1 163.3 169.1 162.7 162.7 98 Cash assets5 184.9 179.6 181.4 182.0 184.1 174.3 187.2 193.7 186.6 211.1 178.7 181.4 99 Other assets6 168.7 170.9 169.9 169.6 172.9 172.9 175.7 177.7 182.9 177.7 174.9 174.0 100 Total assets7 3,380.2 3313.0 3330.0 3357.4 3369.6 3367.8 3,607.0 3,627.5 3,614.6 3,645.7 3,604.7 3,606.7 Liabilities 101 Deposits 2,370.4 2,402.9 2,398.5 2,418.3 2,438.5 2,434.6 2,454.6 2,467.6 2,470.0 2,490.6 2,448.1 2,438.1 102 Transaction 791.7 784.0 765.2 766.5 774.7 759.6 770.0 768.3 775.1 791.2 751.7 740.5 103 Nontransaction 1.578.7 1,618.8 1,633.3 1,651.8 1,663.8 1,675.0 1,684.6 1,699.3 1,694.9 1,699.5 1,696.3 1,697.6 104 Large time 214.2 243.7 248.7 247.2 248.0 250.7 253.6 259.4 254.6 255.4 258.8 262.1 105 Other 1364.5 1,375.2 1,384.6 1,404.6 1,415.8 1,424.4 1,431.0 1,439.9 1,440.4 1,444.1 1,437.6 1,435.4 106 Borrowings 492.8 546.6 560.0 568.3 570.9 562.5 570.8 572.5 572.8 572.0 568.1 571.1 107 From banks in the U.S 148.0 162.8 161.6 167.9 177.9 176.9 180.0 185.0 179.3 185.5 178.8 189.1 108 From nonbanks in the U.S 344.7 383.8 398.5 400.4 393.1 385.6 390.8 387.5 393.5 386.4 389.3 382.0 109 Net due to related foreign offices .... 63.2 84.1 91.8 89.6 81.7 89.1 88.7 92.0 81.7 88.2 92.8 101.5 110 Other liabilities8 135.9 148.7 145.2 142.9 138.1 138.2 145.9 146.5 144.0 146.6 146.5 146.0 111 Total liabilities 3,0623 3,1823 3,1953 3,219.1 3,2293 3,224.4 3,260.0 3,278.6 3,268.5 3,297.4 3,2553 3,256.7 112 Residual (assets less liabilities)9 317.9 330.6 334.5 338.3 340.4 343.4 347.0 349.0 346.1 348.3 349.2 350.0 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic NonfinancialS tatistics • January 1996 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 condition commercial banks in the United States. (large domestic); other domestically chartered commercial banks (small domestic); branches 5. Includes vault cash, cash items in process of collection, demand balances due from and agencies of foreign banks; New York State investment companies, and Edge Act and depository institutions in the United States, balances due from Federal Reserve Banks, and agreement corporations (foreign-related institutions). Excludes international banking facili- other cash assets. ties. Data are Wednesday values, or pro rata averages of Wednesday values. Large domestic 6. Excludes the due-from position with related foreign offices, which is included in lines banks constitute a universe; data for small domestic banks and foreign-related institutions are 25, 53, 81, and 109. estimates based on weekly samples and on quarter-end condition reports. Data are adjusted 7. Excludes unearned income, reserves for losses on loans and leases, and reserves for for breaks caused by reclassifications of assets and liabilities. transfer risk. Loans are reported gross of these items. 2. Excludes federal funds sold to, reverse repurchase agreements with, and loans to 8. Excludes the due-to position with related foreign offices, which is included in lines 25, commercial banks in the United States. 53, 81, and 109. 3. Consists of reserve repurchase agreements with broker-dealers and loans to purchase 9. This balancing item is not intended as a measure of equity capital for use in capital and carry securities. adequacy analysis. 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 1995 AAccccoouunntt Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 Oct. 4 Oct. 11 Oct. 18 Oct. 25 ASSETS 1 Cash and balances due from depository institutions 103,108r 124,919' 114,472' 114,893' 115,893' 116,244 132,703 110,528 114,278 2 U.S. Treasury and government securities 297,556r 298,932' 297,246' 295,021' 296,670 299,726 298,965 298,085 300,052 3 Trading account 18,970 20,964 21,641 19,806 20,331 23,486 23,542 23,691 23,368 4 Investment account 278,585r 277,968' 275,606' 275,215' 276,339 276,241 275,423 274,395 276,684 5 Mortgage-backed securities1 102,228r 102,229' 101,864' 103,387' 104,683' 104,882 104,595 105,329 106,893 ft All others, by maturity One year or less 44,201 45,051 43,900 43,506 42,979' 42,976 43,573 43,518 44,054 7 One year through five years 72,960r 71,725' 70,781' 69,712' 70,606' 70,450 69,661 69,308 69,438 8 More than five years 59,197r 58,962' 59,061' 58,610' 58,071' 57,933 57,593 56,240 56,298 9 Other securities 124,709 124,435 126,387 125,020' 123,943' 123.583 122,389 121,772 123,910 10 Trading account 1,600 1,475 1,484 1,429 1,487 1,435 1,253 1,265 1,326 11 Investment account 62,690 62,833 63,015 62,873 62,687 62,567 62,595 62,697 63,282 12 State and local government, by maturity 20,065 19,926 19,970 19,992 19,936 19,612 19,609 19,602 19,663 13 One year or less 5,215 5,196 5,193 5,216 5,189 4,983 5,034 5,029 5,019 14 More than one year 14,850 14,729 14,777 14,776 14,747 14,629 14,576 14,573 14,644 15 Other bonds, corporate stocks, and securities 42,625 42,907 43,045 42,882 42,751 42,955 42,985 43,095 43,620 16 Other trading account assets 60,419 60,127 61,888 60,717' 59,769' 59,580 58,542 57,810 59,302 17 Federal funds sold2 98,693 101,769 102,962 104,314 102.266 95,791 102,149 104,652 106,067 18 To commercial banks in the United States 66,042 66,164 67,357 66,766 68,694 62,837 67,852 66,760 71,189 19 To nonbank brokers and dealers in securities 27,503 29,466 28,139 32,080 28.741 27,758 28,886 31,466 29,198 20 To others3 5,147 6,140 7,467 5,469 4,830 5,197 5,410 6,426 5,680 21 Other loans and leases, gross 1,247,129r 1,249,205' 1,248,462' 1,256,914' 1,256,850' 1,254,996 1,259,006 1,256,123 1,252,079 22 Commercial and industrial 340,084' 341,597' 341,560' 345,620' 344,059' 345,458 345,000 345,293 346,061 23 Bankers acceptances and commercial paper 1,556 1,423 1,496 1,568 1,561 1,604 1,682 1,527 1,505 24 All other 338,527' 340,174' 340,064' 344,052' 342.498' 343,854 343,318 343,767 344,556 25 U.S. addressees 336,021' 337,634' 337,528' 341,538' 340,026' 341,276 340,698 341,165 341,970 26 Non-U.S. addressees 2,506 2,540 2,536 2,514 2.473 2,578 2,620 2,602 2,585 27 Real estate loans 495,409 496,236 499,311 497,282' 498,361' 499,075 501,503 499,973 499,576 28 Revolving, home equity 48,557 47,988 47,738 47,797 47,882 47,751 47,864 47,826 47,824 29 All other 446,852 448,248 451,573 449,485' 450,478' 451,323 453,639 452,147 451,752 30 To individuals for personal expenditures 250,541 249,537 247,711 249,014 249,581 247,017 246,792 245,936 245,260 31 To depository and financial institutions 66,049' 65,625' 65,345' 64,876' 65,473' 66,772 66,445 65,335 62,286 32 Commercial banks in the United States 42,535' 41,743' 41,625' 38,011' 38,512' 39,100 39,162 37,954 35,336 33 Banks in foreign countries 2,858 2,814 2,986 2,860 2,987 3.354 2,738 2,907 2,687 34 Nonbank depository and other financial institutions 20,656 21,068 20,734 24,005 23,974 24,318 24,545 24,475 24,263 35 For purchasing and carrying securities 15,896 14,552 14,764 17,843 16,877 13,442 15,501 15,096 15,227 36 To finance agricultural production 6,742' 6,719' 6,713' 6,733' 6,727' 6,762 6,706 6,649 6,582 37 To states and political subdivisions 10,991 10,939 10,946 10.941 10,935 10,926 10.805 10,874 10,839 38 To foreign governments and official institutions 1,086 1,243 994 1,020 1,125 997 1,089 975 1,003 39 All other loans 24,111' 26,224' 24,333' 26,646' 26,440' 26,770 27,057 27,815 26,921 40 Lease-financing receivables 36,221 36,534 36,785 36,941 37,271 37,778 38,108 38,177 38,325 41 LESS: Unearned income 1,646 1,625 1,671 1,669 1,672 1,693 1,761 1,764 1,764 42 Loan and lease reserve3 34,185 34,272' 34,292 34,346 34,194 33,889 33,495 33,497 33,434 43 Other loans and leases, net 1,211,298' 1,213,307' 1,212,499' 1,220,899' 1,220,983' 1,219,413 1,223,749 1,220,862 1,216,881 44 All other assets 135,170' 138,922' 138,666' 139,308' 138,834 146,514 139,198 138,983 136,407 45 Total assets l,970,533r 2,002,284r l,992,232r l,999,455r l,998,589r 2,001,272 2,019,151 1,994,884 1,997,595 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • January 1996 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1995 AAccccoouunntt Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 Oct. 4 Oct. 11 Oct. 18 Oct. 25 LIABILITIES 46 Deposits 1.164,205R 1,202,89 LR 1,184,999' 1,176,604' 1,167,621' 1,190,011 1,201,515 1,176,001 1,169,197 47 Demand deposits 289,972 315,409R 300,154' 301,359' 298,117' 307,972 319,624 296,111 290,007 48 Individuals, partnerships, and corporations 247,413 266,411' 254,781' 249,794' 246,938' 261,306 267,694 250,439 245,085 49 Other holders 42.559 48,997 45,373 51,565 51,180 46,666 51,930 45,672 44,921 50 States and political subdivisions 8,226 7,955 7,999 9,447 8,930 8,230 7,826 7,895 8,195 51 U.S. government 1.523 1.798 2,425 3,188 1,844 1,874 1,584 1,745 1,549 52 Depository institutions in the United States 17.994 23.487 19,406 20,711 20,709 21,147 23,359 19,358 20,448 53 Banks in foreign countries 5,113 4,873 4,755 4,915 4,719 5.642 5,419 6,243 5,219 54 Foreign governments and official institutions 702 924 892 759 852 921 613 575 675 55 Certified and officers' checks 9.000 9,961 9,895 12,545 14,126 8,852 13,129 9,856 8,836 56 Transaction balances other than demand deposits 104,213 109.468 106,876 102,951 97,980 101,570 99,962 98,883 97,222 57 Nontransaction balances 770,019R 778,014' 777,969' 772,294' 771,524 780,469 781,929 781,008 781,969 58 Individuals, partnerships, and corporations 747,219R 755.002' 754,790' 749,384' 748,543 757,664 758,868 757,870 758,389 59 Other holders 22,800 23,012 23,179 22,910 22,981 22,805 23,061 23,137 23,579 60 States and political subdivisions 18,584 18,835 18,929 18.705 18,835 19,143 19,219 19,201 19,676 61 U.S. government 2,339 2,247 2,276 2,274 2,299 2,301 2,306 2,243 2,195 62 Depository institutions in the United States 1,580 1.631 1.648 1,593 1,532 1,048 1,222 1,380 1,400 63 Foreign governments, official institutions, and banks . . 298 300 325 338 315 313 314 313 308 64 Liabilities for borrowed money5 403,995R 400.951' 397.580' 419,210' 421,013' 413,846 411,666 408,700 410,795 65 Borrowings from Federal Reserve Banks 50 0 0 0 0 0 825 0 120 66 Treasurv tax and loan notes 3,804 1.007' 2.489 30,692' 26,005 11,614 7,706 6,166 7,300 67 Other liabilities for borrowed money6 400,140R 399,944' 395,091' 388,517' 395,008' 402,232 403,135 402,534 403,376 68 Other liabilities (including subordinated notes and debentures) . . . 215,436R 209.584' 220,043' 213,848' 220.890' 207,994 215,372 219,411 226,552 69 Total liabilities 1,783,636' l,813,426r l,802,622r 1,809,661' l,809,525r 1,811,851 1,828,553 1,804,112 1,806,544 70 Residual (total assets less total liabilities)7 186,897 188,857 189,611 189,794 189,064 189,421 190,598 190,772 191,051 MEMO 71 Total loans and leases, gross, adjusted, plus securities8 L,659,509R 1,666,434' 1,666.076' 1,676,492' 1,672,522' 1,672,159 1,675,494 1,675,920 1,675,584 72 Time deposits in amounts of $100,000 or more 110,409R 111,262' 112,209' 110,727' 108,281 109,984 110,190 112,781 115,549 73 Loans sold outright to affiliates9 1,485 1,476 1,465 1.453 1,443 1,432 1,422 1,411 1,402 74 Commercial and industrial 281 281 281 281 281 280 281 281 281 75 Other 1,204 1.195 1,184 1,172 1,162 1,151 1,141 1,130 1,121 76 Foreign branch credit extended to U.S. residents10 25,692 25,733 25,539 25,759 25,951 25,941 26,430 25,896 26,545 77 Net owed to related institutions abroad 91,245 78,667 85,794 80,893' 91,136 76,443 82,673 87,340 96,166 1. Includes certificates of participation, issued or guaranteed by agencies of the U.S. 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 of 3. Includes allocated transfer risk reserve. 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 (ATS) subsidiaries of the holding company. accounts, and telephone and preauthorized transfers of savings deposits. 10. Credit extended by foreign branches of domestically chartered weekly reporting banks 5. Includes borrowings only from other than directly related institutions. to nonbank U.S. residents. Consists mainly of commercial and industrial loans, but includes 6. Includes federal funds purchased and securities sold under agreements to repurchase. an unknown amount of credit extended to other than nonfinancial businesses. 7. This balancing item is not intended as a measure of equity capital for use in capitaladequacy 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 1995 AAccccoouunntt Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 Oct. 4 Oct. 11 Oct. 18 Oct. 25 ASSETS 1 Cash and balances due from depository institutions 17,337 16,504 17,156 16,850 16,941 17,055 17,711 16,562 17,104 2 U.S. Treasury and government agency securities 44,921 41,726 43,212 41,854 41,450 41,884 41,476 42,896 4433,,112299 3 Other securities 32,125 32,074 34,459 33,823 33,534 37,947 38,155 38,119 37,482 4 Federal funds sold1 32,716 31,618 32,223 31,029 37,903 28,563 31,249 33,468 37,246 5 To commercial banks in the United States 11,093 7,616 9,185 8,226 15,333 9,391 10,981 10,986 14,813 6 To others2 21,622 24,002 23,038 22,803 22,570 19,172 20,267 22,482 22,433 7 Other loans and leases, gross 176,350 177,517 178,154 180,123 180,667 178,188 176,148 176,077 176,725 8 Commercial and industrial 113,267r 113,843r 113,693r 114,649r 114,118r 113,059 112,442 112,497 113,102 9 Bankers acceptances and commercial paper . 3,512 3,508 3,469 3,667 3,703 3,842 3,758 3,858 3,831 10 All other 109,755r 110,335r 110,224r 110,982r 110,415r 109,217 108,684 108,638 109,271 11 U.S. addressees 104,85 lr 105,425r 105,314r 106,028r 105,368r 104,209 103,718 103,767 104,415 12 Non-U.S. addressees 4,904 4,910 4,910 4,954 5,048 5,007 4,966 4,872 4,856 1.3 Loans secured by real estate 22,905 22,775 22,777 22,811 22,803 23,102 23,101 22,960 22,931 14 Loans to depository and financial institutions 28,359r 28,908r 29,124r 29,674r 29,763r 29,198 28,162 28,278 28,408 15 Commercial banks in the United States 4,116 4,141 3,912 3,758 3,863 4,022 4,046 4,219 3,974 16 Banks in foreign countries 1,974 2,144 2,201 2,277 2,355 2,416 2,369 2,402 2,912 17 Nonbank financial institutions 22,269r 22,622' 23,01 lr 23,640r 23,545r 22,760 21,747 21,658 21,522 18 For purchasing and carrying securities 4,842 5,680 6,048 6,540 7,304 6,255 5,925 6,401 6,019 19 To foreign governments and official institutions 876 858 961 892 872 898 899 867 517 20 All other 4,576 4,090 4,164 4,167 4,354 4,257 4,213 3,806 4,312 21 Other assets (claims on nonrelated parties) 40,230 41,351 43,941 38,145 37,778 37,087 38,223 38,077 37,655 22 Total assets3 373,932 370,787 378,199 368,468 374,477 366,163 368,638 370,111 373,176 LIABILITIES 23 Deposits or credit balances owed to other than directly related institutions 110,414 109,310 108,448 107,077 112,108 111,124 108,831 108,976 108,105 24 Demand deposits4 4,484 3,818 3,964 3,992 4,515 3,837 3,998 3,710 3,803 25 Individuals, partnerships, and corporations .... 3,012 3,134 3,074 3,048 3,449 3.024 3,131 2,772 3,112 26 Other 1,472 684 890 944 1,066 813 867 939 692 27 Nontransaction accounts 105,930 105,492 104,485 103,085 107,593 107,287 104,833 105,265 104,301 28 Individuals, partnerships, and corporations .... 73,348 73,572 73,237 72,023 75,201 75,410 73,581 74,664 74,131 29 Other 32,581 31,919 31,248 31,061 32,392 31,878 31,252 30,601 30,170 30 Borrowings from other than directly related institutions 82,841 82,242 84,412 80,464 76,784 75,572 77,136 78,617 73,873 31 Federal funds purchased5 40,698 41,679 43,938 43,902 40,378 40,464 43,623 45,052 44,936 32 From commercial banks in the United States .. 5,605 8,621 8,946 7,644 6,611 6,779 8,178 8,884 7,302 33 From others 35,092 33,058 34,992 36,257 33,767 33,685 35,446 36,168 37,634 34 Other liabilities for borrowed money 42,143 40,564 40,474 36,562 36,406 35,109 33,513 33,565 28,937 35 To commercial banks in the United States 5,461 5,372 5,694 4,812 4,697 4,955 4,914 4,395 4,234 36 To others 36,683 35,192 34,780 31,750 31,709 30,154 28,599 29,169 24,703 37 Other liabilities to nonrelated parties 53,965 53,474 58,204 51,257 50,905 53,392 55,261 54,234 52,455 38 Total liabilities6 373,932 370,787 378,199 368,468 374,477 366,163 368,638 370,111 373,176 MEMO 39 Total loans (gross) and securities, adjusted 270,901 271,177 274,950 274,845 274,358 273,168 272,000 275,356 275,796 40 Net owed to related institutions abroad 96,458 95,763 98,079 103,026 108,476 100,635 101,734 103,373 114,909 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 US. 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 United 4. Includes other transaction deposits. States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic NonfinancialS tatistics • January 1996 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1995 IItteemm 1990 1991 1992 1993 1994 Apr. May June July Aug. Sept. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 562,656 528,832 545,619 555,075 595,382 651,128 650,580 648,819 657,938 660,719 669,805 Financial companies1 2 Dealer-placed paper2, total 214,706 212,999 226,456 218,947 223,038 252,846 258,006 251,555 262,695 261,904 268,838 3 Directly placed paper3, total 200,036 182,463 171,605 180,389 207,701 219,281 216,879 218,005 215,473 215,361 214,002 4 Nonfinancial companies4 147,914 133,370 147,558 155,739 164,643 179,001 175,695 179,259 179,770 183,454 186,965 Bankers dollar acceptances (not seasonally adjusted) 5 Total 54,771 43,770 38,194 32,348 29,835 By holder 6 Accepting banks 9,017 11,017 10,555 12,421 11,783 7 Own bills 7,930 9,347 9,097 10,707 10,462 8 Bills bought from other banks 1,087 1,670 1,458 1,714 1,321 Federal Reserve Banks6 9 Foreign correspondents 918 1,739 1,276 725 410 10 Others 44,836 31,014 26,364 19,202 17,642 By basis 11 Imports into United States 13,095 12,843 12,209 10,217 10,062 12 Exports from United States 12,703 10,351 8,096 7,293 6,355 13 All other 28,973 20,577 17,890 14,838 13,417 1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales, 5. Data on bankers dollar acceptances are gathered from approximately 100 institutions. personal, and mortgage financing; factoring, finance leasing, and other business lending; The reporting group is revised every January. Beginning January 1995, data for Bankers insurance underwriting; and other investment activities. dollar acceptances will be reported annually in September. 2. Includes all financial-company paper sold by dealers in the open market. 6. In 1977 the Federal Reserve discontinued operations in bankers dollar acceptances for 3. As reported by financial companies that place their paper directly with investors. its own account. 4. Includes public utilities and firms engaged 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 Loans' Percent per year Date of change Rate Period Av r e a r t a e ge Period Av r e a r t a e ge Period Av r e a r t a e ge 1992—July 2 66..0000 1992 6.25 1993—Jan 6.00 1994—Sept 7.75 1993 6.00 Feb 6.00 Oct 7.75 1994—Mar. 24 6.25 1994 7.15 Mar 6.00 Nov 8.15 Apr. 19 6.75 Apr. 6.00 Dec 8.50 May 17 7.25 1992—Jan 6.50 May 6.00 Aug. 16 7.75 Feb 6.50 June 6.00 1995—Jan 8.50 Nov. 15 8.50 Mar. 6.50 July 6.00 Feb 9.00 Apr. 6.50 Aug 6.00 Mar. 9.00 1995—Feb. 1 9.00 May 6.50 Sept 6.00 Apr. 9.00 JJuullyy 77 8.75 June 6.50 Ocl 6.00 May 9.00 Julv 6.02 Nov 6.00 June 9.00 Aug 6.00 Dec 6.00 July 8.80 Sept 6.00 Aug 8.75 Oct 6.00 1994—Jan 6.00 Sept 8.75 Nov 6.00 Feb 6.00 Ocl 8.75 66..0000 6.06 88..7755 Apr. 6.45 May 6.99 June 7.25 July 7.25 Aug 7.51 1. The prime rate is one of several base rates that banks use to price short-term business Report. Data in this table also appear in the Board's H.15 (519) weekly and G.13 (415) loans. The table shows the date on which a new rate came to be the predominant one quoted monthly statistical releases. For ordering address, see inside front cover, by a majority of the twenty-five largest banks by asset size, based on the most recent Call Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic NonfinancialS tatistics • January 1996 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1995 1995, week ending IItteemm 11999922 11999933 11999944 July Aug. Sept. Oct. Sept. 29 Oct. 6 Oct. 13 Oct. 20 Oct. 27 MONEY MARKET INSTRUMENTS 1 Federal funds1,2,3 3.52 3.02 4.21 5.85 5.74 5.80 5.76 5.80 6.00 5.72 5.71 5.76 2 Discount window borrowing2,4 3.25 3.00 3.60 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 Commercial paper3,5,6 3 1-month 3.71 3.17 4.43 5.87 5.85 5.82 5.81 5.85 5.84 5.82 5.80 5.81 4 3-month 3.75 3.22 4.66 5.79 5.82 5.74 5.82 5.76 5.81 5.82 5.80 5.82 5 6-month 3.80 3.30 4.93 5.68 5.75 5.66 5.71 5.70 5.74 5.73 5.70 5.70 Finance paper, directly placed'1,5,7 6 1-month 3.62 3.12 4.33 5.74 5.72 5.71 5.71 5.72 5.73 5.71 5.71 5.71 7 3-month 3.65 3.16 4.53 5.60 5.64 5.58 5.66 5.60 5.66 5.66 5.66 5.67 8 6-month 3.63 3.15 4.56 5.39 5.51 5.45 5.51 5.47 5.53 5.51 5.51 5.51 Bankers acceptances3,5,8 9 3-month 3.62 3.13 4.56 5.66 5.68 5.66 5.71 5.70 5.70 5.70 5.71 5.73 10 6-month 3.67 3.21 4.83 5.56 5.62 5.58 5.61 5.63 5.61 5.61 5.60 5.62 Certificates of deposit, secondary marked'9 11 1-month 3.64 3.11 4.38 5.80 5.77 5.74 5.75 5.76 5.76 5.75 5.75 5.75 12 3-month 3.68 3.17 4.63 5.77 5.77 5.73 5.79 5.78 5.79 5.79 5.78 5.79 13 6-month 3.76 3.28 4.96 5.73 5.79 5.73 5.76 5.79 5.79 5.76 5.74 5.75 14 Eurodollar deposits, 3-month3,10 3.70 3.18 4.63 5.79 5.79 5.74 5.81 5.78 5.81 5.81 5.81 5.82 U.S. Treasury bills Secondary market3,5 15 3-month 3.43 3.00 4.25 5.42 5.40 5.28 5.28 5.26 5.30 5.30 5.27 5.24 16 6-month 3.54 3.12 4.64 5.37 5.41 5.30 5.32 5.35 5.35 5.33 5.32 5.31 17 1-year 3.71 3.29 5.02 5.28 5.43 5.31 5.28 5.37 5.30 5.29 5.28 5.27 Auction average3,5,11 18 3-month 3.45 3.02 4.29 5.47 5.41 5.26 5.30 5.14 5.34 5.31 5.32 5.22 19 6-month 3.57 3.14 4.66 5.41 5.40 5.28 5.34 5.27 5.38 5.32 5.34 5.33 20 1-year 3.75 3.33 5.02 5.38 5.55 5.21 5.30 n.a. n.a. n.a. 5.30 n.a. U.S. TREASURY NOTES AND BONDS Constant maturities'2 21 1-year 3.89 3.43 5.32 5.59 5.75 5.62 5.59 5.69 5.61 5.60 5.59 5.58 22 2-year 4.77 4.05 5.94 5.78 5.98 5.81 5.70 5.89 5.76 5.72 5.68 5.67 23 3-year 5.30 4.44 6.27 5.89 6.10 5.89 5.77 5.97 5.84 5.79 5.74 5.75 24 5-year 6.19 5.14 6.69 6.01 6.24 6.00 5.86 6.08 5.92 5.88 5.83 5.84 25 7-year 6.63 5.54 6.91 6.20 6.41 6.13 5.97 6.20 6.04 5.97 5.92 5.95 26 10-year 7.01 5.87 7.09 6.28 6.49 6.20 6.04 6.26 6.10 6.05 5.99 6.04 27 20-year n.a. 6.29 7.49 6.74 6.92 6.65 6.45 6.70 6.55 6.47 6.38 6.40 28 30-year 7.67 6.59 7.37 6.72 6.86 6.55 6.37 6.57 6.45 6.40 6.32 6.35 Composite 29 More than 10 years (long-term) 7.52 6.45 7.41 6.71 6.90 6.63 6.43 6.68 6.53 6.45 6.37 6.39 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 6.09 5.38 5.77 5.68 5.83 5.71 5.74 5.70 5.76 5.76 5.70 5.72 31 Baa 6.48 5.83 6.17 5.91 5.95 5.90 5.95 5.98 6.05 5.93 5.90 5.90 32 Bond Buyer series14 6.44 5.60 6.18 5.92 6.06 5.91 5.80 6.00 5.88 5.82 5.72 5.76 CORPORATE BONDS 33 Seasoned issues, all industries'5 8.55 7.54 8.26 7.66 7.81 7.56 7.39 7.58 7.46 7.40 7.34 7.37 Rating group 34 8.14 7.22 7.97 7.41 7.57 7.32 7.12 7.33 7.20 7.14 7.08 7.10 35 Aa 8.46 7.40 8.15 7.54 7.69 7.45 7.27 7.47 7.34 7.28 7.22 7.25 36 A 8.62 7.58 8.28 7.65 7.79 7.56 7.39 7.58 7.46 7.40 7.35 7.37 37 Baa 8.98 7.93 8.63 8.04 8.19 7.93 7.75 7.95 7.82 7.76 7.70 7.73 38 A-rated, recently offered utility bonds16 8.52 7.46 8.29 7.72 7.84 7.55 7.36 7.49 7.41 7.27 7.32 7.40 MEMO Dividend-price ratio17 39 Common stocks 2.99 2.78 2.82 2.50 2.49 2.42 2.41 2.41 2.41 2.42 2.39 2.41 1. The daily effective federal funds rate is a weighted average of rates on trades through 12. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Depart- New York brokers. ment of the Treasury. 2. Weekly figures are averages of seven calendar days ending on Wednesday of the 13. General obligation bonds based on Thursday figures; Moody's Investors Service. current week; monthly figures include each calendar day in the month. 14. State and local government general obligation bonds maturing in twenty years are used 3. Annualized using a 360-day year for bank interest. in compiling this index. The twenty-bond index has a rating roughly equivalent to Moodys' 4. Rate for the Federal Reserve Bank of New York. A1 rating. Based on Thursday figures. 5. Quoted on a discount basis. 15. Daily figures from Moody's Investors Service. Based on yields to maturity on selected 6. An average of offering rates on commercial paper placed by several leading dealers for long-term bonds. firms whose bond rating is AA or the equivalent. 16. Compilation of the Federal Reserve. This series is an estimate of the yield on recently 7. An average of offering rates on paper directly placed by finance companies. offered, A-rated utility bonds with a thirty-year maturity and five years of call protection. 8. Representative closing yields for acceptances of the highest-rated money center banks. 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 in 10. Bid rates for Eurodollar deposits at 11:00 a.m. London time. Data are for indication 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 issue-date G.13 (415) monthly statistical releases. For ordering address, see inside front cover. basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.36 STOCK MARKET Selected Statistics 1995 IInnddiiccaattoorr 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug. Sept. Oct. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 229.00 249.71 254.16 261.86 266.81 274.38 281.81 289.52 298.18 300.05 310.41 311.78 2 Industrial 284.26 300.10 315.32 328.98 337.96 347.69 357.01 366.75 379.13 379.79 390.42 389.63 3 Transportation 201.02 242.68 247.17 237.29 252.37 254.36 254.70 256.80 279.15 285.63 295.54 291.16 4 Utility 99.48 114.55 104.96 103.87 102.08 104.70 106.02 108.12 109.59 111.06 114.67 123.59 5 Finance 179.29 216.55 209.75 211.76 213.29 219.38 228.45 236.26 240.49 245.27 260.72 265.12 6 Standard & Poor's Corporation (1941-43 = 10)' 415.75 451.63 460.42 481.92 493.20 507.91 523.83 539.35 557.37 559.11 578.77 582.92 7 American Stock Exchange (Aug. 31, 1973 = 50)2 391.28 438.77 449.49 446.37 456.06 471.54 487.03 492.60 513.25 526.86 547.64 530.26 Volume of trading (thousands of shares) 8 New York Stock Exchange 202,558 263,374 290,652 333,020 338,733 331,184 341,905 345,547 363,780 309,879 352,184 369,386 9 American Stock Exchange 14,171 18,188 17,951 18,424 17,905 19,404 19,266 24,622 23,283 21,825 25,422 17,865 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers3 43,990 60,310 61,160 59,800 60,270 62,520 64,070 66,340 67,600 71,440 77,076 75,005 Free credit balances at brokers4 11 Margin accounts5 8,970 12,360 14,095 12,380 12,745 12,440 13,403 13,710 13,830 13,900 14,806 14,753 12 Cash accounts 22,510 27,715 28,870 25,860 26,680 26,670 27,464 29,860 28,600 29,190 29,796 29,908 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 added collateralized by securities. Margin requirements on securities other than options are the to the group of stocks on which the index is based. The index is now based on 400 industrial difference between the market value (100 percent) and the maximum loan value of collateral stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and as prescribed by the Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, 40 financial. effective May 1, 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective 2. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Nov. 1, 1971. previous readings in half. On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the 3. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has initial margin required for writing options on securities, setting it at 30 percent of the current included credit extended against stocks, convertible bonds, stocks acquired through the market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the exercise of subscription rights, corporate bonds, and government securities. Separate report- required initial margin, allowing it to be the same as the option maintenance margin required ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in by the appropriate exchange or self-regulatory organization; such maintenance margin rules April 1984. must be approved by the Securities and Exchange Commission. Effective Jan. 31, 1986, the 4. Free credit balances are amounts in accounts with no unfulfilled commitments to SEC approved new maintenance margin rules, permitting margins to be the price of the option brokers and are subject to withdrawal by customers on demand. plus 15 percent of the market value of the stock underlying the option. 5. Series initiated in June 1984. Effective June 8, 1988, margins were set to be the price of the option plus 20 percent of the 6. Margin requirements, stated in regulations adopted by the Board of Governors pursuant market value of the stock underlying the option (or 15 percent in the case of stock-index to the Securities Exchange Act of 1934, limit the amount of credit that can be used to options). purchase and carry "margin securities" (as defined in the regulations) when such credit is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Nonfinancial Statistics • January 1996 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1995 11999933 11999944 11999955 May June July Aug. Sept. Oct. U.S. budge? 1 Receipts, total 1,153,226 1,257,45 lr 1,350,576 90,405 147,868 92,749 96,560 143,219 95,593 2 On-budget 841,292 922,425r 999,496 61,027 115,998 65,788 69,265 112,510 72,200 3 Off-budget 311,934 335,026 351,080 29,378 31,870 26,961 27,295 30,709 23,393 4 Outlays, total 1,408,532 l,460,553r 1,514,389 129,958 135,054 106,328 130,411 135,933 118,352 5 On-budget 1,141,945 l,181,181r 1,225,724 103,184 120,236 80,931 104,135 105,098 92,151 6 Off-budget 266,587 279,372 288,665 26,773 14,818 25,397 26,276 30,836 26,200 7 Surplus or deficit (-), total -255,306 -203,370 -163,813 -39,553 12,814 -13,579 -33,851 7,286 -22,758 8 On-budget -300,653 258,756r -226,228 -42,157 -4,237 -15,143 -34,870 7,412 -19,951 9 Off-budget 45,347 55,654 62,415 2,604 17,051 1,564 1,019 -126 -2,807 Source of financing (total) 10 Borrowing from the public 248,594 184,696r 171,288 44,740 8,491 10,627 16,071 -6,618 13,353 11 Operating cash (decrease, or increase (—)) 6,283 16,564 -2,007 11,841 -34,312 11,635 30,776 -19,820 16,755 12 Other2 429 l,842r -5,468 22,578 12,250 15,523 12,996 19,152 -7,350 MEMO 13 Treasury operating balance (level, end of period) 52,506 35,942 37,949 26,228 60,540 48,905 18,129 37,949 21,194 14 Federal Reserve Banks 17,289 6,848 8,620 4,646 20,977 11,206 4,767 8,620 7,018 15 Tax and loan accounts 35,217 29,094 29,329 21,582 39,563 37,700 13,363 29,329 14,176 1. Since 1990, off-budget items have been the social security trust funds (federal old-age net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF loansurvivors insurance and federal disability insurance) and the U.S. Postal Service. valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCE. U.S. Department of the Treasury, Monthly Treasury Statement of Receipts and International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Outlays of the U.S. Government; and US. Office of Management and Budget, Budget of the accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A3 3 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1993 1994 1995 1995 11999944 11999955 H2 HI H2 HI Aug. Sept. Oct. RECEIPTS 1 All sources 1,257,453 1,350,576 582,038 652,234 625,557 710,542 96,560 143,219 95,593 7 Individual income taxes, net 543,055 590,157 262,073 275,052 273,474 307,498 44,122 60,909 51,840 3 Withheld 459,699 499,898 228,423 225,387 240,062 251,398 41,631 36,295 46,918 4 Presidential Election Campaign Fund 70 69 2 63 10 58 1 1 0 Nonwithheld 160,047 175,815 41,768 117,937 42,031 132,006 4,146 24,743 5,899 6 Refunds 76,761 85,624 8,115 68,325 9,207 75,958 1,657 2,551 978 Corporation income taxes 7 Gross receipts 154,205 174,422 68,266 80,536 78,392 92,132 3,284 33,719 4,813 8 Refunds 13,820 17,334 6,514 6,933 7,331 10,399 782 730 2,633 9 Social insurance taxes and contributions, net . . . 461,475 484,474 206,176 248,301 220,141 261,837 39,804 39,902 32,104 10 Employment taxes and contributions 428,810 451,046 192,749 228,714 206,613 228,663 34,914 39,304 30,549 11 Self-employment taxes and contributions" . 24,433 27,127 4,335 20,762 4,135 23,429 135 2,910 -98 12 Unemployment insurance 28,004 28,878 11,010 17,301 11,177 18,001 4,454 235 1,214 13 Other net receipts4 4,661 4,550 2,417 2,284 2,349 2,267 436 364 342 14 Excise taxes 55,225 57,485 25,994 26,444 30,062 27,452 4,757 5,706 4,453 15 Customs deposits 20,099 19,300 10,215 9,500 11,042 8,847 1,794 1,634 1,786 16 Estate and gift taxes 15,225 14,764 6,617 8,197 7,071 7,424 1,500 1,289 1,160 17 Miscellaneous receipts5 21,988 27,306 9,227 11,170 13,305 15,749 2,081 789 2,070 OUTLAYS 18 All types 1,460,553 l,514,428r 727,685 710,620 752,150 760,824 130,411 135,972r 118,352 19 National defense 281,563 272,179 146,672 133,844 141,884r 135,931 23,882 26,040 18,353 20 International affairs 17,083 16,448 10,186 5,800 11,889 4,727 1,877 1,479 1,074 21 General science, space, and technology 16,227 17,563 8,880 8,502 7,603 8,611 1,668 1,612 1,427 22 Energy 5,219 5,146 1,663 2,237 2,923 2,358 13 969 348 23 Natural resources and environment 21,064 23,328 11,221 10,111 11,911 10,273 2,116 1,915 2,835 24 Agriculture 15,057 9,763 7,516 7,451 7,623 4,039 -462 -102 1,109 25 Commerce and housing credit -5,122 -18,740 -1,490 -4,962 -4,270 -13,936 -2,592 2,490 -1,661 26 Transportation 38,134 38,555 19,570 16,739 21,835 18,192 3,359 3,719 3,128 27 Community and regional development 10,454 11,000 4,288 4,571 6,283 4,858 909 1,043 943 28 Education, training, employment, and social services 46,307 52,706 26,753 19,262 27,448r 25,738 5,785 4,802 3,556 29 Health 106,836 114,760 52,958 53,195 54,147 58,759 10,422 9,401 9,657 30 Social security and Medicare 464,312 495,701 223,735 232,777 236,817 251,975 42,790 42,605 40,732 31 Income security 214,036 220,214 102,380 109,080 101,806 117,639 16,919 19,591 14,522 37 Veterans benefits and services 37,642 37,935 19,852 16,686 19,761 19,267 3,267 4,517 1,594 33 Administration of justice 15,238 16,255 7,400 7,718 7,753 8,062 1,400 1,335 1,223 34 General government 11,316 13,856 6,531 5,084 7,356 5,797 1,464 1,385 1,712 35 Net interest6 202,957 232,175 99,914 99,844 109,435 116,170 20,619 18,929 20,565 36 Undistributed offsetting receipts7 -37,772 -44,455 -20,344 -17,308 -20,066 -17,632 -3,022 -5,796 -2,765 1. Functional details do not sum to total outlays for calendar year data because revisions to 5. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. monthly totals have not been distributed among functions. Fiscal year total for outlays does 6. Includes interest received by trust funds. not correspond to calendar year data because revisions from the Budget have not been fully 7. Rents and royalties for the outer continental shelf, U.S. government contributions for distributed across months. employee retirement, and certain asset sales. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. SOURCE. U.S. Department of the Treasury, Monthly Treasury Statement of Receipts and 3. Old-age, disability, and hospital insurance. Outlays of the U.S. Government-, and U.S. Office of Management and Budget, Budget of the 4. Federal employee retirement contributions and civil service retirement and U.S. Government, Fiscal Year 1996. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic NonfinancialS tatistics • January 1996 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1993 1994 1995 IItteemm Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 1 Federal debt outstanding 4,436 4,562 4,602 4,673 4,721 4,827 4,891 4,978 5,001 2 Public debt securities 4,412 4,536 4,576 4,646 4,693 4,800 4,864 4,951 4,974 3 Held by public 3,295 3,382 3,434 3,443 3,480 3,543 3,610 3,635 n.a. 4 Held by agencies 1,117 1,154 1,142 1,203 1,213 1,257 1,255 1,317 n.a. 5 Agency securities 25 27 26 28 29 27 27 27 27 6 Held by public 25 27 26 27 29 27 26 27 n.a. / Held by agencies 0 0 0 0 0 0 0 0 n.a. 8 Debt subject to statutory limit 4,316 4,446 4,491 4,559 4,605 4,711 4,775 4,861 4,885 9 Public debt securities 4,315 4,445 4,491 4,559 4,605 4,711 4,774 4,861 4,885 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO U Statutory debt limit 4,900 4,900 4,900 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 the participation certificates, notes to international lending organizations, and District of Colum- United States and Treasury Bulletin. bia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1994 1995 TTyyppee aanndd hhoollddeerr 11999911 11999922 11999933 11999944 Q4 Ql Q2 Q3 1 Total gross public debt 3,801.7 4,177.0 4,535.7 4,800.2 4,800.2 4,864.1 4,951.4 4,974.0 By type 2 Interest-bearing 3,798.9 4,173.9 4,532.3 4,769.2 4,769.2 4,860.5 4,947.8 4,950.6 3 Marketable 2,471.6 2,754.1 2,989.5 3,126.0 3,126.0 3,227.3 3,252.6 3,260.5 4 Bills 590.4 657.7 714.6 733.8 733.8 756.5 748.3 742.5 5 Notes 1,430.8 1,608.9 1,764.0 1,867.0 1,867.0 1,938.2 1,974.7 1,980.3 6 Bonds 435.5 472.5 495.9 510.3 510.3 517.7 514.7 522.6 7 Nonmarketable1 1,327.2 1,419.8 1,542.9 1,643.1 1,643.1 1,633.2 1,695.2 1,690.2 8 State and local government series 159.7 153.5 149.5 132.6 132.6 122.9 121.2 113.4 9 Foreign issues2 41.9 37.4 43.5 42.5 42.5 41.8 41.4 41.0 10 Government 41.9 37.4 43.5 42.5 42.5 41.8 41.4 41.0 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 135.9 155.0 169.4 177.8 177.8 178.8 180.1 181.2 13 Government account series3 959.2 1,043.5 1,150.0 1,259.8 1,259.8 1,259.2 1,322.0 1,324.3 14 Non-interest-bearing 2.8 3.1 3.4 31.0 31.0 3.6 3.6 23.3 By holder 4 15 U.S. Treasury and other federal agencies and trust funds 968.7 1,047.8 1,153.5 1,257.1 1,257.1 1,254.7 1,316.6 16 Federal Reserve Banks 281.8 302.5 334.2 374.1 374.1 369.3 389.0 17 Private investors 2,563.2 2,839.9 3,047.7 3,168.0 3,168.0 3,239.1 3,244.6 18 Commercial banks 232.5 294.4 322.2 290.6 290.6 303.5 305.0 19 Money market funds 80.0 79.7 80.8 67.6 67.6 67.7 58.7 20 Insurance companies 181.8 197.5 234.5 242.8 242.8 259.0 260.0 21 Other companies 150.8 192.5 213.0 226.5 226.5 230.3 227.7 n.a. 22 State and local treasuries 485.1 476.7 508.9 443.3 443.3 415.2 415.0 Individuals 23 Savings bonds 138.1 157.3 171.9 180.5 180.5 181.4 182.6 24 Other securities 125.8 131.9 137.9 152.5 152.5 161.4 161.6 25 Foreign and international5 491.7 549.7 623.0 688.6 688.6 729.6 783.7 26 Other miscellaneous investors6 677.4 760.2 755.4 875.6 875.6 891.0 850.4 1. Includes (not shown separately) securities issued to the Rural Electrification Administra- 5. Consists of investments of foreign balances and international accounts in the United tion, depository bonds, retirement plan bonds, and individual retirement bonds. States. 2. Nonmarketable series denominated in dollars, and series denominated in foreign cur- 6. Includes savings and loan associations, nonprofit institutions, credit unions, mutual rency 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 actual SOURCES. U.S. Treasury Department, data by type of security, Monthly Statement of the 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 A3 3 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1995 1995, week ending IItteemm July Aug. Sept. Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 Oct. 4 Oct. 11 Oct. 18 Oct. 25 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 42,521 44,812 48,527 46,234 50,858 46,628 48,928 50,634 42,343 43,957 48,337 41,331 Coupon securities, by maturity 2 Five years or less 88,585 88,513 89,933 83,590 79,347 74,783 87,213 118,160 85,213 76,008 89,090 98,718 3 More than five years 48,238 51,000 49,005 47,257 48,983 45,900 52,648 49,971 45,286 45,596 56,156 48,121 4 Federal agency 21,442 21,039 24,972 23,049 22,997 22,975 24,819 27,798 27,231 21,597 23,937 24,225 5 Mortgage-backed 29,364 27,588 29,574 18,769 26,438 46,352 23,911 23,504 23,234 41.187 34,205 20,949 By type of counterparty With interdealer broker 6 U.S. Treasury 105,382 107,723 110,578 106,013 103,750 100,114 110,626 130,628 100.148 96,410 112,366 109,545 7 Federal agency 673 757 661 835 374 769 749 657 757 723 583 666 8 Mortgage-backed 10,315 8,587 11,127 6,339 9,023 16,930 9,008 10,174 8,511 15,046 13,277 8,369 With other 9 U.S. Treasury 73,961 76,601 76,887 71,068 75.438 67,198 78,164 88,137 72,694 69,151 81,217 78,625 10 Federal agency 20,770 20,282 24,311 22,213 22,623 22,206 24,070 27,141 26,475 20,875 23,354 23,559 11 Mortgage-backed 19,049 19,001 18,447 12,431 17,415 29,422 14,904 13,329 14,723 26.141 20,928 12,579 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 493 764 990 1,240 1,424 1,177 800 887 390 378 585 743 Coupon securities, by maturity 13 Five years or less 1,773 1,747 2,070 2,973 2,440 2,009 1,779 2,347 1,519 1,452 1,448 1,742 14 More than five years 13,585 13,206 16,073 13,914 16,211 14,983 16,563 16,948 15,109 13,858 15,320 13,797 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 n.a. 0 n.a. 0 0 0 0 0 Coupon securities, by maturity 18 Five years or less 2,808r 2,262r 1,602 1,975 1,588 1,044 1,699 1,850 2,162 2,497 2,092 1,486 19 More than five years 4,297r 4,032r 4,257 3,152' 4,374 4,425 4,120 4,273 3,907 4,808 6,107 3,764 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 1.117 1,123 897 1,429 767 1,353 609 710 1,201 1,243 1,334 572 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 of delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt primary dealers. Monthly averages are based on the number of trading days in the month. securities are included when the time to delivery is more than five business days. Forward Transactions are assumed evenly distributed among the trading days of the report week. contracts for mortgage-backed agency securities are included when the time to delivery is Immediate, forward, and futures transactions are reported at principal value, which does not more than thirty business days. include accrued interest; options transactions are reported at the face value of the underlying 3. Futures transactions are standardized agreements arranged on an exchange. All futures securities. 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 on 2. Outright transactions include immediate and forward transactions. Immediate delivery an organized exchange or in the over-the-counter market, and include options on futures refers to purchases or sales of securities (other than mortgage-backed federal agency securi- contracts on U.S. Treasury and federal agency securities. ties) for which delivery is scheduled in five business days or less and "when-issued" NOTE, "n.a." indicates that data are not published because of insufficient activity. securities that settle on the issue date of offering. Transactions for immediate delivery of mortgage- Major changes in the report form filed by primary dealers induced a break in the dealer data backed agency securities include purchases and sales for which delivery is scheduled in thirty business series as of the week ending July 6, 1994. 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 • January 1996 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1995 1995, week ending July Aug. Sept. Aug. 30 Sept. 6 Sept. 13 Sept. 20 Sept. 27 Oct. 4 Oct. 11 Oct. 18 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 8,454 5,044 7,744 1,492 18,803 11,173 8,738 --11,,993355 -2,108 -349 33,,667799 Coupon securities, by maturity 2 Five years or less 2,934 778 7,088 169 6,781 7,447 2,771 8,658 13,277 7,447 8,169 3 More than five years -17,954 -17,786 -17.370 -16,364 -17,106 -15,742 -16,475 -20,317 -16,905 -15,567 -14,084 4 Federal agency 20,134 19,128 21.837 19,133 23,026 21,239 20,380 21,444 25,168 23,566 22,486 5 Mortgage-backed 32,714 30,040 32.596 29,738 31,054 31,607 33,770 33,567 32,985 38,074 38,282 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -5,615 -3,539 -2,440 -3,453 -3,656 -3,569 -997 -1,854 -2,109 --22,,110000 -3,439 Coupon securities, by maturity 7 Five years or less 1,913 2,329 952 1,831 990 1,086 535 1,200 961 -376 -646 8 More than five years -1,271 -1,283 -8.204 -2,677 -5,033 -8,322 -11,675 -7,043 -8,879 -11,754 -14,280 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 NET OPTIONS POSITIONS By type of deliverable security 11 U.S. Treasury bills 0 0 n.a. 0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Coupon securities, by maturity 12 Five years or less 846 2,239 2,175 2,514 2,536 2,085 2,355 1,814 2,089 3,962 3,613 13 More than five years -3,260 -2,883 -3,203 -3,057 -2,895 -4,441 -1,833 -4,043 -2,163 -1,606 -1,516 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 1,802 1,567 1,111 2,136 465 1,195 1,294 1,119 1,758 891 2,063 Financing5 Reverse repurchase agreements 16 Overnight and continuing 222,594 222,035 218,987 211,239 208,646 213,107 230,402 224,873 213,015 221,947 234,239 17 Term 419,813 406,450 418,204 396,801 379,952 420,523 437,529 434,254 406,756 404,185 428,007 Securities borrowed 18 Overnight and continuing 156,460 156,456 164,552 156,079 164,046 167,213 167,421 158,507 166,763 162,135 161,437 19 Term 59,037 62,392 64,797 63,666 61,276 61,460 68,088 68,516 63,271 63,979 67,270 Securities received as pledge 20 Overnight and continuing 2,740 2,063 2,547 1,930 2,514 2,654 2,517 2,502 2,538 2,568 2,693 21 Term 81 112 87 91 180 113 45 44 42 49 33 Repurchase agreements 22 Overnight and continuing 479,826 476,058 494,244 464,861 497,826 501,084 510,364 467,875 495,031 502,149 510,367 23 Term 357,225 344,449 355,324 333,828 308,141 353,552 380,314 381,601 334,203 333,239 363,293 Securities loaned 24 Overnight and continuing 5,717 4,631 6,312 4,820 6,793 6,669 6,350 5,638 6,004 5,995 6,165 25 Term 2,132 2,102 2,478 2,067 2,194 2,534 2,530 2,384 3,012 2,896 2,738 Securities pledged 26 Overnight and continuing 30,162 28,712 33,053 30,836 32,290 31,225 29,361 39,885 31,518 29,612 30,590 27 Term 3,909 3,062 3,643 2,803 2,503 2,277 4,427 5,099 3,880 3,929 3,864 Collateralized loans 28 Overnight and continuing 18,645 16,913 14,509 16,050 15,511 14,345 13,927 14,513 14,236 17,183 18,057 29 Term 4,177 n.a. 2,528 n.a. n.a. n.a. n.a. n.a. 2,528 1,184 2,958 MEMO: Matched book6 Securities in 30 Overnight and continuing 214,055r 214,020r 217,301 . 197,995r 206,305 215,693 226,512 216,745 222,846 226,314 237,025 31 Term 403,020r 394,908r 402,615 390,988' 358,637 404,962 427,363 416,480 394,998 394,221 419,566 Securities out 32 Overnight and continuing 298,309 306,428 316,398 297,731 320,041 326,389 330,499 292,040 309,734 317,824 333,114 33 Term 304,492 291,160 299,663 282,980 255,589 300,029 321,887 322,423 281,991 283,389 305,638 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 futures Reserve Bank of New York by the U.S. government securities dealers on its published list of positions are included regardless of time to delivery. primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar 5. Overnight financing refers to agreements made on one business day that mature on the days of the report week are assumed to be constant. Monthly averages are based on the next business day; continuing contracts are agreements that remain in effect for more than one number of calendar days in the month. business day but have no specific maturity and can be terminated without advance notice by 2. Securities positions are reported at market value. either party; term agreements have a fixed maturity of more than one business day. Financing 3. Net outright positions include immediate and forward positions. Net immediate posi- data are reported in terms of actual funds paid or received, including accrued interest. tions include securities purchased or sold (other than mortgage-backed agency securities) that 6. Matched-book data reflect financial intermediation activity in which the borrowing and have been delivered or are scheduled to be delivered in five business days or less and lending transactions are matched. Matched-book data are included in the financing break- "when-issued" securities that settle on the issue date of offering. Net immediate positions for downs given above. The reverse repurchase and repurchase numbers are not always equal mortgage-backed agency securities include securities purchased or sold that have been because of the "matching" of securities of different values or different types of collateralizadelivered or are scheduled to be delivered in thirty business days or less. tion. Forward positions reflect agreements made in the over-the-counter market that specify NOTE, "n.a." indicates that data are not published because of insufficient activity. delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt Major changes in the report form filed by primary dealers induced a break in the dealer data securities are included when the time to delivery is more than five business days. Forward series as of the week ending July 6, 1994. contracts for mortgage-backed agency securities are included when the time to delivery is more than thirty business days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A3 3 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1995 AAggeennccyy 11999911 11999922 11999933 11999944 Apr. May June July Aug. 1 Federal and federally sponsored agencies 442,772 483,970 570,711 738,928 759,681 771,524 785,982r 788,323 801,819 2 Federal agencies 41,035 41,829 45,193 39,186 38,777 38,720 38,412 39,403 39,581 3 Defense Department1 7 7 6 6 6 6 6 6 6 4 Export-Import Bank2'3 9,809 7,208 5,315 3,455 3,156 3,156 2,652 2,652 2,652 5 Federal Housing Administration4 397 374 255 116 70 78 81 84 83 6 Government National Mortgage Association certificates of participation5 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7 Postal Service6 8,421 10,660 9,732 8,073 7,873 7,615 7,615 8,615 8,615 8 Tennessee Valley Authority 22,401 23,580 29,885 27,536 27,672 27,865 28,058 28,046 28,225 9 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 Federally sponsored agencies7 401,737 442,141 523,452 699,742 720,904 732,804 747,570 748,920 762,238 11 Federal Home Loan Banks 107,543 114,733 139,512 205,817 211,944 218,131 223,089 223,100 228,299 12 Federal Home Loan Mortgage Corporation 30,262 29,631 49,993 93,279 106,432 107,686 108,484 111,427 112,341 13 Federal National Mortgage Association 133,937 166,300 201,112 257,230 258,176 263,023 270,937 268,458 275,271 14 Farm Credit Banks8 52,199 51,910 53,123 53,175 53,629 54,054 53,915 54,635 54,979 15 Student Loan Marketing Association9 38,319 39,650 39,784 50,335 50,758 49,993 51,268 51,325 51,323 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 Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 185,576 154,994 128,187 103,817 95,374 92,739 90,638 88,892 86,776 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 9,803 7,202 5,309 3,449 3,150 3,150 2,646 2,646 2,646 21 Postal Service6 8,201 10,440 9,732 8,073 7,873 7,615 7,615 8,615 8,615 22 Student Loan Marketing Association 4,820 4,790 4,760 n.a. n.a. n.a. n.a. n.a. n.a. 23 Tennessee Valley Authority 10,725 6,975 6,325 3,200 3,200 3,200 3,200 3,200 3,200 24 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Other lending[i 25 Farmers Home Administration 48,534 42,979 38,619 33,719 31,769 30,759 30,004 28,419 27,384 26 Rural Electrification Administration 18,562 18,172 17,578 17,392 17,299 17,313 17,256 17,274 17,276 27 Other 84,931 64,436 45,864 37,984 32,083 30,702 29,917 28,738 27,655 1. Consists of mortgages assumed by the Defense Department between 1957 and 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 insurance 12. The Resolution Funding Corporation, established by the Financial Institutions Reform, claims. Once issued, these securities may be sold privately on the securities market. Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government National 13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations Mortgage Association acting as trustee for the Farmers Home Administration, the Department issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt solely for the of Health, Education, and Welfare, the Department of Housing and Urban Development, the purpose of lending to other agencies, its debt is not included in the main portion of the table to Small Business Administration, and the Veterans Administration. 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. Includes guaranteed by numerous agencies, with the amounts guaranteed by any one agency generally Federal Agricultural Mortgage Corporation; therefore details do not sum to total. Some data being small. The Farmers Home Administration entry consists exclusively of agency assets, are estimated. whereas the Rural Electrification Administration entry consists of both agency assets and 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is 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 • January 1996 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1995 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept. Oct. I All issues, new and refunding' 226,8X8 279,945 153,950 11,844 8,552 11,804 17,956 9,777 12,308 9,764 13,574 By type of issue 2 General obligation 78,611 90,599 54,404 5,459 3,536 4,332 5,755 3,529 4,519 3,635 6,252 3 Revenue 136,580 189,346 99,546 6,385 5,016 7,472 12,201 6,248 7,789 6,129 7,322 By type of issuer 4 State 24,874 27,999 19,186 2,315 994 1,315 1,329 645 617 1,510 1,825 5 Special district or statutory authority2 138,327 178,714 95,896 6,572 5,814 8,039 11,382 7,399 7,491 5,821 7,831 6 Municipality, county, or township 63,617 73,232 38,868 2,957 1,744 2,450 5,245 1,733 4,200 2,433 3,918 7 Issues for new capital 101,865 91,434 105,972 10,538 6,497 8,406 13,796 8,384 7,142 6,843 8,054 By use of proceeds 8 Education 18,852 16,831 21,267 1,666 1,863 2,594 2,494 1,924 11,,118800 1,929 1,725 9 Transportation 14,357 9,167 10,836 454 615 606 3,127 1,926 886699 446 631 10 Utilities and conservation 12,164 12,014 10,192 633 345 1,282 1,235 485 1,504 563 1,794 11 Social welfare 16,744 13,837 20,289 2,556 1,547 1,738 2,062 1,333 1,421 1,228 1,587 12 Industrial aid 6,188 6,862 8,161 1,011 391 416 411 500 201 627 203 13 Other purposes 33,560 32,723 35,227 4,218 1,736 1,770 4,467 2,216 1,967 2,050 2,114 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 1995 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, oorr iissssuueerr 11999922 11999933 11999944 Feb. Mar. Apr.' May June Julyr Aug.r Sept. 1 All issues' 559,827 754,969 n.a. 42,181r 40,098r 30,438 54,577 55,682 33,200 47,001 55,869 2 Bonds2 471,502 641,498 n.a. 37,350r 37,178r 26,909 48,579 48,585 29,075 41,070 49,000 By type of offering 3 Public, domestic 337788,,005588 486,879 365,050 29,452r 32,990r 22,756 40,052 42,398 23.147 32,351 43,000 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 56,238 7,898 4,188 4,153 8,528 6,186 5,928 8,718 6,000 By industry group 6 Manufacturing 8822,,005588 88,002 31,981 4,450 2,174r 2,876 2,139 6,330 4,456 3,982 4,580 7 Commercial and miscellaneous 43,111 60,293 27,900 3,038 1,978 1,815 6,085 4,528 1,078 2,480 22,,118822 8 Transportation 9,979 10,756 4,573 110r 403 800 955 657 10 133 990088 9 Public utility 48,055 56,272 11,713 265r 959 331 2,530 2,661 498 620 1,819 10 Communication 15,394 31,950 11,986 1,127 411 336 1,767 1,745 1,520 1,089 2,787 11 Real estate and financial 272,904 394,226 333,135 28,360 31,254"" 20,752 35,103 32,664 21,513 32,764 36,724 12 Stocks2 88,325 113,472 n.a. 4,831 2,920 3,876 6,208 7,651 4,503 6,098 6,869 By type of offering 13 Public preferred 2211,,333399 18,897 12,432 296 205 656 1,507 726 753 1,234 1,010 14 Common 57,118 82,657 47,881 4,535 2,715 3,221 4,701 6,925 3,750 4,864 5,859 15 Private placement3 9,867 11,917 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 22,723 22,271 1,582 1,010 634 2,369 2,324 1,306 2,215 2,064 17 Commercial and miscellaneous 20,231 25,761 n.a. l,502r 907 2,150 1,133 2,742 1,882 1,431 2,677 18 Transportation 2,595 2,237 15 60 48 101 0 0 78 93 19 Public utility 6,532 7,050 258 137 141 185 209 133 91 190 20 Communication 2,366 3,439 0 20 0 0 0 64 0 41 21 Real estate and financial 33,879 52,021 l,475r 786 903 2,322 2,376 1,117 2,277 1,804 1. Figures represent gross proceeds of issues maturing in more than one year; they are the 2. Monthly data cover only public offerings. principal amount or number of units calculated by multiplying by the offering price. Figures 3. Monthly data are not available. exclude secondary offerings, employee stock plans, investment companies other than closed- SOURCES. Beginning July 1993, Securities Data Company and the Board of Governors of end, intracorporate transactions, equities sold abroad, and Yankee bonds. Stock data include the Federal Reserve System. 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 Assets' Millions of dollars 1995 IItteemm 11999933 11999944 Feb. Mar. Apr. May June July Aug. Sept. 1 Sales of own shares2 851,885 841,286 59,121 69,898 68,294 70,798 74,749 76,081 72,113 68,772 2 Redemptions of own shares 567,881 699,823 50,738 60,970 59,957 57,033 61,932 56,344 57,610 54,443 3 Net sales3 284,004 141,463 8,383 8,928 8,337 13,765 12,817 19,736 14,503 14,329 4 Assets4 1,510,209 1,550,490 1,619,705 1,657,370 1,710,280 1,769,287 1,808,753 1,880,754 1,908,525 1,963,184 5 Cash5 100,209 121,296 126,307 121,424 124,092 128,375 122,461 126,340 127,173 127,682 6 Other 1,409,838 1,429,195 1,493,399 1,535,946 1,586,187 1,640,913 1,686,292 1,754,415 1,781,352 1,835,502 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 market 5. Includes all U.S. Treasury securities and other short-term debt securities. 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 gains comprises substantially all open-end investment companies registered with the Securities and distributions and share issue of conversions from one fund to another in the same group. Exchange Commission. Data reflect underwritings of newly formed companies after their 3. Excludes sales and redemptions resulting from transfers of shares into or out of money initial offering of securities. 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 1995 AAccccoouunntt 11999922 11999933 11999944 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 1 Profits with inventory valuation and capital consumption adjustment 405.1 485.8 542.7 533.9 508.2 546.4 556.0 560.3 569.7 581.1 n.a. 2 Profits before taxes 395.9 462.4 524.5 501.7 483.5 523.1 538.1 553.5 570.6 574.1 n.a. 3 Profits-tax liability 139.7 173.2 202.5 191.5 184.1 201.7 208.6 215.6 220.0 220.4 n.a. 4 Profits after taxes 256.2 289.2 322.0 310.2 299.4 321.4 329.5 337.9 350.7 353.6 n.a. 5 Dividends 171.1 191.7 205.2 194.6 196.3 202.5 207.9 213.9 217.1 219.9 223.7 6 Undistributed profits 85.1 97.5 116.9 115.6 103.0 118.9 121.6 124.0 133.5 133.8 n.a. 7 Inventory valuation -6.4 -6.2 -19.5 -6.5 -12.3 -14.1 -19.6 -32.1 -39.0 -28.2 -7.4 8 Capital consumption adjustment 15.7 29.5 37.7 38.8 37.0 37.4 37.5 38.8 38.1 35.2 35.4 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 1199994411 Ql Q2 Q3 Q4 Ql Q2 Q3 Q41 1 Total nonfarm business 546.60 586.73 638.37 563.48 578.95 594.56 604.51 619.34 637.08 651.92 645.13 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 other2 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 • January 1996 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities' Billions of dollars, end of period; not seasonally adjusted 1994 1995 AAccccoouunntt 11999922 11999933 11999944 Q1 Q2 Q3 Q4 Q1 Q2 Q3 ASSETS 1 Accounts receivable, gross2 491.8 482.8 551.0 494.5 511.3 524.1 551.0 568.5 586.9 594.1 Consumer 118.3 116.5 134.8 120.1 124.3 130.3 134.8 135.8 141.7 146.2 3 Business 301.3 294.6 337.6 302.3 313.2 317.2 337.6 351.9 361.8 336611..88 4 Real estate 72.2 71.7 78.5 72.1 73.8 76.6 78.5 80.8 83.4 8866..11 5 LESS; Reserves for unearned income 53.2 50.7 55.0 51.2 51.9 51.1 55.0 58.9 62.1' 61.2 6 Reserves for losses 16.2 11.2 12.4 11.6 12.1 •12.1 12.4 12.9 13.7 13.8 7 Accounts receivable, net 422.4 420.9 483.5 431.7 447.3 460.9 483.5 496.7 511.1 519.0 8 All other 142.5 170.9 183.4 171.2 174.6 177.2 183.4 194.6 198.1r 198.1 9 Total assets 564.9 591.8 666.9 602.9 621.9 638.1 666.9 691.4 709.2r 717.1 LIABILITIES AND CAPITAL 10 Bank loans 37.6 25.3 21.2 24.2 23.3 21.6 21.2 21.0 21.5 21.8 11 Commercial paper 156.4 159.2 184.6 165.9 171.2 171.0 184.6 181.3 181.3 178.0 Debt 12 Owed to parent 39.5 42.7 51.0 41.1 44.7 50.0 51.0 52.5 57.5 59.0 13 Not elsewhere classified 196.3 206.0 235.0 211.7 219.6 228.2 235.0 254.4 264.4 272.1 14 All other liabilities 68.0 87.1 99.5 90.5 89.9 95.0 99.5 102.5 102.1 101.7 15 Capital, surplus, and undivided profits 67.1 71.4 75.7 69.5 73.2 72.3 75.7 79.7 82.5 84.4 16 Total liabilities and capital 564.9 591.8 666.9 602.9 621.9 638.1 666.9 691.4 709.2r 717.1 1. Includes finance company subsidiaries of bank holding companies but not of retailers 2. Before deduction for unearned income and losses, and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. 1.52 DOMESTIC FINANCE COMPANIES Consumer, Real Estate, and Business Credit1 Millions of dollars, amounts outstanding, end of period 1995 TTyyppee ooff ccrreeddiitt 11999922 11999933 11999944 Apr. May June Julyr Aug.r Sept. Seasonally adjusted 1 Total 539,996 545,533 614,784 644,041 653,872 660,714 661,656 670,755 673,546 2 Consumer.. 157,579 160,349 176,198 181,775 186,584 188,666 189,898 191,199 192,630 3 Real estate' 72,473 71,965 78,770 81,877 82,843 84,198 84,886 85,756 86,121 4 Business.. 309,944 313,219 359,816 380,389 384,446 387,850 386,872 393,800 394,795 Not seasonally adjusted 5 Total 544,691 550,751 620,975 646,621 653,503 661,910 658,140 664,492 670,957 6 Consumer 159,558 162,770 178,999 181,598 184,616 187,303 187,803 190,226 192,690 1 1 9 8 7 0 1 Re S S M O al e e t o c c h e t u u e s o r r r t r i i a t t c t i i v e z z o e 2 e e n h d d s i u c o m l m e th o s e e t r o r 3 r c v o e n h su ic m le e s r 4 4 2 7 5 6 1 9 2 1 7 1 , , , , , 7 2 0 2 5 3 4 4 2 5 4 3 5 0 9 7 5 6 3 1 1 6 6 0 0 , , , , , 7 0 0 3 2 2 2 5 9 9 7 4 7 6 3 3 7 6 7 1 1 8 3 1 2 , , , , , 8 2 4 6 2 2 9 7 0 7 1 7 9 9 2 6 7 3 8 1 1 2 2 5 2 , , , , , 2 4 1 3 5 6 3 0 6 3 1 5 4 9 3 6 7 3 8 1 2 2 3 5 2 , , , , , 7 1 6 9 8 3 1 6 8 4 5 7 7 9 3 6 7 3 8 1 6 3 2 5 3 , , , , , 5 3 1 1 4 8 5 3 6 2 1 1 5 2 5 3 8 6 7 1 4 2 6 5 3 , , , , , 9 3 3 8 2 8 8 0 6 5 7 1 2 1 9 3 6 7 8 1 1 6 7 7 3 , , , , , 5 1 2 6 7 5 0 5 6 5 1 7 1 7 7 6 7 3 8 1 1 6 7 8 5 , , , , , 1 1 3 8 3 1 2 4 5 7 7 8 5 7 1 12 Business 312,890 316,254 363,497 382,919 386,152 391,256 385,350 388,159 392,139 1 1 1 3 4 5 Mo W R to e h r ta o v i l l e e 5 s h a ic le l 6 e s 8 2 2 9 0 9 , , , 0 5 8 1 4 9 1 1 0 9 3 1 5 1 8 , , , 1 1 0 4 7 9 8 3 1 1 2 3 1 1 5 8 , , , 5 0 1 1 3 9 4 7 7 1 2 3 2 9 2 8 , , , 5 3 5 7 7 7 4 0 2 1 2 3 2 1 9 8 , , , 2 5 3 2 1 1 8 2 2 1 2 3 2 2 6 7 , , , 1 9 48 4 8 7 2 9 1 2 3 2 2 2 4 , , , 1 9 0 4 5 0 7 3 5 1 2 3 2 1 3 4 , , , 3 4 0 9 8 4 2 7 8 1 2 2 2 5 9 4 , , , 0 3 4 0 1 0 6 3 0 16 Leasing 38,580 45,934 61,646 66,628 67,572 68,356 68,905 69,169 70,081 17 Equipment 151,424 145,452 157,953 162,623 165,219 169,995 170,253 170,825 171,239 1 1 8 9 R W e h ta o i l l e sale6 33 8 , , 5 6 2 8 1 0 35 8 , , 5 0 1 0 3 1 39 9 , , 6 6 8 7 0 8 40 9 , , 8 6 8 6 0 1 4 1 1 0 , , 2 6 6 4 4 3 4 1 2 1 , , 0 7 0 2 8 5 4 1 2 2 , , 5 1 4 1 1 1 4 1 3 2 , , 1 2 2 7 1 8 4 1 2 2 , , 8 2 2 1 3 0 2 2 2 0 1 2 O Se th L cu e e r r a i s t b i i z u n e s g d i n e b s u s s 7 i ness assets4 1 6 0 1 0 9 1 , , , 8 5 2 5 9 2 6 9 3 1 5 2 0 1 3 1 , , , 6 9 9 3 9 3 2 7 8 1 6 2 0 1 5 8 , , , 4 8 5 9 5 9 5 2 5 1 6 2 1 7 4 2 , , , 2 4 0 9 2 8 8 6 2 1 6 2 1 8 4 3 , , , 5 0 3 2 9 1 2 9 2 1 6 2 1 4 9 6 , , , 3 4 2 6 0 6 5 9 2 1 6 2 1 3 7 5 , , , 8 2 6 6 2 0 9 3 1 1 6 2 1 4 8 5 , , , 8 3 4 9 8 2 8 8 6 1 6 3 1 6 0 6 , , , 1 3 2 1 8 0 1 9 6 23 Retail 1,120 2,869 4,494 4,937 5,224 4,989 4,784 4,587 5,293 24 Wholesale 5,756 10,584 14,826 16,561 17,676 18,310 16,469 17,986 19,180 25 Leasing 4,723 8,179 6,532 5,800 5,622 6,110 5,970 5,815 5,916 1. Includes finance company subsidiaries of bank holding companies but not of retailers 4. Outstanding balances of pools upon which securities have been issued; these balances and banks. Data are before deductions for unearned income and losses. Data in this table also are no longer carried on the balance sheets of the loan originator. appear in the Board's G.20 (422) monthly statistical release. For ordering address, see inside 5. Passenger car fleets and commercial land vehicles for which licenses are required. front cover. 6. Credit arising from transactions between manufacturers and dealers, that is, floor plan 2. Includes all loans secured by liens on any type of real estate, for example, first and junior financing. mortgages and home equity loans. 7. Includes loans on commercial accounts receivable, factored commercial accounts, and 3. Includes personal cash loans, mobile home loans, and loans to purchase other types of receivable dealer capital; small loans used primarily for business or farm purposes; and consumer goods such as appliances, apparel, general merchandise, and recreation vehicles. wholesale and lease paper for mobile homes, campers, and travel trailers. Digitized for FRASER 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 1995 IItteemm 11999922 11999933 11999944 Apr. May June July Aug. Sept. Oct. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms' 1 Purchase price (thousands of dollars) 158.1 163.1 170.4 174.7 178.1 181.7 169.4 170.4 174.8 174.3 2 Amount of loan (thousands of dollars) 118.1 123.0 130.8 134.6 136.3 137.7 130.4 130.6 131.8 133.0 3 Loan-to-price ratio (percent) 76.6 78.0 78.8 79.2 78.7 78.2 78.9 78.9 78.1 77.8 4 Maturity (years) 25.6 26.1 27.5 28.1 28.4 27.2 26.6 27.3 28.0 26.6 5 Fees and charges (percent of loan amount)2 1.60 1.30 1.29 1.14 1.30 1.18 1.18 1.12 1.20 1.11 Yield (percent per year) 6 Contract rate1 7.98 7.03 7.26 7.96 7.79 7.54 7.58 7.56 7.50 7.39 7 Effective rate1'3 8.25 7.24 7.47 8.15 7.99 7.73 7.78 7.75 7.69 7.58 8 Contract rate (HUD series)4 8.43 7.37 8.58 8.44 7.84 7.80 7.98 7.91 7.78 7.62 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 8.46 7.46 8.68 8.56 8.03 8.00 8.09 88..0033 88..0033 77..6611 10 GNMA securities6 7.71 6.65 7.96 7.96 7.53 7.24 7.27 7.49 7.26 7.16 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 158,119 190,861 222,057 226,197 228,078 232,534 235,882 238,850 241,378 246,234 1? FHA/VA insured 22,593 23,857 28,377 28,664 28,576 28,886 28,761 28,640 28,515 28,442 13 Conventional 135,526 167,004 194,499 198,161 200,004 204,022 207,227 210,063 212,652 217,469 14 Mortgage transactions purchased (during period) 75,905 92,037 62,389 3,709 3,787 6,575 5,657 5,688 5,002 7,443 Mortgage commitments (during period) 15 Issued7 74,970 92,537 54,038 3,277 6,085 5,605 4,512 6,284 6,019 6,732 16 To sell8 10,493 5,097 1,820 22 28 9 26 53 9 0 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 17 Total 33,665 55,012 72,693 79,147 81,008 85,532 88,874 91,544 94,989 99,758 18 FHA/VA insured 352 321 276 262 257 253 250 246 28 lr 276 19 Conventional 33,313 54,691 72,416 78,885 80,751 85,278 88,624 91,298 94,708r 99,482 Mortgage transactions (during period) ?0 Purchases 191,125 229,242 124,697 4,530 10,982 7,001 7,316 9,594 11,458 11,092 21 Sales 179,208 208,723 117,110 3,805 10,479 5,326 6,074 8,161 10,239 9,856 22 Mortgage commitments contracted (during period)9 261,637 274,599 136,067 13,437 4,549 6,198 8,106 10,578 12,469 10,388 1. Weighted averages based on sample surveys of mortgages originated by major institu- 6. Average net yields to investors on fully modified pass-through securities backed by tional lender groups for purchase of newly built homes; compiled by the Federal Housing mortgages and guaranteed by the Government National Mortgage Association (GNMA), 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 the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. 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 U.S. 9. Includes conventional and government-underwritten loans. The Federal Home Loan Department of Housing and Urban Development (HUD). Based on transactions on the first Mortgage Corporation's mortgage commitments and mortgage transactions include activity day of the subsequent month. under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured exclude swap activity. by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic NonfinancialS tatistics • January 1996 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1994 1995 Type of holder and property 11999911 11999922 11999933 Q2 Q3 Q4 Q1 Q2P 1 All holders 3,926,337 4,056,233 4,229,592 4,315,839 4,375,155 4,426,606 4,474,715 4,527,103 By type of property 2 One- to four-family residences 2,781,327 2.963.391 3,149,634 3,235,939 3,292,201 3,344,791 3,383,139 3,431,841 3 Multifamily residences 306,551 295,417 291,985 295,013 297,650 296,902 298,230 300,629 4 Commercial 759,154 716.687 706,780 702,821 702,679 701,941 709,942 710,266 5 Farm 79.305 80.738 81,194 82,066 82,625 82,971 83,404 84,367 By type of holder 6 Major financial institutions 1,846,726 1.769.187 1,767,835 1.763.227 1.786.074 1.815,810 1.841,815 1,865,145 7 Commercial banks" 876.100 894.513 940,444 956,840 981,365 1,004,280 1,024,854 1,052,882 8 One- to four-family 483,623 507.780 556,538 569,512 592,021 611,697 625,378 648,815 9 Multifamily 36,935 38.024 38,635 38,609 38,004 38,916 39,746 40,519 10 Commercial 337,095 328,826 324,409 326,800 328,931 331,100 336,795 339,983 11 Farm 18,447 19.882 20,862 21,918 22,408 22,567 22,936 23,564 12 Savings institutions3 705,367 627.972 598,330 585,671 587,545 596,198 601,777 598,876 13 One- to four-family 538,358 489.622 469,959 462,219 466,704 477.499 483,625 481,434 14 Multifamily 79.881 69.791 67,362 66,281 65,532 64,400 63,778 64,373 15 Commercial 86.741 68.235 60,704 56,872 55,017 54.011 54,085 52,788 16 Farm 388 324 305 299 291 289 288 281 17 Life insurance companies 265,258 246.702 229,061 220,716 217,165 215,332 215,184 213,387 18 One- to four-family 11,547 11,441 9,458 8,122 7,984 7,910 7,892 7,817 19 Multifamily 29,562 27,770 25,814 24,958 24,534 24,306 24,250 24,019 20 Commercial 214.105 198,269 184,305 178,194 175,168 173,539 173,142 171,493 21 Farm 10,044 9,222 9,484 9,442 9,479 9,577 9,900 10,058 22 Federal and related agencies 266.146 286.263 328,598 329,725 329,304 323,491 319,770 315,211 23 Government National Mortgage Association . . . 19 30 22 12 12 6 15 10 24 One- to four-family 19 30 15 12 12 6 15 10 25 Multifamily 0 0 7 0 0 0 0 0 26 Farmers Home Administration4 41,713 41,695 41,386 41,370 41,587 41,781 41,857 41,917 27 One- to four-family 18,496 16,912 15.303 14,459 14,084 13,826 13,507 13,217 28 Multifamily 10.141 10,575 10,940 11,147 11,243 11,319 11,418 11,512 29 Commercial 4,905 5.158 5,406 5,526 5,608 5,670 5,807 5,949 30 Farm 8,171 9,050 9,739 10,239 10,652 10,966 11,124 11,239 31 Federal Housing and Veterans' Administrations 10,733 12.581 12,215 11,169 10,533 10,964 10,890 10,098 32 One- to four-family 4,036 5,153 5,364 4,826 4,321 4,753 4,715 4,838 33 Multifamily 6,697 7,428 6,851 6,343 6,212 6,211 6,175 5,260 34 Resolution Trust Corporation 45,822 32,045 17,284 13,908 15,403 10,428 9,342 6,456 35 One- to four-family 14,535 12,960 7,203 6,045 6,998 5,200 4,755 2,870 36 Multifamily 15.018 9.621 5,327 4,230 4,569 2,859 2,494 1,940 37 Commercial 16.269 9,464 4,754 3,633 3,836 2,369 2,092 1,645 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 0 0 14,112 11,407 9,169 7,821 6,730 6,039 40 One- to four-family 0 0 2,367 1,706 1,241 1,049 840 731 41 Multifamily 0 0 1,426 1.701 2,090 1,595 1,310 1,135 42 Commercial 0 0 10,319 8,000 5,838 5,177 4,580 4,173 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 112,283 137,584 166,642 175.377 177,200 178,059 177,615 178,462 45 One- to four-family 100.387 124,016 151,310 159,437 161,255 162,160 161,780 162,674 46 Multifamily 11.896 13.568 15,332 15.940 15,945 15,899 15,835 15,788 47 Federal Land Banks 28,767 28,664 28,460 28,475 28,538 28,555 28,065 28,005 48 One- to four-family 1,693 1,687 1,675 1,675 1,679 1,671 1,651 1,648 49 Farm 27.074 26.977 26,785 26,800 26,859 26,885 26,414 26,357 50 Federal Home Loan Mortgage Corporation 26,809 33.665 48,476 48,007 46,863 45,876 45,256 44,224 51 One- to four-family 24.125 31,032 45,929 45,427 44,208 43,046 42,122 40,963 52 Multifamily 2,684 2,633 2,547 2,580 2.655 2,830 3,134 3,261 53 Mortgage pools or trusts5 1,250.666 1,425,546 1.553,818 1,652,999 1,682,421 1,703,076 1,714,357 1,737,483 54 Government National Mortgage Association . .. 425,295 419,516 414,066 435,709 444,976 450,934 454,401 457,101 55 One- to four-family 415.767 410,675 404,864 426,363 435,511 441,198 444,632 446,855 56 Multifamily 9,528 8,841 9,202 9,346 9,465 9,736 9,769 10,246 57 Federal Home Loan Mortgage Corporation 359.163 407,514 446,029 479,555 482,987 486,480 488,723 496,139 58 One- to four-family 351.906 401,525 441,494 475,733 479,539 483,354 485,643 493,105 59 Multifamily 7.257 5.989 4,535 3.822 3,448 3,126 3,080 3,034 60 Federal National Mortgage Association 371,984 444.979 495,525 514,855 523,512 530,343 533,262 543,669 61 One- to four-family 362,667 435.979 486.804 505,730 514,375 520,763 523,903 533,091 62 Multifamily 9,317 9,000 8,721 9,125 9,137 9,580 9,359 10,578 63 Farmers Home Administration4 47 38 28 22 20 19 14 13 64 One- to four-family 11 8 5 4 4 3 2 2 65 Multifamily 0 0 0 0 0 0 0 0 66 Commercial 19 17 13 10 9 9 7 6 67 Farm 17 13 10 8 7 7 5 5 68 Private mortgage conduits 94,177 153,499 198,171 222,858 230,926 235,300 237,957 240,561 69 One- to four-family 84,000 132.000 164,000 179,500 182,300 183,600 184,400 187,000 70 Multifamily 3,698 6,305 8,701 11,514 13,891 14,925 15,743 15,745 71 Commercial 6,479 15,194 25,469 31,844 34,735 36,774 37,814 37,816 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others6 562.798 575,237 579,341 569,887 577,356 584,229 598,772 609,264 74 One- to four-family 370,157 382,572 387,345 375,167 379,964 387,057 398,279 406,770 75 Multifamily 83.937 85,871 86.586 89,417 90,924 91,201 92,137 93,218 76 Commercial 93.541 91,524 91,401 91,943 93,538 93,292 95,620 96,413 77 Farm 15,164 15,270 14,009 13,360 12,929 12,681 12,736 12,863 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 local 2. Includes loans held by nondeposit trust companies but not loans held by bank trust credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and departments. finance companies. 3. Includes savings banks and savings and loan associations. SOURCES. Based on data from various institutional and government sources. Separation of 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from nonfarm mortgage debt by type of property, if not reported directly, and interpolations and FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting extrapolations, when required for some quarters, are estimated in part by the Federal Reserve. changes by the Farmers Home Administration. Line 69 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 1995 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999922 11999933 11999944 Apr. May June July Aug.' Sept. Seasonally adjusted 1 Total 730,847 790,351 902,853 946,452 959,593 970,741 979,387r 989,720 995,136 2 Automobile 257,436 280,566 317,237 326,431 330,390 333,164 337,588 339,634 341,387 3 Revolving 258,081 286,588 334,511 359,655 367,117 373,572 376,802r 381,188 384,025 4 Other2 215,331 223,197 251,106 260,366 262,086 264,005 264,998r 268,898 269,724 Not seasonally adjusted 5 Total 748,057 809,440 925,000 938,108 951,096 964,362 971,416r 988,988 997,869 By major holder 6 Commercial banks 330,088 367,566 427,851 431,444 434,863 437,498 441,165 451,784 449,502 7 Finance companies 118,279 116,453 134,830 137,804 139,632 141,743 142,163 144,918 146,202 8 Credit unions 91,694 101,634 119,594 123,233 125,052 126,352 127,413r 129,683 131,203 9 Savings institutions 37,049 37,855 38,468 37,499 37,500 37,501 38,001 38,000 38,000 10 Nonfinancial business3 49,561 55,296 60,957 55,116 55,914 56,349 56,360 55,723 54,177 11 Pools of securitized assets4 121,386 130,636 143,300 153,012 158,135 164,919 166,314' 168,880 178,785 By major type of credit 12 Automobile 258,226 281,458 318,213 324,146 328,932 333,194 336,614 341,579 344,636 13 Commercial banks 109,623 122,000 141,851 142,014 142,865 144,761 146,149 148,549 148,901 14 Finance companies 57,259 56,057 61,609 62,435 63,689 65,162 65,861 67,667 68,857 15 Pools of securitized assets4 33,888 39,481 34,918 35,319 36,244 36,690 37,071 36,681 37,476 16 Revolving 271,850 301,837 352,266 355,012 362,283 368,809 372,030' 379,295 382,263 17 Commercial banks 132,966 149,920 180,183 180,609 183,006 182,950 184,245 189,163 185,572 18 Nonfinancial business3 44,466 50,125 55,341 49,773 50,595 51,040 51,077 50,437 48,906 19 Pools of securitized assets4 74,921 79,878 94,376 103,188 106,811 112,575 113,782 116,268 123,811 20 Other 217,981 226,145 254,521 258,950 259,881 262,359 262,772' 268,114 270,970 21 Commercial banks 87,499 95,646 105,817 108,821 108,992 109,787 110,771 114,072 115,029 22 Finance companies 61,020 60,396 73,221 75,369 75,943 76,581 76,302 77,251 77,345 23 Nonfinancial business3 5,095 5,171 5,616 5,343 5,319 5,309 5,283 5,286 5,271 24 Pools of securitized assets4 12,577 11,277 14,006 14,505 15,080 15,654 15,461' 15,931 17,498 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 3. Includes retailers and gasoline companies. extended to individuals that is scheduled to be repaid (or has the option of repayment) in two 4. Outstanding balances of pools upon which securities have been issued; these balances or more installments. Data in this table also appear in the Board's G.19 (421) monthly are no longer carried on the balance sheets of the loan originator. statistical release. For ordering address, see inside front cover. 5. Totals include estimates for certain holders for which only consumer credit totals are 2. Comprises mobile home loans and all other installment loans that are not included in available. automobile or revolving credit, such as loans for education, boats, trailers, or vacations. These loans may be secured or unsecured. 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent per year except as noted 1995 IItteemm 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept. INTEREST RATES Commercial banks2 1 48-month new car 9.29 8.09 8.12 n.a. n.a. 9.78 n.a. n.a. 9.44 n.a. 2 24-month personal 14.04 13.47 13.19 n.a. n.a. 14.03 n.a. n.a. 13.84 n.a. Credit card plan 3 All accounts n.a. n.a. 15.69 n.a. n.a. 16.15 n.a. n.a. 15.98 n.a. 4 Accounts assessed interest n.a. n.a. 15.77 n.a. n.a. 16.23 n.a. n.a. 15.94 n.a. Auto finance companies 5 New car 9.93 9.48 9.79 11.95 11.74 11.43 11.08 11.01 10.85 10.75 6 Used car 13.80 12.79 13.49 15.10 14.99 14.78 14.63 14.35 14.23 14.12 OTHER TERMS3 Maturity (months) 1 New car 54.0 54.5 54.0 54.5 54.6 54.4 53.9 54.1 53.5 53.4 8 Used car 47.9 48.8 50.2 52.1 52.2 52.2 52.3 52.4 52.3 52.3 Loan-to-value ratio 9 New car 89 91 92 92 92 92 92 92 92 92 10 Used car 97 98 99 99 100 99 99 100 99 100 Amount financed (dollars) 11 New car 13,584 14,332 15,375 15,826 16,029 16,155 16,083 16,086 16,056 16,402 12 Used car 9,119 9,875 10,709 11,220 11,505 11,396 11,518 11,637 11,662 11,725 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 2. Data are available for only the second month of each quarter, extended to individuals that is scheduled to be repaid (or has the option of repayment) in two 3. At auto finance companies, or more installments. Data in this table also appear in the Board's G.19 (421) monthly statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • January 1996 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1993 1994 1995 Transaction rateaorv rtr sertnr 11999900 11999911 11999922 11999933 Q4 Q1 Q2 Q3 Q4 Ql Q2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 635.3 478.7 540.6 618.5 602.4 660.0 650.3 527.8 607.6 623.9 842.4 819.6 By sector and instrument 2 U.S. government 246.9 278.2 304.0 256.1 155.9 274.2 210.5 122.9 133.6 156.4 271.8 193.6 3 Treasury securities 238.7 292.0 303.8 248.3 155.7 266.5 211.8 118.2 130.7 162.1 273.0 192.0 4 Budget agency issues and mortgages 8.2 -13.8 .2 7.8 .2 7.7 -1.3 4.7 2.9 -5.7 -1.2 1.6 5 Private 388.4 200.4 236.7 362.4 446.6 385.8 439.7 404.9 474.0 467.5 570.6 626.0 By instrument 6 Tax-exempt obligations 48.7 68.7 31.1 75.5 -29.9 27.3 13.1 -28.4 -46.4 -57.9 -57.4 -20.3 / Corporate bonds 47.1 78.8 67.6 75.2 22.0 67.4 35.4 35.9 14.2 2.7 41.4 119.5 8 Mortgages 199.5 161.4 123.9 155.7 187.2 148.5 166.4 170.3 221.0 191.3 241.1 163.2 y Home mortgages 185.6 163.8 179.5 183.9 195.2 184.6 194.7 164.4 220.8 200.7 207.2 153.3 10 Multifamily residential 4.8 -3.1 -11.2 -6.0 1.7 -2.3 .4 4.4 6.6 -4.6 3.6 8.0 ii Commercial 9.3 .4 -45.5 -22.6 -11.4 -33.9 -29.3 -1.4 -8.6 -6.2 28.6 -1.9 12 Farm -.3 .4 1.1 .5 1.8 .2 .6 2.9 2.2 1.4 1.7 3.9 13 Consumer credit 15.6 -14.8 7.3 58.9 121.2 110.1 68.7 122.8 131.6 161.5 100.3 147.9 14 Bank loans n.e.c .4 -40.9 -13.8 4.8 71.4 26.9 69.1 53.6 89.5 73.6 139.8 102.2 15 Commercial paper 9.7 -18.4 8.6 10.0 21.4 3.8 8.2 16.4 33.8 27.2 1.1 44.8 16 Other loans 67.5 -34.4 11.9 -17.7 53.2 1.8 78.9 34.3 30.2 69.2 104.3 68.6 By borrowing sector 17 Household 218.5 171.1 214.2 280.9 353.5 335.0 307.4 308.0 392.1 406.4 324.4 324.7 18 Nonfinancial business 123.9 -33.3 .8 18.5 137.1 33.8 135.2 144.2 135.2 133.8 302.4 328.8 19 Farm 2.3 2.1 1.0 2.0 2.8 3.6 2.9 8.7 2.2 -2.4 .6 6.8 20 Nonfarm noncorporate 10.1 -27.9 -43.5 -24.6 15.5 -15.3 11.8 12.7 18.1 19.2 71.8 32.0 21 Corporate 111.4 -7.4 43.2 41.1 118.8 45.5 120.6 122.7 115.0 117.0 230.0 289.9 22 State and local government 46.0 62.6 21.7 63.0 -44.0 17.0 -2.9 -47.2 -53.4 -72.6 -56.2 -27.5 23 Foreign net borrowing in United States 23.9 14.8 22.6 68.8 -20.3 41.8 -98.0 -37.0 20.6 32.9 64.3 36.0 24 Bonds 21.4 15.0 15.7 81.3 7.1 60.1 -2.6 -17.4 20.8 27.7 13.5 46.7 2b Bank loans n.e.c -2.9 3.1 2.3 .7 1.4 -6.3 6.0 -4.5 4.7 -.5 8.1 5.6 26 Commercial paper 12.3 6.4 5.2 -9.0 -27.3 -12.0 -101.8 -5.2 -8.1 5.9 37.9 -9.6 27 U.S. government and other loans -7.0 -9.8 -.6 -4.2 -1.6 .0 .5 -9.9 3.3 -.2 4.9 -6.7 28 Total domestic plus foreign 659.2 493.4 563.3 687.3 582.1 701.8 552.3 490.9 628.2 656.8 906.7 855.6 Financial sectors 29 Total net borrowing by financial sectors 202.6 151.7 239.2 289.5 456.3 364.3 520.6 370.8 412.1 521.9 315.3 381.7 By instrument 30 U.S. government-related 167.4 145.7 155.8 164.2 284.3 143.3 336.8 254.7 243.1 302.4 125.4 186.1 31 Government-sponsored enterprises securities 17.1 9.2 40.3 80.6 176.9 53.4 160.0 146.6 152.1 249.0 62.9 127.2 32 Mortgage pool securities 150.3 136.6 115.6 83.6 112.1 89.9 196.0 108.1 91.0 53.4 62.5 59.0 33 Loans from U.S. government -.1 .0 .0 .0 -4.8 .0 -19.2 .0 .0 .0 .0 .0 34 35.3 6.0 83.4 125.3 172.1 221.0 183.8 116.1 169.0 219.5 189.9 195.6 35 Corporate bonds 46.0 66.8 80.5 118.6 110.2 140.8 158.1 95.4 95.9 91.2 150.3 145.3 36 Mortgages .6 .5 .6 3.6 9.8 5.5 9.8 12.4 12.0 4.9 5.1 4.8 3/ Bank loans n.e.c 4.7 8.8 2.2 -14.0 -12.3 -18.0 -9.9 -27.7 -11.9 .5 17.8 10.1 38 Open market paper 8.6 -32.0 -.7 -6.2 41.6 76.0 36.6 3.6 42.3 84.0 40.3 33.3 39 Loans from Federal Home Loan Banks -24.7 -38.0 .8 23.3 22.8 16.8 -10.8 32.3 30.7 38.8 -23.6 2.2 By borrowing sector 40 Government-sponsored enterprises 17.0 9.1 40.2 80.6 172.1 53.4 140.8 146.6 152.1 249.0 62.9 127.2 41 Federally related mortgage pools 150.3 136.6 115.6 83.6 112.1 89.9 196.0 108.1 91.0 53.4 62.5 59.0 42 Private 35.3 6.0 83.4 125.3 172.1 221.0 183.8 116.1 169.0 219.5 189.9 195.6 43 Commercial banks -.7 -11.7 8.8 5.6 10.0 1.2 2.0 12.4 22.8 2.9 9.3 18.4 44 Bank holding companies -27.7 -2.5 2.3 8.8 10.3 12.2 3.5 10.1 11.5 16.0 13.4 20.3 45 Funding corporations 15.4 -6.5 13.2 2.9 24.2 36.7 48.8 -17.2 47.2 17.9 62.3 10.4 46 Savings institutions -30.2 -44.5 -6.7 11.1 12.8 8.8 -5.6 5.8 14.8 36.1 -19.2 -6.9 47 Credit unions .0 .0 .0 .2 .2 .1 .1 .2 .5 .2 -.3 -.1 48 Life insurance companies .0 .0 .0 .2 .3 .4 .0 .0 .0 1.3 .0 .1 49 Finance companies 23.8 17.7 -1.6 .2 50.2 16.3 63.3 67.0 16.9 53.7 82.5 61.1 50 Mortgage companies .0 -2.4 8.0 -1.0 -11.5 -10.4 -21.6 -18.2 -7.0 1.0 8.2 1.2 51 Real estate investment trusts (REITs) .8 1.2 .3 3.4 13.7 6.1 14.5 15.3 18.8 6.3 6.9 6.4 52 Brokers and dealers 1.5 3.7 2.7 12.0 .5 29.3 -9.9 .3 -7.6 19.3 -29.5 -.1 53 Issuers of asset-backed securities (ABSs) 52.3 51.0 56.3 81.8 61.2 120.3 88.7 40.5 51.1 64.7 56.3 84.7 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 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 11999944 Q4 Q1 Q2 Q3 Q4 Qi Q2 All sectors 55554444 TTTToooottttaaaallll nnnneeeetttt bbbboooorrrrrrrroooowwwwiiiinnnngggg,,,, aaaallllllll sssseeeeccccttttoooorrrrssss 861.8 645.2 802.5 976.8 1,038.4 1,066.1 1,072.9 861.7 1,040.3 1,178.7 1,222.0 1,237.3 55555555 UUUU....SSSS.... ggggoooovvvveeeerrrrnnnnmmmmeeeennnntttt sssseeeeccccuuuurrrriiiittttiiiieeeessss 414.4 424.0 459.8 420.3 444.9 417.5 566.5 377.6 376.7 458.8 397.2 379.8 55556666 TTTTaaaaxxxx----eeeexxxxeeeemmmmpppptttt sssseeeeccccuuuurrrriiiittttiiiieeeessss 48.7 68.7 31.1 75.5 -29.9 27.3 13.1 -28.4 -46.4 -57.9 -57.4 -20.3 55557777 CCCCoooorrrrppppoooorrrraaaatttteeee aaaannnndddd ffffoooorrrreeeeiiiiggggnnnn bbbboooonnnnddddssss 114.5 160.6 163.8 275.1 139.3 268.3 190.9 113.8 130.9 121.7 205.1 311.5 55558888 MMMMoooorrrrttttggggaaaaggggeeeessss 200.1 161.9 124.5 159.2 197.0 154.0 176.2 182.7 233.0 196.2 246.2 168.0 55559999 CCCCoooonnnnssssuuuummmmeeeerrrr ccccrrrreeeeddddiiiitttt 15.6 -14.8 7.3 58.9 121.2 110.1 68.7 122.8 131.6 161.5 100.3 147.9 66660000 BBBBaaaannnnkkkk llllooooaaaannnnssss nnnn....eeee....cccc 2.2 -29.1 -9.4 -8.5 60.6 2.6 65.1 21.4 82.2 73.6 165.6 117.9 66661111 OOOOppppeeeennnn mmmmaaaarrrrkkkkeeeetttt ppppaaaappppeeeerrrr 30.7 -44.0 13.1 -5.1 35.7 67.7 -57.0 14.8 68.0 117.1 79.3 68.5 66662222 OOOOtttthhhheeeerrrr llllooooaaaannnnssss 35.8 -82.2 12.1 1.3 69.6 18.6 49.4 56.8 64.3 107.8 85.6 64.1 Funds raised through mutual funds and corporate equities 66663333 TTTToooottttaaaallll nnnneeeetttt sssshhhhaaaarrrreeee iiiissssssssuuuueeeessss 19.7 215.4 296.0 440.1 162.1 429.5 343.7 207.9 159.6 -62.9 49.6 146.6 66664444 MMMMuuuuttttuuuuaaaallll ffffuuuunnnnddddssss 65.3 151.5 211.9 320.0 138.3 287.7 236.4 144.0 165.4 7.6 104.5 178.5 66665555 CCCCoooorrrrppppoooorrrraaaatttteeee eeeeqqqquuuuiiiittttiiiieeeessss -45.6 64.0 84.1 120.1 23.7 141.8 107.3 63.9 -5.7 -70.5 -54.9 -31.9 66666666 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss -63.0 18.3 27.0 21.3 -44.9 21.5 -9.6 -2.0 -50.0 -118.0 -68.4 -73.2 66667777 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 10.0 15.1 26.4 38.3 26.0 41.0 48.4 20.0 21.2 14.3 .7 5.6 66668888 FFFFoooorrrreeeeiiiiggggnnnn sssshhhhaaaarrrreeeessss ppppuuuurrrrcccchhhhaaaasssseeeedddd iiiinnnn UUUUnnnniiiitttteeeedddd SSSSttttaaaatttteeeessss 7.4 30.7 30.7 60.5 42.7 79.3 68.5 45.9 23.1 33.2 12.8 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 NonfinancialS tatistics • January 1996 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1993 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999900 11999911 11999922 11999933 11999944 Q4 Ql Q2 Q3 Q4 Ql Q2 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 861.8 645.2 802.5 976.8 1,038.4 1,066.1 1,072.9 861.7 1,040.3 1,178.7 1,222.0 1,237.3 2 Private domestic nonfinancial sectors 189.9 -7.4 75.9 15.8 234.9 104.4 288.8 270.4 141.9 238.5 -33.8 -238.2 3 Households 157.0 -39.6 74.2 3.1 317.4 196.7 337.0 385.9 186.2 360.3 148.3 -157.1 4 Nonfarm noncorporate business -1.7 -3.7 -1.1 -3.2 -2.0 -3.5 -3.6 -1.8 -1.9 -.5 .9 .9 5 Nonfinancial corporate business -3.7 6.7 29.6 14.5 24.1 12.2 19.9 12.2 25.1 39.2 6.2 26.6 6 State and local governments 38.3 29.2 -26.8 1.5 -104.6 -101.0 -64.4 -125.9 -67.6 -160.5 -189.2 -108.6 1 U.S. government 33.7 10.5 -11.9 -18.4 -24.2 -7.7 -46.5 -16.2 -9.3 -24.7 -13.0 -25.7 8 Foreign 85.5 26.6 101.2 121.7 132.1 204.2 123.9 64.3 132.2 208.1 260.1 340.8 y Financial sectors - 552.7 615.4 637.3 857.7 695.6 765.2 706.7 543.2 775.6 756.8 1,008.8 1,160.5 10 Government sponsored enterprises 13.9 15.2 69.0 90.2 123.3 71.2 92.4 101.1 125.6 174.3 12.2 86.7 ii Federally related mortgage pools 150.3 136.6 115.6 83.6 112.1 89.9 196.0 108.1 91.0 53.4 62.5 59.0 12 Monetary authority 8.1 31.1 27.9 36.2 31.5 38.5 48.8 17.9 24.0 35.4 24.8 12.6 13 Commercial banking 125.1 80.8 95.3 142.2 162.0 188.1 184.7 109.1 191.1 163.3 359.6 292.8 14 U.S. commercial banks 94.9 35.7 69.5 149.6 148.1 197.3 120.6 128.4 164.4 178.9 177.5 212.6 15 Foreign banking offices 28.4 48.5 16.5 -9.8 11.2 -6.5 59.0 -21.5 22.1 -15.0 182.3 75.4 16 Bank holding companies -2.8 -1.5 5.6 .0 .9 -4.8 3.1 .2 2.7 -2.4 -1.9 3.2 17 Banks in U.S. affiliated areas 4.5 -1.9 3.7 2.4 1.9 2.1 2.1 1.9 1.9 1.8 1.7 1.7 18 Funding corporations 16.1 15.8 23.5 18.1 13.8 42.6 19.5 33.5 25.1 -23.0 22.3 -36.6 19 Thrift institutions -154.0 -123.5 -61.3 -1.7 34.9 -13.3 13.6 42.6 52.8 30.5 29.4 5.4 20 Life insurance companies 94.4 83.2 79.1 105.1 58.1 86.4 47.6 6.4 80.5 98.1 109.9 91.1 21 Other insurance companies 26.5 32.6 12.8 33.3 21.1 32.1 27.9 20.8 16.0 19.7 13.0 14.9 22 Private pension funds 17.2 85.7 37.3 40.2 -42.4 -60.1 -97.7 -30.7 -17.6 -23.6 97.6 138.9 23 State and local government retirement funds 34.9 46.0 34.4 25.5 60.8 36.9 72.9 69.3 26.3 74.6 64.5 65.7 24 Finance companies 28.8 -9.8 5.0 -9.0 68.2 22.6 72.1 49.8 58.9 91.8 95.7 56.1 25 Mortgage companies .0 11.2 .1 .0 -22.9 -13.3 -43.5 -36.3 -14.0 2.1 16.5 2.3 26 Mutual funds 41.4 90.3 123.7 169.6 7.6 138.9 61.7 9.4 24.2 -64.8 -10.1 2255..22 27 Closed-end funds .2 14.7 17.4 10.2 3.5 7.7 8.3 3.2 1.4 1.0 .8 11..11 28 Money market funds 80.9 30.1 1.3 14.6 28.5 56.9 -45.0 32.2 50.0 76.7 25.5 138.2 29 Real estate investment trusts (REITs) -.7 -.7 1.1 .6 4.7 .2 6.6 6.6 5.5 .2 2.5 3.1 30 Brokers and dealers 2.8 17.5 -6.9 9.2 -34.0 -82.8 -55.7 -52.6 -19.3 -8.6 30.7 124.2 31 Asset-backed securities issuers (ABSs) 51.1 48.9 53.8 80.5 57.8 113.7 87.9 42.8 46.3 54.3 49.8 78.3 32 Bank personal trusts 15.9 10.0 8.0 9.5 7.1 8.9 8.9 10.2 7.7 1.4 1.6 1.8 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Net flows through credit markets 861.8 645.2 802.5 976.8 1,038.4 1,066.1 1,072.9 861.7 1,040.3 1,178.7 1,222.0 1,237.3 Other financial sources 34 Official foreign exchange 2.0 -5.9 -1.6 .8 -5.8 2.2 -.2 -14.6 .2 -8.6 17.8 10.3 35 Special drawing rights certificates 1.5 .0 -2.0 .0 .0 .0 .0 .0 .0 .0 .0 .0 36 Treasury currency 1.0 .0 .2 .4 .7 .7 .7 .6 .8 .7 .7 .7 il Life insurance reserves 25.7 25.7 27.3 35.2 20.1 35.5 20.0 10.6 23.8 26.2 25.4 25.3 38 Pension fund reserves 165.1 360.3 249.7 309.2 103.6 251.6 6.8 102.6 155.4 149.6 393.6 311.2 39 Interbank claims 35.0 -3.4 43.5 50.9 85.5 4.7 173.0 165.8 -55.0 58.0 27.4 119.4 40 Checkable deposits and currency 43.6 86.3 113.5 117.3 -10.1 81.9 173.1 -66.1 -89.6 -57.7 117.7 103.0 41 Small time and savings deposits 63.7 1.5 -57.2 -70.3 -40.5 -36.6 2.5 -62.4 -57.2 -44.9 52.9 134.3 42 Large time deposits -66.1 -58.5 -73.2 -23.5 19.0 13.7 -39.6 -4.4 81.2 39.0 95.1 44.0 43 Money market fund shares 70.3 41.2 3.9 19.2 45.4 61.1 -35.1 68.5 49.9 98.4 16.6 275.4 44 Security repurchase agreements -24.2 -16.5 35.5 65.5 84.3 -14.4 23.0 176.4 82.8 54.8 167.0 127.5 45 Foreign deposits 38.2 -16.7 -7.2 -11.7 30.1 32.8 16.0 16.9 23.2 64.3 5.0 10.0 46 Mutual fund shares 65.3 151.5 211.9 320.0 138.3 287.7 236.4 144.0 165.4 7.6 104.5 178.5 41 Corporate equities -45.6 64.0 84.1 120.1 23.7 141.8 107.3 63.9 -5.7 -70.5 -54.9 -31.9 4488 Security credit 3.5 51.4 4.2 61.9 -2.3 86.5 29.9 -17.7 -62.3 40.9 -15.1 12.6 4499 Trade debt 37.0 3.8 41.1 50.0 93.4 54.4 36.6 96.3 115.8 125.0 74.7 65.3 50 Taxes payable -4.8 -6.2 8.5 4.6 3.0 4.9 15.3 -14.4 8.2 3.0 20.9 -5.8 51 Noncorporate proprietors' equity -27.1 -4.2 18.3 -11.7 -30.0 -27.5 -49.5 -25.0 -17.2 -28.3 -40.8 -13.1 52 Investment in bank personal trusts 29.7 16.1 -7.1 1.6 18.8 17.6 15.0 24.7 23.6 11.9 21.0 22.3 53 Miscellaneous 139.0 203.4 270.2 315.6 269.6 389.9 386.7 223.1 320.1 148.7 534.7 298.8 54 Total financial sources 1,414.5 1,539.0 1,765.9 2,332.1 1,885.5 2,454.6 2,190.7 1,750.6 1,803.7 1,796.9 2,786.1 2,925.1 Floats not included in assets (—) 55 U.S. government checkable deposits 3.3 -13.1 .7 -1.5 -4.8 -15.5 -2.4 -1.4 15.2 -30.7 13.9 -19.0 56 Other checkable deposits 8.5 4.5 1.6 -1.3 -2.8 -6.2 .6 -1.1 -6.2 -4.3 -5.0 -5.4 5/ Trade credit 9.1 9.7 4.5 14.2 5.6 10.5 -27.7 16.0 29.4 4.9 -18.0 -5.4 Liabilities not identified as assets (—) 58 Treasury currency .2 -.6 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.2 -.1 59 Interbank claims 1.6 26.2 -4.9 4.2 -2.7 24.0 -29.1 5.3 11.6 1.2 -3.9 9.7 60 Security repurchase agreements -24.0 6.2 27.9 82.5 48.6 22.8 13.5 117.0 66.8 -3.0 87.6 -32.8 61 Taxes payable .1 1.3 14.0 1.0 -2.0 -8.6 .8 1.4 1.0 -11.1 -16.3 30.6 62 Miscellaneous -32.2 -31.6 -51.8 -44.9 29.1 23.0 41.3 -170.0 149.4 95.6 -90.2 -122.3 63 Total identified to sectors as assets 1,447.9 1,536.4 1,774.2 2,278.1 1,814.7 2,404.6 2,194.1 1,783.4 1,536.9 1,744.5 2,818.2 3,069.9 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. E6 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 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Nonfinanciai sectors 1 Total credit market debt owed by domestic nonfinanciai sectors 11,184.1 11,727.9 12,368.3 12,970.5 12,368.3 12,490.8 12,620.8 12,776.8 12,970.5 13,140.6 13,343.2 By sector and instrument 2 U.S. government 2,776.4 3,080.3 3,336.5 3,492.3 3,336.5 3,387.7 3,395.4 3,432.3 3,492.3 3,557.9 3,583.5 3 Treasury securities 2,757.8 3,061.6 3,309.9 3,465.6 3,309.9 3,361.4 3,368.0 3,404.1 3,465.6 3,531.5 3,556.7 4 Budget agency issues and mortgages 18.6 18.8 26.6 26.7 26.6 26.3 27.4 28.2 26.7 26.4 26.8 5 Private 8,407.7 8,647.6 9,031.8 9,478.2 9,031.8 9,103.1 9,225.3 9,344.5 9,478.2 9,582.7 9,759.7 By instrument 6 Tax-exempt obligations 1,108.6 1,139.7 1,215.2 1,185.2 1,215.2 1,217.6 1,209.9 1,200.9 1,185.2 1,170.2 1,164.6 7 Corporate bonds 1,086.9 1,154.5 1,229.7 1,251.7 1,229.7 1,238.6 1,247.5 1,251.1 1,251.7 1,262.1 1,292.0 8 Mortgages 3,920.0 4,043.9 4,220.6 4,407.9 4,220.6 4,248.3 4,301.3 4,357.6 4,407.9 4,454.7 4,505.9 9 Home mortgages 2,780.0 2,959.6 3,149.6 3,344.8 3,149.6 3,184.4 3,235.9 3,292.2 3,344.8 3,383.1 3,431.8 10 Multifamily residential 304.8 293.6 289.0 290.7 289.0 289.1 290.2 291.9 290.7 291.6 293.6 II Commercial 755.8 710.3 700.8 689.4 700.8 693.5 693.1 691.0 689.4 696.5 696.1 12 Farm 79.3 80.4 81.2 83.0 81.2 81.3 82.1 82.6 83.0 83.4 84.4 13 Consumer credit 797.2 804.6 863.5 984.7 863.5 859.6 891.6 929.4 984.7 988.7 1,026.6 14 Bank loans n.e.c 686.0 672.1 677.0 748.3 677.0 687.4 706.3 725.4 748.3 776.9 807.9 15 Commercial paper 98.5 107.1 117.8 139.2 117.8 129.9 135.7 138.7 139.2 149.8 162.5 16 Other loans 710.6 725.7 707.9 761.1 707.9 721.7 733.1 741.5 761.1 780.3 800.3 By borrowing sector 17 Household 3,784.5 3,998.7 4,285.8 4,638.9 4,285.8 4,326.3 4,417.7 4,520.9 4,638.9 4,684.8 44,,778800..11 18 Nonfinanciai business 3,712.1 3,716.1 3,750.1 3,887.5 3,750.1 3,782.5 3,825.8 3,852.5 3,887.5 3,960.8 4,050.0 19 Farm 135.0 136.0 138.3 141.2 138.3 136.7 141.5 143.1 141.2 138.9 143.4 20 Nonfarm noncorporate 1,116.9 1,075.0 1,050.4 1,065.8 1,050.4 1,052.6 1,056.3 1,060.2 1,065.8 1,083.0 1,091.5 21 Corporate 2,460.2 2,505.1 2,561.5 2,680.5 2,561.5 2,593.2 2,628.0 2,649.2 2,680.5 2,738.9 2,815.1 22 State and local government 911.1 932.8 995.9 951.8 995.9 994.3 981.9 971.1 951.8 937.1 929.6 23 Foreign credit market debt held in United States 299.7 313.1 381.9 361.6 381.9 356.5 348.7 352.4 361.6 376.8 387.1 24 Bonds 130.5 146.2 227.4 234.6 227.4 226.8 222.4 227.6 234.6 237.9 249.6 25 Bank loans n.e.c 21.6 23.9 24.6 26.1 24.6 26.2 25.1 26.3 26.1 28.2 29.6 26 Commercial paper 81.8 77.7 68.7 41.4 68.7 43.3 42.0 39.9 41.4 50.9 48.5 27 U.S. government and other loans 65.9 65.3 61.1 59.6 61.1 60.3 59.2 58.6 59.6 59.8 59.5 28 Total credit market debt owed by nonfinanciai sectors, domestic and foreign 11,483.8 12,041.0 12,750.2 13,332.2 12,750.2 12,847.3 12,969.5 13,129.2 13,332.2 13,517.4 13,730.4 Financial sectors 29 Total credit market debt owed by financial sectors 2,751.0 3,005.7 3,300.6 3,762.2 3,300.6 3,426.5 3,525.7 3,626.8 3,762.2 3,834.1 3,936.3 By instrument 30 U.S. government-related 1,564.2 1,720.0 1,884.1 2,168.4 1,884.1 1,961.5 2,030.5 2,089.8 2,168.4 2,192.7 2,245.0 31 Government-sponsored enterprises securities 402.9 443.1 523.7 700.6 523.7 563.7 600.3 638.3 700.6 716.3 748.1 32 Mortgage pool securities 1,156.5 1,272.0 1,355.6 1,467.8 1,355.6 1,397.8 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 33 Loans from US. government 4.8 4.8 4.8 .0 4.8 .0 .0 .0 .0 .0 .0 34 Private 1,186.8 1,285.8 1,416.5 1,593.8 1,416.5 1,465.1 1,495.2 1,537.0 1,593.8 1,641.4 1,691.3 35 Corporate bonds 638.9 725.8 844.4 952.1 844.4 882.0 906.6 930.4 952.1 990.2 1,027.3 36 Mortgages 4.8 5.4 8.9 18.7 8.9 11.4 14.5 17.5 18.7 20.0 21.2 37 Bank loans n.e.c 78.4 80.5 66.5 54.3 66.5 62.4 55.3 52.4 54.3 57.1 59.4 38 Open market paper 385.7 394.3 393.5 442.8 393.5 408.8 410.3 420.5 442.8 454.1 462.8 39 Loans from Federal Home Loan Banks 79.1 79.9 103.1 125.9 103.1 100.4 108.5 116.2 125.9 120.0 120.5 By borrowing sector 40 Government-sponsored enterprises 407.7 447.9 528.5 700.6 528.5 563.7 600.3 638.3 700.6 716.3 774488..11 41 Federally related mortgage pools 1,156.5 1,272.0 1,355.6 1,467.8 1,355.6 1,397.8 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 42 Private financial sectors 1,186.8 1,285.8 1,416.5 1,593.8 1,416.5 1,465.1 1,495.2 1,537.0 1,593.8 1,641.4 1,691.3 43 Commercial banks 65.0 73.8 79.5 89.5 79.5 78.4 82.1 87.5 89.5 90.3 95.4 44 Bank holding companies 112.3 114.6 123.4 133.6 123.4 124.2 126.8 129.6 133.6 137.0 142.0 45 Funding corporations 139.1 161.6 169.9 199.3 169.9 190.7 191.5 200.6 199.3 221.2 229.1 46 Savings institutions 94.6 87.8 99.0 111.7 99.0 97.6 99.0 102.7 111.7 106.9 105.2 47 Credit unions .0 .0 .2 .5 .2 .3 .3 .4 .5 .4 .3 48 Life insurance companies .0 .0 .2 .6 .2 .3 .3 .3 .6 .6 .6 49 Finance companies 391.9 390.4 390.5 440.7 390.5 401.9 414.2 420.9 440.7 456.7 467.3 50 Mortgage companies 22.2 30.2 29.2 17.8 29.2 23.8 19.3 17.5 17.8 19.8 20.1 51 Real estate investment trusts (REITs) 13.6 13.9 17.4 31.1 17.4 21.0 24.8 29.5 31.1 32.8 34.4 52 Brokers and dealers 19.0 21.7 33.7 34.3 33.7 31.3 31.3 29.4 34.3 26.9 26.8 53 Issuers of asset-backed securities (ABSs) 329.1 391.7 473.5 534.7 473.5 495.7 505.8 518.6 534.7 548.8 570.0 All sectors 54 Total credit market debt, domestic and foreign.... 14,234.8 15,046.7 16,050.7 17,094.3 16,050.7 16,273.8 16,495.2 16,756.0 17,094.3 17,351.5 17,666.7 55 U.S. government securities 4,335.7 4,795.5 5,215.8 5,660.7 5,215.8 5,349.2 5,425.9 5,522.1 5,660.7 5,750.6 5,828.5 56 Tax-exempt securities 1,108.6 1,139.7 1,215.2 1,185.2 1,215.2 1,217.6 1,209.9 1,200.9 1,185.2 1,170.2 1,164.6 57 CCoorrppoorraattee aanndd ffoorreeiiggnn bboonnddss >>..TT 1,856.3 2,026.4 2,301.5 2,438.4 2,301.5 2,347.3 2,376.5 2,409.1 2,438.4 2,490.2 2,568.9 58 MMoorrttggaaggeess 3,924.8 44,,004499..33 4,229.6 4,426.6 4,229.6 4,259.7 4,315.8 4,375.2 4,426.6 4,474.7 4,527.1 59 Consumer credit 797.2 880044..66 863.5 984.7 863.5 859.6 891.6 929.4 984.7 988.7 1,026.6 60 Bank loans n.e.c 785.9 776.6 768.2 828.8 768.2 776.0 786.7 804.0 828.8 862.1 896.9 61 Open market paper 565.9 579.0 580.0 623.5 580.0 582.0 587.9 599.2 623.5 654.7 673.8 62 Other loans 860.4 875.7 877.0 946.6 877.0 882.5 900.8 916.2 946.6 960.1 980.4 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • January 1996 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1993 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 Q4 Q1 Q2 Q3 Q4 Q1 Q2 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 14,234.8 15,046.7 16,050.7 17,094.3 16,050.7 16,273.8 16,495.2 16,756.0 17,094.3 17,351.5 17,666.7 2 Private domestic nonfinancial sectors 2,240.1 2,320.1 2,351.5 2,623.2 2,351.5 2,397.5 2,450.6 2,497.3 2,623.2 2,586.1 2,511.4 3 Households 1,446.5 1,524.8 1,541.7 1,926.4 1,541.7 1,640.7 1,717.1 1,779.9 1,926.4 1,946.9 1,885.7 4 Nonfarm noncorporate business 44.1 42.9 39.7 37.7 39.7 38.8 38.4 37.9 37.7 38.0 38.2 5 6 y 8 / U F F i o . n S N S r a e . t o n a i g g n t c o e n f i a v i n a l e n a r s d n n e c m c l i t o a e o c l n r a s c t l o g rp o o v r e a r t n e m b e u n s t i s n ess 10, 5 2 9 7 1 5 4 5 9 8 3 6 8 6 9 . . . . . 3 9 2 0 8 11 1 , , 2 5 2 4 0 2 2 3 3 5 6 5 5 6 5 . . . . . 5 8 0 6 0 12 1 , , 2 5 2 2 1 2 4 3 9 7 5 4 0 6 2 . . . . . 2 9 7 3 2 12 1 , , 2 3 2 9 2 0 6 9 9 7 6 9 0 1 2 . . . . . 5 0 0 7 9 12 1 , , 2 5 2 2 1 2 4 3 7 9 5 4 0 2 6 . . . . . 2 9 7 2 3 12 1 , , 4 2 2 4 2 7 1 4 5 0 8 9 0 4 3 . . . . . 0 0 0 3 0 12 1 , , 4 2 2 6 2 4 1 4 1 1 9 5 5 0 8 . . . . . 2 4 9 7 4 12 1 , , 4 2 2 7 2 2 4 1 9 5 9 9 2 1 4 . . . . . 8 7 6 7 4 12 1 , , 2 2 3 9 2 0 6 9 9 7 6 9 0 1 2 . . . . . 5 0 0 7 9 13 1 , , 2 3 2 2 3 4 0 5 2 3 1 3 9 5 6 . . . . . 5 2 8 8 5 13 1 , , 2 3 5 1 4 1 6 9 3 2 8 9 7 6 1 . . . . . 1 3 1 8 4 1 n 0 G Fe o d v e e r r a n l m ly e r n e t l - a s t p e o d n m so o r r e t d g a e g n e t e p rp o r o i l s s e s 1, 3 1 9 5 0 6 . . 7 5 1, 4 2 5 7 9 2 . . 7 0 1, 5 3 4 5 9 5 . . 8 6 1, 6 4 7 6 3 7 . . 2 8 1, 5 3 4 5 9 5 . . 8 6 1, 5 3 7 9 2 7 . . 0 8 1, 5 4 9 3 7 0. . 1 9 1, 6 4 2 5 9 1 . . 4 5 1, 6 4 7 6 3 7 . . 2 8 1, 6 4 7 7 5 6 . . 3 4 1, 6 4 9 9 7 6 . . 7 9 12 Monetary authority 272.5 300.4 336.7 368.2 336.7 341.5 351.6 356.8 368.2 367.1 375.7 13 Commercial banking 2,853.3 2,948.6 3,090.8 3,252.8 3,090.8 3,120.2 3,156.2 3,204.1 3,252.8 3,326.1 3,407.9 14 U.S. commercial banks 2,502.5 2,571.9 2,721.5 2,869.6 2,721.5 2,743.8 2,780.3 2,822.3 2,869.6 2,906.5 2,963.5 1 1 5 6 F B o a r n e k i g h n o l b d a i n n k g i n c g o m of p f a ic n e ie s s 31 1 9 1 . . 2 9 33 1 5 7 . . 8 5 32 1 6 7 . . 0 5 33 1 7 8 . . 1 4 32 1 6 7 . . 0 5 33 1 1 8 . . 8 2 33 1 0 8 . . 8 3 33 1 5 9 . . 5 0 33 1 7 8 . . 1 4 37 1 3 7 . . 6 9 39 1 7 8 . . 2 7 17 Banks in U.S. affiliated areas 19.7 23.4 25.8 27.8 25.8 26.4 26.8 27.3 27.8 28.2 28.6 18 Funding corporations 51.5 75.0 93.1 106.9 93.1 97.9 106.3 112.6 106.9 112.4 103.3 2 i 0 y T Li h f r e i f i t n i s n u s r t a it n u c t e io c n o s mpanies 1 1 , , 1 1 9 9 2 9 . . 6 6 1 1, , 2 1 7 3 8 4 . . 8 5 1 1 , , 3 1 8 32 3 . . 7 9 1 1, , 4 1 4 6 2 7 . . 1 6 1 1 , , 3 1 8 3 3 2 . . 9 7 1 1 , , 1 4 3 0 4 2 . . 2 7 1 1 , , 1 4 4 0 6 7 . . 1 6 1 1, , 4 1 2 6 8 0 . . 1 3 1 1, , 4 1 4 6 2 7 . . 1 6 1 1 , , 1 4 7 7 3 6 . . 1 8 1 1 , , 1 5 7 0 5 3 . . 7 0 21 Other insurance companies 376.6 389.4 422.7 443.8 422.7 429.6 434.8 438.8 443.8 447.0 450.8 2 2 2 3 P St r a iv te a t a e n d p e lo n c s a io l n g o f v u e n rn d m s ent retirement funds 4 6 7 9 9 3 . . 9 0 7 5 3 14 0 . . 3 4 7 5 7 4 0 2 . . 6 6 7 6 2 0 8 3 . . 2 3 7 5 7 4 0 2 . . 6 6 7 5 4 6 6 0 . . 2 8 7 57 3 8 8 . . 1 5 7 5 3 8 4 4 . . 1 7 7 6 2 0 8 3 . . 2 3 7 61 5 9 2 . . 5 6 7 63 8 5 7 . . 9 3 24 Finance companies 487.5 492.6 482.8 551.0 482.8 494.5 511.3 524.1 551.0 568.5 586.7 25 Mortgage companies 60.3 60.5 60.4 37.5 60.4 49.5 40.4 37.0 37.5 41.6 42.2 26 Mutual funds 450.5 574.2 743.8 751.4 743.8 759.2 761.5 767.6 751.4 748.9 755.2 27 Closed-end funds 50.3 67.7 77.9 81.4 77.9 80.0 80.8 81.1 81.4 81.6 81.9 2 2 3 8 Y 0 M R B e r o o a n k l e e e y r s s t m a a t n a e r d k i n e d v t e e a f s u l t e n m r d s e s n t trusts (REITs) 4 1 0 2 2 7 4 . . . 7 0 0 4 1 0 1 4 7 8 . . . 1 1 1 4 1 1 2 8 8 6 . . . 7 6 3 44 9 1 7 2 3 . . . 1 3 3 4 1 1 2 8 8 6 . . . 7 6 3 4 1 2 1 1 2 2 0 . . . 0 4 3 42 9 1 1 9 1 . . . 4 3 9 42 9 1 3 4 3 . . . 5 4 3 44 9 1 7 2 3 . . . 1 3 3 4 1 6 0 1 7 0 3 . . . 9 0 9 4 1 9 3 1 4 1 4 . . . 0 0 7 3 3 2 1 A Ba s n se k t - p b e a r c s k o e n d a l s e tr c u u s r t i s t ies issuers (ABSs) 3 2 1 2 7 3 . . 8 5 3 23 7 1 7 . . 5 9 4 2 5 4 8 0. . 9 4 5 2 1 4 6 8 . . 1 0 4 2 5 4 8 0 . . 4 9 4 2 8 4 0 3 . . 3 2 4 2 9 4 1 5 . . 0 7 5 24 0 7 2 . . 7 6 5 2 1 4 6 8 . . 1 0 5 24 2 8 8 . . 4 6 5 24 4 8 8 . . 8 2 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Total credit market debt 14,234.8 15,046.7 16,050.7 17,094.3 16,050.7 16,273.8 16,495.2 16,756.0 17,094.3 17351.5 17,666.7 Other liabilities 34 Official foreign exchange 55.4 51.8 53.4 53.2 53.4 56.4 54.9 55.5 53.2 64.1 67.1 3 3 3 3 5 6 / 8 T L P S e p r if e n e e a s c s i i i o u a n l n r s y u d f r r u c a a u n n w r d c r i e e n r n e g r s c e e y r s i r e g v r h e v t s e s s certificates 4, 4 1 0 3 1 1 5 8 0 6 . . . . 7 3 0 3 4, 4 5 3 1 1 6 3 8 6 . . . . 5 0 0 5 4, 4 9 6 7 1 8 4 8 7 . . . . 2 7 0 0 5, 4 0 8 1 1 8 7 8 7 . . . . 4 0 0 6 4, 4 9 6 7 1 8 4 8 7 . . . . 2 7 0 0 4, 4 8 7 9 1 3 6 8 7 . . . . 2 4 0 1 4, 4 8 7 9 1 5 8 8 7 . . . . 9 5 0 3 5, 4 0 8 1 1 1 3 8 7 . . . . 8 4 0 5 5, 4 0 8 1 1 8 7 8 7 . . . . 4 0 0 6 5, 4 2 9 5 1 4 2 8 7 . . . . 7 7 0 8 5, 5 4 0 7 1 1 2 8 8 . . . . 0 4 0 0 3 4 9 0 I D n e te p r o b s a i n ts k a c t la fi i n m a s n cial institutions 5,0 9 4 6 5. . 1 4 5,0 1 5 3 9 2 . . 1 6 5,1 1 5 8 5 3 . . 5 9 5, 2 2 7 8 0 3 . . 3 8 5,1 1 5 8 5 3 . . 5 9 5, 2 1 1 6 5 3 . . 8 7 5, 2 1 3 8 0 6 . . 7 2 5, 2 2 4 1 3 1 . . 1 8 5, 2 2 7 8 0 3 . . 3 8 5, 2 3 6 69 6 . . 1 3 5, 2 5 6 3 7 1 . . 0 6 4 4 1 2 C Sm he a c ll k a ti b m le e d a e n p d o s s i a t v s i a n n g d s d cu ep rr o e s n i c ts y 2 1 , , 3 0 5 2 0 0 . . 7 9 2 1 , , 2 1 9 3 3 4 . . 5 4 2 1 , , 2 2 2 5 3 1 . . 2 7 2 1 , , 1 2 8 4 2 1 . . 7 6 2 1 , , 2 2 2 5 3 1 . . 2 7 2 1 , , 2 2 3 2 3 0 . . 8 5 2 1 , , 2 2 1 2 4 9 . . 1 7 2 1 , , 1 2 9 0 8 4 . . 7 8 2 1 , , 1 2 8 4 2 1 . . 7 6 2 1 , , 2 1 0 9 6 3 . . 3 5 2 1 , , 2 2 3 4 5 5 . . 5 4 4 4 4 3 M La o r n g e e y t i m m a e r k d e e t p o fu si n t d s shares 4 53 8 9 8 . . 6 4 4 5 1 4 5 3 . . 2 6 5 3 6 9 2 1. . 7 7 4 60 1 8 0 . . 2 7 5 3 6 9 2 1. . 7 7 5 3 7 8 9 2 . . 7 6 5 3 7 7 3 9 . . 9 0 4 58 0 3 2 . . 5 2 4 60 1 8 0 . . 2 7 4 63 3 8 5 . . 9 2 4 68 4 4 4 . . 1 0 45 Security repurchase agreements 355.8 392.3 457.8 542.1 457.8 474.9 512.9 540.2 542.1 595.4 620.5 4 4 44 6 7 88 M Se u c F t u o u r r a i e t l y ig f n u c n re d d d e i s p t h o a s r i e ts s 2 8 1 1 8 8 3 9 8 . . . 9 6 9 1, 2 2 0 8 1 4 0 7 2 . . . 1 3 1 1, 2 2 4 7 6 4 9 8 6 . . . 3 4 3 1, 2 2 5 9 7 6 8 7 2 . . . 5 0 9 1, 2 2 4 6 7 4 8 9 6 . . . 4 3 3 1, 2 2 4 8 7 8 2 2 3 . . . 8 4 9 1, 2 2 5 7 7 0 8 6 6 . . . 0 6 9 1, 2 2 5 6 8 8 3 2 7 . . . 2 4 7 1, 2 2 5 9 7 6 8 7 2 . . . 5 0 9 1, 2 2 6 9 6 0 9 8 7 . . . 7 8 2 1, 3 2 7 7 0 4 1 2 7 . . . 6 2 1 44 5 5 99 0 1 T T In r a v a x d e e s e s t m d p e a e b y n t a t b i l n e bank personal trusts 9 6 3 0 7 6 8 1 . . . 1 3 2 9 6 7 2 7 7 9 9 . . . 4 6 6 1, 6 0 6 8 2 0 4 7 . . . 9 2 4 1, 6 1 7 8 2 0 7 0 . . . 0 3 8 1, 6 0 6 8 2 0 4 7 . . . 9 2 4 1, 6 0 5 8 2 5 9 4 . . . 2 2 9 1, 6 0 5 8 4 0 2 9 . . . 1 0 2 1, 6 0 7 8 8 1 6 6 . . . 5 3 0 1, 6 1 7 8 2 0 7 0 . . . 0 3 8 1, 7 1 0 9 2 7 3 7 . . . 5 2 6 1, 7 1 4 8 4 5 8 4 . . . 7 5 4 52 Miscellaneous 2,991.9 3,176.7 3,430.7 3,746.3 3,430.7 3,560.9 3,600.2 3,701.5 3,746.3 3,872.5 3,907.9 53 Total liabilities 29,612.4 31,386.8 33,840.1 35,696.9 33,840.1 34,201.4 34,533.1 35,183.2 35,696.9 36,501.1 37,437.3 Financial assets not included in liabilities ( + ) 54 Gold and special drawing rights 22.3 19.6 20.1 21.1 20.1 20.4 20.8 21.0 21.1 22.7 22.9 5 5 5 6 C H o o r u p s o e r h a o te ld e e q q u u it i i t e y s in noncorporate business 4 2 , , 8 4 6 4 3 8. . 7 6 5 2 , , 4 4 6 1 2 3 . . 9 7 6 2 , , 2 4 7 2 8 5 . . 5 4 6 2 , , 2 5 9 1 3 2 . . 4 8 6 2 , , 2 4 7 2 8 5 . . 5 4 6 2 , , 1 4 4 74 2 . . 2 6 5 2, , 5 9 0 6 2 5 . . 7 8 6 2 , , 2 5 2 2 8 6 . . 7 6 6 2 , , 2 5 9 1 3 2 . . 4 8 6 2 , , 8 5 3 2 5 5 . . 8 7 7 2 , , 3 5 9 28 3 . . 5 0 Floats not included in assets (—) 5 5 5 8 9 7 T O U r . t a S h d . e e r g o c c h v re e e d c rn i k t m ab e l n e t d c e h p e o c s k i a ts b le deposits -13 4 0 0 3 . . . 6 4 8 -12 4 5 2 6 . . . 9 0 8 -10 4 7 0 5 . . 1 . 7 6 -10 3 1 8 3 . . . 4 0 4 -10 4 7 0 5 . . 1 . 7 6 -12 3 7 6 . . 1 . 3 3 -13 3 4 8 . . 2 . 7 9 -12 3 6 0 1 . . 9 . 6 2 -10 3 1 8 3 . . . 4 0 4 -12 3 0 2 4 . . . 3 3 2 -13 3 3 3 2 . . . 0 7 0 Liabilities not identified as assets (-) 60 Treasury currency -4.7 -4.9 -5.1 -5.4 -5.1 -5.2 -5.2 -5.3 -5.4 -5.4 -5.4 61 Interbank claims -4.2 -9.3 -4.7 -6.5 -4.7 -7.7 -7.4 -3.4 -6.5 -2.7 -2.6 62 Security repurchase agreements 9.2 38.1 120.5 169.1 120.5 135.9 162.5 189.3 169.1 203.3 192.0 63 Taxes payable 17.8 25.2 26.2 24.2 26.2 15.5 21.3 22.0 24.2 6.6 21.2 64 Miscellaneous -320.7 -378.2 -457.3 -347.8 -457.3 -398.7 -387.1 -395.6 -347.8 -382.3 -390.3 65 Total identified to sectors as assets 37,336.0 39,689.2 42,945.3 44,750.6 42,945.3 43,189.2 43,332.9 44,247.7 44,750.6 46,149.7 47,664.3 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. 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 1995 MMeeaassuurree 11999922 11999933 11999944 Feb. Mar. Apr. May June July Aug.' Sept.' Oct. 1 Industrial production1 107.6 112.0 118.1 122.1 122.0 121.2 121.4 121.4 121.5 122.9 123.1 122.7 Market groupings 2 Products, total 106.5 110.7 115.9 119.1 118.9 118.0 118.2 118.5 118.6' 120.0 120.2 119.4 3 Final, total 109.0 113.4 118.4 121.8 121.6 121.0 121.1 121.5 121.5' 123.2 123.3 122.4 4 Consumer goods 105.9 109.4 113.2 115.7 114.9 114.4 114.4 114.9 114.4' 116.0 115.7 115.2 5 Equipment 113.4 119.3 126.5 131.2 132.0 131.3 131.4 131.7 132.7 134.4 135.3 133.9 6 Intermediate 98.8 102.4 108.1 110.9 110.7 108.9 109.4 109.3 109.6' 110.4 110.7 110.2 7 Materials 109.2 114.1 121.5 126.7 126.7 126.1 126.3 125.8 126.1' 127.4 127.5 127.7 Industry groupings 8 Manufacturing 108.0 112.9 119.7 124.2 124.2 123.3 123.2 123.2 123.2' 124.5 125.1 124.8 9 Capacity utilization, manufacturing (percent)2. . 79.2 80.9 83.4 84.7 84.4 83.5 83.1 82.8 82.5 83.1 83.3 82.8 10 Construction contracts3 97.5r 105.2 114.1r 114.0' 116.0 107.0 118.0' 121.0' 117.0' 121.0 116.0 112.0 11 Nonagricultural employment, total4 106.5 108.4 111.3 113.9 114.1 114.1 114.0 114.3 114.3 114.6 114.6 114.8 12 Goods-producing, total 94.2 94.3 95.6 98.6 98.8 98.6 98.2 98.2 97.9 97.9 97.9 97.9 13 Manufacturing, total 95.3 94.8 95.1 97.5 97.5 97.4 97.1 97.0 96.6 96.6 96.4 96.3 14 Manufacturing, production workers 94.9 94.9 96.1 99.1 99.1 99.0 98.6 98.3 97.8 97.9 97.7 97.7 15 Service-producing 110.5 112.9 116.3 118.8 119.0 119.0 119.1 119.4 119.6 119.9 120.0 120.1 16 Personal income, total 135.6 141.4 150.0 156.8 157.6 157.9 157.6 158.5 159.5 159.6 160.3 n.a. 17 Wages and salary disbursements 131.6 136.2 145.0 150.7 150.9 151.7 150.6 151.8 153.0 152.8 153.5 n.a. 18 Manufacturing 118.0 120.0 126.0 131.0 130.6 128.9 128.1 128.4 128.5' 128.9 129.3 n.a. 19 Disposable personal income5 137.0 142.5 150.8 157.6 158.4 157.1 158.3 159.0 159.9 160.0 160.6 n.a. 20 Retail sales5 126.4 134.7 145.r 149.6 150.6 150.5 152.2 153.5 152.9 153.9 154.1 153.8 Prices6 21 Consumer (1982-84=100) 140.3 144.5 148.2 150.9 151.4 151.9 152.2 152.5 152.5 152.9 153.2 153.7 22 Producer finished goods (1982=100) 123.2 124.7 125.5 126.9 127.1 127.6 128.1 128.2 128.3 128.1 127.9 128.5 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 5. Based on data from U.S. Department of Commerce, Survey of Current Business. the ordering address, see the inside front cover. The latest historical revision of the industrial 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price production index and the capacity utilization rates was released in November 1994. See indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, "Industrial Production and Capacity Utilization: A Revision," Federal Reserve Bulletin, vol. Monthly Labor Review. 81 (January 1995), pp. 16-26. For a detailed description of the industrial production index, NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series see "Industrial Production: 1989 Developments and Historical Revision," Federal Reserve mentioned in notes 3 and 6, can also be found in the Survey of Current Business. Bulletin, vol. 76 (April 1990), pp. 187-204. Figures for industrial production for the latest month are preliminary, and many figures for 2. Ratio of index of production to index of capacity. Based on data from the Federal the three months preceding the latest month have been revised. See "Recent Developments in Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pp. 3. Index of dollar value of total construction contracts, including residential, nonresiden- 411-35. See also "Industrial Production Capacity and Capacity Utilization since 1987," tial, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. Dodge Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. 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 1995 CCaatteeggoorryy 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept.' Oct. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 126,982 128,040 131,056 132,511 132,737 131,811 131,869 132,519 132,211 132,591 132,648 Employment 2 Nonagricultural industries3 114,391 116,232 119,651 121,576 121,478 120,962 121,034 121,550 121,417 121,867 121,944 3 Agriculture 3,207 3,074 3,409 3,698 3,594 3,357 3,451 3,409 3,362 3,273 3,455 Unemployment 4 Number 9,384 8,734 7,996 7,237 7,665 7,492 7,384 7,559 7,431 7,451 7,249 5 Rate (percent of civilian labor force) 7.4 6.8 6.1 5.5 5.8 5.7 5.6 5.7 5.6 5.6 5.5 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 108,604 110,525 113,423 116,302 116,310 116,248 116,547 116,575 116,838r 116,888 117,004 7 Manufacturing 18,104 18,003 18,064 18,525 18,506 18,456 18,428 18,353 18,357 18,319 18,298 8 Mining 635 611 604 589 583 582 582 577 575 573 570 9 Contract construction 4,492 4,642 4,916 5,256 5,242 5,190 5,230 5,226 5,233' 5,258 5,286 10 Transportation and public utilities 5,721 5,787 5,842 6,175 6,184 6,177 6,192 6,195 6,217' 6,200 6,222 11 Trade 25,354 25,675 26,362 27,047 27,062 27,045 27,118 27,184 27,177' 27,226 27,246 12 Finance 6,602 6,712 6,789 6,938 6,924 6,925 6,930 6,938 6,947 6,956 6,974 13 Service 29,052 30,278 31,805 32,524 32.548 32,630 32,784 32,820 32,986' 33,053 33,110 14 Government 18,653 18,817 19,041 19,248 19,261 19,243 19,283 19,282 19,346' 19,303 19,298 1. Beginning January 1994, reflects redesign of current population survey and population 4. Includes all full- and part-time employees who worked during, or received pay for, the controls from the 1990 census. pay period that includes the twelfth day of the month; excludes proprietors, self-employed 2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly persons, household and unpaid family workers, and members of the armed forces. Data are figures are based on sample data collected during the calendar week that contains the twelfth adjusted to the March 1992 benchmark, and only seasonally adjusted data are available at this day; annual data are averages of monthly figures. By definition, seasonality does not exist in time. 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 • January 1996 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1994 1995 1994 1995 1994 1995 Q4 Ql Q2 Q3' Q4 Ql Q2 Q3 Q4 Ql Q2 Q3' Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 120.S 122.0 121.3 122.5 141.9 143.1 144.5 145.8 84.9 85.2 84.0 84.0 2 Manufacturing 122.7 124.3 123.2 124.2 145.3 146.6 148.2 149.7 84.5 84.7 83.2 83.0 3 Primary processing3 118.4 119.3 117.2 116.4 132.3 133.2 134.2 135.1 89.5 89.5 87.4 86.2 4 Advanced processing4 124.8 126.6 126.1 127.9 151.3 152.9 154.7 156.5 82.5 82.8 81.5 81.7 5 Durable goods 129.4 131.6 130.4 132.6 153.1 154.9 157.1 159.2 84.6 84.9 83.0 83.3 6 Lumber and products 107.9 107.6 103.9 105.4 116.5 117.1 118.0 118.8 92.7 91.9 88.0 88.7 7 Primary metals 119.4 120.4 116.8 115.0 125.4 126.7 127.5 128.2 95.2 95.0 91.6 89.7 8 Iron and steel 123.3 125.4 120.6 118.9 128.8 130.9 131.7 132.5 95.8 95.9 91.6 89.8 9 Nonferrous 113.9 113.7 111.6 109.7 120.5 120.9 121.6 122.3 94.5 94.1 91.8 89.6 10 Industrial machinery and equipment 167.5 171.5 172.9 178.6 184.1 187.8 192.6 197.4 91.0 91.3 89.8 90.5 11 Electrical machinery 169.4 174.0 176.9 185.7 188.5 193.8 199.9 205.9 89.9 89.8 88.5 90.2 12 Motor vehicles and parts 141.5 145.9 136.0 136.3 162.2 164.2 166.5 168.8 87.2 88.8 81.7 80.8 13 Aerospace and miscellaneous transportation equipment 80.8 81.5 82.1 81.1 129.1 128.8 128.5 128.3 62.6 63.3 63.9 63.3 14 Nondurable goods 115.3 116.1 115.3 115.0 136.3 137.1 138.0 138.9 84.6 84.7 83.5 82.8 15 Textile mill products 111.6 111.8 108.7 104.4 122.0 122.7 123.5 124.3 91.4 91.1 88.1 84.0 16 Paper and products 120.6 120.3 119.7 118.9 127.7 128.4 129.3 130.1 94.4 93.6 92.6 91.4 17 Chemicals and products 126.0 129.7 127.9 128.3 154.7 156.2 157.6 159.0 81.4 83.1 81.2 80.7 18 Plastics materials 130.2 134.3 128.8 131.6 132.6 133.8 98.9 101.3 96.2 19 Petroleum products 106.5 107.8 106.4 107.3 115.1 115.1 115.3 115.5 92.5 93.7 92.2 92.9 20 Mining 99.2 100.3 100.5 100.5 111.4 111.4 111.4 111.4 89.0 90.0 90.2 90.3 21 Utilities 116.3 118.2 120.7 125.0 135.8 136.3 136.8 137.3 85.6 86.8 88.2 91.1 22 Electric 117.3 118.5 120.9 125.6 133.6 134.1 134.7 135.3 87.8 88.4 89.7 92.8 1973 1975 Previous cycle5 Latest cycle6 1994 1995 High Low High Low High Low Oct. May June July' Aug.' Sept. Oct.p Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 84.4 84.0 83.7 83.6 84.3 84.1 83.6 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 83.8 83.1 82.8 82.5 83.1 83.3 82.8 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 88.3 87.5 86.6 86.2 86.1 86.3 85.8 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.2 82.1 81.4 81.3 81.1 82.0 82.1 81.7 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 83.9 82.8 82.7 82.5 83.4 83.8 83.2 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.3 91.7 87.1 88.0 88.2 88.1 89.9 88.6 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.0 92.5 92.3 90.0 90.2 88.6 90.2 88.4 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.1 92.4 92.7 88.9 87.8 87.9 93.7 89.4 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.0 92.7 91.9 91.6 93.6 89.6 85.7 87.3 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 72.5 90.9 90.0 89.2 89.8 90.8 90.9 91.1 11 Electrical machinery 87.8 63.8 89.4 71.1 84.9 76.6 89.3 88.5 88.5 89.3 90.2 91.0 91.6 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 57.6 85.7 80.7 80.5 78.8 81.6 81.8 79.8 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 79.4 62.6 63.8 63.8 63.2 63.6 63.0 58.7 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.4 83.9 83.7 83.1 82.7 82.9 82.7 82.5 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.9 90.8 88.7 85.2 82.6 85.9 83.5 83.2 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.5 93.2 93.8 91.2 92.7 91.1 90.3 90.3 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 78.9 80.2 81.1 81.1 80.6 80.6 80.9 81.1 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 93.3 97.0 94.6 92.8 90.2 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 83.7 90.4 92.1 91.8 92.6 92.0 94.2 91.5 20 Mining 94.4 88.4 96.6 80.6 86.5 86.0 89.0 90.2 90.1 90.6 90.0 90.3 88.7 21 Utilities 95.6 82.5 88.3 76.2 92.6 83.2 86.4 89.2 89.1 90.2 93.6 89.4 88.9 22 Electric 99.0 82.7 88.3 78.7 94.8 86.5 88.3 90.2 90.7 91.5 96.2 90.8 90.4 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 3. Primary processing includes textiles; lumber; paper; industrial chemicals; synthetic the ordering address, see the inside front cover. The latest historical revision of the industrial materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and glass; production index and the capacity utilization rates was released in November 1994. See primary metals; and fabricated metals. "Industrial Production and Capacity Utilization: A Revision," Federal Reserve Bulletin, vol. 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; printing 81 (January 1995), pp. 16-26. For a detailed description of the industrial production index, and publishing; chemical products such as drugs and toiletries; agricultural chemicals; leather see "Industrial Production: 1989 Developments and Historical Revision," Federal Reserve and products; machinery; transportation equipment; instruments; and miscellaneous manufac- Bulletin, vol. 76 (April 1990), pp. 187-204. tures. 2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally adjusted 5. Monthly highs, 1978-80; monthly lows, 1982. index of industrial production to the corresponding index of capacity. 6. Monthly highs, 1988-89; monthly lows, 1990-91. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1994 1995 1994 GGrroouupp por- avg. tion Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Julyr Aug.r Sept. Oct.p Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 118.1 119.5 120.3 121.7 122.0 122.1 122.0 121.2 121.4 121.4 121.5 122.9 123.1 122.7 2 Products 60.9 115.9 116.9 117.5 118.7 119.1 119.1 118.9 118.0 118.2 118.5 118.6 120.0 120.2 119.4 3 Final products 46.6 118.4 119.2 119.8 121.2 121.6 121.8 121.6 121.0 121.1 121.5 121.5 123.2 123.3 122.4 4 Consumer goods, total 28.5 113.2 113.0 113.9 115.5 115.7 115.7 114.9 114.4 114.4 114.9 114.4 116.0 115.7 115.2 5 Durable consumer goods 5.5 119.4 119.4 120.5 123.4 124.5 123.4 121.4 119.4 116.5 117.1 115.8 119.0 120.1 118.4 6 Automotive products 2.5 125.5 124.5 127.1 131.1 131.7 132.3 129.7 126.1 121.1 122.9 119.7 125.1 127.2 124.0 7 Autos and trucks 1.6 125.4 122.3 126.5 131.4 132.7 133.5 130.8 124.9 119.0 120.2 115.4 123.8 124.9 121.0 8 Autos, consumer .9 94.9 92.9 94.0 100.5 103.6 103.6 103.1 94.4 88.2 86.6 88.9 88.6 90.8 88.9 9 Trucks, consumer .7 180.7 175.5 185.8 187.3 184.6 187.1 180.0 180.2 175.4 182.3 162.9 188.9 187.5 179.7 10 Auto parts and allied goods .9 123.2 126.6 125.7 127.8 126.9 127.0 124.8 126.1 122.9 125.9 126.3 125.1 129.6 128.0 11 Other 3.0 114.1 115.2 115.0 116.8 118.3 115.9 114.3 113.8 112.6 112.2 112.5 113.9 114.0 113.7 12 Appliances, televisions, and air conditioners .7 126.0 124.9 126.9 131.5 132.1 125.8 122.7 121.9 123.6 124.8 126.1 129.3 129.1 129.6 13 Carpeting and furniture .8 105.0 107.4 105.9 108.0 110.2 107.9 106.5 106.9 104.1 101.9 103.9 104.2 104.4 104.8 14 Miscellaneous home goods 1.5 113.8 114.9 114.5 114.9 116.5 115.8 114.7 113.8 112.3 112.3 111.1 112.2 112.5 111.2 15 Nondurable consumer goods 23.0 111.8 111.5 112.4 113.7 113.6 113.9 113.5 113.3 114.0 114.5 114.2 115.4 114.7 114.5 16 Foods and tobacco 10.3 110.5 112.2 112.4 114.3 113.1 112.9 112.9 113.8 114.1 115.2 114.3 114.8 114.1 113.8 17 Clothing 2.4 95.9 96.2 96.2 96.8 96.1 94.7 94.6 93.6 93.3 91.1 89.6 89.6 88.4 87.7 18 Chemical products 4.5 129.7 127.2 130.5 134.0 137.0 136.6 135.9 133.7 133.5 135.4 134.8 137.5 139.0 140.4 19 Paper products 2.9 104.7 103.6 104.6 104.3 103.4 104.1 102.9 104.2 103.7 103.2 105.0 103.9 104.4 104.4 20 Energy 2.9 113.9 109.8 110.6 109.6 110.4 114.1 113.3 111.2 116.8 117.0 117.3 123.3 118.6 116.5 21 Fuels .9 106.7 103.9 109.8 107.4 107.4 109.1 110.6 109.9 108.3 108.2 108.3 107.5 111.7 107.4 22 Residential utilities 2.1 116.8 112.2 110.7 110.3 111.6 116.0 114.3 111.6 120.4 120.6 121.1 130.0 121.4 120.3 23 Equipment 18.1 126.5 128.8 128.9 130.1 130.9 131.2 132.0 131.3 131.4 131.7 132.7 134.4 135.3 133.9 24 Business equipment 14.0 146.7 150.9 151.0 152.6 153.7 154.5 155.9 154.9 154.9 155.5 157.0 159.3 160.9 159.6 25 Information processing and related 5.7 176.4 183.2 184.2 188.3 188.7 189.1 192.3 193.7 194.3 196.3 198.4 202.6 206.2 209.4 26 Computer and office equipment 1.5 284.2 300.5 305.7 311.9 318.0 325.3 331.8 340.0 346.8 350.5 359.7 367.8 377.8 390.0 27 Industrial 4.0 120.9 124.4 124.1 124.1 125.9 126.1 126.2 124.8 125.6 125.8 127.2 129.3 129.2 129.4 28 Transit 2.6 137.9 137.1 137.5 137.8 139.7 143.4 144.7 140.8 137.4 138.0 138.0 137.9 138.6 124.9 29 Autos and trucks 1.2 148.0 149.2 151.6 152.6 157.2 157.7 154.9 147.1 142.2 142.8 145.7 146.2 147.9 141.8 30 Other 1.7 129.4 134.3 133.1 133.1 133.5 132.9 132.6 130.4 131.2 128.8 130.7 131.5 132.2 131.1 31 Defense and space equipment 3.4 71.0 68.7 69.0 68.7 68.6 67.7 67.5 66.8 66.8 66.9 66.5 66.2 65.2 64.6 32 Oil and gas well drilling .5 90.8 88.3 86.0 86.0 86.7 89.1 85.7 89.2 91.9 86.4 89.6 89.6 91.3 83.7 33 Manufactured homes .2 137.3 142.0 143.1 153.6 153.6 147.4 148.3 147.2 150.4 152.4 147.6 153.7 157.4 34 Intermediate products, total 14.3 108.1 109.9 110.6 110.9 111.3 110.9 110.7 108.9 109.4 109.3 109.6 110.4 110.7 110.2 35 Construction supplies 5.3 106.8 109.7 109.8 111.6 112.2 111.0 110.5 108.6 107.1 107.2 107.8 108.1 109.3 108.7 36 Business supplies 9.0 109.1 110.1 111.3 110.7 110.9 111.0 110.9 109.3 111.0 110.8 110.9 112.0 111.7 111.3 37 Materials 39.1 121.5 123.4 124.6 126.3 126.5 126.7 126.7 126.1 126.3 125.8 126.1 127.4 127.5 127.7 38 Durable goods materials 20.6 131.2 134.2 136.0 138.6 139.1 139.2 139.2 138.4 138.3 138.2 138.7 141.0 142.4 143.0 39 Durable consumer parts 3.9 132.2 133.8 135.8 139.7 139.1 139.1 138.3 134.7 132.7 132.8 130.4 135.3 135.9 136.1 40 Equipment parts 7.5 143.1 149.0 150.7 152.3 153.6 155.1 156.2 157.7 158.9 160.1 163.1 165.9 168.7 171.0 41 Other 9.1 121.3 122.7 124.6 127.3 127.6 126.7 126.3 124.9 124.7 123.6 123.5 124.1 124.8 124.4 42 Basic metal materials 3.0 119.7 121.3 123.2 126.0 125.6 124.8 125.2 123.5 123.6 120.9 122.3 120.9 121.9 119.4 43 Nondurable goods materials 8.9 118.4 120.3 121.5 122.8 122.3 121.8 121.7 120.9 121.4 119.5 118.5 118.9 118.1 118.2 44 Textile materials 1.1 105.3 106.9 110.3 108.7 109.8 108.5 108.8 108.1 106.7 102.4 95.8 102.7 100.1 99.4 45 Paper materials 1.8 118.7 120.5 122.1 121.3 120.8 122.1 124.1 121.9 125.8 120.4 123.9 122.0 118.1 118.6 46 Chemical materials 4.0 123.2 124.6 125.9 127.5 128.6 128.3 127.6 127.0 127.5 126.1 125.7 124.9 124.7 125.0 47 Other 2.0 116.9 119.5 119.3 123.4 119.1 116.8 116.0 115.8 114.7 116.0 113.5 114.0 115.9 115.8 48 Energy materials 9.6 105.2 105.2 104.9 105.3 105.6 106.6 106.6 106.7 107.1 107.2 107.9 108.4 106.7 106.2 49 Primary energy 6.3 100.3 100.3 100.7 101.7 101.7 102.0 102.5 102.4 102.1 102.6 102.5 101.5 101.7 100.7 50 Converted fuel materials 3.3 114.9 115.1 113.4 112.3 113.4 115.6 114.7 115.2 116.9 116.2 118.7 122.3 116.9 117.1 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 117.6 119.1 119.8 121.1 121.4 121.4 121.4 120.8 121.2 121.1 121.3 122.6 122.7 122.5 52 Total excluding motor vehicles and parts 95.2 117.1 118.5 119.2 120.5 120.8 120.8 120.8 120.3 120.7 120.7 121.0 122.2 122.3 122.0 53 Total excluding computer and office equipment 98.3 115.4 116.6 117.4 118.7 118.9 118.9 118.7 117.9 118.0 117.9 118.0 119.3 119.3 118.8 54 Consumer goods excluding autos and trucks . 26.9 112.4 112.4 113.1 114.5 114.6 114.5 113.9 113.8 114.1 114.6 114.3 115.6 115.1 114.8 55 Consumer goods excluding energy 25.6 113.1 113.3 114.2 116.2 116.3 115.9 115.1 114.8 114.1 114.7 114.0 115.2 115.3 115.0 56 Business equipment excluding autos and trucks 12.8 146.5 151.0 150.9 152.5 153.3 154.1 155.9 155.6 156.1 156.7 158.0 160.5 162.0 161.3 57 Business equipment excluding computer and office equipment 12.5 130.7 133.8 133.6 134.7 135.4 135.6 136.6 135.0 134.4 134.7 135.6 137.4 138.2 135.9 58 Materials excluding energy 29.5 127.3 129.9 131.6 133.8 134.0 133.9 133.9 133.0 133.1 132.5 132.5 134.2 135.0 135.4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • January 1996 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 Group S co IC de Z p p r o o r - - 1 a 9 v 9 g 4 . Apr. May June Julyr Aug.r Sept. Oct, Index (1987 = 100) MAJOR INDUSTRIES 59 Total index 100.0 118.1 119.5 120.3 121.7 122.0 122.1 122.0 121.2 121.4 121.4 121.5 122.9 123.1 122.7 60 Manufacturing 85.5 119.7 121.5 122.6 124.2 124.5 124.2 124.2 123.3 123.2 123.2 123.2 124.5 125.1 124.8 61 Primary processing 26.5 115.3 116.6 118.4 120.3 119.8 119.1 118.9 117.7 117.4 116.5 116.1 116.3 116.9 116.5 62 Advanced processing 59.0 121.8 123.8 124.6 126.0 126.6 126.6 126.7 126.0 125.9 126.3 126.5 128.3 129.0 128.8 63 Durable goods 45.1 125.5 128.0 129.1 131.2 131.6 131.5 131.6 130.4 130.1 130.5 130.8 132.8 134.1 133.6 64 Lumber and products 24 2.0 106.0 106.7 106.7 110.4 110.2 107.4 105.2 104.9 102.7 104.0 104.5 104.7 107.1 105.8 65 Furniture and fixtures 25 1.4 111.4 114.8 113.0 114.7 116.0 115.6 113.8 112.7 111.4 112.3 113.2 113.4 114.1 113.6 66 Stone, clay, and glass products 32 2.1 104.9 105.4 106.9 110.1 108.7 107,4 108.1 105.8 106.1 106.8 105.4 105.6 105.8 105.8 67 Primary metals 33 3.1 114.5 115.9 119.1 123.0 120.9 119.8 120.5 117.8 117.7 115.0 115.5 113.6 115.9 113.9 68 Iron and steel 331,2 1.7 118.3 118.8 121.9 129.3 125.9 124.3 126.1 122.6 122.1 117.3 116.0 116.4 124.4 118.9 69 Raw steel .1 107.9 109.0 114.2 121.9 114.6 117.2 117.2 114.3 112.4 112.7 110.9 113.6 118.5 70 Nonferrous 333-6,9 1.4 109.3 111.8 115.2 114.8 114.2 113.8 113.1 111.5 111.8 111.6 114.3 109.6 105.1 107^2 71 Fabricated metal products. .. 34 5.0 110.8 112.2 113.3 115.3 115.3 114.9 114.6 112.9 113.8 114.5 112.8 115.3 116.1 115.6 72 Industrial machinery and equipment 35 7.9 159.9 166.5 167.5 168.5 171.4 171.1 172.0 172.3 173.3 173.1 175.8 179.1 180.9 182.7 73 Computer and office equipment 357 1.7 284.2 300.5 305.7 311.9 318.0 325.3 331.8 340.0 346.8 350.5 359.7 367.8 377.8 390.0 74 Electrical machinery 36 7.3 160.0 166.9 168.8 172.5 172.9 174.0 175.2 175.1 176.9 178.7 182.1 185.7 189.3 192.4 75 Transportation equipment. . . 37 9.6 109.7 109.0 110.5 111.9 112.6 113.5 112.9 110.1 107.6 107.7 106.2 109.1 109.1 104.9 76 Motor vehicles and parts . 371 4.8 137.9 138.4 141.4 144.6 146.1 146.7 144.8 139.0 134.4 134.7 132.4 137.7 138.7 136.0 77 Autos and light trucks . 371 2.5 131.9 128.6 132.7 138.4 140.0 140.8 138.2 131.3 124.8 125.7 121.6 129.4 130.7 126.8 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.8 82.6 80.8 80.9 80.6 80.4 81.7 82.3 82.4 82.0 82.0 81.1 81.6 80.7 75.2 79 Instruments 38 5.4 107.4 108.2 107.7 108.9 108.4 107.7 108.5 108.4 107.5 108.1 108.0 109.2 109.2 109.6 80 Miscellaneous 39 1.3 116.2 118.4 118.6 117.6 119.1 120.3 119.0 118.2 117.3 118.2 115.7 117.1 117.9 117.8 81 Nondurable goods 40.5 113.3 114.2 115.4 116.4 116.5 116.1 115.8 115.4 115.5 115.0 114.7 115.1 115.1 115.1 82 Foods 20 9.4 112.8 113.4 113.9 114.7 115.9 115.7 115.4 115.3 116.5 116.8 115.6 116.2 116.1 115.5 83 Tobacco products 21 1.6 96.5 104.5 101.5 108.0 97.3 96.4 97.9 104.1 101.4 104.3 106.4 104.9 102.1 103.8 84 Textile mill products 22 1.8 109.0 110.6 112.0 112.2 113.3 110.9 111.2 111.2 109.6 105.4 102.4 106.8 104.0 103.9 85 Apparel products 23 2.2 96.3 96.9 96.8 97.0 96.6 95.8 95.4 93.9 93.5 91.1 89.9 90.0 89.4 88.3 86 Paper and products 26 3.6 117.4 118.9 121.3 121.7 119.8 120.3 120.6 119.6 121.2 118.2 120.3 118.5 117.8 118.0 87 Printing and publishing 27 6.8 101.1 101.4 102.0 101.6 101.3 100.8 100.4 99.7 100.3 99.6 99.7 100.8 101.0 100.7 88 Chemicals and products .... 28 9.9 124.1 123.8 126.2 128.0 130.4 129.7 129.2 127.8 127.8 128.2 127.7 128.2 129.0 129.8 89 Petroleum products 29 1.4 105.3 104.0 107.6 107.7 107.4 107.6 108.5 106.9 106.2 105.9 106.9 106.3 108.8 105.8 90 Rubber and plastic products . 30 3.5 133.5 136.7 138.3 140.0 140.2 140.5 139.1 139.6 136.6 136.3 135.9 136.6 137.2 138.0 91 Leather and products 31 .3 85.8 85.6 84.5 84.4 82.9 82.8 82.7 80.2 80.5 78.5 76.5 78.4 78.6 77.1 92 Mining 6.8 99.8 99.2 98.3 100.1 100.0 100.6 100.2 100.7 100.5 100.4 100.9 100.2 100.5 98.7 93 Metal "10 .4 159.4 158.9 154.3 156.2 158.5 160.4 159.3 158.7 159.9 162.5 167.1 167.1 164.7 163.8 94 Coal 12 1.0 112.0 110.2 110.1 117.8 117.9 118.6 117.4 114.1 109.7 111.9 114.5 108.4 113.7 109.9 95 Oil and gas extraction 13 4.7 93.0 92.2 91.2 92.2 91.2 92.3 91.6 93.0 93.7 93.1 92.7 93.0 92.4 90.9 96 Stone and earth minerals 14 .6 107.0 109.3 109.9 109.9 115.1 112.0 114.8 114.2 112.5 111.5 114.6 114.2 115.6 114.3 97 Utilities 7.7 118.1 117.2 116.5 115.2 116.5 119.2 118.9 118.0 122.1 122.0 123.7 128.5 122.9 122.4 98 Electric 49L3PT 6.1 117.8 117.9 117.5 116.5 117.2 119.0 119.3 118.6 121.6 122.4 123.6 130.2 123.0 122.7 99 Gas 492.3PT 1.6 119.2 114.4 112.3 109.8 113.7 120.1 117.3 115.9 123.9 120.4 123.9 122.1 122.4 121.0 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.7 118.6 120.5 121.5 122.9 123.2 122.9 122.9 122.4 122.5 122.5 122.6 123.7 124.3 124.2 101 Manufacturing excluding office and computing machines . . . 83.8 116.5 118.1 119.1 120.6 120.8 120.5 120.4 119.4 119.2 119.1 119.0 120.2 120.7 120.3 Gross value (billions of 1987 dollars, annual rates) MAJOR MARKETS 102 Products, total 1,707.0 2,006.2 2,020.4 2,037.2 2,056.5 2,063.2 2,066.5 2,065.1 2,049.6 2,051.8 2,056.4 2,058.1 2,083.5 2,092.2 2,072.4 103 Final 1,314.6 1,576.3 1,584.4 1,598.4 1,615.1 1,621.1 1,626.4 1,626.1 1,615.5 1,616.5 1,621.6 1,621.1 1,644.9 1,651.6 1,633.9 104 Consumer goods 866.6 982.5 977.0 988.5 999.6 1,000.2 1,001.9 997.3 989.6 989.3 992.4 985.5 1,000.8 1,000.9 989.0 105 Equipment 448.0 593.8 607.3 609.9 615.5 620.9 624.5 628.7 625.9 627.2 629.3 635.6 644.1 650.7 644.9 106 Intermediate 392.5 429.8 436.0 438.8 441.4 442.0 440.1 439.0 434.1 435.3 434.7 437.0 438.5 440.6 438.6 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 81 (January 1995), pp. 16-26. For a detailed description of the industrial production index, the ordering address, see the inside front cover. The latest historical revision of the industrial see "Industrial Production: 1989 Developments and Historical Revision," Federal Reserve production index and the capacity utilization rates was released in November 1994. See Bulletin, vol. 76, (April 1990), pp. 187-204. "Industrial Production and Capacity Utilization: A Revision," Federal Reserve Bulletin, vol. 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 11999944 Dec. Jan. Feb. Mar. Apr. May June Julyr Aug.r Sept. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,095 1,199 1,372 1,420 1,293 1,282 1,235 1,243 1,243 1,275 1,355 1,368 1,405 2 One-family 911 987 1,068 1,105 990 931 911 905 930 958 1,011 1,044 1,073 3 Two-family or more 184 213 303 315 303 351 324 338 313 317 344 324 332 4 Started 1,200 1,288 1,457 1,545 1,366 1,319 1,238 1,269 1,282 1,298 1,432 1,392 1,389 5 One-family 1,030 1,126 1,198 1,250 1,055 1,048 987 1,009 988 1,034 1,107 1,126 1,121 6 Two-family or more 170 162 259 295 311 271 251 260 294 264 325 266 268 7 Under construction at end of period1 612 680 762 791 792 797 769 763 755 756 761 774 783 8 One-family 473 543 558 584 578 579 552 544 536 534 538 549 556 9 Two-family or more 140 137 204 207 214 218 217 219 219 222 223 225 227 10 Completed 1,158 1,193 1,347 1,388 1,436 1,302 1,443 1,334 1,342 1,256 1,345 1,226 1,229 11 One-family 964 1,040 1,160 1,173 1,209 1,080 1,222 1,089 1,072 1,053 1,037 998 979 12 Two-family or more 194 153 187 215 227 222 221 245 270 203 308 228 250 13 Mobile homes shipped 210 254 304 347 361 335 333 318 329 329 319 335 346 Merchant builder activity in one-family units 14 Number sold 610 666 670 627 643 575 612 607 667 723r 792 704 727 15 Number for sale at end of period1 265 293 338 338 342 347 347 348 347 347 347 351 352 Price of units sold (thousands of dollars)2 16 Median 121.3 126.1 130.4 135.0 127.9 135.0 130.0 134.0 133.9 133.7r 130.0 135.0 130.0 17 Average 144.9 147.6 153.7 159.6 147.4 160.2 153.3 157.8 158.0 160.2r 153.6 161.7 160.4 EXISTING UNITS (one-family) 18 Number sold 3,520 3,800 3,946 3,760 3,610 3,420 3,620 3,390 3,550 3,800 3,990 4,120 4,150 Price of units sold (thousands of dollars)2 19 Median 103.6 106.5 109.6 109.1 108.1 107.0 107.9 108.1 109.0 116.2 115.9 117.6 115.2 20 Average 130.8 133.1 136.4 135.6 135.3 133.4 134.5 134.2 135.4 143.3 142.2 144.4 140.5 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 435,022 464,504 506,904 521,771 521,054 521,429 523,467 522,094r 514,515r 518,934r 528,185 528,715 535,000 22 Private 315,695 339,161 376,566 386,103 384,806 383,652 383,301 382,220r 376,148' 377,486' 385,233 387,323 391,383 23 Residential 187,870 210,455 238,884 243,565 241,938 240,207 237,894 234,109r 231,342' 228,388' 232,415 235,964 240,366 24 Nonresidential 127,825 128,706 137,682 142,538 142,868 143,445 145,407 148,111 144,806 149,098 152,818 151,359 151,017 25 Industrial buildings 20,720 19,533 21,121 22,769 22,715 23,370 23,911 24,707 24,760 24,416 24,424 24,225 24,113 26 Commercial buildings 41,523 42,627 48,552 53,491 53,338 53,687 55,439 55,011 51,779 55,420 56,906 55,606 55,334 27 Other buildings 21,494 23,626 23,912 24,694 24,373 24,039 23,062 23,948 24,319 23,447 24,463 24,054 24,241 28 Public utilities and other 44,088 42,920 44,097 41,584 42,442 42,349 42,995 44,445 43,948 45,815 47,025 47,474 47,329 29 Public 119,322 125,342 130,337 135,668 136,248 137,777 140,166 139,874 138,367 141,447 142,952 141,392 143,617 30 Military 2,502 2,454 2,319 2,784 2,925 2,624 3,048 2,736 2,442 2,569 3,212 3,048 2,311 31 Highway 34,899 37,431 39,882 38,464 38,574 38,681 40,667 41,158 38,657 40,875 44,204 42,792 43,117 32 Conservation and development 6,021 5,978 6,228 7,466 6,681 7,128 7,139 6,273 5,531 6,117 5,326 5,607 5,030 33 Other 75,900 79,479 81,908 86,954 88,068 89,344 89,312 89,707 91,737 91,886 90,210 89,945 93,159 1. Not at annual rates. SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are 2. Not seasonally adjusted. private, domestic shipments as reported by the Manufactured Housing Institute and season- 3. Recent data on value of new construction may not be strictly comparable with data for ally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are previous periods because of changes by the Bureau of the Census in its estimating techniques. published by the National Association of Realtors. All back and current figures are available For a description of these changes, see Construction Reports (C-30-76-5), issued by the from the originating agency. Permit authorizations are those reported to the Census Bureau Census Bureau in July 1976. from 19,000 jurisdictions beginning in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • January 1996 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier months earlier (annual rate) Change from 1 month earlier IIInnndddeeexxx IIIttteeemmm llleeevvveeelll,,, 1994 1995 1995 OOOcccttt... 11999944 11999955 111999999555 111 OOcctt.. OOcctt.. Dec. Mar. June Sept. June July Aug. Sept. Oct. CONSUMER PRICES2 (1982-84=100) 1 All items 2.6 2.8 1.9 3.2 3.2 1.8 .1 .2 .1 .1 .3 153.7 2 Food 2.4 3.0 3.9 .0 3.6 3.6 .1 .2 .2 .5 .3 149.4 3 Energy items .4 -1.2 .4 -1.1 5.4 -11.5 .5 -.8 -.8 -1.4 .4 104.5 4 All items less food and energy 2.9 3.0 2.0 4.1 3.0 2.8 .2 .2 .2 .2 .3 162.8 5 Commodities 1.7 1.6 .3 2.6 .6 2.3 -.1 .1 .4 .1 .2 140.5 6 Services 3.5 3.7 2.6 4.8 4.3 3.0 .3 .3 .1 .3 .3 175.6 PRODUCER PRICES (1982=100) 7 Finished goods 1.0 2.1 2.2 3.2 ,6r 1.3r -.2 .R -.1 .3 -.1 128.5 8 Consumer foods .6 2.9 9.2 -1.2 -4.6r 8.8r -,3r I.R .0 1.0 .0 129.7 9 Consumer energy -2.2 -.4 .0 11.3 1.5r -14.3r -I.R —2.4r -.9 -.5 -.9 76.8 10 Other consumer goods 1.7 2.6 .6 2.9 3.2 2.3 ,I .2 .1 .3 .1 143.2 11 Capital equipment 1.9 2.2 -.3 3.0 1.8r 2.1r ,OR ,3r .1 .1 -.1 137.7 Intermediate materials 12 Excluding foods and feeds 3.2 4.4 7.2 10.6 3.9 -.6 .0 .0 -.1 -.1 -.4 125.7 13 Excluding energy 4.2 5.1 8.3 10.5 4.2 1.8 ,I .3 .1 .1 -.3 135.8 Crude materials 14 Foods -6.4 10.5 -1.2 -4.6 -,8r 42.3r 3.8r 4.2r .7 4.2 2.1 109.3 15 Energy -11.6 -4.7 -7.6 -4.5 14.6r -22.01" - 1.2r -5.3r -3.8 3.2 -.4 66.9 16 Other 13.1 4.0 27.9 21.9 4.6r - 18.2r ,2r - 1.9r -.9 -2.1 -2.6 165.6 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A51 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995 AAccccoouunntt 11999922 11999933 11999944 Q3 Q4 QL Q2 Q3 GROSS DOMESTIC PRODUCT 1 Total 6,020.2 6,343.3 6,738.4 6,791.7 6,897.2 6,977.4 7,030.0 7,113.2 By source 2 Personal consumption expenditures 4,136.9 4,378.2 4,628.4 4,657.5 4,734.8 4,782.1 4,851.0 4,898.1 3 Durable goods 492.7 538.0 591.5 591.5 617.7 615.2 620.3 632.4 4 Nondurable goods 1,295.5 1,339.2 1,394.3 1,406.1 1,420.7 1,432.2 1,446.2 1,449.1 5 Services 2,348.7 2,501.0 2,642.7 2,659.9 2,696.4 2,734.8 2,784.5 2,816.6 6 Gross private domestic investment 788.3 882.0 1,032.9 1,055.1 1,075.6 1,107.8 1,094.1 1,113.4 7 Fixed investment 785.2 866.7 980.7 992.5 1,020.8 1,053.3 1,056.9 1,074.5 8 Nonresidential 561.4 616.1 697.6 709.1 732.8 766.4 779.3 788.0 9 Structures 171.1 173.4 182.8 184.6 192.0 198.6 204.3 207.6 10 Producers' durable equipment 390.3 442.7 514.8 524.5 540.7 567.8 575.0 580.4 11 Residential structures 223.8 250.6 283.0 283.4 288.0 286.8 277.6 286.5 12 Change in business inventories 3.0 15.4 52.2 62.6 54.8 54.5 37.2 38.9 13 Nonfarm -2.7 20.1 45.9 53.4 47.4 54.1 37.9 43.5 14 Net exports of goods and services -30.3 -65.3 -98.2 -109.6 -98.9 -111.1 -124.7 -118.3 15 Exports 638.1 659.1 718.7 730.5 765.5 778.8 797.5 802.0 16 Imports 668.4 724.3 816.9 840.1 864.4 889.9 922.2 920.3 17 Government purchases of goods and services 1,125.3 1,148.4 1,175.3 1,188.8 1,185.8 1,198.7 1,209.6 1,220.1 18 Federal 449.0 443.6 437.3 444.3 431.9 434.4 434.7 436.8 19 State and local 676.3 704.7 738.0 744.5 753.8 764.3 774.8 783.3 By major type of product 20 Final sales, total 6,017.2 6,327.9 6,686.2 6,729.1 6,842.4 6,922.9 6,992.8 7,074.3 21 Goods 2,292.0 2,390.4 2,532.4 2,543.6 2,603.3 2,638.1 2,650.0 2,682.5 22 Durable 968.6 1,032.4 1,118.8 1,125.8 1,151.8 1,175.0 1,178.6 1,201.7 23 Nondurable 1,323.4 1,358.1 1,413.6 1,417.8 1,451.5 1,463.1 1,471.4 1,480.8 24 Services 3,227.2 3,405.5 3,576.2 3,603.6 3,641.9 3,680.6 3,741.0 3,777.3 25 Structures 498.1 532.0 577.6 581.9 597.3 604.3 601.8 614.6 26 Change in business inventories 3.0 15.4 52.2 62.6 54.8 54.5 37.2 38.9 27 Durable goods -13.0 8.6 34.8 44.1 36.3 48.0 28.3 26.3 28 Nondurable goods 16.0 6.7 17.4 18.5 18.5 6.5 8.9 12.6 MEMO 29 Total GDP in 1987 dollars 4,979.3 5,134.5 5,344.0 5,367.0 5,433.8 5,470.1 5,487.8 5,544.6 NATIONAL INCOME 30 Total 4,829.5 5,131.4 5,458.4 5,494.9 5,599.4 5,688.4 5,719.4 n.a. 31 Compensation of employees 3,591.2 3,780.4 4,004.6 4,023.7 4,095.3 4,157.3 4,183.0 4,230.9 32 Wages and salaries 2,954.8 3,100.8 3,279.0 3,293.9 3,356.4 3,403.4 3,422.3 3,462.7 33 Government and government enterprises 567.3 583.8 602.8 604.4 609.0 617.2 620.3 624.4 34 Other 2,387.5 2,517.0 2,676.2 2,689.6 2,747.4 2,786.2 2,802.0 2,838.2 35 Supplement to wages and salaries 636.4 679.6 725.6 729.7 738.9 753.9 760.8 768.2 36 Employer contributions for social insurance 307.7 324.3 344.6 346.0 350.2 354.3 356.8 360.4 37 Other labor income 328.7 355.3 381.0 383.7 388.7 399.6 403.9 407.8 38 Proprietors' income1 418.7 441.6 473.7 467.0 485.7 493.6 487.2 492.3 .39 Business and professional1 374.4 404.3 434.2 437.1 444.0 449.2 452.2 458.3 40 Farm1 44.4 37.3 39.5 29.8 41.7 44.4 35.0 34.0 41 Rental income of persons2 -5.5 24.1 27.7 32.6 29.0 25.4 24.2 20.5 42 Corporate profits' 405.1 485.8 542.7 556.0 560.3 569.7 581.1 n.a. 43 Profits before tax3 395.9 462.4 524.5 538.1 553.5 570.6 574.1 n.a. 44 Inventory valuation adjustment -6.4 -6.2 -19.5 -19.6 -32.1 -39.0 -28.2 -7.4 45 Capital consumption adjustment 15.7 29.5 37.7 37.5 38.8 38.1 35.2 35.4 46 Net interest 420.0 399.5 409.7 415.7 429.2 442.4 444.0 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 • January 1996 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995 AAccccoouunntt 11999922 11999933 11999944 Q3 Q4 Q1 Q2 Q3 PERSONAL INCOME AND SAVING 1 Total personal income 5,154.3 5,375.1 5,701.7 5,734.5 5,856.6 5,962.0 6,008.1 6,075.8 2 Wage and salary disbursements 2,974.8 3,080.8 3,279.0 3,293.9 3,356.4 3,403.4 3,422.3 3,462.7 3 Commodity-producing industries 757.6 773.8 818.2 821.8 837.3 848.5 842.0 846.6 4 Manufacturing 578.3 588.4 617.5 618.3 629.5 638.1 629.6 631.9 5 Distributive industries 682.3 701.9 748.5 753.5 769.6 776.8 782.9 795.4 6 Service industries 967.6 1,021.4 1,109.5 1,114.3 1,140.5 1,160.9 1,177.0 1,196.3 7 Government and government enterprises 567.3 583.8 602.8 604.4 609.0 617.2 620.3 624.4 8 Other labor income 328.7 355.3 381.0 383.7 388.7 399.6 403.9 407.8 Y Proprietors' income1 418.7 441.6 473.7 467.0 485.7 493.6 487.2 492.3 10 Business and professional1 374.4 404.3 434.2 437.1 444.0 449.2 452.2 458.3 li Farm' 44.4 37.3 39.5 29.8 41.7 44.4 35.0 34.0 12 Rental income of persons" -5.5 24.1 27.7 32.6 29.0 25.4 24.2 20.5 13 Dividends 161.0 181.3 194.3 196.9 202.7 205.5 208.1 211.6 14 Personal interest income 665.2 637.9 664.0 674.2 701.1 723.6 739.3 748.3 15 Transfer payments 860.2 915.4 963.4 969.0 979.7 1,004.8 1,018.6 1,031.0 16 Old-age survivors, disability, and health insurance benefits 414.0 444.4 473.5 476.5 483.1 496.7 503.4 508.3 17 LESS: Personal contributions for social insurance 248.7 261.3 281.4 282.9 286.6 293.8 295.4 298.4 18 EQUALS: Personal income 5,154.3 5,375.1 5,701.7 5,734.5 5,856.6 5,962.0 6,008.1 6,075.8 19 LESS: Personal tax and nontax payments 648.6 686.4 742.1 744.1 754.7 777.6 807.0 807.0 20 EQUALS: Disposable personal income 4,505.8 4,688.7 4,959.6 4,990.3 5,101.9 5,184.4 5,201.0 5,268.8 21 LESS: Personal outlays 4,257.8 4,496.2 4,756.5 4,787.0 4,869.3 4,920.7 4,994.9 5,045.9 22 EQUALS: Personal saving 247.9 192.6 203.1 203.3 232.6 263.7 206.1 222.9 MEMO Per capita (1987 dollars) 23 Gross domestic product 19,489.7 19,878.8 20,475.8 20,536.5 20,739.8 20,836.3 20,858.6 21,023.3 24 Personal consumption expenditures 13,110.4 13,390.8 13,715.4 13,716.6 13,853.5 13,880.1 13,965.7 14,033.4 25 Disposable personal income 14,279.0 14,341.0 14,696.0 14,697.0 14,927.0 15,048.0 14,973.0 15,095.0 26 Saving rate (percent) 5.5 4.1 4.1 4.1 4.6 5.1 4.0 4.2 GROSS SAVING 27 Gross saving 722.9 787.5 920.6 922.6 950.3 1,006.0 983.8 n.a. 28 Gross private saving 980.8 1,002.5 1,053.5 1,052.7 1,082.7 1,126.4 1,090.0 n.a. 29 Personal saving 247.9 192.6 203.1 203.3 232.6 263.7 206.1 222.9 30 Undistributed corporate profits' 94.3 120.9 135.1 139.5 130.7 132.6 140.8 n.a. 31 Corporate inventory valuation adjustment -6.4 -6.2 -19.5 -19.6 -32.1 -39.0 -28.2 -7.4 Capital i onsumption allowances 32 Corporate 396.8 407.8 432.2 432.6 438.0 445.3 454.7 461.0 33 Noncorporate 261.8 261.2 283.1 277.3 281.3 284.7 288.4 292.0 34 Government surplus, or deficit ( —), national income and product accounts -257.8 -215.0 -132.9 -130.1 -132.3 -120.4 -106.2 n.a. 35 Federal -282.7 -241.4 -159.1 -154.0 -161.1 -148.6 -129.6 n.a. 36 State and local 24.8 26.3 26.2 23.9 28.8 28.2 23.4 n.a. 37 Gross investment 731.7 789.8 889.7 901.5 907.9 947.4 916.8 n.a. 38 Gross private domestic investment 788.3 882.0 1,032.9 1,055.1 1,075.6 1,107.8 1,094.1 1,113.4 39 Net foreign investment -56.6 -92.3 -143.2 -153.6 -167.7 -160.4 -177.3 n.a. 40 Statistical discrepancy 8.8 2.3 -30.9 -21.1 -42.4 -58.6 -67.0 n.a. 1. With inventory valuation and capital consumption adjustments. SOURCE. U.S. Department of Commerce, Survey of Current Business. 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A53 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1994 1995 IItteemm ccrreeddiittss oorr ddeebbiittss 11999922 11999933 11999944 Q2 Q3 Q4 Q1 Q2P 1 Balance on current account -61,548 -99,925 -151,245 -37,986 -39,714 -43,277 -39,025 -43,622 2 Merchandise trade balance2 -96,106 -132,618 -166,099 -41,494 -44,627 -43,488 -45,050 -49,040 3 Merchandise exports 440,352 456,823 502,485 122,730 127,384 133,926 138,061 142,543 4 Merchandise imports -536,458 -589,441 -668,584 -164,224 -172,011 -177,414 -183,111 -191,583 5 Military transactions, net -2,142 448 2,148 376 1,124 679 542 537 6 Other service transactions, net 58,767 57,328 57,739 14,195 14,696 15,342 15,068 15,135 7 Investment income, net 10,080 9,000 -9,272 -2,285 -2,533 -4,571 -1,961 -2,874 8 U.S. government grants -15,083 -16,311 -15,814 -3,703 -3,488 -6,245 -2,867 -2,356 9 U.S. government pensions and other transfers -3,735 -3,785 -4,247 -1,063 -1,064 -1,063 -782 -988 10 Private remittances and other transfers -13,330 -13,988 -15,700 -4,012 -3,822 -3,931 -3,975 -4,036 11 Change in U.S. government assets other than official reserve assets, net (increase, —) -1,661 -330 -322 491 -283 -931 -152 -157 12 Change in U.S. official reserve assets (increase, -) 3,901 -1,379 5,346 3,537 -165 2,033 -5,318 -2,722 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) 2,316 -537 -441 -108 -111 -121 -867 -156 15 Reserve position in International Monetary Fund -2,692 -44 494 251 273 -27 -526 -786 16 Foreign currencies 4,277 -797 5,293 3,394 -327 2,181 -3,925 -1,780 17 Change in U.S. private assets abroad (increase, —) -68,115 -182,880 -130,875 -10,001 -27,492 -56,258 -69,873 -72,228 18 Bank-reported claims3 20,895 29,947 915 15,107 1,590 -16,651 -29,284 -35,534 19 Nonbank-reported claims 45 1,581 -32,621 -10,230 -8,051 -12,449 -11,518 20 U.S. purchases of foreign securities, net -46,415 -141,807 -49,799 -7.128 -10,976 -15,238 -6,567 -20,597 21 U.S. direct investments abroad, net -42,640 -72,601 -49,370 -7,750 -10,055 -11,920 -22,504 -16,097 22 Change in foreign official assets in United States (increase, +) 40,466 72,146 39,409 9,162 19,691 -421 22,308 37,759 23 U.S. Treasury securities 18,454 48,952 30,723 5,919 16,477 7,470 10,131 25,169 24 Other U.S. government obligations 3,949 4,062 6,025 2,360 2,222 1,228 1,126 1,326 25 Other U.S. government liabilities4 2,180 1,706 2,211 174 494 692 -154 513 26 Other U.S. liabilities reported by U.S. banks3 16,571 14,841 2,923 1,674 1,298 -9,856 10,940 7,802 27 Other foreign official assets5 -688 2,585 -2,473 -965 -800 45 265 2,949 28 Change in foreign private assets in United States (increase, +) 113,357 176,382 251,956 37,364 60,045 85,136 72,533 76,459 29 U.S. bank-reported liabilities3 15,461 20,859 114,396 28,231 19,650 34,676 -531 15,006 30 U.S. nonbank-reported liabilities 13,573 10,489 -4,324 -2,047 487 -5,242 10,113 31 Foreign private purchases of U.S. Treasury securities, net 36,857 24,063 33,811 -7,317 5,428 25,929 29,910 29,966 32 Foreign purchases of other U.S. securities, net 29,867 79,864 58,625 12,551 14,762 10,195 15,816 20,202 33 Foreign direct investments in United States, net 17,599 41,107 49,448 5,946 19,718 19,578 17,225 11,285 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -26,399 35,985 -14,269 -2,567 -12,082 13,718 19,527 4,511 36 Due to seasonal adjustment 587 -6,641 782 6,183 410 37 Before seasonal adjustment -26,399 35,985 -14,269 -3,154 -5,441 12,936 13,344 4,101 MEMO Changes in official assets 38 U.S. official reserve assets (increase, —) 3,901 -1,379 5,346 3,537 -165 2,033 -5,318 -2,722 39 Foreign official assets in United States, excluding line 25 (increase, +) 38,286 70,440 37,198 8,988 19,197 -1,113 22,462 37,246 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 5,942 -3,717 -1,184 -4,217 3,564 1,120 -322 5 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38^10. 4. Associated primarily with military sales contracts and other transactions arranged with 2. Data are on an international accounts basis. The data differ from the Census basis data, or through foreign official agencies. shown in table 3.11, for reasons of coverage and timing. Military exports are excluded from 5. Consists of investments in U.S. corporate stocks and in debt securities of private 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 and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current dealers. Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • January 1996 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1995 IItteemm 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept.P 1 Goods and services, balance -39,480 -74,841 -106,212 -9,209 -11,076 -10,780 -11,280 -11,186 -8,359 -8,349 2 Merchandise -96,106 -132,618 -166,099 -14,537 -16,336 -15,976 -16,493 -16,230 -13,504 -13,705 3 Services 56,626 57,777 59,887 5,328 5,260 5,196 5,213 5,044 5,145 5,356 4 Goods and services, exports 618,969 644,578 701,201 65,342 64,412 65,595 64,599 63,408 66,190 67,244 5 Merchandise 440,352 456,823 502,485 47,947 47,157 48,307 47,381 46,368 49,084 49,858 6 Services 178,617 187,755 198,716 17,395 17,255 17,288 17,218 17,040 17,106 17,386 7 Goods and services, imports -658,449 -719,420 -807,413 -74,551 -75,488 -76,375 -75,879 -74,594 -74,549 -75,593 8 Merchandise -536,458 -589,441 -668,584 -62,484 -63,493 -64,283 -63,874 -62,598 -62,588 -63,563 9 Services -121,991 -129,979 -138,829 -12,067 -11,995 -12,092 -12,005 -11,996 -11,961 -12,030 MEMO 10 Balance on merchandise trade, Census basis -84,501 -115,568 -150,630 -12,886 -14,797 -14,058 -14,730 -15,290 -12,507 -12,806 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 1995 AAsssseett 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept. Oct.p 1 Total 71,323 73,442 74,335 86,761 88,756 90,549 90,063 91,534 86,648 87,152 86,224 2 Gold stock, including Exchange Stabilization Fund1 11,056 11,053 11,051 11,053 11,055 11,054 11,054 11,053 11,053 11,051 11,051 3 Special drawing rights2'3 8,503 9,039 10,039 11,651 11,743 11,923 11,869 11,487 11,146 11,035 10,949 4 Reserve position in International Monetary Fund2 11,759 11,818 12,030 13,418 14,206 14,278 14,276 14,761 14,470 14,681 14,700 5 Foreign currencies4 40,005 41,532 41,215 50,639 51,752 53,294 52,864 54,233 49,979 50,385 49,524 1. Gold held "under earmark" at Federal Reserve Banks for foreign and international SDR holdings and reserve positions in the IMF also have been valued on this basis since July accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold 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 year 2. Special drawing rights (SDRs) are valued according to a technique adopted by the indicated, as follows: 1970—$867 million; 1971—$717 million; 1972—$710 million; 1979— International Monetary Fund (IMF) in July 1974. Values are based on a weighted average of $1,139 million; 1980—51,152 million; 1981—$1,093 million; plus net transactions in SDRs. exchange rates for the currencies of member countries. From July 1974 through December 4. Valued at current market exchange rates. 1980, sixteen currencies were used; since January 1981, five currencies have been used. U.S. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1995 AAsssseett 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept. Oct.p 1 Deposits 205 386 250 370 166 227 167 190 165 201 275 Held in custody 2 U.S. Treasury securities2 314,481 379,394 441,866 459,694 469,482 474,181 482,506 505,613 502,737 506,572 507,075 3 Earmarked gold3 13,118 12,327 12,033 11,964 11,897 11,800 11,725 11,728 1 l,728r 11,728 11,709 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; not organizations. 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 1995 IItteemm 11999933 11999944 Mar. Apr. May June July Aug. Sept.p 1 Total1 483,002 520,578 542,768 552,623 560,324 580,073r 604,392r 612,828 619,358 By type 2 Liabilities reported by banks in the United States 69,808 73,031 83,697 85,564 84,859 91,583r 93,743r 104,745 109,981 3 U.S. Treasury bills and certificates3 151,100 139,570 141,716 146,417 154,575 154,517 159,654 157,516 163,093 U.S. Treasury bonds and notes 4 Marketable 212,237 254,059 262,020 265,178 263,404 274,254 291,034 290,670 286,154 5 Nonmarketable4 5,652 6,109 6,135 6,174 6,209 6,245 6,288 6,329 6,366 6 U.S. securities other than U.S. Treasury securities5 44,205 47,809 49,200 49,290 51,277 53,474 53,673 53,568 53,764 By area 1 Europe1 207,121 215,024 218,385 216,771 217,793 223,814 224,343 221,105 222,820 8 Canada 15,285 17,235 19,268 19,248 19,631 19,549 21,746 21,508 20,522 9 Latin America and Caribbean 55,898 41,492 39,847 42,475 44,707 50,288r 58,007r 63,264 63,305 10 Asia 197,702 236,819 256,845 266,089 270,519 278,767 290,878r 297,343 303,818 11 Africa 4,052 4,179 4,583 4,200 4,281 4,427 4,309 4,433 4,684 12 Other countries 2,942 5,827 3,838 3,838 3,391 3,226 5,107 5,173 4,207 1. Includes the Bank for International Settlements. Venezuela, beginning December 1990, 30-year maturity issue; Argentina, beginning April 2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, 1993, 30-year maturity issue. negotiable time certificates of deposit, and borrowings under repurchase agreements. 5. Debt securities of U.S. government corporations and federally sponsored agencies, and 3. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official U.S. corporate stocks and bonds. institutions of foreign countries. SOURCE. Based on U.S. Department of the Treasury data and on data reported to the 4. Excludes notes issued to foreign official nonreserve agencies. Includes current value of department by banks (including Federal Reserve Banks) and securities dealers in the United zero-coupon Treasury bond issues to foreign governments as follows: Mexico, beginning States, and on the 1989 benchmark survey of foreign portfolio investment in the United March 1988, 20-year maturity issue and beginning March 1990, 30-year maturity issue; States. 3.16 LIABILITIES TO, AND CLAIMS ON, FOREIGNERS Reported by Banks in the United States' Payable in Foreign Currencies Millions of dollars, end of period 1994 1995 IItteemm 11999911 11999922 11999933 Sept. Dec. Mar. June 1 Banks' liabilities 75,129 72,796 78,259 83,444 89,587 96,190 106,069 ?. Banks' claims 73,195 62,799 61,425 64,161 60,249 72,511 77,195 3 Deposits 26,192 24,240 20,401 20,731 19,640 24,257 28,915 4 Other claims 47,003 38,559 41,024 43,430 40,609 48,254 48,280 5 Claims of banks' domestic customers2 3,398 4,432 9,103 12,719 15,020 11,637 13,070 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 • January 1996 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1995 IItteemm 11999922 11999933 11999944 Mar. Apr. May June July Aug. Septp BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 810,259 926,793 1,017,047 1,031,278 1,037,624 1,041,439 l,057,301r l,059,317r 1,075,124 1,070,861 2 Banks' own liabilities 606,444 627,040 721,624 725,066 720,976 722,735 735,054r 730,208' 744,644 732,358 3 Demand deposits 21,828 21,573 23,376 22,746 22,950 23,567 22,226 24,100 21,771 23,745 4 Time deposits2 160,385 175,032 186,400 184,124 182,196 184,299 195,214r 191,739' 198,121 187,537 5 Other3 93,237 112,056 115,933 120,939 123,852 127,544 122,722r 140,910' 137,438 135,844 6 Own foreign offices4 330,994 318,379 395,915 397,257 391,978 387,325 394,892' 373,459' 387,314 385,232 7 Banks' custodial liabilities5 203,815 299,753 295,423 306,212 316,648 318,704 322,247 329,109 330,480 338,503 8 U.S. Treasury bills and certificates6 127,644 176,739 162,826 170,138 175,540 182,046 182,204 188,621 187,318 192,711 9 Other negotiable and readily transferable instruments7 21,974 36,289 42,177 44,921 48,278 40,331 45,112 44,252 44,908 47,241 10 Other 54,197 86,725 90,420 91,153 92,830 96,327 94,931 96,236 98,254 98,551 11 Nonmonetary international and regional organizations8.. . 9,350 10,936 8,606 9,263 8,710 8,576 9,776 11,955 9,963 12,370 12 Banks' own liabilities 6,951 5,639 8,176 8,639 7,547 7,609 8,972 10,884 8,659 11,479 13 Demand deposits 46 15 29 31 214 34 114 43 40 64 14 Time deposits2 3,214 2,780 3,298 3,899 3,954 3,516 4,459 4,977 4,486 4,189 15 Other3 3,691 2,844 4,849 4,709 3,379 4,059 4,399 5,864 4,133 7,226 16 Banks' custodial liabilities5 2,399 5,297 430 624 1,163 967 804 1,071 1,304 891 17 U.S. Treasury bills and certificates6 11,,990088 4,275 281 314 763 510 312 551 826 354 18 Other negotiable and readily transferable instruments7 486 1,022 149 307 400 456 492 520 478 537 19 Other 5 0 0 3 0 1 0 0 0 0 20 Official institutions9 159,563 220,908 212,601 225,413 231,981 239,434 246,100r 253,397' 262,261 273,074 21 Banks' own liabilities 51,202 64,231 59,580 69,196 67,999 68,974 73,129r 75,379' 83,346 85,928 22 Demand deposits 1,302 1,601 1,564 1,705 1,485 1,575 1,398 1,429 1,547 1,362 23 Time deposits2 17,939 21,654 23,511 23,925 25,788 27,462 27,426r 29,502' 31,740 31,978 24 Other3 31,961 40,976 34,505 43,566 40,726 39,937 44,305 44,448' 50,059 52,588 25 Banks' custodial liabilities5 108,361 156,677 153,021 156,217 163,982 170,460 172,971 178,018 178,915 187,146 26 U.S. Treasury bills and certificates6 104,596 151,100 139,570 141,716 146,417 154,575 154,517 159,654 157,516 163,093 27 Other negotiable and readily transferable instruments7 3,726 5,482 13,245 14,351 17,473 15,771 18,325 18,159 20,735 23,777 28 Other 39 95 206 150 92 114 129 205 664 276 29 Banks10 547,320 592,208 680,738 685,733 681,438 680,063 685,718r 665,934' 684,101 669,050 30 Banks' own liabilities 476,117 478,792 566,647 565,555 558,903 560,440 566,247' 545,332' 562,661 546,467 31 Unaffiliated foreign banks 145,123 160,413 170,732 168,298 166,925 173,115 171,355' 171,873' 175,347 161,235 32 Demand deposits 10,170 9,719 10,633 10,878 10,701 11,406 10,554 12,121 10,061 11,817 33 Time deposits' 90,296 105,192 111,156 107,507 100,613 103,681 111,674' 104,806' 110,287 98,967 34 Other' 44,657 45,502 48,943 49,913 55,611 58,028 49,127' 54,946' 54,999 50,451 35 Own foreign offices4 330,994 318,379 395,915 397,257 391,978 387,325 394,892' 373,459' 387,314 385,232 36 Banks' custodial liabilities5 71,203 113,416 114,091 120,178 122,535 119,623 119,471 120,602 121,440 122,583 37 U.S. Treasury bills and certificates6 11,087 10,712 11,219 15,723 15,717 14,437 15,021 15,535 15,489 16,170 38 Other negotiable and readily transferable instruments7 7,555 17,020 14,234 15,254 15,815 10,955 11,188 10,583 10,142 9,665 39 Other 52,561 85,684 88,638 89,201 91,003 94,231 93,262 94,484 95,809 96,748 40 Other foreigners 94,026 102,741 115,102 110,869 115,495 113,366 115,707' 128,031' 118,799 116,367 41 Banks' own liabilities 72,174 78,378 87,221 81,676 86,527 85,712 86,706' 98,613' 89,978 88,484 42 Demand deposits 10,310 10,238 11,150 10,132 10,550 10,552 10,160 10,507 10,123 10,502 43 Time deposits2 48,936 45,406 48,435 48,793 51,841 49,640 51,655' 52,454' 51,608 52,403 44 Other3 12,928 22,734 27,636 22,751 24,136 25,520 24,891' 35,652' 28,247 25,579 45 Banks' custodial liabilities5 21,852 24,363 27,881 29,193 28,968 27,654 29,001 29,418 28,821 27,883 46 U.S. Treasury bills and certificates6 10,053 10,652 11,756 12,385 12,643 12,524 12,354 12,881 13,487 13,094 47 Other negotiable and readily transferable instruments7 10,207 12,765 14,549 15,009 14,590 13,149 15,107 14,990 13,553 13,262 48 Other 1,592 946 1,576 1,799 1,735 1,981 1,540 1,547 1,781 1,527 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 9,111 17,567 17,895 16,741 17,651 11,938 12,158 10,129 10,409 9,915 1. Reporting banks include all types of depository institutions as well as some brokers and 6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official dealers. Excludes bonds and notes of maturities longer than one year. institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in "Other negotia- 7. Principally bankers acceptances, commercial paper, and negotiable time certificates of ble and readily transferable instruments." 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 subsidiar- American Development Bank, and the Asian Development Bank. Excludes "holdings of ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory dollars" of the International Monetary Fund. agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists 9. Foreign central banks, foreign central governments, and the Bank for International principally of amounts owed to the head office or parent foreign bank, and to foreign Settlements. branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. 10. Excludes central banks, which are included in "Official institutions." 5. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks for foreign customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A57 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1995 IItteemm 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept.p AREA 50 Total, all foreigners 810,259 926,793 1,017,047 1,031,278 1,037,624 1,041,439 1,057,301 1,059,317 1,075,124 1,070,861 51 Foreign countries 800,909 915,857 1,008,441 1,022,015 1,028,914 1,032,863 1,047,525 1,047,362 1,065,161 1,058,491 52 Europe 307,670 378,107 392,931 381,150 368,495 377,387 374,702 377,555 376,437 360,406 53 Austria 1,611 1,917 3,649 4,012 4,030 3,961 3,854 3,923 3,869 5,221 54 Belgium and Luxembourg 20,567 28,670 21,978 23,942 22,855 25,734 21,078 24,793 24,590 24,035 55 Denmark 3,060 4,517 2,784 2,396 2,567 2,811 2,432 2,131 2,468 2,476 56 Finland 1,299 1,872 1,436 1,222 2,028 1,708 1,455 2,390 2,270 1,972 57 France 41,411 40,316 45,207 41,447 38,668 40,976 45,034 42,870 43,307 38,094 58 Germany 18,630 26,685 27,190 28,285 28,496 31,968 34,342 33,790 31,252 31,385 59 Greece 913 1,519 1,393 2,264 2,195 2,160 2,351 2,297 2,384 2,105 60 Italy 10,041 11,759 10,882 8,686 9,414 9,810 10,371 10,218 10,811 8,935 61 Netherlands 7,365 16,096 15,971 15,784 12,545 14,622 11,449 11,743 10,685 13,106 62 Norway 3,314 2,966 2,338 2,066 1,374 1,289 1,305 1,119 2,087 1,011 63 Portugal 2,465 3,366 2,846 2,810 2,940 2,855 2,674 3,164 2,932 3,032 64 Russia 577 2,511 2,714 3,469 5,011 7,042 7,177 6,313 7,265 6,367 65 Spain 9,793 20,493 14,655 11,675 9,859 9,780 10,532 9,089 9,962 10,050 66 Sweden 2,953 2,738 3,093 2,474 1,845 1,437 3,471 2,187 2,876 3,143 67 Switzerland 39,440 41,561 41,881 39,355 41,258 39,984 47,243 42,192 41,644 41,375 68 Turkey 2,666 3,227 3,341 2,513 3,624 3,187 3,255 2,972 3,522 3,935 69 United Kingdom 111,805 133,993 163,768 160,162 153,431 151,052 141,110 151,339 150,779 140,014 70 Yugoslavia" 504 570 245 210 219 220 220 214 146 215 71 Other Europe and other former U.S.S.R.'2 29,256 33,331 27,760 28,478 26,136 26,791 25,349 24,811 23,588 23,935 72 Canada 22,420 20,235 24,627 27,035 28,563 27,716 29,451 28,888 28,286 28,750 73 Latin America and Caribbean 317,228 362,161 422,781 422,812 431,632 429,741 444,638 435,628 446,797 433,818 74 Argentina 9,477 14,477 17,199 9,978 10,154 10,210 10,806 12,336 11,473 11,114 75 Bahamas 82,284 73,800 103,684 100,400 97,304 92,324 97,244 88,580 95,793 92,566 76 Bermuda 7,079 8,117 8,467 9,044 8,955 8,617 7,156 6,907 6,606 6,051 77 Brazil 5,584 5,301 9,140 10,860 13,114 15,563 18,242 21,224 26,734 27,580 78 British West Indies 153,033 193,649 229,620 236,331 244,233 242,895 252,372 245,018 244,220 234,613 79 Chile 3,035 3,183 3,114 3,587 3,446 2,911 3,304 2,661 2,876 2,689 80 Colombia 4,580 3,171 4,579 3,644 3,598 3,401 3,273 3,429 3,346 3,254 81 Cuba 3 33 13 5 6 5 5 5 3 4 82 Ecuador 993 880 873 1,117 1,054 1,048 1,179 1,118 1,160 1,130 83 Guatemala 1,377 1,207 1,121 1,062 1,094 1,069 1,128 1,099 1,121 1,196 84 Jamaica 371 410 529 491 422 542 449 426 444 484 85 Mexico 19,454 28,018 12,244 15,750 17,246 18,174 19,172 20,977 22,091 22,041 86 Netherlands Antilles 5,205 4,686 4,530 4,013 4,076 6,001 4,626 6,066 4,776 5,014 87 Panama 4,177 3,582 4,542 4,361 4,816 4,881 4,297 4,624 4,981 4,661 88 Peru 1,080 926 899 893 931 1,004 996 943 1,027 908 89 Uruguay 1,955 1,611 1,594 1,754 1,930 2,091 2,029 1,951 1,935 1,837 90 Venezuela 11,387 12,786 13,975 12,632 12,122 12,041 11,187 11,419 11,134 11,905 91 Other 6,154 6,324 6,658 6,890 7,131 6,964 7,173 6,845 7,077 6,771 92 143,540 114444,,552299 155,556 178,417 187,634 186,272 188,284 192,175 199,526 222,897 China 93 People's Republic of China 3,202 4,011 10,066 12,017 12,138 9,459 10,579 11,908 13,208 22,273 94 Republic of China (Taiwan) 8,408 10,627 9,826 10,021 9,630 9,137 9,740 9,152 9,819 10,229 95 Hong Kong 18,499 17,132 17,087 19,888 20,069 22,690 23,031 25,124 24,141 21,838 96 India 1,399 1,114 2,338 2,354 2,194 1,939 2,104 2,269 2,655 2,912 97 Indonesia 1,480 1,986 1,587 2,107 1,696 2,331 2,115 1,962 2,259 2,362 98 Israel 3,773 4,435 5,155 5,003 5,411 5,326 4,570 4,596 4,720 4.204 99 Japan 58,435 61,466 64,259 77,846 84,761 83,174 83,348 85,801 89,082 104,247 100 Korea (South) 3,337 4,913 5,124 4,374 4,760 5,030 4,982 5,061 4,876 5,438 101 Philippines 2,275 2,035 2,714 2,297 2,257 2,704 2,538 2,652 2,792 2,785 102 Thailand 5,582 6,137 6,466 9,564 10,416 11,582 11,497 11,239 11,172 11,798 103 Middle Eastern oil-exporting countries'3 21,437 15,824 15,475 15,516 15,730 15,612 16,865 16,468 15,773 16,885 104 Other 15,713 14,849 15,459 17,430 18,572 17,288 16,915 15,943 19,029 17,926 105 Africa 5,884 6,633 6,511 6,817 6,583 6,707 6,779 6,962 6,983 7,027 106 Egypt 2,472 2,208 1,867 1,781 2,102 2,045 2,143 1,840 1,924 2,127 107 Morocco 76 99 97 70 66 72 90 94 87 79 108 South Africa 190 451 433 706 401 539 594 1,000 744 465 109 Zaire 19 12 9 9 12 10 18 13 15 9 110 Oil-exporting countries'4 1,346 1,303 1,343 1,599 1,328 1,302 1,418 1,364 1,666 1,791 111 Other 1,781 2,560 2,762 2,652 2,674 2,739 2,516 2,651 2,547 2,556 112 Other 4,167 4,192 6,035 5,784 6,007 5,040 3,671 6,154 7,132 5,593 113 Australia 3,043 3,308 5,141 5,024 4,912 4,255 2,944 5,472 5,458 4,776 114 Other 1,124 884 894 760 1,095 785 727 682 1,674 817 115 Nonmonetary international and regional organizations. , . 9,350 10,936 8,606 9,263 8,710 8,576 9,776 11,955 9,963 12,370 116 International15 7,434 6,851 7,537 8,092 7,173 6,597 8,124 10,266 7,918 10,638 117 Latin American regional'6 1,415 3,218 613 576 666 1,067 804 834 1,039 876 118 Other regional'7 501 867 456 595 871 912 848 855 1,006 856 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank for Reconstruction and Development. Excludes 12. Includes the Bank for International Settlements. Since December 1992, has "holdings of dollars" of the International Monetary Fund. included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 17. Asian, African, Middle Eastern, and European regional organizations, except the Bank Emirates (Trucial States). for International Settlements, which is included in "Other Europe." 14. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • January 1996 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1995 AArreeaa oorr ccoouunnttrryy 11999922 11999933 11999944 Mar. Apr. May June July Aug. Sept.p 1 Total, all foreigners 499,437 486,250 483,372 491,402 480,697 483,947 519,489r 506,828r 518,658 512,391 2 Foreign countries 494,355 483,845 478,781 487,668 477,760 482,337 516,856r 505,511r 517,241 509,564 3 Europe 123,377 122,823 124,609 127,193 122,538 123,304 128,932 125,948 126,587 115,332 4 Austria 331 413 692 589 461 756 581 616 685 670 5 Belgium and Luxembourg 6,404 6,532 6,737 7,424 8,505 8,052 5,148 8,063 8,249 7,050 6 Denmark 707 382 1,030 723 549 508 599 443 428 410 7 Finland 1,418 594 691 564 700 431 394 967 1,001 1,221 8 France 14,723 11,822 12,767 13,480 13,132 14,083 15,362 15,419 15,192 13,926 9 Germany 4,222 7,722 6,732 7,097 7,156 6,644 7,986 6,272 7,827 7,797 10 Greece 717 680 592 611 560 407 442 445 393 385 11 Italy 9,047 8,836 6,041 6,396 6,209 6,219 6,734 6,066 5,746 5,910 12 Netherlands 2,468 3,063 2,957 3,182 3,551 5,998 4,356 4,478 4,354 4,696 13 Norway 355 396 504 1,442 1,295 1,382 1,019 1,206 1,047 1,392 14 Portugal 325 834 938 907 915 990 1,208 987 916 986 15 Russia 3,147 2,310 949 770 657 511 508 495 504 421 16 Spain 2,755 2,800 3,529 3,066 2,076 2,138 3,565 3,626 3,480 3,519 17 Sweden 4,923 4,252 4,096 3,394 3,522 3,319 2,939 3,557 2,819 2,676 18 Switzerland 4,717 6,603 7,492 7,854 7,398 7,631 10,290 7,539 7,361 7,183 19 Turkey 962 1,301 874 690 810 722 713 725 764 802 20 United Kingdom 63,430 61,963 66,558 67,724 63,642 62,218 65,790 63,746 64,479 54,277 21 Yugoslavia2 569 536 265 247 247 248 229 230 230 234 22 Other Europe and other former U.S.S.R.3 2,157 1,784 1,165 1,033 1,153 1,047 1,069 1,068 1,112 1,777 23 Canada 13,845 18,543 18,150 20,302 17,482 20,553 19,715 18,870 17,266 18,449 24 Latin America and Caribbean 218,078 223,997 222,541 224,955 224,901 223,659 243,232' 237,824' 248,907 249,100 25 Argentina 4,958 4,473 5,834 6,297 6,178 6,352 6,596 6,255 6,164 6,118 26 Bahamas 60,835 63,296 66,096 65,458 64,352 62,297 63,287' 59,446' 60,421 62,409 27 Bermuda 5,935 8,532 8,381 8,804 11,843 10,884 8,549 6,373 8,944 6,295 28 Brazil 10,773 11,845 9,579 10,871 10,896 11,192 11,522 12,528 12,974 13,081 29 British West Indies 101,507 98,708 95,609 96,422 94,155 95,284 113,870 113,951 117,416 119,298 30 Chile 3,397 3,619 3,794 4,348 4,247 3,867 4,316 4,245 4,642 4,436 31 Colombia 2,750 3,179 4,003 3,983 3,928 4,034 4,032 4,182 4,273 4,355 32 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 884 680 680 567 565 663 767 767 724 782 34 Guatemala 262 288 366 379 359 353 344 340 350 361 35 Jamaica 162 195 258 275 262 258 264 277 290 287 36 Mexico 14,991 15,713 17,721 17,187 17,182 17,375 17,277 17,146 16,827 16,466 37 Netherlands Antilles 1,379 2,682 1,055 1,187 1,333 1,778 2,881' 2,730 6,314 5,602 38 Panama 4,654 2,893 2,179 2,470 2,507 2,433 2,506 2,512 2,494 2,504 39 Peru 730 656 996 1,096 1,116 1,095 1,359 1,332 1,366 1,461 40 Uruguay 936 969 503 355 366 398 377 424 424 387 41 Venezuela 2,525 2,907 1,828 1,649 1,679 1,662 1,608 1,647 1,601 1,457 42 Other 1,400 3,362 3,659 3,607 3,933 3,734 3,677 3,669 3,683 3,801 43 Asia 131,789 111,765 107,337 109,512 110066,,774499 110088,,778800 111188,,669977 111177,,119988'' 111188,,118899 112200,,220044 China 44 People's Republic of China 906 2,271 836 841 980 879 1,143 1,206 1,163 1,315 45 Republic of China (Taiwan) 2,046 2,623 1,444 1,549 1,534 1,519 1,794 1,913 1,600 1,558 46 Hong Kong 9,642 10,826 9,159 14,396 11,602 12,069 14,894 14,753' 14,493 15,644 47 India 529 589 994 1,040 1,139 1,126 1,210 1,732 1,903 1,944 48 Indonesia 1,189 1,527 1,470 1,513 1,463 1,427 1,443 1,516 1,618 1,569 49 Israel 820 826 688 811 683 783 949 748 699 711 50 Japan 79,172 60,029 59,425 55,602 55,191 58,475 61,039 61,268 63,286 63,007 51 Korea (South) 6,179 7,539 10,286 12,303 11,953 12,265 12,617 13,142 12,844 13,121 52 Philippines 2,145 1,409 660 550 496 532 916' 596 621 747 53 Thailand 1,867 2,170 2,902 2,778 2,757 2,755 2,688 2,670 2,594 2,594 54 Middle Eastern oil-exporting countries4 18,540 15,113 13,741 13,069 13,292 11,643 12,569' 11,946 11,401 11,721 55 Other 8,754 6,843 5,732 5,060 5,659 5,307 7,435 5,708 5,967 6,273 56 4,279 3,857 3,015 2,875 2,741 2,751 2,919 2,907 2,838 2,700 57 Egypt 186 196 225 205 181 237 204 193 194 202 58 Morocco 441 481 429 424 440 454 686 645 653 647 59 South Africa 1,041 633 671 644 584 579 563 531 544 449 60 Zaire 4 4 2 2 2 2 2 7 2 9 61 Oil-exporting countries5 1,002 1,129 842 731 700 658 657 659 614 620 62 Other 1,605 1,414 846 869 834 821 807 872 831 773 63 Other 2,987 2,860 3,129 2,831 3,349 3,290 3,361 2,764 3,454 3,779 64 Australia 2,243 2,037 2,186 1,723 1,768 1,877 1,999 2,072 2,072 2,632 65 Other 744 823 943 1,108 1,581 1,413 1,362 692 1,382 1,147 66 Nonmonetary international and regional organizations6 ... 5,082 2,405 4,591 3,734 2,937 1,610 2,633 1,317 1,417 2,827 1. Reporting banks include all types of depository institutions as well as some brokers and 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 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 all 6. Excludes the Bank for International Settlements, which is included in "Other Europe." parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1995 Mar. Apr. May Juner Julyr Aug. Sept. 1 Total 559,495 560,040 580,496 593,011 625,934 2 Banks' claims 499,437 486,250 483,372 491,402 480,697 483,947 519,489 506,828 518,658 512,391 3 Foreign public borrowers 31,367 29,004 23,470 23,722 22,193 19,075 23,772 19,716 21,423 22,291 4 Own foreign offices2 303,991 284,270 282,143 292,092 282,383 285,843 300,564 292,026 295,929 296,546 5 Unaffiliated foreign banks 109,342 100,169 111,494 105,406 104,883 104,005 112,162 113,309 111,557 106,688 6 Deposits 61,550 49,186 59,142 53,485 54,970 51,454 58,583 59,456 57,386 49,970 7 Other 47,792 50,983 52,352 51,921 49,913 52,551 53,579 53,853 54,171 56,718 8 AH other foreigners 54,737 72,807 66,265 70,182 71,238 75,024 82,991 81,777 89,749 86,866 9 Claims of banks' domestic customers3 60,058 73,790 97,124 101,609 106,445 10 Deposits 1155,,445522 34,291 56,649 56,584 58,526 11 Negotiable and readily transferable instruments4 3311,,447744 25,819 27,188 3300,,556655 3311,,559911 12 Outstanding collections and other claims 13,132 13,680 13,287 14,460 16,328 MEMO 13 Customer liability on acceptances 8,655 7,846 8,377 8,415 8,500 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 38,623 29,287 32,004 35,259 26,429 29,437 35,409 34,221 35,133 n.a. 1. For banks' claims, data are monthly; for claims of banks' domestic customers, data are principally of amounts due from the head office or parent foreign bank, and from foreign for quarter ending with month indicated. branches, agencies, or wholly owned subsidiaries of the head office or 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, bankers acceptances, and commercial 2. For U.S. banks, includes amounts due from own foreign branches and foreign subsidiar- paper. ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory 5. Includes demand and time deposits and negotiable and nonnegotiable certificates of agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists deposit denominated in U.S. dollars issued by banks abroad. 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 1995 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa** 11999911 11999922 11999933 Sept. Dec. Mar. June 1 Total 195,302 195,119 201,611 196,600 201,117 198,959 217,954 By borrower 2 Maturity of one year or less 162,573 163,325 171,786 169,769 175,429 170,580 189,651 3 Foreign public borrowers 21,050 17,813 17,763 17,368 15,557 15,749 15,916 4 All other foreigners • 141,523 145,512 154,023 152,401 159,872 154,831 173,735 5 Maturity of more than one year 32,729 31,794 29,825 26,831 25,688 28,379 28,303 6 Foreign public borrowers 15,859 13,266 10,880 7,414 7,670 7,689 7,726 7 All other foreigners 16,870 18,528 18,945 19,417 18,018 20,690 20,577 By area Maturity of one year or less 8 Europe 51,835 53,300 57,392 59,803 58,188 54,389 60,573 9 Canada 6,444 6,091 7,673 7,304 7,360 7,417 8,210 10 Latin America and Caribbean 43,597 50,376 59,689 58,735 61,448 63,803 70,491 11 Asia 51,059 45,709 41,419 37,086 40,696 38,213 44,327 12 Africa 2,549 1,784 1,820 1,530 1,371 1,223 1,443 13 All other3 7,089 6,065 3,793 5,311 6,366 5,535 4,607 Maturity of more than one year 14 Europe 3,878 5,367 5,276 4,038 3,865 4,496 3,700 15 Canada 3,595 3,287 2,558 2,683 2,495 3,596 3,084 16 Latin America and Caribbean 18,277 15,312 14,007 12,714 12,230 13,003 14,116 17 Asia 4,459 5,038 5,600 5,093 4,731 5,215 5,491 18 Africa 2,335 2,380 1,936 1,840 1,553 1,592 1,372 19 All other3 185 410 448 463 814 477 540 1. Reporting banks include all types of depository institutions as well as some brokers and 2. Maturity is time remaining until maturity, dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • January 1996 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1993 1994 1995 AArreeaa oorr ccoouunnttrryy 11999911 11999922 June Sept. Dec. Mar. June Sept. Dec. Mar. June 1 Total 343.S 344.7 376.3 387.4 405.2 476.4r 485.6r 485.2r 496.7r 537.6r 523.3r 2 G-10 countries and Switzerland 137.5r 131.3r 149.0 152.0 161.6 180.3r 174.9r 183.7 191.7r 201.0' 199.2r 3 Belgium and Luxembourg .0 5.6 7.0 7.1 7.4 8.0r 8.6r 9.6r 7.0 8.3r 13' 4 France 11.3r 15.3 14.0 12.3 12.0 16.6 19.1 21.2 19.7 20.1 19.3 5 Germany 8.3 9.1 10.7 12.2 12.6 29.9r 25.0' 24.2r 23.8r 30.4 29.1 6 Italy 5.6 6.5 7.9 8.7 7.6 15.6 14.0 11.6 11.8 10.6 10.7 } Netherlands .0 2.8 3.7 3.7 4.7 4.1 3.6 3.5 3.6 3.6 4.3 8 Sweden 1.9 2.3 2.5 2.5 2.7 2.9 3.0 2.6 2.7 3.1 3.0 9 Switzerland 3.4 4.8 4.7 5.6 5.9 6.3 6.5 6.2 6.9 6.2 6.1 10 United Kingdom 68.4 59.7 72.9 73.9 84.2 69.5r 64.6r 78.4r 85.5r 89.5r 86.5r 11 Canada 5.8 6.3 8.0 9.7 6.8 7.8 9.7 9.9 9.7 10.6 10.8 12 Japan 22.2 18.8 17.6 16.4 17.6 19.6r 20.7 16.5 21.0 24.5 22.1 13 Other industrialized countries 22.8 24.0 27.2 26.0 24.6 41.2r 41.7 41.6 45.2 43.9 43.2' 14 Austria .6 1.2 1.3 .6 .4 1.0 1.0 1.0 1.1 .9 .1 15 Denmark .9 .9 1.0 1.1 1.0 1.1 1.1 ..99 1.2 1.6 1.1 16 Finland .7 .7 .9 .6 .4 1.0 .8 ..88 1.0 1.1 .5 17 Greece 2.6 3.0 3.1 3.2 3.2 3.8 4.6 4.3 4.5 4.9 5.0 18 Norway 1.4 1.2 1.8 2.1 1.7 1.6 1.6 1.6 2.0 2.4 1.8 19 Portugal .6 .4 .9 1.0 .8 1.2 1.1 1.0 1.2 1.0 1.2 20 Spain 8.3 8.9 10.5 9.3 8.9 12.3 11.7 13.1 13.6 14.1 13.3r 21 Turkey 1.4 1.3 2.1 2.1 2.1 2.4 2.1 1.8 1.6 1.4 1.4 22 Other Western Europe 1.8 1.7 1.7 2.2 2.6 3.0 2.8 1.0 2.7 2.5 2.6 23 South Africa 1.9 1.7 1.3 1.2 1.1 1.2 1.2 1.2 1.0 1.4 1.4 24 Australia 2.7 2.9 2.5 2.8 2.3 12.7 13.7 15.0 15.4 12.6 14.3 25 OPEC2 14.5 15.8 15.7 14.8 17.4 22.9 21.6 21.6 23.8r 19.5 20.3 26 Ecuador .7 .6 .6 .5 .5 .5 .5 .4 .5 .5 .7 27 Venezuela 5.4 5.2 5.5 5.4 5.1 4.7 4.4 3.9 3.7 3.5 3.5 28 Indonesia 2.7 2.7 3.1 2.8 3.3 3.4 3.2 3.3 3.8 4.0 4.1 29 Middle East countries 4.2 6.2 5.4 4.9 7.4 13.2 12.4 13.0 15.0r 10.7 11.4 30 African countries 1.5 1.1 1.1 1.1 1.2 1.1 1.1 1.0 .9 .7 .6 31 Non-OPEC developing countries 64.3 72.6 76.9 77.4 82.9 94. r 94.5' 92.9' 95.9r 98.4r 103.5' Latin America 32 Argentina 4.8 6.6 6.6 7.2 7.7 8.7r 9.9r 10.5r 11.2 11.4 12.3 33 Brazil 9.6 10.8 12.3 11.7 12.0 12.7 12.0 9.3 8.4 9.2 10.0 34 Chile 3.6 4.4 4.6 4.7 4.7 5.1 5.1 5.4 6.1 6.3 7.0 35 Colombia 1.7 1.8 1.9 2.0 2.1 2.2 2.4 2.4 2.6 2.6 2.6 36 Mexico 15.5 16.0 16.8 17.5 17.6 18.8 18.4 19.6 18.4 17.8 17.6 37 Peru .4 .5 .4 .3 .4 .6 .6 .6 .5 .6 .8 38 Other 2.1 2.6 2.7 2.7 3.1 2.8r 2.1' 2.8r 2.1' 2.4r 2.6 Asia China 39 People's Republic of China .3 .7 1.6 .5 2.0 .8 .8 1.0 1.1 1.1 1.4 40 Republic of China (Taiwan) 4.1 5.2 5.9 6.4 7.3 7.6 7.1 6.9 9.2 8.5r 9.0' 41 3.0 3.2 3.1 2.9 3.2 3.4r 3.7 3.9 4.2 3.8 4.0 42 Israel .5 .4 .4 .4 .5 .4 .4 .4 .4 .6 .6 43 Korea (South) 6.8 6.6 6.9 6.5 6.7 14.1 14.3 14.4 16.2 16.9 18.7 44 Malaysia 2.3 3.1 3.7 4.1 4.4 5.2 5.2 3.9r 3.1 3.9 4.1 4b Philippines 3.7 3.6 2.9 2.6 3.1 3.4 3.2 2.9 3.3 3.0 3.6 46 Thailand 1.7 2.2 2.4 2.8 3.1 3.0 3.3 3.5 2.1r 3.3 3.8 47 Other Asia 2.4 3.1 2.9 3.4 3.1 3.1 3.2r 3.4r 4.7r 4.9r 3.5r Africa 48 Egypt .4 .2 .2 .2 .4 .4 .5 .3 .3 .4 .4 49 Morocco .7 .6 .6 .6 .7 .7 .7 .7 .6 .6 .9 50 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .7 1.0 .9 .8 .8 1.0 .9 .9 .8 .7 .6 52 Eastern Europe 2.4 3.1 3.2 3.0 3.1 3.4 3.0 3.0 2.7 2.3r 1.8' 53 Russia4 .9 1.9 1.9 1.7 1.6 1.5 1.2 1.1 .8 .6 .4 54 Yugoslavia5 .9 .6 .6 .6 .6 .5 .5 .5 .5 .4 .3 55 Other .7 .6 .8 .7 .9 1.4 1.4 1.5 1.4 1.2r 1.0' 56 Offshore banking centers 53.8r 58.T 58.0 67.9 72.0 78.1r 79.9r 76.3r 70.5 84.4r 83.0' 5 7 Bahamas 11.9 6.9 7.1 12.7 10.8 13.4r 13.0r 13.4r 10.0 12.6 7.9' 58 Bermuda 2.3 6.2 4.5 5.5 8.6 8.9 6.5 6.0 8.3 8.7 8.5 59 Cayman Islands and other British West Indies 15.5r 21.5r 15.6 15.1 17.4 17.5r 23.5 21.1 19.8 19.3 23.3 60 Netherlands Antilles 1.2 1.1 2.5 2.8 2.6 3.5 2.5 1.7 1.0 .9 2.5' 61 Panama6 1.4 1.9 2.1 2.1 2.4 2.0 1.9 1.9 1.3 1.1 1.3 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 14.3 13.9 16.9 19.1 18.7 19.7 21.8 20.3 19.9 22.4r 23.0' 64 Singapore 7.1 6.5 9.3 10.4 11.2 13.0 10.6 11.8 10.1 19.2 16.4 65 Other .0 .0 .0 .0 .1 .0 .0 .0 .1 .0 .0 66 Miscellaneous and unallocated8 47.9 39.7 46.1 46.2 43.4 55.9 69.7 65.8 66.6 82.0r 72.1' 1. The banking offices covered by these data include US. offices and foreign branches of 2. Organization of Petroleum Exporting Countries, shown individually; other members of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not covered OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United include U.S. agencies and branches of foreign banks. Beginning March 1994, the data include Arab Emirates); and Bahrain and Oman (not formally members of OPEC). large foreign subsidiaries of U.S. banks. The data also include other types of U.S. depository 3. Excludes Liberia. Beginning March 1994 includes Namibia. institutions as well as some types of brokers and dealers. To eliminate duplication, the data 4. As of December 1992, excludes other republics of the former Soviet Union. are adjusted to exclude the claims on foreign branches held by a U.S. office or another foreign 5. As of December 1992, excludes Croatia, Bosnia and Hercegovinia, and Slovenia. branch of the same banking institution. 6. Includes Canal Zone. These data are on a gross claims basis and do not necessarily reflect the ultimate country 7. Foreign branch claims only. risk or exposure of U S. banks. More complete data on the country risk exposure of U.S. banks 8. Includes New Zealand, Liberia, and international and regional organizations. are available in the quarterly Country Exposure Lending Survey published by the Federal Financial Institutions Examination Council. 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 States Millions of dollars, end of period 1994 1995 Type of liability, and area or country 11999911 11999922 11999933 Mar. June Sept. Dec. Mar. Junep 1 Total 44,708 45,511 50,330 52,102 55,350 57,190 54,586 51,092 50,565 2 Payable in dollars 39,029 37,456 38,728 38,543 42,936 42,712 39,651 37,204 35,635 3 Payable in foreign currencies 5,679 8,055 11,602 13,559 12,414 14,478 14,935 13,888 14,930 By type 4 Financial liabilities 22,518 23,841 28,959 30,485 33,245 35,871 32,852 29,752 28,832 5 Payable in dollars 18,104 16,960 18,545 18,930 22,819 23,262 19,792 17,645 15,876 6 Payable in foreign currencies 4,414 6,881 10,414 11,555 10,426 12,609 13,060 12,107 12,956 7 Commercial liabilities 22,190 21,670 21,371 21,617 22,105 21,319 21,734 21,340 21,733 8 Trade payables 9,252 9,566 8,802 8,979 9,911 9,550 10,005 9,908 10,558 9 Advance receipts and other liabilities . . . 12,938 12,104 12,569 12,638 12,194 11,769 11,729 11,432 11,175 10 Payable in dollars 20,925 20,496 20,183 19,613 20,117 19,450 19.859 19,559 19,759 11 Payable in foreign currencies 1,265 1,174 1,188 2,004 1,988 1,869 1,875 1,781 1,974 By area or country Financial liabilities 12 Europe 12,003 13,387 18,810 20,582 23,689 23,813 20,870 16,804 17,217 13 Belgium and Luxembourg 216 414 175 525 524 661 495 612 778 14 France 22,,110066 11,,662233 2,539 2,606 1,590 2,241 1,727 2,046 1,101 15 Germany 668822 888899 975 1,214 939 1,467 1,961 1,755 1,589 16 Netherlands 11,,005566 606 534 564 533 648 552 633 530 17 Switzerland 440088 569 634 1,200 631 633 688 883 1,056 18 United Kingdom 6,528 8,610 13,332 13,865 18,255 16,848 14,709 10,025 11,133 19 Canada 292 544 859 508 698 618 629 1,817 894 20 Latin America and Caribbean 4,784 4,053 3,359 3,554 3,125 3,139 3,021 3,024 2,808 21 Bahamas 537 379 1,148 1,158 1,052 1,112 926 931 851 22 Bermuda 114 114 0 120 115 15 80 149 138 23 Brazil 6 19 18 18 18 7 207 58 58 24 British West Indies 3,524 2,850 1,533 1,613 1,297 1,344 1,160 1,231 1,118 25 Mexico 7 12 17 14 13 15 0 10 3 26 Venezuela 4 6 5 5 5 5 5 5 4 27 Asia 5,381 5,818 5,689 5,650 5,694 8,149 8,147 7,911 7,720 28 Japan 4,116 4,750 4,620 4,638 4,760 6,947 7,013 6,890 6,791 29 Middle Eastern oil-exporting countries' 13 19 23 24 24 31 35 27 25 30 Africa 6 6 133 133 9 133 135 156 151 31 Oil-exporting countries2 4 0 123 124 0 123 123 122 122 32 All other3 52 33 109 58 30 19 50 40 42 Commercial liabilities 8,701 7,398 6,827 6,553 6,919 6,866 6,835 6,812 6,964 33 Europe 248 298 239 263 254 287 241 271 288 34 Belgium and Luxembourg 1,039 700 655 554 712 742 760 692 581 35 France 1,052 729 684 577 670 552 604 504 575 36 Germany 710 535 688 628 649 674 722 574 476 37 Netherlands 575 350 375 388 473 391 327 329 434 38 Switzerland 2,297 2,505 2,039 2,142 2,309 2,350 2,444 2,848 2,902 39 United Kingdom 40 Canada 1,014 1,002 879 1,039 1,070 1,068 1,037 1,198 1,107 41 Latin America and Caribbean 1,355 1,533 1,658 1,900 2,000 1,783 1,857 1,389 1,856 42 Bahamas 3 3 21 8 2 6 19 8 3 43 Bermuda 310 307 350 493 418 200 345 265 401 44 Brazil 219 209 214 209 215 147 161 97 108 45 British West Indies 107 33 27 20 24 33 23 29 12 46 Mexico 307 457 481 554 703 672 574 362 428 47 Venezuela 94 142 123 147 192 189 276 273 204 48 Asia 9,334 10,594 10,980 10,927 10,968 10,501 11,058 10,937 10,874 49 Japan 3,721 3,612 4,314 4,617 4,389 4,235 4,801 4,785 4,350 50 Middle Eastern oil-exporting countries' 1,498 1,889 1,534 1,534 1,834 1,680 1,603 1,800 1,810 51 Africa 715 568 453 478 510 468 428 463 482 52 Oil-exporting countries2 327 309 167 194 241 264 256 248 252 53 Other3 1,071 575 574 720 638 633 519 541 450 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria. Emirates (Trucial States). 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • January 1996 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1994 1995 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999911 11999922 11999933 Mar. June Sept. Dec. Mar. June 1 Total 45,262 45,073 48,881 50,716 49,513 51,406 56,743 52,177 57,666 2 Payable in dollars 42,564 42,281 44,883 46,596 45,018 47,065 52,690 47,878 53,285 3 Payable in foreign currencies 2,698 2,792 3,998 4,120 4,495 4,341 4,053 4,299 4,381 By type 4 Financial claims 27,882 26,509 27,528 29,379 27,337 28,930 32,876 28,651 33,574 5 Deposits 20,080 17,695 15,681 16,404 15,842 16,764 18,720 17,218 22,149 b Payable in dollars 19,080 16,872 15,146 15,847 15,203 16,153 18,245 16,609 21,477 / Payable in foreign currencies 1,000 823 535 557 639 611 475 609 672 8 Other financial claims 7,802 8,814 11,847 12,975 11,495 12,166 14,156 11,433 11,425 y Payable in dollars 6,910 7,890 10,655 11,788 10,172 10,978 13,096 10,266 10,338 10 Payable in foreign currencies 892 924 1,192 1,187 1,323 1,188 1,060 1,167 1,087 11 Commercial claims 17,380 18,564 21,353 21,337 22,176 22,476 23,867 23,526 24,092 12 Trade receivables 14,468 16,007 18,390 18,480 19,375 19,713 21,034 20,581 21,151 13 Advance payments and other claims 2,912 2,557 2,963 2,857 2,801 2,763 2,833 2,945 2,941 14 Payable in dollars 16,574 17,519 19,082 18,961 19,643 19,934 21,349 21,003 21,470 lb Payable in foreign currencies 806 1,045 2,271 2,376 2,533 2,542 2,518 2,523 2,622 By area or country Financial claims 16 Europe 13,441 9,331 7,249 7,411 6,763 8,156 77,,667799 7,277 7,456 17 Belgium and Luxembourg 13 8 134 125 83 114 8866 69 81 18 France 269 764 826 790 995 831 800 808 706 19 Germany 283 326 526 466 459 413 540 443 355 20 Netherlands 334 515 502 503 472 503 429 606 601 21 Switzerland 581 490 530 535 509 747 523 490 499 22 United Kingdom 11,534 6,252 3,535 3,853 3,127 4,440 4,436 3,919 4,510 23 Canada 2,642 1,833 2,032 2,294 3,080 3,164 3,801 4,064 3,929 24 Latin America and Caribbean 10,717 13,893 16,031 16,645 14,799 14,952 18,841 15,500 20,597 2b Bahamas 827 778 1,310 1,385 1,288 1,086 2,369 " 905 2,322 26 Bermuda 8 40 125 34 39 52 27 37 85 I) Brazil 351 686 654 672 466 411 520 487 460 28 British West Indies 9,056 11,747 12,536 13,281 11,993 12,271 14,880 13,274 16,816 2y Mexico 212 445 868 850 614 655 606 475 524 30 Venezuela 40 29 161 26 33 32 35 27 27 31 640 864 1,657 2,550 2,234 2,175 1,838 1,457 1,226 32 Japan 350 668 892 1,657 1,349 662 931 584 467 33 Middle Eastern oil-exporting countries' 5 3 3 5 2 19 141 4 5 34 Africa 57 83 99 76 74 87 249 77 64 3b Oil-exporting countries2 1 9 1 0 1 1 0 9 9 36 All other3 385 505 460 403 387 396 468 276 302 Commercial claims 37 Europe 8,193 8,451 9,105 8,793 8,952 8,812 9,517 9,047 9,224 38 Belgium and Luxembourg 194 189 184 182 189 179 213 198 216 3y France 1,585 1,537 1,947 1,830 1,779 11,,776666 1,879 1,783 1,673 40 Germany 955 933 1,018 950 940 888833 1,027 995 1,023 41 Netherlands 645 552 423 355 294 331 307 335 349 42 Switzerland 295 362 432 415 686 538 557 562 620 43 United Kingdom 2,086 2,094 2,377 2,348 2,443 2,505 2,547 2,404 2,459 44 Canada 1,121 1,286 1,781 1,870 1,875 1,906 1,988 2,006 1,982 45 Latin America and Caribbean 2,655 3,043 3,274 3,560 3,900 3,960 4,117 4,146 4,341 46 Bahamas 13 28 11 13 18 34 9 17 21 47 Bermuda 264 255 182 222 295 246 234 202 207 48 Brazil 427 357 460 419 500 471 612 678 765 49 British West Indies 41 40 71 58 67 49 83 59 85 bO Mexico 842 924 990 1,011 1,048 11,,113366 1,243 1,114 1,112 bl Venezuela 203 345 293 292 303 338888 348 294 318 52 4,591 4,866 5,979 5,932 6,266 6,561 6,881 7,013 7,173 53 Japan 1,899 1,903 2,275 2,447 22,,449900 2,586 2,623 2,725 2,805 b4 Middle Eastern oil-exporting countries' 620 693 701 654 660088 605 690 690 697 55 Africa 430 554 493 487 472 445 454 475 460 56 Oil-exporting countries2 95 78 72 88 78 59 67 75 61 57 Other3 390 364 721 695 711 792 910 839 912 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria. Emirates (Trucial States). 3. Includes nonmonetary international and regional organizations. 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 1995 Transaction, and area or country 1993 1994 Jan.- Mar. Apr. May June July Aug. Sept.p Sept. U.S. corporate securities STOCKS 1 Foreign purchases 319,664 350,558 332,857 35,332 30,082 38,769 45,429 42,444 41,908 44,448 2 Foreign sales 298,086 348,648 325,318 37,653 29,206 36,087 43,199 40,009 39,366 44,217 3 Net purchases, or sales (—) 21,578 1,910 7,539 -2,321 876 2,682 2,230 2,435 2,542 231 4 Foreign countries 21,306 1,900 7,691 -2,291 877 2,692 2,238 2,443 2,565 294 5 Europe 10,658 6,717 1,236 -1,304 165 381 -44 2,045 1,836 -1,319 6 France -103 -201 -605 -250 -80 -66 -79 261 17 -126 7 Germany 1,642 2,110 -1,700 -243 -261 -528 -224 8 -104 -136 8 Netherlands -602 2,251 2,391 296 349 174 70 364 431 197 9 Switzerland 2,986 -30 -3,150 -475 -673 -476 -201 -20 -847 9 10 United Kingdom 4,559 840 5,306 -309 1,125 1,382 243 1,445 2,330 -1,114 11 Canada -3,213 -1,160 -1,673 -333 -197 75 -740 -425 -10 -197 12 Latin America and Caribbean 5,719 -2,108 7,152 -243 570 -26 1,651 881 1,811 751 13 Middle East1 -321 -1,142 -461 -73 59 -87 -99 -24 -5 -77 14 Other Asia 8,198 -1,207 1,217 -342 314 2,013 1,358 107 -961 1,048 15 Japan 3,825 1,190 -3,606 -321 29 86 -466 141 -1,076 -598 16 Africa 63 29 46 -10 -10 41 15 -5 17 34 17 Other countries 202 771 174 14 -24 295 97 -136 -123 54 18 Nonmonetary international and regional organizations 272 10 -152 -30 -1 -10 -8 -8 -23 -63 BONDS2 19 Foreign purchases 283,824 289,614 210,734 25,390 18,163 22,830 27,934 23,81 lr 24,742 25,808 20 Foreign sales 217,824 229,665 144,928 17,552 14,111 16,609 18,774 14,943 16,741 17,218 21 Net purchases, or sales (—) 66,000 59,949 65,806 7,838 4,052 6,221 9,160 8,868r 8,001 8,590 22 Foreign countries 65,462 59,064 66,173 8,151 4,035 6,309 9,167 9,035r 7,982 8,568 23 Europe 22,587 37,093 50,702 4,976 2,271 4,944 7,772 6,246r 5,561 6,088 24 France 2,346 242 173 -85 -874 27 44 7 538 63 25 Germany 887 657 4,563 -176 -83 -17 667 51 1,163 916 26 Netherlands -290 3,322 939 154 -37 191 -59 557 45 203 27 Switzerland -627 1,055 626 -61 -87 124 -130 317 -99 343 28 United Kingdom 19,686 31,592 43,070 5,248 3,396 4,764 7,062 4,969r 3,775 3,640 29 Canada 1,668 2,958 2,282 289 184 277 159 169 415 349 30 Latin America and Caribbean 15,691 5,442 5,625 1,285 889 678 289 1,145 754 1,720 31 Middle East1 3,248 771 1,740 328 326 -26 64 348 281 241 32 Other Asia 20,846 12,153 5,538 1,150 356 426 785 1,189 919 146 33 Japan 11,569 5,486 3,415 570 275 871 293 1,026 1,008 -364 34 Africa 1,149 -7 131 22 -11 -5 47 -13 64 23 35 Other countries 273 654 155 101 20 15 51 -49 -12 1 36 Nonmonetary international and regional organizations 538 885 -367 -313 17 -88 -7 -167 19 22 Foreign securities 37 Stocks, net purchases, or sales (—) -62,691 -47,236 -35,884 -2,856 -2,135 -3,648 -4,379 -8,188 -5,904 -7,493 38 Foreign purchases 245,490 386,942 253,380 28,925 24,519 29,229 29,067 28,582 30,867 28,712 39 Foreign sales 308,181 434,178 289,264 31,781 26,654 32,877 33,446 36,770 36,771 36,205 40 Bonds, net purchases, or sales ( —) -80,377 -9,272 -30,250 -1,223 -824 -4,368 -7,473 —5,009r -3,810 -4,951 41 Foreign purchases 745,952 848,288 655,956 79,170 53,639 75,199 96,154 66,737 72,222 83,171 42 Foreign sales 826,329 857,560 686,206 80,393 54,463 79,567 103,627 71,746r 76,032 88,122 43 Net purchases, or sales (—), of stocks and bonds .... -143,068 -56,508 -66,134 -4,079 -2,959 -8,016 -11,852 — 13,197r -9,714 -12,444 44 Foreign countries -143,232 -57,028 -65,457 -3,990 -3,115 -8,020 -11,541 — 12,978r -9,541 -12,499 45 Europe -100,872 -2,712 -29,835 -1,892 -1,893 -7,561 -5,857 -7,961 -2,539 -2,462 46 Canada -15,664 -7,475 -8,809 -1,154 -1,193 -1 -1,425 -1,751 -906 -3,046 47 Latin America and Caribbean -7,600 -18,347 -2,795 -1,304 585 471 -512 —659r 817 611 48 Asia -15,159 -24,276 -24,850 9 -558 -1,388 -2,941 -3,158 -7,250 -7,533 49 Africa -185 -467 -307 85 -14 -68 -67 -45 34 -117 50 Other countries -3,752 -3,751 1,139 266 -42 527 -739 596 303 48 51 Nonmonetary international and regional organizations 164 520 -677 -89 156 4 -311 -219 -173 55 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, 2. Includes state and local government securities and securities of U.S. government Saudi Arabia, and United Arab Emirates (Trucial States). agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. corporations organized to finance direct investments abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • January 1996 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions1 Millions of dollars; net purchases, or sales (—) during period 1995 1995 AArreeaa oorr ccoouunnttrryy 11999933 11999944 Jan.— Mar. Apr. May June July Aug. Sept.p Sept. 1 Total estimated 23,552 78,796 123,323 9,211 6,400 14,519 22,578 31,865 26,082 -11,013 2 Foreign countries 23,368 78,632 123,004 9,107 6,416 14,568 22,395 31,382 26,442 -10,943 3 Europe -2,373 38,608 54,870 3,109 3,152 509 2,665 13,336 9,170 6,377 4 Belgium and Luxembourg 1,218 1,098 364 51 62 -512 -148 -53 580 143 5 Germany -9,976 5,709 2,801 1,461 1,216 -4,129 -1,866 1,039 2,995 2,568 6 Netherlands -515 1,254 517 -7 -243 40 1,078 883 -1,468 -1,915 7 Sweden 1,421 794 581 30 -70 211 63 124 100 61 8 Switzerland -1,501 481 586 -418 -173 353 9 206 -515 818 9 United Kingdom 6,197 23,438 43,774 3,099 2,251 5,203 1,359 7,315 7,950 5,570 10 Other Europe and former U.S.S.R 783 5,834 6,247 -1,107 109 -657 2,170 3,822 -472 -868 11 Canada 10,309 3,491 2,010 434 -1,391 201 433 720 -825 -2,225 12 Latin America and Caribbean -4,561 -10,179 13,898 -2,332 3,212 3,803 5,368 513 11,265 -5,299 13 Venezuela 390 -319 -203 387 184 -16 121 -114 -359 -524 14 Other Latin America and Caribbean -5,795 -20,493 13,686 -3,358 2,189 2,425 5,158 1,034 5,364 1,171 15 Netherlands Antilles 844 10,633 415 639 839 1,394 89 -407 6,260 -5,946 16 20,582 47,042 51,148 8,445 1,189 9,845 12,605 16,490 7,322 -10,055 17 Japan 17,070 29,518 31,357 4,167 1,487 6,291 5,585 6,658 5,430 -4,021 18 Africa 1,156 240 253 -9 -36 39 242 -1 -130 108 19 Other -1,745 -570 825 -540 290 171 1,082 324 -360 151 20 Nonmonetary international and regional organizations 184 164 319 104 -16 -49 183 483 -360 -70 21 International -330 526 -14 458 -294 356 -409 311 -140 -196 22 Latin American regional 653 -154 238 -367 228 -528 629 99 -10 -6 MEMO 23 Foreign countries 23,368 78,632 123,004 9,107 6,416 14,568 22,395 31,382 26,442 -10,943 24 Official institutions 1,306 41,822 32,095 4,022 3,158 -1,774 10,850 16,780 -364 -4,516 25 Other foreign 22,062 36,810 90,909 5,085 3,258 16,342 11,545 14,602 26,806 -6,427 Oil-exporting countries 26 Middle East2 -8,836 -38 5,610 152 733 -1,063 815 3,582 1,890 -50 27 -5 0 2 1 0 0 1 0 0 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 U.S. Treasury bonds and notes held by official institutions of foreign 3. Comprises Algeria, Gabon, Libya, and Nigeria. 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 Nov. 30, 1995 Rate on Nov. 30, 1995 Rate on Nov. 30, 1995 Country Country Country Month Month Month effective effective effective Austria. . 3.5 Aug. 1995 Germany. .. 3.5 Aug. 1995 Norway 4.75 Feb. 1994 Belgium. 3.5 Aug. 1995 Italy 9.0 June 1995 Switzerland .... 2.0 Sept. 1995 Canada.. 6.07 Nov. 1995 Japan 0.5 Sept. 1995 United Kingdom 12.0 Sept. 1992 Denmark 5.0 Aug. 1995 Netherlands 3.25 Nov. 1995 France2 . 4.8 Nov. 1995 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 banks or Treasury bills for seven to ten days. brokers. For countries with more than one rate applicable to such discounts or advances, the rate shown is the one at which it is understood that the central bank transacts the largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES1 Percent per year, averages of daily figures 1995 TTyyppee oorr ccoouunnttrryy 11999922 11999933 11999944 May June July Aug. Sept Oct. Nov. 1 Eurodollars 3.70 3.18 4.63 6.03 5.89 5.79 5.79 5.74 5.81 5.75 2 United Kingdom 9.56 5.88 5.45 6.64 6.63 6.73 6.74 6.71 6.69 6.61 3 Canada 6.76 5.14 5.57 7.56 7.07 6.69 6.62 6.66 6.66 6.02 4 Germany 9.42 7.17 5.25 4.49 4.43 4.46 4.35 4.09 4.00 3.91 5 Switzerland 7.67 4.79 4.03 3.29 3.09 2.77 2.79 2.67 2.15 1.98 6 Netherlands 9.25 6.73 5.09 4.41 4.21 4.14 4.02 3.85 3.88 3.73 7 France 10.14 8.30 5.72 7.29 7.04 6.31 5.81 5.86 6.73 5.74 8 Italy 13.91 10.09 8.45 10.38 10.91 10.93 10.45 10.36 10.74 10.65 9 Belgium 9.31 8.10 5.65 5.16 4.62 4.52 4.41 4.20 4.14 3.87 10 Japan 4.39 2.96 2.24 1.31 1.16 .91 .82 .56 .51 .54 1. Rates are for three-month interbank loans, with the following exceptions: Canada, finance company paper; Belgium, three-month Treasury bills; and Japan, CD rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 International Statistics • January 1996 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1995 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999922 11999933 11999944 June July Aug. Sept. Oct. Nov. 1 Australia/dollar2 73.521 67.993 73.161 71.959 72.792 74.137 75.371 75.699 74.534 2 Austria/schilling 10.992 11.639 11.409 9.854 9.765 10.168 10.270 9.955 9.974 3 Belgium/franc 32.148 34.581 33.426 28.790 28.562 29.735 30.044 29.105 29.154 4 Canada/dollar 1.2085 1.2902 1.3664 1.3775 1.3612 1.3552 1.3509 1.3458 1.3534 5 China, P.R./yuan 5.5206 5.7795 8.6404 8.3206 8.3207 8.3253 8.3374 8.3353 8.3334 6 Denmark/krone 6.0372 6.4863 6.3561 5.4604 5.4073 5.6060 5.6587 5.4912 5.4923 7 Finland/markka 4.4865 5.7251 5.2340 4.3134 4.2592 4.3170 4.3754 4.2781 4.2489 8 France/franc 5.2935 5.6669 5.5459 4.9172 4.8307 4.9727 5.0352 4.9374 4.8882 9 Germany/deutsche mark 1.5618 1.6545 1.6216 1.4012 1.3886 1.4456 1.4601 1.4143 1.4173 10 Greece/drachma 190.81 229.64 242.50 226.56 225.45 232.38 235.65 232.65 234.16 11 Hong Kong/dollar 7.7402 7.7357 7.7290 7.7356 7.7385 7.7416 7.7368 7.7317 7.7338 12 India/rupee 28.156 31.291 31.394 31.404 31.385 31.592 33.310 34.656 34.710 13 Ireland/pound2 170.42 146.47 149.69 162.87 163.96 160.25 159.05 161.32 160.54 14 Italy/lira 1,232.17 1,573.41 1,611.49 1.639.75 1,609.71 1,607.18 1,613.41 1,605.69 1,592.67 15 Japan/yen 126.78 111.08 102.18 84.64 87.40 94.74 100.55 100.84 101.94 16 Malaysia/ringgit 2.5463 2.5738 2.6237 2.4396 2.4500 2.4813 2.5124 2.5324 2.5389 17 Netherlands/guilder 1.7587 1.8585 1.8190 1.5686 1.5557 1.6195 1.6354 1.5846 1.5877 18 New Zealand/dollar2 53.792 54.127 59.358 66.947 67.417 65.687 65.607 65.899 65.224 19 Norway/krone 6.2142 7.1009 7.0553 6.2387 6.1710 6.3438 6.3943 6.2397 6.2536 20 Portugal/escudo 135.07 161.08 165.93 147.63 145.88 149.88 152.11 148.94 148.68 21 Singapore/dollar 1.6294 1.6158 1.5275 1.3953 1.3984 1.4116 1.4331 1.4231 1.4128 22 South Africa/rand 2.8524 3.2729 3.5526 3.6627 3.6404 3.6402 3.6616 3.6502 3.6499 23 South Korea/won 784.66 805.75 806.93 763.88 760.05 768.88 772.04 767.20 769.78 24 Spain/peseta 102.38 127.48 133.88 121.71 119.71 123.45 125.41 122.51 121.81 25 Sri Lanka/rupee 44.013 48.211 49.170 50.210 50.899 51.227 52.547 52.539 53.199 26 Sweden/krona 5.8258 7.7956 7.7161 7.2631 7.1749 7.2383 7.1227 6.8301 6.6088 27 Switzerland/franc 1.4064 1.4781 1.3667 1.1588 1.1556 1.1962 1.1868 1.1453 1.1437 28 Taiwan/dollar 25.160 26.416 26.465 25.784 26.278 27.234 27.432 26.925 27.257 29 Thailand/baht 25.411 25.333 25.161 24.672 24.755 24.960 25.129 25.115 25.166 30 United Kingdom/pound2 176.63 150.16 153.19 159.48 159.52 156.68 155.90 157.79 156.25 MEMO 31 United States/dollar3 86.61 93.18 91.32 82.27 81.90 84.59 85.69 84.10 84.14 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, industrial countries. The weight for each of the ten countries is the 1972-76 average world see inside front cover. trade of that country divided by the average world trade of all ten countries combined. Series 2. Value in U.S. cents. revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 (August 1978), p. 700). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 1995 A76 SPECIAL TABLES—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 November 1994 February 1995 A68 February 1995 May 1995 A68 May 1995 August 1995 A68 August 1995 November 1995 A68 Assets and liabilities of U.S. branches and agencies of foreign banks September 30, 1994 February 1995 A72 December 31, 1994 May 1995 A72 March 31, 1995 October 1995 A68 June 30, 1995 November 1995 A72 Pro forma balance sheet and income statements for priced service operations June 30, 1992 October 1992 A70 March 31, 1995 August 1995 A76 June 30, 1995 October 1995 A72 September 30, 1995 January 1996 A68 Assets and liabilities of life insurance companies June 30, 1991 December 1991 A79 September 30, 1991 May 1992 A81 December 31, 1991 August 1992 A83 September 30, 1992 March 1993 A71 Residential lending reported under the Home Mortgage Disclosure Act 1994 September 1995 A68 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • January 1996 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item Sept. 30, 1995 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 440.2 Investment in marketable securities 3,961.8 Receivables 59.4 Materials and supplies 9.2 Prepaid expenses 35.4 Items in process of collection 1,914.2 Total short-term assets 6,420.2 Long-term assets (Note 2) 355.7 Furniture and equipment 165.1 Leases and leasehold improvements 22.4 Prepaid pension costs 233.2 Total long-term assets 776.4 Total assets 7,196.6 Short-term liabilities Clearing balances and balances arising from early credit of uncollected items 4,430.3 Deferred-availability items 1,885.9 Short-term debt 104.0 Total short-term liabilities 6,420.2 Long-term liabilities Obligations under capital leases 3.8 Long-term debt 162.0 Postretirement/postemployment benefits obligation 173.4 Total long-term liabilities 339.2 Total liabilities 6,759.4 437.2 Total liabilities and equity (Note 3) 7,196.6 NOTE. Components may not sum to totals because of rounding. The priced services financial statements consist of these tables and the accompanying notes. B. Pro forma income statement Millions of dollars Item Quarter ended Sept. 30, 1995 Nine months ended Sept. 30, 1995 Revenue from services provided to depository institutions (Note 4) 182.4 547.5 Operating expenses (Note 5) 160.1 490.8 Income from operations 22.3 56.7 Imputed costs (Note 6) Interest on float 3.2 12.0 Interest on debt 4.1 12.2 Sales taxes 2.4 7.5 FDIC insurance .4 10.0 5.8 37.4 Income from operations after imputed costs 12.3 19.2 Other income and expenses (Note 7) Investment income on clearing balances 64.4 189.8 Earnings credits 58.5 5.8 168.7 21.1 Income before income taxes 18.1 40.4 Imputed income taxes (Note 8) 5.6 12.5 Income before cumulative effect of a change in accounting principle 12.5 27.9 Cumulative effect on previous years from retroactive application of accrual method of accounting for postemployment benefits (net of $6.5 million tax) (Note 9) -14.6 12.5 13.3 MEMO Targeted return on equity (Note 10) 7.8 25.5 NOTE. Components may not sum to totals because of rounding. The priced services financial statements consist of these tables and the accompanying notes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank Reported Data A69 NOTES TO FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES (1) SHORT-TERM ASSETS (6) IMPUTED COSTS The imputed reserve requirement on clearing balances held at Reserve Banks by depository Imputed costs consist of interest on float, interest on debt, sales taxes, and the FDIC institutions reflects a treatment comparable to that of compensating balances held at corre- assessment. Interest on float is derived from the value of float to be recovered, either spondent banks by respondent institutions. The reserve requirement imposed on respondent explicitly or through per-item fees, during the period. Float costs include costs for checks, balances must be held as vault cash or as nonearning balances maintained at a Reserve Bank; book-entry securities, noncash collection, ACH, and funds transfers. thus, a portion of priced services clearing balances held with the Federal Reserve is shown as Interest is imputed on the debt assumed necessary to finance priced-service assets. The required reserves on the asset side of the balance sheet. The remainder of clearing balances is sales taxes and FDIC assessment that the Federal Reserve would have paid had it been a assumed to be invested in three-month Treasury bills, shown as investment in marketable private-sector firm are among the components of the PSAF (see note 3). securities. The following list shows the daily average recovery of float by the Reserve Banks for the Receivables are (1) amounts due the Reserve Banks for priced services and (2) the share of third quarter of 1995 in millions of dollars: suspense-account and difference-account balances related to priced services. Materials and supplies are the inventory value of short-term assets. Total float 391.2 Prepaid expenses include salary advances and travel advances for priced-service personnel. Unrecovered float 4.6 Items in process of collection is gross Federal Reserve cash items in process of collection Float subject to recovery 386.6 (CIPC) stated on a basis comparable to that of a commercial bank. It reflects adjustments for Sources of float recovery intra-System items that would otherwise be double-counted on a consolidated Federal Income on clearing balances 38.5 Reserve balance sheet; adjustments for items associated with non-priced items, such as those As-of adjustments 174.1 collected for government agencies; and adjustments for items associated with providing fixed Direct charges 66.2 availability or credit before items are received and processed. Among the costs to be Per-item fees 107.8 recovered under the Monetary Control Act is the cost of float, or net CIPC during the period (the difference between gross CIPC and deferred-availability items which is the portion of Unrecovered float includes float generated by services to government agencies and by other gross CIPC that involves a financing cost), valued at the federal funds rate. central bank services. Float recovered through income on clearing balances is the result of the increase in investable clearing balances; the increase is produced by a deduction for float for (2) LONG-TERM ASSETS cash items in process of collection, which reduces imputed reserve requirements. The income on clearing balances reduces the float to be recovered through other means. As-of adjustments Consists of long-term assets used solely in priced services, the priced-services portion of and direct charges are mid-week closing float and interterritory check float, which may be long-term assets shared with nonpriced services, and an estimate of the assets of the Board of recovered from depositing institutions through adjustments to the institution's reserve or Governors used in the development of priced services. Effective Jan. 1, 1987, the Reserve clearing balance or by valuing the float at the federal funds rate and billing the institution Banks implemented the Financial Accounting Standards Board's Statement of Financial directly. Float recovered through per-item fees is valued at the federal funds rate and has been Accounting Standards No. 87, Employers' Accounting for Pensions (SFAS 87). Accordingly, added to the cost base subject to recovery in the third quarter of 1995. the Federal Reserve Banks recognized credits to expenses of $9.3 million in the third quarter of 1995, $8.7 million in the second quarter of 1995, and $7.2 million in the first quarter of (7) OTHER INCOME AND EXPENSES 1995 and corresponding increases in this asset account. Consists of investment income on clearing balances and the cost of earnings credits. Investment income on clearing balances represents the average coupon-equivalent yield on (3) LIABILITIES AND EQUITY three-month Treasury bills applied to the total clearing balance maintained, adjusted for the effect of reserve requirements on clearing balances. Expenses for earnings credits granted to Under the matched-book capital structure for assets that are not "self-financing," short-term depository institutions on their clearing balances are derived by applying the average federal assets are financed with short-term debt. Long-term assets are financed with long-term debt funds rate to the required portion of the clearing balances, adjusted for the net effect of and equity in a proportion equal to the ratio of long-term debt to equity for the fifty largest reserve requirements on clearing balances. bank holding companies, which are used in the model for the private-sector adjustment factor (PSAF). The PSAF consists of the taxes that would have been paid and the return on capital that would have been provided had priced services been furnished by a private-sector firm. (8) INCOME TAXES Other short-term liabilities include clearing balances maintained at Reserve Banks and deposit balances arising from float. Other long-term liabilities consist of obligations on capital Imputed income taxes are calculated at the effective tax rate derived from the PSAF model leases. (see note 3). (9) POSTEMPLOYMENT BENEFITS (4) REVENUE Effective Jan. 1, 1995, the Reserve Banks implemented SFAS 112, Employers' Accounting Revenue represents charges to depository institutions for priced services and is realized from for Postemployment Benefits. Accordingly in the first quarter of 1995 the Reserve Banks each institution through one of two methods: direct charges to an institution's account or recognized a one-time cumulative charge of $21.1 million to reflect the retroactive application charges against its accumulated earnings credits. of this change in accounting principle. (5) OPERATING EXPENSES (10) RETURN ON EQUITY Operating expenses consist of the direct, indirect, and other general administrative expenses Represents the after-tax rate of return on equity that the Federal Reserve would have earned of the Reserve Banks for priced services plus the expenses for staff members of the Board of had it been a private business firm, as derived from the PSAF model (see note 3). This amount Governors working directly on the development of priced services. The expenses for Board is adjusted to reflect the recovery of automation consolidation costs of $1.7 million for the staff members were $.7 million per quarter in the first three quarters of 1995. The credit to second quarter of 1995 and $.3 million for the first quarter of 1995. The Reserve Banks plan expenses under SFAS 87 (see note 2) is reflected in operating expenses. to recover these amounts, along with a finance charge, by the end of the year 2000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Index to Statistical Tables References are to pages A3-A69 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Deposits (See also specific types) Agricultural loans, commercial banks, 21, 22 Banks, by classes, 4, 18—23 Assets and liabilities (See also Foreigners) Federal Reserve Banks, 5,11 Banks, by classes, 18—23 Interest rates, 16 Domestic finance companies, 36 Turnover, 17 Federal Reserve Banks, 11 Discount rates at Reserve Banks and at foreign central banks and Financial institutions, 28 foreign countries (See Interest rates) Foreign banks, U.S. branches and agencies, 23 Discounts and advances by Reserve Banks (See Loans) Automobiles Dividends, corporate, 35 Consumer installment credit, 39 Production, 47, 48 EMPLOYMENT, 45 Eurodollars, 26 BANKERS acceptances, 11, 12, 21-24, 26 Bankers balances, 18-23. (See also Foreigners) FARM mortgage loans, 38 Bonds (See also U.S. government securities) Federal agency obligations, 5, 10, 11, 12, 31, 32 New issues, 34 Federal credit agencies, 33 Rates, 26 Federal finance Branch banks, 23 Debt subject to statutory limitation, and types and ownership Business activity, nonfinancial, 45 of gross debt, 30 Business expenditures on new plant and equipment, 35 Receipts and outlays, 28, 29 Business loans (See Commercial and industrial loans) Treasury financing of surplus, or deficit, 28 Treasury operating balance, 28 Federal Financing Bank, 33 CAPACITY utilization, 46 Federal funds, 7, 21, 22, 23, 26, 28 Capital accounts Federal Home Loan Banks, 33 Banks, by classes, 18 Federal Home Loan Mortgage Corporation, 33, 37, 38 Federal Reserve Banks, 11 Federal Housing Administration, 33, 37, 38 Central banks, discount rates, 65 Federal Land Banks, 38 Certificates of deposit, 26 Federal National Mortgage Association, 33, 37, 38 Commercial and industrial loans Federal Reserve Banks Commercial banks, 21, 22 Condition statement, 11 Weekly reporting banks, 21-23 Discount rates (See Interest rates) Commercial banks U.S. government securities held, 5, 11, 12, 30 Assets and liabilities, 18-23 Federal Reserve credit, 5, 6, 11, 12 Commercial and industrial loans, 18-23 Federal Reserve notes, 11 Consumer loans held, by type and terms, 39 Federal Reserve System Deposit interest rates of insured, 16 Balance sheet for priced services, 68 Loans sold outright, 22 Condition statement for priced services, 68 Real estate mortgages held, by holder and property, 38 Federally sponsored credit agencies, 33 Time and savings deposits, 4 Finance companies Commercial paper, 24, 26, 36 Assets and liabilities, 36 Condition statements (See Assets and liabilities) Business credit, 36 Construction, 45, 49 Loans, 39 Consumer installment credit, 39 Paper, 24, 26 Consumer prices, 45 Financial institutions, loans to, 21, 22, 23 Consumption expenditures, 52, 53 Float, 5 Corporations Flow of funds, 40-44 Profits and their distribution, 35 Foreign banks, assets and liabilities of U.S. branches and agencies, Security issues, 34, 65 22, 23 Cost of living (See Consumer prices) Foreign currency operations, 11 Credit unions, 39 Foreign deposits in U.S. banks, 5, 22 Currency in circulation, 5, 14 Foreign exchange rates, 66 Customer credit, stock market, 27 Foreign trade, 54 Foreigners Claims on, 55, 58, 59, 60, 62 DEBITS to deposit accounts, 17 Liabilities to, 22, 54, 55, 56, 61, 63, 64 Debt (See specific types of debt or securities) Demand deposits GOLD Banks, by classes, 18-23 Certificate account, 11 Ownership by individuals, partnerships, and Stock, 5, 54 corporations, 22, 23 Government National Mortgage Association, 33, 37, 38 Turnover, 17 Gross domestic product, 51 Depository institutions Reserve requirements, 9 Reserves and related items, 4, 5, 6,13 HOUSING, new and existing units, 49 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 INCOME and expenses, Federal Reserve System, 68 REAL estate loans—Continued Income, personal and national, 45, 51, 52 Terms, yields, and activity, 37 Industrial production, 45, 47 Type of holder and property mortgaged, 38 Installment loans, 39 Repurchase agreements, 7 Insurance companies, 30, 38 Reserve requirements, 9 Interest rates Reserves Bonds, 26 Commercial banks, 18 Consumer installment credit, 39 Depository institutions, 4, 5, 6, 13 Deposits, 16 Federal Reserve Banks, 11 Federal Reserve Banks, 8 U.S. reserve assets, 54 Foreign central banks and foreign countries, 65 Residential mortgage loans, 37 Money and capital markets, 26 Retail credit and retail sales, 39, 45 Mortgages, 37 Prime rate, 25 SAVING International capital transactions of United States, 53-65 Flow of funds, 40-44 International organizations, 55, 56, 58, 61, 62 National income accounts, 51 Inventories, 51 Savings institutions, 38, 39, 40 Investment companies, issues and assets, 35 Savings deposits (See Time and savings deposits) Investments (See also specific types) Securities (See also specific types) Banks, by classes, 18—23 Federal and federally sponsored credit agencies, 33 Commercial banks, 4, 18-23 Foreign transactions, 63 Federal Reserve Banks, 11,12 New issues, 34 Financial institutions, 38 Prices, 27 Special drawing rights, 5, 11, 53, 54 LABOR force, 45 State and local governments Life insurance companies (See Insurance companies) Deposits, 21, 22 Loans (See also specific types) Holdings of U.S. government securities, 30 Banks, by classes, 18—23 New security issues, 34 Commercial banks, 18-23 Ownership of securities issued by, 21, 23 Federal Reserve Banks, 5, 6, 8, 11, 12 Rates on securities, 26 Federal Reserve System, 68 Stock market, selected statistics, 27 Financial institutions, 38 Stocks (See also Securities) Insured or guaranteed by United States, 37, 38 New issues, 34 Prices, 27 MANUFACTURING Capacity utilization, 46 Student Loan Marketing Association, 33 Production, 46, 48 Margin requirements, 27 TAX receipts, federal, 29 Member banks (See also Depository institutions) Thrift institutions, 4. (See also Credit unions and Savings institutions) Federal funds and repurchase agreements, 7 Time and savings deposits, 4, 14, 16, 18-23 Reserve requirements, 9 Trade, foreign, 54 Mining production, 48 Treasury cash, Treasury currency, 5 Mobile homes shipped, 49 Treasury deposits, 5, 11, 28 Monetary and credit aggregates, 4, 13 Treasury operating balance, 28 Money and capital market rates, 26 UNEMPLOYMENT, 45 Money stock measures and components, 4, 14 U.S. government balances Mortgages (See Real estate loans) Commercial bank holdings, 18-23 Mutual funds, 35 Treasury deposits at Reserve Banks, 5, 11, 28 Mutual savings banks (See Thrift institutions) U.S. government securities Bank holdings, 18-23, 30 NATIONAL defense outlays, 29 Dealer transactions, positions, and financing, 32 National income, 51 Federal Reserve Bank holdings, 5, 11, 12, 30 Foreign and international holdings and OPEN market transactions, 10 transactions, 11, 30, 64 Open market transactions, 10 PERSONAL income, 52 Outstanding, by type and holder, 30, 31 Prices Rates, 26 Consumer and producer, 45, 50 U.S. international transactions, 53-66 Stock market, 27 Utilities, production, 48 Prime rate, 25 Producer prices, 45, 50 VETERANS Administration, 37, 38 Production, 45, 47 Profits, corporate, 35 WEEKLY reporting banks, 18-23 Wholesale (producer) prices, 45, 50 REAL estate loans Banks, by classes, 21, 22, 38 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman 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 {CATHERINE 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 MARTHA S. SCANLON, Deputy Associate Director JENNIFER J. JOHNSON, Deputy Secretary PETER A. TINSLEY, Deputy Associate Director BARBARA R. LOWREY, Associate Secretary and Ombudsman FLINT BRAYTON, Assistant Director DAY W. RADEBAUGH, JR., Assistant Secretary1 DAVID S. JONES, Assistant Director STEPHEN A. RHOADES, Assistant Director DIVISION OF BANKING CHARLES S. STRUCKMEYER, Assistant Director SUPERVISION AND REGULATION ALICE PATRICIA WHITE, Assistant Director RICHARD SPILLENKOTHEN, Director JOYCE K. ZICKLER, Assistant Director STEPHEN C. SCHEMERING, Deputy Director JOHN J. MINGO, Senior Adviser DON E. KLINE, Associate Director 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 STEPHEN M. HOFFMAN, JR., Assistant Director VINCENT R. REINHART, Assistant Director LAURA M. HOMER, Assistant Director NORMAND R. V. BERNARD, Special Assistant to the Board JAMES V. HOUPT, Assistant Director JACK P. JENNINGS, Assistant Director DIVISION OF CONSUMER MICHAEL G. MARTINSON, Assistant Director AND COMMUNITY AFFAIRS RHOGER H PUGH, Assistant Director GRIFFITH L. GARWOOD, Director SIDNEY M. SUSSAN, Assistant Director GLENN E. LONEY, Associate Director MOLLY S. WASSOM, Assistant Director DOLORES S. SMITH, Associate Director WILLIAM SCHNEIDER, Project Director, MAUREEN P. ENGLISH, Assistant Director National Information Center IRENE SHAWN MCNULTY, Assistant Director 1. On loan from the Division of Information Resources Management. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 SUSAN M. PHILLIPS JANET L. YELLEN OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PAYMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director SHEILA CLARK, EEO Programs Director DAVID L. ROBINSON, Deputy Director (Finance and Control) LOUISE L. ROSEMAN, Associate Director DIVISION OF HUMAN RESOURCES CHARLES W. BENNETT, Assistant Director MANAGEMENT JACK DENNIS, JR., Assistant Director EARL G. HAMILTON, Assistant Director DAVID L. SHANNON, Director JOHN R. WEIS, Associate Director JEFFREY C. MARQUARDT, Assistant Director JOHN H. PARRISH, Assistant Director ANTHONY V. DIGIOIA, Assistant Director FLORENCE M. YOUNG, Assistant Director JOSEPH H. HAYES, JR., Assistant Director FRED HOROWITZ, Assistant Director OFFICE OF THE INSPECTOR GENERAL OFFICE OF THE CONTROLLER BRENT L. BOWEN, Inspector General DONALD L. ROBINSON, Assistant Inspector General GEORGE E. LIVINGSTON, Controller BARRY R. SNYDER, Assistant Inspector General STEPHEN J. CLARK, Assistant Controller (Programs and Budgets) DARRELL R. PAULEY, Assistant Controller (Finance) DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director 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

A74 Federal Reserve Bulletin • January 1996 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman ALAN S. BLINDER EDWARD W. KELLEY, JR. SUSAN M. PHILLIPS EDWARD G. BOEHNE LAWRENCE B. LINDSEY GARY H. STERN JERRY L. JORDAN ROBERT D. MCTEER, JR. JANET L. YELLEN ALTERNATE MEMBERS J. ALFRED BROADDUS, JR. MICHAEL H. MOSKOW ERNEST T. PATRIKIS JACK GUYNN ROBERT T. PARRY STAFF DONALD L. KOHN, Secretary and Economist THOMAS E. DAVIS, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary WILLIAM G. DEWALD, Associate Economist JOSEPH R. COYNE, Assistant Secretary WILLIAM C. HUNTER, Associate Economist GARY P. GILLUM, Assistant Secretary DAVID E. LINDSEY, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel FREDERIC S. MISHKIN, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel LARRY J. PROMISEL, Associate Economist MICHAEL J. PRELL, Economist CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist LAWRENCE SLIFMAN, Associate Economist LYNN E. BROWNE, Associate Economist DAVID J. STOCKTON, 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

A75 CONSUMER ADVISORY COUNCIL KATHARINE W. MCKEE, Durham, North Carolina, Vice Chairman THOMAS R. BUTLER, Riverwoods, Illinois EUGENE I. LEHRMANN, Madison, Wisconsin ROBERT A. COOK, Baltimore, Maryland RONALD A. PRILL, Minneapolis, Minnesota ALVIN J. COWANS, Orlando, Florida LISA RICE-COLEMAN, Toledo, Ohio ELIZABETH G. FLORES, Laredo, Texas JOHN R. RINES, Detroit, Michigan EMANUEL FREEMAN, Philadelphia, Pennsylvania JULIA M. SEWARD, Richmond, Virginia DAVID C. FYNN, Cleveland, Ohio ANNE B. SHLAY, Philadelphia, Pennsylvania ROBERT G. GREER, Houston, Texas REGINALD J. SMITH, Kansas City, Missouri KENNETH R. HARNEY, Chevy Chase, Maryland JOHN E. TAYLOR, Washington, D.C. GAIL K. HILLEBRAND, San Francisco, California LORRAINE VANETTEN, Troy, Michigan TERRY JORDE, Cando, North Dakota LILY K. YAO, Honolulu, Hawaii 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, Hillsborough, 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

A76 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 year. (202) 728-5886. When a charge is indicated, payment should Monetary Policy and Reserve Requirements Handbook. $75.00 accompany request and be made payable to the Board of Gover- per year. nors of the Federal Reserve System or may be ordered via Securities Credit Transactions Handbook. $75.00 per year. Mastercard or Visa. Payment from foreign residents should be The Payment System Handbook. $75.00 per year. drawn on a U.S. bank. Federal Reserve Regulatory Service. Four vols. (Contains all four Handbooks plus substantial additional material.) $200.00 per year. Rates for subscribers outside the United States are as follows THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. and include additional air mail costs: 1994. 157 pp. Federal Reserve Regulatory Service, $250.00 per year. ANNUAL REPORT. Each Handbook, $90.00 per year. ANNUAL REPORT: BUDGET REVIEW, 1994-95. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 COUNTRY MODEL, May 1984. 590 pp. $14.50 each. each in the United States, its possessions, Canada, and INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. Mexico. Elsewhere, $35.00 per year or $3.00 each. 440 pp. $9.00 each. ANNUAL STATISTICAL DIGEST: period covered, release date, num- FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. ber of pages, and price. December 1986. 264 pp. $10.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1982 December 1983 266 pp. $ 7.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1983 October 1984 264 pp. $11.50 1984 October 1985 254 pp. $12.50 1985 October 1986 231 pp. $15.00 EDUCATION PAMPHLETS 1986 November 1987 288 pp. $15.00 Short pamphlets suitable for classroom use. Multiple copies are 1987 October 1988 272 pp. $15.00 available without charge. 1988 November 1989 256 pp. $25.00 1980-89 March 1991 712 pp. $25.00 1990 November 1991 185 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1991 November 1992 215 pp. $25.00 Consumer Handbook to Credit Protection Laws 1992 December 1993 215 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small 1993 December 1994 281 pp. $25.00 Businesses 1994 December 1995 190 pp. $25.00 Series on the Structure of the Federal Reserve System The Board of Governors of the Federal Reserve System The Federal Open Market Committee SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF Federal Reserve Bank Board of Directors CHARTS. Weekly. $30.00 per year or $.70 each in the United Federal Reserve Banks States, its possessions, Canada, and Mexico. Elsewhere, Organization and Advisory Committees $35.00 per year or $.80 each. A Consumer's Guide to Mortgage Lock-Ins A Consumer's Guide to Mortgage Settlement Costs THE FEDERAL RESERVE ACT and other statutory provisions affect- A Consumer's Guide to Mortgage Refinancings ing the Federal Reserve System, as amended through August Home Mortgages: Understanding the Process and Your Right 1990. 646 pp. $10.00. to Fair Lending REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL How to File a Consumer Complaint RESERVE SYSTEM. Making Deposits: When Will Your Money Be Available? ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— Making Sense of Savings Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. SHOP: The Card You Pick Can Save You Money Vol. II (Irregular Transactions). 1969. 116 pp. Each volume Welcome to the Federal Reserve $2.25. When Your Home is on the Line: What You Should Know GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 each. About Home Equity Lines of Credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A77 STAFF STUDIES: Only Summaries Printed in the 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. BULLETIN 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 text or 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, to be added to the mailing list for the series may be sent to Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary Publications Services. Ann Taylor. March 1992. 37 pp. 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by James Staff Studies 1-157 are out of print. 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, by PRODUCTS, by Mark J. Warshawsky with the assistance of Gregory E. Elliehausen and John D. Wolken. September Dietrich Earnhart. September 1989. 23 pp. 1993. 18 pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Donald Savage. February 1990. 12 pp. January 1994. Ill pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by Gre- ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING gory E. Elliehausen and John D. Wolken. September 1990. PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, 35 pp. 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

A78 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 by num- of Puerto Rico and the U.S. Virgin Islands; the San Franber and Reserve Bank city (shown on both pages) and by cisco Bank serves American Samoa, Guam, and the Comletter (shown on the facing page). monwealth of the Northern Mariana Islands. The Board of In the 12th District, the Seattle Branch serves Alaska, Governors revised the branch boundaries of the System and the San Francisco Bank serves Hawaii. most recently in December 1991. The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 1-A 2-B 3-C 4-D 5-E Pittsburgh Baltimore MD m 1 CT m yw ' t \ icinnati Buffalo S NY NJ m BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H Birmingham^ * ^ij^jidIsville ** - ) ' ^ Jacfcsos&ville yj^j^ •Memphis a. New Cleans ^y IN J ATLANTA CHICAGO ST. LOUIS 9-1 1 m m •Helena *> s MINNEAPOLIS 10-J 12-L w m w ^ m m Okl a&om City KANSAS CITY 11-K 4R mm - 1 JBflw 7 V EL Pteo r r- i 4 USton •Los Angles SDN J^^YFLL^ M DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 Jerome H. Grossman Cathy E. Minehan William C. Brainard Paul M. Connolly NEW YORK* 10045 Maurice R. Greenberg William J. McDonough John C. Whitehead Ernest T. Patrikis 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 Walter A. Varvel Baltimore 21203 Michael R. Watson William J. Tignanelli1 Charlotte 28230 James O. Roberson Dan M. Bechter1 Culpeper 22701 Julius Malinowski, Jr.2 ATLANTA 30303 Leo Benatar Jack Guynn Hugh M. Brown TTeemmppoorraarriillyy vvaaccaanntt Donald E. Nelson1 Birmingham 35283 Patricia B. Compton Fred R. 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 David R. Allardice1 ST. LOUIS 63166 Robert H. Quenon Thomas C. Melzer John F. McDonnell W. LeGrande Rives Little Rock 72203 Janet M. Jones Robert A. Hopkins 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 LeRoy W. Thorn Harold L. Shewmaker DALLAS 75201 Cece Smith Robert D. McTeer, Jr. Roger R. Hemminghaus TToonnyy JJ.. SSaallvvaaggggiioo 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 Raymond H. Laurence 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; Milwaukee, Wisconsin 53202; and Peoria, Illinois 61607. 1. Senior Vice President. 2. Assistant Vice President. 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 Sys- For further information regarding a subscription to tem makes some of its statistical releases available to the economic bulletin board, please call (202) 482the public through the U.S. Department of Com- 1986. The releases transmitted to the economic bullemerce's economic bulletin board. Computer access tin board, on a regular basis, are the following: to the releases can be obtained by subscription. Reference Number Statistical release Frequency of release H.3 Aggregate Reserves Weekly/Thursday H.4.1 Factors Affecting Reserve Balances Weekly /Thursday H.6 Money Stock Weekly/Thursday H.8 Assets and Liabilities of Insured Domestically Chartered Weekly/Monday and Foreign Related Banking Institutions H.10 Foreign Exchange Rates Weekly/Monday H.15 Selected Interest Rates Weekly/Monday G.5 Foreign Exchange Rates Monthly/end of month G.17 Industrial Production and Capacity Utilization Monthly/midmonth G.19 Consumer Installment Credit Monthly/fifth business day Z.7 Flow of Funds Quarterly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT PUBLICATIONS The Federal Reserve Board publishes a series of pam- Shop . . . The Card You Pick Can Save You Money is phlets covering individual credit laws and topics, as designed to help consumers comparison shop when pictured below. looking for a credit card. It contains the results of the Three booklets on the mortgage process are available: Federal Reserve Board's survey of the terms of credit A Consumer's Guide to Mortgage Lock-Ins, A Consum- card plans offered by credit card issuers throughout the er's Guide to Mortgage Refinancings, and A Consumer's United States. Because the terms can affect the amount Guide to Mortgage Settlement Costs. These booklets an individual pays for using a credit card, the booklet were prepared in conjunction with the Federal Home lists the annual percentage rate (APR), annual fee, grace Loan Bank Board and in consultation with other federal period, type of pricing (fixed or variable rate), and a agencies and trade and consumer groups. The Board telephone number for each card issuer surveyed. also publishes the Consumer Handbook to Credit Pro- Copies of consumer publications are available free tection Laws, a complete guide to consumer credit pro- of charge from Publications Services, Mail Stop 127, tections. This forty-four-page booklet explains how to Board of Governors of the Federal Reserve System, shop and obtain credit, how to maintain a good credit Washington, DC 20551. Multiple copies for classroom rating, and how to dispute unfair credit transactions. use are also available free of charge. Business Credit for Women, Minorities, and Small Businesses Ttra Card You Pick Can Save You Money Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis