Federal Reserve Bulletin, 1996-07

VOLUME 82 • NUMBER 7 • JULY 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 621 CREDIT RISK, CREDIT SCORING, AND THE Approval of a joint agency policy statement on PERFORMANCE OF HOME MORTGAGES managing interest rate risk. This article examines the ways institutions Adoption of a state-federal supervisory involved in mortgage lending assess credit risk protocol. and how credit risk relates to loan performance. Proposal to revise Regulation Z to incorporate An increasingly prominent tool used to facilitate changes made by the Truth in Lending Act the assessment of credit risk in mortgage lend- Amendments of 1995 and to establish new dising is credit scoring based on credit history and closure rules for debt cancellation contracts; other pertinent data, and the article presents new proposal for clarifying and technical amendinformation about the distribution of credit ments to Regulation CC; and withdrawal of scores across population groups and how credit proposed amendments to the commentary on scores relate to the performance of loans. In Regulation DD. addition, the article takes a special look at the performance of loans made through nontradi- Availability of a video to help lenders to tribal tional underwriting practices and "affordable" governments and individuals on Native Amerihome lending programs. can reservations. 649 INDUSTRIAL PRODUCTION AND CAPACITY 659 MINUTES OF THE FEDERAL OPEN UTILIZATION FOR MAY 1996 MARKET COMMITTEE MEETING HELD ON MARCH 26, 1996 Industrial production advanced 0.7 percent in May, as it had in April. Capacity utilization rose At its meeting on March 26, 1996, the Commit- 0.3 percentage point in May, to 83.2 percent. tee adopted a directive that called for maintaining the existing degree of pressure on reserve positions and that did not include a presumption 652 STATEMENT TO THE CONGRESS about the likely direction of any adjustments to Janet L. Yellen, member, Board of Governors of policy during the intermeeting period. the Federal Reserve System, discusses the environment for small business financing and the 665 LEGAL DEVELOPMENTS role of banks in providing credit to small firms Various bank holding company, bank service and says that the Federal Reserve has devoted corporation, and bank merger orders; and pendconsiderable effort to building its knowledge of ing cases. the characteristics of small businesses and their use of financial services, including conducting the National Survey of Small Business Finances, A1 FINANCIAL AND BUSINESS STATISTICS and that the Federal Reserve will continue to These tables reflect data available as of review its rules and procedures to ensure that May 29, 1996. unnecessary burdens do not hinder banks' willingness to lend to creditworthy small businesses, before the House Committee on Small Business, A3 GUIDE TO TABULAR PRESENTATION May 1, 1996. A4 Domestic Financial Statistics A42 Domestic Nonfinancial Statistics A50 International Statistics 656 ANNOUNCEMENTS Meeting of the Consumer Advisory Council. A63 GUIDE TO STATISTICAL RELEASES AND Amendment to Regulation K. SPECIAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 INDEX TO STATISTICAL TABLES A72 FEDERAL RESERVE BOARD PUBLICATIONS A68 BOARD OF GOVERNORS AND STAFF A74 MAPS OF THE FEDERAL RESERVE SYSTEM A70 FEDERAL OPEN MARKET COMMITTEE AND A76 FEDERAL RESERVE BANKS, BRANCHES, STAFF; ADVISORY COUNCILS AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages Robert B. Avery, Raphael W. Bostic, Paul S. Calem, An increasingly prominent tool used to facilitate and Glenn B. Canner, of the Board's Division of the assessment of credit risk in mortgage lending is Research and Statistics, wrote this article. Jon credit scoring based on credit history and other perti- Matson provided research assistance. nent data, and the article presents new information about the distribution of credit scores across popula- Institutions involved in lending, including mortgage tion groups and the way credit scores relate to the lending, carefully assess credit risk, which is the performance of loans. In addition, the article takes a possibility that borrowers will fail to pay their loan special look at the performance of loans that were obligations as scheduled. The judgments of these made through nontraditional underwriting practices institutions affect the incidence of delinquency and and through "affordable" home lending programs. default, two important factors influencing profitability. To assess credit risk, lenders gather information on a range of factors, including the current and past DELINQUENCY AND DEFAULT financial circumstances of the prospective borrower and the nature and value of the property serving as Delinquency occurs when a borrower fails to make a loan collateral. The precision with which credit risk scheduled payment on a loan. Since loan payments can be evaluated affects not only the profitability of are typically due monthly, the lending industry cusloans that are originated but also the extent to which tomarily categorizes delinquent loans as either 30, applications for mortgages that would have been 60, 90, or 120 or more days late depending on the profitable are rejected. For these reasons, lenders con- length of time the oldest unpaid loan payment has tinually search for better ways to assess credit risk. been overdue. This article examines the ways institutions Default occurs, technically, at the same time as involved in mortgage lending assess credit risk and delinquency; that is, a loan is in default as soon as the how credit risk relates to loan performance.1 The borrower misses a scheduled payment. In this article, discussion focuses mainly on the role of credit risk however, we reserve the term "default" for any of assessment in the approval process rather than on its the following four situations: effects on pricing. Although the market for home purchase loans is characterized by some pricing of • A lender has been forced to foreclose on a mortcredit risk (acceptance of below-standard risk quality gage to gain title to the property securing the loan. in exchange for a higher interest rate or higher fees), • The borrower chooses to give the lender title to mortgage applicants in general are either accepted or the property "in lieu of foreclosure." rejected on the basis of whether they meet a lender's • The borrower sells the home and makes less than underwriting standards. The article draws on the full payment on the mortgage obligation. extensive literature that examines the performance of • The lender agrees to renegotiate or modify the home mortgages and the way that performance relates terms of the loan and forgives some or all of the to borrower, loan, and property characteristics. delinquent principal and interest payments. Loan modifications may take many forms including a change in the interest rate on the loan, an extension of 1. Institutions that originate mortgages do not necessarily bear the credit risk of the loans; the risk is often borne, at least in part, by a the length of the loan, and an adjustment of the mortgage insurer or by an institution that purchases mortgages. A principal balance due. previous article in the Federal Reserve Bulletin assessed which institutions bear the risks of mortgage lending by examining the distribution of home loans originated in 1994 across the various institutions Because practices differ in the lending industry, not participating in the mortgage market. See Glenn B. Canner and Wayne all of the above situations are consistently recorded Passmore, "Credit Risk and the Provision of Mortgages to Loweras defaults by lenders. Moreover, the length of the Income and Minority Homebuyers," Federal Reserve Bulletin, vol. 81 (November 1995), pp. 989-1016. foreclosure process may vary considerably, affecting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

622 Federal Reserve Bulletin • July 1996 the measured default rate. For these reasons, analyses credit to reflect this uncertainty. Alternatively, lendof default experiences can be difficult and are often ers may respond to this uncertainty by restricting based on only a subset of actual defaults. Delinquen- credit to only the most creditworthy borrowers. By cies, on the other hand, are recorded contemporane- better distinguishing between applicants that are ously and generally on a more consistent basis. likely to perform well on their loans from those that Therefore, delinquency data may provide a good are less likely to do so, lenders can ensure wider source of information for analysis, particularly for availability of mortgages to borrowers at prices that evaluating the performance of newly originated loans, better reflect underlying risks. and for identifying underperforming loans that Default also imposes great costs both on the borrequire greater attention. rowers involved in the process and on society in The number of borrowers who become delinquent general. For borrowers, default ordinarily results in a on their loans is much greater than the number of lower credit rating and reduced access to credit in the actual defaults. In some cases, delinquency results future, a loss of assets, and the costs of finding and from a temporary disruption in income or an unex- moving to a new home. When geographically conpected expense, such as might arise from a medical centrated, defaults can also have a pronounced social emergency. Many of these borrowers are able to effect because they lower local property values, catch up on missed payments (and any associated late reduce the incentives to invest in and maintain the payment fees) once their financial circumstances homes in the affected neighborhoods, increase the improve. In other cases, lenders work with borrowers risk of lending in those neighborhoods, and thus to establish a repayment plan to bring payments back reduce the availability of credit there. on schedule. Delinquencies, particularly serious ones, are often THEORETICAL AND EMPIRICAL DETERMINANTS resolved when the borrower sells the property and OF CREDIT RISK uses the proceeds to pay off the loan. Even when the proceeds of the sale are insufficient to fully repay the Gaining a greater understanding of the factors that mortgage obligation, the lender may accept a partial determine mortgage loan delinquency and default has payment to avoid foreclosure. Foreclosure is usually been an objective of mortgage lenders, policy maka costly process. Lenders face a variety of expenses, ers, and academics for decades. A better understandincluding interest accrued from the time of delining of these relationships holds the promise that quency through foreclosure; legal expenses; costs to lenders can more accurately gauge the credit risk maintain the property; expenses associated with the posed by different applicants and increase the safety sale of the property; and the loss that arises if the and profitability of mortgage lending. foreclosed property sells for less than the outstanding An extensive literature regarding the theoretical balance on the loan. Because foreclosure is so costly and empirical determinants of mortgage credit risk to lenders, they may encourage delinquent borrowers has developed over the past three decades.3 This to sell their homes and avoid foreclosure even if the literature emphasizes the important roles of equity in proceeds of the sale would not cover the entire the home and vulnerability to so-called triggering amount owed on the loan.2 This alternative is attracevents in determining the incidence of delinquency tive to many borrowers because having a foreclosure and default. These studies have enhanced our underrecorded on their credit histories is particularly standing of the determinants of credit risk and have derogatory and will usually be a significant hindrance established a better foundation for consistent and in their future efforts to obtain credit. effective mortgage lending. Because default is costly, the interest rates lenders charge incorporate a risk premium. To the extent that the causes of default are not well understood, lenders Theoretical Determinants may charge a higher average price for mortgage of Mortgage Loan Performance Most models of mortgage loan performance empha- 2. For an assessment of the factors that influence the length of time size the role of the borrower's equity in the home in lenders are willing to allow mortgage loans to remain delinquent the decision to default. So long as the market value of before foreclosing, see Thomas M. Springer and Neil G. Waller, "A New Look at Forbearance," Mortgage Banking, December 1995, pp. 81-84. For a discussion of the reduced losses to lenders associated with alternatives to foreclosure, see John Bancroft, "Freddie Mac 3. See Roberto G. Quercia and Michael A. Stegman, "Residential Pushes Alternatives to Foreclosures," Real Estate Finance Today, Mortgage Default: A Review of the Literature," Journal of Housing November 6, 1995, pp. 12 and 18. Research, vol. 3, no. 1 (1993), pp. 341-79. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 623 the home (after accounting for sales expenses and adverse changes in their financial or personal circumrelated costs) exceeds the market value of the mort- stances, referred to as "triggering events." In this gage, the borrower has a financial incentive to sell the view, both negative equity and a triggering event property to extract the equity rather than default.4 would be associated with most defaults. A triggering "Option-based" theories provide a framework for event alone would not ordinarily cause a default understanding the relationship between equity and when a borrower has equity in a home; rather, the loan performance; these theories view the amount of borrower would sell the property and fully repay the equity accumulated in the property as the key deter- loan to keep the equity (net of transactions costs) and minant of whether a borrower will default. Within avoid the adverse consequences of a default. On the this framework, mortgage default is viewed as a put other hand, in the absence of a triggering event, a option, in which the borrower has the right (option) borrower would not be expected to exercise the to transfer ownership of (put) the home to the lender default option ruthlessly because of the large (trans- (through foreclosure or voluntarily) to retire the out- action and reputation) costs the borrower would bear. standing balance on the loan. Borrowers will be A default, in this latter case, would occur only if, in increasingly likely to exercise this option the further the owner's view, the property's value had declined the market value of the house falls below the value of significantly and prospects for its near-term recovery the mortgage. However, because of high transaction were poor. and other costs (for example, moving expenses and Analysts who emphasize the role of triggering damage to the borrower's credit rating resulting from events focus on adversities such as reductions in default), few borrowers would be expected to exer- income brought about by a period of unemployment. cise this option "ruthlessly" (that is, default as soon Other events that may lead to repayment problems as equity falls below zero).5 include bouts of illness, which may result in both Option-based theories of loan performance identify large expenses and a disruption in income, and a number of equity-related factors likely to influence changes in family circumstances, particularly divorce. default rates. Included among these are the initial Measures of the borrower's vulnerability to such loan-to-value ratio (the ratio of the loan amount to the events include ratios of monthly debt payment to value of the property), which determines the amount income; the level of financial reserves available to the of equity at the time of loan origination; current and borrower; measures of earnings stability, such as the expected future rates of home price appreciation, borrower's employment history; and the borrower's which determine the direction, speed, and size of credit history, which in part reflects the borrower's changes in equity levels; the age of the loan, because ability and willingness to manage debt payments in equity accumulates as payments on a mortgage the face of changing circumstances. reduce the amount owed; and the term of the mort- Option-based and triggering-event theories suggest gage, because loans of shorter duration are amortized different relationships between delinquency and more quickly. In addition, current mortgage interest default. In the options-based view, delinquency rates (relative to the rate on an outstanding loan) occurs only as a precursor to default and would be influence the likelihood of default by affecting the evident only among borrowers with substantial negavalue of the mortgage to a borrower. For example, a tive equity. Triggering-event theories view delinquenmortgage interest rate below current market levels is cies as related to an event and not necessarily to the a disincentive for the borrower to default because a borrower's level of equity. In this view, delinquennew mortgage would carry a higher rate. cies are not explicitly linked to default but can lead to While option-based theories emphasize the role of default if the triggering event is sufficiently severe equity in the home in determining loan performance, and the borrower has substantial negative equity in other theories of loan performance additionally the home. emphasize the financial footing of borrowers and their corresponding vulnerability to significant i Empirical Evidence on the Determinants of Mortgage Loan Performance 4. The value of the mortgage is not determined solely by the principal balance owed. It also depends on the relationship between the rate of interest on the loan and the current market rate for Empirical investigations have found that both equity mortgages of similar duration. and adverse changes in borrowers' circumstances are 5. In some states, lenders have the statutory right to seek deficiency judgments against a borrower to try to recover losses incurred as a related to mortgage loan performance, as predicted consequence of default. Such statutory provisions tend to reduce the by theory. Studies consistently find that the level of ruthless exercise of the default option. In many instances, however, borrowers do not have other assets available to cure deficiencies. equity (whether proxied by the loan-to-value ratio at Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

624 Federal Reserve Bulletin • July 1996 the time of origination or by a contemporaneous 1. Proportion of selected mortgages that defaulted measure of the ratio) is closely related to both the by year-end 1992 and resulting severity of loss, by selected loan-to-value ratio ranges likelihood of default and the size of the loss in the Percent event of default. A recent analysis of the performance of nearly Loan-to-value ratio (percent) 425,000 loans originated over the 1975-83 period PPeerrffoorrmmaannccee mmeeaassuurree AAllll 10-70 71-80 81-90 91-95 illustrates these relationships. The analysis found that conventional mortgages with loan-to-value ratios at Proportion defaulted ... .24 1.11 2.74 6.20 2.16 Average loss severity .. 22.3 29.2 34.4 47.9 39.2 origination in the range of 91 percent to 95 percent NOTE. Mortgages were originated during the 1975-83 period and purchased default more than twice as frequently as loans with by Freddie Mac. Defaulted loans are those on which Freddie Mac acquired the loan-to-value ratios in the range of 81 percent to property through foreclosure. Loan-to-value ratio is the original loan amount divided by the value of the property at origination. Loss severity is the total loss 90 percent and more than five times as often as loans before mortgage insurance payouts (if any) resulting from foreclosure (including with loan-to-value ratios in the range of 71 percent to interest and transaction costs) divided by the mortgage balance. 80 percent (table 1). Loss severity (that is, loss to the SOURCE. Robert Van Order and Peter Zorn, "Income, Location and Default: Some Implications for Community Lending," paper presented at the Conference lender measured as a proportion of the original loan on Housing and Economics, Ohio State University, Columbus, July 1995. balance) is about 40 percent higher for loans with original loan-to-value ratios in the range of 91 percent to 95 percent than it is with loans with loan-tovalue ratios in the range of 81 percent to 90 percent.6 While research suggests that negative equity is a Additional evidence regarding the relationship necessary condition for default, it also suggests that between loan-to-value ratios at time of origination negative equity is not a sufficient condition (most and mortgage default is provided in an analysis con- loans with negative equity do not default).9 In line ducted by Duff & Phelps Credit Rating Company. with the triggering-event explanations, measures of a They found that among thirty-year fixed rate mort- borrower's ability to pay also explain default and gages, those with a 90 percent loan-to-value ratio are delinquency, although delinquency relationships are 230 percent more likely to default than loans with an less well documented. Default rates have been found 80 percent loan-to-value ratio and that loans with a to decrease generally with increases in levels of 95 percent loan-to-value ratio are 350 percent more wealth and liquid assets. Further, default likelihoods likely to default than a loan with an 80 percent are closely linked to measures of income stability. loan-to-value ratio.7 Default rates are generally higher for the self- Research also finds that the likelihood of default is employed and for those with higher percentages of positively related to loan-to-value ratios among nonsalary income and lower for those with longer single-family loans insured by the Federal Housing employment tenures. Perhaps surprisingly, after con- Administration (FHA). The default rate among FHA- trolling for other factors, the initial ratio of debt insured loans with down payments of 3 percent or payment to income has been found to be, at best, only less is approximately twice as high as the rate among weakly related to the likelihood of default.10 those with down payments of 10 percent to 15 per- Although a borrower's credit history may play an cent, and five times as high as the rate among loans important role in determining mortgage loan performwith down payments of 25 percent or more.8 ance, few published studies have been able to incorporate such information in their analyses. Relevant credit history data are often difficult to obtain and hard to quantify. The available evidence, however, 6. See Robert Van Order and Peter Zorn, "Income, Location, and Default: Some Implications for Community Lending," paper pre- indicates that loans made to borrowers with flawed sented at the Conference on Housing and Economics, Ohio State credit histories (those who have had difficulties meet- University, Columbus, July 1995. Further, a number of studies have ing scheduled payments on past loans) default or found that neighborhood and property conditions, which ultimately affect property values and thus equity, are significant factors for mortgage performance. See, for example, James R. Barth, Joseph J. Cordes, and Anthony M.J. Yezer, "Financial Institution Regulations, Redlining, and Mortgage Markets," in The Regulation of Financial 9. See Robert Van Order and Ann B. Schnare, "Finding Common Institutions, Conference Series 21, Federal Reserve Bank of Boston Ground," Secondary Mortgage Markets, vol. 11 (Winter 1994), (April 1980), pp. 101-43. pp. 15-19. 7. "The State of the Private Mortgage Insurance Industry," Special 10. See Quercia and Stegman, "Residential Mortgage Default"; Report, Duff & Phelps Credit Rating Company, December 1995. and James A. Berkovec, Glenn B. Canner, Stuart A. Gabriel, and 8. See "An Actuarial Review of the Federal Housing Administra- Timothy H. Hannan, "Race, Redlining, and Residential Mortgage tion's Mutual Mortgage Insurance Fund," prepared by Price Loan Performance," Journal of Real Estate Finance and Economics, Waterhouse for the U.S. Department of Housing and Urban Develop- vol. 9 (November 1993), pp. 263-94; and Van Order and Zorn, ment, June 6, 1990, p. 12. "Income, Location, and Default." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 625 become delinquent more often than loans made to cialize in financing certain types of properties or borrowers with good credit histories.11 The relation- borrowers. ship between credit history and loan performance is In assessing credit risk, lenders consider the size of discussed further in the section on credit scoring. the proposed down payment and the value of the On balance, defaults likely occur as a result of a collateral as determined by a property appraisal, combination of factors. Almost uniformly, studies which together determine the loan-to-value ratio. indicate that the level of equity is a robust predictor Lenders also evaluate the capacity of the prospective of default. Studies also demonstrate a significant rela- borrower to meet scheduled debt payments and to tionship between mortgage performance and mea- provide the initial funds required to close the loan. In sures of vulnerability to triggering events. so doing, lenders rely on many of the same factors that researchers have found to be important predictors of loan performance, including borrower sources MORTGAGE UNDERWRITING AND of income; employment history (such as measures of RISK MITIGATION employment stability and prospects for income growth); ratios of debt payment to income; and asset Institutions that bear the credit risk of mortgage lend- holdings, particularly the amount of liquid assets ing mitigate that risk by screening borrowers and available to meet down-payment, closing cost, and by sharing risk with others. Screening of prospective cash reserve requirements.12 borrowers is accomplished primarily through the In addition, lenders evaluate the credit history of underwriting process, whereby information needed to prospective borrowers as an indicator of their finanassess credit risk is collected, verified, and evaluated. cial stability, ability to manage credit, and willing- Risk-sharing may take a number of forms. First, ness to make timely payments. Credit histories are and most important, lenders share the risk of default often complex and consist of many items, including with the borrower by requiring a down payment and the number and age of credit accounts of different establishing a schedule of payments that will fully types, the number of recent inquiries to the credit file, amortize the loan over a set period of time. Second, account activity patterns, the incidence and severity lenders often share the credit risk of a loan with of payment problems, and the length of time since either a private mortgage insurer or a government any payment problems occurred. agency such as the FHA or the Department of Veter- Some applicants fall well within the underwriting ans Affairs (VA). Finally, lenders may sell a loan to guidelines established by lenders, whereas others fall another party under arrangements that partly or fully far below the standards. The decision to either transfer the credit risk. The institutions that share or approve or deny loan requests from such applicants is assume the risk of lending do not solely rely on the generally straightforward. Frequently, however, the screening done by mortgage originators but also decision is less clear-cut. For example, an applicant make independent assessments. may fail to meet one of many established underwriting guidelines, such as a satisfactory record of payments on past debts.13 The Underwriting Practices Lending policies generally allow for flexibility in of Mortgage Lenders implementation so that applicants may offset weakness in one factor with strength in others. For exam- Lenders pursue different business strategies, and their ple, even if an applicant's ratio of debt payment to underwriting practices and standards reflect those income exceeds a lender's established guidelines, the strategies. Some lenders choose to underwrite mortgages more strictly and thus limit their exposure to losses. Others accept more credit risk but also price 12. Most lenders require borrowers to have cash reserves sufficient for this risk, attempting to recoup higher expected to cover two months of mortgage payments (including principal, interest, and tax and insurance escrows) at the time of closing. This losses by charging higher fees or interest rates on reserve may provide a cushion should the borrower suffer a temporary riskier mortgages. Still others may choose to spe- financial setback, and it is a signal to the lender that the borrower has the discipline to accumulate savings. 13. For example, a study of mortgage lending in Boston found that more than 80 percent of the applicants for home purchase loans ll. See, for example, Wilson Thompson, "A Model of FHA's appeared either to have a weakness in their credit histories or to fail to Origination Process and How it Relates to Default and Non-Default," meet some other underwriting standard. See Alicia H. Munnell, Lynn Working Paper, Department of Housing and Urban Development E. Browne, James McEneaney, and Geoffrey M.B. Tootell, "Mort- (1980); and Gordon H. Steinbach, "Ready to Make the Grade," gage Lending in Boston: Interpreting HMDA Data," American Eco- Mortgage Banking (June 1995), pp. 36-42. nomic Review, vol. 86 (March 1996), pp. 25-53. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

626 Federal Reserve Bulletin • July 1996 lender may approve the loan if the applicant exhibits tion. Three government-sponsored enterprises (GSEs) very stable income and an excellent credit history. dominate secondary-market activity—the Federal Similarly, a lender might consider a large down pay- National Mortgage Association (Fannie Mae), the ment to be a compensating factor offsetting weakness Federal Home Loan Mortgage Corporation (Freddie in some other area. Lenders will generally weigh all Mac), and the Government National Mortgage Assothe factors and in some cases seek additional informa- ciation (Ginnie Mae). Fannie Mae and Freddie Mac tion in attempting to make a more precise evaluation mainly buy conventional mortgages, holding some in of credit risk. portfolio and converting others into securities that are sold to investors. Ginnie Mae does not purchase loans but guarantees the timely payment of interest Risk Sharing and principal for privately issued securities backed by mortgages insured by the FHA or VA. Various Originators of mortgage loans typically share or non-GSE institutions, including commercial banks, transfer risk by requiring borrowers to purchase mort- savings associations, insurance companies, and pengage insurance or by selling mortgages to secondary- sion funds are also active purchasers of mortgages. market institutions. For most mortgages, all or a Mortgage insurers and secondary-market institusignificant portion of the credit risk is borne by a tions generally consider the same set of factors origiparty other than the originator of the loan. For nators review when assessing credit risk. The underinstance, credit risk was either shared or transferred writing standards applied, however, will differ across on nearly three-fourths of all the home purchase institutions in accordance with their various business loans originated in 1994.14 strategies and tolerance for risk. Private mortgage Mortgage lenders generally require a down pay- insurers, for example, while backing loans with high ment of at least 20 percent of the appraised value of a loan-to-value ratios, generally require borrowers to home, unless the mortgage is backed by a type of make larger down payments and pay a larger share of insurance, paid for by the borrower, known as mort- the closing costs than do the FHA and VA.15 gage guarantee insurance. Mortgage insurance for Sometimes mortgage originators do not share low-down-payment loans is available from the fed- credit risk with other institutions. Unlike mortgage eral government, primarily through programs admin- insurers and secondary-market institutions, which are istered by the FHA and the VA and from private generally remote from borrowers, institutions that mortgage insurance (PMI) companies. both originate and bear the credit risk of mortgages When a loan is backed by mortgage insurance, (known as portfolio lenders) are typically located in much of the credit risk is transferred to the insurer. the communities where they extend credit and have Should the borrower default, the insurer will reim- numerous other financial relationships with their burse the lender for the losses resulting from default, communities. For these reasons, portfolio lenders up to certain limits. Mortgage insurers, like loan may have better information about local economic originators, establish underwriting standards that conditions and the risks posed by individual borrowdetermine which loans they will insure and how ers, which, in turn, may enable them to better meamuch credit risk they will bear. Lenders may encour- sure and mitigate the risks associated with mortgage age applicants seeking mortgages with low down lending. With better information to gauge credit risk, payments and those posing higher risks to apply for portfolio lenders may be able to profitably originate government-backed loans rather than conventional some loans that do not meet the underwriting stanloans backed by PMI because the greater depth of dards established by secondary-market institutions insurance coverage provided by the government on and PMI companies. such loans affords the lender greater protection in the event of default. Secondary-market institutions buy and sell billions CREDIT SCORING AND THE of dollars of mortgages and securities backed by MORTGAGE LENDING PROCESS mortgages each year. Secondary-market institutions promulgate the underwriting guidelines that loans Mortgage lending institutions establish guidelines for must meet to be eligible for purchase or securitiza- underwriters to follow when evaluating applications 15. See Glenn B. Canner, Wayne Passmore, and Monisha Mittal, 14. See Canner and Passmore, "Credit Risk and the Provision of "Private Mortgage Insurance," Federal Reserve Bulletin, vol. 80 Mortgages," p. 998. (October 1994), pp. 883-99. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 627 for credit, but they also rely heavily on the experi- here as "credit history" scores and the latter as ence and judgment of underwriters when assessing "application" scores. Because they reflect the wide credit risk. Relying on subjective analysis has some range of factors considered in the evaluation of credit important limitations, however. Loan officers differ in risk, application scores are more comprehensive than their experience and in their views regarding the credit history scores. The credit history score is, then, relationships between risk and specific credit charac- a single element to be weighed along with the other teristics of applicants. Consequently, an institution factors in determining the total application score. cannot be sure that its underwriters are approving all applications that have risk profiles consistent with the objectives of the institution. In addition, because of Credit History Scores the numerous and often complex factors mortgage underwriters need to consider, subjective underwrit- The difficulties in assessing the often complex inforing is time-consuming and costly. mation about individuals' past and current '"xperience To facilitate the mortgage underwriting process, with credit has helped motivate the adoption of scorreduce costs, and promote consistency, "credit scor- ing methods for interpreting credit history. A credit ing" models have been developed that numerically history score represents the estimated relationship weigh or "score" some or all of the factors consid- between information on the credit histories of indiered in the underwriting process and provide an indi- viduals contained in credit bureau reports and the cation of the relative risk posed by each application. likelihood of poor loan performance. In credit history In principle, a well-constructed credit scoring system scoring systems, prospective applicants receive a holds the promise of increasing the speed, accuracy, numerical score based on their individual credit hisand consistency of the credit evaluation process while tory information; the score reflects the historic perforreducing costs. Thus, credit scoring can reduce risk mance of loans extended to individuals with similar by helping lenders weed out applicants posing exces- characteristics. Individuals with identical credit sive risk and can also increase the volume of loans by scores may have received them for different reasons, better identifying creditworthy applicants. but within the context of the credit scoring index, Generically, scoring is a process that uses recorded they are assessed to have equal likelihoods of the information about individuals and their loan requests predicted behavior, that is, they are considered to to predict, in a quantifiable and consistent manner, pose the same credit risk. their future performance regarding debt repayment. Credit history scores can supplement or even Scores represent the estimated relationship between replace the traditional subjective assessment of credit information obtained from credit bureau reports or history with a quantitative measure summarizing the loan applications and the likelihood of poor loan pertinent information in an applicant's credit report. performance, most often measured as delinquency or Adding a statistically derived measure of the credit default (see box "Developing a Credit History Scor- risk associated with a given credit history may allow ing System"). underwriters to better and more quickly assess the Scoring has been used to assess applications for strengths and weaknesses of applications. motor vehicle loans, credit cards, and other types Each of the three national credit bureaus, Equifax, of consumer credit for decades.16 Technological TRW, and Trans Union, make available credit history advances in information processing and risk analysis scores—developed by Fair, Isaac and Company, Inc. combined with competitive pressures to process (FICO)—based on information contained in each of applications more quickly and efficiently are pushing the credit bureau's files. These generic credit history the lending industry to incorporate scoring in the scores—the Equifax Beacon, the TRW-FICO, and mortgage underwriting process. the Trans Union Empirica scores—are made avail- Mortgage lenders ordinarily consider two kinds of able to help lenders assess risk on a wide variety of scores: those that are based primarily on the credit loans. In addition, credit history scores tailored to the histories of individuals and those that weigh credit mortgage market (mortgage credit history scores) are history as well as the other factors considered in the now available; these scores are specifically designed underwriting process. The former will be referred to to assess the credit history risk of mortgage loans.17 16. See Robert A. Eisenbeis, "Problems in Applying Discriminant Analysis in Credit Scoring Models," Board of Governors of the 17. See "Equifax, Inc. Develops Mortgage Credit Scoring Sys- Federal Reserve System, Staff Economic Studies (1977); and Edward tem," National Mortgage News, June 13, 1994, p. 25. A number of M. Lewis, An Introduction to Credit Scoring (San Rafael, Calif.: "custom" credit history scoring models have been developed for Athena Press, 1990). specific lenders to assess credit risk for specific loan products. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

628 Federal Reserve Bulletin • July 1996 Recent events have ensured that credit history Application Scores scores will be used much more often in the mortgage lending process than they have been in the Based on all information relevant to a loan applicapast. Most prominently, letters issued by Fannie tion, application scores are most often used to deter- Mae and Freddie Mac in 1995 strongly encourage the thousands of lenders from whom they purchase and Lender Profiles," October 24, 1995; and Freddie Mac Industry loans to consider the Beacon, TRW-FICO, and Letter from Michael K. Stamper, "The Predictive Power of Selected Credit Scores," July 11, 1995. As an alternative, Freddie Mac and Empirica credit history scores in their loan Fannie Mae recommend that, when underwriting loans, lenders conunderwriting.18 sider credit history scores that are calculated to predict bankruptcy. The generic bankruptcy scores are the Equifax Delinquency Alert System, Trans Union's Delphi score, and the TRW-MDS score. Also 18. See Fannie Mae Letter LL09-95 to all Fannie Mae lenders from see Marshall Taylor, "Secondary Markets Explain Credit Scores," Robert J. Engelstad, "Measuring Credit Risk: Borrower Credit Scores Real Estate Finance Today, April 1, 1996, p. 16. Developing a Credit History Scoring System Developing a credit history scoring system requires infor- are widely used have adopted a scale with a range of scores mation about the experiences of individuals with credit.1 between 300 and 900, with higher scores corresponding to Information is ordinarily drawn from credit account files lower credit risk. maintained by credit bureaus and sometimes from records Both the good accounts and the bad accounts will have maintained by lending institutions. The credit account files files with a wide range of scores. However, if the credit of individuals are segregated into groups based on measures scoring system is predictive of performance, good accounts of loan performance. Ordinarily, the credit account files are will have the highest percentage of high scores and bad segregated into two distinct categories: those in which debts accounts likewise will have the highest percentage of low have not been paid as scheduled as of a specified date or scores. The predictive power or performance of a scoring during a specified time period (referred to here as "bad" model is measurable, and the developer of the model looks accounts) and the rest ("good" accounts). Bad credit for the combination of attributes of the borrower's credit accounts can be defined in various ways depending on the history that will maximize the score's predictive power. severity of observed credit difficulties. For example, bad The distribution of total scores for individuals falling into accounts might include any file with at least one thirty-day the good or bad categories can be described graphically (see delinquency within the past year, or they may be limited to diagram). As shown, the good accounts tend to cluster accounts that have had more serious delinquencies. around a higher average score than do the bad accounts. To Having sorted the files according to performance as of a operate a scoring system for credit underwriting, a lender specified date or during a specified period, the analyst then must select a cutoff score (such as 620) that can be used to focuses on information in the credit files from a preceding distinguish acceptable from unacceptable risks. Regardless time period that might have predicted the performance of the cutoff score selected, some customers with bad scores outcome. Detailed information drawn from each credit file will be offered credit because of offsetting factors, and is then recorded for statistical analysis. The selection of some customers with good scores will be denied credit, also specific items is often based on discussions with loan under- because of offsetting factors. writers plus a preliminary (bivariate) statistical analysis of the relationship between individual credit factors and loan performance. The information recorded pertains primarily Distribution of credit scores of good and bad accounts to the individual's experience with credit. Percentage of accounts The analyst then uses multivariate statistical analysis of the recorded information to identify which set of characteristics is most useful in identifying borrowers who are likely to meet their scheduled payments and those who are not. The statistical analysis provides weights (or scores) for each factor, ranking its relative importance in predicting into which group an individual will fall. Applying these weights to the characteristics of individual accounts yields a total score for each individual. Most credit scoring systems that 1. Federal law prohibits lenders from considering certain factors such as gender, race, or ethnicity in making credit decisions. Consequently, these factors are not used in constructing credit scoring models, and age and marital status can be considered only under certain circumstances. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 629 mine which credit requests are clearly acceptable the risk weights assigned to these factors in establishunder established underwriting guidelines and which ing scores are not generally available to the public. need further review. The use of application scores As a consequence, scoring systems have a "black differs among the participants in the mortgage mar- box" aspect to them. Nonetheless, most scoring sysket: Loan originators generally use application scores tems share a number of elements. For example, most to identify applications eligible for streamlined credit history scoring systems consider records of underwriting; secondary-market institutions use them bankruptcy, current and historic ninety-day delinto facilitate loan purchases; and PMI companies quencies, and the number of credit lines. Most use them to help screen applications for mortgage mortgage application scoring systems additionally insurance. consider factors such as the loan-to-value ratio, the As a screen for streamlined underwriting, a thresh- ratio of debt payment to income, and measures of old score corresponding to low credit risk is estab- employment stability. However, the risk weights lished by the lender. Applicants with scores within assigned to these factors vary from system to system. the low-risk range generally would be eligible for a streamlined review that focuses primarily on verification of reported information and evaluation of the Other Uses of Credit Scoring collateral. Streamlined underwriting allows those making credit decisions to reduce costs by enabling Credit history scores and application scores have uses underwriters to spend less time on the low-risk appli- other than in the loan underwriting process. To monications and more time on those applications that tor the quality of their portfolio and to determine the involve more complexity and potential risk.19 Impor- appropriate level of reserves to set aside for losses, tantly, streamlined underwriting also benefits many lenders may periodically obtain credit scores for borcustomers by shortening the amount of time between rowers with outstanding loans. Similarly, institutions the date of application and the credit decision. can use credit scores to evaluate the quality and value Secondary-market institutions also use application of mortgages they are considering for sale. For examscores. Freddie Mac and Fannie Mae, for instance, ple, credit scores can help identify the credit risk of have developed application scoring systems that seasoned loans and help determine the appropriate indicate to the lender whether a prospective loan is grade (risk) pool into which individual loans should clearly eligible for sale to these institutions or be placed for sale to the secondary market. whether the lender will need to show that compensat- Lenders may use credit scores to differentiate risk ing factors exist that make the loan an acceptable categories of loans for pricing decisions. Rather than credit risk.20 reject higher-risk loans for origination or purchase, Private mortgage insurance companies use applica- the lender may decide to price the risk by requiring tion scoring systems to quickly identify those pro- an interest rate premium on those loans with higher spective loans that clearly meet the underwriting predicted probabilities of default. The use of credit standards of the insurer. Loan applications that fail scores can also help with the collection and loss the automated screen are reviewed by an underwriter mitigation process by, for example, allowing lenders to determine whether compensating factors are to concentrate staff resources on borrowers whose present that would make the loan insurable. Mort- credit scores indicate greater risk of delinquency. gage Guarantee Insurance Corporation (MGIC), for Finally, lenders can use credit scores to facilitate example, reports that about 30 percent of the applica- strategic planning decisions. For instance, lenders tions they receive for mortgage insurance are concerned about possible attrition in their loan portapproved through their automated application sys- folio due to competition for refinancings may offer a tem; the remaining applications are referred to under- new loan to those current borrowers whose credit writers for closer review.21 scores indicate that they would be most attractive to Most credit history and application scoring sys- potential competitors. tems are proprietary, and the specific factors used and Limitations of Scoring 19. See, for example, Janet Sonntag, "The Debate Over Credit Scoring," Mortgage Banking (November 1995), pp. 46-52. Although credit scoring can reduce costs and bring 20. The automated underwriting systems developed by Freddie Mac and Fannie Mae are known respectively as "Loan Prospector" more consistency to the underwriting process, its and "Desktop Underwriter." reliability depends upon the accuracy, completeness, 21. See Jim Kunkel, "The Risks of Mortgage Automation," Mortand timeliness of the information used to generate the gage Banking (December 1995), pp. 45-57. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

630 Federal Reserve Bulletin • July 1996 scores. For example, credit scores based on erroneous characteristics of these consumers. Also, many indior seriously incomplete credit report information are vidual lenders have made too few mortgages to not likely to accurately measure the risk posed by an develop a sound mortgage credit scoring model. individual applicant and may lead to unwarranted Recently, however, developers of scoring models actions on an application (see box "How To Obtain have integrated information from several sources to Your Credit Report and What To Do To Correct develop both mortgage credit history scores and Errors in the Report"). mortgage application scores. Also, concerns have been expressed that credit scores may not accurately gauge the creditworthiness of individuals whose experiences differ substantially from those on whom the index is based. If the base- How To Obtain Your Credit Report and line population used to generate the scoring index is What To Do To Correct Errors in the Report not sufficiently diverse, then scores may lack predictive power for the underrepresented segments of the In 1970 the Congress enacted the Fair Credit Reporting overall population. For example, rent, utility, and Act (FCRA) to give consumers specific rights in dealing other nonstandard payment histories, which are often with credit bureaus. The FCRA requires credit bureaus considered important for low-income populations, are to furnish a correct and complete consumer credit report frequently left out of scoring models. Thus, scores for to businesses or persons to use in evaluating consumer these populations may not reliably assess individual applications for credit, insurance, a job, or other legitirisk. mate business need in connection with a transaction Another set of concerns surrounds the use of credit involving the consumer. scores more generally in the underwriting process. Consumers can obtain a copy of their credit file from Lenders relying too heavily on scores might not give a credit bureau. A reasonable fee may be charged for the adequate consideration to special circumstances, such report. If a consumer has been denied credit, insurance, as a recent illness, that might mitigate a low score. or employment because of information that was supplied by a credit bureau, the FCRA requires that the recipient Further, scores may lack predictive power if the of the report give the consumer the name and address of underlying model used to generate the scores does the credit bureau that supplied the information. The not reflect current relationships between risk characconsumer then has the right to obtain the report free of teristics and measures of loan performance. Builders charge if requested within thirty days of receiving a of credit scoring models report that model perfornotice of denial. Reports can be requested by phone at mance deteriorates over time. Thus, periodic validathe following numbers: Equifax—1-800-685-1111; tion may be necessary to ensure that scoring models Trans Union—1-800-916-8800; and TRW—1-800-682retain their accuracy. 7654. Credit scoring and its application to mortgage mar- Consumers have the right to dispute the information kets are evolving. Credit history scores, for example, in their credit files if they believe that their credit reports traditionally have been based on the payment perfor- contain errors or are incomplete. When a credit bureau receives a complaint of this nature, it must investigate mance of a cross-section of consumers who have and record the current status of the disputed items within used credit, not all of whom have incurred mortgage a reasonable period of time. If the credit bureau cannot debt. But consumer behavior with respect to mortverify a disputed item, it must delete it from the file. The gage debt may differ from behavior with respect to credit bureau is required to correct any information consumer debt. Consumers facing financial difficulconfirmed to be erroneous and to add any information ties may, for instance, choose to pay their mortgage that has been omitted. obligations first and postpone payments on other If the credit bureau's investigation does not resolve a debts. For this reason, one might expect that a credit dispute, the consumer may file a brief statement explainscoring model developed specifically for the mort- ing the nature of the dispute. The credit bureau must gage market would provide more accurate predic- include this statement in the report each time it is sent tions of future mortgage payment performance than a out. generic credit history score, even before the borrower The Federal Trade Commission is the federal agency that enforces the FCRA. Questions or complaints related has obtained a mortgage. to a credit report may be directed to the Correspondence The development of models for credit history Branch of the Federal Trade Commission, Washington, scores and application scores based on the payment DC 20580. Free copies of publications discussing credit performance of mortgage holders has historically issues are available from Public Reference at the same been hampered by incomplete information about address. which consumers have mortgages and about other Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 631 CREDIT HISTORY SCORES AND reflect the borrower's credit record at the time the MORTGAGE PERFORMANCE loan was originated. Therefore, the sample relationship between the TMS and loan performance does Relatively little information about the relationship not necessarily reflect the predictive value of credit between credit history scores and mortgage loan per- history scores at the time of loan origination. Howformance is publicly available. However, recently ever, the older loans in the sample can be used to obtained proprietary information (courtesy of Equifax demonstrate how lenders can use credit scores to help Credit Information Services, Inc., one of the three monitor or evaluate the credit risk of seasoned loan large national repositories of credit information) portfolios. relates credit scores to loan performance for a large To analyze these relationships, we separated loans sample of mortgage loans. The sample contains virtu- into three types (conventional fixed rate, convenally all of the mortgages that were outstanding and tional adjustable rate, and government-backed) and whose payments were current as of September 1994 two "seasoning" categories (newly originated and at three of the largest lenders in the country. The seasoned) and then sorted them into three credit score sample is not, however, necessarily representative of ranges—low, medium, and high—based on their the pool of borrowers nationwide; these lenders do TMS scores (which, again, are mortgage credit hisnot, for example, participate in all markets, nor do tory scores). Newly originated loans are those issued they offer all types of mortgages. To ensure confiden- after September 1993; seasoned loans are those that tiality, no information was included in the data that were originated between January 1990 and Septemcould be used to identify individuals or financial ber 1993. The three ranges of TMS scores correspond institutions. to the specific ranges identified in the Fannie Mae The data for each loan include a mortgage credit and Freddie Mac letters to mortgage lenders on the history score, "The Mortgage Score" (TMS), devel- use of the generic credit history scores (the Beacon, oped by Equifax Mortgage Services and generated as TRW-FICO, and Empirica scores) in underwriting of September 1994.22 TMS was developed by loans.23 Equifax on the basis of the credit records of mortgag- TMS scores in the low range correspond to generic ors and the payment performance on their mortgage credit history scores that Freddie Mac has identified accounts. The data also include measures of the as showing "a strong indication that the borrower performance of each loan over the subsequent twelve does not show sufficient willingness to repay as months (to September 1995); the date the loan agreed" (generic credit history scores below 621). was originated; the loan type (conventional or TMS scores in the medium range correspond to government-insured and whether the interest rate generic scores about which Freddie Mac has suffion the loan was fixed or variable); the ZIP code of cient concern to require a more detailed evaluation of the property securing the loan; and characteristics of the credit history file (generic credit history scores in the loan such as loan size and loan-to-value ratio at the 621-660 range). TMS scores in the high range the time of origination. All loans in the sample were correspond to generic scores in a range at which, current in their mortgage payments as of Septem- unless additional credit history risks are identified, ber 1994, the date the TMS was determined. For our "the borrower's willingness to pay as agreed is conanalysis, loans with payments at least thirty days late firmed" (generic credit history scores above 660). at any point during the performance period (Septem- The distributions of mortgage loans by credit score ber 1994 through September 1995) are defined as range for the three types of loans sorted by seasoning delinquent. status, and the delinquency rate within each range, For loans originated within the year preceding are shown in table 2. The vast majority of both newly September 1994, the TMS reasonably approximates originated and seasoned loans have credit scores in the credit history score that could have been used in the high range. For example, more than 90 percent of underwriting the loan. These loans, then, allow an conventional fixed rate mortgages have credit scores examination of the relationship between credit history scores at the time of origination and near-term loan performance. For more seasoned (older) loans, the TMS as of September 1994 does not necessarily 23. See note 18. The scales of the generic credit history scores and of the TMS differ. Using the Equifax data on individuals scored with both a generic credit history score and the TMS score, we set cutoffs for the TMS score at a level designed to capture the same percentages of borrowers in the low, medium, and high ranges as were implied by 22. The Mortgage Score and TMS are service marks of Equifax the cutoffs of the generic credit history scores identified in the Freddie Mortgage Services. Mac and Fannie Mae letters. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

632 Federal Reserve Bulletin • July 1996 2. Mortgage loans, grouped by seasoning status, type, and payment status and distributed by credit score Percent Credit score range MEMO: Number of sample loans LLooaann i Low Medium High All Total | Delinquent Newly originated Conventional fixed rate 1.5 4.9 93.6 100 109,433 417 Delinquencies in score range As percentage of all delinquent loans of this type and seasoning 17.3 21.8 60.9 100 MEMO: AS percentage of all loans of this type and seasoning in score range 4.4 1.7 .2 .4 Conventional adjustable rate 3.8 8.3 87.8 100 24.075 119 Delinquencies in score range As percentage of all delinquent loans of this type and seasoning 18.5 24.4 57.1 100 MEMO: AS percentage of all loans of this type and seasoning in score range 2.4 1.4 .3 .5 Government-backed fixed rate 12.8 16.7 70.5 100 36,596 985 Delinquencies in score range As percentage of all delinquent loans of this type and seasoning 52.0 25.2 22.8 100 MEMO: AS percentage of all loans of this type and seasoning in score range 10.9 4.0 .9 2.7 Seasoned Conventional fixed rate 2.1 4.9 93.0 100 257.741 1.909 Delinquencies in score range As percentage of all delinquent loans of this type and seasoning 32.4 19.6 48.0 100 MEMO: As percentage of all loans of this type and seasoning in score range 11.4 2.9 .4 .7 Conventional adjustable rate 7.6 10.7 81.8 100 125,384 2,423 Delinquencies in score range As percentage of all delinquent loans of this type and seasoning 42.5 21.7 35.8 100 MEMO: AS percentage of all loans of this type and seasoning in score range 10.9 3.9 .8 1.9 Government-backed fixed rate : ; 13.7 15.5 70.9 100 67,913 2.786 Delinquencies in score range As percentage of all delinquent loans of this type and seasoning 59.9 19.4 20.7 100 MEMO: AS percentage of all loans of this type and seasoning in score range 18.0 5.1 1.2 4.1 NOTE. Newly originated loans were originated during the October 1993— for a mortgage meets its underwriting guidelines. The ranges for The Mortgage June 1994 period. Seasoned loans were originated during the January 1990— Score correspond to generic credit bureau scores (Beacon, TRW-FICO, September 1993 period. Empirica) as follows: low = less than 621, medium = 621-660, and high = more The credit score is The Mortgage Score (TMS; service mark of Equifax than 660. Mortgage Services), a mortgage credit history score derived from a model based Delinquent accounts are those on which a payment was at least thirty days exclusively on the credit records of households with mortgages and their past due at any time during the period from September 30, 1994, through payment performance on mortgage loans. The credit score for each loan was September 30, 1995. calculated at the end of the third quarter of 1994. . . . Not applicable. Score ranges have been structured to roughly approximate the generic credit SOURCE. Equifax Credit Information Services, Inc. bureau score ranges used by Freddie Mac for evaluating whether an application in the high range. Relative to conventional fixed rate arising at any time over a twelve-month period and mortgages, a larger proportion of conventional adjust- thus overstates the likelihood of a loan being delinable rate mortgages and an even larger proportion of quent at any point in time. On the other hand, ecogovernment-backed loans have low credit scores. For nomic conditions over this particular twelve-month each type of loan, the proportion of seasoned loans period were relatively favorable, and all loans had to with low scores is larger than that of newly originated have been current in their payments at the beginning loans. of the performance period. These latter factors tend Delinquency rates are low for each loan type to reduce measured delinquency rates. regardless of seasoning status. The highest overall The data indicate that TMS scores are a predictor rate of delinquency, that for government-backed of loan performance. For each loan type, regardless seasoned loans, is only 4.0 percent (table 2). These of seasoning status, borrowers with low scores have delinquency rates should be viewed in the context of substantially higher delinquency rates than those with several considerations that bias the results in opposite medium or high scores. For example, the delinquency directions. On one hand, the rate is for delinquencies rate for newly originated government-backed loans Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 633 with low TMS scores is 10.9 percent, compared with percentage of borrowers with low and medium scores 4.0 percent for those with medium scores and 0.9 per- than other loans. These relationships hold for delincent for those with high scores. quent loans as well as for loans that were paid on The relationship between credit scores and delin- schedule. For example, for newly originated convenquency rates is further evidenced by the distribution tional fixed rate mortgage loans (table 3 and chart 1), of delinquent borrowers across credit score ranges for the mean TMS score for paid-as-scheduled loans each type of loan. These distributions show that with loan-to-value ratios less than 81 percent is delinquent borrowers disproportionately have scores 50 points higher than the mean score for those with in the low range. Borrowers with low credit scores loan-to-value ratios of more than 90 percent. Simiaccounted for only 1.5 percent of all newly originated larly, 94.5 percent of the loans with loan-to-value conventional fixed rate loans but for 17 percent of ratios of less than 81 percent are in the high credit those that became delinquent (table 2, memo item). score range, compared with 84.6 percent for those This relationship holds for other product types and with loan-to-value ratios of more than 90 percent. seasoned loans as well. For example, borrowers For each loan type, the mean and median TMS with low credit scores accounted for 2.1 percent of scores for delinquent loans are 100 to 150 points all seasoned conventional fixed rate mortgages, but lower than the mean and median scores for those that they accounted for 32 percent of those that became were paid on schedule, and these differences are delinquent. statistically significant. Similarly, the percentage of The data, however, also consistently show that borrowers in the low credit score range is at least four most borrowers with credit scores in the low range to five times higher for delinquent loans than for are not delinquent. For example, in the case of newly loans that were paid as scheduled. These relationoriginated conventional fixed rate loans, only 4.4 per- ships hold across all subcategories of loans. cent of borrowers with low credit scores became Additional information relating credit history delinquent over the performance period. Thus, while scores to mortgage loan performance was provided delinquent borrowers disproportionately have low by Freddie Mac (table 6). These data pertain to loans scores, most borrowers with low scores are not for single-family owner-occupied properties purdelinquent. chased by Freddie Mac in the first six months of Distinct differences exist in delinquency rates 1994. Performance is measured by whether the loan across loan types and seasoning status. Within each had entered into foreclosure by the end of 1995. credit score range and loan type, seasoned loans have Foreclosure rates for different categories of loans are higher delinquency rates than newly originated loans expressed relative to the rate for borrowers with have.24 For example, the delinquency rate for newly loan-to-value ratios of 80 percent or less and high originated conventional adjustable rate mortgages credit history scores, which was set to l.26 with low credit scores is 2.4 percent, but the rate for Foreclosure rates are substantially higher for borseasoned conventional adjustable rate loans with low rowers with low credit scores as well as for those scores is 10.9 percent. Controlling for score and with high loan-to-value ratios (table 6). Moreover, seasoning, government-backed loans have the highest borrowers with low credit scores perform worse rates of delinquency, a result consistent with data on within each loan-to-value ratio category. The foreclorelative delinquency rates from other sources.25 sure rate is particularly high for borrowers with both Detailed information on the distribution of TMS low credit scores and high loan-to-value ratios— scores by loan performance, type of loan, and almost 50 times higher than that for borrowers with mortgage and location characteristics for newly origi- both high credit scores and low loan-to-value ratios. nated loans is presented in tables 3, 4, and 5. In This finding, that loan performance deteriorates siggeneral, loans with lower loan-to-value ratios and nificantly when risks are high for multiple factors loans on properties located in areas with higher rela- ("layering of risk"), is discussed at length later in tive incomes and higher relative home values have this article. higher mean and median TMS scores and a lower The relationship between borrower income and loan performance appears to be slight. Within each credit score and loan-to-value ratio category, borrowers with income below 80 percent of area median 24. This result is consistent with other research, which indicates that delinquency rates increase as loans age, at least for the first few years after origination. See, for example, chart 1 in The Market Pulse, Mortgage Information Corporation (vol. 1, January 1996), p. 1. 25. See Mortgage Bankers Association National Delinquency 26. The credit score ranges are comparable to those used in tables 2 Survey. through 5. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

634 Federal Reserve Bulletin • July 1996 3. Newly originated conventional fixed rate mortgage loans, grouped by payment performance and characteristic and distributed by credit score Percent except as noted Credit score TToottaall Low Medium High PPPeeerrrfffooorrrmmmaaannnccceee ooofff mmmooorrrtttgggaaagggeee aaannnddd ccchhhaaarrraaacccttteeerrriiissstttiiiccc MMeeaann44 MMeeddiiaann44 Percent MEMO: Percent MEMO: Percent MEMO: Percent MEMO: Percent Percent Percent Percent of charac- of charac- of charac- of characof score of score of score of all teristic range teristic range teristic range teristic loans PAID AS SCHEDULED Mortgage characteristic Loan-to-value ratio (percent) Less than 81 845 865 1.2 72.9 4.3 77.6 94.5 87.1 100 86.5 81 to 90 818 840 2.6 19.8 7.1 16.2 90.3 10.5 100 10.9 More than 90 794 811 4.0 7.3 11.4 6.2 84.6 2.4 100 2.6 All1 841 861 1.4 100 4.8 100 93.8 100 100 100 Loan size (dollars) Less than 100,000 836 859 1.9 47.5 5.7 41.9 92.4 35.0 100 35.5 100,000-200,000 839 859 1.4 33.8 5.0 35.0 93.6 33.8 100 33.9 More than 200,000 847 866 .9 18.7 3.6 23.1 95.5 31.2 100 30.6 All 841 861 1.4 100 4.8 100 93.7 100 100 100 Location characteristic ZIP code median income (percentage of area median income)2 Less than 80 823 846 2.3 9.0 7.7 9.0 90.1 5.5 100 5.7 80 to 120 837 857 1.6 52.2 5.2 50.6 93.2 46.7 100 47.0 More than 120 847 867 1.2 38.8 4.1 40.4 94.7 47.8 100 47.3 All 841 861 1.4 100 4.8 100 93.7 100 100 100 Home values (percentage of area median home value)3 Less than 80 826 847 2.2 20.7 6.6 18.8 91.3 13.4 100 13.8 80 to 120 836 856 1.6 27.9 5.2 26.5 93.1 24.2 100 24.4 More than 120 846 866 1.2 51.4 4.3 54.7 94.5 62.3 100 61.8 All 841 861 1.4 100 4.8 100 93.7 100 100 100 DELINQUENT Mortgage characteristic Loan-to-value ratio (percent) Less than 81 734 740 11.9 63.8 22.9 78.0 65.2 79.8 100 77.1 81 to 90 697 707 21.3 27.6 22.7 18.7 56.0 16.6 100 18.7 More than 90 699 744 29.4 8.6 17.6 3.3 52.9 3.6 100 4.2 All1 720 730 14.4 100 22.6 100 62.9 100 100 100 Loan size (dollars) Less than 100,000 692 686 25.1 59.7 24.6 46.2 50.3 33.9 100 41.0 100,000-200,000 720 730 14.7 29.2 23.8 37.4 61.5 34.6 100 34.3 More than 200,000 766 781 7.8 11.1 14.6 16.5 77.7 31.5 100 24.7 All 720 730 17.3 100 21.8 100 60.9 100 100 100 Location characteristic ZIP code median income (percentage of area median income)2 Less than 80 724 738 17.4 11.1 19.6 9.9 63.0 11.4 100 11.0 80 to 120 707 712 22.0 69.4 21.6 53.8 56.4 50.4 100 54.4 More than 120 739 • 753 9.7 19.4 22.9 36.3 67.4 38.2 100 34.5 All 720 730 17.3 100 21.8 100 60.9 100 100 100 Home value (percentage of area median home value)3 Less than 80 687 677 28.9 38.9 22.7 24.2 48.5 18.5 100 23.3 80 to 120 721 730 14.9 25.0 24.8 33.0 60.3 28.7 100 29.0 More than 120 735 743 13.1 36.1 19.6 42.9 67.3 52.8 100 47.7 All 720 730 17.3 100 21.8 100 60.9 100 100 100 NOTE. Loans were originated during the October 1993-June 1994 period. 3. Value of the property relative to the median value of owner-occupied For definitions of credit score, score range, and delinquency, see note to table 2. homes in the property's MSA or, if location is not in an MSA, relative to the 1. Excluding loans with no reported ratio. median value of owner-occupied homes in all non-MSA portions of the state. 2. Median family income of ZIP code in which the property is located 4. Values of The Mortgage Score. The sample Mortgage Score range is 325 relative to median family income of the property's metropolitan statistical area to 991. (MSA) or, if location is not in an MSA, relative to median family income of all SOURCE. Equifax Credit Information Services, Inc. non-MSA portions of the state. income have somewhat higher foreclosure rates than sure rates than average. Credit score and, to a lesser average, and those with incomes above 120 percent extent, loan-to-value ratio appear to be much stronger of area median income have somewhat lower foreclo- predictors of foreclosure rates than income. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 635 4. Newly originated conventional adjustable rate mortgage loans, grouped by payment performance and characteristic and distributed by credit score Percent except as noted Credit score TToottaall Low Medium High PPPeeerrrfffooorrrmmmaaannnccceee ooofff mmmooorrrtttgggaaagggeee aaannnddd ccchhhaaarrraaacccttteeerrriiissstttiiiccc MMeeaann MMeeddiiaann Percent MEMO: Percent MEMO: Percent MEMO: Percent MEMO: Percent Percent Percent Percent of charac- of charac- of charac- of characof score of score of score of all teristic range teristic range teristic range teristic loans PAID AS SCHEDULED Mortgage characteristic Loan-to-value ratio (percent) Less than 81 817 842 3.8 86.8 8.2 85.5 88.1 86.8 100 86.7 81 to 90 801 821 3.7 12.6 8.8 13.6 87.5 12.6 100 12.7 More than 90 770 782 3.4 .6 12.8 1.0 83.9 .6 100 .6 All 815 839 3.8 100 8.3 100 88.0 100 100 100 Loan size (dollars) Less than 100,000 814 840 4.4 44.2 8.3 37.7 87.3 37.5 100 37.8 100,000-200,000 812 836 3.9 39.1 8.7 39.9 87.5 37.8 100 38.0 More than 200,000 819 840 2.6 16.8 7.6 22.4 89.8 24.7 100 24.2 All 815 839 3.8 100 8.3 100 88.0 100 100 100 Location characteristic ZIP code median income (percentage of area median income) Less than 80 788 811 5.5 13.4 12.6 13.9 81.9 8.5 100 9.1 80to 120 811 836 4.2 52.9 8.6 50.1 87.2 47.5 100 47.9 More than 120 824 847 2.9 33.6 6.9 36.0 90.1 44.1 100 43.0 All 815 839 3.8 100 8.3 100 88.0 100 100 100 Home values (percentage of area median home value) Less than 80 802 828 5.1 38.1 9.9 33.6 84.9 26.9 100 27.9 80 to 120 812 835 3.7 24.3 8.4 25.1 87.9 24.7 100 24.7 More than 120 824 848 3.0 37.6 7.2 41.3 89.8 48.4 100 47.4 All 815 839 3.8 100 8.3 100 88.0 100 100 100 DELINQUENT Mortgage characteristic Loan-to-value ratio (percent) Less than 81 713 723 14.9 63.6 22.3 72.4 62.8 90.8 100 81.0 81 to 90 678 638 30.0 27.3 40.0 27.6 30.0 9.2 100 17.2 More than 90 576 576 100 9.1 0 0 0 0 100 1.7 All 710 718 19.0 100 25.0 100 56.0 100 100 100 Loan size (dollars) Less than 100,000 683 661 24.1 31.8 27.6 27.6 48.3 20.6 100 24.4 100,000-200,000 700 694 14.6 31.8 33.3 55.2 52.1 36.8 100 40.3 More than 200,000 739 764 19.0 36.4 11.9 17.2 69.0 42.6 100 35.3 All 710 718 18.5 100 24.4 100 57.1 100 100 100 Location characteristic ZIP code median income (percentage of area median income) Less than 80 631 653 43.8 31.8 6.3 3.4 50.0 11.8 100 13.4 80 to 120 720 729 15.4 45.4 27.7 62.1 56.9 54.4 100 54.6 More than 120 725 718 13.2 22.7 26.3 34.5 60.5 33.8 100 31.9 All 710 718 18.5 100 24.4 100 57.1 100 100 100 Home value (percentage of area median home value) Less than 80 706 707 17.6 27.3 23.5 27.6 58.8 29.4 100 28.6 80 to 120 688 678 12.8 22.7 38.5 51.7 48.7 27.9 100 32.8 More than 120 731 764 23.9 50.0 13.0 20.7 63.0 42.6 100 38.7 All 710 718 18.5 100 24.4 too 57.1 100 100 100 NOTE. See notes to table 3. SOURCE. Equifax Credit Information Services, Inc. The performance patterns by credit score and These performance data reflect foreclosures during loan-to-value ratio are very similar for borrowers at only the first eighteen to twenty-four months after all income levels. For example, among borrowers origination. Typically, most foreclosures occur more with high incomes, those with low credit scores and than two years after origination. Analysts at Freddie high loan-to-value ratios still have a foreclosure rate Mac, however, believe that the pattern of relative almost 50 times higher than those with high credit foreclosure rates presented in table 6 will hold as scores and low loan-to-value ratios. these loans season. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

636 Federal Reserve Bulletin • July 1996 5. Newly originated government-backed fixed rate mortgage loans, grouped by payment performance and characteristic and distributed by credit score Percent except as noted Credit score TToottaall Low Medium High PPPeeerrrfffooorrrmmmaaannnccceee ooofff mmmooorrrtttgggaaagggeee aaannnddd ccchhhaaarrraaacccttteeerrriiissstttiiiccc MMeeaann MMeeddiiaann Percent MEMO: Percent MEMO: Percent MEMO: Percent MEMO: Percent Percent Percent Percent of charac- of score of charac- of score of charac- of score of charac- of all teristic range teristic range teristic range teristic loans PAID AS SCHEDULED Mortgage characteristic Loan size (dollars) Less than 100,000 752 767 12.6 71.4 17.1 68.9 70.2 64.9 100 66.4 More than 100,000 762 780 9.9 28.6 15.2 31.1 74.8 35.1 100 33.6 All 756 772 11.7 100 16.5 100 71.8 100 100 100 Location characteristic ZIP code median income (percentage of area median income) Less than 80 728 733 14.9 12.9 22.6 13.9 62.5 8.8 100 10.2 80 to 120 754 770 11.9 65.6 16.5 64.6 71.6 64.5 100 64.6 More than 120 770 792 10.0 21.5 14.1 21.5 76.0 26.7 100 25.2 All 756 772 11.7 100 16.5 100 71.8 100 100 100 Home values (percentage of area median home value) Less than 80 751 766 12.2 37.6 18.0 39.2 69.8 35.0 100 36.0 80 to 120 756 772 12.0 39.7 15.7 36.8 72.3 39.0 100 38.7 More than 120 763 780 10.5 22.8 15.6 24.0 73.8 26.1 100 25.4 All 756 772 11.7 100 16.5 100 71.8 100 100 100 DELINQUENT Mortgage characteristic Loan size (dollars) Less than 100,000 604 592 54.5 68.9 25.0 65.3 20.5 59.1 100 65.8 More than 100,000 622 610 47.2 31.1 25.5 34.7 27.3 40.9 100 34.2 All 610 598 52.0 100 25.2 100 22.8 100 100 100 Location characteristic ZIP code median income (percentage of area median income) Less than 80 596 593 54.5 16.6 29.5 18.5 16.0 11.1 100 15.8 80 to 120 606 592 54.5 68.4 22.9 59.3 22.6 64.4 100 65.2 More than 120 635 626 41.2 15.0 29.4 22.2 29.4 24.4 100 19.0 All 610 598 52.0 100 25.2 100 22.8 100 100 100 Home value (percentage of area median home value) Less than 80 604 591 54.0 45.3 25.6 44.4 20.5 39.1 100 43.7 80 to 120 614 606 48.9 34.2 27.1 39.1 24.0 38.2 100 36.3 More than 120 616 597 53.3 20.5 20.8 16.5 25.9 22.7 100 20.0 All 610 598 52.0 100 25.2 100 22.8 100 100 100 NOTE. See notes to table 3. SOURCE. Equifax Credit Information Services, Inc. THE DISTRIBUTION OF SCORES qualify for a mortgage if they have compensating ACROSS THE POPULATION factors such as a low loan-to-value ratio. Proprietary information on the credit history scores, mortgage status, and ZIP code location of Little information is publicly available about how individuals and households was obtained from credit histories vary across population groups. As a Equifax. The information is based on a nationally summary measure of the credit histories of individrepresentative sample and includes the Equifax TMS uals, credit history scores provide a convenient way scores for 3.4 million individuals and the 2.5 million to compare different segments of the population with households they comprise.27 Households were classirespect to their credit history profiles. Such comparisons offer a rough and partial guide to the willingness of lenders to extend credit to different categories of 27. The sample was drawn by sorting the country's roughly 29,000 households, since credit history is only one element residential ZIP codes into strata defined by Census region, center-city/ lenders consider in the evaluation of a mortgage suburban/rural location, and median household income. A stratified nationally representative sample of 994 ZIP codes was drawn from application. Even applicants with low scores may these strata. TMS scores (computed in the same way as those dis- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 637 1. Mean mortgage scores of selected, newly originated, conventional fixed rate loans, by payment status and characteristics of loan and locality Mean mortgage score Mean mortgage score Loan-to-value ratio Loan size, dollars On time 1 Delinquent 800 mem II I i w b lj hi i i mm j Mi i _. Less than 81-90% More than Less than 100,000- More than 100,000 200,000 200,000 Borrower income, percent of area median Home value, percent of area median 800 800 | I I I • | Less than 80-120% More than Less than 80-120% More than 80% 120% 120% NOTE. For definitions and source, see notes to tables 2 and 3. fled according to whether or not they appeared to section for various classifications of ZIP code. For all have an outstanding mortgage loan. Other than the three population groups, the distributions of TMS TMS score and mortgage status, no information was scores are similar across different categories of ZIP provided about the characteristics of the individuals. code, although some absolute differences exist However, because the ZIP code of the individual's (table 7). For example, households with mortgages residence is known, it is possible to classify individ- tend to have fewer low scores and tend to live in uals by the characteristics of these locations. areas with higher relative median family incomes and We have calculated the distributions of three differ- median home values. For all categories, more than ent population groups—individuals, households, and half, and in most cases more than two-thirds, of households identified as having mortgages—across sample households or individuals have TMS scores the same TMS score ranges used in the previous in the high range. For these households, TMS scores fall within the acceptable range for mortgage qualification. cussed in the previous section) were obtained for all individuals with credit files in Equifax's off-line credit marketing database showing About 20 percent of individuals, 23 percent of addresses in the sample ZIP codes. households, and 15 percent of households with mort- Credit reports showing the same address were considered to be gages have low TMS scores and thus may have from the same household, and the low-score report (if two reports problems qualifying for a mortgage on the basis of were involved) or the middle-score report (if three or more reports were involved) was chosen to represent the household. These figures their credit histories (table 7). These proportions do understate the number of households with more than one adult. A not vary much across urban/suburban/rural classificapossible explanation is that many couples obtain credit in only one tions but do vary substantially by median income and person's name. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

638 Federal Reserve Bulletin • July 1996 6. Relative foreclosure rates for selected categories of the proportion with low scores varies substantially by mortgage loans, by credit score range area income and home value and region. Almost Index one-fourth of households with mortgages in ZIP Loan-to-value ratio codes with lower incomes or lower home values fall Low Medium High and borrower income in the low-score range and may have difficulty All loans refinancing. Borrower income (percentage of area median income) Less than 80 36.8 13.9 2.2 80 to 120 35.3 10.2 1.7 120 or more 31.1 8.9 1.1 All 33.9 10.3 1.5 THE PERFORMANCE OF LOANS Loan-to-value ratio less than IN AFFORDABLE HOME LOAN PROGRAMS 81 percent Borrower income (percentage of area median income) Less than 80 32.0 11.0 1.8 In recent years mortgage originators, secondary mort- 80 to 120 29.0 7.4 1.1 gage market institutions (Fannie Mae and Freddie 120 or more 22.0 6.7 .7 All 26.9 7.9 1.0 Mac in particular), and PMI companies have initiated Loan-to-value ratio 81 percent a wide variety of affordable home loan programs or more intended to benefit low- and moderate-income and Borrower income (percentage of area median income) minority households and neighborhoods (see box Less than 80 51.4 23.0 4.4 80 to 120 47.4 15.8 3.6 "The Elements of an Affordable Home Loan Pro- 12 A 0 l o l r more 4 4 6 7 . . 7 6 1 15 2 . . 3 9 2 3 . . 8 3 gram").29 These initiatives supplement a variety of long-standing government-sponsored programs, par- NOTE. The loans are for single-family owner-occupied properties and were purchased by Freddie Mac in the first six months of 1994. Index of foreclosure ticularly those of the FHA and state and local housing rate covers loans foreclosed by December 31, 1995; the index sets the average authorities. In many cases, the reach of private-sector foreclosure rate equal to 1 for loans with borrower generic credit bureau scores of more than 660 and loan-to-value ratios of less than 81 percent. programs has been extended through public-private The credit score ranges correspond to generic credit bureau scores as follows: partnerships. low = less than 621, medium = 621-660, and high = more than 660. Area median income is the median family income of the property's MSA or, Analysis of data gathered under the Home Mortif location is not in an MSA, the median family income of the property's county. gage Disclosure Act (HMDA) for the period 1992-94 Borrower income is as of the time of loan origination. SOURCE. Freddie Mac. suggests that affordable home loan programs may be having an effect in metropolitan statistical areas home value of ZIP codes and by Census region. For (MSAs), as conventional mortgage lending to lowexample, about 33 percent of the households living in and moderate-income borrowers has increased at a ZIP codes with median family incomes in the lowest substantially faster rate than lending to other groups range have low scores, compared with only 17 per- (table 8). From 1992 to 1993 and from 1993 to 1994, cent of households living in ZIP codes with median the number of conventional home purchase loans family incomes in the highest income range. extended to low- and moderate-income borrowers The extent of the variation in TMS scores by Cen- (incomes below 80 percent of the MSA median) sus region is somewhat surprising. Although some of increased 38 percent and 27 percent respectively. the variation by region is explained by differences in Over these same two years, lending to upper-income economic factors such as income and unemployment borrowers (incomes above 120 percent of the MSA rates (additional analysis not shown), much of the median) rose more slowly, increasing only 8 percent variation is unexplained. and then 13 percent. Information on the distribution, across score A combination of factors may have given rise to ranges, of households identified as having mortgages this pattern of lending. In some cases, lenders may is potentially useful for forecasting the ability of be responding to newly perceived profit opportunities mortgage holders to refinance their outstanding in underserved market niches. Some depository mortgage loans. As noted, 15 percent of all the institutions may also be seeking to build an outhouseholds with mortgages have low TMS scores standing record of community reinvestment in order and thus may have difficulty refinancing.28 Again, to enhance their compliance with the Community 28. This finding should be viewed with some caution. The percent- 29. See "Affordable Mortgage Program Study," Consumer Bankage of sample households identified as having mortgages is lower than ers Association, annual reports 1993-95. For a review of the affordthe proportion estimated from other data sources. If the sample able lending initiatives sponsored by Fannie Mae and Freddie Mac, households identified as having mortgages have a different credit see the brochures "Opening Doors with Fannie Mae's Community score distribution than mortgage holders overall, then the sample Lending Products," Fannie Mae, 1995, and "Expanding the Dream," statistics may be biased. Freddie Mac, 1995. 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Credit Risk, Credit Scoring, and the Performance of Home Mortgages 639 Since affordable home lending initiatives typically The Elements of an Affordable involve the application of flexible underwriting stan- Home Loan Program dards, questions have been raised about whether the payment performance, and ultimately the profitabil- The details vary widely, but affordable home loan pro- ity, of these loans is substantially different from that grams generally involve four distinct elements: targeted of traditionally underwritten loans. Analyses of these groups, special marketing, the application of flexible issues have tended to focus on measures of payment underwriting standards, and the use of risk mitigation performance such as delinquency rates or, more activities. Targeted groups are usually defined with eligirarely, the incidence of default. Little information is bility criteria tied to borrower or neighborhood income, available about the cost of other aspects of affordable loan-to-value ratios, location, homebuyer status (for example, first-time homebuyers), and other factors. lending programs, such as enhanced servicing, home- Most important among these criteria are the income buyer education, and various forms of direct subsieligibility restrictions, which normally require a prospec- dies (for example, waivers of some or all closing tive borrower to have a low or moderate income or to costs), that also affect the profitability of these propurchase a home in a low- or moderate-income neigh- grams. Similarly, little is known about possible borhood. Special marketing activities commonly include increases in revenue that may result from a highhomebuyer education seminars and outreach to religious volume affordable lending program. For example, and community organizations active in targeted neigh- providing mortgages to lower-income households borhoods. Flexible underwriting policies usually have may lead to other credit- or deposit-related relationthe following characteristics: low-down-payment ships that may be profitable for the lender. requirements; higher acceptable ratios of debt payment to income; the use of alternative credit history information such as records of payments for rent and utilities; flexible employment standards; and reduced cash reserve Evidence from Roundtable Discussions requirements. In addition, many lenders offer reduced interest rates, waive private mortgage insurance require- Until recently, most of the available information on ments, or reduce or waive points or fees associated with the performance of affordable home lending prooriginating the loan. grams had been anecdotal. For example, in round- To reduce the potential for higher losses on these table discussions held with lenders in preparing the flexibly underwritten loans, lenders customarily require Federal Reserve's 1993 "Report to the Congress on the borrower to complete a homebuyer education pro- Community Development Lending by Depository gram and to undergo credit counseling when needed. Institutions," the participants generally held the view Lenders also use enhanced servicing techniques on these that the costs of originating and servicing loans made loans, contacting borrowers by phone, for example, as under affordable home loan programs were greater soon as they are thirty-days delinquent to determine the cause of the delinquency and to establish a plan to than those incurred on other housing loans but that rectify the situation. delinquency and default experience to that time had not been worse. Statistical analysis undertaken for that report did not find any notable relationship between bank profitability and the level of lower Reinvestment Act (CRA).30 More generally, financial income mortgage lending activity.31 institutions may have determined that increased The roundtable participants suggested that the lending to a targeted area would serve their long-run increased risks associated with allowing more flexinterest in community stability. Finally, relatively ible underwriting can be mitigated in various ways. larger numbers of low- and moderate-income house- Some lenders, by drawing on their specialized knowlholds may have been seeking to purchase homes edge of local market conditions, familiarity with borduring this period because the affordability of housrowers, and greater experience with affordable home ing improved to levels not seen since the 1960s. lending, may be able to reduce the risks of applying flexible underwriting guidelines. By integrating care- 30. The Community Reinvestment Act of 1977 is intended to encourage commercial banks and savings associations to help meet the credit needs of the local communities in which they are chartered, including low- and moderate-income neighborhoods, in a manner 31. Statistical analysis of bank profitability and affordable home consistent with safe and sound operations. For a review of different lending was based on data from the 1992 HMDA reports and from perspectives on the CRA, see Glenn B. Canner and Wayne Passmore, Call Reports of commercial banks and thrift institutions. See Board of "Home Purchase Lending in Low-Income Neighborhoods and to Governors of the Federal Reserve System, "Report to the Congress on Low-Income Borrowers," Federal Reserve Bulletin, vol. 81 (Febru- Community Development Lending by Depository Institutions" (Board ary 1995), pp. 71-103. of Governors, 1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

640 Federal Reserve Bulletin • July 1996 7. Individuals and households, grouped by ZIP code characteristic and distributed by credit score range Percent Low Medium High Total CChhaarraacctteerriissttiicc ooff ZZIIPP ccooddee Percent MEMO: Percent MEMO: Percent MEMO: Percent MEMO: Percent Percent Percent Percent of charac- of charac- of charac- of characof score of score of score of score teristic teristic teristic teristic range range range range Individuals Median income of ZIP code (percentage of area median income)' Less than 80 29.5 21.0 14.2 17.4 56.3 11.9 100 14.4 80 to 120 19.8 65.2 11.8 66.6 68.4 67.2 100 66.7 More than 120 14.9 13.8 10.0 16.0 75.1 20.8 100 18.8 All 20.3 100 11.8 100 67.9 100 100 100 Median home value of ZIP code (percentage of area median home value)2 Less than 80 27.4 34.3 13.9 29.7 58.7 21.9 100 25.3 80 to 120 19.6 51.7 11.5 52.2 68.9 54.1 100 53.4 More than 120 13.4 14.1 10.0 18.0 76.6 24.0 100 21.3 All 20.3 100 11.8 100 67.9 100 100 100 Urbanization of ZIP code Urban 22.0 37.5 12.0 35.0 66.0 33.5 100 34.5 Suburban 18.9 44.0 11.4 45.4 69.7 48.4 100 47.2 Rural 20.4 18.5 12.6 19.6 67.0 18.1 100 18.4 All 2200..33 110000 1111..88 110000 6677..99 110000 110000 110000 Census region of ZIP code3 Northeast New England 17.8 5.4 11.2 5.8 71.0 6.5 100 6.2 Middle Atlantic 17.9 14.6 11.0 15.4 71.1 17.3 100 16.5 Midwest East North Central 15.5 9.4 10.8 11.2 73.6 13.2 100 12.2 West North Central 16.5 5.3 10.4 5.8 73.1 7.0 100 6.5 South South Atlantic 21.7 23.7 11.5 21.5 66.8 21.7 100 22.1 East South Central 25.5 5.1 13.8 4.8 60.7 3.6 100 4.1 West South Central 27.8 13.9 13.6 11.7 58.6 8.8 100 10.1 West Mountain 20.4 6.3 12.5 6.7 67.1 6.2 100 6.3 Pacific 20.6 16.2 12.7 17.1 66.7 15.7 100 15.9 AU 20.3 100 11.8 100 67.9 100 100 100 All households Median income of ZIP code (percentage of area median income)' Less than 80 32.8 21.4 14.9 17.6 52.3 12.2 100 15.0 80 to 120 22.4 65.0 12.7 66.6 64.9 67.2 100 66.6 More than 120 17.0 13.6 11.0 15.9 72.1 20.6 100 18.4 All 22.9 100 12.7 100 64.4 100 100 100 Median home value of ZIP code (percentage of area median home value)2 Less than 80 30.7 34.3 14.7 29.6 54.6 21.8 100 25.6 80 to 120 22.3 51.3 12.5 51.6 65.2 53.3 100 52.7 More than 120 15.2 14.4 11.0 18.7 73.8 24.9 100 21.7 All 22.9 100 12.7 100 64.4 100 100 100 Urbanization of ZIP code Urban 24.7 38.4 12.8 35.9 62.5 34.6 100 35.7 Suburban 21.5 43.0 12.3 44.5 66.2 47.2 100 45.9 Rural 23.1 18.6 13.5 19.6 63.4 18.1 100 18.4 All 22.9 100 12.7 100 64.4 100 100 100 Census region of ZIP codei Northeast New England 20.3 5.3 12.3 5.8 67.3 6.3 100 6.0 Middle Atlantic 20.2 14.4 11.9 15.4 67.9 17.3 100 16.4 Midwest East North Central 17.9 9.3 11.8 11.1 70.2 13.0 100 11.9 West North Central 18.9 5.3 11.4 5.8 69.8 7.0 100 6.5 South South Atlantic 24.5 23.9 12.4 21.8 63.1 22.0 100 22.4 East South Central 28.6 5.1 14.7 4.8 56.7 3.6 100 4.1 West South Central 31.1 13.8 14.2 11.4 54.7 8.6 100 10.2 West Mountain 23.1 6.4 13.5 6.7 63.4 6.3 100 6.4 Pacific 23.2 16.3 13.6 17.3 63.2 15.9 100 16.1 All 22.9 100 12.7 100 64.4 100 100 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 641 7. Continued Percent Low Medium High Total CChhaarraacctteerriissttiicc ooff ZZIIPP ccooddee Percent MEMO: Percent MEMO: Percent MEMO: Percent MEMO: Percent Percent Percent Percent of charac- of charac- of charac- of characof score of score of score of score teristic range teristic range teristic range teristic range Households with mortgages Median income of ZIP code (percentage of area median income>' Less than 80 22.6 14.5 14.5 12.8 62.9 8.2 100 9.6 80 to 120 15.1 64.2 11.0 64.3 73.9 63.3 100 63.6 More than 120 11.9 21.3 9.3 22.9 78.8 28.5 100 26.8 All 15.0 100 10.9 100 74.1 100 100 100 Median home value of ZIP code (percentage of area median home value)2 Less than 80 22.2 29.6 14.2 25.9 63.6 17.1 100 19.9 80 to 120 14.9 55.5 10.8 55.2 74.3 55.9 100 55.8 More than 120 9.2 14.9 8.5 18.9 82.4 27.0 100 24.3 All 15.0 100 10.9 100 74.1 100 100 100 Urbanization of ZIP code Urban 15.0 32.2 11.1 32.7 73.9 32.0 100 32.1 Suburban 15.1 57.4 10.7 56.0 74.2 57.1 100 57.0 Rural 14.4 10.4 11.3 11.3 74.3 10.9 100 10.9 All 15.0 100 10.9 100 74.1 100 100 100 Census region of ZIP code3 Northeast New England 13.6 6.2 10.7 6.7 75.7 7.0 100 6.9 Middle Atlantic 14.1 13.7 10.1 13.5 75.8 14.9 100 14.6 Midwest East North Central 11.4 8.7 10.1 10.5 78.5 12.0 00 11.3 West North Central 12.1 4.1 9.2 4.3 78.6 5.4 00 5.1 South South Atlantic 15.6 26.5 10.4 24.3 73.9 25.3 00 25.4 East South Central 17.9 2.8 12.0 2.6 70.2 2.2 00 2.4 West South Central 19.8 11.3 11.9 9.3 68.3 7.8 00 8.5 West Mountain 15.3 7.5 11.7 7.9 73.0 7.3 00 7.4 Pacific 15.5 19.2 12.2 20.8 72.3 18.1 00 18.5 All 15.0 100 10.9 100 74.1 100 00 100 NOTE. The credit score is The Mortgage Score (TMS), of Equifax Mortgage MSA or, if location is not in an MSA, relative to median value of owner- Services. For definition of TMS and of the credit score ranges, see note to occupied homes in non-MSA portion of state. table 2; see also text note 27. 3. See map of Census Bureau regions and divisions, inside front cover, U.S. 1. Median family income in ZIP code in which the property is located Department of Commerce, Statistical Abstract of the United States: 1994, relative to median family income in the property's MSA or, if location is not Bureau of the Census (Government Printing Office, 1994). in an MSA, relative to median family income in the non-MSA portion of the SOURCE. Equifax Credit Information Services, Inc. state. 2. Median value of owner-occupied homes in ZIP code in which the property is located relative to median value of owner-occupied homes in the property's fully designed homebuyer education efforts and credit home loan programs and purchased by secondarycounseling services into their affordable lending pro- market institutions or insured by private mortgage grams, lenders may be able to screen out relatively insurance companies. For the most part, the evidence high-risk applicants and better prepare first-time pertains to delinquency rates, because the loans homebuyers for the responsibilities of homeowner- examined are too recent in origin to permit a compreship. In addition, by adopting an enhanced servicing hensive evaluation of default and loss experience. In program for affordable home loan products that what follows, it should be emphasized that the vast includes postpurchase contact and counseling and, if majority of borrowers relying on affordable home necessary, early delinquency intervention, lenders loan products are current on their mortgage paymay be able to help avoid some potential defaults. ments. However, even relatively small delinquency and default rates may make a program unprofitable. Analyzing delinquencies and defaults can highlight specific variables in the program that might be modi- Experiences of Secondary-Market Institutions fied to screen out particularly bad risks and enhance and Private Mortgage Insurers program profitability. Additional evidence has begun to accumulate about Freddie Mac has been following the performance the performance of loans extended under affordable of the affordable home loans it purchases under its Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

642 Federal Reserve Bulletin • July 1996 8. Increase in number of conventional home purchase loans quency rate through February 1996 has been about for lenders reporting under HMDA, by selected character- 4 times higher than that for the peer group of tradiistics of borrowers, 1992-94 tionally underwritten loans. Other Affordable Gold Percent loans originated in 1994 show a delinquency rate MEMO: about 50 percent higher than that for the peer group. Number of Borrower characteristic 1992-93 1993-94 loans To help enhance the effectiveness of its Affordable in 1994 Gold home loan program, Freddie Mac offers lenders All 16.5 17.9 2,795,162 a tool, titled the "Gold Measure Worksheet," that can assist loan underwriters in their efforts to accurately Race or ethnic group American Indian/Alaskan Native . 7.3 23.8 10,691 assess the risk associated with combining various Asian/Pacific Islander 6.5 18.6 93,319 Black 35.8 54.7 125,796 flexibilities in underwriting affordable home loans Hispanic 25.4 42.0 129,695 (see box "Freddie Mac's Gold Measure Worksheet"). White 17.5 15.7 2,281,450 Other 64.1 61.3 18,984 Joint (white/minority) 17.8 37.0 60,763 Income (percentage of MSA Freddie Mac's Gold Measure Worksheet median)' Less than 80 38.4 27.0 516.824 80-99 21.4 19.1 295,734 100-120 16.2 15.7 285,044 Freddie Mac says that its Gold Measure Worksheet is a More than 120 8.2 12.5 1,069.305 tool "designed to assist management and underwriters in Income less than 80 percent their efforts to accurately assess the risk associated with of MSA median combining various underwriting flexibilities," and American Indian/Alaskan Native . 22.1 32.0 2,125 Asian/Pacific Islander 28.6 29.3 16,865 thereby it helps the lender determine whether a loan will Black 67.7 62.8 39,666 Hispanic 49.5 67.9 38,213 be acceptable for sale to Freddie Mac under its Afford- White 36.4 19.8 391,535 able Gold program. Total2 38.4 27.0 516,824 The worksheet (facing page) identifies borrower and NOTE. AS of 1993, a large number of additional independent mortgage loan characteristics related to credit risk and assigns a companies became covered by the Home Mortgage Disclosure Act (HMDA). To specific number of points (referred to as risk units, or provide the most appropriate year-over-year comparisons, the lending activity of these newly covered firms was excluded from 1993 volume estimates. RUs) to each characteristic. The sum of the risk units 1. MSA median is the median family income of the metropolitan statistical provides a summary measure of the risk associated with area in which the property related to the loan is located (table includes only properties in MSAs). a given loan. The applicant's credit history is one ele- 2. Includes loans for which race is unknown or categorized as "other" or ment considered and is evaluated by using a credit his- "joint." tory score obtained from a credit bureau or by measuring SOURCE. Federal Financial Institutions Examination Council. the individual components of the credit history file. According to Freddie Mac, the Gold Measure Work- "Affordable Gold" program, which was established sheet is intended to complement, rather than replace, the to promote lending to low- and moderate-income judgment of underwriters. As indicated in the worksheet households.32 Freddie Mac reports that the sixty-day instructions, it should be used in conjunction with delinquency rate on these loans has been higher than Freddie Mac's booklet Discover Gold Through Expandon a "peer group" of traditionally underwritten mort- ing Markets "to identify compensating factors and risk gages, controlling for the loan-to-value ratio, the date offsets." This booklet provides case studies illustrating of loan origination, region of the country, and type of the flexibility lenders have in applying Freddie Mac's property.33 Among those Affordable Gold loans origi- underwriting guidelines. nated in 1994 for which borrowers were allowed to Freddie Mac specifies the following guidelines for evaluating the summary score derived from the Gold meet part of the minimum down-payment require- Measure Worksheet: ments with funds provided by a third party, the delin- • A score of 15 or less (or up to 18 with comprehensive borrower prepurchase and postpurchase homeownership education) is acceptable to Freddie Mac, provided 32. Most of the loans extended to low- and moderate-income households that are purchased by Freddie Mac (and Fannie Mae) no other risk is apparent from the review of borrower qualify under standard underwriting guidelines. Loans in the Afford- eligibility, property appraisal, potential fraud, or data able Gold program are generally underwritten using nonstandard integrity issues. criteria. Fannie Mae has a similar program, the "Community Home • A score between 16 and 25 is acceptable only with Buyers Program." documented offsets not captured on the Gold Measure The performance of loans made to low- and moderate-income households using standard underwriting guidelines may be different Worksheet. from that of Affordable Gold loans. As shown in table 6 for loans • A score greater than 25 requires that the transaction underwritten with standard guidelines, borrower income is not be further evaluated. Generally, Freddie Mac has found strongly related to foreclosure rates. that loans with RUs greater than 25 are not acceptable 33. See comments by Leland Brendsel in Snigdha Prakash, "Freddie Sounds a Delinquency Alarm on Popular Lower-Income for purchase without sufficient compensating factors. Mortgage," American Banker, July 21, 1995, pp. 1 and 8. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 643 GOLD MEASURE WORKSHEET-Version 2.0 Freddie Mac Borrower/Co borrower Seller Name Name(s) Freddie Mae Seller Number Freddie Mac Loan Number City, State (if available) Lender Loan Number Branch Office/Channel Origination Date Underwriting Center Completion Dale TPO Name Underwriter Loan Decision Approved Denied . Withdrawn. File Closed Directions: • Circle the appropriate "Risk Units" (RUs) for each category. Total the RUs in each section and enter on the Subtotal line. Then combine Subtotals lor each section and enter the Grand Total on the Total RUs line. Note that negative numbers such as "-2" are risk offsets. • It is important to read the accompanying Gold Measure Worksheet and Instructions—Version 2.0 booklet and to refer to it for additional information oil completing this worksheet. • This worksheet is an aid. not a substitute for the underwriting decision. • Complete either Credit File A or Credit File B, out not both. Use Credit File A if 3 credit scores are requested. Use Credit File B if fewer than 3 credit scores are requested See the Gold Measure Worksheet and Instructions—Version 2.0 booklet for easy instructions on how to order bureau and bankruptcy scores for use with Credit File A. I. Credit File A I. Credit File B Direction*: When using Credit File A, complete etthw the Bureau Direction*: Use Credit File B if fewer than 3 credit scores are requested. Score or the Bankruptcy Score, but not both. No delinquencies or other derogatory Number of derogatory Bureau Score Bankruptcy Score tradeline or derogatory public Public records: RUs Equifax Beacon Score. Equifax DAS Score, record information and number of 0-1 0 T S r c a o n r s e U a n n i d o n T R E W m - p F i I r C ic O a Score T a r n a d n s T R U W ni - o M n D D S e S lp c h o i r e S core tradelines (open or closed) is: RUs 2-3 (See instructions) (See instructions] 11 or more -4 Over 3 RUs RUs 6 1 - -5 1 0 -3 0 Number of inquiries in Over 790 -16 150 or less -12 the past 3 months: RUs 771 - 790 -14 151 - 200 -10 One or more revolving tradelines 0 -2 761 - 770 -11 201 - 240 -4 and total revolving balances are 1 0 731 - 760 -7 241 - 300 -3 under $500: RtJs 2-3 5 721 - 730 -5 301 - 320 -1 4 4 8 701 - 720 0 321 - 360 0 5 11 681 - 700 6 361 - 420 4 Fewer than 3 tradelines More than 5 14 661- 680 8 421 - 480 8 ((ooppeenn oorr cclloosseedd)):: RUs 641 - 660 12 481 - 540 11 2 Age of oldest tradeline 621- 640 17 541 - 620 15 (in months): RUs 601 - 620 20 621 - 700 18 Percent of all tradelines (open or 0 (no tradelines) - 6 18 581- 600 23 701 - 740 21 closed) ever delinquent or worse 7 - 12 13 541 - 580 25 741 - 840 23 (30-90 days or more, collection, 13- 24 7 540 or less 32 841 - 960 25 charge-off, etc.): RUs 25- 48 3 Over 960 29 0- 10% -3 49- 72 2 No reported No reported 11 - 15% 0 73 - 120 0 Score available 20 Score available 20 16 - 40% 4 121 - 168 -1 41 - 60% 169 or more Subtotal of circle I d . C R r U e s d : it F " il e A. Over 60% If age of oldest tradeline is 13-48 months and any one or Worst ever derogatory credit file more of the following: entry is either: • More than 3 inquiries • 30-180 days delinquent: within the past 3 months RUs or • More than 3 tradelines Self-employed and above area median income: 5 I Public record (bankruptcy, opened in the oast year • Total open balances Majority of income from commissions: 5 foreclosure, judgment, lien, exceed $10,000 RUs Employed second earner on application: -2 g or a r t n ra is d h e m lin e e n t, r e s p u o it r , t e c d e r a t s a in o v c e o r llections) 6 Borrower's time on job is 5 years or more: -2 180 days delinquent, charge-off, CoJxirrower's time on job is 2 years or more: -1 repossession or collection: RUs I. Credit File B 10 Subtotal of circled RUs: II. Income Subtotal of circled RUs: IV. Debt-Payment Burden Loan. Collateral. Assets Debt-to-income ratio is: Spread between total debt and RUs housing ratios (i.e. nonhousing LTV/TLTV Property seller contributions Less than 32.6% 0 debt ratio) is: RUs f ( i i n n a cl n u c d in in g g * ) s i e s c : ondary R Us exceed 3% of value: RUs 4 3 3 0 2 8 . . . 6 6 6 - - - 3 4 4 2 8 0 . . . 5 5 5 % % % 2 4 7 M 10 o r t e o t 1 h 5 a % n 15% 2 5 60.5% or lower -27 42.6 - 44.5% 10 Proposed housing expense is 6 7 0 0 . . 6 6 - - 8 7 0 0 . .5 0 % % - - 1 5 6 Reserves are: RUs 4 46 4 . . 6 6 - - 4 4 6 8 . . 5 5 % % 1 1 3 5 l h e o s u s s i t n h g a n e 1 xp 2 e 0 n % s e o : f previous RUs 8 8 0 5 . . 1 6 - - 9 8 0 5 . . 5 5 % % -1 0 A L t e s l s e a t s h t a n 1 , 1 b u m t o l n e t s h s 8 4 O 8 ve .6 r - 5 0 5 .5 0 % .5 % 3 1 0 8 -1 9 9 0 3 . . 6 6 - - 9 9 3 4 . . 5 5 % % 2 5 At th le a a n s t 2 2 m , b o u n t t h l s e ss IV. Debt-Payment Burden. Subtotal of circled RUs: 94.6 - 95.5% 8 than 4 months 95.6 - 96.5% 10 At least 4, but less V. Loan/Property Type 96.6 - 98.5% 11 than 5 months 98.6 - 99.5% 13 5 or more months Loan type is: RUs Property type is: RUs 99.6 - 99.9% 15 Less than 5% down from 15-Year -6 2 Unit 5 borrower funds with 20-Year -4 3-4 Unit 11 95% LTV (e.g. Affordable 25-Year -1 Condominium 5 Gold with 3/2 Option): RUs RUs 8 Rate-Capped 6 V. Loan/Property Type. Payment-Capped 8 Subtotal of circled RUs: III. Loan, Collateral, Assets. Subtotal of circled RUs: Total of sections I A or B. II. III. IV and V. TOTAL RUs: •When secondary financing is included, if the secondary Freddie Mac Risk Unit Guideline: 15 RUs financing provides for any amortization (payments) before If pre-purchase counseling: 16 RUs maturity of the Freddie Mac loan, trten add 1% to LTV for every If post-purchase counseling: 17 RUs rounded percentage point of secondary financing. Likewise, add If pre and post purchase counseling: 18 RUs 0.5% to LTV for every rounded percentage point of secondary financing, if there ifc no amortization (no payments due) before Refer to Gold Measure Worksheet and Instructions—Version 2.0 booklet for more information This maturity of the Freddie Mac loan, unsecured grants or gifts worksheet is an aid, not a substitute for the underwriting decision. Call your Account Representative require no adjustments to LTV. for additional information. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

644 Federal Reserve Bulletin • July 1996 Freddie Mac finds that the "Gold Measure score" (3) Borrowers with ratios of debt payment to (the application score computed using the Gold income exceeding the traditional guideline levels had Measure Worksheet) is a strong predictor of loan a delinquency rate 60 percent higher than those with performance and that the Gold Measure Worksheet ratios at or below the traditional guideline levels. provides a useful guide to making sound affordable (4) Borrowers with less than two months of cash housing loans. For example, among the Affordable reserves at closing had a delinquency rate 40 percent Gold loans originated in 1994, the delinquency rate higher than those with at least two months of cash for those with scores (at origination) in the "high reserves. risk" range was 5.6 times higher than the overall To learn more about the relationship between delinquency rate for the peer group.34 Those with underwriting flexibility and payment performance, scores in the "medium risk" range had a delinquency MGIC also reviewed its claim rate experience on all rate 1.4 times higher than the peer group, while those loans (including those not originated under affordable with scores in the "low risk" range had a delin- home lending programs) it had insured on properties quency rate only 0.6 times as high as the peer group. in the Midwest region from 1985 through 1990. Private mortgage insurance companies play an MGIC found that claim rates are substantially higher important role in affordable home lending programs when several criteria that qualify borrowers are because lenders and secondary-market institutions jointly eased in order to qualify an applicant for often require borrowers under the programs to obtain credit, a practice referred to as layering of underwritsuch insurance. Like the secondary-market institu- ing flexibilities.36 tions, the PMI companies have been closely monitor- GE Capital Mortgage Insurance Corporation ing the performance of the loans they insure that were (GEMICO) reports a delinquency experience with extended under affordable home lending programs. loans made under affordable home loan programs Mortgage Guarantee Insurance Corporation (MGIC) that it has insured that is similar to MGIC's experiwas the first PMI company to provide a detailed ence. Like MGIC, GEMICO investigated the results analysis of the performance of such loans. MGIC's of allowing borrowers to qualify for credit with layanalysis found that the delinquency rate on such ered flexibilities. The baseline for comparison was loans has been higher than on the other loans it the delinquency rate for all GEMICO-insured loans insures, controlling for loan-to-value ratios.35 written under affordable home lending programs that To better understand the factors that may be con- have a loan-to-value ratio of at least 95 percent and tributing to the elevated delinquency rates, MGIC that were originated over the 1992-94 period (labeled focused on the effect of underwriting flexibility pro- 100 percent in chart 2). Loan performance was vided in four areas: (1) funds for down payment measured at the end of 1995. As illustrated, when provided by a third party, (2) credit history, (3) allow- underwriting flexibilities were layered to qualify an able ratios of debt payment to income, and (4) avail- applicant for credit, payment performance deterioable cash reserves after closing. MGIC found that, rated markedly. For example, for those loans in which among the affordable home program loans insured in borrowers' cash reserves covered less than one month 1992 and 1993, providing flexibility in these four of mortgage payments (the customary minimum is areas was associated with the following results: two months), the delinquency rate was 32 percent (1) Borrowers who covered a 3 percent down pay- higher than the baseline rate. Among these low-cashment themselves and had a third party provide an reserve loans, delinquency rates soared to nearly additional 2 percent (so-called 3/2 option loans) had a 2.5 times the baseline rate when the seller contribdelinquency rate twice as high as borrowers who uted some of the funds needed to meet down-payment provided the entire 5 percent down payment. or closing cost requirements. (2) Borrowers with "adverse" credit histories had The GEMICO analysis found that delinquency delinquency rates four times higher than borrowers rates on loans extended to borrowers with "good" with excellent credit histories, and borrowers with no credit histories have been lower than the baseline. credit history had delinquency rates eight times Conversely, delinquency rates have been particularly higher. high among loans in which the borrowers had marginal credit histories, high ratios of debt payment to income, and no cash reserves. 34. For the analysis presented here, "high risk" loans are those that have Gold Measure application scores above 25, "medium risk" loans are those with scores between 16 and 25, and "low risk" are those with scores below 16 (see box "Freddie Mac's Gold Measure 36. A subsequent study updated this analysis to cover loans origi- Worksheet"). nated from 1986 through 1991 (Larry Pierzchalski, "Guarding Against 35. Steinbach, "Ready to Make the Grade." Risk," Mortgage Banking, June 1996, pp. 38-45). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 645 A third large mortgage insurance company, United has insured, those extended under the 3/2 option Guaranty Corporation, reports that among the loans it program have the highest delinquency rate. Like the insures, delinquency rates on loans from affordable other PMI companies, United Guaranty also indicates home lending programs (of various types) exceed that it is too soon to determine whether the elevated those on traditionally underwritten loans with the delinquency rates on loans originated under affordsame loan-to-value ratio and year of origination able home lending programs will ultimately result in (chart 3).37 Among the affordable home loans that it elevated claim rates and higher losses. The PMI industry has generally not attempted to explicitly price the portion of the risk on loans made 37. Like the other PMI companies, United Guaranty also reports under affordable home lending programs that exceeds that loans underwritten using multiple flexibilities have substantially the risk on standard loans with the same loan-tohigher delinquency rates than other loans. 2. Effect on the performance of mortgages originated under affordable home loan programs when underwriting flexibilities are combined to qualify the borrower, by risk factor Relative delinquency rate Relative delinquency rate Credit history Total debt (payment as percent of income) . . with high — 4.0 housing debt and no — 3.5 reserves — 3.0 . . . with seller contribution t X t z' Less than 39 More than 43 Seller contribution (percent) Housing debt (payment as percent of income) 4.0 — 4.0 . . . with seller . with marginal 3.5 contribution — 3.5 credit and no 3.0 reserves — 3.0 . with seller 2.5 contribution 2.5 2.0 2.0 1.5 1.5 1.0 1.0 4 0.5 Less — 0.5 Less than 1 At least 3 than 34 More than 38 NOTE. The delinquency rates are those relative to the average rate, set Cash reserves (months) to 1, for a reference group of mortgages. The reference group consists of 4.0 all mortgages insured by GE Capital and originated under affordable home loan programs during the 1992-94 period with loan-to-value ratios . with seller 3.5 of at least 95 percent. Delinquent loans are those on which a scheduled payment was 60 to contribution 3.0 90 days past due at the end of 1995. Cash reserves is the amount of ready cash that the borrower will have 1• available, after purchasing the home, to cover monthly debt payments, 2.5 real estate taxes, and homeowner's insurance premiums should the borrower's income be interrupted. 2.0 Seller contribution is the amount of money provided by the seller to cover the borrower's obligations at the time of loan origination, 1.5 expressed as a percentage of the loan amount. Credit history: "Good" refers to borrowers who, at the time of loan 1.0 origination, had no debt payments overdue sixty or more days, no multiple thirty-day delinquencies, and no outstanding judgments or 0.5 At least 3 Less than 1 collections. "Marginal" refers to all other borrowers. SOURCE. GE Capital Mortgage Corporation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

646 Federal Reserve Bulletin • July 1996 3. Relative delinquency rates of selected, privately insured, the risks of offering flexible underwriting standards affordable home mortgages, by year of origination and to levels more in line with their current pricing type of loan structure.40 Relative delinquency rate 95% LTV with 97% LTV Experiences of Primary-Market Lending 3/2 option Institutions While secondary-market institutions and the PMI companies have had quite similar experiences with affordable home lending, individual banks and savings institutions that originate mortgages report much more varied experiences with such loans. The programs of the depository institutions vary greatly in their target populations and details of operation. Insti- — _i ; 1 tutions also differ in their loan servicing practices, 1992 1993 1994 1995 which may affect the proportion of loans that move NOTE. The delinquency rates shown are those relative to the rate on standard from initial delinquency into more serious delin- 95 percent loan-to-value (LTV) ratio loans, for which the rate was set to 1. Delinquencies are payments reported by lenders as being at least thirty days quency and foreclosure. Consequently, generalizing past due. about the experiences with loans made under afford- In this chart, the affordable loan category comprises loans designated by the lender as affordable home loans, loans sold to a state or local housing finance able home loan programs by the large number of agency, and 97 percent loan-to-value ratio loans. In loans with the 3/2 option, individual creditors that offer them is difficult. the borrower made a 3 percent down payment and a third party supplied a 2 percent down payment. Moreover, assessing the performance of affordable SOURCE. United Guaranty Residential Insurance Co. home loan portfolios is often complicated or precluded by a lack of adequate performance data on the value ratio.38 But anticipating that greater lender flex- loans. Most are relatively new and focused on relaibility on such loans would entail some additional tively small geographic areas. Equally important, risk, insurers have employed various techniques to without information on the performance of traditionmitigate credit risk, such as requiring that borrowers ally underwritten loans that were originated, for receive some form of homebuyer education. Insurers example, during the same time period and within the are now instructing lenders to tighten their proce- same geographic area, the effect of individual underdures, emphasizing that they should use the flexibili- writing flexibilities cannot be established. ties in the underwriting guidelines judiciously and Information from individual lenders reveals the that layering risk factors to qualify applicants for varied nature of their experiences. Nat West, a large credit is inappropriate unless the applicants have bank in the Middle Atlantic region, found that the offsetting strengths. Insurers have further emphasized delinquency rate was roughly 25 percent lower for to underwriters that borrowers with marginal credit the loans it made under affordable home lending histories also are at greater risk of default;39 insurers programs than for its conventional loans made over therefore have tried to clarify for lenders the circum- the same period and in the same area; the bank stances under which applicants with marginal credit attributes this record in part to enhanced counseling histories would be considered creditworthy. The PMI efforts. Bank of America also reports a 25 percent companies have expressed confidence that tightening procedures, along with improved homebuyer education programs and enhanced servicing, will reduce 40. Homebuyer education programs have varied considerably, ranging from the rudimentary to a series of in-depth classes. Industry representatives continue to believe that a well-designed program can significantly help borrowers prepare for the responsibilities of homeownership ("Affordable Housing—An Interview With MGIC's 38. Recently, however, United Guaranty announced that it will Gordon H. Steinbach," Creative Interfaces, Chevy Chase, Md., raise the insurance premium for its 95 percent loan-to-value ratio March-April 1996, p. 2). loans in which 2 percentage points of the funds are provided by a third In line with that objective, Fannie Mae has organized the American party (that is, 3/2 option loans); the premium will rise to the level Homeowner Education and Counseling Institute, whose purpose is to required of 97 percent loan-to-value ratio loans, which have exhibited help enlarge the pool of first-time homebuyers through the developelevated delinquency rates comparable to those on 3/2 option loans. ment of a high-quality, standardized education and counseling pro- 39. An analysis of delinquent loans made under affordable home gram. The institute is being financed initially by Fannie Mae, Freddie loan programs insured by United Guaranty found, for example, that Mac, and several lenders and industry associations (Edward Kulkosky, 53 percent have one or more major credit payment problems listed in "Fannie Institute's Goal: Informing Both Lenders and Potential Bortheir credit bureau reports. rowers," American Banker, June 5, 1996, p. 8). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Credit Risk, Credit Scoring, and the Performance of Home Mortgages 647 lower delinquency rate for its affordable home loans Little is known about the degree of geographic relative to its traditionally underwritten loans. They concentration of defaults in affordable lending proattribute this relatively favorable performance to the grams. One recent study, however, has investigated careful application of underwriting flexibilities based this issue using information from a single lender on on their many years of experience with affordable the performance of loans underwritten under an home lending. affordable home loan program in Philadelphia 43 The In contrast, other banks have found that delin- study found that more than two-thirds of the loans quency rates on loans extended under affordable that were delinquent at least ninety days were located home programs have exceeded those on traditionally in Census tracts where only one-third of the bank's underwritten loans having comparable loan-to-value affordable home loans had been extended. The ratios. Moreover, like the secondary-market institu- study's preliminary analysis suggests that geographic tions, these banks have had higher delinquency rates factors, such as area unemployment rates, are imporon loans involving multiple flexibilities. tant in predicting these delinquencies. In addition, Participants in the NeighborWorks network— the borrower's credit history, as summarized by a regional lending consortiums organized by the Neigh- credit history score, is also a strong predictor of loan borhood Reinvestment Corporation (NRC)—have delinquency. Two factors may have mitigated the also had a variety of experiences with the loans they adverse effects of concentration: Tracts with high have originated under affordable home lending pro- delinquency rates are dispersed across the city, and grams. For some NeighborWorks programs, the rate the lender typically works with seriously delinquent for delinquencies lasting sixty days or longer is close borrowers, providing a period of forbearance to help to or below the industry average, while the rate is them resume payments and avoid foreclosure. higher for other NeighborWorks programs. NRC views homebuyer education, both prepurchase and postpurchase, to be an essential element of successful SUMMARY affordable home lending programs.41 To measure credit risk, lenders gather information about prospective borrowers and the collateral they Geographic Concentration of Defaults offer and then assess this information in light of experience gained from extending credit in the past. Not addressed in most analyses of affordable home Historically, lenders have relied heavily on the sublending programs is the question of whether delin- jective judgment of underwriters in assessing credit quencies and defaults of loans in such programs tend risk. to be geographically concentrated. Many affordable To facilitate the underwriting process, reduce costs, lending programs target specific neighborhoods or and promote consistency, lenders have brought credit involve criteria that tend to focus the geographic scoring into the process. In some uses, credit scores reach of these programs. Consequently, the portfolio are based exclusively on credit bureau records and, as of affordable home program loans would tend to be such, provide a summary measure of the relative less geographically diverse than the portfolio of tradi- credit risk posed by individuals with differing credit tionally underwritten loans. From a social perspec- histories. In other uses, credit scores are based on a tive, this issue may be important because geographic wider range of information and are used to evaluate concentrations of foreclosed properties can have the overall credit risk posed by an applicant, providadverse effects on neighborhood stability 42 ing a summary measure that lenders can use to gauge the acceptability of an application. The data consistently show that credit scores are useful in gauging the relative levels of risk posed 41. George Knight and Catherine A. Smith, "Death Knell or False Alarm? Assessing the Risks in Lending," Stone Soup, Fall 1995, by both prospective mortgage borrowers and those pp. 4-7. with existing mortgages. Although the absolute levels 42. Concern about the adverse neighborhood consequences of geoof delinquency and default are low in all score graphic concentrations of defaults in the FHA lending program are longstanding. Historically, the economic deterioration of many innercity neighborhoods has been linked to the level of FHA lending in these communities and the relatively high rate of foreclosure and property abandonment associated with this lending program. See 43. See Paul S. Calem and Susan M. Wachter, "Performance of Calvin Bradford and Anne B. Schlay, "Assessing a Can Opener: Mortgages in a Community Reinvestment Portfolio: Implications for Economic Theory's Failure to Explain Discrimination in FHA Lend- Flexible Lending Initiatives," paper presented at the American Real ing Markets," CityScape, U.S. Department of Housing and Urban Estate and Urban Economics Association meetings, San Francisco, Development, March 1996, pp. 77-88. January 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

648 Federal Reserve Bulletin • July 1996 categories, the proportion of problem loans increases programs have made their payments on time. Probas credit scores decrease. That relationship puts the lems to date appear to have been concentrated among focus of business concern on the prospective and loans in which underwriting flexibilities have been existing borrowers with low scores because even layered and loans in which third-party down-payment small increases in the rate of default may mean the assistance has been allowed. difference between profit and loss. Lenders and mortgage insurers have responded by Analysis of the distribution of borrowers across tightening their procedures, emphasizing to undercredit history score ranges suggests that most house- writers that the flexibilities provided in underwriting holds have relatively high scores, regardless of the guidelines need to be used judiciously and that approincome or home value characteristics of the areas in priate compensating factors are needed to offset the which they reside. However, relatively more of those risks associated with lending outside traditional who reside in lower-income locations or in locations guidelines. Market participants generally agree that, with lower home values have lower scores. to be viable, affordable home lending programs must For many institutions in the mortgage market, be accompanied by effective risk mitigation activievaluating and managing the risks of lending to non- ties, including homebuyer education programs and traditional borrowers and the risks of allowing greater enhanced loan servicing. Affordable lending proflexibility in underwriting are relatively new experi- grams are evolving and, as experience is gained, ences. Carefully evaluating the experiences to date lenders are likely to find ways to expand homebuying provides important insights. opportunities without accepting undue risks. • Available information suggests that most borrowers with loans made under affordable home loan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

649 Industrial Production and Capacity Utilization for May 1996 Released for publication June 14 125.3 percent of its 1987 average, total industrial production was 3.2 percent higher than it was in Industrial production advanced 0.7 percent in May, May 1995. Industrial capacity utilization rose 0.3 peras it had in April. A portion of the increase reflected centage point in May, to 83.2 percent. a spurt in electricity generation related to the unusual When analyzed by market group, the data show weather in May. Excluding the 3 percent gain in that the output of consumer goods rose 0.4 percent in utilities production, the index of industrial produc- May largely because of the jump in residential election rose 0.5 percent, led by sizable gains in busi- tricity sales. The production of automotive products, ness equipment and durable goods materials. At which had rebounded 11.8 percent in April from a Industrial production indexes Twelve-month percent change Twelve-month percent change Materials 10 Durable manufacturing 5 + Products 0 5 1990 1991 1992 1993 1994 1995 1996 1990 1991 1992 1993 1994 1995 1996 Capacity and industrial production Ratio scale, 1987 production = 100 Ratio scale, 1987 production =100 — Total industry Capacity -— 140 — Manufacturing Capacity _ 140 120 > 120 Production - 100 Production - 100 80 80 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing Utilization 90 Utilization 90 80 80 - 70 H 70 I I I I I I I I I J I L 1982 1984 1986 1988 1990 1992 1994 1996 1982 1984 1986 1988 1990 1992 1994 1996 All series are seasonally adjusted. Latest series, May. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

650 Federal Reserve Bulletin • July 1996 Industrial production and capacity utilization, May 1996 Industrial production, index, 1987=100 Percentage change CCCaaattteeegggooorrryyy 11999966 19961 MMaayy 11999955 ttoo Feb.r Mar.r Apr.r MayP Feb/ Mar.' Apr/ MayP MMaayy 11999966 Total 124.2 123.6 124.4 125.3 1.3 -.5 .7 .7 3.2 Previous estimate 123.9 123.4 124.5 1.2 -.5 .9 Major market groups Products, total2 120.7 120.0 120.9 121.6 1.8 -.6 .8 .6 3.4 Consumer goods 116.6 115.3 116.1 116.5 1.7 -1.1 .7 .4 2.1 Business equipment 164.8 163.0 166.4 167.7 2.7 -1.1 2.1 .8 8.7 Construction supplies 109.3 111.0 110.4 110.7 1.9 1.6 -.6 .3 3.9 Materials 129.4 129.2 129.8 131.0 .7 -.2 .5 .9 2.9 Major industry groups Manufacturing 126.2 125.2 126.5 127.2 1.4 -.8 1.1 .5 3.3 Durable 137.5 135.7 138.6 139.7 1.9 -1.3 2.2 .8 6.6 Nondurable 113.8 113.6 113.2 113.4 .7 -.2 -.4 .2 -.9 Mining 98.0 101.1 99.8 99.8 .9 3.2 -1.3 .0 -.7 Utilities 126.6 127.9 125.6 129.4 .8 1.1 -1.8 3.1 6.0 Capacity utilization, percent MEMO Capacity, cceennttaaggee 1995 1996 cchhaannggee,, Average, Low, High, MMaayy 11999955 1967-95 1982 1988-89 ttoo May Feb/ Mar/ Apr/ MayP MMaayy 11999966 Total 82.1 71.8 84.9 83.7 83.3 82.6 82.9 83.2 3.9 Previous estimate 83.1 82.5 83.0 Manufacturing 81.4 70.0 85.2 82.8 82.3 81.3 81.9 82.0 4.3 Advanced processing 80.7 71.4 83.5 80.8 81.1 79.6 80.5 80.6 5.1 Primary processing . 82.6 66.8 89.0 87.8 84.9 85.2 85.0 85.2 2.6 Mining 87.4 80.6 86.5 89.7 87.6 90.4 89.2 89.2 -.1 Utilities 86.9 76.2 92.6 90.6 93.1 93.9 92.1 94.8 1.3 NOTE. Data seasonally adjusted or calculated from seasonally adjusted 2. Contains components in addition to those shown, monthly data. r Revised, 1. Change from preceding month. p Preliminary. strike-induced drop, moved up another 0.6 percent in The production of farm and service industry equip- May. After all the recent volatility, the index for ment declined as well. automotive products in April and May was in the The output of construction supplies advanced upper end of the range that has prevailed during the 0.3 percent. So far this year, this sector has extended past two years. The production index for other dura- the recovery that began last fall. In the past three ble consumer goods has changed little in the past two months average output was 1.5 percent higher than in months and approximately equaled its average level the fourth quarter. The production of materials in both 1994 and 1995. The output of consumer increased 0.9 percent in May after a gain of 0.5 pernondurable goods, which dropped 0.6 percent in cent in April. The strength was evident in durable April, advanced 0.4 percent in May, reflecting the goods materials, particularly semiconductors, comsurge in utility output for residential use; among puter parts, miscellaneous plastics materials, and other consumer nondurables, production was flat parts used to make motor vehicles. The output of overall and has changed little since last summer. nondurable goods materials increased 0.2 percent. The index for business equipment climbed 0.8 per- The production of energy materials rebounded cent. The production of computer and office equip- 1.3 percent, with the gain centered in electricity genment continued to advance strongly; the gain over the eration and coal mining. past twelve months totaled nearly 40 percent. The When analyzed by industry group, the data show output of industrial equipment turned up after having that manufacturing output advanced 0.5 percent after eased for two months. The index for transit equip- a gain of 1.1 percent in April. The strength continued ment fell 0.8 percent as truck production fell back. to be centered in durable manufacturing, which Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 651 climbed 0.8 percent. Production increased 1 percent rate in the primary-processing grouping, at 85.2 peror more for computers, furniture, and electrical cent, is V-h percentage points above its long-run machinery. The output of nondurables rose 0.2 per- average. Among primary-processing industries, utilicent but remained nearly 1 percent lower than a year zation rates remain on the high side for lumber and ago. The output of paper and products, which had products, primary metals and fabricated metal prodfallen sharply in the second half of 1995 and early ucts, petroleum refining, and rubber and plastics this year, has improved a bit in recent months. Pro- products; rates are below average for paper and texduction of textiles and rubber and plastics products tile mill products. In mining, the utilization rate rebounded from a sharp decline in April. Production remained at 89.2 percent, with gains in coal mining in mining did not change, and the output at utilities and oil and gas well drilling and declines in other jumped 3.1 percent. categories. The operating rate for utilities rose The factory operating rate edged up 0.1 percentage 2.7 percentage points, to 94.8 percent. The electric point, to 82.0 percent, the same level as in the fourth utility industry operated at a high level on a seasonquarter. The utilization rate in advanced-processing ally adjusted basis; generation has grown more than industries is close to its 1967-95 average, while the generating capacity in recent years. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

652 Statement to the Congress Statement by Janet L. Yellen, Member, Board of Gov- tight. The sting of the "credit crunch" was still a ernors of the Federal Reserve System, before the fresh memory in the minds of borrowers and lenders, Committee on Small Business of the U.S. House of not to mention policymakers. Representatives, May 1, 1996 Out of concern that exaggerated lending restraint might have been fostered by regulatory and legisla- I am pleased to be here today to discuss the environ- tive reactions to the numerous problems in the indusment for small business financing and the role of try, the regulatory agencies undertook an extensive banks in providing credit to small firms. review of their policies and practices. This review Small businesses are a vital part of our economy. produced a number of measures aimed at removing They play a key role in the generation of jobs, new impediments that might stand in the way of lending ideas, and the preservation of the entrepreneurial to creditworthy borrowers. Former Federal Reserve spirit; no one would question the contribution that a Governor John LaWare, in testimony two years ago, thriving small business sector makes to the well- highlighted for this committee many of these being of our nation. It is therefore appropriate that changes. small businesses hold a special place in the consider- Since then, the agencies have continued their ations of policymakers at all levels of government. efforts to reduce the burden of regulation and to The Federal Reserve Board has devoted consider- ensure that examiners evaluate bank lending in a able effort to building our knowledge of the charac- consistent, prudent, and balanced manner. teristics of small businesses and their use of financial I think we would all agree that the financial enviservices. As the committee is aware, we have recently ronment today is markedly improved from that of completed our second National Survey of Small Busi- 1993. Although undoubtedly there remain pockets of ness Finances; Board staff are now processing the weakness and problems for individual small busiresults of extensive interviews with more than 5,000 nesses, a wide array of statistical indicators suggest small business owners around the country. Some of that access to bank credit has eased appreciably for the early findings from the survey were published in all businesses. Business loans at banks have the July 1995 Federal Reserve Bulletin, and we will expanded rapidly since 1993. Indeed, the volume of continue to analyze and report on the data as they commercial and industrial loans at banks grew become available. I will refer to this and other survey strongly in 1994 and then last year registered its information in my remarks this morning. largest percentage increase in more than a decade (13 percent). Small businesses have participated in this expansion. Data collected from banks in their June Call CREDIT AVAILABILITY TODAY Reports reveal that small commercial loans (defined as loans of $1 million or less and including those As I developed my thoughts for this hearing, I came secured by commercial real estate) increased more to appreciate how much more pleasant it is to report than 7 percent between June 1994 and June 1995. on conditions in good times than in bad times. When Roughly one-third of the growth in small loans over Chairman Greenspan appeared before this committee that period occurred at 7,000 mostly small and rein early 1993, a tepid recovery from recession was gional banks whose business loan portfolios combeginning to give way to more solid expansion. But prise only small loans. commercial banks were still struggling with severe A good portion of the expansion, however, was loan problems that had resulted from excessive opti- at large banks (those with assets of $5 billion or mism in real estate and certain other loan markets in more). Part of the growth at large banks reflected the the 1980s. Because of large loan losses, many deposi- effect of bank mergers that moved more banking tory institutions had failed or been merged. Although assets into the largest size categories. Nonetheless, there were signs in 1993 that banks were on the even after adjusting for these transactions, large instimend, credit conditions generally remained quite tutions expanded their lending to small firms an esti- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

653 mated 4 percent. We sometimes forget that large While we are pleased with the improvements in banks account for an important share of loans to credit availability, it would be foolish to assume that small businesses, even though such loans may be no problem areas exist or that small businesses are no only a small fraction of a large institution's total longer vulnerable to changes in the financial environassets. ment. The small business community is diverse. The pickup in business loan growth has been, in Many businesses are quite small without the operatimportant part, a demand-related phenomenon. As ing history or assets that make them good credit risks. the economy has grown, business needs for financing Start-up businesses may have high growth potential have expanded as well. but little equity. Because most small businesses have But the willingness of banks to supply credit also no access to public debt markets and equity markets, has been on the upswing. Continued improvements in they are likely to be especially sensitive to developbank profits, healthy capital positions, and low delin- ments that affect institutional lenders and local credit quency rates on business loans have encouraged markets. banks to compete aggressively for business custom- As we consider the potential problems that small ers. The Federal Reserve conducts quarterly surveys businesses may face down the road, we would like to of senior loan officers at sixty large banks around the know more about their sources of credit. Our survey country. For ten consecutive quarters since mid-1993 of small businesses provides some useful insights in until the end of last year, these banks, on net, reported this regard. easing the terms and standards applied to business loans for all sizes of borrowers. Respondent banks last year attributed their easing primarily to increased competition from other banks and, to a lesser extent, SOURCES OF SMALL BUSINESS CREDIT: from nonbank lenders. This easing has shown up in SURVEY EVIDENCE surveys of lending terms: For example, the spread between rates on business loans and market interest In our 1993 survey, 84 percent of small and mediumrates fell last year for loans of all sizes. sized businesses identified a commercial bank as Perhaps the most telling evidence of improved their primary financial institution. Banks were used financing opportunities are reports from small busi- more often than any other type of supplier. Most nesses themselves. Small and midsized firms sur- small firms used checking services at banks, and veyed by the National Federation of Independent commercial banks are used twice as often as any Businesses (NFIB) had reported that "interest rates other source for lines of credit, loans, or leases. and financing" were among their most pressing prob- Most small businesses used a commercial bank lems in the early 1990s. However, only a small located close to the firm—indeed, about 85 percent of percentage of firms cited this as a concern in recent all suppliers of financial services to small businesses surveys. In addition, the net percentage of NFIB were located within thirty miles, and about half of the respondents reporting that credit was more difficult to depository institutions were within two miles. obtain dropped appreciably from peaks in 1990 and About one-third of small firms also used nonde- 1991 and has fluctuated around low levels over the pository institutions for financial services, and 20 perpast year. The NFIB surveys have been consistent cent had some loan from a nondepository source. The with reports heard at the Federal Reserve. For exam- most common loans from these sources are vehicle ple, the Federal Reserve District Banks meet periodi- loans and capital leases. Such loans are generally cally with representatives from the small business secured by tangible assets and often supplied by the and agricultural sectors; representatives at these captive finance companies of manufacturers of automeetings generally have been quite positive with mobiles and other equipment. In contrast, small busiregard to credit availability. nesses rarely obtain unsecured loans or lines of credit It would appear from our latest quarterly surveys from nondepository institutions. Slightly fewer than of banks that the trend toward easing standards for 10 percent had loans from family and friends. business loans has come to an end, but there is The survey indicates that the use of nonbank no sign of reversal, and banks, on balance, remain sources increases with firm size. In particular, very accommodative to business credit demands. Given small firms rarely used nondepository sources, prospects for moderate growth in economic activity whereas about 40 percent of firms with fifty or more and the healthy position of banks, the outlook for employees used nondepository sources. bank lending to small businesses continues to be Overall, the survey confirms that banks, especially favorable. local institutions, continue to play a major role in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

654 Federal Reserve Bulletin • July 1996 small business finance. The relationship between maintain close working relationships with small banks and small businesses involves a wide range of customers—then other small banks in the area will be services supplied by the bank. positioned to fill the gap. Consistent with this view, there were reports that community banks were eagerly looking to increase their market shares after LOOKING AHEAD: BANKS AND SMALL some of the larger bank mergers last year. BUSINESS LENDING Although some banking relationships inevitably will be disturbed when ownership and management Looking ahead, there are a number of developments change, we would expect these effects to be shortin banking markets that may be significant for small lived. business borrowers. Perhaps the most prominent is I offer these generalizations with caution. The Fedthe ongoing consolidation of the banking industry. eral Reserve takes very seriously its responsibility for Some fear that this trend may impede the flow of evaluating the possible impact of bank mergers on credit to small businesses and disrupt the relation- local markets. We have found that each assessment ships that many small businesses have with their must be done on a case-by-case and market-bylocal banks. This issue deserves careful attention, and market basis. To this end, we devote considerable I think it worthwhile to offer a few thoughts on the resources to assessing competitive impacts, Commusubject this morning. nity Reinvestment Act concerns, and a variety of First, it is important that we put the trend in merger other factors. We will be watching closely for eviactivity in perspective. In the past ten years, the U.S. dence that small businesses are being disadvantaged banking structure has undergone extensive change as by bank mergers. banks have adjusted to the removal of long-standing restrictions on interstate banking and have responded to technological change and growing international competition. One result has been a sharp decline in OTHER DEVELOPMENTS the number of banking institutions—from more than 14,000 in 1985 to near 10,000 in 1995. Part of this A number of other changes in the credit markets decline was a result of bank failures: Nearly 1,200 seemingly bode well for small business financing, banks were forced to close, and many weak institu- including the efforts of large institutions to meet tions were merged. community development concerns and enhance their Despite the decline in the number of banks, the presence in local markets. Recently, large West Coast number of banking offices and branches has risen banks have announced programs that would channel sharply. (Banking offices jumped from 53,000 in billions of dollars into small business lending. Some 1980 to 65,000 in 1995.) There appears to have been of these programs reportedly have been structured to no reduction in the availability of banking offices streamline the application process and make it easier serving the public. for small businesses to obtain loan approval on a Moreover, analyses of banking markets over the timely basis. years have provided little support for the notion that In addition, new technologies and information when large banks enter a market, they drive out the flows are providing opportunities for banks and other smaller banks. Rather, small banks have been, and lenders to more efficiently evaluate loan risks. One continue to be, able to retain market shares and technique that is rapidly gaining acceptance is credit operate profitably in competition with larger banks. scoring. Credit scoring is a statistical procedure that Our staff studies have shown that smaller banks typi- provides an estimate of default probability for indically perform as well as or better than their larger vidual loans, based on borrower and loan charactercounterpart, even in markets dominated by large istics. The development of credit scoring models institutions. requires that lenders have access to a large amount of This makes it hard to accept the notion that profit- historical information on the performance of loans able lending opportunities in our local communities with similar characteristics. It inevitably will take will be unmet. If the local bank is making profitable time to develop databases of small business loans, small business loans, it seems logical that its acquirer given the diverse characteristics of the millions of would continue to make those loans. Should large small borrowers. But once developed, credit scoring banks find it is too costly to establish a lending and loan standardization may offer significant cost presence in small business markets—perhaps be- advantages for evaluating the risks associated with cause it is inefficient for large, remote institutions to lending. Many large banks already have begun to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statement to the Congress 655 probe the possibilities of credit scoring techniques for The banking agencies are mindful of the fact that small business markets. loans to small businesses are vulnerable to regulatory As credit scoring and loan standardization become burden as well. Spreading fixed regulatory complimore commonplace, we may well see growth in the ance costs over small balances can make such loans amount of small business loan securitization. To date more costly to originate than large loans. Thus, the that growth has been hampered by the huge diversity agencies took great care to avoid unnecessary costs among small business borrowers and the difficulty in when we implemented safety and soundness stanaccurately assessing the riskiness of pools of non- dards pursuant to section 132 of the Federal Deposit standard small business loans. In contrast, the bulk of Insurance Corporation Improvement Act of 1991. loans that are backed by the Small Business Adminis- That law directed the agencies to provide safety and tration (SBA) have been more easily securitized soundness standards for, among other things, loan because they are known to be low risk by virtue of documentation and credit underwriting. Rather than their guarantee. The ability to securitize non-SBA prescribing detailed and costly requirements on what loans would increase the liquidity of small business should be contained in a file for a small business lending and provide banks and other lenders with loan, the standards establish goals for the documentaadditional sources of funding. We anticipate that the tion, leaving the specific methods for achieving those cost savings generated through these new processes goals to each institution. will be passed on, at least in part, to small business customers. Clearly not all small business loans are going to be appropriate candidates for securitization, and not all SUMMARY banks will wish to adopt complex statistical models for managing risks. There will continue to be a mar- Let me conclude by saying that I am optimistic about ket for nonstandard small business lending and a role the outlook for small business credit availability. We for regional and community banks. Of course, we have emerged from the credit crunch into a much should also expect that small businesses that do not sounder financing environment and a well-balanced easily fit the standard models will not share in the economic expansion. Bank balance sheets are vastly cost savings that credit scoring will provide. improved. Moreover, many of the new developments The agencies also have worked to improve the in banking point to more efficient risk management liquidity of small business loans by refining the risk- techniques that could lower costs of small business based capital standards for those loans sold with lending. At the same time, many of our large banks recourse. In response to section 208 of the Riegle have become quite actively involved in small busi- Community Development and Regulatory Improve- ness and community development programs. ment Act of 1994, the agencies lowered the capital Our conversations with bankers and small business requirement for small business loans that are trans- groups suggest that bank regulatory issues are not the ferred with recourse by well-capitalized banking pressing concern today that they were a few years organizations. This change should facilitate the secu- earlier. Nonetheless, we, as regulators, will continue ritization of small business loans, while at the same to review our rules and procedures to ensure that time ensuring that qualifying banks hold adequate unnecessary burdens do not hinder banks' willingcapital. ness to lend to creditworthy small businesses. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

656 Announcements MEETING OF THE CONSUMER ADVISORY The preamble states that the agencies have elected COUNCIL not to pursue a standardized measurement framework previously issued for comment in August 1995. This The Federal Reserve Board announced on May 31, decision reflects concerns about the burden, accuracy, 1996, that the Consumer Advisory Council would and complexity of a standardized measure and recogmeet in a session open to the public on June 27, 1996. nition that industry techniques for measuring interest The council's function is to advise the Board on the rate risk are continuing to evolve. exercise of the Board's responsibilities under the The joint policy statement had earlier been Consumer Credit Protection Act and on other matters approved by the Federal Deposit Insurance Corporaon which the Board seeks its advice. tion and the Comptroller of the Currency for banks under their jurisdiction. The assessment of interest rate risk management made by examiners in accordance with the joint REGULATION K: FINAL RULE policy statement will be incorporated into a bank's overall risk management rating. Last year the Board The Federal Reserve Board announced on May 9, announced that Federal Reserve examiners will 1996, a final rule amending provisions of Regulaassign a formal rating of the risk management profile tion K (International Banking Operations) regarding of state member banks and bank holding companies interstate banking operations of foreign banking orgaand that this rating will be given significant weight in nizations. The final rule was effective immediately. determining the overall effectiveness of management. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 removed geographic restrictions on interstate banking by foreign banks effective September 29, 1995, and requires that certain foreign ADOPTION OF A STATE-FEDERAL SUPERVISORY banks without U.S. deposit-taking offices select a PROTOCOL home state for the first time. The final rule requires that these foreign banks The Federal Reserve Board announced on May 22, select a home state by June 30, 1996, and removes 1996, the adoption of a state-federal supervisory outdated restrictions on certain mergers by U.S. bank protocol for the coordinated supervision of statesubsidiaries of foreign banks outside the home state chartered banking organizations that operate across of a foreign bank. Obsolete and superseded provistate lines. sions of Regulation K concerning home state selec- The protocol, accompanied by a model agreement, tion were also deleted. is designed to reduce regulatory burden and improve the efficiency of bank examinations. It has also been adopted by the Federal Deposit Insurance Corpora- APPROVAL OF A JOINT AGENCY POLICY tion and the Conference of State Bank Supervisors. STATEMENT ON MANAGING INTEREST RATE The protocol is a statement of principles that pro- RISK vides for the appropriate federal regulator and state supervisor to coordinate the supervision of interstate The Federal Reserve Board on May 23, 1996, banks to ensure safety and soundness, reduce burden, approved a joint agency policy statement providing and minimize duplication. One requirement, for guidance to banks on sound practices to be followed example, is for federal and state regulators to develop for managing interest rate risk. a joint supervisory program for each state-chartered The policy statement emphasizes the importance of interstate bank, including plans for upcoming examiadequate oversight by a bank's board of directors and nations. It also provides for conducting examinations senior management and of a sound risk management on either a joint or an alternate basis and for the process. sharing of information among regulators. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

657 The model agreement carries out provisions of the regulatory burden of the guidance. The Board protocol and would be signed by, for example, a believes that the existing commentary provides suffi- Federal Reserve Bank and state supervisors in a cient guidance. particular Federal Reserve District. AVAILABILITY OF A VIDEO TO HELP LENDERS TO TRIBAL GOVERNMENTS AND INDIVIDUALS PROPOSED ACTIONS ON NATIVE AMERICAN RESERVATIONS The Federal Reserve Board on May 16, 1996, The Federal Reserve announced on May 17, 1996, requested comment on proposed revisions to its the availability of a video designed to help lenders Regulation Z (Truth in Lending) to incorporate establish profitable relationships with tribal governchanges made by the Truth in Lending Act Amend- ments and individuals on Native American ments of 1995. Comments were requested by reservations. June 21, 1996. The videotaped seminar, entitled "Lending in The Board is also proposing to revise Regulation Z Indian Country: Culture and Legal Issues," was to establish new disclosure rules for debt cancellation developed by the Federal Reserve Bank of contracts that would be similar to the rules for credit Minneapolis. The five-part video and accompanying insurance. guidebook explore cultural differences, land and title The Federal Reserve Board on May 16, 1996, issues, tribal powers, sovereign immunity, tribal requested public comment on clarifying and technical courts, collateral, remedies, and other issues of interamendments to its Regulation CC (Availability of est to those seeking to do business in Indian country. Funds and Collection of Checks). In some cases the It features Jim West, president of West Ratcliff & amendments also reduce the compliance burden for Company of Albuquerque, an expert on Native depository institutions. Comments were requested by American economic and business development, and July 19, 1996. Mark Jarboe, partner with the law firm of Dorsey & On May 22, 1996, the Federal Reserve Board Whitney LLP of Minneapolis and chairman of its withdrew proposed amendments to its commentary Indian and Gaming Law Department. on Regulation DD (Truth in Savings) that were origi- The video tapes and guidebook are available nally issued for public comment December 6. Based for $135, which includes $10 shipping and handling. on the approximately fifty comments received and A brochure and order form are available from the on further analysis, the Board decided to withdraw Federal Reserve Bank of Minneapolis at 1-800-553the proposal because of the narrow scope and added 9656, ext. 6008. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

659 Minutes of the Federal Open Market Committee Meeting Held on March 26,1996 A meeting of the Federal Open Market Committee Messrs. Davis, Dewald, Goodfriend, and Hunter, was held in the offices of the Board of Governors of Senior Vice Presidents, Federal Reserve Banks of Kansas City, St. Louis, Richmond, and the Federal Reserve System in Washington, D.C., on Chicago respectively Tuesday, March 26, 1996, at 8:00 a.m. Mr. Judd, Ms. Rosenbaum, and Mr. Rosengren, Vice Presidents, Federal Reserve Banks of Present: San Francisco, Atlanta, and Boston respectively Mr. Greenspan, Chairman Mr. Bentley, Assistant Vice President, Mr. McDonough, Vice Chairman Federal Reserve Bank of New York Mr. Boehne Mr. Jordan Mr. Kelley By unanimous vote, the minutes of the meeting of Mr. Lindsey the Federal Open Market Committee held on Janu- Mr. McTeer ary 30-31, 1996, were approved. Ms. Phillips The Manager of the System Open Market Account Mr. Stern reported on developments in foreign exchange mar- Ms. Yellen kets during the period January 31, 1996, through Messrs. Broaddus, Guynn, Moskow, and Parry, March 25, 1996. There were no open market trans- Alternate Members of the Federal Open Market actions in foreign currencies for System account dur- Committee ing this period, and thus no vote was required of the Committee. Messrs. Hoenig and Melzer, and Ms. Minehan, The Manager also reported on developments in Presidents of the Federal Reserve Banks of Kansas City, St. Louis, and Boston respectively domestic financial markets and on System open market transactions in government securities and fed- Mr. Kohn, Secretary and Economist eral agency obligations during the period January 31, Mr. Bernard, Deputy Secretary 1996, through March 25, 1996. By unanimous vote, Mr. Coyne, Assistant Secretary the Committee ratified these transactions. Mr. Gillum, Assistant Secretary Mr. Mattingly, General Counsel The Committee then turned to a discussion of the Mr. Baxter, Deputy General Counsel economic and financial outlook and the implementa- Mr. Prell, Economist tion of monetary policy over the intermeeting period Mr. Truman, Economist ahead. A summary of the economic and financial information available at the time of the meeting and Messrs. Lang, Mishkin, Promisel, Rolnick, Rosenblum, Siegman, Simpson, Sniderman, and of the Committee's discussion is provided below, Stockton, Associate Economists followed by the domestic policy directive that was approved by the Committee and issued to the Federal Mr. Fisher, Manager, System Open Market Account Reserve Bank of New York. Much of the information reviewed at this meeting Mr. Ettin, Deputy Director, Division of Research and had been influenced to an uncertain degree by unusu- Statistics, Board of Governors ally severe winter weather, industrial strikes, and U.S. Mr. Reinhart, Assistant Director, Division of Monetary Affairs, Board of Governors government shutdowns. On balance, however, growth Ms. Low, Open Market Secretariat Assistant, of economic activity appeared to have picked up after Division of Monetary Affairs, Board of having slowed appreciably in late 1995. Growth in Governors consumer spending seemed to have resumed at a moderate rate in the wake of January's storms; busi- Mr. Stone, First Vice President, Federal Reserve ness spending on durable equipment was recording Bank of Philadelphia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

660 Federal Reserve Bulletin • July 1996 further healthy gains; and housing demand was show- Orders for other types of equipment also had picked ing some signs of strengthening. With businesses up on balance over the last several months, although making considerable progress in getting their inven- shipments of such equipment dropped in January tories under control, industrial production and after a sizable rise in the fourth quarter. Nonresidenemployment had rebounded briskly. The recent data tial construction activity appeared to be growing on prices gave little indication of any change in more slowly: Non-office commercial construction underlying inflation trends. continued its upward trend but office, institutional, A surge in nonfarm payroll employment in Febru- and industrial building activity had slowed noticeably ary considerably more than offset a large weather- in recent months, and contracts for those categories related drop in January. Very large job gains were also had softened. recorded in February in the construction, retail trade, Business inventories rebounded sharply in January and services industries; however, some of these from a large drop in December. Much of the January increases reflected the reversal of the depressing buildup in stocks occurred in manufacturing, where effects of January's severe winter storms and the part of the backup may have been associated with efforts of some firms to make up for associated delays in shipments as a result of winter storms. The production losses. A small rise in manufacturing inventory-sales ratio for the sector edged up in Januemployment in February only partially offset a fur- ary but was little changed on balance in recent ther loss of factory jobs in January. The civilian months. Inventories at the wholesale level also rose unemployment rate fell to 5.5 percent in February. considerably in January; the inventory-sales ratio Industrial production rose sharply in February, increased slightly but was still well below the high more than offsetting a sizable decline in January. Part levels of last fall. Retail stocks recorded a modest rise of the net increase in output over the January- in January after a sharp decline in December. The February period reflected an upturn in aircraft pro- January increase was in line with the advance in duction after the settlement of a strike at a major sales, and the inventory-sales ratio for the sector as a aircraft manufacturer. In addition, output of office whole was unchanged from December and remained and computing machines continued to rise at a rapid well below levels seen over most of 1995. pace, and the production of other types of business The nominal deficit on U.S. trade in goods and equipment picked up. Output of consumer goods services in December (latest data available) was little changed little on balance over the two-month period. changed from its November level. On a quarterly- Manufacturing production expanded about in line average basis, however, the deficit in the fourth quarwith capacity over the first two months of the year, ter was substantially smaller than it had been in the leaving the overall rate of utilization of manufactur- third quarter. The value of exports of goods and ing capacity little changed. services rose appreciably in the fourth quarter, with Nominal retail sales increased briskly in February the largest increases occurring in machinery exports after having registered little change in January. The and foreign tourist services. The value of imports February spurt was paced by strong motor vehicle declined slightly, largely as a result of decreases in purchases, but spending at general merchandise stores imports of automotive products, consumer goods, and apparel outlets also was up considerably after a and oil. The data available on economic conditions in weak performance in previous months. Sales at dura- the major foreign industrial countries in early 1996 ble goods stores were less robust, rising only slightly suggested that a moderate recovery was under way in in February. Recent indicators of housing demand Japan, and there were some signs of a pickup in and activity were generally favorable. Starts of both activity in much of Western Europe, although the single-family and multifamily units moved higher on German economy remained weak. balance over January and February, and sales of new Inflation trends had remained stable in recent homes increased appreciably in January (latest data months. At the consumer level, food prices continued available). By contrast, sales of existing homes to edge up in February and energy prices again were declined in January for a fourth consecutive month. under appreciable upward pressure. Excluding the Business demand for durable equipment appar- often-volatile food and energy items, consumer prices ently remained fairly robust in early 1996. Incoming advanced in February at a slightly slower rate than in orders for computing equipment were particularly January; and for the twelve months ended in Februstrong in January, and shipments of such equipment ary, consumer prices rose a little less than in the posted further healthy gains. With airline profits high comparable year-earlier period. At the producer level, and new models of airplanes being introduced, orders prices of finished goods other than food and energy for aircraft had climbed rapidly over recent months. were unchanged on balance over January and Febru- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 661 ary; the rise in this measure of prices over the twelve The dollar fell appreciably during the initial portion months ended in February was somewhat larger than of the period—before evidence of a more robust in the comparable year-earlier interval. Average U.S. economy emerged—while data on the German hourly earnings of production and nonsupervisory money supply and the Japanese economy were sugworkers edged down in February after a considerable gesting upward revisions to expected interest rates increase in January. However, for the twelve-month abroad. In late February, emerging signs that the U.S. period ended in February, average hourly earnings economy was generally stronger than expected and rose more than in the year-earlier period. that economic conditions abroad were comparatively At its meeting on January 30-31, 1996, the Com- weaker than they had seemed earlier fostered a mittee adopted a directive that called for a slight rebound in the value of the dollar. reduction in the degree of pressure on reserve posi- Growth of the broader monetary aggregates tions, taking account of a possible reduction of lA per- strengthened considerably in February and early centage point in the discount rate. The directive March following the decline in short-term interest approved by the Committee did not include a pre- rates in late 1995 and early 1996. The acceleration of sumption about the likely direction of any adjust- M2 reflected a surge in demand deposits as well as ments to policy during the intermeeting period, larger inflows to retail money market mutual funds, should unanticipated developments warrant a policy whose yields tend to adjust with a lag to changes change. Accordingly, the directive stated that in the in short-term market interest rates. Larger inflows to context of the Committee's long-run objectives for institution-only money market funds contributed to price stability and sustainable economic growth, and M3's stronger performance. Growth of total domestic giving careful consideration to economic, financial, nonfinancial debt slowed somewhat in December and and monetary developments, slightly greater reserve January, reflecting reduced federal government borrestraint or slightly lesser reserve restraint would rowing, but remained moderate on balance. be acceptable during the intermeeting period. The The staff forecast prepared for this meeting sugreserve conditions associated with this directive were gested that the pace of economic expansion would expected to be consistent with moderate growth of pick up over coming months after a sluggish fourth M2 and M3 over coming months. quarter. Other than a better performance over the first On January 31, the Board of Governors approved a half of 1996 associated with a somewhat faster reduction of lA percentage point in the discount rate, increase in final sales, this forecast differed little from to a level of 5 percent. The decrease was made that prepared for the previous meeting and indicated effective immediately and was passed through to that the economy was expected to expand generally interest rates in reserve markets. Open market opera- along its estimated potential. Consumer spending was tions during the intermeeting period were directed projected to grow slightly more than disposable toward maintaining this new policy stance, and the income; the favorable effect of higher equity prices federal funds rate averaged around 5lA percent, the on household wealth and the still-ample availability level expected to be associated with that stance. of credit were expected to outweigh persisting con- Because the easing move had been largely antici- sumer concerns about job security and the effects of pated in financial markets, the initial response was a already high household debt burdens. Homebuilding small decline in short-term rates and little change in activity was projected to decline a little in response long-term rates. Over the remainder of the period, to the recent backup in residential mortgage rates however, most interest rates moved higher in but to remain at a relatively high level. A less rapid response to incoming economic data that were seen pace of business investment in equipment and as suggesting improved prospects for economic structures was expected in light of the decline over growth and, accordingly, a reduced likelihood of the past year in the rate of utilization of production further easings in monetary policy. In addition, the capacity and the moderate growth projected for sales absence of much progress in federal budget negotia- and profits. The external sector was expected to exert tions was viewed by the markets as indicating that the a small restraining influence on economic activity chances a major multiyear deficit-reduction plan over the projection period. The persisting impasse would be adopted this year were becoming more in the federal budget negotiations suggested little remote. Despite the increase in bond yields, major further fiscal contraction in coming quarters. Given indexes of equity prices recorded sizable gains. the outlook for economic activity, rates of utilization of labor and capital were not expected to change In foreign exchange markets, the trade-weighted materially and inflation was projected to increase value of the dollar in terms of the other G-10 currenmodestly. cies declined slightly over the intermeeting period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

662 Federal Reserve Bulletin • July 1996 In the Committee's discussion of current and the value of stock and bond market holdings had prospective economic developments, members com- been important factors helping to sustain spending in mented on the resiliency of the economy, which this period. In the context of continued underlying appeared to have strengthened appreciably after a momentum in final demand and some decline in period of subpar growth. The latter had been induced excess stocks of unsold motor vehicles stemming to a large extent by inventory adjustments whose from the recently ended strike at a major domestic effects were exacerbated temporarily by government producer, inventories now seemed to be in better shutdowns, unusually severe winter weather, and balance with sales and the economy to be better industrial strikes. The adjustment in inventory invest- positioned to accommodate sustained expansion. ment seemed to be nearing its completion, and some Some members observed, however, that the recent members observed that the settlement of the recent increase in intermediate- and long-term interest rates strike in the motor vehicle industry might well impart would tend to blunt demand in interest-sensitive secadded impetus to the expansion over the nearer term. tors of the economy. Moreover, stock market prices Considerable volatility could be expected in the had risen to comparatively high levels in relation to short-run performance of the economy, but the earnings and interest rates and might be vulnerable members continued to view trend growth at a pace to further weakness in the debt markets or to any near the economy's potential as the most probable tendency for business profit margins to erode. outcome. Many also commented that the risks to such In the course of their comments about developa forecast appeared to have shifted from being pre- ments in key sectors of the economy, members dominantly on the downside earlier in the year to referred to recent indications, including anecdotal better balanced currently. Still, substantial uncertain- reports, of appreciable strengthening in retail sales ties attended the economic outlook, and a number of that tended to support forecasts of sustained growth members observed that an economic performance in consumer spending in coming quarters. In addithat differed considerably in either direction from tion, surveys of consumer sentiment, which had been their current forecasts might well materialize over the more favorable recently, and sharply increased houseprojection period. Regarding the outlook for infla- hold net worth were seen as positive factors in the tion, members' assessments tended to center on outlook for consumer expenditures. On the negative expectations of little change in average consumer side, some members observed that the rise in conprice inflation over the projection horizon. sumer indebtedness and the recent increase in interest The review of regional economic developments by rates would tend to damp consumer spending. Given the Federal Reserve Bank presidents pointed to mod- these financial crosscurrents, it was suggested that erate expansion in economic activity across much of growth in consumer spending might approximate that the nation, though growth was described as modest in of disposable income over the forecast horizon. a few regions and relatively robust in some others. The prospects for business capital spending Business conditions appeared to have improved in a remained a supportive element in the outlook for number of areas since early in the year, but as had further economic expansion, but growth in such been true previously, activity in various sectors of the spending was expected to slow considerably from its economy remained uneven. Manufacturing of most rapid pace over the past few years. The ready availdurable goods other than motor vehicles and some ability and fairly low cost of business finance in defense industry products displayed considerable equity and debt markets and the continuing commitstrength, while the production of many nondurable ment of business firms to modernizing their facilities goods tended to lag. In agriculture, high feed costs to hold down costs in highly competitive markets and low market prices were depressing the cattle would tend to support growth in business fixed industry, while elevated grain prices were boosting investment. Profits and cash flows were expected to the incomes of farmers not subject to the effects of remain reasonably strong, though there were tentative locally adverse weather conditions. signs of some softening in profit margins. On the The economy had displayed considerable resil- other hand, the longevity of the current expansion ience in the face of adjustments to production associ- had resulted in the addition of a good deal of producated with efforts by many business firms to reduce tion capacity in recent years. This development in inventories and a number of additional, albeit tempo- conjunction with some decline in capacity utilization rary, developments that had tended to retard the over the past several quarters pointed to less need for expansion in the latter part of 1995 and at the start of expansion in plant and equipment. The rise in outlays this year. Apparently, relatively low long-term inter- for computers and related products was likely to est rates and the related substantial appreciation in remain fairly robust in light of the continuing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 663 advances in technology and the marked downtrend in their expectations. Those who emphasized the risks computer prices, but the growth of computer expendi- of higher-than-projected inflation tended to cite the tures was projected to be well below the extraor- potential for increasing wage and price pressures in dinary pace of the past few years. The slowdown an economy that already was operating at or close to would reflect factors that were expected to damp the its estimated capacity. Increases in labor costs had growth of overall business investment spending and a been unusually subdued in light of the relatively low greater saturation of potential computer markets that unemployment nationwide and widespread anecdotal might lead to more emphasis on replacement demand reports of labor shortages. In this view the rise in rather than the further expansion of capacity. labor costs could well accelerate at some point, Housing activity generally was expected to be well though not necessarily in the near term, with some maintained in coming quarters, though likely to mod- feedthrough to prices. Other developments that genererate to some extent from current levels in lagged ated some concern about the outlook for inflation response to the rise that had occurred in mortgage included the rise in the costs of medical benefits in interest rates. The response of housing expenditures the fourth quarter, price pressures in the energy and to rate increases was uncertain, and a few members food sectors of the economy, and the possibility that commented that the prospective slowing in housing the recent rise in intermediate- and long-term interest construction could be fairly pronounced. For the rates might to some extent reflect worsening inflanearer term, however, recent data were indicative of tionary expectations. Other members saw only a limconsiderable underlying strength in housing markets, ited risk of higher inflation, and a few indicated that especially in light of the adverse effects of notably they did not rule out some reduction in consumer unfavorable weather conditions in many parts of the price inflation from that experienced in 1995. In this country this winter. Those data tended to be sup- view there was sufficient capacity in the economy to ported by anecdotal reports of significant improve- allow room for moderate growth of economic activity ment in housing markets in several regions over the in line with their forecasts without fostering added course of recent months. Contributing to that perfor- inflation. Moreover, there was only scattered evimance, however, might be a temporary acceleration dence of accelerating increases in worker compensaof purchases by homebuyers who anticipated further tion associated with labor shortages and little indicaincreases in mortgage interest rates. The latter were tion that possibly diminishing worries about job viewed, nonetheless, as still low in comparison with security would induce rising labor militancy. Some their average level over the past several years. members also stressed the persistence of strong com- The outlook for fiscal policy remained uncertain, petition in numerous markets that tended to preclude especially for future years. It was suggested that the or restrain raising prices. stalemate between the Congress and the Administra- In the Committee's discussion of policy for the tion on major spending and tax issues might not be intermeeting period ahead, all the members endorsed resolved in coming months or indeed during the a proposal to maintain an unchanged degree of prescurrent session of the Congress. However, already sure in reserve markets. This policy preference was legislated appropriations and current continuing reso- based on expectations of growth in business activity lutions still pointed to considerable restraint in fed- at a pace averaging in the vicinity of the economy's eral spending this year. With regard to the external potential, a perception among the members that the sector of the economy, projections of appreciable risks to such an outlook were more balanced than growth in exports tended to be supported by anec- earlier, and anticipations that under these circumdotal comments of strong export demand for goods stances inflation would remain constrained. The econproduced in various parts of the country, including omy seemed to have adequate forward momentum some improvement in exports to Mexico. At the same and did not appear to require any further stimulus, time, imports might well expand somewhat more whose implementation might contribute to inflationrapidly than exports if the domestic economy ary pressures in the economy. Several members strengthened as projected this year from its reduced observed that robust growth in broad money for some rate of growth in 1995. months suggested that monetary policy had been The members did not differ greatly in their assess- supportive of sustained economic expansion. At the ments of the most probable course of inflation. Their same time, information on the economy and prices expectations ranged from essentially unchanged to did not seem to indicate developing inflation presslightly higher inflation in comparison with 1995. At sures that needed to be contained by tightening policy the same time, members expressed somewhat differ- at this juncture. Indeed, some members commented ing views about possible deviations of inflation from that, judged from one perspective, financial condi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

664 Federal Reserve Bulletin • July 1996 tions had tightened somewhat as a consequence of Growth of consumer spending, which had been sluggish the recent rise in intermediate- and long-term interest earlier in the winter, spurted in February, paced by strong motor vehicle purchases. Housing starts rose in January rates, though it was difficult to disentangle the real and February. Orders and contracts point to continuing and the inflation components of the rate increases. expansion of spending on business equipment and nonresi- Nonetheless, a number of members noted that infla- dential structures. The nominal deficit on U.S. trade in tion was not expected to moderate further over the goods and services narrowed substantially in the fourth projection horizon and that it could move higher and quarter from its average rate in the third quarter. There has been no clear change in underlying inflation trends. the Committee would need to be particularly vigilant Changes in short-term market interest rates have been in guarding against such an outcome. Against this mixed while long-term rates have risen appreciably since background, the members favored an unbiased the Committee meeting on January 30-31. In foreign instruction in the directive that did not prejudice exchange markets, the trade-weighted value of the dollar in possible intermeeting adjustments to policy in either terms of the other G-10 currencies has declined slightly direction. over the intermeeting period. Growth of M2 and M3 has strengthened considerably in At the conclusion of the Committee's discussion, recent months, while expansion in total domestic nonfinanall the members indicated a preference for a directive cial debt has remained moderate on balance. that called for maintaining the existing degree of The Federal Open Market Committee seeks monetary pressure on reserve positions and that did not include and financial conditions that will foster price stability and promote sustainable growth in output. In furtherance of a presumption about the likely direction of any these objectives, the Committee at its meeting in January adjustments to policy during the intermeeting period. established ranges for growth of M2 and M3 of 1 to Accordingly, in the context of the Committee's long- 5 percent and 2 to 6 percent respectively, measured from run objectives for price stability and sustainable eco- the fourth quarter of 1995 to the fourth quarter of 1996. nomic growth, and giving careful consideration to The monitoring range for growth of total domestic nonfinancial debt was set at 3 to 7 percent for the year. The economic, financial, and monetary developments, the behavior of the monetary aggregates will continue to be Committee decided that slightly greater or slightly evaluated in the light of progress toward price level stabillesser reserve restraint would be acceptable during ity, movements in their velocities, and developments in the the intermeeting period. The reserve conditions con- economy and financial markets. templated at this meeting were expected to be consis- In the implementation of policy for the immediate future, tent with moderate growth in M2 and M3 over com- the Committee seeks to maintain the existing degree of pressure on reserve positions. In the context of the Coming months. mittee's long-run objectives for price stability and sustain- At the conclusion of the meeting, the Federal able economic growth, and giving careful consideration to Reserve Bank of New York was authorized and economic, financial, and monetary developments, slightly directed, until instructed otherwise by the Commit- greater reserve restraint or slightly lesser reserve restraint would be acceptable in the intermeeting period. The contee, to execute transactions in the System Account templated reserve conditions are expected to be consistent in accordance with the following domestic policy with moderate growth in M2 and M3 over coming months. directive: Votes for this action: Messrs. Greenspan, McDonough, Boehne, Jordan, Kelley, Lindsey, McTeer, Many of the data for recent months reviewed at this Ms. Phillips, Mr. Stern, and Ms. Yellen. Votes against meeting were influenced to an uncertain degree by unusuthis action: None. ally severe winter weather, industrial strikes, and U.S. government shutdowns. On balance, the expansion in eco- It was agreed that the next meeting of the Commitnomic activity appears to have picked up after slowing tee would be held on Tuesday, May 21, 1996. appreciably in late 1995. Nonfarm payroll employment The meeting adjourned at 10:35 a.m. surged in February, considerably more than offsetting a large drop in January, and the civilian unemployment rate fell to 5.5 percent. Manufacturing production increased Donald L. Kohn sharply in February after a sizable decline in January. Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

665 Legal Developments FINAL RULE—AMENDMENT TO REGULATION K (3) A foreign bank that has any branches, agencies, subsidiary commercial lending companies, or subsidiary The Board of Governors is amending 12 C.F.R. Part 211, banks in one state, and has no such offices or subsidiarits Regulation K (International Banking Operations), re- ies in any other states, shall have as its home state the garding interstate banking operations of foreign banking state in which such offices or subsidiaries are located. organizations. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 removed geographic restrictions on interstate banking by foreign banks effective ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT September 29, 1995, and requires certain foreign banks without U.S. deposit-taking offices to select a home state Orders Issued Under Section 3 of the Bank Holding for the first time. The final rule requires these foreign banks Company Act to select a home state by June 30, 1996, and removes outdated restrictions on certain mergers by U.S. bank sub- Aspen Bancshares, Inc. sidiaries of foreign banks outside the home state of the Aspen, Colorado foreign bank. Obsolete and superseded provisions of Regulation K concerning home state selection also are deleted. Order Approving Acquisition of a Bank Holding Effective May 9, 1996, 12 C.F.R. Part 211 is amended as Company follows: Aspen Bancshares, Inc., Aspen, Colorado ("Aspen"), a Part 211—International Banking Operations bank holding company within the meaning of the Bank (Regulation K) Holding Company Act ("BHC Act"), has requested Board approval under section 3(a)(3) of the BHC Act (12 U.S.C. 1. The authority citation for Part 211 continues to read as § 1842(a)(3)) to acquire Val Cor Bancorporation, Inc. follows: ("Val Cor"), and thereby indirectly acquire Valley National Bank of Cortez ("Valley National"), both of Cortez, Authority. 12U.S.C. 221 et seq., 1818, 1841 et seq., 3101 Colorado. et seq., 3901 et seq. Notice of the application, affording interested persons an opportunity to submit comments, has been published 2. In section 211.22, paragraph (a) is revised; paragraph (c) (61 Federal Register 7518 (1996)). The time for filing is removed; and paragraph (d) is redesignated as paragraph comments has expired, and the Board has considered the (c) to read as follows: application and all comments received in light of the factors set forth in section 3(c) of the BHC Act. Section—211.22 Interstate banking operations of Aspen is the 16th largest depository institution in Coloforeign banking organizations. rado, controlling deposits of $262.8 million, representing less than 1 percent of total deposits in depository institu- (a) Determination of home state. (1) A foreign bank (ex- tions in Colorado.1 Val Cor is the 67th largest depository cept a foreign bank to which paragraph (a)(2) of this institution in the state, controlling deposits of $59.6 milsection applies) that has any combination of domestic lion, representing less than 1 percent of total deposits in agencies or subsidiary commercial lending companies depository institutions statewide. On consummation of the that were established before September 29, 1994, in proposed transaction, Aspen would become the 15th largmore than one state and have been continuously oper- est commercial banking or thrift organization in Colorado, ated shall select its home state from those states in which controlling deposits of $322.4 million, representing less such offices or subsidiaries are located. A foreign bank than 1 percent of total deposits in depository institutions in shall do so by filing with the Board a declaration of the state. home state by June 30, 1996. In the absence of such selection, the Board shall designate the home state for such foreign banks. (2) A foreign bank that, as of September 29, 1994, had declared a home state or had a home state determined 1. Deposit data are as of June 30, 1995. In this context, depository pursuant to the law and regulations in effect prior to that institutions include commercial banks, savings banks, and savings date shall have that state as its home state. associations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

666 Federal Reserve Bulletin • July 1996 Competitive Considerations The Board notes that the HHI levels are only guidelines that are used by the Board, the Department of Justice, and Aspen's subsidiary thrift institution, Centennial Savings the other banking agencies to help identify cases in which a Bank, Durango, Colorado ("Centennial"), and Val Cor's more detailed competitive analysis is appropriate to assure bank subsidiary, Valley National, compete directly in the that the proposal would not have a significantly adverse Cortez, Colorado, banking market2 ("Cortez banking mar- effect on competition in any relevant market. A proposal ket").3 Valley National is the largest depository institution that fails to pass the HHI market screen may nonetheless in the market, controlling deposits of $64.8 million, repre- be approved because other information may indicate that senting 25.9 percent of total deposits in depository institu- the proposal would not have a significantly adverse effect tions in the market ("market deposits").4 Centennial is the on competition. In this case, the Department of Justice has fifth largest depository institution in the market, controlling reviewed the proposal and advised the Board that consumdeposits of $31.8 million, representing approximately mation of the proposal would not likely have any signifi- 12.7 percent of market deposits. On consummation, Aspen cantly adverse competitive effects in the Cortez banking would become the largest depository institution in the market and any other relevant banking market.6 market, controlling total deposits of $96.6 million, repre- A number of factors indicate in this case that the market senting 38.6 percent of total deposits in depository institu- concentration as measured by the HHI tends to overstate tions in the market. The market, as measured by the the competitive effects of this proposal. For example, Cen- Herfindahl-Hirschman Index ("HHI"), would become tennial, which is a thrift institution, engages primarily in highly concentrated; and, under the Department of Justice mortgage lending activities and engages only in a de minimerger guidelines, the level of change in market concentra- mis amount of commercial lending activity in the market. tion raises concerns about the potential competitive effects Centennial has maintained this focus even after its acquisiof this proposal.5 tion in 1993 by Aspen, a bank holding company.7 Valley National, on the other hand, engages in only limited mortgage lending activities and has focused its activities on 2. The Board has long held that the product market for evaluating commercial lending.8 Following consummation of the promergers and acquisitions of insured depository institutions is the posal, Centennial and Valley National will be operated as cluster of products and services offered by the insured institutions, and separate institutions, and each will retain its current manthe Supreme Court has emphasized that it is this cluster of products agement.9 and services that, as a matter of trade reality, makes banking a distinct line of commerce. See First Hawaiian, Inc., 79 Federal Reserve Seven depository institution competitors, including four Bulletin 966, 966-68 (1993); SouthTrust Corporation, 78 Federal institutions in the town of Cortez, would remain in the Reserve Bulletin 710 (1992); United States v. Philadelphia National Cortez banking market following consummation of this Bank, 374 U.S. 321, 357 (1963). proposal. These seven competitors would continue to serve 3. The Board and the courts also have found that the relevant the relatively small population of the market. Three of banking market for analyzing the competitive effect of a proposal must reflect commercial and banking realities and should consist of these competitors would each have more than 15 percent of the local area where the banks involved offer their services and where market deposits. In addition, the banking market has sevlocal customers can practicably turn for alternatives. See St. Joseph eral characteristics that make it attractive for entry by an Valley Bank, 68 Federal Reserve Bulletin 673, 674 (1982). The key out-of-market firm. Its population has increased at a rate question to be considered in making this selection "is not where the parties to the merger do business or even where they compete, but higher than the rate of increase in population statewide, where, within the area of competitive overlap, the effect of the merger and at a rate much higher than other rural areas in Coloon competition will be direct and immediate." United States v. Phila- rado.10 Banks in the market have a higher average return delphia National Bank, 374 U.S. at 357; United States v. Phillipsburg National Bank, 399 U.S. 350, 364-65 (1969). The Board has considered Aspen's contention that the relevant banking market includes a five-county area described as the San Juan Basin Area ("Basin generally will not be challenged (in the absence of other factors Area"), that includes Montezuma, Dolores, La Plata, San Juan, and indicating anticompetitive effects) unless the post-merger HHI is at Archuleta Counties. The Board believes that the appropriate market least 1800 and the merger increases the HHI by at least 200 points. for analyzing the competitive effects of this proposal is the Cortez, 6. The Office of the Comptroller of the Currency also has not Colorado, banking market, an area at the southwestern extreme of the objected to the proposal. state that is approximated by Montezuma and Dolores Counties. The 7. As of December 31, 1995, Centennial reported only $49,000 in Board bases this conclusion on an analysis of employment commuting commercial loans, significantly less than 1 percent of the total comdata, traffic patterns, locations of deposits and loans, and interviews mercial loans made in the market, while more than 90 percent of its with local bankers and other officials conducted in 1995 by the staff of total loans in the market were in the form of mortgages and other the Board and the Federal Reserve Bank of Kansas City ("Reserve housing-related construction loans. Bank") as part of an on-site investigation of the area, as well as other 8. Valley National is the third largest commercial lender in the facts of record that indicate that commuting, travel, and competition Cortez banking market, reporting commercial loans totalling $5 milbetween the Cortez banking market and the other counties in the Basin lion, as of December 31, 1995. The bank accounted for approximately Area is limited. 22 percent of all commercial loans made in the banking market in 4. Market data are as of December 31, 1995. 1995. 5. The HHI would increase by 657 points to a level of 2367. Under 9. If Centennial's deposits were weighted at 50 percent, the increase the revised Department of Justice Merger Guidelines, 49 Federal in the HHI would be 374 points to 2185. Register 26,823 (June 29, 1984), a market in which the post-merger 10. The population of the Cortez market grew by 13.5 percent from HHI is above 1800 is considered highly concentrated. The Department 1990 to 1995, and is projected to grow an additional 15.3 percent from of Justice has informed the Board that a bank merger or acquisition 1995 to 1999. The average rate of growth for the entire state from Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 667 on average assets than banks average statewide.11 More- the size of the next largest competitor. The HHI for this over, legal barriers for entry into the market will be signifi- market would increase by over 650 points to above 2365. cantly reduced as of January 1, 1997, when Colorado law These measures confirm that the market would be highly would permit unlimited statewide de novo branching.12 concentrated following consummation of this proposal. Based on these and all of the other facts of record, the Aspen argues that its subsidiary thrift in this market does Board concludes that consummation of this proposal, on not compete with banks in the market. However, there is balance, is not likely to have a significantly adverse effect nothing to preclude Aspen from merging Centennial into on competition or concentration of banking resources in one of its commercial subsidiary banks or from commencany relevant banking market. In light of all the facts of ing commercial lending activities at the thrift in response record, the Board also concludes that the financial and to market demand. Centennial's transition to commercial managerial resources and the future prospects of Aspen lending by merger or otherwise would be particularly easy and Val Cor and their respective subsidiaries are consistent because it is owned by a banking organization that poswith approval, as are the other supervisory factors the sesses the skills and business culture to provide a full range Board must consider under section 3 of the BHC Act. In of commercial loan products. Thus, looking forward, we addition, considerations relating to the convenience and believe that the HHI is an appropriate indication of the needs of the communities to be served are consistent with likely market impact of this proposal. Even recognizing approval of the application. that Centennial does not offer small business and other For these reasons, and in light of all the facts of record, commercial lending products to any significant degree and the Board has determined that the application should be, assuming that it will continue not to offer these products, and hereby is, approved. The Board's approval is specifi- Centennial and Valley National Bank of Cortez compete cally conditioned on Aspen's compliance with all commit- directly for insured deposits. If combined in the same ments made in connection with the application. The com- organization, we believe that the resulting organization mitments relied on by the Board in reaching this decision would dominate competition for this product. are deemed to be conditions imposed in writing by the Other factors do not, in our judgment, mitigate these Board in connection with its findings and decision, and as potential anti-competitive effects. The Cortez banking marsuch may be enforced in proceedings under applicable law. ket is a small market and is a market that the data indicate The acquisition of Val Cor shall not be consummated to us is not attractive to entry. There has in fact been no before the fifteenth calendar day following the effective de novo entry into this market since 1979, and only Applidate of this order, unless such period is extended for good cant has entered by acquisition since 1979. While Colorado cause by the Board or the Reserve Bank, acting pursuant to will permit de novo intrastate branching beginning in 1997, delegated authority. the characteristics of this market, including its relatively By order of the Board of Governors, effective May 31, small population and the current high ratio of banking 1996. offices to population, are likely to discourage rather than encourage new entry. Approval of this proposal would Voting for this action: Chairman Pro Tempore Greenspan and create a dominant competitor in the market that will also Governors Lindsey and Phillips. Voting against this action: Governors likely discourage further entry. Kelley and Yellen. For these reasons, we believe that the considerations relating to the competitive effects of this proposal are not WILLIAM W. WILES consistent with approval. Considerations relating to other Secretary of the Board factors do not lend sufficient weight to warrant approval of this proposal. Accordingly, we would deny this proposal. Dissenting Statement of Governors Kelley and Yellen May 31, 1996 We believe that the proposed transaction by Aspen would have a significantly adverse effect on competition in the Cortez, Colorado, banking market. Norwest Corporation This proposal involves the combination of the largest Minneapolis, Minnesota and the fifth largest insured depository institutions in the market. Together, these institutions would control over 38 Order Approving the Acquisition of a Bank Holding percent of market deposits and would be more than twice Company Norwest Corporation, Minneapolis, Minnesota ("Nor- 1990 to 1995 was 12.8 percent, and the projected rate from 1995 to west"), a bank holding company within the meaning of the 1999 is 11.7 percent. 11. For 1995, the average return on average assets for commercial Bank Holding Company Act ("BHC Act"), has requested banks in the Cortez market was 1.74 percent compared to a statewide Board approval under section 3 of the BHC Act (12 U.S.C. average of 1.43 percent. § 1842) to acquire Union Texas Bancorporation, Inc. 12. Under current Colorado law, banks are permitted to establish ("Union Texas"), and, indirectly, Union Texas's wholly only one de novo branch or branch by merging with another bank, owned subsidiary bank, Union National Bank of Texas except in very limited circumstances. See Colorado Revised Statutes §§ ll-25-03(8)(a) and (b) (1995 Cum. Supp.). ("Union Bank"), both of Laredo, Texas. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

668 Federal Reserve Bulletin • July 1996 Notice of this proposal, affording interested persons an Competitive Considerations opportunity to submit comments, has been published (61 Federal Register 8625 (1996)). The time for filing The BHC Act prohibits the Board from approving an comments has expired, and the Board has considered the application under section 3 of the BHC Act if the proposal proposal and all comments received in light of the factors would result in a monopoly, or if the proposal would set forth in section 3 of the BHC Act. substantially lessen competition in any relevant market Norwest, with total consolidated assets of $72.1 billion, unless such anticompetitive effects are clearly outweighed operates subsidiary banks in 16 states.1 Norwest is the 13th in the public interest by the probable effect of the transaclargest commercial banking organization in the United tion in meeting the convenience and needs of the commu- States, controlling 1.9 percent of total United States bank- nity to be served. Norwest and Union Texas each operates ing assets, and is the ninth largest commercial banking a subsidiary bank in the San Antonio, Texas, banking organization in Texas, controlling approximately $2.3 bil- market.5 lion in deposits, representing 1.6 percent of all deposits in Norwest operates the fifth largest banking or thrift orgacommercial banking organizations in the state ("state de- nization ("depository institution") in the San Antonio posits").2 Norwest also engages in a number of permissible banking market, controlling deposits of approximately nonbanking activities nationwide. Union Texas, with total $826 million, representing 7.6 percent of total deposits in consolidated assets of $238 million, operates one subsid- depository institutions in the market ("market deposits").6 iary bank in Texas. Union Texas is the 64th largest com- Union Texas operates the 35th largest depository institumercial banking organization in Texas, controlling approx- tion in the market, controlling deposits of approximately imately $227 million in deposits, representing less than $15.3 million, representing less than 1 percent of market 1 percent of state deposits. After consummation of this deposits. On consummation of this proposal, Norwest proposal, Norwest would become the eighth largest com- would remain the fifth largest depository institution in the mercial banking organization in Texas, controlling approx- San Antonio banking market, controlling deposits of apimately $2.6 billion in deposits, representing 1.8 percent of proximately $842 million, representing 7.7 percent of marstate deposits. ket deposits. The market would remain moderately concentrated, as measured by the Herfindahl-Hirschman Index Interstate Analysis ("HHI"),7 and numerous competitors would remain in this market. Based on all the facts of record, the Board con- Section 3(d) of the BHC Act, as amended by section 101 of cludes that consummation of this proposal would not result the Riegle-Neal Interstate Banking and Branching Effi- in any significantly adverse effect on competition or conciency Act of 1994, allows the Board to approve an appli- centration of banking resources in the San Antonio or any cation by a bank holding company to acquire control of a other relevant banking market. bank located in a state other than the home state of such bank holding company, if certain conditions are met. For purposes of the BHC Act, the home state of Norwest is Minnesota, and Norwest would acquire a bank in Texas.3 The conditions for an interstate acquisition under section 3(d) are met in this case.4 In view of all the facts of record, the Board is permitted to approve this proposal 5. The San Antonio banking market is approximated by Bexar, under section 3(d) of the BHC Act. Comal, Guadalupe, Kendall, and Wilson Counties, all in Texas. 6. Market data are as of June 30, 1995. Market share data 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 commercial banks. See Midwest Financial Group, 1. Asset data are as of December 31, 1995. 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 2. State deposit data are as of June 30, 1995. 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly 3. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding included thrift deposits in the calculation of market share on a company's home state is the state in which the operations of the bank 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal holding company's banking subsidiaries were principally conducted Reserve Bulletin 52 (1991). on July 1, 1966, or the date on which the company became a bank 7. On consummation of this proposal, the HHI would increase by holding company, whichever is later. 2 points to 1060. Under the revised Department of Justice Merger 4. See 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in and (B). Norwest is adequately capitalized and adequately managed. which the post-merger HHI is between 1000 and 1800 is considered Union Texas's subsidiary bank has been in existence and has continu- moderately concentrated. The Justice Department has informed the ously operated for more than five years, as required under Texas law. Board that a bank merger or acquisition generally will not be chal- In addition, on consummation of this proposal, Norwest and its lenged (in the absence of other factors indicating anticompetitive affiliates would control less than 10 percent of the total amount of effects) unless the post-merger HHI is at least 1800 and the merger deposits of insured depository institutions in the United States, and increases the HHI by more than 200 points. The Justice Department less than 20 percent of the total amount of deposits of insured has stated that the higher than normal threshold for an increase in the depository institutions in Texas, as required by state law. The Texas HHI when screening bank mergers and acquisitions for anticompetibanking commissioner has informally advised the Board that all tive effects implicitly recognizes the competitive effects of limitedcriteria of state law are satisfied in this case. purpose lenders and other non-depository financial entities. 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Legal Developments 669 Other Factors under the BHC Act An institution's most recent CRA performance evaluation is a particularly important consideration in the applica- The BHC Act also requires the Board to consider the tions process because it represents a detailed on-site evalufinancial and managerial resources and future prospects of ation of the institution's overall record of performance the companies and banks involved, the convenience and under the CRA by its primary federal supervisor.10 In needs of the community to be served, and certain other addition, the Board considers an institution's policies and supervisory factors. practices for compliance with applicable fair lending laws. The Board also takes into account information on an insti- A. Supervisory Factors tution's lending activities that assist in meeting the credit needs of low- and moderate-income neighborhoods, in- The Board has carefully considered the financial and man- cluding programs and activities initiated since its most agerial resources and future prospects of Norwest, Union recent CRA performance examination. Texas, and their respective subsidiaries, as well as other Performance Examinations. All of Norwest's subsidiary supervisory factors in light of all the facts of record. These banks, including the banks conducting banking activities in facts include supervisory reports of examination assessing the six metropolitan areas discussed in Protestant's comthe financial and managerial resources of the organizations ments, received a CRA performance rating of "satisfactoand confidential financial information provided by Nor- ry" or "outstanding" in their most recent evaluation for west. The Board notes that Norwest would contribute CRA performance by their primary federal supervisor. In additional capital to Union Bank that would strengthen the particular, Norwest banks received "outstanding" ratings bank's assets, earnings, and reserves. Based on these and from the Comptroller of the Currency ("OCC") in the all other facts of record, the Board concludes that all the metropolitan areas of Denver, Des Moines and supervisory factors under the BHC Act, including financial Minneapolis/St. Paul, including Norwest's lead subsidiary and managerial resources, weigh in favor of approving this bank, Norwest Bank Minnesota, National Association, proposal. Minneapolis, Minnesota ("Norwest Minnesota").11 Norwest's subsidiary banks in the metropolitan areas of Phoe- B. Convenience and Needs Factor nix, Albuquerque, and Lubbock were rated "satisfactory" by the OCC at their most recent CRA performance evaluations.12 Union Bank also received a "satisfactory" rating The Board has long held that consideration of the convefrom the OCC for CRA performance as of May 4, 1995. nience and needs factor includes a review of the records of the relevant depository institutions under the Community Examiners performed a fair lending review of home Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As purchase and home improvement loan files at these Norprovided in the CRA, the Board has evaluated this factor in west subsidiary banks. This review found that minority light of examinations by the primary federal supervisor of applicants were not denied credit on a prohibited basis at the CRA performance records of the relevant institutions. The Board also has carefully considered comments from Minnesota ACORN Fair Housing ("Protestant") contend- ment Opportunity Commission ("EEOC"), and the EEOC has jurisdiction for determining whether a company is in compliance with ing that Norwest and Union Texas have not assisted in equal employment statutes. The Board has previously noted that its meeting the credit needs of low- and moderate-income limited jurisdiction under the specific statutory factors set forth in the areas or areas with predominately minority, particularly BHC Act does not authorize it to adjudicate disputes between a African-American and Hispanic, populations. Protestant commenter and an applicant that arise under a statute administered supports its contentions with housing-related loan data and enforced by another agency. On the other hand, substantiated improper actions may be considered by the Board in light of all facts filed by Norwest's nonbanking mortgage lending subsidof record of an application under the factors in the BHC Act or in the iary, Norwest Mortgage, Inc., Des Moines, Iowa ("Norcontext of the Board's general supervisory authority over its regulated west Mortgage"), under the Home Mortgage Disclosure banking organizations. See Norwest Corporation, 82 Federal Reserve Act ("HMDA") for a number of metropolitan areas,8 and Bulletin 580 (1996). by Union Bank for the metropolitan areas of Laredo and 10. The Board notes that the Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act San Antonio, both in Texas.9 provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the 8. Data for Norwest Mortgage cited by the Protestant are from the applications process. 54 Federal Register 13,742, 13,745 (1989). following metropolitan areas: Phoenix, Arizona; Denver, Colorado; 11. The OCC also rated as "outstanding" Norwest Bank Colorado, Chicago, Illinois; Des Moines, Iowa; Minneapolis/St. Paul, Minne- National Association, Denver, Colorado ( as of November 21, 1994) sota; Albuquerque, New Mexico; and Dallas, Houston, and Lubbock, ("Norwest Colorado"); and Norwest Bank Iowa, National Associaall in Texas. tion, Des Moines, Iowa (as of February 6, 1995) ("Norwest Iowa"). 9. Protestant's comments included four complaints about individual The OCC rated Norwest Minnesota as of June 28, 1994. transactions with Norwest subsidiaries. Those complaints have been 12. The OCC rated as "satisfactory" the performance of Norwest referred to the appropriate federal banking supervisor of the Norwest Bank Arizona, National Association, Phoenix, Arizona (as of Deceminstitution involved for review and consideration. One individual also ber 16, 1994); Norwest Bank New Mexico, National Association, alleges employment discrimination by Norwest in the termination of Albuquerque, New Mexico (as of May 23, 1995) ("Norwest New her employment. Norwest is required under the regulations of the Mexico"); and Norwest Bank Texas, National Association, Lubbock, Department of Labor to file annual reports with the Equal Employ- Texas (as of June 21, 1995) ("Norwest Texas"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

670 Federal Reserve Bulletin • July 1996 any of the examined banks. Moreover, as part of Norwest's chase, home improvement, and van conversion loans at corporate fair lending policies and procedures, senior credit 1 percent below the bank's standard rate for conventional underwriters at Norwest's subsidiary banks perform a sec- home purchase loans. In February 1994, Norwest New ond review of all HMDA-reported loan applications that Mexico created a Small Business Credit Unit to simplify are initially declined to determine if they could be ap- the application and approval process for small businesses proved using alternative credit information sources. Nor- seeking loans under $100,000. Norwest Iowa, in cooperawest's corporate auditors perform a comparative review of tion with local government and community groups, helped selected loan files at Norwest subsidiary banks on a peri- establish the Neighborhood Finance Corporation in 1990 to odic basis to assess compliance with fair lending laws, and provide housing to low- and moderate-income households HMDA data are reviewed at least quarterly by senior and has since committed to purchase $4.2 million of loans management of the subsidiary banks and Norwest. made by the organization and provide a portion of its The OCC examinations found that the community delin- operating funds. As a result of consultation with commueations for all of Norwest's subsidiary banks in the metro- nity groups and the implementation of recommendations politan areas discussed by Protestant were generally rea- through the CMI process, several Norwest subsidiary banks sonable and did not exclude any low- and moderate- have increased their hiring of multilingual employees and income areas. The geographic distribution of credit use of multilingual advertising and brochures. extensions, applications, and denials also were considered Norwest subsidiary banks also participate in several reasonable. Examiners determined that the banks' ascer- government supported programs and efforts of community tainment and marketing efforts were generally effective and organizations to provide housing to low- and moderatein some cases commendable.13 income households. For example, Norwest Iowa, working Lending Activities. All Norwest subsidiary banks use with the Federal Home Loan Bank, the Iowa Housing Norwest's Community Marketing Initiative ("CMI"), an Corporation, and private investors, provided $500,000 to annual planning process that is designed to assess the develop five apartment buildings in Ottumwa, Iowa, for needs of all segments of the communities served. Manag- low-income persons with disabilities. Through Central City ing officers of each bank review demographic, economic, Lending, the bank made 53 loans totaling $1.4 million at and geographic lending distribution data for the delineated reduced rates and with no closing fees to purchase and community, including information gathered from commu- rehabilitate single family homes in central neighborhoods nity advisory panels and surveys. From this review, low- of Davenport, Iowa, and loaned an additional $4.9 million and moderate-income areas are specifically identified, and throughout Iowa to finance 20 low-income housing quantified goals for loan and deposit penetration, market- projects. In 1994, Norwest New Mexico loaned nearly ing, and other CRA-related efforts are adopted. The CMI $4 million to Santa Fe Community Housing Trust to purprogram is approved annually by the board of directors, chase a 48-unit low-income housing development, and and progress under the CMI program is reviewed monthly subsequently made 38 CHOP loans to low-income individby community advisory boards and quarterly by bank uals to purchase units in the project. The bank also orimanagement and the board of directors. ginated 727 VA or FHA home mortgage loans for Several lending programs to assist low- and moderate- $60.4 million during the period covered by its most recent income borrowers have been initiated as a result of the CRA examination. Norwest Minnesota invested $5 million CMI program. For example, through this process Norwest in the National Equity Fund, a national organization that developed and introduced its Community Home Owner- supports local community development corporations, to ship Program ("CHOP"), which offers low- and moderate- fund investments in residential projects that qualify for income first-time home buyers more flexible underwriting federal low-income housing tax credits. An affiliate of the criteria, lower down payment requirements with no private bank, Norwest Investment Services, Inc., Minneapolis, mortgage insurance, credit counseling, and competitive Minnesota, underwrote $9.1 million of housing revenue rates without points or origination fees. In June 1993, bonds to provide subsidized housing to low- income house- Norwest Colorado introduced its Disability Community holds in the Twin Cities area. During 1993, Norwest Colo- Home Ownership Program, which provides home pur- rado originated 440 CHOP loans for a total of $46.5 million, which constituted 47 percent of its total home purchase loan originations, and, during the first 13. Protestant criticizes the outreach efforts of Norwest Minnesota six months of 1994, the bank originated an additional to the Hmong community of St. Paul, an Asian community of approx- 243 CHOP loans for a total of $12.4 million, which repreimately 25,000 residents. Examiners found that Norwest Minnesota sented 44 percent of its total home purchase loan originahad demonstrated a strong commitment to ascertaining the credit tions.14 needs of its community, including the use of focus groups among several minority communities, including Asians, ongoing contact with community groups, and the establishment of community advisory boards in several local markets. Examiners also noted that Norwest Minnesota effectively marketed its credit products and services to all 14. In addition, Norwest Mortgage participates in government prosegments of the community, including low- and moderate-income grams such as the Federal Home Loan Bank's Affordable Housing areas. The bank's marketing efforts include advertisements in commu- Program, which provides grant funds for down payment and closing nity newspapers that focus on African-American, Hispanic, Asian, cost assistance, and Department of Housing and Urban Developand Native American readers. ment's section 184 programs, which provides mortgages for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 671 The Board has carefully reviewed HMDA data from Record of Performance in Texas. Norwest has a satisfac- Norwest Mortgage cited to support Protestant's conten- tory record of CRA performance in Texas. All of its tions.15 These data show that in some respects, such as 14 subsidiary Texas banks have received either an "outpercentage of applications received from African- standing" or "satisfactory" rating from their primary fed- American and Hispanic applicants, Norwest's performance eral supervisor at their most recent examination for CRA is comparable to or exceeds the performance of lenders in performance. In the metropolitan areas discussed in Protesthe aggregate in a substantial number of the metropolitan tant's comments, Norwest Texas received a "satisfactory" areas analyzed by Protestant. In other respects, however, rating as previously noted, and Norwest Bank Texas San the data show disparities in denial rates to African- Antonio, N.A., Texas ("Norwest San Antonio"), received American and Hispanic loan applicants as compared to a "satisfactory" rating for CRA performance from the white applicants. OCC as of October 4, 1993.18 The Board is concerned when the record of an institution Examiners conducted a fair lending review of Norwest indicates such disparities in lending, and believes that all Texas, including a comparison of the loan files of all banks are obligated to ensure that their lending practices Hispanic applicants denied HMDA-reported loans in 1994 are based on criteria that assure not only safe and sound with the loan files of nonminority individuals whose applilending, but also assure equal access to credit by creditwor- cations were approved for loans. The examination found thy applicants regardless of race. The Board recognizes, no evidence of discrimination or disparate treatment of however, that HMDA data alone provide an incomplete Hispanic applicants or of practices intended to discourage measure of an institution's lending in its community be- individuals from applying for credit. The bank's policies, cause these data cover only a few categories of housing- procedures, and training programs were found to be aderelated lending and provide limited information about the quate to ensure that employees do not illegally discourage covered loans.16 HMDA data therefore have limitations or pre-screen applicants.19 Norwest Texas also performed a that make the data an inadequate basis, absent other infor- second review of all applications before denial to ensure mation, for concluding that an institution has engaged in that all applicants were treated fairly. Examiners also found illegal discrimination in lending.17 that Norwest Texas solicited credit applications from residents of all segments of its community, including low- and moderate-income areas. The bank participated in a local television program that provided information to the Hispurchase of homes on Native American reservations. Norwest Mortpanic community concerning available banking products gage also participates in the outreach and marketing efforts of other organizations, including the Neighborhood Reinvestment Corpora- and services, employs Spanish speaking employees to protion, the National Community Reinvestment Corporation, and the Urban League. 15. Nonbanking companies that are affiliated with depository institutions were not included by Congress in the provisions of the CRA, and grams present several advantages, including lower interest rates and the CRA by its terms only applies to insured depository institutions. down payment requirements, for borrowers whose overall financial 12 U.S.C. § 2902(2); The Mitsui Bank, Limited, 76 Federal Reserve condition may not meet the underwriting criteria for conventional Bulletin 381 (1990). However, insured depository institutions may financing. Moreover, the record indicates that Norwest has in place have the lending activities of nonbanking affiliates in their communi- procedures for compliance with fair lending laws that extend throughties taken into account as part of their CRA performance record. In out the mortgage operations of Norwest and include fair lending this case, Norwest provides conventional mortgage loans primarily training of all employees who have contact with customers, a second through Norwest Mortgage in the communities served by Norwest review of all applications denied on initial review, and a quarterly depository institutions, and the loans made by Norwest Mortgage have analysis of HMDA data in all markets. Other Norwest divisions, such been considered by the primary federal supervisory agencies of the as Norwest Audit Services, conduct comparable analyses of selected Norwest banks in their CRA performance examinations. Accordingly, loan files. See Norwest Corporation, 82 Federal Reserve Bulletin the Board has considered the HMDA data of Norwest Mortgage on a (1996) (Order dated May 6, 1996). Based on all the facts of consolidated basis with data from Norwest's subsidiary banks in the record, and for the reasons discussed above, the Board has concluded metropolitan areas discussed by Protestant. that action on this application should not be delayed in order to 16. For example, these data do not provide a basis for an indepen- conduct a special examination of Norwest Mortgage. dent assessment of whether an applicant who was denied credit was in 18. Norwest acquired Norwest San Antonio in August 1995, and did fact creditworthy. Thus, credit history problems and excessive debt not operate a bank in San Antonio before this acquisition. Norwest levels relative to income—reasons most frequently cited for a credit San Antonio has not been examined for CRA performance since its denial—are not available from the HMDA data. acquisition by Norwest. 17. Protestant requests that the Board conduct an on-site examina- 19. Protestant criticizes Norwest Texas for the large percentage of tion of Norwest Mortgage in light of its contentions relating to its HMDA-reported loans to Hispanics that were for home improve- Norwest Mortgage's HMDA data. Protestant also alleges on the basis ments rather than for home purchases. Norwest replied that Norwest of these data that Norwest Mortgage may "steer" minority borrowers banks typically do not originate conventional home purchase loans, to less desirable government-sponsored mortgage loan programs in which are provided by Norwest Mortgage. The Board notes that the the Lubbock market. The Board notes that advising applicants of CRA does not require a bank to use specific lending products or different loan programs, including government-sponsored lending pro- services to meet the credit needs of its community. Rather, the Board grams, is not illegal as long as this advice is not provided on a basis has recognized the importance of allowing banks to focus their lendprohibited by law, such as race or national origin. Norwest denies that ing efforts on particular community needs in meeting their responsibilits lending activities violate fair lending laws and states that the type ities under the CRA. See, e.g., Dominion Bancshares Corporation, and size of the loans made by Norwest Mortgage to minorities in the 72 Federal Reserve Bulletin 787 (1986); C&S/Sovran Corporation/ Lubbock market reflect loan demand by these borrowers. In particular, Avantor Financial Corporation, 76 Federal Reserve Bulletin 779 Norwest maintains that government-sponsored mortgage loan pro- (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

672 Federal Reserve Bulletin • July 1996 vide translations for customers, and uses Spanish language nience and needs considerations, including Norwest's home mortgage counseling books from the Federal Na- record of performance and its plans for operating Union tional Mortgage Association. Bank, are consistent with approval of this application.23 Norwest Texas, and Norwest's other subsidiary banks in Texas, employ Norwest's annual CMI planning process. Conclusion Under the CMI, Norwest Texas has established a Community Advisory Board ("CAB"), composed of persons with Based on the foregoing and all other facts of record, interests reflecting a cross section of Lubbock and San including all the commitments made by Norwest in con- Angelo, Texas, to assist in ascertaining credit needs, estab- nection with this proposal, the Board has determined that lishing products and programs to address those needs, and the application should be, and hereby is, approved.24 The assessing the eifectiveness of the bank's programs in pene- Board's approval is expressly conditioned on compliance trating all segments of the community. Based on the results of the CAB program and demographic data, Norwest Texas's management and its board of directors develop formal 23. Protestant also maintains that the monthly fee charged for Norwest's Instant Cash and Check ATM card and for providing written plans for each delineated community. As part of cancelled checks with monthly account statements have a disproporthis program, the bank makes loans available under Nor- tionate impact on low- and moderate-income and senior citizens. In west's CHOP initiative for low- and moderate-income addition, Protestant contends that Norwest Minnesota charges excesbuyers purchasing their first home.20 The bank also com- sive fees for checks returned for nonsufficient funds ("NSF checks") and does not make overdraft protection readily available, thereby mitted $2 million in May 1995 for new home construction discouraging individuals with lower incomes and senior citizens, who in Chatman Hill, a low- and moderate-income area. may be more likely to write NSF checks, from maintaining bank In addition to programs developed under CMI, Norwest accounts. These comments, however, provide an incomplete picture. Texas committed $25,000 to the Community Housing Re- The Instant Cash and Check ATM card is a specialized ATM card that permits a customer to purchase goods from any merchant accepting a sources Board to provide down payment and closing cost VISA credit card. Norwest also offers the Instant Cash ATM card for assistance for home loan applicants and to provide levertransactions at a Norwest ATM for no fee in most states and a nominal age for the program's grant application to the City of fee in some markets. In addition, Norwest offers special checking Lubbock. Norwest Texas also has committed funds to accounts with no minimum deposit or fees, and has offered customers support the rehabilitation of small businesses in downtown the free option of having a printed statement that displays reduced photocopies of 15 checks on a single page. Overdraft protection is Lubbock and the relocation of businesses displaced by also offered to all Norwest checking account customers based on local freeway construction. underwriting criteria similar to that used for other unsecured exten- As noted, Union Bank received a "satisfactory" CRA sions of credit. performance rating at its most recent examination by the Moreover, while the Board has recognized that banks help serve the banking needs of their communities by making available basic bank- OCC. The examination of Union Bank also found no ing services at a nominal or no charge, the CRA does not require that evidence of discrimination or other illegal credit practices banks limit the fees charged for services. The record indicates that or practices that would discourage applications for credit, Norwest has an established record of providing a full range of banking and found that Union Bank's policies, procedures, and services in its delineated communities, included substantial lending training programs adequately addressed compliance with services, and offers access to a full range of retail banking services fair lending laws.21 Moreover, Norwest's CRA-related pol- through various accounts. The record does not support the conclusion that the fees charged by Norwest for checking accounts or other icies and programs would be implemented at Union Bank services are based in any way on a factor prohibited by law or that the on consummation of this proposal.22 manner of disclosing these fees violates applicable regulations, as Conclusion on Convenience and Needs Factor. As dis- alleged by Protestant. 24. Protestant requested that the Board hold a public hearing or cussed above, the Board has carefully reviewed the relepublic meeting to permit its members and other members of the public vant CRA examination information, the programs impleto ask questions directly of Norwest and Union Texas. Section 3(b) of mented by the relevant institutions, the policies in place to the BHC Act does not require the Board to hold a public hearing or ensure fair lending, relevant HMDA and other lending meeting on an application unless the appropriate supervisory authority data, comments and concerns raised by Protestants, and for the bank to be acquired makes a timely written recommendation of denial of the application. In this case, neither the OCC nor any other facts of record in its consideration of the effect of this appropriate state supervisory authority has recommended denial. transaction on the convenience and needs of the commu- Under the Board's rules, the Board may, in its discretion, hold a nity. Based on this review, the Board concludes that conve- public hearing or meeting on an application to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and 262.25(d). The Board has carefully considered Protestant's request in light of all the facts of 20. This program was introduced in June 1994. As of the date of the record. Protestant has had ample opportunity to submit its views and CRA examination in June 1995, Norwest Texas had committed has, in fact, submitted substantial materials that have been considered $10 million to the program and had funded 27 loans for $782,000. by the Board in acting on the application. Protestant does not indicate 21. Examiners noted technical fair lending law violations that were what, if any, additional views would be expressed at a public hearing not considered to affect the substance of the bank's credit granting or meeting, or why its written submission does not adequately present process. the views of its members. Based on all the facts of record, the Board 22. Examiners questioned the lack of sophisticated information has determined that public or private hearings or meetings are not management systems at Union Bank to geocode lending information. necessary to clarify the factual record or otherwise warranted in this Norwest would implement its information management systems at case, and, accordingly, the request for public hearings or meetings on Union Bank on consummation of this proposal. the applications are denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 673 by Norwest with all the commitments made in connection Section 4(c)(8) of the BHC Act provides that a bank with this proposal and with the conditions referred to in holding company may engage, with Board approval, in any this order. For purposes of this action, the commitments activity that the Board determines to be "so closely related and conditions relied on by the Board in reaching this to banking or managing or controlling banks as to be a decision are deemed to be conditions imposed in writing proper incident thereto." The Board previously has deterand, as such, may be enforced in proceedings under appli- mined by regulation that engaging in commercial finance cable law. and providing management consulting services to unaffili- This proposal shall not be consummated before the fif- ated banks and non-bank depository institutions are activiteenth calendar day following the effective date of this ties that are closely related to banking and permissible for order or later than three months following the effective date bank holding companies under section 4(c)(8) of the BHC of this order, unless such period is extended for good cause Act.2 BNC has committed that BNC Financial will conduct by the Board or by the Federal Reserve Bank of Minne- these activities in accordance with the limitations imposed apolis, acting pursuant to delegated authority. by the Board's regulations. By order of the Board of Governors, effective May 29, In connection with its commercial finance activities, 1996. BNC Financial proposes to acquire debt at a discount from its stated principal amount, including bank loans or other Voting for this action: Chairman Pro Tempore Greenspan and debt in default at the time of acquisition. In some cases, Governors Kelley, Lindsey, Phillips, and Yellen. BNC Financial would take an active role in restructuring the defaulted debt, including participating on creditors' WILLIAM W. WILES committees. In other cases, BNC Financial would sell the Secretary of the Board debt and related collateral to independent third parties shortly after acquisition. Orders Issued Under Section 4 of the Bank Holding The Board previously has determined by order that the Company Act acquisition of debt in default is an activity that is closely related to banking.3 BNC has committed to engage in this BNCCORP, INC. activity subject to the limitations and conditions relied Bismarck, North Dakota upon by the Board in Norwest. In particular, BNC Financial will divest any shares or assets securing debt in default Order Approving a Notice to Engage in Certain within the time period set out for the divestiture of shares Management Consulting and Commercial Finance acquired in satisfaction of a debt-previously-contracted Activities ("DPC") in the BHC Act unless such shares or assets are a permissible investment for a bank holding company.4 BNC BNCCORP, INC., Bismarck, North Dakota ("BNC"), a has stated that BNC Financial will not purchase equity of bank holding company within the meaning of the Bank obligors of criticized debt acquired by BNC Financial Holding Company Act ("BHC Act"), has applied for (other than equity that may be collateral for such debt) and Board approval under section 4(c)(8) of the BHC Act will stand only in the position of a creditor. BNC also has (12 U.S.C. § 1843(c)(8)) and section 225.23 of Regulacommitted that BNC Financial will not acquire criticized tion Y (12 C.F.R. 225.23) to acquire substantially all the assets or defaulted debt from its affiliated banks, and will assets of Cambridge Bank Professionals, LLC, St. Cloud, not acquire debt in default that is secured by shares of Minnesota ("Cambridge"), through a newly formed and banks or bank holding companies. wholly owned subsidiary, BNC Financial Corporation, St. In order to approve this notice, the Board must consider Cloud, Minnesota ("BNC Financial"). Cambridge prowhether the activities proposed "can reasonably be exposes to provide management consulting services to nonafpected to produce benefits to the public, such as greater filiated financial institutions as permitted by Regulation Y. convenience, increased competition, or gains in efficiency, In addition, BNC proposes that BNC Financial engage that outweigh possible adverse effects, such as undue conde novo in commercial finance activities. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published 2. 12 C.F.R. 225.25(b)(1) and (11). Neither BNC nor its subsidiaries (61 Federal Register 10,581 and 15,945 (1996)). The time would own or control, directly or indirectly, any equity securities in for filing comments has expired, and the Board has consid- institutions to which BNC Financial provides management consulting ered the notice and all comments received in light of the services. factors set forth in section 4(c)(8) of the BHC Act. 3. Norwest Corporation, 81 Federal Reserve Bulletin 1128 (1995) (' 'Norwest"). BNC, with $240.4 million in total consolidated assets, 4. Under the BHC Act, a bank holding company must divest any controls bank subsidiaries in North Dakota and Minne- shares or assets acquired in satisfaction of DPC within two years of sota.1 BNC also engages directly and through subsidiaries the date that the shares or assets were acquired. See 12 U.S.C. in a variety of permissible nonbanking activities. § 1843(c)(2); 12 C.F.R. 225.22(c)(1). For this purpose, BNC has committed that it will consider shares or assets acquired in satisfaction of defaulted debt to have been acquired on the date that the debt is acquired. BNC also may apply for three one-year extensions to the 1. Asset data are as of December 31, 1995. divestiture period. See 12 C.F.R. 225.22(c)(1). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

674 Federal Reserve Bulletin • July 1996 centration of resources, decreased or unfair competition, These activities shall not be commenced later than three conflicts of interest, or unsound banking practices."5 As months after the effective date of this order, unless such part of its evaluation of these factors, the Board considers period is extended for good cause by the Board or, pursuant the financial condition and managerial resources of the to delegated authority, by the Federal Reserve Bank of notificant and its subsidiaries and the effect of the proposed Minneapolis. transaction on these resources.6 Based on all the facts of By order of the Board of Governors, effective May 1, the record, including relevant reports of examination, the 1996. Board has concluded that financial and managerial considerations are consistent with approval of this proposal. Voting for this action: Chairman Pro Tempore Greenspan and The Board expects that the proposal that BNC Financial Governors Kelley, Phillips, and Yellen. Absent and not voting: Goverengage de novo in commercial finance activities would nor Lindsey. result in greater competition in the market for these ser- JENNIFER J. JOHNSON vices and an increase in funding available to lenders as Deputy Secretary of the Board credit is purchased by BNC Financial. The Board also expects that the proposed management consulting activities Cardinal Bancshares, Inc. would produce efficiencies and economies of scale for Lexington, Kentucky BNC and would thereby permit BNC to provide more effective consulting services to financial institutions. In Order Approving a Notice to Engage in Certain Data sum, the proposal should result in greater convenience for Processing Activities BNC's customers and in the availability of a wider range of services in the marketplace. Cardinal Bancshares, Inc., Lexington, Kentucky ("Cardi- To address any potential adverse impact from its perfornal"), a bank holding company within the meaning of the mance of the proposed activities, BNC has committed to Bank Holding Company Act ("BHC Act"), has applied for conduct the activities pursuant to conditions the Board the Board's approval under section 4(c)(8) of the BHC Act previously has found satisfactory to mitigate potential ad- (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's verse effects.7 In addition, there is no evidence in the Regulation Y (12 C.F.R. 225.23), for its wholly owned record to indicate that the acquisition of Cambridge and the thrift subsidiary, Security First Network Bank, Pineville, conduct of the proposed activities would result in any Kentucky ("SFNB"), to acquire Five Paces Software, Inc., undue concentration of resources or decreased or unfair Atlanta, Georgia ("Five Paces"), and thereby engage nacompetition, because the activities involve a market with tionwide in data processing activities related to providing many competitors and no significant barriers to entry. banking and financial services over the Internet.1 SFNB Accordingly, the Board has concluded that the perforproposes to acquire all the voting shares of Five Paces.2 mance of the proposed activities by BNC Financial can Notice of this proposal, affording interested persons an reasonably be expected to produce public benefits that opportunity to submit comments, has been published outweigh possible adverse effects under the proper incident (60 Federal Register 39,739 (1995)). The time for filing to banking standard of section 4(c)(8) of the BHC Act. comments has expired, and the Board has considered the Based on the foregoing and all the facts of record, the Board has determined that the notice should be, and hereby is, approved. Approval of this notice is specifically conditioned on compliance by BNC with the commitments made 1. SFNB received approval from the Office of Thrift Supervision ("OTS") of a proposal to provide electronic banking services to its in connection with this notice. The Board's determination customers over the Internet. See Office of Thrift Supervision, Order also is subject to all the terms and conditions set forth in No. 95-88 (May 8, 1995). The Board believes that the provision of Regulation Y, including those in sections 225.7 and computer banking services by SFNB to its customers over the Internet 225.23(b) (12 C.F.R. 225.27 and 225.23(b)), and to the in accordance with the authority granted by the OTS, and as specifi- Board's authority to require such modification or termina- cally described in this proposal, is consistent with Cardinal's existing authority under the BHC Act and Regulation Y to operate a savings tion of the activities of a bank holding company or any of association. See 12 C.F.R. 225.25(b)(9). SFNB also operates as a its subsidiaries as the Board finds necessary to ensure traditional thrift institution at its home office in Pineville, Kentucky. compliance with, and to prevent evasion of, the provisions 2. SFNB will acquire Five Paces through the merger of Five Paces of the BHC Act and the Board's regulations and orders with and into SFNB's wholly owned subsidiary, Equitable Service thereunder. For purposes of this transaction, the commit- Corporation, Pineville, Kentucky, which thereafter will use Five Paces's name. SFNB has committed to increase the number of memments and conditions to which BNC has agreed shall be bers of the board of directors of Five Paces to ensure that SFNB will deemed to be conditions imposed in writing by the Board control the election of a majority of that board. The OTS has approved in connection with its findings and decision, and, as such, the acquisition of Five Paces by SFNB. See Letter dated May 17, may be enforced in proceedings under applicable law. 1996, from Ronald N. Karr, Regional Director, OTS, to Stuart G. Stein, Esq. Five Paces, which is currently owned by various stockholders and employees of SecureWare, Inc., Atlanta, Georgia ("Secure- Ware"), developed the software used by SFNB to offer its Internet 5. 12 U.S.C. § 1843(c)(8). banking services. At present, SFNB is the only institution using 6. See 12 C.F.R. 225.24. software developed by Five Paces to permit the execution of tradi- 7. See Norwest Order at 1129, n.12. tional banking transactions over the Internet. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 675 proposal and all comments received in light of the factors Regulation Y also provides that bank holding companies set forth in section 4(c)(8) of the BHC Act. may engage in incidental activities that are necessary to Cardinal, with approximately $675 million in total con- carry on an activity that is closely related to banking.8 solidated assets, is the 16th largest commercial banking All of Five Paces's data processing and transmission organization in Kentucky, controlling deposits of approxi- activities are provided in connection with transactions in mately $570.7 million.3 Cardinal controls two subsidiary accounts maintained by a financial institution. The data banks and two thrifts in Kentucky. involve the type of "financial, banking, or economic" information contemplated by Regulation Y.9 Under Regula- Description of Proposed Activities tion Y, a bank holding company may provide permissible data processing and transmission services by any techno- Five Paces would provide data processing and data trans- logical means. The Board previously has concluded that mission services to unaffiliated financial institutions to the development, production, and sale of software that assist these institutions in offering banking and financial allows a customer to conduct banking transactions using services to their customers over the Internet.4 Five Paces personal computers is closely related to banking and enengages in the design and development of computer-based compassed within the activities permissible under the delivery systems for banking services that permit custom- Board's data processing regulation.10 Thus, it is within the ers of any financial institution to conduct banking transac- scope of Regulation Y for a bank holding company to tions with, and purchase banking products and services design, develop, and market products to process and transfrom, the institution over the Internet.5 Five Paces also mit financial, banking, or economic data through the Interprovides marketing and technical support (including cus- net between customers and financial institutions. Based on these and all the facts of record, the Board concludes that tomization and installation services). Five Paces also exthe activities proposed by Five Paces are permissible data pects to develop additional data processing and transmisprocessing and transmission services and are closely resion services that would allow customers of financial lated to banking within the meaning of the BHC Act. institutions to obtain electronic access to their accounts through alternative telecommunications channels, such as computer modems connected to public telephone lines. Proper Incident to Banking Analysis Closely Related to Banking Analysis In order to approve this proposal, the Board also must determine that the proposed activities are a proper incident Section 4(c)(8) of the BHC Act provides that a bank to banking, that is, that the proposal "can reasonably be holding company may, with Board approval, engage in any expected to produce benefits to the public, such as greater activity that the Board determines to be "so closely related convenience, increased competition, or gains in efficiency, to banking or managing or controlling banks as to be a that outweigh possible adverse effects, such as undue conproper incident thereto."6 The Board has determined that centration of resources, decreased or unfair competition, or certain data processing activities are closely related to unsound banking practices."11 banking and, therefore, permissible for bank holding com- As part of its review of these factors, the Board considpanies under section 4(c)(8) of the BHC Act. In particular, ers the financial and managerial resources of the notificant, section 225.25(b)(7) of Regulation Y permits bank holding its subsidiaries, and the company to be acquired, and the companies to provide data processing and transmission effect the transaction would have on those resources.12 services, facilities (including software), data bases, or ac- Based on all the facts of record, the Board concludes that cess to such services, facilities, or data bases by any financial and managerial considerations are consistent with technological means, as long as the data to be processed or approval of this notice.13 There is no evidence in the record furnished are "financial, banking, or economic" in nature.7 hardware must not constitute more than 30 percent of the cost of any packaged offering. Id. Five Paces has committed to comply with these 3. Asset data are as of March 31, 1996. Deposit data are as of limitations. December 31, 1995. 8. See 12 C.F.R. 225.21(a)(2). 4. For purposes of this order, a financial institution means a bank, a 9. Prior to commencing any new activity not described in the notice, bank holding company, a thrift institution, a thrift holding company, Five Paces must consult with the Federal Reserve System in order to and any subsidiary of any of these companies. ensure that the activity will satisfy the criteria set forth in the BHC 5. These services include opening checking, money market and Act and Regulation Y, and to give the Federal Reserve System an certificate of deposit accounts; transferring funds between accounts; opportunity to consider whether a separate notice would be required. viewing and reconciling checking account registers; and paying bills. 10. See, e.g., Citicorp, 72 Federal Reserve Bulletin 497 (1986); and 6. 12 U.S.C. § 1843(c)(8). The Royal Bank of Canada, 82 Federal Reserve Bulletin 363 (1996). 7. 12 C.F.R. 225.25(b)(7). Regulation Y requires that data pro- 11. 12 U.S.C. § 1843(c)(8). cessing services be provided pursuant to a written agreement, and 12. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 places certain limitations on the facilities and hardware provided with Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 the data processing services. In particular, the facilities must be Federal Reserve Bulletin 155 (1987). designed, marketed, and operated for the processing and transmission 13. In connection with the acquisition of Five Paces, Cardinal of financial, banking, or economic data; hardware must be provided proposes to dividend ownership of SFNB to Cardinal's shareholders. only in conjunction with permissible software; and general purpose A number of Cardinal's management officials will continue to serve as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

676 Federal Reserve Bulletin • July 1996 to indicate that this proposal would produce any other transactions using personal computers without visiting a significant adverse effects, such as decreased or unfair bank branch and without the bank establishing a separate competition, undue concentration of resources, or conflicts proprietary computer network. The affiliation of Five Paces of interests.14 with financial institutions also would allow Five Paces to The Board has carefully considered the possibility that, draw on the expertise of financial institutions in developing by helping to make banking services available over the products and services that would best meet the needs of Internet, which is a non-proprietary computer network financial institutions. In addition, the proposed transaction accessible by users worldwide, the activities of Five Paces and resulting capital infusion would enable Five Paces to could expose financial institutions, their customers, infor- develop additional products and services, which would mation, and transactions to electronic interception, interfer- benefit potential customers and increase competition. ence, or fraud. The software developed by Five Paces uses Based on all the facts of record, the Board has detercryptography to attempt to maintain the privacy of transac- mined that the balance of the public interest factors it is tions, and various security measures designed to protect the required to consider under the proper incident to banking underlying data. standard of section 4(c)(8) of the BHC Act is favorable and The Board recognizes that neither the software devel- consistent with approval of this notice. oped by Five Paces nor any other software product or security system can provide absolute protection against Conclusion these risks. The nature of these risks is not different, however, from those to which more traditional banking Based on all the facts of record, the Board has determined operations are exposed in other forms. The Board also that this proposal should be, and hereby is, approved. The expects banking organizations considering whether to pro- Board's approval is specifically conditioned on compliance vide services over the Internet to analyze carefully the with the commitments made in connection with this notice associated risks, and to evaluate carefully whether those and with the conditions referred to in this order. The risks are consistent with their policies relating to the secu- Board's determination also is subject to all the conditions rity of customer information and other data.15 The Board set forth in Regulation Y, including those in sections 225.7 believes that such analyses and evaluations would mitigate and 225.23(g)(3) (12 C.F.R. 225.7 and 225.23(g)(3)), and the risk that conducting banking transactions over the to the Board's authority to require such modification or Internet would result in unsound banking practices.16 termination of the activities of a bank holding company or The Board expects that the acquisition of Five Paces by any of its subsidiaries as the Board finds necessary to SFNB would enhance consumer convenience by expand- ensure compliance with and to prevent evasion of the ing the availability of electronic banking services and by provisions of the BHC Act and the Board's regulations and making those services available in new ways. In particular, orders issued thereunder. For purposes of this action, these customers would be able to conduct banking and financial conditions and commitments 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 directors and officers of SFNB and hold a substantial amount of SFNB proceedings under applicable law. voting shares. Cardinal has submitted a plan that, within 120 days of This transaction shall not be consummated later than the spin-off, would eliminate all management and director interlocks between Cardinal and SFNB, raise additional capital for SFNB, and three months after the effective date of this order, unless reduce the overlapping ownership between Cardinal and SFNB. Upon such period is extended for good cause by the Board or by fulfillment of this plan, Cardinal would no longer be deemed to the Federal Reserve Bank of Cleveland, acting pursuant to control SFNB for purposes of the BHC Act. See 12 U.S.C. delegated authority. § 1841(g)(3); 12 C.F.R. 225.32 and 225.139. By order of the Board of Governors, effective May 21, 14. Cardinal has committed that Five Paces will not use or disclose to any person any confidential information concerning financial insti- 1996. tution clients of Five Paces or customers of these financial institutions without the express consent of the client. The Board also notes that Voting for this action: Chairman Pro Tempore Greenspan and SecureWare is an "affiliate" of SFNB within the meaning of sec- Governors Kelley, Phillips, and Yellen. Absent and not voting: Govertions 23A and 23B of the Federal Reserve Act, and, therefore, that nor Lindsey. transactions between SecureWare and SFNB or Five Paces would be subject to the limitations established by those statutes. JENNIFER J. JOHNSON 15. The Board also expects financial institutions, as part of this evaluation, to implement any modifications to their information secu- Deputy Secretary of the Board rity procedures and controls that appear to be necessary or appropriate in light of the risks associated with Internet-based services. Dresdner Bank AG 16. Cardinal, SFNB, and Five Paces have committed that they will Frankfurt, Germany not represent that the Board's approval of this notice constitutes an endorsement of Five Paces's products or services by the Board, the Federal Reserve System, or any Federal Reserve Bank. Cardinal, Order Approving Acquisition of Nonbanking Companies SFNB, and Five Paces will not indicate in any of their marketing efforts or materials, either oral or written, that the Federal Reserve Dresdner Bank AG, Frankfurt, Germany ("Notificant"), a System or any part thereof assures or has approved or endorsed the security, functionality, or effectiveness of products or services offered foreign banking organization subject to the provisions of by Five Paces. the Bank Holding Company Act ("BHC Act"), has re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 677 quested Board approval under section 4(c)(8) of the BHC ject to the recordkeeping and reporting obligations, fidu- Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the ciary standards, and other requirements of the Investment Board's Regulation Y (12 C.F.R. 225.23) to acquire all the Advisers Act and the SEC. voting interests in RCM Capital Management, California As noted above, the Board previously has determined by Limited Partnership ("RCM Management"), and thereby regulation that the proposed investment advisory activities engage in providing investment and financial advisory of RCM Management and the proposed trust activities of services under section 225.25(b)(4) of Regulation Y RCM Trust are closely related to banking for purposes of (12 C.F.R. 225.25(b)(4)), and RCM Capital Trust Com- the BHC Act.6 Notificant has agreed to conduct these pany ("RCM Trust"), both of San Francisco, California, activities in accordance with the limitations set forth in and thereby engage in performing functions or activities Regulation Y. that may be performed by a trust company under section Notificant also has requested Board approval to provide 225.25(b)(3) of Regulation Y (12CF.R. 225.25(b)(3)).1 administrative services to closed-end funds and mutual Notificant also proposes to engage through RCM Manage- funds, including proprietary mutual funds. The administrament in providing administrative services to closed-end tive services that RCM Management would provide ininvestment companies and open- end investment compa- clude computing the fund's performance data, coordinating nies ("mutual funds"), including mutual funds that are communications and activities between the investment adsold primarily to customers of RCM Management or Noti- viser and other service providers, accounting and recordficant ("proprietary mutual funds").2 keeping, providing office facilities and clerical support for Notice of this proposal, affording interested persons an the fund, preparing and filing tax returns and regulatory opportunity to submit comments, has been published reports for the fund, and providing telephone shareholder (61 Federal Register 7004 (1996)). The time for filing services through a toll-free number.7 The Board previously comments has expired, and the Board has considered the has determined that these activities are closely related to notice and all comments received in light of the factors set banking.8 The Board also has determined that, subject to forth in section 4(c)(8) of the BHC Act. the prudential and other limitations established by the Board in prior orders, Notificant's proposed administration Notificant, with total consolidated assets of approximately $338 billion,3 operates branches in New York, New activities for mutual funds are not prohibited by the Glass- Steagall Act (12 U.S.C. § § 221a and 377).9 Notificant has York, and Chicago, Illinois, and an agency in Los Angeles, California.4 In addition to these banking operations, Notificant owns several nonbanking subsidiaries in the United States, including Dresdner Securities (USA) Inc., New 6. See 12 C.F.R. 225.25(b)(3), (b)(4). The Board has by regulation York, New York ("DSI"), and Oeschle International Advi- authorized bank holding companies to sponsor, organize, and manage sors, LP, Boston, Massachusetts, both of which engage in closed-end investment companies. See id. at 225.25(b)(4)(ii). A closed-end investment company that is controlled by a bank holding investment advisory activities in the United States. RCM company must conform its activities to the requirements of section 4 Management, with total assets of $45.1 million, provides of the BHC Act. Accordingly, Notificant has committed that, if it investment advice to corporations, foundations, pension controls any closed-end fund, it will limit such fund's investments to funds, high-net-worth individuals and investment compa- less than 5 percent of the voting shares of any issuer. nies.5 RCM Trust, with total assets of $1.8 million, is a 7. Notificant has committed that telephone service operators will not solicit callers to purchase shares in particular mutual funds and that limited purpose trust company organized under the laws of substantive questions about mutual fund performance or strategies California. will be referred to specific mutual fund distributors or investment RCM Management is an investment adviser registered advisors. See The Chase Manhattan Corporation, 81 Federal Reserve with the Securities and Exchange Commission ("SEC") Bulletin 883 (1995) ("Chase"). 8. See Chase; Mellon Bank Corporation, 79 Federal Reserve Bulleunder the Investment Advisers Act of 1940 (15 U.S.C. tin 626 (1993) ("Mellon"). § 80b-1 et seq.). Accordingly, RCM Management is sub- 9. See Barclays PLC, 82 Federal Reserve Bulletin 158 (1996) ("Barclays"); Mellon. Notificant has committed that the distributor of the mutual funds will not be affiliated with Notificant or RCM Man- 1. Notificant would acquire RCM Management and RCM Trust agement, and that neither Notificant nor RCM Management will be through a wholly owned limited liability company, RCM Capital involved in the distribution of mutual fund shares. RCM Management Management L.L.C. ("RCM Capital"). After consummation of the will not engage in advertising on behalf of mutual funds and will not proposal, RCM Management would be dissolved and succeeded by be involved in the preparation of a fund's sales literature, except to RCM Capital and RCM Trust would become a wholly owned subsid- review such sales literature for the sole purpose of ensuring compliiary of RCM Capital. For purposes of this order, "RCM Manage- ance with all pertinent regulatory requirements. Notificant will have ment" refers to RCM Management and RCM Capital, as successor to no officer, director, or employee interlocks with any mutual fund that RCM Management. is advised and administered by RCM Management, and the majority 2. A list of the proposed administrative services is included in the of the directors of any mutual fund administered by RCM Manage- Appendix. ment will consist of disinterested individuals. In addition, RCM 3. All asset data are as of December 31, 1995, and use exchange Management will provide administrative services to a mutual fund rates then in effect. pursuant to a contract that requires that the contract be reviewed and 4. Notificant's wholly owned subsidiary, Deutsch- approved annually by the fund's board of directors, and that permits Suedamerikanische Bank AG, Hamburg, Germany, also operates an the fund's board of directors to terminate the contract, without penagency in Miami, Florida. alty, on 60 days' notice. Notificant also will not acquire for its own 5. RCM Management had approximately $26 billion in assets under account more than 5 percent of the shares of any mutual fund for management as of December 31, 1995. which RCM Management provides only administrative services. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

678 Federal Reserve Bulletin • July 1996 committed to conduct the proposed administration activi- facts of record, the Board finds that the public benefits of ties subject to the prudential and other limitations estab- Notificant's proposed activities outweigh any adverse eflished by the Board in Mellon and Barclays}0 fects, and, therefore, that the activities are a proper incident In order to approve this notice, the Board also must find to banking for purposes of section 4(c)(8) of the BHC Act. that the performance of the proposed activities by Notifi- Based on the foregoing and all the facts of record, cant "can reasonably be expected to produce benefits to the including the commitments discussed in this order and all public . . . that outweigh possible adverse effects, such as other commitments and representations made by Notificant undue concentration of resources, decreased or unfair com- in connection with this notice, and subject to the terms and petition, conflicts of interests, or unsound banking practic- conditions set forth in this order, the Board has determined es."11 As part of the Board's evaluation of these factors, that the notice should be, and hereby is, approved. The the Board considers the financial and managerial resources Board's determination is subject to all the conditions set of the notificant and its subsidiaries and the effect the forth in Regulation Y, including those in sections 225.7 and transaction would have on such resources.12 The Board 225.23(b)(3) and (b)(7) of Regulation Y (12 C.F.R. 225.7 notes that Notificant's capital ratios meet applicable risk- and 225.25(b)(3) and (b)(7)), and to the Board's authority based capital standards under the Basle Accord and are to require modification or termination of the activities of a equivalent to the capital levels that would be required of a bank holding company or any of its subsidiaries as the U.S. banking organization. Based on all the facts of record, Board finds necessary to assure compliance with, and to the Board concludes that financial and managerial consid- prevent evasion of, the provisions of the BHC Act and the erations are consistent with approval. Board's regulations and orders issued thereunder. The The Board expects that consummation of the proposal Board's decision is specifically conditioned on Notificant's can reasonably be expected to provide added convenience compliance with the commitments and representations and services to Notificant's customers by offering them an made in connection with this notice, including the commitexpanded range of investment products and management ments and conditions discussed in this order. The commitexpertise. Notificant also has stated that consummation of ments, representations, and conditions relied on in reaching the proposal would give RCM Management access to this decision shall be deemed to be conditions imposed in Notificant's worldwide customer base and contacts and writing by the Board in connection with its findings and would increase RCM Management's ability to compete in decision and may be enforced in proceedings under applithe highly competitive market for investment advisory cable law. services. In addition, the Board previously has determined This transaction shall not be consummated later than that the provision of administrative services to mutual three months after the effective date of this order, unless funds within the parameters established by the Board is not such period is extended for good cause by the Board or the likely to result in the types of subtle hazards at which the Federal Reserve Bank of New York, acting pursuant to Glass-Steagall Act is aimed or in any other adverse effects. delegated authority. There are numerous providers of the proposed nonbanking By order of the Board of Governors, effective May 30, services, and there is no evidence in the record to indicate 1996. that consummation of this proposal is likely to result in significantly adverse effects, such as undue concentration Voting for this action: Chairman Pro Tempore Greenspan and of resources, decreased or unfair competition, conflicts of Governors Kelley, Lindsey, Phillips, and Yellen. interests, or unsound banking practices.13 Based on all the WILLIAM W. WILES Secretary of the Board 10. Neither Notificant nor RCM Management will acquire shares of any mutual fund to which Notificant provides advisory services. Notificant proposes that the profit-sharing plan for employees of RCM Management and RCM Trust ("Plan") be permitted to own up to 5 percent of the shares of certain proprietary mutual funds that are advised by RCM Management. RCM Management and RCM Trust employees can direct that their contributions to the Plan be invested in a variety of investment vehicles available through the Plan, including ther rights established by section 8(c)(1) of the International Banking the proprietary funds. Based on the unique facts in this case and the Act of 1978 (12 U.S.C. § 3106(c)). Notificant, however, has commitcommitments provided by Notificant, the Board concludes that the ted that DSI and the operations of Notificant authorized under section Plan's limited proposed ownership interest in the funds would not 4 of the BHC Act will remain completely separate and the companies enable Notificant to control these funds and is consistent with the will not engage in any business with, or on behalf of, each other. In Glass-Steagall Act, the BHC Act and the Board's interpretive rule furtherance of this commitment, and not in limitation thereof, Notifi- (12 C.F.R. 225.125). cant also has committed that there will be no director, officer or 11. 12 U.S.C. § 1843(c)(8). employee interlocks of any kind between DSI and Notificant's U.S. 12. See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 subsidiaries authorized under section 4 of the BHC Act; there will be Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 no joint marketing efforts between DSI and Notificant's subsidiaries Federal Reserve Bulletin 155 (1987). authorized under section 4 of the BHC Act; and DSI and Notificant's 13. In considering the public interest factors in this case, the Board subsidiaries authorized under section 4 of the BHC Act will not share has considered that Notificant, through DSI, engages in bank- fees, profits or customer information with, will not make customer ineligible securities activities in the United States pursuant to grandfa- referrals to, and will not engage in cross-marketing with, each other. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 679 Appendix ing Company Act ("BHC Act"), has requested Board approval under section 4(c)(8) of the BHC Act (12 U.S.C. List of Administrative Services § 1843(c)(8)) and section 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) to acquire a limited partnership (1) Maintaining and preserving the records of the funds, interest in 150 Baronne Street Limited Partnership, New including financial and corporate records; Orleans, Louisiana ("Limited Partnership"), and thereby (2) Computing dividends, performance data and financial engage in community development activities. These activiinformation regarding the funds; ties would be conducted pursuant to section 225.25(b)(6) (3) Furnishing statistical and research data; of the Board's Regulation Y (12 C.F.R. 225.25(b)(6)). (4) Preparing and filing with the SEC and state securities Notice of the proposal, affording an opportunity for regulators registration statements, notices, reports and other interested persons to submit comments, has been published material required to be filed under applicable laws; (61 Federal Register 16,101 (1996)). The time for filing (5) Preparing reports and other informational materials comments has expired, and the Board has considered the regarding the funds including proxies and other sharenotice and all comments received in light of the factors set holder communications and reviewing prospectuses; forth in section 4(c)(8) of the BHC Act. (6) Providing legal and regulatory advice to the fund in FCC, with consolidated assets of $8.5 billion, controls connection with its other administrative functions; six banks in Louisiana.1 FCC also engages in a number of (7) Providing office facilities and clerical support for the nonbanking activities. funds; Limited Partnership has been formed to develop an (8) Developing and implementing procedures for monitoroffice building in the historic section of the Central Busiing compliance with regulatory requirements and compli- ness District of New Orleans.2 The nearly vacant office ance with the funds' investment objectives, policies, and building would be converted into a hotel complex. The restrictions as established by the funds' boards; building is located in a low- and moderate-income area that (9) Providing routine fund accounting services and liaison is adjacent to a public housing project. The State of Louisiwith outside auditors; ana has designated this area as a "difficult to develop" (10) Preparing and filing tax returns; Enterprise Zone, which would provide investors with cer- (11) Reviewing and arranging for payment of fund ex- tain state tax benefits.3 penses; The Board has recognized the benefit of allowing bank (12) Providing communication and coordination services holding companies to participate in community developwith regard to the funds' investment adviser, transfer agent, ment activities based on their unique role in the community custodian, distributor and other service organizations that and has adopted a regulation permitting bank holding comrender recordkeeping or shareholder communication ser- panies to make debt and equity investments in community vices; development corporations or projects.4 Regulation Y per- (13) Reviewing and providing advice to the distributor and mits bank holding companies to make equity and debt the funds regarding sales literature and marketing plans to investments in corporations or projects that promote comassure regulatory compliance; munity welfare, such as economic rehabilitation of low- (14) Providing information to the distributor's personnel income areas that provide housing, services, or jobs for concerning fund performance and administration; residents.5 The Board has permitted bank holding compa- (15) Participating in seminars, meetings, and conferences nies, directly or through a subsidiary, to invest in, and designed to present information to brokers and investment provide financing to, entities in a low- or moderate-income companies, but not in connection with the sale of shares of area if those entities create long-term employment opportuthe funds to the public, concerning the operations of the nities, a majority of which (based on full-time equivalent funds, including administrative services provided by RCM Management to the funds; (16) Assisting existing funds in the development of additional portfolios; (17) Providing reports to the fund's board with regard to its 1. Asset data are as of December 31, 1995. activities; and 2. FCC would invest $4.9 million as the only limited partner and (18) Providing telephone shareholder services through a would provide $7.8 million of the $15 million construction financing toll-free number. through its subsidiary bank. One of the managing members of Limited Partnership's general partner is a minority-owned company that would serve as the developer and manager of the property. First Commerce Corporation 3. The building also has been designated as a Certified Historic New Orleans, Louisiana Structure by the National Park Service, thereby permitting the investors in the project to qualify for certain federal income investment tax Order Approving Provision of Community Development credits. Activities 4. 12 C.F.R. 225.25(b)(6). See also 12 C.F.R. 225.127 ("Bank holding companies possess a unique combination of financial and managerial resources making them particularly suited for a meaningful and First Commerce Corporation, New Orleans, Louisiana substantial role in remedying our social ills."). ("FCC"), a bank holding company under the Bank Hold- 5. 12 C.F.R. 225.25(b)(6). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

680 Federal Reserve Bulletin • July 1996 positions) will be filled by low- and moderate-income interests, or unsound banking practices. Accordingly, the persons.6 Board has determined that the balance of public interest In this case, FCC has committed that at least a majority factors it must consider under section 4(c)(8) of the BHC of the permanent full-time jobs at the hotel complex will be Act is favorable and consistent with approval. filled by low- and moderate-income individuals. In addi- Based on the foregoing and all the facts of record, tion, one of the members of Limited Partnership's general including the commitments made by FCC in connection partner has committed to initiate a special program to train with this notice, the Board has determined that the notice welfare recipients residing in public housing projects for should be, and hereby is, approved. This determination employment in the hotel complex. A portion of the net also is subject to all the conditions set forth in the Board's profits earned by the partnership also would be donated to Regulation Y, including those in sections 225.7 and a nonprofit corporation that provides low-cost housing and 225.23(b), and to the Board's authority to require such employment and business opportunities to disadvantaged modification or termination of the activities of a bank residents of Orleans Parish.7 In light of all the facts of holding company or any of its subsidiaries as the Board record, including the commitments and representations finds necessary to assure compliance with, or to prevent made by FCC, the proposed activities appear consistent evasion of, the provisions and purposes of the BHC Act with the Board's regulations and precedent and, therefore, and the Board's regulations and orders issued thereunder. permissible for bank holding companies. Accordingly, the The Board's approval of this proposal is specifically condi- Board concludes that the proposed investment in Limited tioned on compliance by FCC and its subsidiaries with Partnership is a community development activity permissi- these conditions and commitments which are conditions ble under section 4(c)(8) of the BHC Act and sec- imposed in writing by the Board in connection with its tion 225.25(b)(6) of Regulation Y. findings and decision and may be enforced in proceedings In order to approve the notice, the Board also is required under applicable law. to determine that the performance of the proposed activi- This transaction shall not be consummated later than ties by FCC "can reasonably be expected to produce three months after the effective date of this order, unless benefits to the public, such as greater convenience, in- such period is extended for good cause by the Board or by creased competition, or gains in efficiency, that outweigh the Federal Reserve Bank of Atlanta, acting pursuant to possible adverse effects, such as undue concentration of delegated authority. resources, decreased or unfair competition, conflicts of By order of the Board of Governors, effective May 29, interests, or unsound banking practices." 12 U.S.C. 1996. § 1843(c)(8).8 As part of its review of these factors, the Board has Voting for this action: Chairman Pro Tempore Greenspan and considered the financial and managerial resources of FCC Governors Kelley, Lindsey, Phillips, and Yellen. and the effect the transaction would have on those resources.9 Based on all the facts of record, the Board concludes WILLIAM W. WILES Secretary of the Board that financial and managerial considerations are consistent with approval. Consummation of this proposal can reasonably be ex- Huntington Bancshares Incorporated pected to result in public benefits that outweigh adverse Columbus, Ohio effects. The Board expects that the proposed project would help to revitalize a geographic area in economic decline Wachovia Corporation and create improved job opportunities for low- and Winston-Salem, North Carolina moderate-income individuals. In addition, the Board expects that the proposed job training program and contribu- Area Bancshares Corporation tions to the nonprofit organization would create improved Owensboro, Kentucky job and other opportunities for low- and moderate-income individuals. There is no evidence in the record to indicate Order Approving Notices to Engage in Certain Data that consummation of this proposal is likely to result in any Processing Activities significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of Huntington Bancshares Incorporated, Columbus, Ohio ("Huntington"), Wachovia Corporation, Winston-Salem, North Carolina ("Wachovia"), and Area Bancshares Cor- 6. See 59 Federal Register 63,712 (1994) amending 12 C.F.R. poration, Owensboro, Kentucky ("Area") (collectively, 225.127. 7. FCC estimates that the partnership would contribute approxi- "BHC Investors"), bank holding companies within the mately $372,000 over the next seven years with additional contribu- meaning of the Bank Holding Company Act ("BHC Act"), tions after this period until the partnership is dissolved. each have applied for the Board's approval under sec- 8. 12 U.S.C. § 1843(c)(8). tion 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and 9. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 section 225.23 of the Board's Regulation Y (12 C.F.R. Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank, 73 Federal Reserve Bulletin 155 (1987). 225.23), to engage in data processing activities through Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 681 Five Paces Software, Inc., Atlanta, Georgia ("Five Pac- Five Paces.4 Accordingly, the BHC Investors have rees").1 As described more fully in the Board's Order issued quested Board approval to exercise a controlling influence today, the Board has approved the notice by Cardinal over Five Paces and engage in the activities of Five Paces. Bancshares, Inc., Lexington, Kentucky ("Cardinal"), for its wholly owned thrift subsidiary, Security First Network Closely Related to Banking Analysis Bank, Lexington, Kentucky ("SFNB"), to acquire all the voting shares of Five Paces.2 Five Paces develops and sells Section 4(c)(8) of the BHC Act provides that a bank computer software and engages in other data processing holding company may, with Board approval, engage in any activities related to providing banking and financial ser- activity that the Board determines to be "so closely related vices over the Internet. to banking or managing or controlling banks as to be a Notice of this proposal, affording interested persons an proper incident thereto."5 For the reasons discussed more opportunity to submit comments, has been published fully in the Cardinal Order, and hereby incorporated in this (60 Federal Register 55,579, 55,580, and 55,582 (1995)). order, the Board concludes that the activities proposed by The time for filing comments has expired, and the Board Five Paces are permissible data processing and transmishas considered the proposal and all comments received in sion services under Regulation Y and closely related to light of the factors set forth in section 4(c)(8) of the BHC banking within the meaning of the BHC Act. Act.3 The BHC Investors propose to assist Five Paces in the Proper Incident to Banking Analysis development of its products and services, in the development of business strategies, and in its operations. The BHC In order to approve this proposal, the Board also must Investors propose to provide this assistance through repre- determine that the proposed activities are a proper incident sentation on the board of directors of Five Paces and to banking, that is, that the proposal "can reasonably be through other advisors. The BHC Investors also propose to expected to produce benefits to the public, such as greater establish various business relationships with Five Paces, convenience, increased competition, or gains in efficiency, including purchasing software and other services from Five that outweigh possible adverse effects, such as undue con- Paces. Although, as discussed above, the BHC Investors centration of resources, decreased or unfair competition, or have committed not to attempt to exercise a controlling unsound banking practices."6 influence over SFNB, those commitments do not apply to As part of its review of these factors, the Board has the involvement of the BHC Investors in the business of considered the financial and managerial resources of the BHC Investors, their subsidiaries, and the company to be acquired, and the effect the transaction would have on those resources.7 Based on all the facts of record, including relevant reports of examination and inspection, the Board 1. Under this proposal, BHC Investors would each acquire voting concludes that financial and managerial considerations are and nonvoting stock in Security First Network Bank, Pineville, Ken- consistent with approval of these notices. There is no tucky ("SFNB"). Because the BHC Investors do not intend to become evidence in the record to indicate that this proposal would involved in any manner in the management or operations of SFNB, produce any other significant adverse effects, such as dethey have structured their shareholdings in accordance with the creased or unfair competition, undue concentration of re- Board's precedents on noncontrolling investments. For example, the total investment of each BHC Investor would be less than 15 percent sources, or conflicts of interests.8 of the total equity of SFNB and would consist of less than 5 percent of The Board has carefully considered the possibility that, SFNB's voting shares and nonvoting, convertible preferred shares that by helping to make banking services available over the meet the requirements for nonvoting securities under Regulation Y. Internet, which is a non-proprietary computer network BHC Investors are unaffiliated and have no agreements among themselves regarding ownership or control of SFNB or Five Paces. With- accessible by users worldwide, the activities of Five Paces out Board approval, BHC Investors may sell their shares only to could expose financial institutions, their customers, infor- SFNB, in a widely dispersed public offering, or in blocks of stock representing less than 2 percent of SFNB's equity. Other shareholder groups would hold substantially larger blocks of SFNB voting shares, and BHC Investors have made a number of commitments similar to 4. Under this proposal, SFNB will own all the shares of Five Paces those relied on by the Board in past cases to ensure that BHC and will control the election of a majority of the board of directors of Investors do not exercise or attempt to exercise a controlling influence Five Paces, who will be unaffiliated with Cardinal and the BHC over the management or policies of SFNB. See generally Board letter Investors. The OTS has approved SFNB's ownership and operation of to Thomas M. Shoaff, Esq., dated April 30, 1986 (investment by Five Paces. See Letter dated May 17, 1996, from Ronald N. Karr, Lincoln National Corporation). As explained below, BHC Investors Regional Director, OTS, to Stuart G. Stein, Esq. do expect to provide assistance to Five Paces regarding the design, 5. 12 U.S.C. § 1843(c)(8). development, and marketing of data processing products and services 6. 12 U.S.C. § 1843(c)(8). of Five Paces, and have requested Board approval to exercise a 7. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 controlling influence over Five Paces and to engage in the activities of Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Five Paces. Federal Reserve Bulletin 155 (1987). 2. See Cardinal Bancshares, Inc., 82 Federal Reserve Bulletin 8. The BHC Investors have committed that Five Paces will not use (1996) (Order dated May 21, 1996) ("Cardinal Order"). or disclose to any person any confidential information concerning 3. Asset and deposit information for each of the BHC Investors is financial institution clients of Five Paces or customers of these financontained in the Appendix. cial institutions without the express consent of the client. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

682 Federal Reserve Bulletin • July 1996 mation, and transactions to electronic interception, interfer- with the commitments made in connection with these noence, or fraud. The software developed by Five Paces uses tices and with the conditions referred to in this order. The cryptography to attempt to maintain the privacy of transac- Board's determination also is subject to all the conditions tions and various security measures designed to protect the set forth in Regulation Y, including those in sections 225.7 underlying data. and 225.23(g)(3) (12 C.F.R. 225.7 and 225.23(g)(3)), and The Board recognizes that neither the software devel- to the Board's authority to require such modification or oped by Five Paces nor any other software product or termination of the activities of a bank holding company or security system can provide absolute protection against any of its subsidiaries as the Board finds necessary to these risks. The nature of these risks is not different, ensure compliance with and to prevent evasion of the however, from those to which more traditional banking provisions of the BHC Act and the Board's regulations and operations are exposed in other forms. The Board also orders issued thereunder. For purposes of this action, these expects banking organizations considering whether to pro- conditions and commitments are deemed to be conditions vide services over the Internet to analyze carefully the imposed in writing by the Board in connection with its associated risks, and to evaluate carefully whether those findings and decision and as such, may be enforced in risks are consistent with their policies relating to the secu- proceedings under applicable law. rity of customer information and other data.9 The Board This transaction shall not be consummated later than believes that such analyses and evaluations would mitigate three months after the effective date of this order, unless the risk that conducting banking transactions over the such period is extended for good cause by the Board or by Internet would result in unsound banking practices.10 the Federal Reserve Banks of Cleveland, Richmond, or The Board expects that the acquisition of Five Paces by St. Louis, acting pursuant to delegated authority. SFNB, and the investments by the BHC Investors, would By order of the Board of Governors, effective May 21, enhance consumer convenience by expanding the availabil- 1996. ity of electronic banking services and by making those services available in new ways. In particular, customers Voting for this action: Chairman Pro Tempore Greenspan and would be able to conduct banking and financial transac- Governors Kelley, Phillips, and Yellen. Absent and not voting: Govertions using personal computers without visiting a bank nor Lindsey. branch and without the bank establishing a separate propri- JENNIFER J. JOHNSON etary computer network. The record also indicates that Deputy Secretary of the Board involvement of the BHC Investors in the operations of Five Paces should provide Five Paces with access to resources Appendix and expertise in various aspects of data processing and banking services that are likely to enhance the products Huntington, with approximately $20.3 billion in total condeveloped by, and operations of, Five Paces. In addition, solidated assets, is the fifth largest commercial banking the proposed transaction and resulting capital infusion organization in Ohio, controlling deposits of approxiwould enable Five Paces to develop additional products mately $12.6 billion.1 Huntington controls subsidiary banks and services, and increase the capital available to SFNB. in Ohio, West Virginia, Michigan, Indiana, and Florida. Based on all the facts of record, the Board has determined that the balance of the public interest factors it is Wachovia, with approximately $45 billion in total consolirequired to consider under the proper incident to banking dated assets, is the second largest commercial banking standard of section 4(c)(8) of the BHC Act is favorable and organization in North Carolina, controlling deposits of consistent with approval of these notices. approximately $26.4 billion. Wachovia controls subsidiary banks in North Carolina, Georgia, South Carolina, and Conclusion Delaware. Based on all the facts of record, the Board has determined Area, with approximately $1.1 billion in total consolidated that this proposal should be, and hereby is, approved. The assets, is the tenth largest commercial banking organiza- Board's approval is specifically conditioned on compliance tion in Kentucky, controlling deposits of approximately $811.5 million. Area controls subsidiary banks in Kentucky.2 9. The Board also expects financial institutions, as part of this evaluation, to implement any modifications to their information security procedures and controls that appear to be necessary or appropriate in light of the risks presented by Internet-based services. 10. The BHC Investors have committed that they will not represent that the Board's approval of these notices constitutes an endorsement of Five Paces's products or services by the Board, the Federal Reserve System, or any Federal Reserve Bank. The BHC Investors also will not indicate in any of their marketing efforts or materials, either oral or written, that the Federal Reserve System or any part thereof assures or 1. Asset and deposit data are as of December 31, 1995. has approved or endorsed the security, functionality, or effectiveness 2. The BHC Investors also engage, directly or through subsidiaries, of products or services offered by Five Paces. in a variety of permissible nonbanking activities in the United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 683 Norwest Corporation trated.4 The Board has determined previously that the Minneapolis, Minnesota market for mortgage origination is local in scope.5 The Board has reviewed the 307 MSAs where Norwest and Order Approving a Notice to Acquire Certain Prudential have reported mortgage originations under the Nonbanking Assets Home Mortgage Disclosure Act ("HMDA"). These data show that in all but two Metropolitan Areas ("MAs"), Norwest Corporation, Minneapolis, Minnesota ("Nor- consummation of this proposal would not exceed the Dewest"), a bank holding company within the meaning of the partment of Justice Merger Guidelines.6 In the remaining Bank Holding Company Act ("BHC Act") has applied for two MAs, a significant number of competitors would re- Board approval under section 4(c)(8) of the BHC Act main following this transaction.7 In addition, there are low (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's barriers to entry into the mortgage origination business. Regulation Y (12 C.F.R. 225.23) to acquire indirectly Based on all the facts of record, including the business through its wholly owned subsidiaries substantially all the strategies and manner of mortgage origination operations assets of The Prudential Home Mortgage Company, Inc., of the two companies,8 the Board concludes that if there Clayton, Missouri ("Prudential"), that are related to origi- would be any adverse effects from this transaction, they are nating and servicing residential mortgage loans. The Board likely to be negligible. previously has determined that mortgage lending is a per- The Board previously has determined by regulation that missible activity for a bank holding company.1 the proposed activities are closely related to banking.9 In Notice of the proposal, affording interested persons an order to approve this proposal, the Board also must deteropportunity to submit comments, has been published mine that the proposed activity is a proper incident to (61 Federal Register 9991 (1996)). The time for filing banking, that is, that the proposal "can reasonably be comments has expired, and the Board has considered the expected to produce benefits to the public, such as greater notice and all comments received in light of the factors set convenience, increased competition, or gains in efficiency, forth in section 4 of the BHC Act.2 that outweigh possible adverse effects, such as undue con- Norwest, with total consolidated assets of $72.1 billion,3 centration of resources, decreased or unfair competition, controls banks in Minnesota and 14 other states. Norwest conflicts of interests, or unsound banking practices."10 As also engages in a number of nonbanking activities, includ- part of its evaluation of these factors, the Board considers ing mortgage origination and mortgage servicing, nation- the financial and managerial resources of the notificant and wide. its subsidiaries and the effect the transaction would have on Norwest and Prudential both engage in servicing and those resources. All of Norwest's subsidiary banks are well originating residential mortgage loans. The market for capitalized, and Norwest's record of earnings is strong. mortgage servicing is national in scope and unconcen- Norwest would fund this acquisition through the issuance 4. On consummation of this proposal, Norwest would control ap- 1. 12 C.F.R. 225.25(b)(1). Norwest Funding, Inc. would acquire proximately 5 percent of the market for mortgage servicing. The 30 certain mortgage loans originated by Prudential, and Norwest Mort- largest mortgage servicers control a combined market share of approxgage, Inc. ("Norwest Mortgage") would acquire certain mortgage imately 42 percent and numerous competitors would remain in the servicing contracts and other assets related to Prudential's mortgage market. Market share and ratings are calculated on the basis of dollar lending business. As part of this transaction, Norwest Bank Minne- volume of mortgages, and data provided in Inside Mortgage Finance sota, N.A., a national bank controlled by Norwest, would also acquire (1995). Data for servicing are for year-end 1995. certain assets and assume certain liabilities of Securitized Asset Ser- 5. NBD Bancorp, Inc., 71 Federal Reserve Bulletin 258, 261 (1985); vices Corporation, an affiliate of Prudential that is engaged in First National City Corp., 60 Federal Reserve Bulletin 50, 51 (1974). mortgage-backed securities administration and mortgage servicing. 6. 49 Federal Register 26,823 (June 29, 1984). All of these Norwest subsidiaries are located in Minneapolis, Minne- 7. Twenty eight mortgage providers would remain in the Great sota. The acquisition of assets by Norwest Bank Minnesota, N.A. is Falls, Montana Metropolitan Statistical Area ("MSA"), and 19 would not subject to the Board's approval. See Merchants National Corp., 75 remain in the Casper, Wyoming MSA. Federal Reserve Bulletin 388 (1989), aff'd, 890 F.2d 1275 (2d Cir. 8. Norwest originates mortgages in local markets through a network 1989). of approximately 700 retail loan offices that market mortgage loan 2. The Board received untimely comments from Inner City Press/ services locally. Prudential, on the other hand, originates mortgages Community on the Move ("Protestant") submitted after the close of throughout the United States from three telemarketing locations and the public comment period. Protestant contends that the notice for this depends primarily on nationwide marketing techniques such as: proposal should be republished and that the notice inadequately de- (1) inserts and messages on statements to current Prudential customscribed the transaction and did not identify all the Prudential affiliates ers, (2) messages to employees of firms that have relocation contracts that would sell assets to Norwest. Notice of the proposal inviting with Prudential and to members of national professional and affinity public comment was published in accordance with the Board's Rules groups such as the American Medical Association, and (3) advertise- {see 12 C.F.R. 225.23(c) and 262.25(a)(4)), and provided all interested ments in affinity group publications. Competition in local markets persons with a description of the proposed activities, the acquiring affects the pricing decisions for mortgage loans made by Norwest but company, and the transaction pending before the Board. As noted, not for mortgage loans made by Prudential. Norwest permits its local some of the assets in this proposal would be purchased directly by a offices to vary the prices offered based on local market conditions. subsidiary national bank of Norwest and would not require public Prudential, on the other hand, sets one price for its mortgage loans notice or approval under the BHC Act. The comments filed by nationwide. Protestant indicate that it had adequate notice of the proposal. 9. See 12 C.F.R. 225.25(b)(1). 3. Assets are as of December 31, 1995. 10. 12 U.S.C. § 1843(c)(8). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

684 Federal Reserve Bulletin • July 1996 of commercial paper, which would be retired by the sale on lending policies and procedures.14 Fair lending initiatives the secondary market of mortgages purchased from Pru- extend throughout the mortgage operations of Norwest and dential. Thus, Norwest has sufficient financial resources to include fair lending training of all employees who have effect this transaction as proposed without impairing its contact with customers, a second review of all applications financial strength or that of its depository subsidiaries. In denied on initial review, and a quarterly analysis of HMDA evaluating the managerial resources of Norwest, the Board in all markets. Other Norwest divisions, such as Norwest has carefully considered the reports of examination of Audit Services, conduct comparative analyses of selected Norwest and its subsidiaries. Based on these and other loan files. Norwest states that it will continue its commitfacts of record, the Board concludes that financial and ment to fair lending upon consummation of this proposal. managerial considerations weigh in favor of approval of The facts of record support the effectiveness of Northis proposal.11 west's policies and practices. For example, Norwest Mort- Protestant contends that Prudential's record of making gage's overall origination rates for African-American and housing-related loans to minorities raises adverse consider- Hispanic mortgage applicants in the combined MAs reations for this proposal.12 The BHC Act requires the Board viewed by Protestant exceeds origination rates by these to consider whether the performance of the proposed activ- applicants in the aggregate of all HMDA reporters. In ities by the acquiring bank holding company is likely to addition, Norwest has hired new community development achieve public benefits that outweigh likely adverse effects. loan officers in a number of MAs with predominately Prudential is not currently subject to supervision by the minority population to focus on underserved communities federal banking agencies. Thus, while Protestant has com- and anticipates employing a total of 375 such officers by plained about the manner in which Prudential conducted its 1997. activities in the past, the Board is required by the BHC Act The Board also has considered the potential benefits to to consider the manner in which Norwest proposes to the public, such as greater convenience, increased competiconduct the proposed activities after the acquisition. tion, or gains in efficiency in light of Protestant's conten- Protestant also argues that Norwest's record of housing- tions that no public benefits have been demonstrated in this related lending to minorities is not significantly better than proposal. Norwest states that the acquisition of new tech- Prudential's record in certain MAs13 and that Norwest's nologies and systems from Prudential would enable Norprograms and policies are insufficient to improve Pruden- west more effectively to provide mortgage origination sertial's record. Norwest has stated that the operations ac- vices both in its existing market locations and in new quired from Prudential would be managed by Norwest's markets nationwide. The Board notes that the adoption of senior management and would be subject to Norwest's fair new automated processing technologies by the mortgage industry has been a key factor in improving the efficiency in mortgage servicing and appears to have yielded economies of scale. In addition, Norwest's customers would 11. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve benefit from access to new options for obtaining mortgage Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve financing that would be provided by Prudential's nation- Bulletin 155 (1987). Protestant criticizes the management of Pruden- wide origination strategies. Improvements in Norwest's tial's securities subsidiary. This transaction does not involve the risk management with the acquisition of Prudential's secacquisition of Prudential's securities brokerage operations, and Protesondary marketing and hedging group should also enhance tant has provided no facts to show how this contention relates to the management of Norwest or to the mortgage operations proposed to be the safety and soundness of Norwest's operations and has acquired in this transaction. Protestant also maintains that fees charged the potential to reduce costs to Norwest and mortgage by Norwest's discount brokerage subsidiary are among the highest in applicants. the industry. There is no evidence in the record that Norwest's The requirement under section 4 of the BHC Act that the securities brokerage fees are illegal or discriminatory. Another commenter objected to this proposal because a bank subse- Board must determine that public benefits from a proposal quently acquired by Norwest foreclosed on his property. This matter is can reasonably be expected to outweigh potential adverse an isolated incident that is unrelated to the transaction under review in effects necessarily involves a balancing process that takes this case, and the Board notes that courts can provide this commenter into account the extent of the potential for adverse effects. with an appropriate remedy if the commenter can substantiate im- For the reasons discussed above, the potential for adverse proper actions in the foreclosure. The Board also concludes that the common law lien filed by the commenter would not adversely affect effects, if any, resulting from this transaction is negligi- Norwest's financial condition. 12. Protestant criticizes Prudential's management and its record of making mortgage loans to minorities as reflected by data filed under 14. Norwest's efforts to improve its ability to provide mortgage the HMDA for a number of MAs. services to underserved communities are implemented by six full-time 13. For example, Protestant notes that HMDA data for Prudential employees in Norwest's Fair Lending Initiatives Department. Protesand Norwest in 1993 and 1994 indicate that the percentages of loans tant contends that this is not enough employees to coordinate effecapproved for minority applicants decreased in the Anaheim, Chicago, tively fair lending law compliance, particularly in light of the deficien- Los Angeles, Oakland, Riverside and Tampa MAs. In addition, Protes- cies alleged by Protestant in Prudential's record of housing-related tant notes that, in the New York and Nassau-Suffolk MAs, Prudential lending to minorities, and that, in any event, Norwest's policies are makes more loans to minorities than Norwest. Protestant also gener- themselves inadequate. As explained above, Norwest's policies, alally alleges that in other MAs Norwest receives fewer applications though initiated by six employees, are implemented throughout the from, and makes fewer loans to, minorities than other HMDA report- mortgage origination operation, and include training of each employee ing lenders in the aggregate. engaged in mortgage origination activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 685 ble.15 The Board also believes that, based on the consider- 225.23(g)), and to the Board's authority to require modifiations discussed above, including the operational efficien- cation or termination of the activities of a bank holding cies and expanded channels for mortgage originations, the company or any of its subsidiaries as the Board finds proposal can reasonably be expected to produce notable necessary to assure compliance with, and to prevent evapublic benefits.16 Accordingly, based on all the facts of sion of, the provisions of the BHC Act and the Board's record, the Board has determined that the performance of regulations and orders issued thereunder. The Board's decithe proposed activities by Norwest can reasonably be ex- sion is specifically conditioned on compliance by Norwest pected to produce benefits to the public that would out- with all the commitments made in connection with this weigh any likely adverse effects under the proper incident notice. For purposes of this action, these commitments and to banking standard of section 4(c)(8) of the BHC Act. conditions shall be deemed to be conditions imposed in Based on the foregoing and all the facts of record, writing by the Board in connection with its findings and including the commitments and representations made by decision and, as such, may be enforced in proceedings Norwest in this case, the Board has determined that the under applicable law. notice should be, and hereby is, approved.17 This determi- The transaction shall not be consummated later than nation is subject to all the conditions set forth in the three months after the effective date of this order, unless Board's Regulation Y, including those in sections 225.7 such period is extended for good cause by the Board or by and 225.23(g) of Regulation Y (12 C.F.R. 225.7 and the Federal Reserve Bank of Minneapolis, acting pursuant to delegated authority. By order of the Board of Governors, effective May 6, 1996. 15. Protestant has not provided any facts to show that this proposal would result in undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsafe or unsound banking prac- This action was taken pursuant to the Board's Rules Regarding tices. Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee of 16. Protestant maintains that the public benefits identified by Nor- Board members. Voting for this action: Chairman Pro Tempore west are too speculative and that Norwest has not demonstrated that Greenspan and Governors Kelley, and Phillips. Absent and not voting: these benefits would be unavailable unless this proposal is approved. Governors Lindsey and Yellen. The Board has reviewed the public benefits identified by Norwest in light of all the facts of record, including Norwest's extensive experi- JENNIFER J. JOHNSON ence as a leading mortgage originator, the Board's experience with the Deputy Secretary of the Board mortgage industry in general, the current operational aspects of each organization's mortgage activities, and Norwest's representations about its future mortgage activities. The Board also notes that this Swiss Bank Corporation transaction would directly result in Norwest obtaining new automated Basel, Switzerland processing technologies, and secondary marketing and hedging expertise. Based on this review, the Board concludes that public benefits can be reasonably expected to result from this transaction. The proper Order Approving a Notice to Retain Control of Certain incident to banking standard in section 4 of the BHC Act, moreover, Nonbanking Companies and to Continue to Engage in does not require a demonstration that the transaction under review Certain Securities- and Derivatives-Related Activities would be the only means of achieving such benefits. 17. Protestant has requested that the Board hold a public hearing or meeting on this notice relating to its allegations. This request was not Swiss Bank Corporation, Basel, Switzerland ("Swiss received within the time period specified under the Board's Rules of Bank"), a foreign bank subject to the provisions of the Procedure. See 12 C.F.R. 262.3(e). Bank Holding Company Act ("BHC Act"),1 has provided The Board also notes that a hearing is required under section 4 of notice under section 4(c)(8) of the BHC Act (12 U.S.C. the BHC Act only if there are disputed issues of material fact that § 1843(c)(8)) and section 225.23 of the Board's Regulacannot be resolved in some other manner. 12 C.F.R. 225.23(f). As noted, Norwest's senior management and fair lending policies will be tion Y (12 C.F.R. 225.23) to retain control of all the voting implemented on consummation of the proposal and Prudential's tech- shares of certain United States subsidiaries of S.G. Warnologies and operational strategies will be incorporated into Nor- burg Overseas Ltd., London, England ("United States Subwest's current mortgage activities. Protestant does not dispute this, but sidiaries"), and the assets and liabilities of the branch of challenges the weight that should be accorded to, and the conclusions S.G. Warburg Forex Ltd., London, England, that is located that may be drawn from these and other facts of record. Nor does Protestant identify any other disputed issues of fact that are material to in New York, New York ("New York Forex", and, tothe Board's decision. In addition, Protestant's allegations regarding gether with the United States Subsidiaries, collectively, Prudential do not reflect adversely on the factors the Board must consider, which relate to the effects likely to result from the conduct of the proposed activities by an affiliate of a bank holding company. Moreover, the interested parties have had an opportunity to present their views, and Protestant has submitted substantial written comments that have been considered by the Board. Protestant's request fails to show why a written presentation would not suffice and to summarize what evidence would be presented at a hearing or meeting. See 12 C.F.R. 262.3(e). On the basis of all the facts of record, the Board has determined that a public hearing or public meeting is not 1. Swiss Bank, a foreign bank with branches and an agency in the required or necessary to clarify the factual record in this notice, or United States, is subject to the BHC Act by operation of section 8(a) otherwise warranted in this case. Accordingly, the request for a public of the International Banking Act of 1978 (12 U.S.C. § 3106(a)) hearing or meeting on this notice is hereby denied. ("IBA"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

686 Federal Reserve Bulletin • July 1996 "Warburg").2 Warburg engages in the following nonbank- derivatives-related activities, including underwriting and ing activities: dealing in all types of debt and equity securities (other than (1) Providing various types of investment and financial securities issued by open-end investment companies) on a advice, as described in section 225.25(b)(4) of Regula- limited basis.4 S.G. Warburg Options Inc. and S.G. Wartion Y; burg OTC USA, Inc. would either be merged with and into (2) Conducting discount and full-service securities bro- Company at the same time or liquidated promptly thereafkerage activities, and activities incidental thereto, as ter. The assets and liabilities of New York Forex would be described in section 225.25(b)(15) of Regulation Y; acquired either by Company or by a branch of Swiss Bank (3) Underwriting and dealing in obligations of the United located in London or the United States. States, general obligations of states and their political Notice of the proposal, affording interested persons an subdivisions, and other obligations that state member opportunity to submit comments, has been published banks of the Federal Reserve System may be authorized (60 Federal Register 40,181 (1995)). The time for filing to underwrite and deal in under 12 U.S.C. §§ 24 and comments has expired, and the Board has considered the 335, as described in section 225.25(b)(16) of Regula- notice and all comments received in light of the factors set tion Y; forth in section 4(c)(8) of the BHC Act. (4) Acting as agent in the private placement of all types Swiss Bank, with total consolidated assets of approxiof securities, and providing related advisory services; mately $162.1 billion, is the 44th largest banking organiza- (5) Underwriting and dealing in, to a limited extent, all tion in the world.5 In the United States, Swiss Bank opertypes of debt and equity securities; ates branches in New York, New York; Chicago, Illinois; (6) Trading for its own account in the securities option and San Francisco, California; maintains an agency in contracts listed in Appendix A attached hereto; Miami, Florida; and engages through subsidiaries in a (7) Trading for its own account in the futures and broad range of nonbanking activities. Company is, and will options on futures contracts listed in Appendix B continue to be, a broker-dealer registered with the Securiattached hereto; and ties and Exchange Commission ("SEC") and a member of (8) Trading for its own account in foreign exchange the National Association of Securities Dealers, Inc. spot, forward, and futures transactions. ("NASD"). Accordingly, Company is subject to the recordkeeping and reporting obligations, fiduciary standards, The United States Subsidiaries include S.G. Warburg & and other requirements of the Securities Exchange Act of Co., Inc., New York, New York, S.G. Warburg Options 1934 (15 U.S.C. § 78a et seq.), the SEC, and the NASD. Inc., Chicago, Illinois, and S.G. Warburg OTC USA, Inc., Swiss Bank seeks approval for Company to continue to Chicago, Illinois.3 Swiss Bank intends to merge S.G. War- conduct the activities listed above throughout the United burg & Co., Inc. with and into SBC Capital Markets Inc., States, and plans for Company to continue to conduct these New York, New York ("Company"), a subsidiary of Swiss activities worldwide. The Board previously has determined Bank that engages in a wide range of securities- and by order or regulation that all of these activities are closely related to banking within the meaning of section 4(c)(8) of the BHC Act, and Swiss Bank previously has received 2. On June 26, 1995, Swiss Bank received temporary authority to Board approval to engage in each of these activities acquire Warburg pursuant to section 4(c)(9) of the BHC Act through Company.6 Company would continue to conduct (12 U.S.C. § 1843(c)(9)). This authority was granted in reliance on certain commitments and conditions, including Swiss Bank's commit- its activities in accordance with the conditions and limitament to file this notice. tions imposed by the Board in the Swiss Bank Orders, 3. Under the proposal, Swiss Bank also would retain S.G. Warburg including the limitations established in Regulation Y and Investments (U.S.A.) Inc. ("Warburg Investments"), which makes all the commitments furnished by Swiss Bank. equity investments in nonbanking companies and also engages in lending activities. Making loans is a permissible activity for bank Company currently is engaged in limited underwriting holding companies under Regulation Y, and Swiss Bank has previ- and dealing activities that the Board previously has deterously received approval under Regulation Y to make loans. See mined are permissible under section 20 of the Glass- 12 C.F.R. 225.25(b)(1); Swiss Bank Corporation, 81 Federal Reserve Steagall Act (12 U.S.C. § 377). In particular, the Board has Bulletin 185 (1995) ("Swiss Bank 1994"). Swiss Bank has committed determined that the conduct of these securities underwritthat, to the extent Warburg Investments holds investments that do not conform to section 4(c)(6) of the BHC Act (12 U.S.C. § 1843(c)(6)) ing and dealing activities is consistent with section 20, and the Board's policy statements, orders, and interpretations concern- provided that the company engaged in the underwriting ing nonvoting equity investments, such investments will be divested and dealing activities derives no more than 10 percent of or modified so as to conform to the BHC Act and the Board's policies its total gross revenue over any two-year period from and precedents within two years from the date this acquisition was consummated. It is a condition of the Board's approval of this notice that Swiss Bank provide quarterly reports on the progress it has made toward fulfillment of this commitment. The Board also expects that, in 4. See Swiss Bank 1994. accordance with the Policy Statement on Nonvoting Equity Invest- 5. Asset data are as of December 31, 1994, and employ exchange ments (12 C.F.R. 225.143), Swiss Bank will consult with the Federal rates then in effect. Reserve System before Warburg Investments makes any new or 6. See Swiss Bank 1994. See generally Swiss Bank Corporation, 11 additional investments to ensure that the investments would conform Federal Reserve Bulletin 759 (1991), and Swiss Bank Corporation, 11 to the requirements of the BHC Act and the Board's policies and Federal Reserve Bulletin 126 (1991) (together with Swiss Bank 1994, precedents. collectively, "Swiss Bank Orders"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 687 underwriting and dealing in securities that a state member Section 20 Orders and found this capitalization to be bank may not underwrite or deal in directly ("bank- consistent with approval of the proposal. This determinaineligible securities").7 Swiss Bank has committed that tion on the capitalization of Company is based on all the Company will conduct its underwriting and dealing activi- facts of record, including related commitments and repreties with respect to bank-ineligible securities subject to this sentations made by Swiss Bank. 10-percent revenue test.8 In addition, the Board notes that on March 6, 1996, In order to approve the notice, the Board also must Swiss Bank, without admitting to any allegations, condetermine that the proposal can reasonably be expected to sented to the issuance of an order of assessment of a civil produce public benefits that would outweigh possible ad- money penalty in settlement of charges that Company verse effects under the proper incident to banking standard violated the 10-percent revenue limitation on bankof section 4(c)(8) of the BHC Act. Under the framework ineligible securities activities. In reviewing the notice, the established in this and prior decisions, consummation of Board has considered the steps that Swiss Bank and Comthe proposal is not likely to result in any significant adverse pany have put in place to monitor compliance with the effects, such as undue concentration of resources, de- 10-percent limitation. On the basis of all the facts of creased or unfair competition, conflicts of interests, or record, including the foregoing, the Board has concluded unsound banking practices that outweigh the public bene- that these financial and managerial considerations are confits of the proposal. The record also indicates that the sistent with approval of this proposal. Accordingly, and proposal should enhance Company's ability to compete based on all the facts of record, the Board has concluded with other financial institutions engaged in the interna- that the balance of the public interest factors it is required tional investment banking business, and to offer a broader to consider under the proper incident to banking standard range of products and services to its customers. of section 4(c)(8) of the BHC Act is favorable and consis- As part of the Board's evaluation of these factors under tent with approval of the notice. section 4(c)(8), the Board also has considered the financial Based on all the facts of record, the Board has deterand managerial resources of Swiss Bank and its subsidiar- mined to, and hereby does, approve the notice subject to all ies and the effect of the proposal on such resources.9 The the terms and conditions discussed in this order and in the Board notes that Swiss Bank's capital ratios satisfy applica- Swiss Bank Orders. The Board's approval of the proposal ble risk-based standards established under the Basle Ac- extends only to activities conducted within the limitations cord, and that the acquisition of Warburg had de minimis of those orders and this order, including the Board's reserimpact on Swiss Bank's financial and managerial re- vation of authority to establish additional limitations to sources. The Board also has reviewed the capitalization of ensure that Company's activities are consistent with safety Company in accordance with the standards set forth in the and soundness, conflicts of interests, and other relevant considerations under the BHC Act. The Board's determination also is subject to all the terms and conditions set forth 7. See Canadian Imperial Bank of Commerce, et al., 76 Federal in Regulation Y, including those in sections 225.7 and Reserve Bulletin 158 (1990); J.P. Morgan & Co. Incorporated, et al., 225.23(b) of Regulation Y, and to the Board's authority to 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities require such modification or termination of the activities of Industries Ass' n v. Board of Governors of the Federal Reserve System, a bank holding company or any of its subsidiaries as the 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve Board finds necessary to ensure compliance with, and to Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. prevent evasion of, the provisions of the BHC Act and the 1988), cert, den., 486 U.S. 1059 (1988) (collectively, "Section 20 Board's regulations and orders issued thereunder. The Orders"). Compliance with the 10-percent revenue limitation shall be Board's decision is specifically conditioned on compliance calculated in accordance with the method stated in the Section 20 with all the commitments made in connection with the Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989), the Order notice, the conditions established in this order, and the Approving Modifications to the Section 20 Orders, 79 Federal Reserve commitments and conditions set forth or referred to in the Bulletin 226 (1993), and the Supplement to Order Approving Modifi- Swiss Bank Orders and the Board regulations and other cations to Section 20 Orders, 79 Federal Reserve Bulletin 360 (1993). orders noted above. These commitments and conditions The Board notes that Swiss Bank has elected to use the Board's shall be deemed to be conditions imposed in writing by the alternative indexed revenue test to measure compliance with the 10-percent limitation on bank-ineligible securities activities. Board in connection with its findings and decision, and, as 8. Swiss Bank has proposed to deal in certain derivative instruments such, may be enforced in proceedings under applicable that themselves constitute securities, such as cash-settled stock index law. options that are traded on securities exchanges. The Board notes that By order of the Board of Governors, effective May 13, these instruments are securities for purposes of the federal securities laws, and that the securities comprising the relevant stock indexes are 1996. also securities that are not eligible for a bank to invest in under the Glass-Steagall Act. Based on the status of these stock index options Voting for this action: Chairman Pro Tempore Greenspan and under the federal securities laws, and after review of the relevant Governors Kelley, Phillips, and Yellen. Absent and not voting: Goverlegislative history and the purposes of the Glass-Steagall Act, the nor Lindsey. Board has determined that stock index options are bank-ineligible securities for purposes of section 20 of the Glass-Steagall Act and the 10-percent revenue test. JENNIFER J. JOHNSON 9. See 12 C.F.R. 225.24. Deputy Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

688 Federal Reserve Bulletin • July 1996 Appendix A same discount, and to allow such discounts when two bank holding company subsidiaries are involved (for example, American Stock Exchange when a bank discounts the floorplan loan based on a Major Market Index options dealership's selling retail paper to an affiliate). If the Board determines that any such arrangement would be prohibited Chicago Board Options Exchange by section 106, Applicants request that the Board grant an Standard & Poor's 100 Stock Index options exemption to permit such activities. Standard & Poor's 500 Stock Index options Notices of the requests, affording interested persons an Long-Term Interest Rate options opportunity to submit comments, have been published (60 Federal Register 57,429 (1995)) and 61 Federal Regis- Appendix B ter 167 (1996)). The time for filing comments has expired, and the Board received four comments in support of these Chicago Board of Trade requests. Options on The Bond Buyer Municipal Bond Index futures Huntington, the 35th largest banking organization in the United States, controls deposits of $12.6 billion and oper- Chicago Mercantile Exchange ates subsidiary banks in Ohio, Michigan, Indiana, West Standard & Poor's 100 Stock Price Index futures Virginia, and Florida.1 National City, the 16th largest bank- Standard & Poor's 500 Stock Price Index futures ing organization in the United States, controls deposits of Options on Standard & Poor's 500 Stock Price Index $25.2 billion and operates subsidiary banks in Ohio, Kenfutures tucky, and Indiana. Applicants also engage directly or Eurodollar futures through subsidiaries in a broad range of permissible nonbanking activities. Marc he a Terme International de France (Paris) Cotation Assiste en Contenue (CAC) 40 Stock Index Background futures For purposes of this proposal, Applicants indicate that a "floorplan loan" is a loan or line of credit provided to an automobile dealership to finance the acquisition of the ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT dealership's inventory for sale to the general public. The AMENDMENTS OF 1970 automobile dealership repays the floorplan loan as vehicles financed under the loan are sold to consumers. Floorplan Huntington Bancshares, Incorporated lending and retail paper financing are provided by both Columbus, Ohio banks and nonbanks. Applicants also indicate that "retail paper financing" National City Corporation refers to indirect financing provided to consumers seeking Cleveland, Ohio to purchase an automobile from the dealership's inventory, and may consist of either: (1) a retail installment contract Order Approving an Exemption from the Anti-Tying between the purchaser and the automobile dealership that Provisions of the Bank Holding Company Act is then sold and assigned to a bank ("three-party paper"); Amendments of 1970 or (2) a direct obligation between the purchaser and a bank that is originated by the dealership on behalf of the bank Huntington Bancshares, Incorporated, Columbus, Ohio ("two-party paper"). The two types of financing are practi- ("Huntington"), and National City Corporation, Clevecally the same, as in each case the automobile serves as land, Ohio ("National City") (collectively, "Applicants"), security for the loan, the dealer accepts the credit applicabank holding companies within the meaning of the Bank tion from the purchaser and forwards it to the bank, and Holding Company Act, have requested an interpretation funds are paid directly from the bank to the dealer. that section 106 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. § 1972) does not prohibit Applicable Law a bank from offering a "floorplan" loan at a reduced rate to an automobile dealership based on the amount of retail Section 106 generally prohibits a bank from conditioning paper financing sold to the bank by the dealership, or the availability of, or varying the consideration charged originated by the dealership on behalf of the bank. For for, any product or service, on the condition or requirement example, a bank might reduce the interest rate on a floorthat a customer: plan loan by 1 percentage point if a dealership sells more (1) Obtain some additional product or service from such than 50 percent of its retail paper to the bank, or originates bank or an affiliate; or more than 50 percent of its retail paper on behalf of the bank. Applicants seek a similar interpretation to allow a nonbank subsidiary of a bank holding company to offer the 1. Deposit data are as of December 31, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 689 (2) Provide some additional product or service to such obtaining a discount service from that bank.8 Because a bank or an affiliate.2 loan conditioned on a customer's obtaining a "discount" Although section 106 applies only when a bank offers the from a bank qualifies for the statutory traditional bank tying product, the Board in 1971 extended the same restric- product exception, that exception would permit a bank to tions to bank holding companies and their nonbank subsid- offer a reduced rate on a floorplan loan based on the iaries.3 amount of three-party paper sold by an automobile dealer- Section 106 contains an exception that permits a bank to ship to that bank. Similarly, the regulatory traditional bank condition the availability of, or vary the consideration product exception would permit a bank to offer a reduced charged for, any product or service on the condition that a rate on a floorplan loan based on the amount of three-party customer obtain a "loan, discount, deposit, or trust ser- paper sold by the automobile dealership to an affiliate of vice", a so called, "traditional bank product", from that the bank.9 bank (the "statutory traditional bank product exception").4 In a two-party paper transaction-in which an automobile Section 106 also permits a bank to condition the availabil- dealership acts as a limited purpose agent for a bank and ity of, or vary the consideration charged for, a product or originates loans to purchasers on behalf of the bank-there service on the condition that a customer provide some is no sale or assignment of retail paper, and credit is additional product or service to such bank that is "related extended by the bank directly to the automobile purchaser. to and usually provided" in connection with a traditional Because credit is extended by the bank directly to the bank product.5 These exceptions were created to preserve a automobile purchaser, as opposed to being assigned to the customer's ability to negotiate the price of multiple bank- bank by the dealership, two-party paper may not be viewed ing services with the bank on the basis of the customer's as a loan to the dealership or as the dealership obtaining a entire relationship.6 discount service from the bank. Thus, two-party paper The Board may, by regulation or order, grant additional arrangements would not qualify under either the statutory exceptions that are not contrary to the purposes of section or regulatory traditional bank product exception. 106. Under this authority, the Board has, by rule, extended Two-party paper transactions, however, may qualify for the statutory traditional bank product exception to permit a the exception in section 106 that permits a bank to tie the bank to vary the consideration charged for a traditional sale of a product (in this case, a loan) to the condition that a bank product on the condition that a customer obtain customer provide some additional product or service to another traditional bank product from an affiliate (the "reg- such bank that is "related to and usually provided in ulatory traditional bank product exception").7 The Board connection with" a traditional bank product (in this case, previously has recognized that granting an exemption, as agency services).10 Applicants argue that two-party paper opposed to an interpretation, provides certainty as to the financing is "related to and usually provided in connecpermissibility of a particular proposal under section 106. tion" with floorplan lending because it is a common practice to obtain retail financing from an entity's floorplan Application of Section 106 lender. In addition, by providing a source for retail financing, the floorplan lender assists the dealership in selling its Applicants' proposal is a tying arrangement under section inventory, thus facilitating repayment of the floorplan loan. 106 because the reduced rate for the floorplan loan is The Consumer Bankers Association also argued that twoconditioned on the automobile dealership's obtaining a party paper transactions qualify under this exception. service from (in the case of three-party paper), or providing a service to (in the case of two-party paper), the bank or its affiliates. Most aspects of this proposal, however, are per- 8. A discount by a bank means a drawback or deduction made upon its advances or loans of money, upon negotiable paper or other missible under statutory or regulatory exceptions to secevidences of debt payable at a future day, which are transferred to the tion 106. bank. Black's Law Dictionary, 4th Ed. 1968. Under this proposal, A three-party paper transaction, for example-in which retail paper is not typically purchased by the bank at a discount from an automobile dealership sells retail paper financing to a the "face amount" because the face amount is the principal amount. A bank may pay the automobile dealership an amount (often called a bank - may be considered the equivalent of the dealership's "reserve") above the principal sum. The total amount paid, however, is less than the total amount of principal and interest the bank expects to collect from the obligor over the term of the transaction, and thus the purchase of the paper from the dealership may be characterized as discounting the paper. 2. 12 U.S.C. § 1972(1)(A)-(D). According to the legislative history, 9. The Board's anti-tying regulations also would permit nonbank "(t)he purpose of this provision is to prohibit anti-competitive prac- subsidiaries to participate in three-party paper transactions on the tices which require bank customers to accept or provide some other same conditions. service or product or refrain from dealing with other parties in order to 10. 12 U.S.C. § 1972(1)(C). Because this exception does not extend obtain the bank product or service they desire." S. Rep. No. 1084,91st to products and services provided to an affiliate of the bank, the Cong. 2d Sess. 17 (1970) ("Senate Report"). Consumer Bankers Association recommended that the Board issue an 3. 36 Federal Register 10,777 (June 3, 1971); 12 C.F.R. 225.7(a). exception to cover arrangements involving affiliates. The Board will 4. 12 U.S.C. § 1972(1)(A). consider this request in connection with its broader review of Regula- 5. 12 U.S.C. § 1972(1)(C). tion Y pursuant to section 303 of the Riegle Community Development 6. Senate Report at 16-17. and Regulatory Improvement Act of 1994 (Pub. L. No. 103-325, 103d 7. 12 C.F.R. 225.7(b)(1). Cong., 1st Sess. (1994)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

690 Federal Reserve Bulletin • July 1996 Applicability of this exception, however, is a factual Conclusion issue and would depend on the interpretation of the reviewing court if a private action were brought under 12 U.S.C. For the reasons discussed above, the Board has concluded § 1975. In addition, this exception would not permit a that an exemption in this case is consistent with the legislabank to olfer the price variance on a floorplan loan based tive authorization to permit exemptions for traditional on the amount of two-party paper originated by the dealer- banking services on the basis of sound economic analysis. ship on behalf of an affiliate of the bank. Accordingly, in The Board, however, reserves the right to terminate the order to provide certainty and ensure the permissibility of exemption in the future if facts develop indicating that the entire proposal under section 106, the Board has con- such tying arrangements are resulting in anti-competitive cluded that an exemption is appropriate. practices. To the extent that the Applicants' proposal is not already Based on all the facts of record, and pursuant to its permitted, the Board has concluded that an exemption to authority under section 106, the Board hereby grants an permit the entire proposal is consistent with the purposes exemption to permit subsidiary banks and nonbank subsidof section 106. The Senate Report notes that the statutory iaries of the Applicants to offer a floorplan loan at a traditional bank product exception was intended to pre- reduced rate to an automobile dealership based on the serve a customer's ability to negotiate the price of multiple amount of retail paper financing sold to the subsidiary (or banking services with the bank on the basis of the custom- an affiliate), or originated by the dealership on behalf of the er's entire relationship with the bank.11 Allowing the pro- subsidiary (or an affiliate). posed arrangement would serve this purpose by allowing This approval is based on the facts and circumstances Applicants to offer volume discounts to dealerships based presented by Applicants, and any material change in those on their relationship with the bank holding company. facts or circumstances could result in a different outcome. As noted above, Applicants already may offer the pro- By order of the Board of Governors, effective May 23, posed price variance using a three-party paper arrangement 1996. under the statutory and regulatory traditional bank product exceptions. The requested exemption would give automo- Voting for this action: Chairman Pro Tempore Greenspan and bile dealerships added flexibility to obtain preferential loan Governors Kelley, Lindsey, Phillips, and Yellen. pricing using two-party as well as three-party retail paper financing. Applicants indicate that two-party paper transac- JENNIFER J. JOHNSON Deputy Secretary of the Board tions are not subject to an Ohio state law that limits the amount a bank may pay an automobile dealership for the purchase of three-party paper.12 This proposal does not raise the concerns about anti- ORDERS ISSUED UNDER INTERNATIONAL BANKING ACT competitive behavior that underlie section 106. Applicants Swiss Bank Corporation have represented that floorplan loans and retail paper fi- Basle, Switzerland nancing would remain separately available to customers at market prices.13 In addition, automobile dealerships could Order Approving Establishment of a Representative continue to obtain floorplan loans and retail paper financ- Office ing from bank and nonbank competitors of the Applicants. Moreover, the market for floorplan loans is national in Swiss Bank Corporation ("Bank"), Basle, Switzerland, a scope and includes numerous competitors, making it unforeign bank within the meaning of the International Banklikely that Applicants could exercise sufficient market ing Act ("IBA"), has applied under section 10(a) of the power to impair competition. In this light, Applicants note IBA (12 U.S.C. § 3107(a)) to establish a representative that competitors of bank holding companies generally offer office in Houston, Texas. The Foreign Bank Supervision pricing arrangements similar to the subject proposal. Enhancement Act of 1991 ("FBSEA"), which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a representative office in the United States. 11. Senate Report at 16-17. Notice of the application, affording interested persons an 12. Ohio law places a limit of two percent of the principal balance of the retail installment contract upon the transfer or assignment of the opportunity to submit comments, has been published in a contract from a dealership to a bank. See Ohio Rev Stat. Ann. newspaper of general circulation in Houston, Texas (The § 1317.08 (Supp. 1995). Ohio courts have determined that two-party Houston Chronicle, October 31, 1995). The time for filing paper transactions between a bank and the purchaser of an automobile comments has expired, and all comments have been conare not subject to state law governing retail installment contracts. See sidered. Vanoy v. Capital Lincoln-Mercury Sales, Inc., 88 Ohio App.3d 138 (1993). Bank, with total consolidated assets of approximately 13. Under antitrust precedent, concerns about tying arrangements $191.0 billion,1 is the third largest bank in Switzerland, are substantially reduced where the buyer is free to take either product by itself even though the seller also may offer the two items as a unit at a single price. Northern Pacific R.R. v. United States, 356 U.S. 1, 6 n.4 (1958). 1. Asset data are as of June 30, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 691 providing commercial and investment banking services The SFBC is responsible for the prudential supervision and worldwide. The shares of Bank are publicly traded and regulation of credit institutions. The Board previously has widely held, with no shareholders owning more than determined, in connection with an application involving 5 percent of Bank. another Swiss bank, Coutts & Co., AG ("Coutts"), that In the United States, Bank operates branches in New Coutts was subject to home country supervision on a York, New York; Chicago, Illinois; and San Francisco, consolidated basis.4 Bank is supervised by the SFBC on the California; an agency in Miami, Florida; and a representa- same terms and conditions as Coutts. Bank also has protive office in Los Angeles, California. Bank also engages in vided additional information regarding the supervision and a full range of securities activities permissible for bank regulation of Bank's activities by entities other than the holding companies through its section 20 subsidiary, SBC SFBC. Based on all the facts of record, the Board has Capital Markets Inc., New York, New York, and several determined that Bank is subject to comprehensive superviother nonbanking subsidiaries.2 In addition, Bank has ap- sion and regulation on a consolidated basis by its home plied to the Board to acquire the U.S. operations of S.G. country supervisors. Warburg & Company, a U.K. merchant bank. The Board also has taken into account the additional Bank's primary purpose for establishing the proposed standards set forth in section 7 of the IBA (See 12 U.S.C. representative office is to facilitate the expansion of its § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). In this regard, private banking business in Mexico and throughout the the SFBC has approved the establishment of the proposed southwestern United States. The proposed representative representative office. office would engage in representational and administrative With respect to the financial and managerial resources of functions related to Bank's private banking activities at the Bank, taking into consideration Bank's record of operadirection of Bank's New York branch. tions in its home country, its overall financial resources, In acting on an application to establish a representative and its standing with its home country supervisors, the office, the IBA and Regulation K provide that the Board Board also has determined that financial and managerial shall take into account whether the foreign bank engages factors are consistent with approval of the proposed repredirectly in the business of banking outside of the United sentative office. Bank appears to have the experience and States and has furnished to the Board the information it capacity to support the proposed representative office and needs to assess the application adequately. The Board also also has established controls and procedures for the proshall take into account whether the foreign bank and any posed representative office to ensure compliance with U.S. foreign bank parent is subject to comprehensive supervi- law. sion or regulation on a consolidated basis by its home Finally, with respect to access to information about country supervisor (12 U.S.C. § 3105(d)(2); 12 C.F.R. Bank's operations, the Board has reviewed the restrictions 211.24).3 The Board may also take into account additional on disclosure in relevant jurisdictions in which Bank operstandards as set forth in the IBA and Regulation K ates and has communicated with relevant government au- (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)). thorities about access to information. Bank has committed In this case, with respect to the issue of supervision by to make available to the Board such information on the home country authorities, the Board has considered the operations of Bank and any affiliate of Bank that the Board following information. Bank is supervised and regulated deems necessary to determine and enforce compliance with by the Swiss Federal Banking Commission ("SFBC"). the IBA, the BHC Act, as amended, and other applicable Federal law. To the extent that the provision of such information may be prohibited by law, Bank has commit- 2. Bank's U.S. nonbanking subsidiaries include SBC Derivatives ted to cooperate with the Board to obtain any necessary Inc., Chicago, Illinois; SBC Portfolio Management International Inc. consents or waivers that might be required from third and SBC Resources Management Inc., each of New York, New York; a commercial paper subsidiary; and subsidiaries incorporated to hold parties for disclosure. In addition, subject to certain condiproperty acquired in satisfaction of debts previously contracted. tions, the SFBC may share information on Bank's opera- 3. In assessing this standard, the Board considers, among other tions with other supervisors, including the Board. In light factors, the extent to which the home country supervisors: of these commitments and other facts of record, and sub- (i) Ensure that the bank has adequate procedures for monitoring ject to the condition described below, the Board concludes and controlling its activities worldwide; (ii) Obtain information on the condition of the bank and its that Bank has provided adequate assurances of access to subsidiaries and offices through regular examination reports, any necessary information the Board may request. audit reports, or otherwise; On the basis of all the facts of record, and subject to the (iii) Obtain information on the dealings with and relationship commitments made by Bank, as well as the terms and between the bank and its affiliates, both foreign and domestic; (iv) Receive from the bank financial reports that are consolidated conditions set forth in this order, the Board has determined on a worldwide basis, or comparable information that permits that Bank's application to establish a representative office analysis of the bank's financial condition on a worldwide consol- should be, and hereby is, approved. Should any restrictions idated basis; and (v) Evaluate prudential standards, such as capital adequacy and risk asset exposure, on a worldwide basis. These are indicia of comprehensive, consolidated supervision. No 4. See Coutts & Co., AG, 79 Federal Reserve Bulletin 636 (1993). single factor is essential and other elements may inform the Board's See also Union Bank of Switzerland, 82 Federal Reserve Bulletin 370 determination. (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

692 Federal Reserve Bulletin • July 1996 on access to information on the operations or activities of referred to above are conditions imposed in writing by the Bank and its affiliates subsequently interfere with the Board in connection with its decision, and may be enforced Board's ability to obtain information to determine and in proceedings under 12 U.S.C. § 1818 or 12 U.S.C. enforce compliance by Bank or its affiliates with applicable § 1847 against Bank, its offices, and its affiliates. Federal statutes, the Board may require termination of any By order of the Board of Governors, effective May 13, of the Bank's direct or indirect activities in the United 1996. States. Approval of this application is also specifically conditioned on Bank's compliance with the commitments Voting for this action: Chairman Pro Tempore Greenspan, and made in connection with this application, and with the Governors Kelley, Phillips, and Yellen. Absent and not voting: Goverconditions in this order.5 The commitments and conditions nor Lindsey. JENNIFER J. JOHNSON Deputy Secretary of the Board 5. The Board's authority to approve the establishment of the proposed representative office parallels the continuing authority of the Texas State Banking Department to license offices of a foreign bank. Department, to license the proposed representative office of Bank in The Board's approval of the application does not supplant the author- accordance with any terms or conditions that the State of Texas may ity of the State of Texas, and its agent, the Texas State Banking impose. INDEX OF ORDERS ISSUED OR ACTIONS TAKEN BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (JANUARY I, 1996-MARCH 31, 1996) Bulletin Merged or Acquired Bank Volume Applicant or Activity Date of Approval and Page Barretville Corporation, Somerville Bank and Trust Company, March 18, 1996 82, 422 Barretville, Tennessee Somerville, Tennessee Adams Bank & Trust, Adams Savings & Loan Association, January 17, 1996 82, 275 Ogallala, Nebraska Grant, Nebraska Chemical Bank, The Chase Manhattan Bank, N.A., January 5, 1996 82, 239 New York, New York New York, New York Chemical Bank Bay Area, Chemical Bank Huron, January 22, 1996 82, 276 Bay City, Michigan Standish, Michigan Chemical Banking Corporation, The Chase Manhattan Corporation, January 5, 1996 82, 239 New York, New York New York, New York Compagnie Financiere de Paribas, To engage de novo through a new United February 26, 1996 82, 348 Paris, France States subsidiary in providing certain data processing and transmission services nationwide CoreStates Financial Corp, Meridian Bancorp, Inc., March 25, 1996 82, 430 Philadelphia, Pennsylvania Reading, Pennsylvania Meridian Bank, Reading, Pennsylvania Meridian Bank, New Jersey, Cherry Hill, New Jersey Delaware Trust Company, Wilmington, Delaware Corporation Bancaria de Espana, S.A., Argentaria International Securities Inc., February 12, 1996 82, 350 Madrid, Spain New York, New York The Fifth Third Bank, NBD Bank, February 7, 1996 82, 366 Cincinnati, Ohio Columbus, Ohio The Fifth Third Bank of Columbus, Columbus, Ohio Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 693 Index of Orders—Continued Bulletin Merged or Acquired Bank Volume Applicant or Activity Date of Approval and Page First Citizens BancShares, Inc., Allied Bank Capital, Inc., January 17, 1996 82, 232 Raleigh, North Carolina Sanford, North Carolina Summit Savings Bank, Inc., SSB, Sanford, North Carolina Peoples Savings Bank, Inc., SSB, Wilmington, North Carolina First Southern Bancorp, Inc., Casey County Bancorp, Inc., March 4, 1996 82, 424 Stanford, Kentucky Liberty, Kentucky Casey County Bank. Liberty, Kentucky First Union Corporation, Internet, Inc., February 26, 1996 82, 352 Charlotte, North Carolina Reston, Virginia First Union Corporation, Society First Federal Savings Bank, February 26, 1996 82, 353 Charlotte, North Carolina Fort Myers, Florida The Governor and Company of the Bank Citizens Financial Group, Inc., March 6, 1996 82, 426 of Ireland, Providence, Rhode Island Dublin, Ireland Citizens Savings Bank, Providence, Rhode Island Citizens Trust Company, Providence, Rhode Island Citizens Bank of Massachusetts, Boston, Massachusetts HSBC Holdings pic, HSBC Securities, Inc., February 15, 1996 82, 356 London, England New York, New York HSBC Holdings BV, Amsterdam, The Netherlands Huntington Bancshares, Incorporated, Huntington Bancshares Florida, Inc., January 5, 1996 82, 236 Columbus, Ohio Columbus, Ohio Peoples Bank of Lakeland, Lakeland, Florida KeyCorp, Key Capital Markets, Inc., February 20, 1996 82, 359 Cleveland, Ohio Cleveland, Ohio Mille Lacs Bancorporation, Inc., Mille Lacs Bancshares, Inc., February 28, 1996 82, 336 Onamia, Minnesota Onamia, Minnesota First State Bank of Onamia, Onamia, Minnesota The Mitsubishi Bank, Limited, The Bank of Tokyo, Ltd., March 8, 1996 82, 436 Tokyo,Japan Tokyo, Japan Union Bank, San Francisco, California The Chicago-Tokyo Bank, Chicago, Illinois The Bank of Tokyo Trust Company, New York, New York Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

694 Federal Reserve Bulletin • July 1996 Index of Orders—Continued Bulletin Merged or Acquired Bank Volume Applicant or Activity Date of Approval and Page National City Corporation, Integra Financial Corporation, January 22, 1996 82, 271 Cleveland, Ohio Pittsburgh, Pennsylvania Integra Holding Company, Pittsburgh, Pennsylvania Integra Bank, Pittsburg, Pennsylvania Integra Trust Company, National Association, Punxsutawney, Pennsylvania North Fork Bancorporation, Inc., Extebank, February 26, 1996 82, 338 Mattituck, New York Stony Brook, New York The Royal Bank of Canada, MECA Software, L.L.C., February 6, 1996 82, 363 Montreal, Quebec, Canada Fairfield, Connecticut The Royal Bank of Scotland Group pic, Bank of Ireland First Holdings, Inc. March 6, 1996 82, 428 Edinburgh, Scotland Manchester, New Hampshire The Royal Bank of Scotland pic, First NH Bank, Edinburgh, Scotland Manchester, New Hampshire Citizens Financial Group, Inc., Providence, Rhode Island The Sumitomo Bank, The Sumitomo Bank of New York Trust February 2, 1996 82, 365 Limited, Company, Osaka, Japan New York, New York Daiwa Bank Trust Company, New York, New York The Daiwa Bank, Limited, Osaka, Japan The Sumitomo Bank, To establish representative offices in Los February 2, 1996 82, 369 Limited, Angeles and San Francisco, California; Osaka, Japan Miami and Tampa, Florida; Atlanta, Georgia; Baltimore, Maryland; Boston, Massachusetts; Minneapolis, Minnesota; St. Louis, Missouri; New York, New York; Philadelphia and Pittsburgh, Pennsylvania; and Dallas and Houston, Texas UJB Financial Corp., Flemington National Bank and Trust February 5, 1996 82, 343 Princeton, New Jersey Company, United Jersey Bank, Flemington, New Jersey Hackensack, New Jersey UJB Financial Corp., Summit Bancorporation, February 5, 1996 82, 345 Princeton, New Jersey Chatham, New Jersey United Jersey Bank, Summit Bank, Hackensack, New Jersey Chatham, New Jersey Union Bank of Switzerland, To establish a state-licensed limited February 28, 1996 82, 370 Zurich, Switzerland branch in New York, New York Wells Fargo & Company, First Interstate Bancorp, March 6, 1996 82, 445 San Francisco, California Los Angeles, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 695 APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Applicant(s) Bank(s) Effective Date Old National Bancorp, The National Bank of Carmi, May 16, 1996 Evansville, Indiana Carmi, Illinois Southwest Bancorporation, Inc., Southwest Bank of Texas, N.A. May 2, 1996 Houston, Texas Houston, Texas Southwest Bancorporation of Delaware, Inc. Wilmington, Delaware Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Effective Date U.S. Bancorp, California Bancshares, Inc., May 17, 1996 Portland, Oregon San Ramon, California CBI Mortgage, Modesto, California By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Section 3 Applicant(s) Bank(s) Reserve Bank Effective Date Amundson Family Limited Beulah Bancorporation, Inc., Minneapolis May 22, 1996 Partnership, Sioux Falls, South Dakota Sioux Falls, South Dakota Associated Banc-Corp., F&M Bankshares of Reedsburg, Inc. Chicago May 3, 1996 Green Bay, Wisconsin Reedsburg, Wisconsin Associated Banc-Shares, Inc., Farmers and Merchants Bank, Madison, Wisconsin Reedsburg, Wisconsin BancPlus Corporation Employee Home Savings Bank, SSB, St. Louis April 26, 1996 Stock Ownership Plan, Meridian, Mississippi Belzoni, Mississippi BancPlus Corporation, Belzoni, Mississippi Capitol Bancorp, Bank of Tucson, Chicago April 24, 1996 Limited, Tucson, Arizona Lansing, Michigan CBR Holdings, Inc., Community Bank of Ravens wood (In Chicago May 17, 1996 Winnetka, Illinois Organization), Chicago, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

696 Federal Reserve Bulletin • July 1996 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date CFX Corporation, The Safety Fund Corporation, Boston May 16, 1996 Keene, New Hampshire Fitchburg, Massachusetts Safety Fund National Bank, Fitchburg, Massachusetts Citizens Bank Group, Inc., Elmore Bancshares, Inc., Minneapolis May 20, 1996 Prior Lake, Minnesota Elmore, Minnesota Community First Bankshares, Inc. Financial Bancorp, Inc., Minneapolis May 20, 1996 Fargo, North Dakota Trinidad, Colorado Connecticut Bankshares, MHC, The Savings Bank of Manchester, Boston April 29, 1996 Manchester, Connecticut Manchester, Connecticut Duncanville Bancshares, Inc., Duncanville National Bank, Dallas May 8, 1996 Duncanville, Texas Duncanville, Texas ExecuFirst Bancorp, Inc., Republic Bancorporation, Inc., Philadelphia May 3, 1996 Philadelphia, Pennsylvania Philadelphia, Pennsylvania Figge Bancshares, Inc., Ossian State Bank, Chicago April 30, 1996 Davenport, Iowa Ossian, Iowa Iowa State Bank, Calmar, Iowa First Citizens Bancorp, The Home Bank of Tennessee, Atlanta May 6, 1996 Cleveland, Tennessee Maryville, Tennessee First Commerce Banks of Florida, First Mercantile National Bank, Atlanta May 3, 1996 Inc., Longwood, Florida Winter Haven, Florida First Commercial Corporation, Cedar Creek Bancshares, Inc., St. Louis April 29, 1996 Little Rock, Arkansas Seven Points, Texas State First Financial Corporation, Texarkana, Arkansas First Frederick Financial First Bank of Frederick, Richmond May 10, 1996 Corporation, Frederick, Maryland Frederick, Maryland Higgins Bancorporation, Inc., The First State Bank of Rosemount, Minneapolis May 8, 1996 Rosemount, Minnesota Rosemount, Minnesota Independent Bank Corporation, North Bank Corporation, Chicago May 8, 1996 Ionia, Michigan Hale, Michigan North Bank, Hale, Michigan Independent Bankshares Rutherford Bank and Trust, Atlanta May 2, 1996 Corporation, Murfreesboro, Tennessee Gallatin, Tennessee Lockney Holding Company, First State Bank, Dallas April 29, 1996 Wilmington, Delaware Silverton, Texas Main Street Bancorp, Inc., Princeville State Bank, Chicago May 9, 1996 Princeville, Illinois Princeville, Illinois Marlin Holding, Ltd., Central Financial Bancorp, Inc., Dallas May 9, 1996 Marlin, Texas Lorena, Texas Central Delaware Financial Bancorp, Inc., Dover, Delaware Lorena State Bank, Lorena, Texas Bank of Troy, Troy, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 697 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Minor Financial, L.L.C., Marlin Holding, Ltd., Dallas May 9, 1996 Marlin, Texas Marlin, Texas Central Financial Bancorp, Inc., Lorena, Texas Central Delaware Financial Bancorp, Inc., Dover, Delaware Lorena State Bank, Lorena, Texas Bank of Troy, Troy, Texas Monticello Bancshares, Inc., Bank of Monticello, Atlanta May 2, 1996 Monticello, Georgia Monticello, Georgia NationsBank Corporation, Charter Bankshares, Inc., Richmond April 25, 1996 Charlotte, North Carolina Houston, Texas NB Holdings Corporation, Charlotte, North Carolina P.C.B. Bancorp, Inc., Premier Community Bank, Atlanta May 16, 1996 Largo, Florida Venice, Florida Peoples National Bancshares, Inc., The Peoples National Bank of New Cleveland April 24, 1996 New Lexington, Ohio Lexington, New Lexington, Ohio Pioneer Bank, Elmore Bancshares, Inc., Minneapolis May 20, 1996 Mapleton, Minnesota Elmore, Minnesota Security Bank Holding Company, Lincoln Security Bank (in organization), San Francisco May 15, 1996 Coos Bay, Oregon Newport, Oregon Security Banking Holding Company Employee Stock Ownership Plan, Coos Bay, Oregon SNBNY Holdings Limited, Safra National Bank of New York, New York May 17, 1996 Marina Bay, City of Gibraltar New York, New York Sooner Southwest Bankshares, Inc., Southwest Consolidated Life Insurance Kansas City May 2, 1996 Bristow, Oklahoma Company, Bristow, Oklahoma Unicorp Bancshares-Delaware, Inc., First Texas Bank, Dallas May 1, 1996 Dover, Delaware Vidor, Texas Unicorp Bancshares-Delaware, Inc., OrangeBank, Dallas May 1, 1996 Dover, Delaware Orange, Texas Unicorp Bancshares-Texas, Inc., Vicor Bancorporation, Inc., Dallas May 1, 1996 Orange, Texas Vidor, Texas First Texas Bank, Vidor, Texas West Texas National Bancshares, Silverton Bancshares, Inc., Dallas April 29, 1996 Inc., Silverton, Texas Lockney, Texas First State Bank, Silverton, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

698 Federal Reserve Bulletin • July 1996 Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Bradley County Financial Services, Tennessee Financial Services, Inc., Atlanta May 13, 1996 Inc., Cleveland, Tennessee Cleveland, Tennessee Hartwick Bancshares, Inc., To retain its lending and servicing (of Chicago May 9, 1996 Hartwick, Iowa loans) activities Mahaska Investment Company, Boatman's Bank Iowa, N.A., Chicago May 13, 1996 Oskaloosa, Iowa Sigourney, Iowa Central Valley Bank, Ottumwa, Iowa MidAm, Inc., Spectrum Check Services, Inc., d.b.a. Cleveland April 25, 1996 Bowling Green, Ohio National Recovery Systems, CCB Services, Inc., Clearwater, Florida Clearwater, Florida Montgomery Bancshares, Inc., To engage de novo in making and Chicago May 3, 1996 Montgomery, Illinois servicing loans Norwest Corporation, Cardinal Credit Corporation, Minneapolis May 3, 1996 Minneapolis, Minnesota Lexington, Kentucky Norwest Financial Services, Inc. Des Moines, Iowa Norwest Financial, Inc., Des Moines, Iowa Norwest Corporation, PriMerit Bank, Minneapolis May 3, 1996 Minneapolis, Minnesota Federal Savings Bank, Las Vegas, Nevada Peoples Bancorp, Inc., Northridge Consulting Corp., Chicago April 29, 1996 Prarie du Chien, Wisconsin Prairie du Chien, Wisconsin Synovus Financial Corp., To engage de novo in merchant data Atlanta April 29, 1996 Columbus, Georgia processing activities TB&C Bancshares, Inc., Columbus, Georgia Total Systems Services, Inc., Columbus, Georgia Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Home Financial Bancorp, Owen Community Bank, s.b., Chicago May 16, 1996 Spencer, Indiana Spencer, Indiana APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Applicant(s) Bank(s) Reserve Bank Effective Date First Virginia Bank-Shenandoa First Virginia Bank-Central, Richmond May 23, 1996 Valley, Charlottesville, Virginia Woodstock, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 699 Bank Merger Act—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Pioneer Bank, The First National Bank of Elmore, Minneapolis May 20, 1996 Mapleton, Minnesota Elmore, Minnesota Republic Bank, Philadelphia, First Executive Bank, Philadelphia May 3, 1996 Pennsylvania Philadelphia, Pennsylvania WesBanco Bank Wheeling, Bank of Weirton, Cleveland May 21, 1996 Wheeling, West Virginia Weirton, West Virginia PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the bank examination material. The action was dismissed by Federal Reserve Banks in which the Board of Governors is not stipulation on May 16, 1996. named a party. Inner City Press/Community on the Move v. Board of Governors, No. 96-4008 (2nd Cir., filed January 19, 1996). Peti- Interamericas Investments, Ltd. v. Board of Governors, No. tion for review of a Board order dated January 5, 1996, 96-60326 (5th Cir., filed May 8, 1996). Petition for review approving the applications and notices by Chemical Bankof order imposing civil money penalties and cease and ing Corporation to merge with The Chase Manhattan Cordesist order in enforcement case. poration, both of New York, New York, and by Chemical Bank to merge with The Chase Manhattan Bank, N.A., both Kuntz v. Board of Governors, No. 96-1137 (D.C. Cir., filed of New York, New York. Petitioners' motion for an emer- April 25, 1996). Petition for review of a Board order dated gency stay of the transaction was denied following oral March 25, 1996, approving an application by Core- argument on March 26, 1996. The case has been consoli- States Financial Corp., Philadelphia, Pennsylvania to ac- dated for oral argument and decision with Lee v. Board of quire Meridian Bancorp, Inc., Reading, Pennsylvania. Governors, No. 95-4134 (2d Cir.). Kuntz v. Board of Governors, No. 96-1079 (D.C. Cir., filed Hotchkiss v. Board of Governors, No. 3:96CV7033 (N.D. March 7, 1996). Petition for review of a Board order dated Ohio, filed January 19, 1996). Appeal of order of bank- February 7, 1996, approving applications by The Fifth ruptcy court granting Board's motion for summary judg- Third Bank, Cincinnati, Ohio, and The Firth Third Bank of ment in adversary proceeding challenging dischargeability Columbus, Columbus, Ohio, to acquire certain assets and of Board consent order. assume certain liabilities of 25 branches of NBD Bank, Columbus, Ohio. Petitioner has moved to consolidate the Menick v. Greenspan, No. 95-CV-01916 (D. D.C., filed Octocase with Kuntz v. Board of Governors, No. 95-1495. On ber 10, 1995). Complaint alleging sex, age, and handicap April 8, 1996, the Board filed a motion to dismiss the discrimination in employment. action. Kuntz v. Board of Governors, No. 95-1495 (D.C. Cir., filed Henderson v. Board of Governors, No. 96-1054 (D.C. Cir., September 21, 1995). Petition for review of Board order filed February 16, 1996). Petition for review of a Board dated August 23, 1995, approving the applications of The order dated January 17, 1996, approving the merger of First Fifth Third Bank, Cincinnati, Ohio, to acquire certain assets Citizens BancShares, Inc., Raleigh, North Carolina, with and assume certain liabilities of 12 branches of PNC Bank, Allied Bank Capital, Inc., Sanford, North Carolina. Petition- Ohio, N.A., Cincinnati, Ohio, and to establish certain ers' motion for a stay was denied on March 7, 1996. branches. The Board's motion to dismiss was filed on October 26, 1995. Research Triangle Institute v. Board of Governors, No. 1:96CV00102 (M.D.N.C., filed February 12, 1996). Lee v. Board of Governors, No. 95-4134 (2nd Cir., filed Contract dispute. On May 3, 1996, the Board filed a motion August 22, 1995). Petition for review of Board orders dated to dismiss the action. July 24,1995, approving certain steps of a corporate reorganization of U.S. Trust Corporation, New York, New York, In re: Subpoena Duces Tecum, Misc. No. 96-MS-43(TPJ) and the acquisition of U.S. Trust by Chase Manhattan (D. D.C., filed February 7, 1996). Motion to enforce a Corporation, New York, New York. On September 12, subpoena issued to the Board seeking, among other things, 1995, the court denied petitioners' motion for an emergency Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

700 Federal Reserve Bulletin • July 1996 stay of the Board's orders. The Board's brief was filed on FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD April 16, 1996. OF GOVERNORS Beckman v. Greenspan, No. 95-35473 (9th Cir., filed May 4, Ricardo Colon 1995). Appeal of dismissal of action against Board and New York, New York others seeking damages for alleged violations of constitutional and common law rights. The appellants' brief was The Federal Reserve Board announced on May 23, 1996, filed on June 23, 1995; the Board's brief was filed on the issuance of an Order of Removal and Prohibition July 12, 1995. against Ricardo Colon, the Controller of the New York branch of Banca Nacionale Dell'Agricultore, Rome, Italy. Board of Governors v. Scott, Misc. No. 95-127 (LFO/PJA) (D. D.C., filed April 14, 1995). Application to enforce an Michael Galietta administrative investigatory subpoena for documents and New York, New York testimony. On August 3, 1995, the magistrate judge issued an order granting in part and denying in part the Board's The Federal Reserve Board announced on May 14, 1996, application. On September 18, 1995, the intervenor moved the issuance of an Order of Prohibition against Michael for reconsideration of a portion of the magistrate's ruling. Galietta, a former securities trader at Deutsche Morgan On May 6, 1996, the court denied the motion for reconsid- Grenfell/C.J. Lawrence, Inc., New York, New York, a eration. nonbank subsidiary of the Deutsche Bank AG, Frankfurt, Germany. Money Station, Inc. v. Board of Governors, No. 95-1182 (D.C. Cir., filed March 30, 1995). Petition for review of a Howard S. Miller, Barry S. Winter, Board order dated March 1, 1995, approving notices by and Keith E. Leonard Bank One Corporation, Columbus, Ohio; CoreStates Finan- New York, New York cial Corp., Philadelphia, Pennsylvania; PNC Bank Corp., Pittsburgh, Pennsylvania; and KeyCorp, Cleveland, Ohio, The Federal Reserve Board announced on May 22, 1996, to acquire certain data processing assets of National City the issuance of combined Orders to Cease and Desist and Corporation, Cleveland, Ohio, through a joint venture sub- of Assessment of Civil Money Penalties against Howard S. sidiary. On April 23, 1996, the court vacated the Board's Miller, Barry S. Winter, and Keith E. Leonard, former order. institution-affiliated parties of The Sequor Group, Inc., New York, New York, a former nonbank subsidiary of In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed Security Pacific Corporation, Los Angeles, California, a January 6, 1995). Action to enforce subpoena seeking pre- former bank holding company. decisional supervisory documents sought in connection with an action by Bank of New England Corporation's trustee in bankruptcy against the Federal Deposit Insurance Corpora- WRITTEN AGREEMENTS APPROVED BY FEDERAL tion. The Board filed its opposition on January 20, 1995. RESERVE BANKS Oral argument on the motion was held July 14, 1995. Keyesport Bancshares, Inc. Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New Keyesport, Illinois York, filed September 17, 1991). Action to freeze assets of individual pending administrative adjudication of civil The Federal Reserve Board announced on May 14, 1996, money penalty assessment by the Board. On Septem- the execution of a Written Agreement between the Federal ber 17, 1991, the court issued an order temporarily restrain- Reserve Bank of St. Louis and Keyesport Bancshares, Inc., ing the transfer or disposition of the individual's assets. Keyesport, Illinois. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Al Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance A25 Federal fiscal and financing operations DOMESTIC FINANCIAL STATISTICS A26 U.S. budget receipts and outlays All Federal debt subject to statutory limitation Money Stock and Bank Credit A27 Gross public debt of U.S. Treasury— Types and ownership A4 Reserves, money stock, liquid assets, and debt A28 U.S. government securities measures dealers—Transactions A5 Reserves of depository institutions, Reserve Bank A29 U.S. government securities dealers— credit Positions and financing A6 Reserves and borrowings—Depository A30 Federal and federally sponsored credit institutions agencies—Debt outstanding A6 Selected borrowings in immediately available funds—Large member banks Securities Markets and Corporate Finance Policy Instruments A31 New security issues—Tax-exempt state and local governments and corporations Al Federal Reserve Bank interest rates A32 Open-end investment companies—Net sales A8 Reserve requirements of depository institutions and assets A9 Federal Reserve open market transactions A32 Corporate profits and their distribution A33 Domestic finance companies—Assets and Federal Reserve Banks liabilities, and consumer, real estate, and business A10 Condition and Federal Reserve note statements credit All Maturity distribution of loan and security holdings Real Estate A34 Mortgage markets Monetary and Credit Aggregates A35 Mortgage debt outstanding A12 Aggregate reserves of depository institutions and monetary base Consumer Installment Credit A13 Money stock, liquid assets, and debt measures A15 Deposit interest rates and amounts outstanding— A36 Total outstanding commercial and BIF-insured banks A36 Terms A16 Bank debits and deposit turnover Flow of Funds Commercial Banking Institutions A37 Funds raised in U.S. credit markets A17 Assets and liabilities, Wednesday figures A39 Summary of financial transactions A40 Summary of credit market debt outstanding A41 Summary of financial assets and liabilities Weekly Reporting Commercial Banks— Assets and liabilities A19 Large reporting banks DOMESTIC NONFINANCIAL STATISTICS A21 Branches and agencies of foreign banks Selected Measures Financial Markets A42 Nonfinancial business activity— A22 Commercial paper and bankers dollar Selected measures acceptances outstanding A42 Labor force, employment, and unemployment A22 Prime rate charged by banks on short-term A43 Output, capacity, and capacity utilization business loans A44 Industrial production—Indexes and gross value A23 Interest rates—money and capital markets A46 Housing and construction A24 Stock market—Selected statistics A47 Consumer and producer prices Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • July 1996 DOMESTIC NONFINANCIAL STATISTICS- Reported by Nonbanking Business CONTINUED Enterprises in the United States A58 Liabilities to unaffiliated foreigners Selected Measures—Continued A59 Claims on unaffiliated foreigners A48 Gross domestic product and income A49 Personal income and saving Securities Holdings and Transactions A60 Foreign transactions in securities INTERNATIONAL STATISTICS A61 Marketable U.S. Treasury bonds and notes—Foreign transactions Summary Statistics A50 U.S. international transactions—Summary Interest and Exchange Rates A51 U.S. foreign trade A51 U.S. reserve assets A61 Discount rates of foreign central banks A51 Foreign official assets held at Federal Reserve A61 Foreign short-term interest rates Banks A62 Foreign exchange rates A52 Selected U.S. liabilities to foreign official institutions A63 GUIDE TO STATISTICAL RELEASES AND Reported by Banks in the United States A52 Liabilities to and claims on foreigners SPECIAL TABLES A53 Liabilities to foreigners A55 Banks' own claims on foreigners A56 Banks' own and domestic customers' claims on SPECIAL TABLE foreigners A64 Pro forma balance sheet and income statements for A56 Banks' own claims on unaffiliated foreigners priced service operations, March 31, 1996 A57 Claims on foreign countries— Combined domestic offices and foreign branches A66 INDEX TO STATISTICAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

A4 Domestic Nonfinancial Statistics • July 1996 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1995 1996 1995 1996r MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q2 Q3 Q4 Ql Dec. Jan. Feb. Mar. Apr. Reserves of depository institutions1 1 Total -7.5 -1.5 -6.9 -1.9' .7 -16.1 -16.4 19.2 -11.7 2 Required -6.6 -2.5 -7.7 -8.5 -6.6 -21.0 -2.7 13.2 -11.6 3 Nonborrowed -8.2 -2.4 -6.4 -6.5 -.5 -11.5 -16.3 19.6 -13.2 4 Monetary base3 5.8 1.7 2.7 1.5r 5.0 .4 -4.1 8.8 -.7 Concepts of money, liquid assets, and debt4 5 Ml -.4 -1.5 -5.1 -2.1' -4.4 -6.1 -2.0 10.0 -3.1 6 M2 3.8 6.9 3.9 5.6 5.5 4.8 5.0 11.1 1.2 7 M3 6.3 8.0 4.4 7.0 3.1' 7.5 9.8 10.6 1.3 8 L 7.3 9.1 5.9r 5.0 5.3 4.1 4.3 12.2 n.a. 9 Debt 7.0 4.6 4.5 4.4 3.6 2.8 5.5 6.9 n.a. Nontransaction components 10 In M25 5.8 10.9 8.1 9.3r 9.9 9.7 8.1 11.6 3.0 11 In M3 only6 16.9 12.1 6.3 12.7r -3.1' 18.3 28.9 8.6 1.9 Time and savings deposits Commercial banks 12 Savings, including MMDAs -6.5 9.0 13.1 22.6 23.2 28.2 16.5 25.2 8.8 13 Small time7 20.4 11.0 3.9 .6' 1.7 4.6 -3.9 -8.5 -8.8 14 Large time8'9 13.6 13.1 19.4 8.8r 6.0 -6.3 19.7 27.7 9.1 Thrift institutions 15 Savings, including MMDAs -14.5 -7.3 -2.8 -.3 -2.7 -3.0 6.0 5.7 14.3 16 Small time7 23.5 4.3 4.7 -2.0 3.7 -8.0 1.0 -9.1 -2.0 17 Large time8 16.7 13.7 8.0 6.2r 4.8 16.0 1.6 -9.5 1.6 Money market mutual funds 18 Retail 14.2 36.9 16.5 14.7 13.0 9.0 15.6 32.6 2.7 19 Institution-only 30.5 27.6 10.3 27.9 12.8 18.0 69.2 21.6 -13.0 Repurchase agreements and Eurodollars 20 Repurchase agreements10 7.4 -5.0 — 14.6r 1.3r —49.9r 45.9 11.7 -13.5 -4.6 21 Eurodollars'0 18.6 9.4 -6.1' 18.2r 7.9 60.5 16.3 -34.6 26.7 Debt components4 22 Federal 5.4 4.6 2.3 1.9 -.4 -3.8 6.1 13.1 n.a. 23 Nonfederal 7.6 4.7 5.3 5.3 5.0 5.1 5.3 4.7 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts outstand- amounts held by depository institutions, the U.S. government, money market funds, and ing during preceding month or quarter. foreign banks and official institutions. Seasonally adjusted M3 is calculated by summing large 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with time deposits, institutional money fund balances, RP liabilities, and Eurodollars, each regulatory changes in reserve requirements. (See also table 1.20.) seasonally adjusted separately, and adding this result to seasonally adjusted M2. 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency securities, commercial paper, and bankers acceptances, net of money market fund holdings of component of the money stock, plus (3) (for all quarterly reporters on the "Report of these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters whose Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference separately, and then adding this result to M3. between current vault cash and the amount applied to satisfy current reserve requirements. Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial 4. 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, nonfinancial 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 5. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail OCDs, each seasonally adjusted separately. money fund balances, each seasonally adjusted separately. M2: Ml plus (1) savings (including MMDAs), (2) small-denomination time deposits (time 6. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in retail (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and money market mutual funds (money funds with minimum initial investments of less than term) of U.S. addressees, each seasonally adjusted separately. $50,000). Excludes individual retirement accounts (IRAs) and Keogh balances at depository 7. Small time deposits—including retail RPs—are those issued in amounts of less than institutions and money market funds. Seasonally adjusted M2 is calculated by summing $100,000. All IRA and Keogh account balances at commercial banks and thrift institutions savings deposits, small-denomination time deposits, and retail money fund balances, each are subtracted from small time deposits. seasonally adjusted separately, and 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-denomination time deposits (in amounts of $100,000 or more), (2) booked at international banking facilities. balances in institutional money funds (money funds with minimum initial investments of 9. Large time deposits at commercial banks less those held by money market funds, $50,000 or more), (3) RP liabilities (overnight and term) issued by all depository institutions, depository institutions, the U.S. government, and foreign banks and official institutions. and (4) Eurodollars (overnight and term) held by US. residents at foreign branches of U.S. 10. Includes both overnight and term. banks worldwide and at all banking offices in the United Kingdom and Canada. Excludes 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 Apr. Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 408,620 414,343 418,391 414,687 415,312 414,640 415,778 418,171 420,131 U.S. government securities2 2 Bought outright—System account 373,807 377,309 378,891 377,113 377,692 376,932 377,477 377,055 379,270 3 Held under repurchase agreements 215 2,398 4,566 2,591 2,724 3,077 3,501 6,337 5,830 Federal agency obligations 4 Bought outright 2,634 2,559 2,492 2,568 2,539 2,533 2,526 2,521 2,491 5 Held under repurchase agreements 26 417 180 314 403 560 1,000 57 22 6 Acceptances 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 27 10 57 5 6 10 27 34 4 8 Seasonal credit 7 10 33 7 10 13 13 19 24 9 Extended credit 0 0 0 0 0 0 0 0 0 10 Float 1,139 614r 315 1,270 747 204 16 775 397 11 Other Federal Reserve assets 30,764 31,025 31,857 30,819 31,190 31,312 31,218 31,372 32,094 12 Gold stock 11,053 11,053 11,052 11,053 11,053 11,053 11,053 11,053 11,053 13 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 24,151r 24,22 lr 24,281 24,208' 24,222r 24,236r 24,250 24,264 24,278 ABSORBING RESERVE FUNDS 15 Currency in circulation 412,827r 415,770r 418,246 415,780r 416,343r 415,916r 417,212 419,0 419,308 16 Treasury cash holdings 276 297 312 282 313 304 314 319 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 4,953 5,610 7,318 5,507 7,235 5,048 6,017 5,986 7,655 18 Foreign 220 186 187 181 171 194 180 212 189 19 Service-related balances and adjustments .. 6,005 5,992 5,938 6,429 5,743 6,035 5,928 5,867 5,800 20 Other 386 394 370 392 385 371 404 372 363 21 Other Federal Reserve liabilities and capital , 12,600 13,022 12,813 13,309 12,928 12,872 12,635 12,789 12,950 22 Reserve balances with Federal Reserve Banks 16,724 18,515 18,709 18,237 17,636 19,357 18,558 19,014 19,047 End-of-month figures Wednesday figures Apr. Mar. 27 Apr. 3 Apr. 10 Apr. 17 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 415,996r 416,892 423,455 413,340 415,555 420,600 428,785 U.S. government securities2 2 Bought outright—System account 376,519 377,056 381,806 377,459 378,383 376,787 379,389 377,189 379,827 3 Held under repurchase agreements 0 3,896 0 10,493 0 8,236 1,903 8,148 13,412 Federal agency obligations 4 Bought outright 2,634 2,526 2,444 2,539 2,539 2,526 2,526 2,491 2,491 5 Held under repurchase agreements 0 1,000 0 1,100 0 2,089 1,000 400 152 6 Acceptances 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 12 34 21 7 26 0 1 8 Seasonal credit 6 9 71 14 12 17 20 34 9 Extended credit 0 0 0 0 0 0 0 0 0 10 Float 393 28r 821 447 1,331 -237 -230 818 336 11 Other Federal Reserve assets 30,330 31,447 31,728 31,404 31,066 31,613 30,943 31,534 32,532 12 Gold stock 11,053 11,053 11,052 11,053 11,053 11,053 11,053 11,053 11,053 13 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 24,194r 24,250r 24,306 24,208r 24,222r 24,236r 24,250 24,264 24,278 ABSORBING RESERVE FUNDS 15 Currency in circulation 414,0 416,26lr 417,681 417,026r 416,65 lr 417,509r 419,012 420,545 419,404 16 Treasury cash holdings 314 313 313 314 317 319 319 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,632 7,021 11,042 5,205 4,444 4,593 4,485 5,000 15,668 18 Foreign 209 191 166 166 168 172 165 201 224 19 Service-related balances and adjustments .. 5,763 5,928r 6,055 6,429 5,743 6,035 5,928 5,867 5,800 20 Other 318 348 360 376 375 375 368 365 358 21 Other Federal Reserve liabilities and capital . 13,062 12,714 12,559 12,968 12,664 12,695 12,284 12,793 12,755 22 Reserve balances with Federal Reserve Banks' 16,038 18,690r 14,268 26,402 18,424 24,816 18,466 20,995 19,758 1. Amounts of cash held as reserves are shown in table 1.12, line 2. 3. Excludes required clearing balances and adjustments to compensate for float. 2. Includes securities loaned—fully guaranteed by U.S. government securities pledged with Federal Reserve Banks—and excludes securities sold and scheduled to be bought back under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Nonfinancial Statistics • July 1996 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1993 1994 1995 1995 1996 Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar.r Apr. 1 Reserve balances with Reserve Banks2 29,374 24,658 20,440 20,055 20,066 20,440 17,763 16,792 18,426 19,181 2 Total vault cash3 36,818 40,378 42,117 40,564 40,576 42,117 44,790 42,205 40,968 40,967 3 Applied vault cash4 33,484 36,682 37,460 36,345 36,332 37,460 39,170 36,957 36,458 36,688 4 Surplus vault cash5 3,334 3,696 4,657 4,219 4,244 4,657 5,620 5,248 4,510 4,278 5 Total reserves6 62,858 61,340 57,900 56,400 56,397 57,900 56,934 53,749 54,884 55,869 6 Required reserves 61,795 60,172 56,622 55,319 55,454 56,622 55,449 52,898 53,747 54,750 7 Excess reserve balances at Reserve Banks7 1,063 1,168 1,278 1,081 943 1,278 1,485 851 1,137 1,120 8 Total borrowings at Reserve Banks8 82 209 257 245 204 257 38 35 21 91 9 Seasonal borrowings 31 100 40 199 73 40 7 7 10 34 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1996 Jan. 3 Jan. 17 Jan. 31 Feb. 14 Feb. 28 Mar. 13 Mar. 27 Apr. 10r Apr. 24 May 8 1 Reserve balances with Reserve Banks2 21,558 19,658 15,055 15,546 17,938 18,192 18,492 18,954 20,331 16,877 2 Total vault cash3 41,865 44,166 46,042 44,132 40,326 41,536 40,438 40,977 40,478 42,089 3 Applied vault cash4 37,353 39,104 39,626 38,455 35,468 36,845 36,011 36,767 36,417 37,190 4 Surplus vault cash5 4,513 5,062 6,416 5,677 4,858 4,691 4,428 4,210 4,061 4,900 5 Total reserves6 58,910 58,762 54,681 54,001 53,406 55,037 54,502 55,721 56,748 54,066 6 Required reserves 57,313 57,143 53,356 53,288 52,436 53,926 53,346 54,567 55,629 53,002 7 Excess reserve balances at Reserve Banks7 1,597 1,619 1,326 713 970 1,111 1,156 1,154 1,119 1,064 8 Total borrowings at Reserve Banks8 218 22 16 24 47 15 20 47 122 92 9 Seasonal borrowings 34 4 5 7 8 8 12 16 30 71 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. 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks' Millions of dollars, averages of daily figures 1996, week ending Monday SSoouurrccee aanndd mmaattuurriittyy Mar. 4 Mar. 11 Mar. 18 Mar. 25 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 89,298 88,072 85,953 82,749 83,135 93,383 90,606 87,706 81,920 2 For all other maturities 12,094 12,728 13,992 13,801 13,693 15,245 13,622 15,649 17,657 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 19,808 19,374 20,324 20,481 20,235 20,089 23,383 24,078 19,054 4 For all other maturities 18,516 18,016 17,783 18,461 17,583 17,066 17,877 18,141 19,418 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 23,815 23,082 24,885 25,606 24,315 14,939 21,031 19,212 16,707 6 For all other maturities 27,495 28,792 31,675 32,780r 28,287 33,927 32,227 37,802 40,479 All other customers 7 For one day or under continuing contract 39,309 39,309 38,241 36,351 35,665 34,918 36,844 34,546 35,314 8 For all other maturities 14,547 14,716 14,135 14,061 14,188 18,634 13,684 13,150 13,962 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 61,942 59,641 61,193 60,964 59,288 65,123 64,862 64,377 68,117 10 To all other specified customers2 33,460 27,534 27,535 23,729 23,208 27,200 26,093 25,851 26,548 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

Policy Instruments A7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit' Seasonal credit2 Extended credit FFeeddeerraall RReesseerrvvee BBaannkk 6/ O 7/ n 9 6 Effective date Previous rate 6/ O 7/ n 9 6 Effective date Previous rate 6/ O 7/ n 9 6 Effective date Previous rate Boston 5.00 2/1/96 5.25 5.30 6/6/96 5.30 5.80 6/6/96 5.80 New York 1/31/96 Philadelphia 1/31/96 Cleveland 1/31/96 Richmond 2/1/96 Atlanta 1/31/96 Chicago 2/1/96 St. Louis 2/5/96 Minneapolis 1/31/96 Kansas City 2/1/96 Dallas 1/31/96 San Francisco 5.00 1/31/96 5.25 5.30 6/6/96 5.30 5.80 6/6/96 5.80 Range of rates for adjustment credit in recent years4 Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Bank level)—All of Effective date level)—All of Effective date level)—All of F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks N.Y. In effect Dec. 31, 1977 1981—Nov. 2 13-14 13 1988—Aug. 9 6-6.5 6.5 6 13 13 11 6.5 6.5 1978—Jan. 9 6-6.5 6.5 Dec. 4 12 12 20 6.5 6.5 1989—Feb. 24 6.5-7 7 May 11 6.5-7 7 1982—July 20 11.5-12 11.5 27 7 7 12 7 7 23 11.5 11.5 July 3 7-7.25 7.25 Aug. 2 11-11.5 11 1990—Dec. 19 6.5 6.5 10 7.25 7.25 3 11 11 Aug. 21 7.75 7.75 16 10.5 10.5 1991—Feb. 1 6-6.5 6 Sept. 22 8 8 27 10-10.5 10 4 6 6 Oct. 16 8-8.5 8.5 30 10 10 Apr. 30 5.5-6 5.5 20 8.5 8.5 Oct. 12 9.5-10 9.5 Mav 2 5.5 5.5 Nov. 1 8.5-9.5 9.5 13 9.5 9.5 Sept. 13 5-5.5 5 3 9.5 9.5 Nov. 22 9-9.5 9 17 5 5 26 9 9 Nov. 6 4.5-5 4.5 1979—July 20 10 10 Dec. 14 8.5-9 9 7 4.5 4.5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 Dec. 20 3.5-4.5 3.5 20 10.5 10.5 17 8.5 8.5 24 3.5 3.5 Sept. 19 10.5-11 11 21 11 11 1984—Apr. 9 8.5-9 9 1992—July 2 3-3.5 3 Oct. 8 11-12 12 13 9 9 7 3 3 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 1994—May 17 3-3.5 3.5 1980—Feb. 15 12-13 13 Dec. 24 8 8 18 3.5 3.5 19 13 13 AAuugg.. 1166 3.5-4 4 May 29 12-13 13 1985—May 20 7.5-8 7.5 1188 4 4 30 12 12 24 7.5 7.5 Nov. 15 4-4.75 4.75 June 13 11-12 11 17 4.75 4.75 16 11 11 1986—Mar. 7 7-7.5 7 July 28 10-11 10 10 7 7 1995—Feb. 1 4.75-5.25 5.25 29 10 10 Apr. 21 6.5-7 6.5 9 5.25 5.25 Sept. 26 11 11 23. 6.5 6.5 Nov. 17 12 12 July 11 6 6 1996—Jan. 31 5.00-5.25 5.00 Dec. 5 12-13 13 Aug. 21 5.5-6 5.5 Feb. 5 5.00 5.00 8 13 13 22 5.5 5.5 1981—May 5 13-14 14 In effect June 7, 1996 5.00 5.00 14 14 1987—Sept. 4 5.5-6 6 11 6 6 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

A8 Domestic Nonfinancial Statistics • July 1996 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Requirement TTyyppee ooff ddeeppoossiitt Percentage of Effective date deposits Net transaction accounts2 1 $0 million-$52.0 million3 33333 1111122222/////1111199999/////9999955555 1111100000 1111122222/////1111199999/////9999955555 00000 1111122222/////2222277777/////9999900000 00000 1111122222/////2222277777/////9999900000 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For corresponding adjustment is made in the event of a decrease. The exemption applies only to previous reserve requirements, see earlier editions of the Annua! Report or the Federal accounts that would be subject to a 3 percent reserve requirement. Effective Dec. 19, 1995, Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions the exemption was raised from $4.2 million to $4.3 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. Transaction accounts include all deposits against which the account holder is permitted report quarterly. to make withdrawals by negotiable or transferable instruments, payment orders of with- 5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits drawal, or telephone or preauthorized transfers for the purpose of making payments to third with an original maturity of less than 1'/> years was reduced from 3 percent to 1 ]/2 percent for persons or others. However, money market deposit accounts (MMDAs) and similar accounts the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that subject to the rules that permit no more than six preauthorized, automatic, or other transfers began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on per month, of which no more than three may be checks, are savings deposits, not transaction nonpersonal time deposits with an original maturity of less than 1 '/> years was reduced from 3 accounts. percent to zero on Jan. 17, 1991. 3. The Monetary Control Act of 1980 requires that the amount of transaction accounts The reserve requirement on nonpersonal time deposits with an original maturity of 1 against which the 3 percent reserve requirement applies be modified annually by 80 percent of years or more has been zero since Oct. 6, 1983. the percentage change in transaction accounts held by all depository institutions, determined 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to zero as of June 30 of each year. Effective Dec. 19, 1995, the amount was decreased from $54.0 in the same manner and on the same dates as was the reserve requirement on nonpersonal million to $52.0 million. time deposits with an original maturity of less than 1 xh years (see note 5). Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the amount of reservable liabilities subject to a zero percent reserve requirement each year for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1995 1996 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar. U.S. TREASURY SECURITIES Outright transactions 1 excluding matched transactions) Treasury bills 1 Gross purchases 17,717 17.484 10.932 409 1,350 4,271 0 0 00 0 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 332,229 376,277 398,487 30,333 29,397 39,057 31,535 31,476 39,332 30,556 4 Redemptions 0 0 900 0 900 0 0 0 0 0 Others within one year 5 Gross purchases 1,223 1.238 390 0 0 0 390 0 0 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 31.368 0 0 0 1.745 6.108 0 2,048 2,746 0 8 Exchanges -36,582 -21,444 0 0 -2,049 -4,937 0 -3,287 -7,575 0 9 Redemptions 0 0 0 485 0 0 0 1,228 0 0 One to five years 10 Gross purchases 10,350 9.168 4.966 100 0 0 2,317 0 0 0 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -27.140 -6,004 0 0 -1,745 -5,292 0 -2,048 -1,908 0 13 Exchanges 0 17,801 0 0 2,049 3,237 0 3,287 5.175 0 Five to ten years 14 Gross purchases 4,168 3,818 1.239 0 0 400 0 0 0 0 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts 0 -3,145 0 0 0 -816 0 0 -818 0 17 Exchanges 0 2,903 0 0 0 1,700 0 0 1,500 0 More than ten years 18 Gross purchases 3,457 3,606 3,122 100 0 0 1,884 0 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts 0 -918 0 0 0 0 0 0 -20 0 21 Exchanges 0 775 0 0 0 0 0 0 900 0 All maturities 22 Gross purchases 36,915 35,314 20.649 609 1,350 4,671 4,591 0 0 0 23 Gross sales 0 0 0 0 0 0 0 0 0 0 24 Redemptions 767 2,337 2,376 0 1,385 0 0 1,228 0 0 Matched transactions 25 Gross purchases 1,475,941 1,700,836 2,197,736 195,830 216.755 226,340 227,858 260,425 274,290 251.623 26 Gross sales 1,475,085 1,701,309 2,202,030 198,587 213,161 228,419 228,071 259.186 275,979 251,086 Repurchase agreements 27 Gross purchases 475,447 309,276 331,694 43,286 28,825 44,569 34,325 16,040 6,230 31,602 28 Gross sales 470,723 311,898 328,497 39,896 32,980 39,876 28,546 28,802 6,230 27,706 29 Net change in U.S. Treasury securities 41,729 29,882 17,175 1,241 -597 7,285 10,157 -12,751 -1,689 4,433 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 774 1.002 1,303 46 83 120 58 0 0 108 Repurchase agreements 33 Gross purchases 35,063 52,696 36,851 1,434 3,740 3,763 2,888 9,793 765 55,,664400 34 Gross sales 34,669 52,696 36,776 1.459 3,605 3,973 1,788 10,893 765 4,640 35 Net change in federal agency obligations -380 -1.002 -1,228 -71 52 -330 1,042 -1,100 0 892 36 Total net change in System Open Market Account . . . 41,348 28,880 15,948 1,170 -545 6,955 11,199 -13,851 -1,689 5,325 I. 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

A10 Domestic Nonfinancial Statistics • July 1996 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1996 1996 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 Feb. 29 Mar. 31 Apr. 30 Consolidated condition statement ASSETS 1 Gold certificate account 11,053 11,053 11,053 11,053 11,052 11,053 11,053 11,052 2 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 3 560 562 561 573 577 547 579 574 Loans 4 To depository institutions 38 25 20 35 129 18 43 93 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 2,526 2,526 2,491 2,491 2.491 2,634 2,526 22,,444444 8 Held under repurchase agreements 2,089 1.000 400 152 1,820 0 1.000 0 9 Total U.S. Treasury securities 385,023 381,292 385,337 393,239 397,860 376,519 380,952 381,806 10 Bought outright2 376,787 379.389 377,189 379,827 380,316 376,519 377.056 381,806 11 Bills 182,933 188,633 183,335 183,282 183,771 182,666 183,202 185,262 1? Notes 148,885 145,787 148,885 150,102 150,102 148,885 148,885 150,102 13 Bonds 44,969 44,969 44,969 46,443 46,443 44,969 44,969 46,443 14 Held under repurchase agreements 8,236 1,903 8,148 13.412 17,544 0 3,896 0 15 Total loans and securities 389,675 384,842 388,248 395,917 402.300 379,171 384,521 384,343 16 Items in process of collection 5,148 6,468 6,279 6,674 5,789 4,791 4,197 8,452 17 Bank premises 1,149 1,150 1,154 1.159 1,159 1,140 1,150 1,158 Other assets 18 Denominated in foreign currencies'1 20,246 19,988 19,996 20,005 20,012 20,212 19,985 19,705 19 All other4 10,164 10,116 10,428 11.166 12.281 8,965 10,333 10,760 20 Total assets 448,163 444,347 447,887 456,714 463,338 436,048 441,986 446,211 LIABILITIES 21 Federal Reserve notes 394,146 395,641 397,160 396,018 394,393 390,640 392,903 394,236 22 Total deposits 36,115 30,232 32,526 41,628 50,676 28,135 32,301 31,975 23 Depository institutions 30,974 25,215 26,959 25,379 42,260 21,768 24,740 20,407 24 U.S. Treasury—General account 4,593 4,485 5,000 15,668 7.837 5,632 7.021 11,042 7.5 Foreign—Official accounts 172 165 201 224 210 209 191 166 26 Other 375 368 365 358 370 318 348 360 71 Deferred credit items 5,208 6,190 5,407 6,314 5,497 4,211 4,069 7,441 28 Other liabilities and accrued dividends5 4,206 4,067 4,316 4,300 4,304 4.158 4.261 4.061 29 Total liabilities 439,674 436,130 439,409 448,259 454,871 427,144 433,534 437,713 CAPITAL ACCOUNTS 30 Capital paid in 4,036 4.039 4,008 4,010 4,022 4,031 4.037 4,023 31 Surplus 3,966 3,966 3.966 3.966 3,966 3,945 3,966 3,957 32 Other capital accounts 486 213 503 478 478 928 449 518 33 Total liabilities and capital accounts 448,163 444,347 447,887 456,714 463,338 436,048 441,986 446,211 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 545.127 554,993 562.062 559,241 544,205 536,476 550.496 550,662 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 505,705 505,725 506.465 506,737 507,770 501,002 506,144 507,928 36 LESS: Held by Federal Reserve Banks 111.559 110,084 109.305 110,719 113,377 110,362 113,241 113,691 37 Federal Reserve notes, net 394,146 395,641 397.160 396,018 394,393 390,640 392,903 394,236 Collateral held against notes, net 38 Gold certificate account 11,053 11,053 11,053 11,053 11.052 11.053 11,053 11.052 39 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 372,925 374,420 375,940 374,797 373.173 369,419 371,682 373,017 42 Total collateral 394,146 395,641 397,160 396,018 394,393 390,640 392,903 394,236 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

Federal Reserve Banks All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 1996 1996 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 Feb. 29 Mar. 31 Apr. 30 1 Total loans 38 25 19 35 129 35 43 92 2 Within fifteen days' 33 12 7 33 125 32 36 59 3 Sixteen days to ninety days 5 13 13 2 4 3 7 33 4 Total U.S. Treasury securities 385,023 381,292 385,337 393,239 397,860 376,519 377,056 381,806 5 Within fifteen days' 23,309 21,157 17,442 28,380 33,277 4,962 8,963 15,945 6 Sixteen days to ninety days 87,710 93,257 93,331 87,638 87,362 87,722 99,039 91,464 7 Ninety-one days to one year 114,825 109,232 113,820 114,231 114,231 124,656 109,875 111,381 8 One year to five years 89,228 87,694 90,792 91,969 91,969 89,228 89,228 91,995 9 Five years to ten years 32,151 32,151 32,151 32,299 32,299 32,151 32,151 32,299 10 More than ten years 37,801 37,801 37,801 38,721 38,721 37,801 37,801 38,721 11 Total federal agency obligations 4,614 3,526 2,891 2,643 4,310 2,634 2,526 2,443 12 Within fifteen days' 2,369 1,000 447 353 2,021 415 280 154 13 Sixteen days to ninety days 569 839 792 670 670 510 569 685 14 Ninety-one days to one year 600 610 610 578 578 615 600 577 15 One year to five years 526 526 526 526 526 543 526 512 16 Five years to ten years 527 527 492 492 492 527 527 492 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

A12 Domestic Nonfinancial Statistics • July 1996 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1995 1996 1992 1993 1994 1995 IItteemm Dec. Dec. Dec. Dec. Sept. Oct. Nov. Dec. Jan. Feb. Mar.r Apr. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 54.37 60.52 59.36 56.36 57.34 56.84 56.33 56.36 55.61 54.85 55.73 55.18 2 Nonborrowed reserves4 54.24 60.44 59.16 56.11 57.07 56.59 56.13 56.11 55.57 54.81 55.71 55.09 3 Nonborrowed reserves plus extended credit5 54.24 60.44 59.16 56.11 57.07 56.59 56.13 56.11 55.57 54.81 55.71 55.09 4 Required reserves 53.21 59.46 58.20 55.09 56.39 55.76 55.39 55.09 54.12 54.00 54.59 54.06 5 Monetary base6 351.24 386.88 418.72 435.01 431.69 432.74 433.21 435.01 435.17r 433.67r 436.86 436.60 Not seasonally adjusted 6 Total reserves7 56.06 62.37 61.13 58.02 57.30 56.56 56.57 58.02 56.95 53.80 54.97 56.00 7 Nonborrowed reserves 55.93 62.29 60.92 57.76 57.03 56.31 56.37 57.76 56.91 53.77 54.95 55.91 8 Nonborrowed reserves plus extended credit5 55.93 62.29 60.92 57.76 57.03 56.31 56.37 57.76 56.91 53.77 54.95 55.91 9 Required reserves8 54.90 61.31 59.96 56.74 56.35 55.48 55.63 56.74 55.47 52.95 53.84 54.88 10 Monetary base9 354.55 390.59 422.51 439.03 431.64 431.60 433.22 439.03 436.01r 430.29r 434.85 437.08 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 56.54 62.86 61.34 57.90 57.16 56.40 56.40 57.90 56.93 53.75 54.88 55.87 12 Nonborrowed reserves 56.42 62.78 61.13 57.64 56.88 56.15 56.19 57.64 56.90 53.72 54.86 55.78 13 Nonborrowed reserves plus extended credit5 56.42 62.78 61.13 57.64 56.88 56.15 56.19 57.64 56.90 53.72 54.86 55.78 14 Required reserves 55.39 61.80 60.17 56.62 56.21 55.32 55.45 56.62 55.45 52.90 53.75 54.75 15 Monetary base12 360.90 397.62 427.25 444.45 436.20 436.34 438.19 444.45 441.96r 436.26r 440.75 442.91 16 Excess reserves'3 1.16 1.06 1.17 1.28 .95 1.08 .94 1.28 1.49 .85 1.14 1.12 17 Borrowings from the Federal Reserve .12 .08 .21 .26 .28 .25 .20 .26 .04 .04 .02 .09 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

Monetary and Credit Aggregates A13 1.21 MONEY STOCK. LIQUID ASSETS, AND DEBT MEASURES' Billions of dollars, averages of daily figures 1996r IItteemm D 19 e 9 c 2 . D 19 e 9 c 3 . D 19 e 9 c 4 . D 19 e 9 c 5 . Jan. Feb. Mar. Apr. Seasonally adjusted Measures2 1 Ml 1,024.4 1,128.6 1,148.7 1,124.9 1,119.2 1,117.3 1,126.6 1,123.7 2 M2 3,438.7 3,494.1 3,509.4 3,660.3 3,675.0 3,690.3 3,724.4 3,728.0 3 M3 4,187.3 4,249.6 4,319.7 4,573.7r 4,602.3 4,640.0 4,680.8 4,685.9 4 L 5,075.8 5,164.5 5,303.7 5,684.4' 5,704.0 5,724.4 5,782.4 n.a. 5 Debt 11,881.7 12,516.4 13,153.2 13,871.3 13,903.2 13,966.8 14,047.0 n.a. Ml components 6 Currency3 292.9 322.4 354.9 373.2 373.6 373.3 375.2 337755..99 7 Travelers checks4 8.1 7.9 8.5 8.9 8.9 8.9 8.9 8.9 8 Demand deposits' 339.1 384.3 382.4 389.8 393.5 397.4 407.1 406.3 9 Other checkable deposits 384.2 414.0 402.9 353.0 343.2 337.8 335.4 332.6 Nontransaction components 10 In M27 2,414.3 2,365.4 2,360.7 2.535.4 2,555.8 2,573.0 2,597.8 2,604.3 11 In M3 only8 748.6 755.6 810.3 913.4r 927.3 949.6 956.4 957.9 Commercial banks 12 Savings deposits, including MMDAs 754.1 785.0 751.9 775.0 793.2 804.1 821.0 827.0 13 Small time deposits9 509.3 470.4 505.4 576.2 578.4 576.5 572.4 568.2 14 Large time depositslc' " 286.6 272.3 298.7 342.4 340.6 346.2 354.2 356.9 Thrift institutions 15 Savings deposits, including MMDAs 433.0 433.8 397.0 359.5 358.6 360.4 362.1 366.4 16 Small time deposits9 361.9 317.6 318.2 359.5 357.1 357.4 354.7 354.1 17 Large time deposits 67.1 61.5 64.8 75.0 76.0 76.1 75.5 75.6 Money market mutual funds 18 Retail 356.0 358.7 388.1 465.1 468.6 474.7 487.6 488.7 19 Institution-only 199.8 197.9 183.7 227.2 230.6 243.9 248.3 245.6 Repurchase agreements and Eurodollars 20 Repurchase agreements 128.1 157.5 180.8 177.6r 184.4 186.2 184.1 118833..44 21 Eurodollars12 66.9 66.3 82.3 91.2r 95.8 97.1 94.3 96.4 Debt components 22 Federal debt 3,068.6 3,328.3 3,497.6 3,644.6 3,633.0 3,651.4 3,691.2 n.a. 23 Nonfederal debt 8,813.1 9,188.1 9.655.6 10,226.7 10,270.2 10,315.4 10,355.8 n.a. Not seasonally adjusted Measures2 24 Ml 1,046.0 1,153.7 1,174.2 1,150.7 1,128.1 1,103.6 1,115.9 1.130.0 25 M2 3,455.1 3,514.1 3,529.8 3,679.9r 3,676.7 3,670.8 3,717.2 3.740.9 26 M3 4,205.3 4,271.3 4,341.5 4,594.8r 4,606.9 4,621.1 4,670.7 4.690.7 27 L 5,103.1 5,194.2 5,333.2 5,714.0r 5,717.4 5,713.6 5,783.3 n.a. 28 Debt 11,883.2 12,509.3 13,145.8 13,858.0 13,897.6 13,950.0 14,019.1 n.a. MI components 29 Currency3 295.0 324.8 357.5 376.1 371.7 370.8 374.3 337755..88 30 Travelers checks4 7.8 7.6 8.1 8.5 8.5 8.5 8.6 8.6 31 Demand deposits5 354.4 401.8 400.1 407.9 399.0 388.3 397.5 406.1 32 Other checkable deposits 388.9 419.4 408.4 358.1 348.9 336.0 335.5 339.5 Nontransaction components 33 In M27 2,409.1 2,360.4 2,355.6 2,529.2 2,548.7 2,567.2 2,601.3 2,610.9 34 In M3 only8 750.2 757.1 811.7 914.8r 930.2 950.3 953.5 949.8 Commercial banks 35 Savings deposits, including MMDAs 752.9 784.3 751.6 775.0 789.5 798.9 819.0 826.0 36 Small time deposits9 507.8 468.2 502.5 572.3 576.1 575.5 573.6 570.1 37 Large time deposits' ' 286.2 272.1 298.5 342.3 337.9 344.7 352.6 354.1 Thrift institutions 38 Savings deposits, including MMDAs 432.4 433.4 396.9 359.5 356.9 358.1 361.2 365.9 39 Small time deposits9 360.9 316.1 316.4 357.0 355.7 356.8 355.5 355.3 40 Large time deposits 67.0 61.5 64.8 75.0 75.4 75.8 75.2 75.0 Money market mutual funds 41 Retail 355.1 358.3 388.2 465.4 470.6 478.0 492.1 493.5 42 Institution-only 201.1 199.4 185.5 229.4 238.2 249.6 248.7 242.8 Repurchase agreements and Eurodollars 43 Repurchase agreements'2 127.2 156.6 179.6 176.lr 183.1 183.5 182.3 182.8 44 Eurodollars12 68.7 67.6 83.4 91.9r 95.6 96.7 94.7 95.0 Debt components 45 Federal debt 3,069.8 3,329.5 3,499.0 3,645.9 3,632.7 3,650.5 3,689.8 n.a. 46 Nonfederal debt 8,813.4 9,179.8 9,646.8 10,212.1 10,264.9 10,299.5 10,329.3 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • July 1996 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 nonfinancial 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, nonfinancial 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) savings deposits (including MMDAs), (2) small-denomination time 4. Outstanding amount of US. dollar-denominated travelers checks of nonbank issuers. deposits (time deposits—including retail RPs—in amounts of less than $100,000), and (3) Travelers checks issued by depository institutions are included in demand deposits. balances in retail money market mutual funds (money funds with minimum initial invest- 5. Demand deposits at commercial banks and foreign-related institutions other than those ments of less than $50,000). Excludes individual retirement accounts (IRAs) and Keogh owed to depository institutions, the U.S. government, and foreign banks and official institubalances at depository institutions and money market funds. Seasonally adjusted M2 is tions, less cash items in the process of collection and Federal Reserve float. calculated by summing savings deposits, small-denomination time deposits, and retail money 6. Consists of NOW and ATS account balances at all depository institutions, credit union fund balances, each seasonally adjusted separately, and adding this result to seasonally share draft account balances, and demand deposits at thrift institutions. adjusted Ml. 7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more) money fund balances. issued by all depository institutions, (2) balances in institutional money funds (money funds 8. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities with minimum initial investments of $50,000 or more), (3) RP liabilities (overnight and term) (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and issued by all depository institutions, and (4) Eurodollars (overnight and term) held by U.S. term) of U.S. addressees. residents at foreign branches of U.S. banks worldwide and at all banking offices in the United 9. Small time deposits—including retail RPs—are those issued in amounts of less than Kingdom and Canada. Excludes amounts held by depository institutions, the U.S. govern- $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are ment, money market funds, and foreign banks and official institutions. Seasonally adjusted subtracted from small time deposits. M3 is calculated by summing large time deposits, institutional money fund balances, RP 10. Large time deposits are those issued in amounts of $100,000 or more, excluding those liabilities, and Eurodollars, each seasonally adjusted separately, and adding this result to booked at international banking facilities. seasonally adjusted M2. 11. Large time deposits at commercial banks less those held by money market funds, L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury depository institutions, the U.S. government, and foreign banks and official institutions. securities, commercial paper, and bankers acceptances, net of money market fund holdings of 12. Includes both overnight and term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A15 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1995r 1996 1993 1994 IItteemm Dec. Dec. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.r Apr. Interest rates (annual effective yields)2 INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts 1.86 1.96 1.93 1.92 1.91 1.93 1.92 1.92 1.93 1.87 1.91 2 Savings deposits3 2.46 2.92 3.12 3.12 3.11 3.13 3.10 3.01 2.98 2.91 2.91 Interest-hearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.65 3.79 4.10 4.10 4.11 4.13 4.11 4.01 4.00 4.03 4.02 4 92 to 182 days 2.91 4.44 4.77 4.75 4.75 4.74 4.69 4.57 4.47 4.50 4.52 5 183 days to 1 year 3.13 5.12 5.15 5.13 5.15 5.11 5.03 4.92 4.80 4.84 4.87 6 More than 1 year to 2 Vi years 3.55 5.74 5.39 5.32 5.31 5.27 5.18 5.03 4.90 4.95 5.03 7 More than 2 VI years 4.28 6.30 5.63 5.59 5.56 5.49 5.41 5.26 5.11 5.19 5.28 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts 1.87 1.94 1.98 2.00 1.98 1.94 1.91 1.85 1.84 1.83 1.86 9 Savings deposits3 2.63 2.87 2.96 2.95 2.96 2.99 2.99 2.95 2.92 2.86 2.85 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 2.81 3.80 4.34 4.27 4.32 4.43 4.44 4.38 4.29 4.39 4.44 11 92 to 182 days 3.02 4.89 5.12 5.07 5.05 5.02 4.95 4.87 4.79 4.77 4.78 12 183 days to 1 year 3.31 5.52 5.45 5.35 5.31 5.28 5.19 5.07 4.93 4.91 4.93 13 More than 1 year to 2 '/i years 3.67 6.09 5.60 5.52 5.51 5.47 5.32 5.22 5.11 5.16 5.24 14 More than 2 Vi years 4.62 6.43 5.78 5.73 5.68 5.64 5.47 5.34 5.25 5.25 5.33 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 305,237 304,896 267,644 253,568 258,175 257,099 252,434 248,464 246,847r 224,358 235,356 16 Savings deposits3 767,035 737,068 735,930 746,351 745,932 753,123 793,168 774,748 798,270r 844,670 818,594 17 Personal 598,276 580,438 575,204 585,762 585,894 588,995 628,372 617,570 634,402r 675,354 650,125 18 Nonpersonal 168,759 156,630 160,726 160,589 160,038 164,128 164,796 157,177 163,869r 169,316 168,469 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 29,362 32,265 30,937 29,794 29,903 31,090 32,807 34,275 36,359r 36,181 34,865 20 92 to 182 days 109,050 96,650 90,796 92,250 93,392 95,494 96,902 96,811 99,914r 100,573 99,712 21 183 days to 1 year 145,386 163,062 189,565 189,664 187,729 184,665 187,828 186,068 188,683r 192,010 196,371 22 More than 1 year to 2 Vi years 139,781 164,395 204,453 204,869 206,579 208,329 211,388 214,093 214,340' 213,907 213,121 23 More than 2 Vl years 180,461 192,712 201,306 201,006 199,479 199,375 203,227 200,849 202,156' 203,102 202,127 24 IRA and Keogh plan deposits 144,011 144,097 150,648 150,298 150,142 149,727 152,390 152,984 155,296' 156,480 160,145 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts 11,191 11,175 10,999 10,884 10,789 11,088 12,727 11,410 11,984 12,106 12,148 26 Savings deposits3 80,376 70,082 66,478 67,726 67,732 68,345 71,402 67,540 71,006 70,571 71,979 27 Personal 77,263 67,159 63,149 64,519 64,432 64,932 67,919 64,172 67,679 67,269 68,453 28 Nonpersonal 3,113 2,923 3,329 3,207 3,300 3,413 3,482 3,369 3,327 3,302 3,526 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 2,746 2,144 1,856 1,656 1,691 1,819 2,115 1,988 2,288' 2,297 2,362 30 92 to 182 days 12,974 11,361 11,079 10,757 10,790 11,394 12,754 12,581 13,979' 14,212 14,975 31 183 days to 1 year 17,469 18,391 22,294 23,654 24,006 24,833 27,072 26,750 28,323' 27,991 29,372 32 More than 1 year to 2 x/i years 16,589 17,787 25,029 26,558 26,678 27,149 28,966 26,968 27,805' 26,788 26,868 33 More than 2'A years 20,501 21,293 22,563 22,251 22,411 22,552 24,247 22,769 22,676' 23,506 23,731 34 IRA and Keogh plan accounts 19,791 19,008 20,333 21,029 21,042 21,230 21,949 21,229 21,137 21,373 21,308 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

A16 Domestic Financial Statistics • July 1996 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 1996 BBaannkk ggrroouupp,, oorr ttyyppee ooff ddeeppoossiitt Sept. Oct. Nov. Dec. Jan.r Feb. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 334,784.1 369,029.1 397,649.3 397,843.6 413,927.0 409,460.9 397,538.3 430,520.9 447,959.0 2 Major New York City banks 171,224.3 191,168.8 201,161.4 207,576.7 210,336.6 204,484.0 203,977.5 229,379.9 238,537.8 3 Other banks 163,559.7 177,860.3 196,487.9 190,266.9 203,590.4 204,976.9 193,560.8 201,141.0 209,421.2 4 Other checkable deposits4 3,481.5 3,798.6 4,207.4 4,366.8 4,690.4 4,891.5 4,595.5 4,960.4 5,034.7 5 Savings deposits (including MMDAs)5 3,497.4 3,766.3 4,507.8 4,898.4 5,328.6 5,679.4 5,703.6 6,025.7 6,397.1 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 785.9 817.4 874.1 858.0 907.5 905.5 852.7 917.1 950.8 7 Major New York City banks 4,198.1 4,481.5 4,867.3 5,018.0 5,269.7 5,222.3 5,069.7 5,368.0 5,852.3 8 Other banks 424.6 435.1 475.2 450.5 489.2 496.3 454.4 471.4 486.6 9 Other checkable deposits4 11.9 12.6 15.4 16.3 18.0 19.1 18.6 20.8 21.6 10 Savings deposits (including MMDAs)5 4.6 4.9 6.1 6.6 7.1 7.5 7.4 7.7 8.1 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 334,899.2 369,121.8 397,657.8 395,203.2 413,547.6 398,219.1 411,802.7 429,312.7 414,902.5 12 Major New York City banks 171,283.5 191,226.0 201,182.6 207,994.2 212,506.0 202,744.5 210,780.0 227,293.7 222,007.5 13 Other banks 163,615.7 177,895.7 196,475.3 187,209.0 201,041.7 195,474.6 201,022.7 202,019.0 192,895.0 14 Other checkable deposits4 3,481.7 3,795.6 4,202.6 4,431.9 4,565.4 4,566.6 4,784.8 5,385.9 4,638.5 15 Savings deposits (including MMDAs)5 3,498.3 3,764.4 4,500.8 4,849.1 5,075.1 5,388.7 6,013.9 6,299.0 5,790.3 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 786.1 818.2 874.6 856.4 895.4 860.5 847.5 895.6 901.1 17 Major New York City banks 4,197.9 4,490.3 4,873.1 5,069.5 5,292.2 5,046.6 4,900.9 5,109.7 5,427.5 18 Other banks 424.8 435.3 475.4 445.3 476.7 462.5 453.9 464.5 459.8 19 Other checkable deposits4 11.9 12.6 15.3 16.7 17.7 17.8 19.0 22.0 19.9 20 Savings deposits (including MMDAs)5 4.6 4.9 6.1 6.6 6.8 7.1 7.8 8.1 7.3 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

Commercial Banking Institutions A17 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Billions of dollars Monthly averages Wednesday figures Account 1995 1995 1996" 1996 Apr. Oct. Nov. Dec." Jan. Feb. Mar. Apr. Apr. 3 Apr. 10 Apr. 17 Apr. 24 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,466.0 3,579.1r 3,591.0" 3,603.1 3,630.4 3,640.3 3,631.4 3,647.3 3,629.7 3,643.7 3,645.5 3,648.6 2 Securities in bank credit 991.8 986.1r 987.0 988.7 988.9 993.7 977.7 976.7 964.2 975.7 975.2 977.8 3 U.S. government securities 708.7 713.3 714.5r 710.8 702.9 715.8 705.1 704.9 700.4 707.1 703.3 704.3 4 Other securities 283.1 272.9 272.4 277.9 286.1 278.0 272.6 271.8 263.9 268.6 271.9 273.5 5 Loans and leases in bank credit2 .. . 2,474.2 2,593.0r 2,604. r 2.614.4 2,641.4 2,646.6 2,653.7 2,670.6 2,665.5 2,668.1 2,670.4 2,670.8 6 Commercial and industrial 680.8 709.4r 713.6r 716.6 722.5 725.5 723.2 728.8 725.8 728.2 728.3 728.0 7 Real estate 1,036.5 l,076.0r l,078.1r 1,079.3 1,086.2 1,089.2 1,094.0 1,095.5 1,092.7 1,095.8 1,097.3 1,096.4 8 Revolving home equity 76.6 78.5 78.8 79.1 79.7 79.9 79.8 80.0 79.2 79.3 80.3 80.3 9 Other 959.9 997.5r 999.3r 1,000.2 1,006.5 1,009.3 1,014.2 1,015.6 1,013.5 1,016.5 1,016.9 1,016.1 10 Consumer 470.3 489.9r 492.9" 495.7 500.4 500.6 503.7 506.2 505.0 505.7 507.3 506.4 11 Security3 77.8 86.9 86.9 83.7 84.9 85.6 85.0 85.4 87.7 81.4 85.1 85.7 12 Other 208.8 230.8T 232.6' 239.2 247.5 245.6 247.8 254.6 254.3 257.0 252.4 254.3 13 Interbank loans4 182.4 194.0 196.4 196.8 204.0 194.2 205.4 212.3 201.6 216.7 206.1 215.4 14 Cash assets5 210.1 222.3 216.2 223.7 233.1 219.1 215.7 221.6 217.7 217.9 213.5 235.6 15 Other assets6 224.8 228.1 231.4 239.8 236.3 242.7 241.6 243.5 242.8 245.8 243.7 242.0 16 Total assets7 4,0263 4,166.8r 4,178.5" 4,207.0 4,247.0 4,239.8 4,237.4 4,267.9 4,235.0 4,267.4 4,252.0 4,284.7 Liabilities 17 Deposits 2,560.0 2,644.2 2,642.1 2,659.2 2,687.1 2,680.9 2,701.3 2,717.2 2,718.6 2,709.2 2,717.7 2,719.9 18 Transaction 792.6 778.6 768.2 773.9 783.3 766.6 768.4 771.9 771.1 771.3 773.6 770.6 19 Nontransaction 1,767.4 1,865.6 1,873.9 1,885.3 1,903.8 1,914.3 1,933.0 1,945.3 1,947.5 1,938.0 1,944.1 1,949.3 20 Large time 387.0 422.8 423.3 421.3 421.6 425.7 428.2 432.3 432.4 426.3 430.2 436.9 21 Other 1,380.4 1,442.8 1,450.6 1,464.0 1,482.1 1,488.5 1,504.8 1,513.0 1,515.1 1,511.7 1,513.9 1,512.5 22 Borrowings 676.7 683.3r 674.7" 690.6 705.3 691.4 687.2 707.7 682.8 706.6 693.5 720.1 23 From banks in the U.S 183.9 199.0" 198.5" 198.4 208.3 195.6 207.8 210.1 197.1 217.3 204.0 212.0 24 From nonbanks in the U.S 492.8 484.3 476.2 492.2 497.0 495.8 479.3 497.6 485.7 489.3 489.5 508.1 25 Net due to related foreign offices 236.5 257.6 263.8 262.9 270.0 276.4 261.3 254.5 256.1 253.8 252.9 263.5 26 Other liabilities8 227.4 222.8r 226.5" 236.7 229.3 232.5 223.8 231.6 224.0 237.3 237.7 226.7 27 Total liabilities 3,700.6 3,807.9 3,807.1 3,8493 3,891.7 3,881.2 3,873.6 3,911.0 3,881.6 3,907.0 3,901.7 3,9303 28 Residual (assets less liabilities)9 325.7 358.9" 371.4" 357.6 355.2 358.5 363.8 356.9 353.4 360.4 350.3 354.5 Not seasonally adjusted Assets 29 Bank credit 3,468.4 3,580.8r 3,597.4" 3,611.0 3,621.2 3,632.0 3,625.7 3,648.5 3,631.5 3,640.3 3,655.1 3,644.9 30 Securities in bank credit 997.3 987.9 985.9 979.1 976.7 988.8 982.2 982.0 975.8 984.2 981.2 979.1 31 U.S. government securities 714.6 711.5 712.9" 706.2 697.5 711.2 709.5 711.0 707.6 714.4 710.7 708.7 32 Other securities 282.7 276.4 273.0 272.9 279.2 277.6 272.8 271.0 268.2 269.8 270.5 270.4 33 Loans and leases in bank credit2 . .. 2,471.1 2,593.0" 2,611.5" 2,631.9 2,644.6 2,643.2 2,643.5 2,666.5 2,655.6 2,656.1 2,673.9 2,665.8 34 Commercial and industrial 686.1 705.5" 711.9" 714.7 719.5 723.7 727.1 734.7 732.1 730.8 735.4 733.9 35 Real estate 1,032.9 1,079. r 1,083.8" 1,084.0 1,086.0 1,086.1 1,088.4 1,091.7 1,087.9 1,091.5 1,093.6 1,092.4 36 Revolving home equity 76.1 79.1 79.3 79.2 79.5 79.4 79.1 79.4 78.3 78.4 79.7 80.0 37 Other 956.8 l,000.1r 1,004.5" 1,004.9 1,006.5 1,006.7 1,009.3 1,012.3 1,009.6 1,013.1 1,014.0 1,012.5 38 Consumer 467.7 490.5r 493.7" 501.5 505.0 501.2 499.5 503.5 500.4 501.3 504.5 504.9 39 Security3 79.0 85.5 88.2 87.6 86.7 88.5 84.8 86.2 82.5 80.1 90.9 86.4 40 Other 205.4 232.3r 233.8" 244.1 247.3 243.7 243.6 250.3 252.8 252.4 249.5 248.2 41 Interbank loans4 180.4 193.3 199.6 209.2 213.0 196.1 203.3 209.3 208.0 219.1 205.9 202.9 42 Cash assets5 205.2 223.3 220.3 238.4 240.6 219.9 208.4 216.1 213.6 210.5 214.8 222.1 43 Other assets6 222.4 228.5 230.9" 239.5 236.9 242.1 240.1 240.9 242.1 242.0 240.6 236.9 44 Total assets7 4,019.7 4,1693" 4,191.5" 4,241.4 4,255.2 4,233.5 4,220.8 4,2583 4,238.6 4,255.4 4,259.8 4,2503 Liabilities 45 Deposits 2,559.2 2,644.2 2,658.0" 2,690.4 2,693.9 2,671.9 2,687.6 2,714.1 2,732.5 2,719.7 2,726.3 2,685.2 46 Transaction 793.6 778.9 781.7 809.1 795.1 759.4 753.6 770.9 781.1 775.5 786.0 744.9 47 Nontransaction 1,765.6 1,865.4 1,876.3 1,881.2 1,898.8 1,912.5 1,934.1 1,943.2 1,951.3 1,944.2 1,940.4 1,940.3 48 Large time 386.9 421.3 424.3 420.3 418.7 426.3 429.7 432.2 431.7 424.8 429.6 437.4 49 Other 1,378.7 1,444.1 1,452.0 1,461.0 1,480.1 1,486.1 1,504.4 1,511.0 1,519.6 1,519.4 1,510.7 1,502.9 50 Borrowings 665.0 688.9r 683.7" 695.2 692.2 685.5 678.7 693.4 667.6 685.0 687.7 700.7 51 From banks in the U.S 183.3 194.1r 200.7" 211.5 215.3 197.3 202.8 208.9 207.6 218.7 205.5 202.5 52 From nonbanks in the U.S 481.7 494.8 483.1 483.7 476.9 488.1 475.9 484.5 460.0 466.3 482.2 498.1 53 Net due to related foreign offices 236.5 258.7 262.8 264.0 277.2 278.1 262.1 254.8 247.9 247.0 245.6 274.0 54 Other liabilities8 223.6 222.1r 228.5" 231.9 231.0 232.9 225.3 228.0 225.2 233.6 231.7 221.5 55 Total liabilities 3,684.3 3,814.0 3,833.2 3,881.5 3,8943 3,868.4 3,853.7 3,890.2 3,873.1 3,885.4 3,8913 3,881.5 56 Residual (assets less liabilities)9 335.3r 355.4r 358.4" 359.9 360.9 365.1 367.1 368.1 365.5 370.0 368.4 368.8 Footnotes appear on next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • July 1996 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1—Continued Billions of dollars Monthly averages Wednesday figures 1996r Apr. Dec.' Feb. Mar. Apr. Apr. 3 Apr. 10 Apr. 17 Apr. 24 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 3,058.7 3,149.9 3,162.6 3,176.4 3,197.7 3,196.3 3,197.5 3,209.2 3,197.5 3,205.5 3,206.8 3,214.0 58 Securities in bank credit 865.1 852.7 854.5 855.0 854.6 853.3 843.7 842.2 834.9 842.0 840.3 843.4 59 U.S. government securities 645.1 646.9r 647,4r 643.9 640.0 643.3 635.4 635.0 630.5 635.9 634.8 636.1 60 Other securities 220.0 205.8 207.0 211.1 214.5 210.0 208.3 207.1 204.4 206.0 205.5 207.3 61 Loans and leases in bank credit2 2,193.5 2,297.1 2,308.1 2,321.4 2,343.1 2,343.0 2,353.8 2,367.1 2,362.7 2,363.5 2,366.5 2,370.7 62 Commercial and industrial 509.5 531.6r 534.9' 535.2 540.1 540.6 540.8 545.1 541.9 543.8 545.0 545.2 63 Real estate 997.2 l,038.6r 1,041.1' 1,043.0 1,050.9 1,054.9 1,060.7 1,062.4 1,059.8 1,062.6 1,064.0 1,063.2 64 Revolving home equity 76.6 78.4 78.8 79.1 79.6 79.8 79.8 80.0 79.2 79.3 80.3 80.3 65 Other 920.6 960.1' 962.2' 963.9 971.3 975.1 980.9 982.4 980.6 983.4 983.7 983.0 66 Consumer 470.3 489.9r 492.9* 495.7 500.4 500.6 503.7 506.2 505.0 505.7 507.3 506.4 67 Security3 46.0 51.6 53.5 56.2 55.6 52.3 51.5 53.2 55.4 49.2 51.6 56.3 68 Other 170.5 185.5 185.7' 191.3 196.1 194.6 197.0 200.1 200.5 202.2 198.5 199.6 69 Interbank loans4 159.9 167.3 169.1 173.7 • 182.2 173.5 184.6 191.3 185.4 194.0 185.2 192.3 70 Cash assets5 183.9 194.2 186.2 193.6 202.0 189.8 188.3 195.5 190.5 191.2 187.7 209.5 71 Other assets6 171.5 174.5 177.7 184.4 182.6 186.1 186.6 188.0 188.1 189.9 188.1 186.2 72 Total assets7 3,517.1 3,629.2 3,639.1 3,671.7 3,707.8 3,689.2 3,700.5 3,727.1 3,704.6 3,724.0 3,711.0 3,745.2 Liabilities 73 Deposits 2,402.4 2,470.8 2,473.6 2,491.8 2,523.3 2,516.1 2,533.5 2,547.8 2,549.6 2,543.7 2,548.5 2,549.0 14 Transaction 782.7 769.4 758.3 763.4 772.6 755.9 758.5 761.4 761.1 761.0 762.9 759.9 75 Nontransaction 1,619.7 1,701.3 1,715.3 1,728.4 1,750.7 1,760.2 1,775.0 1,786.5 1,788.5 1,782.7 1,785.6 1,789.1 76 Large time 242.8 261.0 267.7 270.1 272.0 273.9 272.5 274.8 275.2 272.4 273.5 277.6 11 Other 1,376.9 1,440.3 1,447.6 1,458.3 1,478.7 1,486.4 1,502.5 1,511.7 1,513.3 1,510.2 1,512.1 1,511.5 78 Borrowings 559.5 567.4r 565.7' 577.6 591.1 573.8 575.5 588.4 573.1 592.3 572.3 604.9 /9 From banks in the U.S 163.2 179.3r 178.7' 180.0 186.9 176.2 187.3 186.9 176.1 196.4 181.4 190.7 80 From nonbanks in the U.S 396.2 388.1 387.0 397.6 404.3 397.6 388.1 401.5 397.0 395.8 391.0 414.2 81 Net due to related foreign offices .... 83.8 92.6 89.6 91.0 93.0 90.4 81.2 84.6 76.4 73.8 81.5 95.6 82 Other liabilities8 150.7 143.4r 148.1' 155.2 153.5 155.6 149.7 157.1 152.3 160.4 160.6 153.9 83 Total liabilities 3,196J 3,274.1 3,277.0 3315.7 3^60.9 3336.0 3339.9 3378.0 3351.4 3370.1 3363.0 3,403.5 84 Residual (assets less liabilities)9 320.7 355.1 362.1 356.0 346.9 353.2 360.6 349.2 353.2 353.8 348.1 341.7 Not seasonally adjusted Assets 85 Bank credit 3,061.7 3,154.5 3,172.3 3,182.4 3,186.0 3,188.3 3,190.4 3,212.1 3,197.3 3,206.1 3,215.7 3,212.6 86 Securities in bank credit 870.3 853.8 855.3 848.5 843.6 849.4 847.1 847.5 842.4 849.4 847.4 846.0 87 U.S. government securities 650.8 645.9 646.6 640.1 632.9 639.2 638.6 640.8 636.9 643.2 642.0 640.6 88 Other securities 219.5 207.9r 208.8' 208.4 210.7 210.2 208.5 206.6 205.5 206.3 205.4 205.4 89 Loans and leases in bank credit2 2,191.3 2,300.7 2,317.0 2,333.9 2,342.4 2,338.9 2,343.3 2,364.6 2,354.9 2,356.7 2,368.3 2,366.6 90 Commercial and industrial 514.9 529. r 533.9 533.2 537.0 539.8 543.9 551.0 546.9 547.2 551.5 551.4 91 Real estate 994.1 l,041.7r 1,046.5' 1,047.7 1,050.8 1,051.6 1,055.0 1,058.9 1,055.2 1,058.8 1,060.8 1.059.7 92 Revolving home equity 76.0 79.1 79.3 79.2 79.5 79.4 79.1 79.4 78.3 78.4 79.6 79.9 93 Other 918.0 962.6r 967.3' 968.6 971.3 972.2 975.9 979.5 976.9 980.4 981.1 979.8 94 Consumer 467.7 490.5' 493.7' 501.5 505.0 501.2 499.5 503.5 500.4 501.3 504.5 504.9 95 Security3 46.9 51.9 55.4 56.9 54.0 53.3 51.6 54.1 52.9 50.1 55.0 56.2 96 Other 167.9 187.6 187.4' 194.5 195.7 193.0 193.4 197.0 199.6 199.3 196.4 194.4 97 Interbank loans4 158.1 164.8 173.2 184.7 189.9 177.2 183.2 189.1 192.1 199.0 186.8 179.3 98 Cash assets5 179.6 194.8 190.7 208.5 209.8 191.7 181.5 190.6 187.0 184.6 189.3 196.6 99 Other assets6 170.7 175.2 176.3 183.7 183.6 184.9 185.9 187.2 189.9 188.5 186.7 183.0 100 Total assets7 3313^" 3,632.7 3,655.8 3,702.6 3,712* 3,685.6 3,6843 3,722.4 3,709* 3,721.7 3,7210 3,715.0 Liabilities 101 Deposits 2,403.5 2,472.4 2,488.5 2J522.1 2,529.1 2,507.4 2,519.4 2,547.0 2,564.9 2,558.5 2,560.5 2,515.4 102 Transaction 784.1 769.5 771.8 798.3 784.3 748.8 743.9 760.8 771.3 765.8 776.0 734.7 103 Nontransaction 1,619.4 1,702.9 1,716.8 1,723.8 1,744.9 1,758.6 1,775.5 1,786.2 1,793.7 1,792.7 1,784.5 1,780.7 104 Large time 243.9 260.8 267.4 265.8 269.4 275.3 273.0 276.2 275.0 274.3 274.7 278.8 105 Other 1,375.5 1,442.2 1,449.3 1,458.1 1,475.5 1,483.4 1,502.6 1,510.0 1,518.6 1,518.5 1,509.8 1,501.9 106 Borrowings 547.0 575.0' 576.8' 584.1 581.8 572.6 567.6 573.2 555.8 568.9 564.0 585.9 107 From banks in the U.S 163.5 175.7' 181.2' 191.9 193.8 178.7 182.2 186.6 184.5 198.0 182.4 183.9 108 From nonbanks in the U.S 383.5 399.3 395.6 392.2 388.0 394.0 385.4 386.5 371.4 370.9 381.6 401.9 109 Net due to related foreign offices .... 84.1 92.0 88.4 89.3 92.9 92.3 84.5 85.0 75.5 71.5 77.8 100.6 110 Other liabilities8 148.6 143.8' 149.7' 153.3 154.1 154.1 151.5 155.2 154.0 158.8 157.4 150.6 111 Total liabilities 3,1833 3,283.2 3,303.4 3348* 3358.0 3326.4 3323.0 3360.4 33503 3357* 3359.6 3352.5 112 Residual (assets less liabilities)9 330.3 349.5 352.4 353.8 354.9 359.2 361.3 362.0 359.5 363.9 362.4 362.5 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 A19 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS Millions of dollars, Wednesday figures 1996 AAccccoouunntt Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 ASSETS 1 Cash and balances due from depository institutions 117,389 108,667 113,510 109,275 110,535 113,267 113,019 117,100 127.447 2 U.S. Treasury and government securities 290,002 286,686 285,376 284,298 285,106 282,446 286,488 283,560 281,055 3 Trading account 25,054 25,868 27,040 26,792 26,624 22,237 24,467 21,686 19,411 4 Investment account 264,948 260,818 258,336 257,506 258,482 260,209 262,021 261,874 261,644 5 Mortgage-backed securities' 111,935 111,475 110,458 110,073 112,357 113,268 112,767 113,273 114,323 All others, by maturity 6 One year or less 38,163r 37,140r 36,553' 36,570' 36,013' 36,039 37,568 36,182 35,363 7 One year through five years 64,265r 62,353r 61,281' 61,280' 61,184' 61,755 62,575 63,577 63,498 8 More than five years 50,585r 49,849r 50,045' 49,583' 48,929' 49,147 49,112 48,843 48,460 9 Other securities 122,220 124,994 124,936 119,876 120,071 118,949 119,878 118,987 119,006 10 Trading account 1,493 1,477 1,469 1,539 1,667 1,840 1,911 1,542 1,641 11 Investment account 63,702 64,834 64,907 64,121 63,839 64,181 63,792 63,425 63,411 12 State and local government, by maturity 19,005r 19 fill' 19,087' 19,018' 19,025' 18,978 18,955 19,019 19,065 13 One year or less 4,324r 4,278r 4,263' 4,238' 4,221' 4,222 4,220 4,205 4,219 14 More than one year 14,68 r 14,794r 14,825' 14,781' 14,803' 14,756 14,735 14,814 14,847 15 Other bonds, corporate stocks, and securities 44,697r 45,763r 45,820' 45,103' 44,815' 45,203 44,838 44,406 44,346 16 Other trading account assets 57,025 58,683 58,560 54,216 54,564 52,929 54,175 54,021 53,954 17 Federal funds sold2 107,153 105,488 108,379 106,118 102,037 111,299 116,084 114,112 118,498 18 To commercial banks in the United States 70,082 70,120 71,352 72,224 70,932 72,837 81,396 75,435 79,263 19 To nonbank brokers and dealers in securities 29,951 29,310 31,365 28,658 26,064 32,078 28,716 33,823 35,032 20 To others3 7,119 6,058 5,661 5,236 5,040 6,384 5,973 4,854 4,203 21 Other loans and leases, gross l,282,631r l,284,507r 1,284,496' 1,286,040' 1,286,258' 1,290,095 1,293,924 1,296,749 1,297,003 22 Commercial and industrial 352,841r 353,900' 353,199' 355,369' 356,237' 356,884 357,012 359,923 359,757 23 Bankers acceptances and commercial paper 1,465 1,596 1,579 1,627 1,601 1,618 1,603 1,458 1,431 24 All other 351,376r 352,304' 351,619' 353,742' 354,636' 355,266 355,410 358,465 358,326 25 U.S. addressees 348,560r 349,507' 348,820' 350,984' 351,898' 352,565 352,729 355,726 355,588 26 Non-U.S. addressees 2,816 2,797 2,800 2,758 2,738' 2,702 2,681 2,739 2,738 27 Real estate loans 505,117 508,683 508,792 507,282 506,731' 506,887 508,717 508,812 507,879 28 Revolving, home equity 47,985 47,972 47,920 47,825 47,765 47,014 47,033 47,967 48,191 29 All other 457,132 460,711 460,872 459,457 458,966' 459,873 461,684 460,845 459,688 30 To individuals for personal expenditures 247,863 247,903 246,948 247,608 247,144' '247,939 248,302 249,348 249,873 31 To depository and financial institutions 68,520 69,075 70,405 70,823 71,324' 73,329 74,503 73,101 73,539 32 Commercial banks in the United States 39,630 39,645 40,523 39,792 39,912' 40,708 41,185 40,992 41,242 33 Banks in foreign countries 2,783 2,649 3,001 3,082 3,211 3,033 3,900 3,021 3,510 34 Nonbank depository and other financial institutions 26,107 26,781 26,881 27,949 28,202 29,588 29,418 29,088 28,787 35 For purchasing and carrying securities 19,657 16,741 17,006 16,207 15,923 14,187 14,894 15,122 15,795 36 To finance agricultural production 6,532 6,564 6,521 6,504 6,554 6,518 6,575 6,587 6,645 37 To states and political subdivisions 10,553 10,610 10,572 10,522 10,589 10,543 10,480 10,488 10,317 38 To foreign governments and official institutions 1,286 1,115 1,120 1,102 1,082 1,123 1,323 1,237 1,095 39 All other loans 26,754 25,940 25,538 26,064 26,083 27,918 26,697 26,563 26,397 40 Lease-financing receivables 43,509 43,975 44,396 44,559 44,592 44,767 45,420 45,569 45,706 41 LESS: Unearned income 1,778 1,764 1,803 1,793 1,791 1,764 1,812 1,813 1,808 42 Loan and lease reserve3 33,276 33,537 33,517 33,447 33,182 33,250 33,062 33,049 32,968 43 Other loans and leases, net l,247,577r 1,249,206' 1,249,176' 1,250,800' 1,251,286' 1,255,082 1,259,050 1,261,888 1,262,227 44 All other assets 142,371' 147,228' 142,594' 144,955' 143,579' 148,698 148,511 146,678 140,613 45 Total assets 2,026,712r 2,022,269r 2,023,971r 2,015,322r 2,012,613r 2,029,741 2,043,030 2,042,326 2,048,846 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • July 1996 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1996 AAccccoouunntt Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 LIABILITIES 46 Deposits 1,194,293 1,214,607 1,209,808 1,202,987 1,198,002 1,236,990 1,232,494 1,236,558 1,212,132 47 Demand deposits 298,443' 301,517' 297,850' 296,239 294,139 315,319 311,243 316,277 302,621 48 Individuals, partnerships, and corporations 255,041 258,736 257,055 251,947 250,720 270,698 267,244 269,122 254,789 49 Other holders 43,402' 42,781' 40,795' 44,293 43,420 44,621 43,999 47,155 47,832 50 States and political subdivisions 8,291' 7,831' 7,409' 8,641 8,212 8,128 8,690 8,123 8,820 51 U.S. government 1,709 2,160 1,698 1,959 1,691 2,258 2,493 5,178 6,535 52 Depository institutions in the United States 19,860 20,260 19,412 20,459 20,140 21,488 19,935 20,981 19,640 53 Banks in foreign countries 5,842 4,998 5,019 5,750 5,468 4,977 5,403 4,567 5,279 54 Foreign governments and official institutions 553 680 678 695 604 621 665 640 578 55 Certified and officers' checks 7,147 6,851 6,580 6,788 7,304 7,149 6,813 7,666 6,979 56 Transaction balances other than demand deposits4 85,208' 86,023 84,140' 85,054 84,557 86,892 86,267 89,990 82,854 57 Nontransaction balances 810,643' 827,067' 827,817' 821,694 819,305 834,779 834,984 830,291 826,658 58 Individuals, partnerships, and corporations 785,883' 801,769 802,858' 796,780 794,406' 808,079 808,082 803,662 798,105 59 Other holders 24,760' 25,299' 24,960' 24,914 24,900' 26,700 26,901 26,628 28,552 60 States and political subdivisions 21,754' 22,338' 22,098' 22,103 21,980 22,981 23,073 22,367 22,325 61 U.S. government 741' 785 781 747 728 1,934 2,162 2,455 3,929 62 Depository institutions in the United States 1,979 1,889 1,776 1,752 1,879 1,480 1,362 1,493 1,995 63 Foreign governments, official institutions, and banks .. 285 286 305 312 312' 305 305 312 303 64 Liabilities for borrowed money5 410,004 394,734 404,051 410,568 402,667 392,672 406,765 398,596 416,611 65 Borrowings from Federal Reserve Banks 0 0 0 0 0 0 0 0 0 66 Treasury tax and loan notes 21,229 7 463 15,825 11,733 11,355 5,921 24,794 26,456 67 Other liabilities for borrowed money6 388,774 394,727 403,587' 394,743 390,934 381,318 400,845 373,801 390,156 68 Other liabilities (including subordinated notes and debentures)... 225,731' 215,879' 212,361' 204,347' 214,795' 206,349 207,986 211,554 223,594 69 Total liabilities l,830,028r l,825,220r l,826,219r l,817,902r l,815,464r 1,836,011 1,847,245 1,846,708 1,852,337 70 Residual (total assets less total liabilities)7 196,684' 197,049' 197,751' 197,420' 197,149' 193,730 195,785 195,618 196,509 MEMO 71 Total loans and leases, gross, adjusted, plus securities 1,692,294' 1,691,909' 1,691,311' 1,684,317' 1,682,627' 1,689,245 1,693,793 1,696,982 1,695,057 72 Time deposits in amounts of $100,000 or more 118,222 118,768 117,990 117,728 116,262 119,407 118,241 119,119 122,439 73 Loans sold outright to affiliates9 1,177 1,168 1,151 1,136 1,125 1,116 1,106 1,098 1,088 74 Commercial and industrial 275 275 270 270 269 268 268 268 268 75 Other 902 892 880 866 856 848 838 829 820 76 Foreign branch credit extended to U.S. residents 27,714 27,546 27,354 27,162 26,956 26,901 27,107 27,861 27,837 77 Net owed to related institutions abroad 92,665 82,191 80,559 73,999 85,122 71,164 67,682 73,430 95,245 1. Includes certificates of participation, issued or guaranteed by agencies of the US. 8. Excludes loans to and federal funds transactions with commercial banks in the government, in pools of residential mortgages. United States. 2. Includes securities purchased under agreements to resell. 9. Affiliates include a bank's own foreign branches, nonconsolidated nonbank affiliates 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 A21 1.28 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS Assets and Liabilities Millions of dollars, Wednesday figures 1996 AAccccoouunntt Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 ASSETS 1 Cash and balances due from depository institutions 16,736 16,242 16,694 16,500 16,611 16,273 15,855 15,506 15,572 2 U.S. Treasury and government agency securities 49,319 47,099 46,911 46,967 45,429 46,347 46,790 44,965 4444,,991144 3 Other securities 44,704 44,099 43,329 42,717 42,555 41,985 42,893 44,144 44,657 4 Federal funds sold1 31,387 27,075 29,682 28,169 30,121 24,361 26,693 31,479 28,065 5 To commercial banks in the United States 7,963 5,202 7,274 5,948 7,812 5,248 7,100 6,907 8,634 6 To others2 23,425 21,873 22,409 22,221 22,308 19,113 19,593 24,573 19,431 7 Other loans and leases, gross 185,298 180,675 181,937 183,360 183,599 185,381 184,807 183,775 185,476 8 Commercial and industrial 120,912 119,678 120,149 121,260 120,681 122,739 122,013 121,757 121,023 9 Bankers acceptances and commercial paper . 5,290 5,155 5,048 5,149 5,188 5,163 5,429 5,154 5,162 10 All other 115,622 114,523 115,100 116,112 115,493 117,576 116,584 116,603 115,861 11 U.S. addressees 109,699 108,519 109,007 109,988 109,311 111,360 110,430 110,225 109,670 17 Non-U.S. addressees 5,923 6,004 6,093 6,123 6,182 6,216 6,154 6,378 6,191 13 Loans secured by real estate 21,009 20,833 20,817 20,687 20,374 20,191 20,210 20,208 20,364 14 Loans to depository and financial institutions 29,673 28,376 28,907 29,314 30,067 30,564 30,929 30,110 31,676 15 Commercial banks in the United States 2,413 2,510 3,231 3,144 3,273 2,376 2,548 2,244 2,560 16 Banks in foreign countries 3,050 2,883 2,845 2,671 2,755 3,061 3,110 3,051 3,120 17 Nonbank financial institutions 24,210 22,984 22,830 23,500 24,039 25,127 25,271 24,815 25,997 18 For purchasing and carrying securities 7,014 5,113 5,389 5,503 5,782 4,937 4,952 4,862 5,134 19 To foreign governments and official institutions 661 686 593 669 594 621 582 689 605 20 All other 4,166 4,138 4,202 4,094 4,214 4,372 4,228 4,247 4,610 21 Other assets (claims on nonrelated parties) 40,848 40,115 41,240 36,505 36,785 36,958 37,581 37,240 36,909 22 Total assets3 396,549 386,611 387,969 384,985 384,098 383,950 386,397 392,910 391,417 LIABILITIES 23 Deposits or credit balances owed to other than directly related institutions 104,192 103,864 105,992 105,042 105,989 105,656 101,344 105,173 108,433 24 Demand deposits4 3,887 3,778 3,896 3,623 3,954 3,996 3,936 4,036 4,216 25 Individuals, partnerships, and corporations .... 3,166 3,183 3,105 2,921 3,124 3,119 3,217 3,311 3,481 26 Other 721 595 791 702 830 877 719 725 735 27 Nontransaction accounts 100,306 100,086 102,097 101,419 102,035 101,660 97,408 101,137 104,217 28 Individuals, partnerships, and corporations .... 68,847 69,719 72,078 71,613 71,374 72,501 69,256 72,258 74,789 29 Other 31,458 30,366 30,018 29,807 30,661 29,159 28,153 28,879 29,428 30 Borrowings from other than directly related institutions 75,816 77,113 72,747 75,565 70,075 74,049 76,140 82,875 7755,,996633 31 Federal funds purchased5 45,012 49,350 45,236 47,141 43,941 47,698 45,281 52,877 44,693 32 From commercial banks in the United States .. 10,198 11,755 10,305 8,850 8,730 12,094 9,753 12,657 8,762 33 From others 34,814 37,595 34,931 38,291 35,211 35,604 35,528 40,220 35,931 34 Other liabilities for borrowed money 30,803 27,764 27,511 28,424 26,133 26,351 30,859 29,998 31,270 35 To commercial banks in the United States 4,304 4,282 3,949 4,244 4,381 4,357 4,251 4,328 4,543 36 To others 26,500 23,482 23,562 24,181 21,753 21,994 26,608 25,670 26,727 37 Other liabilities to nonrelated parties 64,960 62,461 63,064 59,105 58,817 58,682 61,598 61,840 59,561 38 Total liabilities6 396,549 386,611 387,969 384,985 384,098 383,950 386,397 392,910 391,417 MEMO 39 Total loans (gross) and securities, adjusted 300,334 291,237 291,354 292,121 290,617 290,450 291,535 295,212 291,918 40 Net owed to related institutions abroad 123,325 111,868 117,991 114,507 120,219 112,918 115,538 107,221 111,635 1. Includes securities purchased under agreements to resell. 5. Includes securities sold under agreements to repurchase. 2. Includes transactions with nonbank brokers and dealers in securities. 6. For U.S. branches and agencies of foreign banks having a net "due to" position, 3. For U.S. branches and agencies of foreign banks having a net "due from" position, includes net owed to related institutions abroad. includes net due from related institutions abroad. 7. Excludes loans to and federal funds transactions with commercial banks in the United 4. Includes other transaction deposits. States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • July 1996 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1995 1996 IItteemm 1991 1992 1993 1994 1995 Oct. Nov. Dec. Jan. Feb. Mar. Commercial paper (seasonally adjusted unless noted otherwise) 1111 AAAAllllllll iiiissssssssuuuueeeerrrrssss 528,832 545,619 555,075 595,382 674,927r 673,241 669,661r 674,927r 685,797r 687,669r 695,201 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooommmmppppaaaannnniiiieeeessss'''' 2222 DDDDeeeeaaaalllleeeerrrr----ppppllllaaaacccceeeedddd ppppaaaappppeeeerrrr2222,,,, ttttoooottttaaaallll 212,999 226,456 218,947 223,038 275,814r 271,299 276,222' 275,814' 288,368' 293.313 292,533 3333 DDDDiiiirrrreeeeccccttttllllyyyy ppppllllaaaacccceeeedddd ppppaaaappppeeeerrrr3333,,,, ttttoooottttaaaallll 182,463 171,605 180,389 207,701 210,853r 215,982 213,578' 210,853' 208,166' 208,046 208,880 4444 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooommmmppppaaaannnniiiieeeessss4444 133,370 147,558 155,739 164,643 188,260 185,960 179,861' 188,260 189,264 186,310' 193,788 Bankers dollar acceptances (not seasonally adjusted)5 5555 TTTToooottttaaaallll 43,770 38,194 32,348 29,835 29,242 BBBByyyy hhhhoooollllddddeeeerrrr 6666 AAAAcccccccceeeeppppttttiiiinnnngggg bbbbaaaannnnkkkkssss 11,017 10,555 12,421 11,783 7777 OOOOwwwwnnnn bbbbiiiillllllllssss 9,347 9,097 10,707 10,462 8888 BBBBiiiillllllllssss bbbboooouuuugggghhhhtttt ffffrrrroooommmm ooootttthhhheeeerrrr bbbbaaaannnnkkkkssss 1,670 1,458 1,714 1,321 FFFFeeeeddddeeeerrrraaaallll RRRReeeesssseeeerrrrvvvveeee BBBBaaaannnnkkkkssss6666 9999 FFFFoooorrrreeeeiiiiggggnnnn ccccoooorrrrrrrreeeessssppppoooonnnnddddeeeennnnttttssss 1,739 1,276 725 410 n.a. i n.a. n.a. n.a. n.a. n.a. n.a. 11110000 OOOOtttthhhheeeerrrrssss 31,014 26,364 19,202 17,642 BBBByyyy bbbbaaaassssiiiissss 11111111 IIIImmmmppppoooorrrrttttssss iiiinnnnttttoooo UUUUnnnniiiitttteeeedddd SSSSttttaaaatttteeeessss 12,843 12,209 10,217 10,062 11112222 EEEExxxxppppoooorrrrttttssss ffffrrrroooommmm UUUUnnnniiiitttteeeedddd SSSSttttaaaatttteeeessss 10,351 8,096 7,293 6,355 11113333 AAAAllllllllooootttthhhheeeerrrr 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. 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 g e Period Av r e a r te a ge Period Av r e a r t a e ge 1993—Jan. 1 66..0000 1993 6.00 1994—Jan 6.00 1995—Jan 8.50 1994 7.15 Feb 6.00 Feb 9.00 1994—Mar. 24 6.25 1995 88..8833 6.06 9.00 Apr. 19 6.75 Apr 6.45 Apr 9.00 May 17 7.25 1993—Jan 6.00 Mav 6.99 Mav 9.00 Aug. 16 7.75 Feb 6.00 June 7.25 June 9.00 Nov. 15 8.50 Mar. 6.00 Julv 7.25 July 8.80 Apr. 6.00 Aug 7.51 Aug 8.75 1995—Feb. 1 9.00 May 6.00 Sept 7.75 Sept 8.75 July 7 8.75 June 6.00 Oct 7.75 Oct 8.75 Dec. 20 8.50 July 6.00 Nov 8.15 Nov 8.75 Aug 6.00 Dec 8.50 Dei 8.65 1996—Feb. 1 8.25 Sept 6.00 Oct 6.00 1996—Jan 8.50 Nov 6.00 Feb 8.25 Dec 6.00 Mar 8.25 Apr 8.25 May 8.25 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

Financial Markets A23 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1996 1996, week ending IItteemm 11999933 11999944 11999955 Jan. Feb. Mar. Apr. Mar. 29 Apr. 5 Apr. 12 Apr. 19 Apr. 26 MONEY MARKET INSTRUMENTS 1 Federal funds12'3 3.02 4.21 5.83 5.56 5.22 5.31 5.22 5.22 5.30 5.08 5.24 5.24 2 Discount window borrowing2' 3.00 3.60 5.21 5.24 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Commercial paper3'5'6 3 1-month 3.17 4.43 5.93 5.56 5.29 5.39 5.40 5.48 5.42 5.42 5.39 5.38 4 3-month 3.22 4.66 5.93 5.40 5.15 5.31 5.39 5.37 5.36 5.41 5.39 5.38 5 6-month 3.30 4.93 5.93 5.23 4.99 5.26 5.38 5.32 5.32 5.42 5.40 5.38 Finance paper, directly placed3'5'7 6 1-month 3.12 4.33 5.81 5.44 5.20 5.29 5.31 5.36 5.32 5.33 5.30 5.29 7 3-month 3.16 4.53 5.78 5.25 5.00 5.18 5.28 5.26 5.26 5.31 5.28 5.27 8 6-month 3.15 4.56 5.68 5.01 4.77 5.04 5.20 5.14 5.18 5.22 5.20 5.21 Bankers acceptances3'5'8 9 3-month 3.13 4.56 5.81 5.31 5.07 5.21 5.28 5.26 5.26 5.31 55..2288 55..2266 10 6-month 3.21 4.83 5.80 5.14 4.91 5.17 5.28 5.22 5.23 5.33 5.27 5.26 Certificates of deposit, secondary marker''9 11 1-month 3.11 4.38 5.87 5.47 5.23 5.31 5.34 5.36 5.35 5.37 5.33 5.31 12 3-month 3.17 4.63 5.92 5.39 5.15 5.29 5.36 5.34 5.34 5.39 5.36 5.34 13 6-month 3.28 4.96 5.98 5.28 5.03 5.30 5.42 5.37 5.38 5.49 5.42 5.40 14 Eurodollar deposits, 3-month3'10 3.18 4.63 5.93 5.40 5.14 5.28 5.36 5.33 5.33 5.41 5.36 5.35 U.S. Treasury bills Secondary market3'5 15 3-month 3.00 4.25 5.49 5.00 4.83 4.96 4.95 5.00 5.01 4.97 4.85 4.96 16 6-month 3.12 4.64 5.56 4.92 4.77 4.96 5.06 5.00 5.06 5.11 5.03 5.04 17 1-year 3.29 5.02 5.60 4.82 4.69 5.06 5.23 5.13 5.18 5.31 5.21 5.21 Auction average3'511 18 3-month 3.02 4.29 5.51 5.02 4.87 4.96 4.99 4.99 5.07 5.03 4.87 44..9977 19 6-month 3.14 4.66 5.59 4.97 4.79 4.96 5.08 4.97 5.06 5.19 5.03 5.02 20 1-year 3.33 5.02 5.69 4.89 4.64 4.98 5.17 n.a. 5.17 n.a. n.a. n.a. U.S. TREASURY NOTES AND BONDS Constant maturities12 21 1-year 3.43 5.32 5.94 5.09 4.94 5.34 5.54 5.42 5.48 5.62 5.51 5.52 22 2-year 4.05 5.94 6.15 5.11 5.03 5.66 5.96 5.78 5.84 6.07 5.95 5.94 23 3-year 4.44 6.27 6.25 5.20 5.14 5.79 6.11 5.89 5.97 6.23 6.11 6.10 24 5-year 5.14 6.69 6.38 5.36 5.38 5.97 6.30 6.08 6.14 6.42 6.32 6.31 25 7-year 5.54 6.91 6.50 5.54 5.64 6.19 6.48 6.27 6.33 6.60 6.49 6.48 26 10-year 5.87 7.09 6.57 5.65 5.81 6.27 6.51 6.32 6.35 6.60 6.52 6.53 27 20-year 6.29 7.49 6.95 6.11 6.30 6.74 6.98 6.81 6.85 7.07 6.99 6.98 28 30-year 6.59 7.37 6.88 6.05 6.24 6.60 6.79 6.65 6.68 6.88 6.80 6.79 Composite 29 More than 10 years (long-term) 6.45 7.41 6.93 6.07 6.28 6.72 6.94 6.78 6.81 7.03 6.95 6.95 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 Aaa 5.38 5.77 5.80 5.27 5.24 5.33 5.62 5.44 5.60 5.54 5.62 5.70 31 Baa 5.83 6.17 6.10 5.59 5.59 5.72 5.94 5.96 6.07 6.00 5.96 5.94 32 Bond Buyer series14 5.60 6.18 5.95 5.43 5.43 5.79 5.94 5.90 5.86 6.03 5.94 5.91 CORPORATE BONDS 33 Seasoned issues, all industries15 7.54 8.26 7.83 7.10 7.27 7.65 7.80 7.69 7.72 7.90 7.79 7.78 Rating group 34 Aaa 7.22 7.97 7.59 6.80 6.99 7.35 7.50 7.39 7.41 7.60 7.50 7.48 35 Aa 7.40 8.15 7.72 6.99 7.16 7.52 7.68 7.57 7.59 7.77 7.67 7.66 36 A 7.58 8.28 7.83 7.12 7.31 7.68 7.83 7.72 7.74 7.92 7.82 7.81 37 Baa 7.93 8.63 8.20 7.47 7.63 8.03 8.19 8.09 8.12 8.30 8.19 8.16 38 A-rated, recently offered utility bonds 7.46 8.29 7.86 7.09 7.31 7.75 7.90 7.77 7.94 7.91 7.89 7.90 MEMO Dividend-price ratio17 39 Common stocks 2.78 2.82 2.56 2.31 2.22 2.22 2.24 2.21 2.20 2.28 2.25 2.22 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 approximately 11:00 a.m. London time. Data are the price index. for indication 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

A24 DomesticN onfinancial Statistics • July 1996 1.36 STOCK MARKET Selected Statistics 1995 1996 IInnddiiccaattoorr 11999944 11999955 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 249.71 254.16 291.18 300.05 310.41 311.78 317.58 327.90 329.22 346.46 346.73 347.50 2 Industrial 300.10 315.32 367.40 379.79 390.42 389.63 398.66 412.11 413.05 435.92 439.55 441.99 3 Transportation 242.68 247.17 270.14 285.63 295.54 291.16 300.06 303.53 300.43 315.29 324.77 326.42 4 Utility 114.55 104.96 114.61 111.06 114.67 123.59 119.49 173.95 127.09 135.51 122.83 122.44 5 Finance 216.55 209.75 238.48 245.27 260.72 265.12 266.12 273.36 274.96 290.97 290.44 287.92 6 Standard & Poor's Corporation (1941-43 = 10)' 451.63 460.42 541.72 559.11 578.77 582.92 595.53 614.57 614.42 649.54 647.07 647.17 7 American Stock Exchange (Aug. 31, 1973 = 50)2 438.77 449.49 498.13 526.86 547.64 530.26 529.93 538.01 540.48 562.34 565.69 580.60 Volume of trading (thousands of shares) 8 New York Stock Exchange 263,374 290,652 345,729 309,879 352,184 365,108 360,199 384,310 416,048 434,607 426,198 419,941 9 American Stock Exchange 18,188 17,951 20,387 21,825 25,422 17,865 16,724 21,085 21,069 27,107 22,988 24,886 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers3 60,310 61,160 76,680 71,440 77,076 75,005 77,875 76,680 73,530 77,090 78,308 81,170 Free credit balances at brokers'1 11 Margin accounts5 12,360 14,095 16,250 13,900 14,806 14,753 15,590 16,250 14,950 15,840 15,770 15,780 12 Cash accounts 27,715 28,870 34,340 29,190 29,796 29,908 30,340 34,340 32,465 34,700 33,113 33,100 Margin requirements (percent of market value and elfective 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

Federal Finance A25 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1995 1996 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. U.S. budget1 1 Receipts, total 1,153,535 l,257.737r 1,355,213 90,008 138,271 142,922 89,349 89,011 203,386 2 On-budget 841,601 922,71 lr 1,004,134 63,651 110,322 110,615 60,912 56,677 160,774 Off-budget 311,934 335,026 351,079 26,357 27,949 32,307 28,437 32,334 42,613 4 Outlays, total 1.408,675' 1,460,84 lr 1,519,133 128,458 132,984 123,647 133,644 136,286 130,993 5 On-budget l,142,088r 1,181,469r 1,230,469 101,767 121,753 98,057 105,711 108,365 105,131 6 Off-budget 266,587 279,372 288,664 26,691 11,232 25,591 27,933 27,921 25,863 1 Surplus or deficit (-), total — 255,140r —203,104r -163,920 -38,450 5,286 19,274 -44,295 -47,275 72,393 8 On-budget -300,487r —258,758r -226,335 -38,116 -11.431 12,558 -44,799 -51,688 55,643 9 Off-budget 45,347 55,654 62,415 -334 16,717 6,716 504 4,413 16,750 Source of financing (total) 10 Borrowing from the public 248,594 184,998 171,288 38,339 -18,358 -4,747 47,022 39,189 -35,466 11 Operating cash (decrease, or increase (—)) 6,283 16,564 -2,007 -4,911 5,610 -16,959 6,297 9,283 -26,449 12 Other 2 429 l,542r —5,361r 5,022 7.462 2,432 -9,024 -197 -10,478 MEMO 13 Treasury operating balance (level, end of period) 52,506 35,942 37.949 26,105 20,495 37,454 31,157 21,874 48,323 14 Federal Reserve Banks 17,289 6,848 8,620 5,703 5.979 8,210 5,632 7,021 11,042 15 Tax and loan accounts 35,217 29,094 29,329 20,402 14,515 29,243 25,525 14,853 37,281 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. Monthly totals; U.S. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the 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

A26 Domestic Nonfinancial Statistics • July 1996 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1994 1995 1996 11999944 11999955 HI H2 HI H2 Feb. Mar. Apr. RECEIPTS 1 All sources 1,257,737 1,355,213 652,234 625,557 710,542 656,400 89,349 89,011 203386 2 Individual income taxes, net 543,055 590,244 275,052 273,474 307,498 292,393 40,327 22,523 107,513 3 Withheld 459,699 499,927 225,387 240,062 251,398 256,916 46.722 41,834 38,930 4 Presidential Election Campaign Fund 70 69 63 10 58 9 7 16 13 5 Nonwithheld 160,047 175,786 117,620 42,031 132,006 43,100 3,163 5,790 89,392 6 Refunds 76,761 85,538 68,325 9,207 75,958 10,058 99,,556655 2255,,111188 2200,,882222 Corporation income taxes 7 Gross receipts 154,205 174,422 80,536 78,392 92,132 88,302 3,797 17,793 26,912 8 Refunds 13,820 17,418 6,933 7,745r 10,399 7,518 2,105 2,332 1,975 9 Social insurance taxes and contributions, net ... 461,475 484,473 248,301 220,141 261,837 224,269 38,960 41,763 60,588 10 Employment taxes and contributions2 428,810 451,045 228,714 206,613 228,663 211,323 36,011 41,086 56,615 11 Self-employment taxes and contributions3 . 24,433 27,127 20,762 4,135 23,429 3,557 278 1,006 12,441 12 Unemployment insurance 28,004 28,878 17,301 11,177 18,001 10,702 2,546 258 3,628 13 Other net receipts4 4,661 4,550 2,284 2,349 2,267 2,247 403 419 346 14 Excise taxes 55,225 57,484 26,444 30,062 27,452 30,014 4,308 4,133 4,577 15 Customs deposits 20,099 19,301 9,500 11,042 8,847 9,849 1,456 1,528 1,388 16 Estate and gift taxes 15,225 14,763 8,197 7,071 7,424 7,718 1,090 1,137 2,704 17 Miscellaneous receipts5 22,274 31,944 11,170 13,305 15,749 11,374 1,517 2,467 1,680 OUTLAYS 18 All types 1,460,841 1,519,133 710,620 752,151 760,824 752,sir 133,644 136,286 130,993 19 National defense 281,642 272,066 133,844 141,885 135,862 132,954 21,691 22,479 2222,,772255 20 International affairs 17,083 16,434 5,800 11,889 4,798r 6,994 2,604 1,391 998888 21 General science, space, and technology 16,227 16,724 8,502 7,604 8,611 8,810 1,326 1,381 1,534 22 Energy 5,219 4,936 2,237 2,923 2,357r 2,203 54 131 17 23 Natural resources and environment 21,064 22,105 10,111 11,911 10,272 12,633 1,817 1,592 1,660 24 Agriculture 15,046 9,773 7,451 7,623 4,040 3,062 345 -62 -249 25 Commerce and housing credit -5,118 -14,441 -4,962 -4,270 -13,937r -4,412 -1,024 -1,443 -1,741 26 Transportation 38,066 39,350 16,739 21,835 18,193 19,931 2,960 2,864 2,864 27 Community and regional development 10,454 10,641 4,571 6,283 4,858 6,085 396 11,,000077 1,026 28 Education, training, employment, and social services 46,307 54,263 19,262 27,450 25,850r 24,894' 4,521' 4,301' 4,014 29 Health 107,122 115,418 53,195 54,147 58,904r 57,078' 9,540' 10,317' 10,458 30 Social security and Medicare 464,312 495,701 232,777 236,817 251,975 251,387 42,950 43,239 44,216 31 Income security 214,031 220,449 109,080 101,806 117,385' 104,078' 23,792' 25,927' 21,417 32 Veterans benefits and services 37,642 37,938 16,686 19,761 19,268 18,684 2,901 3,300 2,974 33 Administration of justice 15,256 16,223 7,718 7,753 8,054' 8,117' 1,280' 1,341' 1,585 34 General government 11,303 13,835 5,084 7,355 5,796' 7,621' 1,575 766 -25 35 Net interest6 202,957 232,173 99,844 109,434 116,169' 119,350 19,771 20,244 20,463 36 Undistributed offsetting receipts7 -37,772 -44,455 -17,308 -20,066 -17,632 -26,994 -2,855 -2,490 -2,932 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 receipts and 6. Includes interest received by trust funds. outlays do not correspond to calendar year data because revisions from the Budget have not 7. Rents and royalties for the outer continental shelf, U.S. government contributions for been fully distributed across months. employee retirement, and certain asset sales. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. SOURCE. Fiscal year totals: U.S. Office of Management and Budget, Budget of the U.S. 3. Old-age, disability, and hospital insurance. Government, Fiscal Year 1997\ monthly and half-year totals: U.S. Department of the Trea- 4. Federal employee retirement contributions and civil service retirement and sury, Monthly Treasury Statement of Receipts and Outlays of the U.S. Government. disability fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1994 1995 1996 IItteemm Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 1 Federal debt outstanding 4,602 4,673 4,721 4,827 4,891 4,978 5,001 5,017 5,153 2 Public debt securities 4,576 4,646 4,693 4,800 4,864 4,951 4,974 4,989 5,118 3 Held by public 3,434 3,443 3,480 3,543 3,610 3,635 3,653 3,684 n.a. 4 Held by agencies 1,142 1,203 1,213 1,257 1,255 1,317 1,321 1,305 n.a. 5 Agency securities 26 28 29 27 27 27 27 28 36 6 Held by public 26 27 29 27 26 27 27 28 n.a. 7 Held by agencies 0 0 0 0 0 0 0 0 n.a. 8 Debt subject to statutory limit 4,491 4,559 4,605 4,711 4,775 4,861 4,885 4,900 5,030 9 Public debt securities 4,491 4,559 4,605 4,711 4,774 4,861 4,885 4,900 5,030 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 5,500 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified SOURCE. 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 1995 1996 TTyyppee aanndd hhoollddeerr 11999922 11999933 11999944 11999955 Q2 Q3 Q4 Q1 1 Total gross public debt 4,177.0 4,535.7 4,800.2 4,988.7 4,951.4 4,974.0 4,988.7 5,117.8 By type 2 Interest-bearing 4,173.9 4,532.3 4,769.2 4,964.4 4,947.8 4,950.6 4,964.4 5,083.0 3 Marketable 2,754.1 2,989.5 3,126.0 3,307.2 3,252.6 3,260.5 3,307.2 3,375.1 4 Bills 657.7 714.6 733.8 760.7 748.3 742.5 760.7 811.9 5 Notes 1,608.9 1,764.0 1,867.0 2,010.3 1,974.7 1,980.3 2,010.3 2,014.1 6 Bonds 472.5 495.9 510.3 521.2 514.7 522.6 521.2 534.1 7 Nonmarketable1 1,419.8 1,542.9 1,643.1 1,657.2 1,695.2 1,690.2 1,657.2 1,707.9 8 State and local government series 153.5 149.5 132.6 104.5 121.2 113.4 104.5 96.5 9 Foreign issues2 37.4 43.5 42.5 40.8 41.4 41.0 40.8 40.4 10 Government 37.4 43.5 42.5 40.8 41.4 41.0 40.8 40.4 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 155.0 169.4 177.8 181.9 180.1 181.2 181.9 183.0 13 Government account series3 1,043.5 1,150.0 1,259.8 1,299.6 1,322.0 1,324.3 1,299.6 1,357.7 14 Non-interest-bearing 3.1 3.4 31.0 24.3 3.6 23.3 24.3 34.8 By holder4 15 U.S. Treasury and other federal agencies and trust funds 1,047.8 1,153.5 1,257.1 1,304.5 1,316.6 1,320.8 1,304.5 16 Federal Reserve Banks 302.5 334.2 374.1 391.0 389.0 374.1 391.0 17 Private investors 2,839.9 3,047.4 3,168.0 3,294.9 3,245.0 3,279.5 3,294.9 18 Commercial banks 294.4 322.2 290.1 285.0 298.0 289.0 285.0 19 Money market funds 79.7 80.8 67.6 71.3 58.7 64.2 71.3 20 Insurance companies 197.5 234.5 240.1 252.0 248.6 250.5 252.0 21 Other companies 192.5 213.0 226.5 288.8 227.7 224.1 288.8 n.a. 22 State and local treasuries5'6 579.3 631.9 521.4 420.0 470.9 422.9 420.0 Individuals 23 Savings bonds 157.3 171.9 180.5 185.0 182.6 183.5 185.0 24 Other securities 131.9 137.9 150.7 162.7 161.6 162.4 162.7 25 Foreign and international7 549.7 623.0 688.6 861.8 784.1 848.1 861.8 26 Other miscellaneous investors6,8 657.5 632.3 802.5 768.3 812.8 834.8 768.3 1. Includes (not shown separately) securities issued to the Rural Electrification Administra- 7. 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- 8. 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 SOURCE. 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. 5. Includes state and local pension funds. 6. In March 1996, in a redefinition of series, fully defeased debt backed by nonmarketable federal securities was removed from "Other miscellaneous investors" and added to "State and local treasuries." The data shown here have been revised accordingly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Nonfinancial Statistics • July 1996 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1996 1996, week ending Item Jan. Feb. Mar. Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 53,618 65,579 56,391 75.724 65,246 58,612 52,050 45,640 70,854 57,295 52,787 50,364 Coupon securities, by maturity 2 Five years or less 102,266r 125,757' 107,071' 147,502' 122,556' 139,682 94,120 81,877 89,934 100,814 102,533 102,601 3 More than five years 54,482r 67,611' 49,903' 61.941 55.182 62,778 44,519 42,142 40,022 41,521 44,926 39,363 4 Federal agency 27,947 26.759 27,384' 26,578 27,494 27,651 25,997 28,636 26,832 20.583 30,480 30,338 5 Mortgage-backed 37.007r 40,768' 42,009' 30,067 41,005' 62,283 35,232 28,483 44,085 47,964 33,797 24,445 By type of counterparty With interdealer broker 6 U.S. Treasury 123,512 148.665 124,458 164,587 137,632 152,717 113,332 101,779 111,975 115,861 114,531 112,998 7 Federal agency 954 1,107 671 799 650 702 621 739 586 648 697 1,046 8 Mortgage-backed 12,634 1144,,666633 15,677 10,950 14,124 24,033 13,603 10,526 15,954 13,993 12,045 8,139 With other 9 U.S. Treasury 86,854r 110.281' 88,907' 120,579' 105,352' 108,355 77,357 67,880 88,835 83,768 85,715 79,331 10 Federal agency 26.993 25,652 26,713' 25.779 26,844 26,949 25,376 27,897 26,246 19,935 29,783 29,291 11 Mortgage-backed 24,373r 26,106 26,331' 19.117 26,880' 38,250 21,629 17,956 28,131 33,971 21,753 16,307 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S.'Treasury bills .' 451 346 487 305 492 567 591 410 212 541 302 581 Coupon securities, by maturity 13 Five years or less 1,592 2,269 2,055 3,186 2.990 2,524 1,845 1,385 1,216 1,435 1,443 1,031 14 More than five years 14,331 17.420 14,824 17.566 17.128 18,600 15,054 10.829 10,186 12,738 14,023 10,297 15 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 16 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 0 OPTIONS TRANSACTIONS4 By type of underlying security 17 U.S." Treasury bills 0 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 18 Five years or less 1,860 2,730 2,775' 3.918 4,262 3,381 1,914 2,067 2,213 1,376 1,585 1,408 19 More than five years 4,109 4,580 3,073' 3,653 3.476 3,967 2,366 2,547 3,117 3.712 4,669 3,625 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 860 1,341 1.125 909 1,720 1,600 792 459 1,250 1,401 979 1,116 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

Federal Finance A25 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1996 1996, week ending IItteemm Jan. Feb. Mar. Feb. 28 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 9,173 8,316 20,889 14,082 17,288 21,460 13,482 17,133 44,826 24,141 12,884 Coupon securities, by maturity 2 Five years or less 21,332 11,937 6,296 9,208 8,753 6,044 7,306 4,521 4,387 8,709 4,651 3 More than five years -14,408 -14,139 -24,377 -19,897 -18,223 -24,674 -25,707 -26,817 -26,494 -31,028 -28,372 4 Federal agency 23,115 23,424 25,754 24,586 21,197 30,359 27,515 24,288 24,016 25,682 23,995 5 Mortgage-backed 38,362 40,161 36,887 40,488 39,464 37,792 38,374 35,091 31,979 31,757 33,353 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -2,787 -2,582 -2,842 -2,059 -1,418 -2,106 -3,929 -3,450 -3,298 -2,626 -2,685 Coupon securities, by maturity 7 Five years or less -2,534 -587 623 1,327 551 1,211 460 420 346 1,419 1,222 8 More than five years -12,781 -9,037 -4,361 -3,348 -6,594 -2,425 -4,030 -4,228 -5,215 -1,462 -3,418 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 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 12 Five years or less -931 5 1,381 1,463 887 613 1,100 2,352 2,257 1,720 1,796 13 More than five years 7,488 2,706 177 -564 759 -1,562 -1,578 1,916 2,377 1,946 572 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 638 3,052 4,949 5,191 4,048 5,614 5,403 5,336 3,662 4,896 4,275 Financing5 Reverse repurchase agreements 16 Overnight and continuing 258,137 264,519 258,180 255,386 264,678 264,903 262,954 246,224 249,234 273,465 264,387 17 Term 405,768 424,730 435,402 406,947 397,073 439,536 450,306 454,766 425,695 445,217 475,409 Securities borrowed 18 Overnight and continuing 171,843 166,781 172,347 169,882 176,708 177,763 176,291 163,981 164,068 170,460 166,267 19 Term 59,920 65,051 66,212 65,419 65,699 66,423 66,505 66,757 65,146 64,465 67,651 Securities received as pledge 20 Overnight and continuing 3,114 1,878 4,477 2,044 2,686 5,088 6,067 4,136 3,910 4,377 3,532 21 Term 53 126 65 51 66 90 57 31 92 53 81 Repurchase agreements 22 Overnight and continuing 553,719 562,396 557,094 552,013 565,231 576,134 565,550 519,437 562,672 594,664 600,073 23 Term 368,819 387,953 393,406 366,235 355,933 398,797 403,225 421,272 374,236 377,959 392,801 Securities loaned 24 Overnight and continuing 5,566 4,714 5,202 5,183 5,345 5,429 5,406 4,815 4,909 4,852 4,592 25 Term 1,578 2,409 2,362 2,509 2,552 2,470 2,178 2,327 2,270 n.a. n.a. Securities pledged 26 Overnight and continuing 34,769 33,230 40,936 34,748 38,677 39,007 42,694 45,736 36,223 36,552 38,533 27 Term 5,597 7,230 8,343 8,039 8,135 7,932 8,206 9,180 8,148 8,088 8,837 Collateralized loans 28 Overnight and continuing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 29 Term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 30 Total 17,606 14,667 12,176 13,054 13,062 10,210 11,300 12,901 14,555 14,443 15,108 MEMO: Matched book6 Securities in 31 Overnight and continuing 264,459 253,184 239,222 239,549 239,209 241,556 244,345 228,895 244,262 253,477 248,186 32 Term 403,403 426,185 434,020 409,045 404,360 442,808 445,405 444,794 424,355 438,212 471,260 Securities out 33 Overnight and continuing 334,864 333,340 328,321 312,477 324,965 331,758 339,704 310,201 339,129 364,716 359,919 34 Term 318,147 330,450 338,096 311,512 306,521 341,791 344,393 363,719 323,134 324,955 345,158 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

A30 Domestic Nonfinancial Statistics • July 1996 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1995 1996 AAggeennccyy 11999922 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. 1 Federal and federally sponsored agencies 483,970 570,711 738,928 n.a. n.a. n.a. n.a. n.a. n.a. 2 Federal agencies 41,829 45,193 39,186 37,347 38,237 39,207 37,347 37,273 31,986 3 Defense Department1 7 6 6 6 6 6 6 6 6 4 Export-Import Bank2,3 7,208 5,315 3,455 2,050 2,512 2,512 2,050 2,050 2,050 5 Federal Housing Administration4 374 255 116 97 88 93 97 31 35 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 10,660 9,732 8,073 5,765 7,265 7,265 5,765 5,765 300 8 Tennessee Valley Authority 23,580 29,885 27,536 29,429 28,366 29,331 29,429 29,421 29,595 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 442,141 523,452 699,742 807,264 778,862 791,660 807,264 799,547 808,398 11 Federal Home Loan Banks 114,733 139,512 205,817 243,194 234,192 239,034 243,194 234,664 233,404 12 Federal Home Loan Mortgage Corporation 29,631 49,993 93,279 119,961 115,626 115,603 119,961 120,868 123,777 13 Federal National Mortgage Association 166,300 201,112 257,230 299,174 280,582 289,768 299,174 297,657 304,159 14 Farm Credit Banks8 51,910 53,123 53,175 57,379 56,529 56,694 57,379 58,659 57,536 15 Student Loan Marketing Association9 39,650 39,784 50,335 47,529 51,906 50,535 47,529 47,673 49,495 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 154,994 128,187 103,817 78,681 82,622 81,693 78,681 78,512 68,037 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 7,202 5,309 3,449 2,044 2,506 2,506 2,044 2,044 2,044 21 Postal Service6 10,440 9,732 8,073 5,765 7,265 7,265 5,765 5,765 300 22 Student Loan Marketing Association 4,790 4,760 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23 Tennessee Valley Authority 6,975 6,325 3,200 3,200 3,200 3,200 3,200 3,200 n.a. 24 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Other lending14 25 Farmers Home Administration 42,979 38,619 33,719 21,015 26,210 21,015 21,015 21,015 21,015 26 Rural Electrification Administration 18,172 17,578 17,392 17,144 17,045 17,141 17,144 17,026 17,040 27 Other 64,436 45,864 37,984 29,513 26,396 30,566 29,513 29,462 27,638 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

Securities Market and Corporate Finance A31 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1995 1996 TTyyppee ooff iissssuuee oorr iissssuueerr,, 11999933 11999944 11999955 oorr uussee Sept. Oct. Nov. Dec. Jan/ Feb. Mar. Apr. 1 All issues, new and refunding1 279,945 153,950 143,101 9,750 13,898 16,839 16,978 11,545 11,598 15,244 13,199 By type of issue 2 General obligation 90,599 54,404 55,737 3,482 6,184 6,194 5,489 6,074 2,063 4,846 5,083 3 Revenue 189,346 99,546 86,555 6,268 7,714 10,645 11,489 5,471 9,535 10,398 8,116 By type of issuer 4 State 27,999 19,186 14,215 1,510 1,825 1,491 951 1,630 695 904 926 5 Special district or statutory authority 178,714 95,896 91,419 5,807 8,155 10,736 11,678 7,052 7,820 10,141 9,571 6 Municipality, county, or township 73,232 38,868 36,658 2,433 3,918 4,612 4,349 2,863 3,083 4,199 2,702 7 Issues for new capital 91,434 105,972 94,412 6,095 7,868 11,415 11,070 6,517 6,383 10,621 9,487 By use of proceeds 8 Education 16,831 21,267 24,926 1,474 1,785 3,377 2,968 2,065 2,226 1,847 2,142 9 Transportation 9,167 10,836 11,887 447 367 1,469 1,178 573 359 1,417 682 10 Utilities and conservation 12,014 10,192 9,618 569 1,780 554 1,664 439 582 892 592 11 Social welfare 13,837 20,289 18,612 1,140 1,716 2,177 1,614 935 904 2,715 1,669 12 Industrial aid 6,862 8,161 6,566 654 227 650 1,325 322 110 785 751 13 Other purposes 32,723 35,227 26,518 1,811 1,993 3,188 2,321 2,183 2,202 2,965 3,651 1. Par amounts of long-term issues based on date of sale. SOURCE. 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 1996 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, 11999933 11999944 11999955 oorr iissssuueerr Aug. Sept. Oct. Nov. Dec. Jan. Feb.r Mar. 1 All issues' 769,088 583,240 n a. 50,163 57,262 52,112 55,349 40,149 47,094r 60,485 54,239 2 Bonds2 646,634 498,039 n.a. 43,911 49,905 43,452 47,568 34,619 42,343r 51,330 47,071 By type of offering 3 Public, domestic 487,029 365,222 408,806 34,490 43,137 36,692 43,336 32,219 33,582r 44,904 4400,,332277 4 Private placement, domestic 121,226 76,065 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 38,379 56,755 76,910 9,421 6,768 6,760 4,232 2,399 8,761 6,426 6,744 By industry group 6 Manufacturing 88,160 43,423 42,950 4,082 3,284 3,397 4,017 3,205 3,759 2,472 3,210 7 Commercial and miscellaneous 58,559 40,735 37,139 2,480 2,607 3,532 4,178 3,099 2,151 2,601 3,852 8 Transportation 10,816 6,867 5,727 133 908 187 225 1,240 664 354 57 9 Public utility 56,330 13,322 11,974 640 911 1,241 485 685 l,821r 955 678 10 Communication 31,950 13,340 18,158 1,240 2,829 2,389 3,333 648 748 2,691 1,873 11 Real estate and financial 400,820 380,352 369,769 35,335 39,365 32,706 35,330 25,742 33,200r 42,258 37,401 12 Stocks2 122,454 85,155 n a. 6,252 7,357 8,660 7,781 5,530 4,751r 9,155 7,168 By type of offering 13 Public preferred 18,897 12,570 10,964 1,261 1,035 836 2,210 890 2,167 3,258 967 14 Common 82,657 47,828 57,809 5,005 6,322 7,824 5,571 4,640 2,584r 5,897 6,201 15 Private placement 20,900 24,800 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 22,271 17,798 n.a. 2,383 1,815 2,209 681 406 1,452 1,896 17 Commercial and miscellaneous 25,761 15,713 n a. 1,541 2,801 4,628 3,274 2,632 2,404 2,750 3,518 18 Transportation 2,237 2,203 87 32 39 97 156 38 141 222 19 Public utility 7,050 2,214 91 190 60 36 322 115 809 319 20 Communication 3,439 494 0 47 0 0 0 200 122 82 21 Real estate and financial 61,004 46,733 2,273 1,905 2,118 2,166 1,739 l,588r 3,714 1,130 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- SOURCE. 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

A32 DomesticN onfinancial Statistics • July 1996 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets' Millions of dollars 1995 1996 IItteemm 11999944 11999955 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Sales of own shares2 841,286 871,415 72,113 68,694 72,730 70,499 94,719 112,332 90,370 93,856 2 Redemptions of own shares 699,823 699,497 57,610 54,473 56.174 52,727 67,945 75,354 60,398 65,748 3 Net sales3 141,463 171,918 14,503 14,221 16,556 17,772 26,774 36,978 29,972 28.108 4 Assets4 1,550,490 2,067,337 1,908,525 1,962,817 1,963,496 2,032,958 2,067,337 2,143,185 2,181,711 2,213,275 5 Cash5 121,296 142,572 127.173 127,446 133,653 141,489 142,572 150,772 144,520 142,697 6 Other 1,429,195 1,924,765 1,781.352 1.835,371 1.829,843 1,891,470 1,924,765 1,992.414 2.037,191 2,069,820 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 1994 1995 1996 AAccccoouunntt 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql 1 Profits with inventory valuation and capital consumption adjustment 464.5 526.5 588.6 531.5 549.8 568.9 559.6 561.1 614.9 618.6 n.a. 2 Profits before taxes 464.3 528.2 600.8 523.2 547.5 570.4 594.1 588.4 609.6 611.0 n.a. 3 Profits-tax liability 163.8 195.3 218.7 192.8 203.4 213.5 217.3 214.2 224.5 218.7 n.a. 4 Profits after taxes 300.5 332.9 382.1 330.4 344.1 356.8 376.8 374.1 385.1 392.3 n.a. 5 Dividends 197.3 211.0 227.4 208.8 212.5 218.5 221.7 224.6 228.5 234.7 239.9 6 Undistributed profits 103.3 121.9 154.7 121.7 131.6 138.3 155.1 149.6 156.6 157.6 n.a. 7 Inventory valuation -6.6 -13.3 -28.1 -9.8 -16.5 -22.8 -51.9 -42.3 -9.3 -8.8 -13.2 8 Capital consumption adjustment 6.7 11.6 15.9 18.1 18.8 21.3 17.4 15.0 14.6 16.5 19.8 SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A3 3 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1994 1995 AAccccoouunntt 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2 Q3 Q4 ASSETS 1 Accounts receivable, gross2 482.8 551.0 614.6 511.3 524.1 551.0 568.5 586.9 594.7 614.6 2 Consumer 116.5 134.8 152.0 124.3 130.3 134.8 135.8 141.7 146.2 152.0 3 Business 294.6 337.6 375.9 313.2 317.2 337.6 351.9 361.8 362.4 375.9 4 Real estate 71.7 78.5 86.6 73.8 76.6 78.5 80.8 83.4 86.1 86.6 5 LESS; Reserves for unearned income 50.7 55.0 63.2 51.9 51.1 55.0 58.9 62.1 61.2 63.2 6 Reserves for losses 11.2 12.4 14.1 12.1 12.1 12.4 12.9 13.7 13.8 14.1 7 Accounts receivable, net 420.9 483.5 537.3 447.3 460.9 483.5 496.7 511.1 519.7 537.3 All other 170.9 183.4 210.7r 174.6 177.2 183.4 194.6 198.1 198.1 210.7r 9 Total assets 591.8 666.9 748,0r 621.9 638.1 666.9 691.4 709.2 717.8 748.0r LIABILITIES AND CAPITAL 10 Bank loans 25.3 21.2 23.1 23.3 21.6 21.2 21.0 21.5 21.8 23.1 11 Commercial paper 159.2 184.6 184.5 171.2 171.0 184.6 181.3 181.3 178.0 184.5 Debt 12 Owed to parent 42.7 51.0 62.3 44.7 50.0 51.0 52.5 57.5 59.0 62.3 13 Not elsewhere classified 206.0 235.0 284.7 219.6 228.2 235.0 254.4 264.4 272.1 284.7 14 All other liabilities 87.1 99.5 106.2r 89.9 95.0 99.5 102.5 102.1 102.4 106.2r 15 Capital, surplus, and undivided profits 71.4 75.7 87.2 73.2 72.3 75.7 79.7 82.5 84.4 87.2 16 Total liabilities and capital 591.8 666.9 748.0r 621.9 638.1 666.9 691.4 709.2 717.8 748.0r 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 1996r TTyyppee ooff ccrreeddiitt 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted 1 Total 545,533 614,784 690,191 682,627 687,187 690,191 696,836 702,118 704,055 2 Consumer 160,349 176,198 198,860 194,620 197,303 198,860 199,872 202,243 202,913 3 Real estate2 71,965 78,770 86,944 87,266 87,699 86,944 88,074 88,001 89,523 4 Business 313,219 359,816 404,387 400,741 402,185 404,387 408,889 411,874 411,619 Not seasonally adjusted 5 Total 550,751 620,975 697,340 681,965 687,944 697,340 697,312 700,927 707,074 6 Consumer 162,770 178,999 202,101 194,931 198,072 202,101 201,774 202,108 203,626 7 Motor vehicles 56,057 61,609 70,061 70,816 68,167 70,061 71,420 73,312 73,418 8 Other consumer3 60,396 73,221 81,988 77,865 78,926 81,988 81,186 81,214 79,779 9 Securitized motor vehicles4 36,024 31,897 33,633 30,096 34,394 33,633 32,128 30,364 31,093 10 Securitized other consumer4 10,293 12,272 16,419 16,154 16,585 16,419 17,040 17,218 19,336 11 Real estate- 71,727 78,479 86,606 87,471 87,672 86,606 88,495 88,520 89,056 12 Business 316,254 363,497 408,633 399,563 402,200 408,633 407,043 410,299 414,392 13 Motor vehicles 95,173 118,197 133,277 129,216 129,708 133,277 132,062 132,153 134,098 14 Retail5 18,091 21,514 25,304 25,752 24,564 25,304 25,906 26,591 27,140 15 Wholesale6 31,148 35,037 36,427 32,209 33,519 36,427 34,198 33,386 33,910 16 Leasing 45,934 61,646 71,546 71,255 71,625 71,546 71,958 72,176 73,048 17 Equipment 145,452 157,953 177,297 172,657 173,183 177,297 175,984 175,812 176,941 18 Retail 35.513 39,680 48,843 43,697 44,194 48,843 48,737 48,660 48,696 19 Wholesale6 8,001 9,678 10,266 11,581 10,889 10,266 9,260 8,914 9,213 20 Leasing 101,938 108,595 118,188 117,379 118,100 118,188 117,987 118,238 119,032 21 Other business7 53,997 61,495 65,363 66,238 66,678 65,363 66,643 68,070 69,976 22 Securitized business assets4 21,632 25.852 32,696 31,452 32,631 32,696 32,354 34,264 33,377 23 Retail 2,869 4,494 4,723 4,586 4,974 4,723 4,467 4,252 4,067 24 Wholesale 10,584 14,826 21,327 20,390 21,208 21,327 21,130 23,460 22,622 25 Leasing 8,179 6,532 6,646 6,476 6,449 6,646 6,757 6,552 6,688 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

A34 Domestic Nonfinancial Statistics • July 1996 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1995 1996 IItteemm 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms' 1 Purchase price (thousands of dollars) 163.1 170.4 175.8 174.3 178.6 181.7 179.2 181.7 184.5 175.2 2 Amount of loan (thousands of dollars) 123.0 130.8 134.5 133.0 136.4 140.9 135.8 143.2 141.5 133.2 3 Loan-to-price ratio (percent) 78.0 78.8 78.6 77.8 78.9 79.1 77.3 80.3 77.8 78.4 4 Maturity (years) 26.1 27.5 27.7 26.6 27.7 27.6 27.7 27.8 26.4 27.1 5 Fees and charges (percent of loan amount)2 1.30 1.29 1.21 1.11 1.22 1.21 1.07 1.24 1.30 1.17 Yield (percent per year) 6 Contract rate1 7.03 7.26 7.65 7.39 7.27 7.20 7.15 7.00 7.25 7.57 7 Effective rate1'3 7.24 7.47 7.85 7.58 7.46 7.40 7.32 7.20 7.49 7.76 8 Contract rate (HUD series)4 7.37 8.58 8.05 7.62 7.46 7.30 7.23 7.56 7.97 8.22 SECONDARY MARKETS Yield (percent per tear) 9 FHA mortgages (Section 203)5 7.46 8.68 8.18 7.61 7.51 7.52 7.11 7.57 8.09 8.52 10 GNMA securities6 6.65 7.96 7.57 7.16 7.01 6.82 6.71 6.85 7.40 7.63 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 190,861 222,057 253,511 246,234 249,928 253,511 255,619 257,970 262,014 263,809 12 FHA/VA insured 23,857 27,558 28,762 28,765 28,901 28,762 28,622 28,502 28,744 29,132 13 Conventional 167,004 194,499 224,749 217,469 221,027 224,749 226,997 229,468 233,270 234,677 14 Mortgage transactions purchased (during period) 92,037 62,389 56,598 7,443 6,148 6,243 4,810 5,371 7,681 5,339 Mortgage commitments (durinq period) 15 Issued7 92,537 54,038 56,092 6,732 6,038 4,765 5,750 7,013 6,293 5,599 16 To sell8 5,097 1,820 360 0 10 0 3 0 29 0 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)^ 17 Total 55,012 72,693 107,424 99,758 102,997 107,424 111,143 114,793 117,420 119,520 18 FHA/VA insured 321 276 267 276 271 267 226 223 220 216 19 Conventional 54,691 72,416 107,157 99,482 102,726 107,157 110,917 114,570 117,200 119,304 Mortgage transactions (during period) 20 Purchases 229,242 124,697 98,470 11,092 9,989 13,108 13,357 10,891 11,984 12,740 21 Sales 208,723 117,110 85,877 9,856 9,011 11,712 11,624 9,733 11,384 11,958 22 Mortgage commitments contracted (during period)9 274,599 136,067 118,659 10,388 11,339 14,609 12,765 10,378 14,520 13,009 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 FN MA 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

Real Estate A35 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1994 1995 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999922 11999933 11999944 Q4 Qi Q2 Q3 Q4P 1 All holders 4,092,984 4,268,919 4,475,242 4,475,242 4,516,816 4,584,661 4,660,895 4,724,076 By type of property 2 One- to four-family residences 3,037,408 3,227,633 3,432,165 3,432,165 3,466,026 3,524,474 3,591,013 3,640,099 3 Multifamily residences 274,234 270,796 275,304 275,304 276,398 280,390 284,237 289,187 4 Commercial 700,604 689,296 684,803 684,803 690,988 695,947 701,225 710,498 5 80,738 81,194 82,971 82,971 83,403 83,850 84,420 84,292 By type of holder 6 Major financial institutions 1,769,187 1,767,835 1,815,810 1,815,810 1,841,815 1,868,175 1,895,285 1,901,935 7 Commercial banks2 894,513 940,444 1,004,280 1,004,280 1,024,854 1,053,048 1,072,780 1,080,320 8 One- to four-family 507,780 556,538 611,697 611,697 625,378 648,705 662,126 665,044 9 Multifamily 38,024 38,635 38,916 38,916 39,746 40,593 43,003 43,522 10 Commercial 328,826 324,409 331,100 331,100 336,795 340,176 343,826 347,927 11 Farm 19,882 20,862 22,567 22,567 22,936 23,575 23,824 23,827 12 Savings institutions3 627,972 598,330 596,199 596,199 601,777 599,745 604,614 602,855 13 One- to four-family 489,622 469,959 477,499 477,499 483,625 482,005 489,150 488,234 14 Multifamily 69,791 67,362 64,400 64,400 63,778 64,404 63,569 62,171 15 Commercial 68,235 60,704 54,011 54,011 54,085 53,054 51,604 52,160 16 Farm 324 305 289 289 288 282 291 290 17 Life insurance companies 246,702 229,061 215,332 215,332 215,184 215,382 217,892 218,759 18 One- to four-family 11,441 9,458 7,910 7,910 7,892 7,911 8,006 8,038 19 Multifamily 27,770 25,814 24,306 24,306 24,250 24,310 24,601 24,700 20 Commercial 198,269 184,305 173,539 173,539 173,142 173,565 175,643 176,353 21 Farm 9,222 9,484 9,577 9,577 9,900 9,596 9,643 9,668 22 Federal and related agencies 286,263 328,598 323,491 323,491 319,770 315,208 314,358 310,408 23 Government National Mortgage Association 30 22 6 6 15 7 2 2 24 One- to four-family 30 15 6 6 15 7 2 2 25 Multifamily 0 7 0 0 0 0 0 0 26 Farmers Home Administration4 41,695 41,386 41,781 41,781 41,857 41,917 41,858 41,791 27 One- to four-family 16,912 15,303 13,826 13,826 13,507 13,217 12,914 12,643 28 Multifamily 10,575 10,940 11,319 11,319 11,418 11,512 11,557 11,617 29 Commercial 5,158 5,406 5,670 5,670 5,807 5,949 6,096 6,248 30 Farm 9,050 9,739 10,966 10,966 11,124 11,239 11,291 11,282 31 Federal Housing and Veterans' Administrations 12,581 12,215 10,964 10,964 10,890 10,098 9,535 9,497 32 One- to four-family 5,153 5,364 4,753 4,753 4,715 4,838 4,918 4,867 33 Multifamily 7,428 6,851 6,211 6,211 6,175 5,260 4,617 4,629 34 Resolution Trust Corporation 32,045 17,284 10,428 10,428 9,342 6,456 4,889 1,700 35 One- to four-family 12,960 7,203 5,200 5,200 4,755 2,870 2,299 761 36 Multifamily 9,621 5,327 2,859 2,859 2,494 1,940 1,420 515 37 Commercial 9,464 4,754 2,369 2,369 2,092 1,645 1,170 424 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 0 14,112 7,821 7,821 6,730 6,039 5,015 4,303 40 One- to four-family 0 2,367 1,049 1,049 840 731 618 492 41 Multifamily 0 1,426 1,595 1,595 1,310 1,135 722 428 42 Commercial 0 10,319 5,177 5,177 4,580 4,173 3,674 3,383 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 137,584 166,642 178,059 178,059 177,615 178,462 182,229 183,782 45 One- to four-family 124,016 151,310 162,160 162,160 161,780 162,674 166,393 168,122 46 Multifamily 13,568 15,332 15,899 15,899 15,835 15,788 15,836 15,660 47 Federal Land Banks 28,664 28,460 28,555 28,555 28,065 28,005 28,151 28,019 48 One- to four-family 1,687 1,675 1,671 1,671 1,651 1,648 1,656 1,652 49 Farm 26,977 26,785 26,885 26,885 26,414 26,357 26,495 26,367 50 Federal Home Loan Mortgage Corporation 33,665 48,476 45,876 45,876 45,256 44,224 42,678 41,315 51 One- to four-family 31,032 45,929 43,046 43,046 42,122 40,963 39,244 37,463 52 Multifamily 2,633 2,547 2,830 2,830 3,134 3,261 3,434 3,852 53 Mortgage pools or trusts5 1,434,264 1,563,453 1,716,209 1,716,209 1,731,272 1,759,314 1,797,162 1,849,640 54 Government National Mortgage Association 419,516 414,066 450,934 450,934 454,401 457,101 463,654 472,298 55 One- to four-family 410,675 404,864 441,198 441,198 444,632 446,855 453,114 461,453 56 Multifamily 8,841 9,202 9,736 9,736 9,769 10,246 10,540 10,845 57 Federal Home Loan Mortgage Corporation 407,514 446,029 486,480 486,480 488,723 496,139 503,457 517,609 58 One- to four-family 401,525 441,494 483,354 483,354 485,643 493,105 500,504 514,796 59 Multifamily 5,989 4,535 3,126 3,126 3,080 3,034 2,953 2,813 60 Federal National Mortgage Association 444,979 495,525 530,343 530,343 533,262 543,669 559,585 582,959 61 One- to four-family 435,979 486,804 520,763 520,763 523,903 533,091 548,400 569,724 62 Multifamily 9,000 8,721 9,580 9,580 9,359 10,578 11,185 13,235 63 Farmers Home Administration4 38 28 19 19 14 13 12 11 64 One- to four-family 8 5 3 3 2 2 2 2 65 Multifamily 0 0 0 0 0 0 0 0 66 Commercial 17 13 9 9 7 6 5 5 67 Farm 13 10 7 7 5 5 5 4 68 Private mortgage conduits 162,217 207,806 248,433 248,433 254,871 262,393 270,454 276,763 69 One- to four-family 140,718 173,635 196,733 196,733 201,314 205,018 209,713 208,354 70 Multifamily 6,305 8,701 14,925 14,925 15,743 17,281 18,903 22,436 71 Commercial 15,194 25,469 36,774 36,774 37,814 40,094 41,838 45,972 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others6 603,270 609,032 619,732 619,732 623,960 641,964 654,089 662,092 74 One- to four-family 447,871 455,709 461,297 461,297 464,252 480,834 491,954 498,452 75 Multifamily 64,688 65,397 69,602 69,602 70,305 71,049 71,896 72,763 76 Commercial 75,441 73,917 76,153 76,153 76,667 77,284 77,368 78,025 77 Farm 15,270 14,009 12,681 12,681 12,736 12,796 12,872 12,853 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. SOURCE. 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

A36 Domestic Nonfinancial Statistics • July 1996 1.55 CONSUMER INSTALLMENT CREDIT" Millions of dollars, amounts outstanding, end of period 1995 1996 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb.r Mar. Seasonally adjusted 1 Total 790,351 902,853 1,024,809 1,005,178 1,015,029 1,024,809 l,035,626r 1,047,785 1,054,173 2 Automobile 280,566 317,237 353,326 344,671 349,138 353,326 356,249' 359,976 360,041 3 Revolving 286,588 334,511 395,234 387,180 390,123 395,234 400,826 406,127 410,915 4 Other2 223,197 251,106 276,249 273,326 275,768 276,249 278,552r 281,682 283,217 Not seasonally adjusted 5 Total 809,440 925,000 1,050,642 1,005,423 1,018,961 1,050,642 l,045,553r 1,046,189 1,046,763 By major holder 6 Commercial banks 367,566 427,851 464,993 451,232 453,690 464,993 459,740 459,324 454,624 / Finance companies 116,453 134,830 152,059 148,681 147,093 152,059 151,849 154,526 153,197 8 Credit unions 101,634 119,594 132,033 130,261 130,970 132,033 131,587 131,208 131,221 9 Savings institutions 37,855 38,468 38,500 38,500 38,500 38,500 38,500 38,500 38,500 10 Nonfinancial business3 55,296 60,957 57,497 54,607 53,139 57,497 54,702 52,940 52,523 11 Pools of securitized assets4 130,636 143,300 205,560 182,142 195,569 205,560 209,175r 209,691 216,698 By major type of credit5 12 Automobile 281,458 318,213 354,395 347,513 351,024 354,395 354,508r 357,432 357,879 13 Commercial banks 122,000 141,851 151,057 150,782 149,905 151,057 152,290 153,173 152,623 14 Finance companies 56,057 61,609 70,061 70,816 68,167 70,061 70,847 73,312 73,418 15 Pools of securitized assets4 39,481 34,918 43,666 36,453 43,240 43,666 41,889' 41,496 42,067 16 Revolving 301,837 352,266 416,187 384,625 392,689 416,187 409,293 405,852 405,864 17 Commercial banks 149,920 180,183 198,076 186,463 189,405 198,076 189,317 186,974 182,967 18 Nonfinancial business3 50,125 55,341 51,971 49,358 47,839 51,971 49,267 47,577 47,178 19 Pools of securitized assets4 79,878 94,376 142,721 126,739 132,978 142,721 147,522 148,285 152,707 20 Other 226,145 254,521 280,060 273,285 275,248 280,060 281,752' 282,905 283,020 21 Commercial banks 95,646 105,817 115,860 113,987 114,380 115,860 118,133 119,177 119,034 22 Finance companies 60,396 73,221 81,998 77,865 78,926 81,998 81,002 81,214 79,779 23 Nonfinancial business3 5,171 5,616 5,526 5,249 5,300 5,526 5,435 5,363 5,345 24 Pools of securitized assets4 11,277 14,006 19,173 18,950 19,351 19,173 19,764' 19,910 21,924 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 1996 IItteemm 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar. INTEREST RATES Commercial banks2 1 48-month new car 8.09 8.12 9.57 n.a. n.a. 9.36 n.a. n.a. 9.12 n.a. 2 24-month personal 13.47 13.19 13.94 n.a. n.a. 13.80 n.a. n.a. 13.63 n.a. Credit card plan 3 All accounts n.a. 15.69 16.02 n.a. n.a. 15.81 n.a. n.a. 15.82 n.a. 4 Accounts assessed interest n.a. 15.77 15.79 n.a. n.a. 15.71 n.a. n.a. 15.41 n.a. Auto finance companies 5 New car 9.48 9.79 11.19 10.75 10.89 10.84 10.52 9.74 9.86 9.77 6 Used car 12.79 13.49 14.48 14.12 14.06 13.98 13.83 13.27 13.28 13.19 OTHER TERMS3 Maturity (months) 7 New car 54.5 54.0 54.1 53.4 54.6 54.5 53.6 51.8 52.3 51.8 8 Used car 48.8 50.2 52.2 52.3 52.3 52.2 51.8 52.2 52.1 52.0 Loan-to-value ratio 9 New car 91 92 92 92 92 92 92 92 91 91 10 Used car 98 99 99 100 99 99 99 99 98 98 Amount financed (dollars) 11 New car 14,332 15,375 16,210 16,402 16,430 16,583 17,034 16,698 16,627 16,520 12 Used car 9,875 10,709 11,590 11,725 11,883 12,012 12,152 12,059 11,990 11,934 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

Flow of Funds A37 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS' Billions of dollars; quarterly data at seasonally adjusted annual rates 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 Q2 Q3 Q4 QL Q2 Q3 Q4 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 480.6 545.3 625.9 617.0 716.7 581.2 579.9 654.3 839.7 879.3 529.6 618.4 By sector and instrument 7 US. government 278.2 304.0 256.1 155.9 144.4 131.3 135.6 150.1 266.8 202.8 65.8 42.4 Treasury securities 292.0 303.8 248.3 155.7 142.9 126.6 132.8 155.7 268.0 201.2 65.4 37.2 4 Budget agency issues and mortgages -13.8 .2 7.8 .2 1.5 4.7 2.9 -5.7 -1.2 1.6 .4 5.1 5 Private 202.4 241.3 369.8 461.1 572.3 449.9 444.3 504.2 572.9 676.5 463.9 576.0 By instrument 6 Municipal securities 87.8 30.5 74.8 -29.3 -47.2 -20.7 -58.4 -53.8 -48.2 -9.5 -113.0 -18.0 7 Corporate bonds 78.8 67.6 75.2 23.3 75.0 37.4 15.4 6.2 55.3 99.0 60.7 84.8 8 Mortgages 158.4 130.9 157.2 196.5 243.5 194.2 203.9 213.5 217.7 236.1 278.2 242.0 9 Home mortgages 173.6 187.6 187.9 204.5 207.9 186.2 208.8 219.8 192.1 203.8 244.6 191.2 10 Multifamily residential -5.5 -10.4 -6.0 1.3 12.1 4.0 5.6 -4.2 2.6 14.2 13.7 18.0 11 Commercial -10.0 -47.8 -25.0 -11.1 22.1 1.1 -12.7 -3.4 21.2 16.3 17.6 33.4 1? Farm .4 1.4 .5 1.8 1.3 2.9 2.2 1.4 1.7 1.8 2.3 -.5 N Consumer credit -14.8 7.3 58.9 121.2 130.8 129.8 124.8 165.2 93.8 158.1 109.6 161.8 14 Bank loans n.e.c -40.9 -13.7 3.8 72.7 99.7 58.7 97.1 77.1 146.6 97.3 85.4 69.5 N Commercial paper -18.4 8.6 10.0 21.4 18.1 9.7 26.4 23.5 23.1 37.5 16.0 -4.1 16 Other loans and advances -48.5 10.1 -10.2 55.4 52.4 40.8 35.1 72.4 84.5 58.0 26.9 40.0 By borrowing sector 17 Household 182.7 200.7 246.5 360.3 373.1 349.9 379.7 419.1 303.5 390.4 440011..88 339966..55 18 Nonfinancial business -61.9 19.5 61.0 144.3 250.8 139.4 130.0 153.6 316.8 302.4 178.3 205.5 19 Farm 2.1 1.3 2.0 2.8 1.7 7.8 2.4 -2.0 .9 3.6 4.3 -2.2 70 Nonfarm noncorporate -11.0 -16.0 7.0 12.1 37.9 10.0 8.8 16.5 51.3 34.4 29.8 36.2 71 Corporate -53.0 34.1 52.0 129.3 211.1 121.7 118.8 139.1 264.6 264.3 144.1 171.5 22 State and local government 81.6 21.1 62.3 -43.4 -51.5 -39.5 -65.4 -68.5 -47.5 -16.3 -116.2 -26.1 73 Foreign net borrowing in United States 14.8 22.6 68.8 -20.3 67.4 -34.2 19.6 33.5 61.4 40.4 97.5 70.1 74 Bonds 15.0 15.7 81.3 7.1 47.3 -17.4 20.8 27.7 13.5 49.9 55.0 70.8 75 Bank loans n.e.c 3.1 2.3 .7 1.4 8.3 -4.5 4.7 -.5 8.1 5.6 8.2 11.3 26 Commercial paper 6.4 5.2 -9.0 -27.3 13.6 -5.2 -8.1 5.9 37.9 -11.1 30.9 -3.4 27 Other loans and advances -9.8 -.6 -4.2 -1.6 -1.8 -7.1 2.2 .4 1.9 -4.0 3.4 -8.6 28 Total domestic plus foreign 495.4 568.0 694.7 596.6 784.1 546.9 599.5 687.8 901.1 919.7 627.2 688.5 Financial sectors 29 Total net borrowing by financial sectors 154.5 240.1 290.8 459.4 455.9 380.1 419.7 544.8 264.9 433.6 461.7 663.5 By instrument 30 U.S. government-related 145.7 155.8 164.2 284.3 213.6 264.5 245.7 317.5 93.0 197.7 230.1 333.5 31 Government-sponsored enterprises securities 9.2 40.3 80.6 176.9 108.5 146.6 152.1 249.0 62.9 127.2 101.5 142.2 32 Mortgage pool securities 136.6 115.6 83.6 112.1 105.1 117.9 93.6 68.5 30.0 70.5 128.6 191.3 33 Loans from U.S. government .0 .0 .0 -4.8 .0 .0 .0 .0 .0 .0 .0 .0 34 8.7 84.3 126.6 175.2 242.4 115.5 174.0 227.3 172.0 236.0 231.6 329.9 35 Corporate bonds 68.8 82.8 119.8 113.4 180.8 96.4 99.5 96.5 155.7 174.2 170.2 223.1 36 Mortgages .5 .6 3.6 9.8 5.3 12.4 12.0 4.9 5.2 5.2 5.2 5.6 37 Bank loans n.e.c 8.8 2.2 -13.0 -12.3 8.0 -27.4 -11.7 1.9 -3.0 21.2 7.1 6.6 38 Open market paper -32.0 -.7 -6.2 41.6 42.6 4.3 41.3 85.9 38.5 34.0 43.3 54.6 39 Other loans and advances «•. -37.3 -.6 22.4 22.6 5.7 29.8 32.8 38.1 -24.5 1.3 5.9 40.1 By borrowing sector 40 Government-sponsored enterprises 9.1 40.2 80.6 172.1 108.5 146.6 152.1 249.0 62.9 127.2 110011..55 114422..22 41 Federally related mortgage pools 136.6 115.6 83.6 112.1 105.1 117.9 93.6 68.5 30.0 70.5 128.6 191.3 47. Private financial sectors 8.7 84.3 126.6 175.2 242.4 115.5 174.0 227.3 172.0 236.0 231.6 329.9 43 Commercial banks -10.7 7.7 4.6 9.9 9.7 10.6 23.9 4.1 6.3 18.2 9.6 4.5 44 Bank holding companies -2.5 2.3 8.8 10.3 15.3 10.1 11.5 16.0 13.3 23.8 25.2 -1.3 45 Funding corporations -6.5 13.2 2.9 24.2 45.2 -10.5 47.3 11.1 61.5 21.7 52.1 45.5 46 Savings institutions -44.7 -7.0 11.3 12.8 3.4 5.8 14.8 36.1 -18.9 -7.2 5.3 34.2 47 Credit unions .0 .0 .2 .2 -.1 .2 .5 .2 -.3 -.1 .1 .0 48 Life insurance companies .0 .0 .2 .3 -.1 .0 .0 1.3 .0 .1 -.1 -.4 49 Finance companies 17.7 -1.6 .2 50.2 51.6 63.6 16.3 57.3 83.1 57.2 6.5 59.6 50 Mortgage companies -2.4 8.0 .0 -11.5 2.9 -18.2 -7.0 11..11 -7.4 14.8 4.0 .0 51 Real estate investment trusts (REITs) 1.2 .3 3.4 13.7 5.4 15.3 18.8 66..33 5.2 5.2 5.2 6.0 57 Brokers and dealers 3.7 2.7 12.0 .5 -5.0 .3 -7.6 19.3 -29.5 -.1 2.1 7.7 53 Issuers of asset-backed securities (ABSs) 52.9 58.6 83.0 64.5 114.1 38.5 55.4 74.5 58.8 102.2 121.6 174.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • July 1996 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2 Q3 Q4 All sectors 55554444 TTTToooottttaaaallll nnnneeeetttt bbbboooorrrrrrrroooowwwwiiiinnnngggg,,,, aaaallllllll sssseeeeccccttttoooorrrrssss 649.9 808.0 985.5 1,056.0 1,240.0 927.0 1,019.2 1,232.6 1,166.0 1,353.4 1,088.9 1,351.9 55555555 UUUU....SSSS.... ggggoooovvvveeeerrrrnnnnmmmmeeeennnntttt sssseeeeccccuuuurrrriiiittttiiiieeeessss 424.0 459.8 420.3 444.9 358.0 395.8 381.3 467.5 359.8 400.5 295.9 375.9 55556666 MMMMuuuunnnniiiicccciiiippppaaaallll sssseeeeccccuuuurrrriiiittttiiiieeeessss 87.8 30.5 74.8 -29.3 -47.2 -20.7 -58.4 -53.8 -48.2 -9.5 -113.0 -18.0 55557777 CCCCoooorrrrppppoooorrrraaaatttteeee aaaannnndddd ffffoooorrrreeeeiiiiggggnnnn bbbboooonnnnddddssss 162.5 166.1 276.3 143.8 303.0 116.4 135.7 130.4 224.5 323.1 285.9 378.7 55558888 MMMMoooorrrrttttggggaaaaggggeeeessss 158.9 131.5 160.8 206.3 248.8 206.6 215.9 218.4 223.0 241.4 283.4 247.6 55559999 CCCCoooonnnnssssuuuummmmeeeerrrr ccccrrrreeeeddddiiiitttt -14.8 7.3 58.9 121.2 130.8 129.8 124.8 165.2 93.8 158.1 109.6 161.8 66660000 BBBBaaaannnnkkkk llllooooaaaannnnssss nnnn....eeee....cccc -29.1 -9.3 -8.5 61.8 116.0 26.8 90.1 78.5 151.7 124.1 100.7 87.4 66661111 OOOOppppeeeennnn mmmmaaaarrrrkkkkeeeetttt ppppaaaappppeeeerrrr -44.0 13.1 -5.1 35.7 74.3 8.8 59.6 115.3 99.5 60.4 90.2 47.1 66662222 OOOOtttthhhheeeerrrr llllooooaaaannnnssss aaaannnndddd aaaaddddvvvvaaaannnncccceeeessss -95.6 8.9 8.0 71.7 56.2 63.5 70.2 111.0 61.8 55.4 36.2 71.5 Funds raised through mutual funds and corporate equities 66663333 TTTToooottttaaaallll nnnneeeetttt sssshhhhaaaarrrreeee iiiissssssssuuuueeeessss 209.4 294.9 442.1 150.8 157.1 263.9 113.2 -81.1 18.1 169.2 190.1 250.9 66664444 MMMMuuuuttttuuuuaaaallll ffffuuuunnnnddddssss 147.2 209.1 323.7 128.9 171.1 199.6 129.7 -12.6 65.1 174.1 195.7 249.7 66665555 CCCCoooorrrrppppoooorrrraaaatttteeee eeeeqqqquuuuiiiittttiiiieeeessss 62.2 85.8 118.4 21.9 -14.1 64.3 -16.4 -68.5 -46.9 -4.9 -5.6 1.2 66666666 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 18.3 27.0 21.3 -44.9 -76.0 -2.0 -50.0 -118.0 -68.4 -59.6 -98.8 -77.2 66667777 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 13.3 28.1 36.6 24.1 14.2 20.4 10.5 16.3 8.7 17.7 11.2 19.0 66668888 FFFFoooorrrreeeeiiiiggggnnnn sssshhhhaaaarrrreeeessss ppppuuuurrrrcccchhhhaaaasssseeeedddd bbbbyyyy UUUU....SSSS.... rrrreeeessssiiiiddddeeeennnnttttssss 30.7 30.7 60.5 42.7 47.8 45.9 23.1 33.2 12.8 37.0 82.0 59.4 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables F.2 through F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 11999955 Q2 Q3 Q4 Q1 Q2 Q3 Q4 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 649.9 808.0 985.5 1,056.0 1,240.0 927.0 1,019.2 1,232.6 1,166.0 1,353.4 1,088.9 1,351.9 2 Private domestic nonfinancial sectors 104.1 90.2 62.7 252.9 -105.1 255.5 205.1 252.0 .0 -158.5 -124.7 -137.1 3 Households 27.9 84.0 37.1 294.8 51.6 297.6 283.9 336.7 179.7 -99.4 131.5 -5.3 4 Nonfarm noncorporate business -5.3 -.1 .6 .7 -.9 1.5 .7 .9 .5 -1.0 -1.0 -2.2 5 Nonfinancial corporate business 30.7 27.8 21.3 51.9 -11.9 27.5 37.4 84.1 -85.2 47.5 -47.3 37.5 6 State and local governments 50.8 -21.5 3.7 -94.6 -143.9 -71.1 -117.0 -169.7 -94.9 -105.7 -207.9 -167.1 7 U.S. government 10.5 -11.9 -18.4 -24.2 -22.8 -14.6 -11.3 -24.4 -13.2 -24.3 -23.4 -30.1 8 Rest of the world 13.3 98.2 128.3 134.4 270.9 65.7 137.5 210.9 244.9 325.9 352.8 159.8 9 Financial sectors 522.0 631.5 812.8 693.0 1,097.0 620.4 687.9 794.0 934.3 1,210.2 884.2 1,359.3 10 Government sponsored enterprises 15.1 68.8 90.2 123.2 78.9 100.9 125.4 175.2 11.2 86.9 50.8 166.8 11 Federally related mortgage pools 136.6 115.6 83.6 112.1 105.1 117.9 93.6 68.5 30.0 70.5 128.6 191.3 12 Monetary authority 31.1 27.9 36.2 31.5 12.7 24.9 29.7 30.0 16.3 20.8 -11.1 24.7 13 Commercial banking 80.8 95.3 142.2 163.4 264.0 128.5 183.4 174.5 342.7 316.0 243.5 153.6 14 U.S. chartered banks 35.7 69.5 149.6 148.1 186.6 136.1 155.6 174.2 183.4 222.4 227.5 112.9 15 Foreign banking offices in United States 48.5 16.5 -9.8 11.2 75.3 -10.0 22.9 -5.6 158.8 83.9 24.1 34.3 16 Bank holding companies -1.5 5.6 .0 .9 .2 .2 2.7 -2.4 -2.0 5.7 -9.0 6.0 17 Banks in US. affiliated areas -1.9 3.7 2.4 3.3 1.9 2.1 2.2 8.3 2.4 4.0 1.0 .4 18 Funding corporations 8.2 17.7 -19.1 -27.4 -6.8 -35.6 -45.5 -11.4 47.1 -9.6 -22.0 -42.8 19 Thrift institutions -146.1 -61.3 -1.7 34.9 20.0 41.5 53.8 32.4 28.2 9.4 40.9 1.6 20 Life insurance companies 86.5 78.5 100.9 66.3 108.0 26.7 89.5 79.4 132.4 131.2 77.0 91.5 21 Other insurance companies 30.0 6.7 27.7 24.9 21.4 22.3 25.3 30.4 19.2 21.7 21.8 22.8 22 Private pension funds 35.4 41.1 45.9 47.0 56.3 49.9 42.5 74.7 58.9 57.2 47.5 61.6 23 State and local government retirement funds 41.1 23.0 19.8 29.0 32.7 46.4 -11.1 36.6 62.4 3.2 53.0 12.1 24 Finance companies -9.2 7.5 -9.0 68.2 63.1 61.2 63.1 80.4 91.8 70.1 42.9 47.3 25 Mortgage companies 11.2 .1 .0 -22.9 5.9 -36.3 -14.0 2.1 -14.4 29.9 7.3 .6 26 Mutual funds 80.1 126.2 159.5 -7.1 51.5 55.4 -29.3 -70.4 -28.8 21.6 51.3 162.0 27 Closed-end funds 12.8 18.2 11.0 -5.5 5.8 -11.6 -13.6 -10.0 3.5 6.4 8.4 5.0 28 Money market mutual funds 32.7 4.7 20.4 30.0 86.5 26.6 57.7 53.9 53.1 135.2 33.2 124.6 29 Real estate investment trusts (REITs) -.7 1.1 .6 4.7 1.8 6.6 5.5 .2 1.8 1.8 1.8 1.9 30 Brokers and dealers 17.5 -1.3 14.8 -44.2 87.9 -57.7 -21.9 -8.0 30.5 146.2 -1.8 177.0 31 Asset-backed securities issuers (ABSs) 48.9 53.8 80.5 57.8 100.8 42.8 46.3 54.3 46.7 89.8 109.7 156.9 32 Bank personal trusts 10.0 8.0 9.5 7.1 1.4 10.2 7.7 1.4 1.6 1.8 1.5 .8 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Net flows through credit markets 649.9 808.0 985.5 1,056.0 1,240.0 927.0 1,019.2 1,232.6 1,166.0 1,353.4 1,088.9 1,351.9 Other financial sources 34 Official foreign exchange -5.9 -1.6 .8 -5.8 8.8 -14.6 .2 -8.6 17.8 10.3 9.0 -1.9 35 Special drawing rights certificates .0 -2.0 .0 .0 2.2 .0 .0 .0 .0 .0 8.6 .0 36 Treasury currency .0 .2 .4 .7 .6 .6 .8 .7 .7 .7 .8 .0 37 Life insurance reserves 25.7 27.3 35.2 34.0 43.8 21.7 67.7 21.6 54.0 49.9 29.9 41.5 38 Pension fund reserves 198.2 238.6 247.3 248.0 248.4 220.7 238.0 293.4 302.5 310.7 214.2 166.2 39 Interbank claims -3.4 43.5 56.4 89.4 6.7 110.7 4.1 98.4 -17.4 28.7 -41.4 56.7 40 Checkable deposits and currency 86.3 113.5 117.3 -9.7 -12.6 -44.9 -66.0 -40.5 42.8 133.5 -150.5 -76.1 41 Small time and savings deposits 1.5 -57.2 -70.3 -40.0 89.5 -57.5 -51.8 -46.9 18.1 112.0 107.6 120.3 42 Large time deposits -58.5 -73.2 -23.5 19.6 80.5 -3.6 84.0 36.5 116.8 69.2 111.5 24.7 43 Money market fund shares 41.6 4.5 20.2 43.3 142.3 34.0 56.4 86.5 59.9 233.5 121.2 154.8 44 Security repurchase agreements -16.5 43.1 71.2 78.3 110.7 166.0 86.0 51.9 161.8 130.7 85.1 65.0 45 Foreign deposits -26.5 -3.5 -18.5 45.8 42.0 50.6 28.1 97.9 39.2 90.6 28.0 10.0 46 Mutual fund shares 147.2 209.1 323.7 128.9 171.1 199.6 129.7 -12.6 65.1 174.1 195.7 249.7 47 Corporate equities 62.2 85.8 118.4 21.9 -14.1 64.3 -16.4 -68.5 -46.9 -4.9 -5.6 1.2 48 Security credit 51.4 4.6 61.4 -.1 20.6 -20.7 -59.3 37.1 -10.7 30.8 35.4 26.9 49 Trade payables 31.0 46.6 37.8 111.9 101.5 114.4 95.4 156.3 112.1 32.5 184.2 77.1 50 Taxes payable -6.2 8.5 4.5 3.0 1.7 -13.1 10.1 4.3 15.5 -4.0 4.4 -9.3 51 Noncorporate proprietors' equity -.2 16.9 4.0 23.8 35.6 36.8 46.6 24.2 28.1 32.6 48.3 33.6 52 Investment in bank personal trusts 16.1 -7.1 1.6 18.8 20.5 24.7 23.6 11.9 21.0 22.3 20.8 18.0 53 Miscellaneous 277.4 287.2 296.3 265.9 409.8 129.4 269.0 372.1 366.0 467.2 289.2 516.6 54 Total financial sources 1,471.4 1,792.8 2,269.8 2,133.8 2,749.6 1,946.2 1,965.5 2,348.4 2,512.3 3,273.6 2,385.3 2,827.2 Floats not included in assets (-) 55 US. government checkable deposits -13.1 .7 -1.5 -4.8 -6.0 .8 7.4 -24.4 13.2 -16.3 3.5 -24.3 56 Other checkable deposits 4.5 1.6 -1.3 -2.8 -3.8 -3.5 -3.3 -2.3 -3.7 -3.9 -3.5 -4.2 57 Trade credit 36.1 11.3 29.7 -3.0 -.5 20.3 16.0 -29.7 25.7 19.9 -6.0 -41.5 Liabilities not identified as assets (—) 58 Treasury currency -.6 -.2 -.2 -.2 -.4 -.2 -.2 -.2 -.2 -.4 -.3 -.9 59 Interbank claims 26.2 -4.9 4.2 -2.7 -3.2 5.4 10.1 -1.7 .8 8.2 7.6 -29.4 60 Security repurchase agreements -9.5 3.6 34.3 27.9 8.5 108.1 -47.3 83.0 73.5 -40.1 13.6 -12.9 61 Foreign deposits -24.0 -2.8 -7.1 36.9 35.4 56.1 39.5 55.8 46.0 81.7 -1.8 15.8 62 Taxes payable -1.0 10.8 10.4 8.5 5.3 6.2 10.8 -.8 -8.7 31.9 11.2 -13.1 63 Miscellaneous 8.9 .8 -48.8 -109.6 -97.5 -336.3 -73.1 14.8 -226.8 -125.1 -32.4 -5.9 64 Total identified to sectors as assets 1,443.8 1,772.0 2,250.0 2,183.7 2,811.8 2,089.3 2,005.7 2,254.0 2,592.5 3,317.5 2,393.5 2,943.7 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. F.6 and F.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • July 1996 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1994 1995 tyyz lyyj Q2 Q3 Q4 Ql Q2 Q3 Q4 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 11,896.7 12,537.4 13,160.6 13,877.3 12,808.0 12,962.6 13,160.6 13,338.7 13,544.3 13,686.8 13,877.3 By sector and instrument 2 U.S. government 3,080.3 3,336.5 3,492.3 3,636.7 3,395.4 3,432.3 3,492.3 3,557.9 3,583.5 3,603.4 3,636.7 3 Treasury securities 3,061.6 3,309.9 3,465.6 3,608.5 3,368.0 3,404.1 3,465.6 3,531.5 3,556.7 3,576.5 3,608.5 4 Budget agency issues and mortgages 18.8 26.6 26.7 28.2 27.4 28.2 26.7 26.4 26.8 26.9 28.2 5 Private 8,816.3 9,200.9 9,668.3 10,240.6 9,412.6 9,530.3 9,668.3 9,780.8 9,960.8 10,083.4 10,240.6 By instrument 6 Municipal securities 1,302.8 1,377.5 1,348.2 1,301.1 1,372.2 1,362.6 1,348.2 1,334.8 1,329.8 1,306.6 1,301.1 / Corporate bonds 1,154.5 1,229.7 1,253.0 1,328.0 1,247.6 1,251.5 1,253.0 1,266.8 1,291.6 1,306.8 1,328.0 8 Mortgages 4,088.7 4,260.0 4,456.5 4,700.0 4,345.8 4,401.9 4,456.5 4,496.8 4,563.3 4,638.2 4,700.0 9 Home mortgages 3,037.4 3,227.6 3,432.2 3,640.1 3,318.7 3,376.0 3,432.2 3,466.0 3,524.5 3,591.0 3,640.1 10 Multifamily residential 272.5 267.8 269.1 281.2 268.8 270.2 269.1 269.8 273.3 276.8 281.2 li Commercial 698.1 683.4 672.3 694.4 676.3 673.1 672.3 677.6 681.6 686.1 694.4 12 Farm 80.7 81.2 83.0 84.3 82.1 82.6 83.0 83.4 83.9 84.4 84.3 13 Consumer credit 804.6 863.5 984.7 1,115.5 891.6 929.4 984.7 987.9 1,026.5 1,060.8 1,115.5 14 Bank loans n.e.c 672.2 676.0 748.6 848.3 705.3 724.7 748.6 781.8 810.3 826.0 848.3 15 Commercial paper 107.1 117.8 139.2 157.4 135.7 138.7 139.2 149.8 162.9 163.3 157.4 16 Other loans and advances 686.5 676.3 738.0 790.4 714.4 721.6 738.0 762.9 776.4 781.8 790.4 By borrowing sector 17 Household 4,023.6 4,272.4 4,632.3 5,005.4 4,407.5 4,511.8 4,632.3 4,675.1 4,780.3 4,890.0 5,005.4 1188 Nonfinancial business 3,696.8 3,770.3 3,921.1 4,171.9 3,860.9 3,885.6 3,921.1 4,004.2 4,085.6 4,122.6 4,171.9 1199 Farm 136.3 138.3 141.2 142.8 141.5 143.1 141.2 138.9 142.8 144.9 142.8 20 Nonfarm noncorporate 1,122.9 1,129.9 1,142.0 1,180.0 1,135.6 1,137.4 1,142.0 1,154.5 1,163.3 1,170.4 1,180.0 21 Corporate 2,437.6 2,502.0 2,638.0 2,849.1 2,583.7 2,605.0 2,638.0 2,710.7 2,779.4 2,807.3 2,849.1 22 State and local government 1,095.9 1,158.2 1,114.8 1,063.3 1.144.2 1,132.8 1,114.8 1,101.6 1,094.9 1,070.8 1,063.3 23 Foreign credit market debt held in United States 313.1 381.9 361.6 429.0 348.7 352.4 361.6 376.8 387.6 410.7 429.0 24 146.2 227.4 234.6 281.9 222.4 227.6 234.6 237.9 250.4 264.2 281.9 23 Bank loans n.e.c 23.9 24.6 26.1 34.4 25.1 26.3 26.1 28.2 29.6 31.6 34.4 26 Commercial paper 77.7 68.7 41.4 55.0 42.0 39.9 41.4 50.9 48.1 55.8 55.0 27 Other loans and advances 65.3 61.1 59.6 57.7 59.2 58.6 59.6 59.8 59.5 59.1 57.7 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 12,209.7 12,919.3 13,522.2 14,306.3 13,156.7 13,315.0 13,522.2 13,715.5 13,931.9 14,097.5 14,306.3 Financial sectors 29 Total credit market debt owed by financial sectors 3,024.9 3,321.0 3,785.7 4,244.3 3,545.3 3,648.1 3,785.7 3,853.5 3,964.8 4,078.0 4,244.3 Bv instrument 30 US. government-related 1,720.0 1,884.1 2,168.4 2,381.9 2.030.5 2,089.8 2,168.4 2,192.7 2,245.0 2,300.2 2,381.9 31 Government-sponsored enterprises securities 443.1 523.7 700.6 809.1 600.3 638.3 700.6 716.3 748.1 773.5 809.1 32 Mortgage pool securities 1,272.0 1,355.6 1,467.8 1,572.9 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 1,526.7 1,572.9 33 Loans from U.S. government 4.8 4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1,304.9 1,436.9 1,617.3 1,862.3 1,514.9 1,558.3 1,617.3 1,660.8 1,719.8 1,777.7 1,862.3 35 Corporate bonds 738.2 858.0 969.0 1,149.8 920.0 944.8 969.0 1,007.9 1,051.4 1,094.0 1,149.8 36 Mortgages 5.4 8.9 18.7 24.0 14.5 17.5 18.7 20.0 21.3 22.6 24.0 37 Bank loans n.e.c 80.5 67.6 55.3 63.3 56.3 53.4 55.3 53.4 58.4 60.3 63.3 38 Open market paper 394.3 393.5 442.8 488.0 410.3 420.5 442.8 454.1 462.8 473.6 488.0 39 Other loans and advances 86.6 108.9 131.6 137.2 113.8 122.0 131.6 125.4 125.7 127.2 137.2 By borrowing sector 40 Government-sponsored enterprises 447.9 528.5 700.6 809.1 600.3 638.3 700.6 716.3 748.1 773.5 809.1 41 Federally related mortgage pools 1,272.0 1,355.6 1,467.8 1,572.9 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 1,526.7 1,572.9 42 Private financial sectors 1,304.9 1,436.9 1,617.3 1,862.3 1,514.9 1,558.3 1,617.3 1,660.8 1,719.8 1,777.7 1,862.3 43 Commercial banks 80.0 84.6 94.5 104.1 86.7 92.6 94.5 95.0 99.9 102.2 104.1 44 Bank holding companies 114.6 123.4 133.6 148.9 126.8 129.6 133.6 137.0 142.9 149.2 148.9 4b Funding corporations 161.6 169.9 199.3 247.1 191.5 200.6 199.3 221.0 229.9 240.0 247.1 46 Savings institutions 88.4 99.6 112.4 115.8 99.7 103.4 112.4 107.7 105.9 107.2 115.8 47 Credit unions .0 .2 .5 .4 .3 .4 .5 .4 .3 .4 .4 4488 Life insurance companies .0 .2 .6 .5 .3 .3 .6 .6 .6 .6 .5 4499 Finance companies 390.4 390.5 440.7 492.3 414.2 420.9 440.7 456.7 467.2 471.9 492.3 50 Mortgage companies 30.2 30.2 18.7 21.6 20.2 18.5 18.7 16.9 20.6 21.6 21.6 51 Real estate investment trusts (REITs) 13.9 17.4 31.1 36.5 24.8 29.5 31.1 32.4 33.7 35.0 36.5 52 Brokers and dealers 21.7 33.7 34.3 29.3 31.3 29.4 34.3 26.9 26.8 27.4 29.3 53 Issuers of asset-backed securities (ABSs) 404.2 487.2 551.6 665.8 519.2 533.0 551.6 566.3 591.9 622.3 665.8 All sectors 54 Total credit market debt, domestic and foreign.... 15,234.6 16,240.3 17,307.9 18,550.6 16,702.0 16,963.1 17,307.9 17,569.1 17,896.7 18,175.4 18,550.6 55 U.S. government securities 4,795.5 5,215.8 5,660.7 6,018.7 5,425.9 5,522.1 5,660.7 5,750.6 5,828.5 5,903.6 6,018.7 56 Municipal securities 1,302.8 1,377.5 1,348.2 1,301.1 1,372.2 1,362.6 1,348.2 1,334.8 1,329.8 1,306.6 1,301.1 57 Corporate and foreign bonds 2,038.9 2,315.2 2,456.5 2,759.6 2,390.0 2,423.9 2,456.5 2,512.7 2,593.4 2,664.9 2,759.6 58 Mortgages 4,094.1 4,269.0 4,475.2 4,724.1 4,360.3 4,419.4 4,475.2 4,516.8 4,584.7 4,660.9 4,724.1 59 Consumer credit 804.6 863.5 984.7 1,115.5 891.6 929.4 984.7 987.9 1,026.5 1,060.8 1,115.5 6600 Bank loans n.e.c 776.6 768.2 830.0 946.0 786.7 804.3 830.0 863.3 898.2 917.9 946.0 6611 Open market paper 579.0 580.0 623.5 700.4 587.9 599.2 623.5 654.7 673.8 692.7 700.4 62 Other loans and advances 843.1 851.1 929.1 985.4 887.4 902.2 929.1 948.1 961.7 968.1 985.4 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

Flow of Funds A41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES' Billions of dollars except as noted, end of period 1994 1995 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2 Q3 Q4 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 15,234.6 16,240.3 17,307.9 18,550.6 16,702.0 16,963.1 17,307.9 17,569.1 17,896.7 18,175.4 18,550.6 2 Private domestic nonfinancial sectors 2,673.7 2,729.3 3,012.5 2,903.4 2,824.7 2,893.9 3,012.5 2,983.7 2,929.5 2,916.3 2.903.4 3 Households 1,620.6 1,646.0 1,971.1 2,018.7 1.747.4 1,839.5 1,971.1 1,996.3 1,953.1 2,007.1 2,018.7 4 Nonfarm noncorporate business 38.1 38.8 39.5 38.6 39.1 39.3 39.5 39.6 39.4 39.1 38.6 5 Nonfinancial corporate business 257.8 283.7 335.6 323.7 298.5 306.8 335.6 307.2 319.0 306.4 323.7 6 State and local governments 757.2 760.8 666.3 522.4 739.8 708.3 666.3 640.6 618.1 563.7 522.4 7 U.S. government 235.0 230.7 206.5 183.8 215.4 212.6 206.5 203.2 197.1 191.3 183.8 8 Rest of the world 1,022.8 1,146.6 1,255.7 1.526.6 1,205.4 1,240.7 1,255.7 1,325.3 1,403.4 1,492.7 1,526.6 y Financial sectors 11,303.1 12,133.7 12,833.2 13,936.9 12,456.6 12,615.9 12,833.2 13.056.9 13,366.6 13,575.1 13,936.9 10 Government-sponsored enterprises 457.8 548.0 671.2 750.1 596.0 627.5 671.2 673.3 695.8 708.5 750.1 n Federally related mortgage pools 1,272.0 1.355.6 1,467.8 1,572.9 1,430.1 1,451.5 1,467.8 1,476.4 1,496.9 1,526.7 1,572.9 12 Monetarv authority 300.4 336.7 368.2 380.8 351.6 356.8 368.2 367.1 375.7 370.6 380.8 13 Commercial banking 2,948.6 3,090.8 3,254.3 3,518.2 3,155.9 3,203.9 3,254.3 3,327.7 3,409.8 3,472.9 3,518.2 14 U.S. chartered banks 2,571.9 2,721.5 2.869.6 3,056.1 2,780.3 2,822.3 2,869.6 2,906.5 2,963.7 3,023.7 3,056.1 15 Foreign banking offices in United States 335.8 326.0 337.1 412.4 330.8 335.5 337.1 373.6 396.0 401.1 412.4 16 Bank holding companies 17.5 17.5 18.4 18.6 18.3 19.0 18.4 17.9 19.3 17.0 18.6 17 Banks in U.S. affiliated areas 23.4 25.8 29.2 31.1 26.5 27.1 29.2 29.8 30.8 31.0 31.1 18 Funding corporations 162.5 149.5 129.8 125.6 138.7 130.5 129.8 140.2 135.7 134.0 125.6 19 Thrift institutions 1,134.5 1,132.7 1,167.6 1,187.7 1,146.1 1,160.4 1,167.6 1,173.4 1.177.3 1,188.1 1,187.7 20 Life insurance companies 1,309.1 1,420.6 1,487.0 1,595.0 1,449.0 1,470.7 1,487.0 1,523.1 1,557.1 1,575.5 1,595.0 21 Other insurance companies 389.4 422.7 446.4 471.9 433.1 439.1 446.4 451.8 458.5 464.4 471.9 22 Private pension funds 571.7 617.6 664.6 720.9 635.3 645.9 664.6 679.3 693.6 705.5 720.9 23 State and local government retirement hinds 417.5 437.3 466.3 498.9 459.2 454.3 466.3 480.7 482.1 493.3 498.9 24 Finance companies 496.4 482.8 551.0 614.0 511.3 524.1 551.0 568.5 586.9 594.7 614.0 25 Mortgage companies 60.5 60.4 37.5 43.3 40.4 37.0 37.5 33.9 41.4 43.2 43.3 26 Mutual funds 566.4 725.9 718.8 770.3 747.8 741.8 718.8 715.9 721.5 735.6 770.3 27 Closed-end funds 67.7 78.6 73.1 78.9 79.0 75.6 73.1 74.0 75.6 77.7 78.9 28 Money market mutual funds 408.6 429.0 459.0 545.5 433.5 437.9 459.0 480.6 508.0 505.7 545.5 29 Real estate investment trusts (REITs) 8.1 8.6 13.3 15.1 11.9 13.3 13.3 13.8 14.2 14.7 15.1 30 Brokers and dealers 122.7 137.5 93.3 181.3 100.8 95.3 93.3 101.0 137.5 137.0 181.3 31 Asset-backed securities issuers (ABSs) 377.9 458.4 516.1 616.9 491.0 502.6 516.1 527.8 550.3 577.7 616.9 32 Bank personal trusts 231.5 240.9 248.0 249.4 245.7 247.7 248.0 248.4 248.8 249.2 249.4 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Total credit market debt 15,234.6 16,240.3 17,307.9 18,550.6 16,702.0 16,963.1 17,307.9 17,569.1 17,896.7 18,175.4 18,550.6 Other liabilities 34 Official foreign exchange 51.8 53.4 53.2 63.7 54.9 55.5 53.2 64.1 67.1 65.1 63.7 35 Special drawing rights certificates 8.0 8.0 8.0 10.2 8.0 8.0 8.0 8.0 8.0 10.2 10.2 36 Treasury currency 16.5 17.0 17.6 18.2 17.3 17.5 17.6 17.8 18.0 18.2 18.2 37 Life insurance reserves 433.0 468.2 502.2 546.0 479.9 496.8 502.2 515.7 528.1 535.6 546.0 38 Pension fund reserves 4.055.1 4,471.6 4,693.9 5,435.3 4,524.0 4,677.0 4,693.9 4,895.7 5,095.4 5,320.1 5,435.3 39 Interbank claims 132.6 189.3 279.7 287.0 237.5 250.1 279.7 271.7 265.5 267.4 287.0 40 Deposits at financial institutions 5,050.2 5,154.9 5,296.0 5,748.4 5,186.7 5,212.4 5,296.0 5,389.5 5,572.4 5,638.7 5,748.4 41 Checkable deposits and currency 1,134.4 1,251.7 1,242.0 1.229.5 1.229.9 1,205.0 1,242.0 1,193.9 1,246.3 1,200.7 1,229.5 42 Small time and savings deposits 2.293.5 2,223.2 2,183.3 2,272.7 2,214.4 2,199.1 2,183.3 2,200.1 2,222.4 2,247.0 2,272.7 43 Large time deposits 415.2 391.7 411.2 491.8 379.3 402.6 411.2 441.1 456.2 486.2 491.8 44 Money market fund shares 539.5 559.6 602.9 745.3 569.2 578.7 602.9 634.0 678.5 702.7 745.3 45 Security repurchase agreements 399.9 471.1 549.4 660.1 522.1 548.1 549.4 603.4 629.3 655.6 660.1 46 Foreign deposits 267.7 257.6 307.1 349.1 271.9 278.9 307.1 316.9 339.6 346.6 349.1 47 Mutual fund shares 992.5 1,375.4 1.477.3 1,865.0 1,445.4 1,515.8 1,477.3 1,552.8 1,664.4 1,789.6 1,865.0 48 Security credit 217.7 279.0 279.0 299.6 279.1 263.9 279.0 269.5 277.9 286.2 299.6 49 Trade payables 995.1 1,032.8 1,144.8 1,246.2 1,059.9 1,082.3 1,144.8 1,143.8 1,158.6 1,202.0 1,246.2 50 Taxes payable 79.7 84.2 87.3 88.9 82.0 86.3 87.3 93.5 88.6 91.4 88.9 51 Investment in bank personal trusts 660.6 691.3 699.4 841.7 680.0 701.1 699.4 736.3 774.6 817.0 841.7 52 Miscellaneous 4,791.2 5,102.9 5,363.9 5,724.6 5,239.7 5,322.2 5,363.9 5,437.9 5,510.4 5,586.2 5,724.6 53 Total liabilities 32,718.6 35,168.3 37,210.2 40,725.4 35,996.6 36,652.0 37,210.2 37,965.3 38,925.7 39,803.2 40,725.4 Financial assets not included in liabilities ( + ) 54 Gold and special drawing rights 19.6 20.1 21.1 22.1 20.8 21.0 21.1 22.7 22.9 22.1 22.1 55 Corporate equities 5,462.9 6,278.5 6,293.4 8,345.4 5,965.8 6,228.7 6,293.4 6,835.8 7,393.0 8,013.8 8.345.4 56 Household equity in noncorporate business 2,458.3 2,476.3 2,564.6 2,635.6 2,523.9 2,550.9 2,564.6 2,576.8 2,608.5 2,622.2 2,635.6 Floats not included in assets (-) 57 U.S. government checkable deposits 6.8 5.6 3.4 3.1 .9 1.2 3.4 4.2 2.0 .6 3.1 58 Other checkable deposits 42.0 40.7 38.0 34.2 38.7 30.6 38.0 33.3 35.7 27.3 34.2 59 Trade credit -251.0 -215.1 -219.0 -219.5 -280.2 -282.3 -219.0 -258.1 -277.1 -283.9 -219.5 Liabilities not identified as assets (-) 60 Treasury currency -4.9 -5.1 -5.4 -5.8 -5.2 -5.3 -5.4 -5.4 -5.5 -5.6 -5.8 61 Interbank claims -9.3 -4.7 -6.5 -9.1 -7.4 -3.4 -6.5 -2.7 -2.9 .1 -9.1 62 Security repurchase agreements 43.0 77.3 105.2 113.7 99.3 98.0 105.2 131.6 115.0 130.4 113.7 63 Foreign deposits 217.6 218.3 258.7 294.1 231.4 241.3 258.7 270.2 290.6 290.2 294.1 64 Taxes payable 25.3 26.2 24.2 38.0 21.3 22.0 24.2 7.9 21.2 23.6 38.0 65 Miscellaneous -514.4 -589.8 -723.9 -785.0 -569.2 -612.4 -723.9 -782.6 -787.4 -802.6 -785.0 66 Total identified to sectors as assets 41,104.3 44,389.7 46,614.6 52,264.7 44,977.5 45,963.0 46,614.6 48,002.3 49,558.5 51,081.2 52,264.7 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

A42 Domestic Nonfinancial Statistics • July 1996 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1987=100, except as noted 1995 1996r MMeeaassuurree 11999933 11999944 11999955 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Industrial production' 111.5 118.1 121.9 122.7 122.8 122.2 122.6 122.8 122.5 123.9 123.4 124.5 Market groupings 2 Products, total 110.0 115.6 118.3 119.2 119.4 118.3 118.8 119.2 118.6 120.4 119.9 121.2 3 Final, total 112.7 118.3 121.4 122.4 122.6 121.3 121.9 122.1 121.9 124.2 123.3 125.0 4 Consumer goods 109.5 113.7 115.1 115.9 116.0 114.9 115.9 115.7 114.6 116.1 115.0 116.3 5 Equipment 117.5 125.3 131.4 132.9 133.1 131.5 131.4 132.3 133.7 137.3 136.6 138.9 6 Intermediate 101.8 107.3 109.0 109.4 109.5 109.2 109.3 110.1 108.5 108,9 109.6 109.9 / Materials 113.8 122.0 127.4 128.1 128.1 128.1 128.4 128.4 128.5 129.3 128.7 129.6 Industry groupings 8 Manufacturing 112.3 119.7 123.9 124.2 124.9 124.4 124.5 124.8 124.5 126.2 125.1 126.8 9 Capacity utilization, manufacturing (percent)2.. 80.6 83.3 83.0r 82.7r 82.8 82.2r 82.0r 81.9 81.4 82.2 81.2 82.0 10 Construction contracts3 105.1r 114.2r 117.8r 124.0 120.0 120.0r 121.0r 115.0r 118.0 112.0 121.0 123.0 11 Nonagricultural employment, total4 108.4 111.3 114.4 114.6 114.7 114.8 115.0 115.1 115.0 115.6 115.8 115.8 12 Goods-producing, total 94.3 95.6 98.2 97.9 97.9 97.9 97.8 98.0 97.7 98.3 98.1 97.8 13 Manufacturing, total 94.8 95.1 96.9 96.6 96.4 96.3 96.2 96.4 96.0 96.1 95.8 95.7 14 Manufacturing, production workers 95.3 97.4 98.3 97.9 97.7 97.5 97.4 97.7 97.1 97.3 96.9 96.8 15 Service-producing 112.9 116.3 119.5 119.9 120.1 120.1 120.4 120.6 120.5 121.1 121.4 121.5 16 Personal income, total 141.3 148.3 157.4 158.0 158.8 159.6 160.1 161.1 161.2 162.4 163.2 n.a. 17 Wages and salary disbursements 136.0 142.6 150.5 151.1 152.0 153.0 152.9 153.7 153.4 155.0 155.7 n.a. 18 Manufacturing 119.3 125.0 129.3 129.3 129.6 129.5 129.5 129.8 128.4 129.8 129.0 n.a. 19 Disposable personal income5 142.4 149.2 157.8 158.5 159.3 160.0 160.6 161.7 161.9 163.1 163.7 n.a. 20 Retail sales5 134.7 144.8 152.2 153.4 153.4 153.0 154.3 155.3 155.3 158.6 159.5 159.0 Prices6 21 Consumer (1982-84=100) 144.5 148.2 152.4 152.9 153.2 153.7 153.6 153.5 154.4 154.9 155.7 156.3 22 Producer finished goods (1982=100) 124.7 125.5 127.9 128.1 127.9 128.7 128.7 129.1r 129.5 129.4 130.2 130.8 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 1995. See "A indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, Revision to Industrial Production and Capacity Utilization, 1991-95," Federal Reserve Monthly Labor Review. Bulletin, vol. 82 (January 1996), pp. 16—25. For a detailed description of the industrial NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series production index, see "Industrial Production: 1989 Developments and Historical Revision," mentioned in notes 3 and 6, can also be found in the Survey of Current Business. Federal Reserve 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 1996r CCaatteeggoorryy 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 128,040 131,056 132,304 132,501 132,473 132,471 113322,,335522 113322,,990033 113333,,001188 113333,,665555 113333,,336611 Employment 2 Nonagricultural industries3 116,232 119,651 121,460 121,701 121,810 121,739 121,656 121,698 122,143 122,664 122,726 3 Agriculture 3,074 3,409 3,440 3,335 3,434 3,323 33,,332255 33,,552299 33,,551199 33,,448877 33,,336688 Unemployment 4 Number 8,734 7,996 7,404 7,465 7,229 7,409 7,371 7,677 7,355 7,504 7,266 5 Rate (percent of civilian labor force) 6.8 6.1 5.6 5.6 5.5 5.6 5.6 5.8 5.5 5.6 5.4 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 110,525 113,423 116,597 116,932 117,000 117,212 117,357 117,211 117,842 118,020 118,022 7 Manufacturing 18,003 18,064 18,406 18,322 18,301 18,272 18,307 18,235 18,265 18,204 18,187 8 Mining 611 604 579 573 571 567 569 567 573 575 574 9 Contract construction 4,642 4,916 5,244 5,262 5,287 5,295 5,297 5,314 5,426 5,431 5,378 10 Transportation and public utilities 5,787 5,842 6,194 6,206 6,217 6,240 6,231 6,231 6,244 6,253 6,262 11 Trade 25,675 26,362 27,156 27,245 27,256 27,362 27,376 27,334 27,462 27,519 27,544 12 Finance 6,712 6,789 6,948 6,957 6,977 6,991 7,001 7,007 7,033 7,043 7,060 13 Service 30,278 31,805 32,788 33,047 33,076 33,185 33,248 33,232 33,505 33,622 33,642 14 Government 18,817 19,041 19,282 19,320 19,315 19,300 19,328 19,291 19,334 19,373 19,375 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

Selected Measures A43 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1995 1996 1995' 1996 1995' 1996 Q2 Q3 Q4 Ql' Q2 Q3 Q4 Qlr Q2 Q3 Q4 Ql' Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 121.4 122.3 122.5 123.3 145.0 146.3 147.7 149.1 83.7 83.6 82.9 82.7 2 Manufacturing 123.3 124.1 124.6 125.3 148.7 150.2 151.9 153.5 83.0 82.6 82.0 81.6 3 Primary processing3 117.7 117.1 117.1 116.7 134.3 135.2 136.1 136.9 87.6 86.6 86.1 85.2 4 Advanced processing4 126.0 127.5 128.1 129.4 155.6 157.5 159.5 161.5 81.0 80.9 80.3 80.1 5 Durable goods 131.4 133.0 134.2 136.1 159.2 161.7 164.2 166.7 82.5 82.3 81.7 81.6 6 Lumber and products 102.9 104.6 105.8 104.6 118.7 119.8 120.9 121.7 86.7 87.3 87.5 85.9 7 Primary metals 119.1 118.2 118.8 118.5 128.1 128.8 129.5 130.3 92.9 91.8 91.8 91.0 8 Iron and steel 121.9 121.3 121.3 122.4 132.4 132.9 133.5 134.4 92.1 91.3 90.9 91.0 9 Nonferrous 115.1 113.9 115.3 113.3 122.5 123.3 124.0 124.8 94.0 92.4 93.0 90.8 10 Industrial machinery and equipment 174.4 178.9 186.8 195.5 200.5 206.1 212.0 218.1 87.0 86.8 88.1 89.6 11 Electrical machinery 171.2 178.4 182.9 186.5 199.0 206.3 213.9 221.8 86.0 86.5 85.5 84.1 12 Motor vehicles and parts 140.5 140.7 140.5 132.7 174.4 176.8 179.2 181.3 80.6 79.6 78.4 73.2 13 Aerospace and miscellaneous transportation equipment 88.7 86.9 79.0 84.0 130.9 130.1 129.3 128.6 67.7 66.8 61.1 65.3 14 Nondurable goods 114.4 114.3 113.9 113.3 137.1 137.7 138.4 139.0 83.5 83.0 82.3 81.5 15 Textile mill products 113.7 110.9 109.4 106.5 130.4 131.6 132.8 133.7 87.2 84.3 82.4 79.7 16 Paper and products 121.2 119.5 118.1 114.4 131.7 132.8 133.9 134.9 92.0 90.0 88.2 84.8 17 Chemicals and products 124.0 124.6 126.4 126.2 154.7 155.6 156.5 157.5 80.2 80.1 80.7 80.1 18 Plastics materials 122.9 118.3 123.1 133.8 135.4 137.1 91.9 87.3 89.7 19 Petroleum products 108.0 109.2 107.7 109.5 116.2 116.4 116.6 116.8 92.9 93.8 92.4 93.8 20 Mining 100.7 100.2 98.2 98.3 112.0 111.9 111.9 111.9 89.9 89.5 87.8 87.9 21 Utilities 120.7 124.7 124.1 125.9 134.8 135.2 135.6 136.0 89.5 92.3 91.5 92.6 22 Electric 120.4 125.0 123.7 126.2 132.1 132.5 133.0 133.4 91.1 94.3 93.1 94.6 1973 1975 Previous cycle5 Latest cycle6 1995' 1996 High Low High Low High Low Apr. Nov. Dec. Jan.' Feb.' Mar. Apr.p Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 84.0 83.0 82.9 82.4 83.1 82.5 83.0 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 83.4 82.0 81.9 81.4 82.2 81.2 82.0 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 88.2 86.0 86.0 85.4 85.0 85.2 85.3 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.1 81.3 80.3 80.2 79.7 81.0 79.6 80.6 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 83.0 81.8 81.7 81.3 82.5 81.0 82.4 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.1 87.8 86.7 88.1 84.8 85.1 87.9 89.1 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.2 94.0 93.3 92.6 93.5 89.8 89.5 90.4 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.0 93.5 94.5 91.8 95.6 88.9 88.6 88.9 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.2 94.6 91.8 93.5 90.7 91.0 90.7 92.2 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 71.8 87.8 88.0 88.8 88.8 90.0 90.1 89.9 11 Electrical machinery 87.8 63.8 89.4 71.1 84.9 77.0 86.3 85.8 84.4 83.2 85.2 83.9 83.1 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 56.6 82.4 78.5 78.4 75.0 77.9 66.8 79.3 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 78.8 68.1 60.1 61.5 63.8 65.6 66.5 67.3 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.3 83.7 82.2 82.1 81.4 81.7 81.5 81.4 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.8 90.2 82.0 81.2 78.0 79.4 81.6 80.6 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.7 92.3 86.8 88.1 85.3 84.1 85.0 85.3 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 79.0 80.0 80.5 80.6 80.8 80.1 79.4 79.3 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 93.5 90.3 89.6 90.8 91.3 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 84.6 92.9 92.1 93.3 93.3 94.3 93.7 94.2 20 Mining 94.4 88.4 96.6 80.6 86.5 86.1 89.9 87.9 87.7 86.8 87.3 89.7 89.0 21 Utilities 95.6 82.5 88.3 76.2 92.6 83.1 88.2 92.5 92.2 92.4 92.4 92.9 91.1 22 Electric 99.0 82.7 88.3 78.7 94.8 86.7 90.1 93.0 93.1 94.2 94.9 94.7 93.2 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 1995. See "A primary metals; and fabricated metals. Revision to Industrial Production and Capacity Utilization, 1991-95," Federal Resen-e 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; printing Bulletin, vol. 82 (January 1996), pp. 16—25. For a detailed description of the industrial and publishing; chemical products such as drugs and toiletries; agricultural chemicals; leather production index, see "Industrial Production: 1989 Developments and Historical Revision," and products; machinery; transportation equipment; instruments; and miscellaneous manufac- Federal Reserve 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

A44 Domestic Nonfinancial Statistics • July 1996 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1995 1996 GGrroouupp p p r o o r - - 1 a 9 v 9 g 5 . tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan.' Feb.' Mar. Apr.p Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 121.9 121.4 121.3 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 123.9 123.4 124.5 2 Products 60.6 118.3 117.7 117.5 117.9 118.0 119.2 119.4 118.3 118.8 119.2 118.6 120.4 119.9 121.2 3 Final products 46.3 121.4 120.9 120.6 121.1 121.2 122.4 122.6 121.3 121.9 122.1 121.9 124.2 123.3 125.0 4 Consumer goods, total 28.6 115.1 114.4 114.1 114.8 114.6 115.9 116.0 114.9 115.9 115.7 114.6 116.1 115.0 116.3 5 Durable consumer goods 5.6 124.2 124.9 121.6 122.3 121.4 124.0 125.8 123.4 124.9 126.3 120.3 125.0 119.7 127.3 6 Automotive products 2.5 130.7 131.7 127.1 129.1 125.3 130.7 132.9 128.5 130.5 132.8 125.9 133.1 120.4 135.5 7 Autos and trucks 1.6 131.4 132.8 127.4 129.5 123.9 132.0 133.1 128.6 129.8 132.1 124.1 133.5 111.1 135.9 8 Autos, consumer .9 103.1 105.5 99.4 99.2 101.0 100.6 102.6 100.2 100.2 99.5 92.8 99.7 77.0 104.1 9 Trucks, consumer .7 181.7 180.9 177.1 183.6 163.9 188.2 187.7 179.1 182.8 190.6 180.4 194.4 173.1 192.7 10 Auto parts and allied goods .9 127.8 128.0 125.0 126.8 126.6 126.6 130.8 126.7 130.2 132.7 128.1 130.6 137.6 133.0 11 Other 3.0 118.6 119.0 116.7 116.3 118.1 118.1 119.6 118.9 119.9 120.5 115.5 117.9 119.1 120.2 12 Appliances, televisions, and air conditioners .7 135.5 131.6 131.2 131.4 132.2 135.8 139.4 140.1 145.3 141.9 132.2 137.2 138.3 141.5 13 Carpeting and furniture .8 105.8 109.1 103.0 101.8 107.9 104.4 106.9 105.6 104.1 107.4 101.1 103.4 107.3 107.3 14 Miscellaneous home goods 1.5 118.2 118.8 118.1 118.0 117.4 118.0 117.8 116.9 117.6 118.3 116.2 117.6 117.1 117.8 15 Nondurable consumer goods 23.0 112.9 111.8 112.4 113.1 113.0 113.9 113.7 112.9 113.8 113.2 113.3 114.0 114.0 113.7 16 Foods and tobacco 10.3 111.3 111.2 111.5 113.1 112.8 111.8 111.6 111.1 110.9 110.6 110.6 111.8 112.2 112.4 17 Clothing 2.4 94.8 96.9 96.7 94.6 93.6 93.9 93.4 92.9 91.5 89.7 88.2 90.3 89.1 88.8 18 Chemical products 4.5 131.3 126.9 127.3 128.6 128.6 132.6 134.0 135.7 135.0 136.5 138.1 136.6 135.6 134.6 19 Paper products 2.9 106.6 106.9 106.5 106.3 107.6 106.7 107.3 106.6 108.4 106.3 104.9 105.9 105.4 106.4 20 Energy 2.9 116.5 112.2 115.8 115.8 116.1 122.3 119.0 113.1 121.1 119.5 121.0 121.4 122.5 120.2 21 Fuels .9 108.8 108.8 108.2 108.8 108.2 108.4 111.4 107.3 108.2 108.6 108.6 111.8 111.1 111.8 22 Residential utilities 2.1 119.6 113.5 119.0 118.7 119.4 128.2 122.2 115.4 126.6 124.1 126.1 125.4 127.3 123.8 23 Equipment 17.7 131.4 131.3 130.8 131.2 131.6 132.9 133.1 131.5 131.4 132.3 133.7 137.3 136.6 138.9 24 Business equipment 13.7 155.7 155.0 154.3 155.1 155.7 157.5 158.2 156.5 156.9 158.4 160.5 164.9 163.0 166.0 25 Information processing and related 5.7 198.1 194.5 193.9 196.0 197.2 201.0 203.0 206.5 208.1 209.4 213.3 220.6 222.2 224.0 26 Computer and office equipment 1.4 373.5 356.4 362.1 363.2 371.7 379.6 390.0 402.9 417.8 431.7 442.9 463.3 480.0 491.5 27 Industrial 4.0 127.5 126.1 126.5 126.2 127.1 129.1 128.7 128.6 129.1 129.5 129.6 131.2 130.3 129.7 28 Transit 2.6 136.3 142.9 139.6 140.3 139.8 138.0 137.9 122.3 119.6 124.5 128.1 133.6 121.1 135.6 29 Autos and trucks 1.2 140.1 141.5 137.8 139.5 139.9 141.3 143.3 135.7 134.2 135.3 129.1 136.0 113.6 140.0 30 Other 1.4 123.2 123.2 122.7 122.6 122.6 122.2 123.3 120.9 121.4 121.7 122.1 123.5 123.1 123.5 31 Defense and space equipment 3.3 65.9 67.1 66.8 66.8 66.5 66.1 65.2 64.4 62.9 62.0 61.6 62.9 63.7 63.9 32 Oil and gas well drilling .6 87.1 89.3 90.5 86.8 88.4 89.5 88.3 83.5 83.1 83.8 85.1 89.7 96.3 100.6 33 Manufactured homes .2 152.7 146.6 148.3 149.6 148.6 155.9 158.0 158.9 161.8 164.4 158.1 157.8 168.2 34 Intermediate products, total 14.3 109.0 108.2 108.2 108.2 108.5 109.4 109.5 109.2 109.3 110.1 108.5 108.9 109.6 109.9 35 Construction supplies 5.3 108.2 108.0 106.6 107.2 107.3 107.0 108.4 108.3 108.7 110.5 107.2 108.6 110.4 111.3 36 Business supplies 9.0 109.6 108.5 109.4 109.1 109.5 111.0 110.3 109.9 109.9 110.0 109.6 109.2 109.3 109.1 37 Materials 39.4 127.4 127.0 127.2 126.8 126.8 128.1 128.1 128.1 128.4 128.4 128.5 129.3 128.7 129.6 38 Durable goods materials 20.8 141.5 139.8 139.8 139.7 140.2 142.3 144.1 143.9 145.3 144.8 145.8 147.3 145.5 147.9 39 Durable consumer parts 4.0 138.5 137.9 135.9 135.8 133.9 138.4 139.8 138.6 140.1 139.3 140.6 141.1 132.4 143.2 40 Equipment parts 7.5 163.0 158.9 160.3 161.7 164.4 167.1 169.1 169.4 171.0 170.8 171.7 176.4 177.0 177.4 41 Other 9.2 126.2 125.9 125.6 124.5 124.4 124.9 126.8 126.5 127.9 127.2 128.2 127.8 127.2 127.3 42 Basic metal materials 3.1 125.7 126.1 125.5 123.5 124.9 123.1 127.0 124.3 128.1 126.6 125.7 123.6 123.5 124.4 43 Nondurable goods materials 8.9 119.8 121.7 122.2 120.4 118.9 118.8 117.8 118.7 116.6 117.4 115.7 116.3 116.0 115.9 44 Textile materials 1.1 109.2 113.2 112.8 109.0 102.6 109.2 106.2 107.3 104.8 103.3 100.3 101.8 103.0 100.5 45 Paper materials 1.8 120.5 122.3 125.6 121.0 123.9 120.4 117.0 121.4 114.3 115.2 113.4 113.4 112.9 113.3 46 Chemical materials 3.9 124.4 125.6 126.2 125.2 124.4 123.1 123.3 122.9 122.7 121.9 121.8 121.7 121.3 121.9 47 Other 2.1 116.5 118.4 116.9 117.4 113.8 114.6 115.1 114.6 114.1 118.9 115.2 117.1 116.4 116.0 48 Energy materials 9.7 106.6 106.6 107.2 107.2 107.5 108.5 105.8 105.5 105.7 106.0 105.9 105.6 107.0 105.6 49 Primary energy 6.3 101.9 102.2 102.3 103.0 102.3 101.4 101.2 101.7 100.8 101.0 100.6 100.9 102.2 100.7 50 Converted fuel materials 3.3 116.0 115.5 116.9 115.5 118.1 122.8 115.0 113.1 115.4 116.2 116.6 114.9 116.5 115.3 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 121.5 120.9 121.0 121.1 121.2 122.3 122.4 121.9 122.3 122.5 122.4 123.6 123.7 124.1 52 Total excluding motor vehicles and parts 95.2 120.9 120.3 120.5 120.5 120.7 121.7 121.8 121.3 121.7 121.9 121.9 123.1 123.5 123.5 53 Total excluding computer and office equipment 98.2 118.2 117.9 117.8 117.8 117.8 118.9 118.9 118.1 118.4 118.5 118.0 119.3 118.5 119.5 54 Consumer goods excluding autos and trucks . 27.0 114.0 113.1 113.3 113.9 114.0 114.8 114.9 114.0 115.0 114.7 114.0 115.0 115.3 115.1 55 Consumer goods excluding energy 25.7 114.9 114.6 113.9 114.7 114.5 115.1 115.7 115.1 115.3 115.3 113.9 115.5 114.2 115.9 56 Business equipment excluding autos and trucks 12.5 157.0 156.2 155.8 156.5 157.2 158.9 159.5 158.4 159.0 160.5 163.5 167.6 167.8 168.4 57 Business equipment excluding computer and office equipment 12.2 133.0 133.7 132.5 133.2 133.2 134.4 134.3 131.6 130.8 131.3 132.6 135.6 132.3 134.5 58 Materials excluding energy 29.7 134.9 134.3 134.4 133.8 133.7 135.1 136.1 136.2 136.6 136.4 136.6 137.8 136.5 138.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 Group sie pro- 1995 code por- avg. Apr. May June July Aug. Sept. Jan.r Feb.r Apr.P Index (1987 = 100) MAJOR INDUSTRIES 59 Total index 100.0 121.9 121.4 121.3 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 123.9 123.4 124.5 60 Manufacturing 85.4 123.9 123.5 123.2 123.3 123.3 124.2 124.9 124.4 124.5 124.8 124.5 126.2 125.1 126.8 61 Primary processing 26.6 117.6 118.2 117.9 117.1 116.9 116.6 117.8 117.0 117.1 117.3 116.7 116.4 116.9 117.3 62 Advanced processing 58.9 126.8 126.0 125.7 126.3 126.3 127.8 128.2 127.9 128.0 128.4 128.2 130.8 129.0 131.3 63 Durable goods 45.0 132.5 131.6 131.1 131.5 131.5 133.2 134.4 133.5 134.3 134.8 134.9 137.6 135.8 138.9 64 Lumber and products "24 2.0 104.5 103.9 101.7 103.0 103.7 103.7 106.2 105.7 104.8 106.9 103.1 103.6 107.2 108.9 65 Furniture and fixtures 25 1.4 111.6 111.4 110.8 111.3 111.1 110.9 112.0 110.9 109.8 109.3 109.3 110.4 109.1 109.1 66 Stone, clay, and glass products 32 2.1 104.1 103.4 104.1 103.8 103.2 103.0 103.8 104.5 104.9 104.3 105.5 104.5 103.8 104.4 67 Ptimjuy metals 33 3.1 119.2 120.2 119.5 117.5 118.3 115.4 121.0 115.7 120.8 120.0 121.5 117.1 117.0 118.4 68 Iron and steel 331,2 1.7 122.4 123.5 123.0 119.2 119.3 117.7 127.0 115.1 126.1 122.7 128.1 119.5 119.5 120.3 69 Raw steel 331PT .1 114.7 114.7 113.0 112.9 111.5 114.2 118.6 111.3 116.4 118.0 113.9 112.5 114.9 70 Nonferrous 333-6,9 1.4 114.8 115.7 114.8 114.9 116.5 111.9 113.2 115.8 113.8 116.2 113.0 113.6 113.4 115.5 71 Fabricated metal products... 34 5.0 113.9 112.3 113.7 113.7 112.4 114.3 115.1 114.0 114.5 115.0 115.6 117.0 116.5 117.0 72 Industrial machinery and equipment 35 8.0 177.8 174.3 174.6 174.4 176.0 179.5 181.3 183.8 186.5 190.1 191.9 196.3 198.3 199.8 73 Computer and office equipment 357 1.8 373.5 356.4 362.1 363.2 371.7 379.6 390.0 402.9 417.8 431.7 442.9 463.3 480.0 491.5 74 Electrical machinery 36 7.2 174.9 169.6 171.1 173.0 175.7 178.7 180.8 182.4 183.6 182.8 182.4 188.9 188.2 188.7 75 Transportation equipment. .. 37 9.5 113.3 115.7 113.2 113.4 111.6 114.1 114.1 109.3 108.6 109.7 108.3 112.2 103.0 114.9 76 Motor vehicles and parts . 371 4.8 141.9 143.0 138.8 139.7 136.7 142.1 143.3 139.7 140.7 141.2 135.5 141.2 121.4 144.7 77 Autos and light trucks . 371PT 2.5 131.3 132.9 127.3 129.2 124.3 131.6 132.8 128.4 129.6 131.5 123.5 132.8 109.9 135.5 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.7 85.8 89.4 88.5 88.1 87.6 87.2 85.9 80.0 77.7 79.4 82.2 84.3 85.4 86.3 79 Instruments 38 5.4 110.7 111.2 109.6 110.9 110.2 111.4 111.3 111.4 111.5 109.7 111.0 113.4 112.6 112.2 80 Miscellaneous 39 1.3 122.7 122.7 122.3 123.1 121.4 122.4 122.9 122.2 123.3 123.5 122.1 124.2 124.5 123.2 81 Nondurable goods 40.5 114.3 114.6 114.4 114.3 114.3 114.3 114.4 114.3 113.7 113.8 113.1 113.6 113.4 113.4 82 Foods "20 9.4 115.3 115.1 115.9 116.1 115.3 115.5 115.5 115.4 114.8 114.8 114.8 116.3 116.0 116.2 83 Tobacco products 21 1.6 90.2 92.0 89.3 96.4 99.1 91.3 90.2 88.2 88.9 88.4 87.1 88.3 90.1 90.6 84 Textile mill products 22 1.8 112.6 117.2 113.6 110.4 109.9 112.4 110.5 111.1 108.9 108.3 104.1 106.2 109.2 108.0 85 Apparel products 23 2.2 95.7 97.4 97.5 95.5 94.8 94.5 94.5 93.3 92.4 91.5 89.2 91.2 89.8 90.4 86 Paper and products 26 3.6 119.8 121.2 122.4 119.9 121.3 118.6 118.5 119.7 116.2 118.2 114.9 113.5 114.9 115.6 87 Printing and publishing 27 6.8 99.4 99.2 99.0 98.6 99.0 100.5 99.8 98.9 99.3 98.8 97.9 98.6 97.4 97.7 88 Chemicals and products .... 28 9.9 125.0 123.5 124.0 124.4 124.0 124.4 125.3 126.7 126.0 126.5 127.1 126.2 125.3 125.4 89 Petroleum products 29 1.4 108.3 107.8 107.4 108.6 109.0 108.5 110.0 106.9 107.4 108.9 108.9 110.1 109.6 110.2 90 Rubber and plastic products . 30 3.5 139.4 140.8 138.2 137.8 137.7 138.7 139.8 139.7 140.3 139.3 139.0 139.6 140.7 138.6 91 Leather and products 31 .3 81.3 82.7 83.0 81.2 78.7 80.8 80.5 79.7 78.2 76.8 75.6 77.2 76.7 75.1 92 Mining 6.9 99.9 100.6 100.5 101.0 100.7 100.0 100.0 98.2 98.3 98.1 97.1 97.6 100.3 99.5 93 Metal 10 .5 169.3 164.6 164.3 166.8 172.2 172.1 170.8 178.3 175.9 172.8 159.5 157.2 160.9 160.9 94 Coal 12 1.0 112.9 112.3 110.8 112.2 117.0 109.7 116.2 112.3 109.5 108.5 103.3 108.0 114.8 109.5 95 Oil and gas extraction 13 4.8 91.9 93.1 93.4 93.6 91.9 92.4 91.2 89.2 90.1 90.1 90.8 89.7 91.7 92.0 96 Stone and earth minerals 14 .6 112.3 112.7 111.1 111.9 113.5 111.6 113.1 112.4 110.9 112.4 108.9 117.6 119.1 115.7 97 Utilities 7.7 122.0 118.8 122.1 121.0 122.7 128.8 122.7 121.6 125.4 125.1 125.6 125.7 126.5 124.3 98 Electric 491.493PT 6.1 122.1 118.9 121.2 121.2 122.2 130.0 122.7 123.7 123.6 123.9 125.5 126.6 126.6 124.7 99 Gas 492.493PT 1.6 121.7 118.4 125.5 120.6 124.5 124.3 122.4 113.6 132.5 129.9 125.6 121.8 126.4 122.4 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.6 122.8 122.3 122.2 122.3 122.5 123.1 123.8 123.4 123.6 123.9 123.9 125.3 125.4 125.7 101 Manufacturing excluding office and computing machines... 83.7 119.5 119.3 118.9 119.1 118.9 119.8 120.3 119.6 119.6 119.7 119.3 120.6 119.4 120.9 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,002.9 2,245.6 2,236.5 2,231.5 2,239.1 2,238.8 2,257.8 2,268.1 2,240.3 2,255.8 2,265.7 2,248.9 2,289.3 2,267.4 2,308.4 103 Final 1,552.2 1,748.7 1,743.1 1,737.4 1,745.6 1,743.2 1,760.5 1,768.2 1,741.9 1,756.8 1,761.9 1,753.0 1,792.1 1,765.4 1,805.0 104 Consumer goods 1,033.4 1,130.5 1,125.2 1,122.3 1,128.4 1,124.0 1,135.7 1,141.1 1,125.1 1,139.3 1,139.0 1,124.7 1,146.0 1,127.8 1,148.5 105 Equipment 518.8 618.3 617.9 615.1 617.1 619.2 624.8 627.1 616.7 617.5 622.9 628.4 646.1 637.7 656.5 106 Intermediate 450.7 496.9 493.4 494.0 493.5 495.6 497.3 499.9 498.4 499.0 503.8 495.9 497.2 501.9 503.4 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For Bulletin, vol. 82 (January 1996), pp. 16-25. For a detailed description of the industrial the ordering address, see the inside front cover. The latest historical revision of the industrial production index, see "Industrial Production: 1989 Developments and Historical Revision," production index and the capacity utilization rates was released in November 1995. See "A Federal Reserve Bulletin, vol. 76, (April 1990), pp. 187-204. Revision to Industrial Production and Capacity Utilization, 1991-95," Federal Reserve 2. Standard industrial classification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • July 1996 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1995 1996R item June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,199 1,372 1,331 1,275 1,355 1,368 1,405 1,384 1,448 1,478 1,372 1,411 1,415 2 One-family 987 1,068 997 958 1,011 1,044 1,073 1,051 1,069 1,110 1,050 1,082 1,092 3 Two-family or more 213 303 335 317 344 324 332 333 379 368 322 329 323 4 Started 1,288 1,457 1,354 1,301 1,450 1,401 1,401 1,351 1,458 1.425 1,453 1,514 1,435 5 One-family 1,126 1,198 1,076 1,036 1,125 1,135 1,130 1,109 1,129 1,150 1,146 1,183 1,165 6 Two-family or more 162 259 278 265 325 266 271 242 329 275 307 331 270 7 Under construction at end of period' 680 762 776 755 762 772 783 781 790 800 803 804 821 8 One-family 543 558 547 533 539 547 555 560 562 569 569 570 583 9 Two-family or more 137 204 229 222 223 225 228 221 228 231 234 234 238 10 Completed 1,193 1,347 1,313 1,256 1,332 1,247 1,267 1,320 1,360 1,225 1,403 1,322 1,390 11 One-family 1,040 1,160 1,066 1,049 1,034 1,019 1,009 1,039 1,081 1,003 1,113 1,049 1,111 12 Two-family or more 153 187 247 207 298 228 258 281 279 222 290 273 279 13 Mobile homes shipped 254 304 340 333 337 344 352 354 355 352 352 341 364 Merchant builder activity in one-family units 14 Number sold 666 670 665 724 782 707 684 673 679 683 729 727 672 15 Number for sale at end of period' 293 337 372 347 344 349 350 360 368 372 373 363 379 Price of units sold (thousands of dollars)2 16 Median 126.1 130.4 133.4 133.7 131.0 134.9 130.0 135.2 137.0 138.6 131.0 138.0 138.0 17 Average 147.6 153.7 157.6 160.2 154.2 162.0 155.6 156.2 160.7 165.6 154.2 163.5 162.3 EXISTING UNITS (one-family) 18 Number sold 3,800 3,946 3,801 3,800 3,970 4,050 4,090 4,070 4,000 3,870 3,720 3,940 4,200 Price of units sold (thousands of dollars)2 19 Median 106.5 109.6 112.2 116.2 116.0 117.6 114.8 113.2 114.3 113.9 114.8 114.0 115.7 20 Average 133.1 136.4 138.4 143.3 142.5 144.5 140.2 138.7 139.5 138.7 141.2 138.7 140.1 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 464,504 506,904 526,597 518,934 528,673 528,397 535,106 534,488 531,710 535,143 540,566 532,124 548,367 22 Private 339,161 376,566 383,887 377,486 384,307 385,653 386,960 388,882 386,666 390,266 392,738 390,618 401,109 23 Residential 210,455 238,884 236,114 228,388 231,002 233,982 237,618 237,741 239,427 241,950 241,565 241,776 248,510 24 Nonresidential 128,706 137,682 147,773 149,098 153,305 151,671 149,342 151,141 147,239 148,316 151,173 148,842 152,599 2B Industrial buildings 19,533 21,121 24,154 24,416 24,399 24,202 24,096 24,964 24,579 24,153 25,125 23,847 24,215 26 Commercial buildings 42,627 48,552 55,159 55,420 57,015 55,709 55,079 56,472 55,482 57,596 56,185 55,399 57,138 27 Other buildings 23,626 23,912 23,990 23,447 24,525 24,015 23,962 24,547 23,753 24,033 24,511 24,405 24,878 28 Public utilities and other 42,920 44,097 44,470 45,815 47,366 47,745 46,205 45,158 43,425 42,534 45,352 45,191 46,368 29 Public 125,342 130,337 142,713 141,447 144,366 142,744 148,146 145,606 145,044 144,877 147,828 141,505 147,258 30 Military 2,454 2,319 2,905 2,569 3,124 3,010 3,090 2,527 3,195 3,216 3,176 3,265 2,846 31 Highway 37,431 39,882 42,221 40,875 44,274 42,902 42,942 44,351 43,361 43,914 43,735 46,855 46,642 32 Conservation and development 5,978 6,228 6,316 6,117 6,603 6,769 6,469 5,191 6,048 5,823 5,618 5,389 5,838 33 Other 79,479 81,908 91,271 91,886 90,365 90,063 95,645 93,537 92,440 91,924 95,299 85,996 91,932 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

Selected Measures A47 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (annual rate) Index level, Item 1995 1996 1995 1996 Apr 1995 1996 1996 1 Apr. Apr. June Sept. Dec.r Mar.r Dec.r Jan.r Feb. Mar. Apr. CONSUMER PRICES2 (1982-84=100) 3.1 2.9 3.5 1.6 2.4 4.0 .2 .4 .2 .4 .4 156.3 3.5 2.6 3.6 2.7 1.9 3.2 .1 .1 .1 .6 .3 152.3 1.9 5.9 5.8 -10.5 1.9 15.8 1.1 1.9 .4 1.4 3.2 110.0 33..11 2.7 3.0 2.8 2.2 3.5 .1 .3 .2 .3 .1 165.0 11..88 1.6 .9 2.0 1.7 2.6 .1 .4 -.1 .4 -.1 142.0 33..77 33..22 44..33 3.0 22..55 3.4 .1 .3 .3 .2 .3 178.2 PRODUCER PRICES (1982=100) 2.1 2.5 1.3 1.6 4.4 2.5 .6 .2 -.2 .5 .4 130,8 1.3 2.0 -2.5 8.8 4.4 .3 .1 -.2 -.3 .6 -.3 131.3 3.6 6.8 1.5 -10.2 10.8 17.8 3.8 2.5 -.7 2.4 2.8 83.5 2,0 1.9 22..99 2.3 3.4 .3 .2 -.2 .1 .1 .0 144.0 11,,99 11..66 11..88 1.8 22..99 -.3 .0 -.1 .1 -.1 .2 138.6 Intermediate materials 7,3 .1 3.9 -.6 -.6 -1.0 .2 .0 -.3 .1 .3 125.5 77,,88 --11..00 44..22 1.5 --22..99 -3.2 -.2 -.4 -.2 -.2 -.2 133.9 Crude materials -10.0 17.3 4.0 34.8 20.8 -3.8 -.4 -.5 -.5 .1 4.0 119.4 -.7 21.1 14.6 -21.0 33.9 38.1 6.1 3.4 -1.1 5.9 10.9 87.2 16 Other 1188..33 --1122..55 33..99 -17.6 --1188..44 -10.2 --..99 -.4 -.5 -1.8 -.5 158.8 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

A48 Domestic Nonfinancial Statistics • July 1996 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1995 1996 AAccccoouunntt 11999933 11999944 11999955 Ql Q2 Q3 Q4 Ql GROSS DOMESTIC PRODUCT 1 Total 6,550.2 6,931.4 7,245.8 7,147.8 7,196.5 7,298.5 7,340.4 7,430.7 By source 2 Personal consumption expenditures 4,454.1 4,698.7 4,924.3 4,836.3 4,908.7 4,960.0 4,992.3 5,061.6 3 Durable goods 530.7 580.9 606.4 593.0 604.0 615.8 612.8 622.6 4 Nondurable goods 1,368.9 1,429.7 1,486.1 1,471.6 1,486.9 1,491.4 1,494.8 1,520.7 b Services 2,554.6 2,688.1 2,831.8 2,771.7 2,817.9 2,852.8 2,884.7 2,918.3 6 Gross private domestic investment 871.1 1,014.4 1,065.3 1,072.0 1,050.3 1,074.8 1,064.0 1,079.4 V Fixed investment 850.5 954.9 1,028.2 1,013.9 1,016.3 1,036.6 1,046.2 1,069.6 8 Nonresidential 598.8 667.2 738.5 723.6 734.4 746.3 749.7 769.0 9 Structures 171.8 180.2 199.7 194.5 197.6 202.5 204.0 207.7 111 Producers' durable equipment 427.0 487.0 538.8 529.0 536.8 543.8 545.7 561.2 11 Residential structures 251.7 287.7 289.8 290.4 281.9 290.3 296.5 300.7 12 Change in business inventories 20.6 59.5 37.0 58.1 34.0 38.2 17.8 9.8 13 Nonfarm 26.8 48.0 39.6 60.8 36.1 41.5 19.9 13.4 14 Net exports of goods and services -64.9 -96.4 -102.3 -106.6 -122.4 -100.8 -79.3 -95.0 lb Exports 660.0 722.0 804.5 778.6 796.9 812.5 829.9 832.7 16 Imports 724.9 818.4 906.7 885.1 919.3 913.3 909.2 927.8 17 Government consumption expenditures and gross investment 1,289.9 1,314.7 1,358.5 1,346.0 1,359.9 1,364.5 1,363.5 1,384.7 18 Federal 522.1 516.3 516.7 519.9 522.6 516.7 507.8 519.2 iy State and local 767.8 798.4 841.7 826.1 837.3 847.7 855.7 865.5 By major type of product 2U Final sales, total 6,529.7 6,871.8 7,208.8 . 7,089.7 7,162.5 7,260.3 7,322.6 7,420.9 21 Goods 2,400.9 2,534.2 2,660.3 2,617.3 2,642.3 2,684.5 2,697.1 2,742.7 22 Durable 1,013.8 1,085.9 1,144.9 1,118.6 1,134.0 1,162.5 1,164.5 1,186.4 23 Nondurable 1,387.2 1,448.3 1,515.4 1,498.7 1,508.3 1,522.1 1,532.6 1,556.3 24 Services 3,581.7 3,742.4 3,920.9 3,852.6 3,904.5 3,943.2 3,983.1 4,027.5 2b Structures 547.0 595.3 627.6 619.8 615.7 632.6 642.3 650.7 26 Change in business inventories 20.6 59.5 37.0 58.1 34.0 38.2 17.8 9.8 27 Durable goods 15.7 31.9 34.9 54.4 28.5 29.2 27.3 6.5 28 Nondurable goods 4.9 27.7 2.2 3.7 5.4 9.1 -9.4 3.3 MEMO 29 Total GDP in chained 1992 dollars 6,383.8 6,604.2 6,739.0 6,701.6 6,709.4 6,768.3 6,776.5 6,823.6 NATIONAL INCOME 30 Total 5,194.4 5,495.1 5,799.2 5,697.7 5,738.9 5,849.2 5,911.1 n.a. 31 Compensation of employees 3,809.4 4,008.3 4,209.1 4,141.6 4,178.9 4,235.9 4,280.2 4,321.0 32 Wages and salaries 3,095.2 3,255.9 3,419.7 3,363.0 3,393.3 3,442.3 3,480.1 3,517.3 33 Government and government enterprises 584.2 602.5 621.7 616.3 619.6 624.1 626.9 633.3 34 Other 2,511.0 2,653.4 2,797.9 2,746.6 2,773.6 2,818.2 2,853.2 2,884.0 3b Supplement to wages and salaries 714.2 752.4 789.5 778.6 785.6 793.7 800.1 803.7 36 Employer contributions for social insurance 333.3 350.2 365.5 360.8 363.6 367.8 369.8 374.6 37 Other labor income 380.9 402.2 424.0 417.7 422.0 425.9 430.2 429.1 38 Proprietors' income' 420.0 450.9 478.3 472.0 474.7 479.6 486.7 498.6 39 Business and professional1 388.1 415.9 449.3 443.5 447.1 451.5 454.9 460.0 40 Farm' 32.0 35.0 29.0 28.5 27.6 28.1 31.8 38.6 41 Rental income of persons2 102.5 116.6 122.2 120.6 121.6 120.9 125.8 126.9 42 Corporate profits' 464.5 526.5 588.6 559.6 561.1 614.9 618.6 n.a. 43 Profits before tax" 464.3 528.2 600.8 594.1 588.4 609.6 611.0 n.a. 44 Inventory valuation adjustment -6.6 -13.3 -28.1 -51.9 -42.3 -9.3 -8.8 -13.2 4b Capital consumption adjustment 6.7 11.6 15.9 17.4 15.0 14.6 16.5 19.8 46 Net interest 398.1 392.8 401.0 403.9 402.6 397.8 399.7 n.a. 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1995 1996 AAccccoouunntt 11999933 11999944 11999955 Ql Q2 Q3 Q4 Ql PERSONAL INCOME AND SAVING 1 Total personal income 5,479.2 5,750.2 6,101.7 5,995.5 6,061.9 6,135.6 6,213.9 6,291.3 2 Wage and salary disbursements 3,090.6 3,241.1 3,419.7 3,361.6 3,393.3 3,442.3 3,481.5 3,515.9 3 Commodity-producing industries 781.3 825.0 858.7 856.2 855.0 859.9 863.5 865.2 4 Manufacturing 593.1 621.3 642.8 643.4 640.5 642.9 644.5 641.7 5 Distributive industries 698.4 739.3 787.9 768.8 778.6 795.4 808.9 819.9 6 Service industries 1,026.6 1,074.3 1,151.3 1,120.2 1,140.0 1,162.8 1,182.2 1,197.5 7 Government and government enterprises 584.2 602.5 621.7 616.3 *6 19.6 624.1 626.9 633.3 8 Other labor income 380.9 402.2 424.0 417.7 422.0 425.9 430.2 429.1 9 Proprietors' income1 420.0 450.9 478.3 472.0 474.7 479.6 486.7 498.6 10 Business and professional1 388.1 415.9 449.3 443.5 447.1 451.5 454.9 460.0 11 Farm1 32.0 35.0 29.0 28.5 27.6 28.1 31.8 38.6 12 Rental income of persons 102.5 116.6 122.2 120.6 121.6 120.9 125.8 126.9 13 Dividends 186.8 199.6 214.8 209.5 212.2 215.8 221.7 226.6 14 Personal interest income 647.3 661.6 714.6 701.9 713.9 717.5 725.2 730.8 15 Transfer payments 910.7 956.3 1,022.6 1,002.4 1,016.8 1,029.9 1,041.4 1,064.2 16 Old-age survivors, disability, and health insurance benefits 444.4 472.9 507.4 497.6 505.1 510.7 516.1 529.9 17 LESS: Personal contributions for social insurance 259.6 278.1 294.5 290.2 292.7 296.2 298.8 300.8 18 EQUALS: Personal income 5,479.2 5,750.2 6,101.7 5,995.5 6,061.9 6,135.6 6,213.9 6,291.3 19 LESS: Personal tax and nontax payments 689.9 731.4 794.3 770.0 801.5 798.4 807.2 812.4 20 EQUALS: Disposable personal income 4,789.3 5,018.8 5,307.4 5,225.5 5,260.4 5,337.2 5,406.7 5,478.9 21 LESS: Personal outlays 4,572.9 4,826.5 5,066.7 4,972.2 5,049.0 5,104.6 5,140.9 5,214.7 22 EQUALS: Personal saving 216.4 192.4 240.8 253.3 211.4 232.6 265.8 264.2 MEMO Per capita (chained 1992 dollars) 23 Gross domestic product 24,724.2 25,332.6 25,613.8 25,559.1 25,540.2 25,695.9 25,668.6 25,788.4 24 Personal consumption expenditures 16,807.5 17,150.4 17,402.1 17,280.3 17,391.7 17,465.5 17,477.7 17,586.9 25 Disposable personal income 18,075.0 18,320.0 18,757.0 18,672.0 18,634.0 18,794.0 18,926.0 19,040.0 26 Saving rate (percent) 4.5 3.8 4.5 4.8 4.0 4.4 4.9 4.8 GROSS SAVING 27 Gross saving 938.4 1,055.9 1,141.6 1,110.5 1,092.3 1,155.7 1,207.9 n.a. 28 Gross private saving 964.5 1,006.0 1,062.5 1,039.9 1,007.3 1,076.1 1,126.6 n.a. 29 Personal saving 216.4 192.4 240.8 253.3 211.4 232.6 265.8 264.2 30 Undistributed corporate profits 103.4 120.2 142.5 120.6 122.3 162.0 165.2 n.a. 31 Corporate inventory valuation adjustment -6.6 -13.3 -28.1 -51.9 -42.3 -9.3 -8.8 -13.2 Capital consumption allowances 32 Corporate 417.0 441.0 454.0 444.4 451.3 456.9 446633..66 446666..22 33 Noncorporate 223.1 237.7 225.2 220.2 222.4 224.7 233.4 229.6 34 Gross government saving -26.1 49.9 79.1 70.5 85.0 79.6 81.3 79.3 35 Federal -181.5 -119.3 -88.7 -99.9 -86.3 -87.7 -81.1 -82.5 36 State and local 160.5 169.2 167.9 170.4 171.3 167.3 162.4 161.7 37 Gross investment 993.5 1,087.2 1,146.1 1,146.7 1,113.9 1,150.7 1,173.0 n.a. 38 Gross private domestic investment 871.1 1,014.4 1,065.3 1,072.0 1,050.3 1,074.8 1,064.0 1,079.4 39 Gross government investment 210.6 212.3 221.9 219.1 223.7 224.7 220.1 227.9 40 Net foreign investment -88.2 -139.6 -141.1 -144.4 -160.1 -148.9 -111.0 n.a. 41 Statistical discrepancy 55.1 31.3 4.5 36.2 21.6 -5.0 -34.9 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

A50 International Statistics • July 1996 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1994 1995 IItteemm ccrreeddiittss oorr ddeebbiittss 11999933 11999944 11999955 Q4 Q1 Q2 Q3 Q4P 1 Balance on current account -99,925 -151,245 -152,915 -43,277 -38,454 -43,142 -40,250 -31,073 2 Merchandise trade balance2 -132,618 -166,099 -174,469 -43,488 -44,459 -48,654 -43,326 -38,030 3 Merchandise exports 456,823 502,485 574,879 133,926 138,325 142,667 145,050 148,837 4 Merchandise imports -589,441 -668,584 -749,348 -177,414 -182,784 -191,321 -188,376 -186,867 S Military transactions, net 448 2,148 2,810 679 542 587 889 792 6 Other service transactions, net 57,328 57,739 60,242 15,342 15,013 14,726 15,130 15,369 7 Investment income, net 9,000 -9,272 -11,403 -4,571 -2,030 -2,684 -5,163 -1,527 8 U.S. government grants -16,311 -15,814 -11,027 -6,245 -2,867 -2,284 -2,942 -2,934 y U.S. government pensions and other transfers -3,785 -4,247 -3,114 -1,063 -682 -889 -887 -656 10 Private remittances and other transfers -13,988 -15,700 -15,954 -3,931 -3,971 -3,944 -3,951 -4,087 11 Change in U.S. government assets other than official reserve assets, net (increase, -) -330 -322 -326 -931 -152 -180 246 -240 12 Change in U.S. official reserve assets (increase, -) -1,379 5,346 -9,742 2,033 -5,318 -2,722 -1,893 191 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -537 -441 -808 -121 -867 -156 362 -147 13 Reserve position in International Monetary Fund -44 494 -2,466 -27 -526 -786 -991 -163 16 Foreign currencies -797 5,293 -6,468 2,181 -3,925 -1,780 -1,264 501 17 Change in U.S. private assets abroad (increase, -) -182,880 -130,875 -270,028 -56,258 -69,985 -97,453 -25,870 -76,720 18 Bank-reported claims3 29,947 915 -59,004 -16,651 -29,284 -39,982 14,631 --44,,336699 19 Nonbank-reported claims 1,581 -32,621 -20,358 -12,449 -11,518 -18,499 9,659 20 U.S. purchases of foreign securities, net -141,807 -49,799 -93,769 -15,238 -6,567 -21,731 -33,998 -31,473 21 U.S. direct investments abroad, net -72,601 -49,370 -96,897 -11,920 -22,616 -17,241 -16,162 -40,878 22 Change in foreign official assets in United States (increase, +) 72,146 39,409 110,483 -421 22,308 37,836 39,346 10,993 23 U.S. Treasury securities 48,952 30,723 68,773 7,470 10,131 25,169 20,489 12,984 24 Other U.S. government obligations 4,062 6,025 3,734 1,228 1,126 1,326 518 764 25 Other U.S. government liabilities4 1,706 2,211 1,814 692 -154 506 89 1,373 26 Other U.S. liabilities reported by U.S. banks3 14,841 2,923 32,896 -9,856 10,940 7,886 18,478 -4,408 27 Other foreign official assets5 2,585 -2,473 3,266 45 265 2,949 -228 280 28 Change in foreign private assets in United States (increase, +) 176,382 251,956 315,842 85,136 72,533 86,496 77,198 79,616 29 U.S. bank-reported liabilities3 20,859 114,396 19,906 34,676 -531 12,239 -21,578 2299,,777766 30 U.S. nonbank-reported liabilities 10,489 -4,324 27,578 -5,242 10,113 10,527 6,938 31 Foreign private purchases of U.S. Treasury securities, net 24,063 33,811 99,081 25,929 29,910 30,315 37,192 1,664 32 Foreign purchases of other U.S. securities, net 79,864 58,625 94,576 10,195 15,816 20,549 30,977 27,234 33 Foreign direct investments in United States, net 41,107 49,448 74,701 19,578 17,225 12,866 23,669 20,942 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy 35,985 -14,269 6,684 13,718 19,068 19,165 -48,777 17,233 36 Due to seasonal adjustment 782 6,162 317 -7,076 600 37 Before seasonal adjustment 35,985 -14,269 6,684 12,936 12,906 18,847 -41,702 16,633 MEMO Changes in official assets 38 U.S. official reserve assets (increase, —) -1,379 5,346 -9,742 2,033 -5,318 --22,,772222 --11,,889933 191 39 Foreign official assets in United States, excluding line 25 (increase, +) 70,440 37,198 108,669 -1,113 22,462 37,330 39,257 9,620 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -3,717 -1,184 4,482 1,120 -322 -11 6,278 -1,463 1. Seasonal factors are not calculated for lines 12-16,18-20, 22-34, and 38-40. 4. Associated primarily with military sales contracts and other transactions 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 institutions 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

Summary Statistics A51 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1995 1996 IItteemm 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Goods and services, balance -74,842 -106,214 -111,505 -8,070 -8,165 -6,837 -6,958 -9,878 -7,037 -8,919 2 Merchandise -132,618 -166,101 -174,555 -13,697 -13,692 -12,125 -12,306 -15,075 -12,633 -14,786 3 Services 57,777 59,887 63,050 5,627 5,527 5,288 5,348 5,197 5,596 5,867 4 Goods and services, exports 644,579 701,200 783,705 67,574 66,652 67,393 68,109 66,793 69,359 68,800 5 Merchandise 456,824 502,484 574,877 49,717 48,920 49,523 50,398 49,011 50,954 49,894 6 Services 187,755 198,716 208,828 17,857 17,732 17,870 17,711 17,782 18,405 18,906 7 Goods and services, imports -719,421 -807,414 -895,210 -75,644 -74,817 -74,230 -75,067 -76,671 -76,396 -77,719 8 Merchandise -589,442 -668,585 -749,432 -63,414 -62,612 -61,648 -62,704 -64,086 -63,587 -64,680 9 Services -129,979 -138,829 -145,778 -12,230 -12,205 -12,582 -12,363 -12,585 -12,809 -13,039 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 1996 AAsssseett 11999922 11999933 11999944 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr." 1 Total 71,323 73,442 74,335 87,152 86,224 85,755 85,832 82,717 84,270 84,212 83,710 2 Gold stock, including Exchange Stabilization Fund1 11,056 11,053 11,051 11,051 11,051 11,050 11,050 11,052 11,053 11,053 11,052 3 Special drawing rights2,3 8,503 9,039 10,039 11,035 10,949 11,034 11,037 10,778 11,106 11,049 10,963 4 Reserve position in International Monetary Fund2 11,759 11,818 12,030 14,681 14,700 14,572 14,649 14,312 14,813 15,249 15,117 5 Foreign currencies4 40,005 41,532 41,215 50,385 49,524 49,099 49,096 46,575 47,298 46,861 46,578 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—$1,152 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 1996 AAsssseett 11999922 11999933 11999944 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.P 1 Deposits 205 386 250 201 275 194 386 165 209 191 166 Held in custody 2 U.S. Treasury securities2 314,481 379,394 441,866 506,572 507,075 522,950 522,170 532,776 559,741 573,435 573,924 3 Earmarked gold3 13,118 12,327 12,033 11,728 11,709 11,702 11,702 11,702 11,689 11,590 11,445 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

A52 International Statistics • July 1996 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period Sept. Jan.' 1 Total1 482,915 520,933r 619,875r 617,912 632,730 630,495r 644,420 670,083 By type 2 Liabilities reported by banks in the United States' 69,721 73,386' 110,409' 108,075 109,516 106,978' 103,769 103,096 3 U.S. Treasury bills and certificates3 151,100 139,570 163,093 157,277 171,366 168,534 173,949 191,188 U.S. Treasury bonds and notes 4 Marketable 212,237 254,059 286,243 291,948 291,033 293,684 306,299 314,980 5 Nonmarketable4 5,652 6,109 6,366 6,407 6,449 6,491 6,120 6,159 6 U.S. securities other than U.S. Treasury securities1 44,205 47,809 53,764 54,205 54,366 54,808 54,283 54,660 By area 1 Europe1 207,034 215,374' 223,033' 222,003 228,180 222,184' 223,569 231,389 8 Canada 15,285 17,235 20,522 20,355 19,535 19,473 19,078 18,850 9 Latin America and Caribbean 55,898 41,492 63,618 61,534 62,344 66,570' 70,131 70,346 10 Asia 197,702 236,824' 303,809 305,025 311,638 310,966' 320,512 339,004 11 Africa 4,052 4,179 4,684 4,761 6,086 6,296 6,924 6,574 12 Other countries 2,942 5,827 4,207 4,232 4,945 5,004 4,204 3,918 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 States1 Payable in Foreign Currencies Millions of dollars, end of period 1995 IItteemm 11999922 11999933 11999944 Mar. June Sept. Dec. 1 Banks' liabilities 72,796 78,259 89,284 96,139 106,621 102,068 112,521 2 Banks' claims 62,799 62,017 60,689 72,732 77,138 69,450 74,874 3 Deposits 24,240 20,993 19,661 24,420 28,909 25,712 22,688 4 Other claims 38,559 41,024 41,028 48,312 48,229 43,738 52,186 5 Claims of banks' domestic customers2 4,432 12,854 10,878 8,879 10,244 6,624 6,145 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

Nonbank-Reported Data A53 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1995 1996 IItteemm 11999933 11999944 11999955'' Sept. Oct. Nov. Dec.' Jan. Feb. Mar.p BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 926,672 l,014,757r 1,095,493 l,074,402r 1,098,512 1,104,705 1,095,493 l,094,316r 1,096,735 1,096,645 2 Banks' own liabilities 626,919 718,440' 749,373 735,515' 762,723 755,089 749,373 743,137' 727,745 726,013 3 Demand deposits 21,569 23,386 24,450 23,704 23,161 23,114 24,450 22,182' 23,507 24,401 4 Time deposits2 175,106 186,512 193,238 188,154 202,532 193,884 193,238 198,513' 192,022 193,019 5 Other3 111,971 112,984' 139,147 136,913' 146,456 154,115 139,147 141,947' 148,524 138,128 6 Own foreign offices4 318,273 395,558 392,538 386,744 390,574 383,976 392,538 380,495 363,692 370,465 7 Banks' custodial liabilities5 299,753 296,317 346,120 338,887 335,789 349,616 346,120 351,179' 368,990 370,632 8 U.S. Treasury bills and certificates6 117766,,773399 116622,,885577 197,341 193,070 188,575 220011,,884455 197,341 220033,,447788 223,395 228,705 9 Other negotiable and readily transferable instruments7 36,289 42,532 52,246 47,279 47,911 49,969 52,246 46,973 43,404 40,483 10 Other 86,725 90,928 96,533 98,538 99,303 97,802 96,533 100,728' 102,191 101,444 11 Nonmonetary international and regional organizations8.. . 10,936 8,606 10,939 13,011 10,294 9,794 10,939 10,606' 10,483 9,476 12 Banks' own liabilities 5,639 8,176 10,247 12,120 8,466 8,339 10,247 9,612' 9,688 8,558 13 Demand deposits 15 29 21 24 77 33 21 30 43 16 14 Time deposits2 2,780 3,298 4,656 4,315 3,901 3,631 4,656 4,385' 3,379 3,584 15 Other3 2,844 4,849 5,570 7,781 4,488 4,675 5,570 5,197 6,266 4,958 16 Banks' custodial liabilities5 5,297 430 692 891 1,828 1,455 692 994 795 918 17 U.S. Treasury bills and certificates6 4,275 281 350 354 1,342 962 350 764 555 564 18 Other negotiable and readily transferable instruments7 1,022 149 341 537 486 493 341 230 230 298 19 Other 0 0 1 0 0 0 1 0 10 56 20 Official institutions9 220,821 212,956' 275,512 273,502' 265,352 280,882 275,512 277,718' 294,284 301,696 21 Banks' own liabilities 64,144 59,935' 83,031 86,356' 83,837 85,551 83,031 84,890' 83,931 87,857 22 Demand deposits 1,600 1,564 2,098 1,362 1,646 1,690 2,098 1,522 1,655 1,423 23 Time deposits2 21,653 23,511 30,970 32,242 30,634 30,627 30,970 27,919' 29,710 31,696 24 Other3 40,891 34,860' 49,963 52,752' 51,557 53,234 49,963 55,449' 52,566 54,738 25 Banks' custodial liabilities5 156,677 153,021 192,481 187,146 181,515 195,331 192,481 192,828 210,353 213,839 26 U.S. Treasury bills and certificates6 151,100 113399,,557700 168,534 163,093 157,277 171,366 168,534 173,949 191,188 198,382 27 Other negotiable and readily transferable instruments7 5,482 13,245 23,603 23,777 24,000 23,610 23,603 18,532 18,138 14,970 28 Other 95 206 344 276 238 355 344 347 1,027 487 29 Banks10 592,171 678,356' 687,760 670,562' 699,109 687,415 687,760 683,022' 666,335 663,536 30 Banks' own liabilities 478,755 563,466' 564,185 547,954' 575,678 562,115 564,185 554,793' 537,029 536,443 31 Unaffiliated foreign banks 160,482 167,908' 171,647 161,210' 185,104 178,139 171,647 174,298' 173,337 165,978 32 Demand deposits 9,718 10,633 11,746 11,818 11,341 11,232 11,746 10,247 10,948 11,813 33 Time deposits2 105,262 111,171 103,837 98,668 114,401 105,401 103,837 110,665' 104,436 101,088 34 Other3 45,502 46,104' 56,064 50,724' 59,362 61,506 56,064 53,386 57,953 53,077 35 Own foreign offices4 318,273 395,558 392,538 386,744 390,574 383,976 392,538 380,495 363,692 370,465 36 Banks' custodial liabilities5 113,416 114,890 123,575 122,608 123,431 125,300 123,575 128,229' 129,306 127,093 37 U.S. Treasury bills and certificates6 10,712 1111,,224400 15,869 16,170 16,429 1166,,668877 15,869 1155,,999922 17,947 15,967 38 Other negotiable and readily transferable instruments7 17,020 14,505 13,035 9,690 9,754 13,070 13,035 13,590 12,094 11.864 39 Other 85,684 89,145 94,671 96,748 97,248 95,543 94,671 98,647' 99,265 99,262 40 Other foreigners 102,744 114,839' 121,282 117,327' 123,757 126,614 121,282 122,970' 125,633 121.937 41 Banks' own liabilities 78,381 86,863' 91,910 89,085' 94,742 99,084 91,910 93,842' 97,097 93,155 42 Demand deposits 10,236 11,160 10,585 10,500 10,097 10,159 10,585 10,383' 10,861 11,149 43 Time deposits2 45,411 48,532 53,775 52,929 53,596 54,225 53,775 55,544' 54,497 56,651 44 Other3 22,734 27,171' 27,550 25,656' 31,049 34,700 27,550 27,915 31,739 25,355 45 Banks' custodial liabilities5 24,363 27,976 29,372 28,242 29,015 27,530 29,372 29,128 28.536 28,782 46 U.S. Treasury bills and certificates6 10,652 11,766 12,588 13,453 13,527 12,830 12,588 12,773 13,705 13,792 47 Other negotiable and readily transferable instruments7 12,765 14,633 15,267 13,275 13,671 12,796 15,267 14,621 12,942 13,351 48 Other 946 1,577 1,517 1,514 1,817 1,904 1,517 1,734 1,889 1,639 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,567 17,895 9,099 9,938 10,290 9,837 9,099 10,479 10,544 10,005 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

A54 International Statistics • July 1996 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1995 1996 IItteemm 11999933 11999944 11999955'' Sept. Oct. Nov. Dec.' Jan. Feb. Mar.p AREA 50 Total, all foreigners 926,672 l,014,757r 1,095,493 l,074,402r 1,098,512 1,104,705 1,095,493 l,094,316r 1,096,735 1,096,645 51 Foreign countries 915,736 l,006,151r 1,084,554 l,061,391r 1,088,218 1,094,911 1,084,554 l,083,710r 1,086,252 1,087,169 52 Europe 377,911 390,701' 362,786 362,284' 376,427 384,013 362,786 368,325' 374,048 370,550 53 Austria 1,917 3,588' 3,537 5,221 4,887 4,755 3,537 3,437 2,996 2,872 54 Belgium and Luxembourg 28,670 21,877' 24,842 24,039 25,192 28,357 24,842 24,881 27,182 25,560 55 Denmark 4,517 2,884' 2,921 2,640' 3,177 3,418 2,921 2,979 3,861 2,876 56 Finland 1,872 1,436 2,831 1,972 2,419 2,315 2,831 2,421 2,409 1,768 57 France 40,316 44,355' 39,204 38,117 43,134 40,415 39,204 39,697 41,099 41,355 58 Germany 26,685 27,109' 24.035 31,390 26,362 26,798 24,035 25,988 24,695 25,203 59 Greece 1,519 1,393 2,011 2,119 2,033 2,265 2,011 1,998 2,063 1,966 60 Italy 11,759 10,885 10,875 8,947 10,251 10,759 10,875 9,616 12,468 11,475 61 Netherlands 16,096 16,033 13,724 13,107 14,933 15,317 13,724 11,350' 12,173 12,789 62 Norway 2,966 2,338 1,394 1,011 1,048 1,287 1,394 1,067 1,246 1,084 63 Portugal 3,366 2,846 2,761 3,033 2,902 2,718 2,761 3,055 2,931 2,843 64 Russia 2.511 2,726' 7,950 6,367 7,338 8,979 7,950 7,858 9,180 9,321 65 Spain 20,496 14,675 10,012 10,100 13,467 10,809 10,012 11,838 11,589 18,976 66 Sweden 2,738 3,094 3,245 3,167 2,035 3,720 3,245 2,555 2,813 2,256 6! Switzerland 41,560 40,515' 43,627 41,446' 42,588 41,178 43,627 40,806 42,010 39,083 68 Turkey 3,227 3,341 4,124 3,936 4,067 4,010 4,124 4,350 4,559 4,103 6 /O 9 Y U u n g it o e s d l av K ia i ' n 1 gdom 133, 3 9 7 93 2 163, 2 7 4 9 5 2 ' 139,1 1 2 7 7 7 141, 2 5 1 77 5 147, 2 4 1 48 0 148,3 1 8 7 4 1 139,1 1 2 7 7 7 152,6 1 5 6 4 3 146,9 1 8 6 5 3 144,1 1 2 4 9 3 11 Other Europe and other former U.S.S.R.12 33,331 27,769 26,389 23,880 22,936 28,358 26,389 21,612 23,626 22,748 72 Canada 20,235 24,768' 26,363 29,052' 35,378 27,450 26,363 28,625 27,434 27,359 73 Latin America and Caribbean 362,238 423,797 440,216 434,333' 439,920 436,580 440,216 435,703' 421.991 433,514 14 Argentina 14,477 17,203 12,236 11,180 11,539 13,031 12,236 13,524 11,764 11,985 75 Bahamas 73,820 104,002 94,991 92,850 96,287 87,719 94.991 96,850' 91,203 88,081 76 Bermuda 8,117 8,424' 4,897 5,995' 6,589 6,561 4,897 4,633 4,702 5,035 n Brazil 5,301 9,145 23,797 27,592 27,366 27,364 23,797 22,715' 21,761 21,462 18 British West Indies 193,699 229,546' 239,083 234,637' 236,053 240,353 239,083 233,383' 227,430 240,646 19 Chile 3,183 3,126 2,825 2,698 2,574 2,696 2,825 2,978 2,772 2,815 80 Colombia 3,171 4,615 3,666 3,257 3,399 33,,444433 3,666 3,713 3,890 3,846 81 Cuba 33 13 8 4 13 88 8 7 7 7 82 Ecuador 880 875 1,315 1,130 1,311 1,307 1,315 1,236 1,201 1,274 83 Guatemala 1,207 1,121 1,275 1,197 1,068 1,210 1,275 1,058 1,074 1,059 84 Jamaica 410 529 481 484 430 447 481 500 495 503 85 Mexico 28,019 12,250 24,555 22,069 20,894 20,993 24,555 23,643 23,899 24,532 86 Netherlands Antilles 4,686 5,217 4,672 5,003' 5,349 5,644 4,672 4,448 4,461 4,402 87 Panama 3,582 4,551 4,265 4,682 4,561 4,287 4,265 4,030 4,165 4,025 88 Peru 929 900 974 909 897 916 974 1,025 1,092 960 89 Uruguay 1,611 1,597 1,835 1,839 1,856 1,912 1,835 1,799 1,726 1,908 90 Venezuela 12,786 13,983 11,810 11,971 12,642 11,622 11,810 12,662 12,611 13,148 91 Other 6,327 6,700 7,531 6,836 7,092 7,067 7,531 7,499 7,738 7,826 92 Asia 144,527 154,326' 240,775 222233,,009955'' 222222,,996677 223322,,222222 224400,,777755 238,175' 224499,,445522 224422,,443344 China 93 People's Republic of China 4,011 10,066 33,750 22,273 22,341 29,875 33,750 35,733 32,200 24,430 94 Republic of China (Taiwan) 10,627 9,844 11,714 10,253 10,729 11,365 11,714 12,311 12,955 15,513 95 Hong Kong 17,132 17,102 20,304 21,865' 21,893 20,287 20,304 20,307 22,286 20,187 96 India 1,114 2,338 3,373 2,914 3,010 3,272 3,373 3,263 3,527 3,990 97 Indonesia 1,986 1,587 2,708 2,366 2,174 2,485 2,708 2,011 2,349 2,169 98 Israel 4,435 5,157 4,073 4,209 3,812 4,090 4,073 4,348 5,780 5,343 99 Japan 61,466 62,975' 109,193 104,315 104,566 105,546 109,193 106,728 113,366 117,312 100 Korea (South) 4,913 5,124 5,782 5,484 5,368 5,593 5,782 5,092' 5,607 5,873 101 Philippines 2,035 2,714 3,089 2,786 2,839 2,880 3,089 2,394 2,366 2,336 102 Thailand 6,137 6,466 12,279 11,803 10,458 12,144 12,279 13,121 13,389 12,158 103 Middle Eastern oil-exporting countries13 15,822 15,482' 15.582 16,895 17,350 16,238 15,582 14,417 13,491 14,235 104 Other 14,849 15,471 18.928 17,932 18,427 18,447 18,928 18,450 22,136 18,888 105 Africa 6,633 6,523 7,641 7,033 7,211 7,793 7,641 7,679 7,818 7,089 106 Egypt 2,208 1,879 2,136 2,127 1,948 1,907 2,136 1,848 2,375 2,057 107 Morocco 99 97 104 79 66 60 104 99 52 65 108 South Africa 451 433 739 467 934 1,206 739 1,217 665 411 109 Zaire 12 9 10 9 4 9 10 11 8 11 110 Oil-exporting countries14 1,303 1,343 1,797 1,792 1,544 1,826 1,797 1,774 1,968 1,706 111 Other 2,560 2,762 2,855 2,559 2,715 2,785 2,855 2,730 2,750 2,839 112 Other 4,192 6,036 6,773 5,594 6,315 6,853 6,773 5,203 5,509 6,223 113 Australia 3,308 5,142 5,644 4,777 5,007 5,758 5,644 4,326 4,503 5,239 114 Other 884 894 1,129 817 1,308 1,095 1,129 877 1,006 984 115 Nonmonetary international and regional organizations. .. 10,936 8,606 10,939 13,011 10,294 9,794 10,939 10,606' 10,483 9,476 116 International15 6,851 7,537 9,2 00 11,279 8,458 8,470 9,200 9,623' 9,409 7,938 117 Latin American regional16 3,218 613 893 876 552 371 893 349 332 758 118 Other regional17 867 456 846 856 1,284 953 846 634 742 780 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

Nonbank-Reported Data A55 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 1996 AArreeaa oorr ccoouunnttrryy 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Total, all foreigners 488,497 483,242 526,35lr 515,573 522,646 533,906 526,351r 522,939r 515,575 525,095 2 Foreign countries 486,092 478,651 524,420r 512,746 520,988 532,485 524,420r 520,637r 513,426 521,292 3 Europe 123,741 123,380 130,316 116,784 131,519 131,660 130,316 133,923 138,574 137,482 4 Austria 412 692 565 670 880 639 565 683 773 792 5 Belgium and Luxembourg 6,532 6,738 7,599 7,056 7,103 10,691 7,599 8,365 8,519 5,728 6 Denmark 382 1,129 403 572 634 602 403 541 599 398 7 Finland 594 512 1,055 1,221 1,916 1,097 1,055 1,397 1,313 1,782 8 France 11,822 12,146 14,799 13,956 14,807 15,259 14,799 12,253 13,161 13,782 9 Germany 7,724 7,608 8,864 8,691 8,081 8,431 8,864 8,072 8,774 9,260 10 Greece 691 604 449 385 404 378 449 555 603 507 11 Italy 8,834 6,043 5,364 5,921 5,530 5,390 5,364 5,010 4,838 5,850 12 Netherlands 3,063 2,959 5,051 4,696 4,592 4,909 5,051 4,305 4,722 5,553 13 Norway 396 504 665 1,392 1,457 1,376 665 1,098 1,408 1,016 14 Portugal 834 938 888 986 1,036 862 888 853 743 787 15 Russia 2,310 973 660 421 696 949 660 678 775 868 16 Spain 3,717 3,530 2,166 3,520 3,162 3,191 2,166 3,811 4,041 5,412 17 Sweden 4,254 4,098 2,060 2,700 2,642 2,362 2,060 2,315 2,151 2,056 18 Switzerland 6,605 5,746 7,074 7,246 6,335 5,925 7,074 4,613 4,016 4,841 19 Turkey 1,301 878 785 807 830 926 785 732 707 917 20 United Kingdom 62,013 66,846 67,388 54,522 69,015 66,911 67,388 75,147 78,040 73,120 21 Yugoslavia2 473 265 147 234 233 237 147 481 118 120 22 Other Europe and other former U.S.S.R.3 1,784 1,171 4,334 1,788 2,166 1,525 4,334 3,014 3,273 4,693 23 Canada 18,617 18,490 16,105' 18,811 17,820 17,010 16,105' 15,690 13,834 13,504 24 Latin America and Caribbean 225,238 223,523 257,399' 250,441 251,325 266,635 257,399' 257,146' 248,554 252,615 25 Argentina 4,474 5,844 6,439 6,110 6,003 6,090 6,439 6,185 6,057 6,224 26 Bahamas 63,353 66,410 59,258 62,796 55,788 60,030 59,258 60,284 63,311 65,617 27 Bermuda 8,901 8,481 5,718 6,012 5,537 8,096 5,718 5,011 4,742 4,833 28 Brazil 11,848 9,583 13,297 13,073 13,334 12,983 13,297 13,252 13,915 13,863 29 British West Indies 99,319 95,741 123,914 120,012 123,700 129,472 123,914 122,759 108,833 113,076 30 Chile 3,643 3,820 5,024 4,388 4,660 4,775 5,024 4,996 4,593 4,546 31 Colombia 3,181 4,004 4,550 4,358 4,593 4,516 4,550 4,622 4,492 4,547 32 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 681 682 825 805 846 847 825 841 842 987 34 Guatemala 288 366 457 361 385 424 457 439 461 465 35 Jamaica 195 258 323 287 289 285 323 299 362 331 36 Mexico 15,879 17,749 18,028 16,990 16,657 16,826 18,028 17,114 17,167 16,957 37 Netherlands Antilles 2,683 1,396 9,229 5,533 9,233 12,048 9,229 11,043 12,973 10,902 38 Panama 2,894 2,198 3,018' 2,594 2,846 3,049 3,018' 2,845' 2,820 2,611 39 Peru 657 997 1,829 1,464 1,501 1,577 1,829 1,762 1,928 1,935 40 Uruguay 969 503 466 386 441 434 466 422 463 623 41 Venezuela 2,910 1,831 1,661 1,480 1,826 1,695 1,661 1,575 1,572 1,557 42 Other 3,363 3,660 3,363 3,792 3,686 3,488 3,363 3,697 4,023 3,541 43 111,775 107,079 115,406' 120,225 114,575 111,443 115,406' 108,989' 106,987 111,142 China 44 People's Republic of China 2,271 836 1,023 1,316 1,241 1,069 1,023 1,014 1,351 2,439 45 Republic of China (Taiwan) 2,625 1,448 1,713 1,584 1,595 1,484 1,713 1,407 1,404 1,729 46 Hong Kong 10,828 9,161 12,895 15,677 12,539 10,713 12,895 13,254 13,867 15,545 47 India 589 994 1,846 1,944 1,924 1,823 1,846 1,864 1,859 1,869 48 Indonesia 1,527 1,470 1,678 1,596 1,623 1,583 1,678 1,458 1,478 1,599 49 Israel 826 688 739 714 886 728 739 668 683 665 50 Japan 60,032 59,151 61,308 63,075 61,878 60,522 61,308 55,897 55,077 52,665 51 Korea (South) 7,539 10,286 14,136' 12,992 13.357 14,115 14,136' 14,501' 15,454 17,240 52 Philippines 1,410 662 1,350 725 673 789 1,350 814 779 1,202 53 Thailand 2,170 2,902 2,597' 2,594 2,568 2,538 2,597' 2,397' 3,256 3,051 54 Middle Eastern oil-exporting countries4 15,115 13,748 9,639 11,723 9,963 9,604 9,639 8,053 6,410 7,145 55 Other 6,843 5,733 6,482' 6,285 6,328 6,475 6,482' 7,662 5,369 5,993 56 Africa 3,861 3,050 2,727 2,705 2,783 2,732 2,727 2,798 2,879 2,884 57 Egypt 196 225 210 202 224 268 210 208 237 247 58 Morocco 481 429 514 647 457 433 514 514 561 585 59 South Africa 633 671 465 454 604 462 465 483 520 567 60 Zaire 4 2 1 2 1 1 1 1 1 1 61 Oil-exporting countries5 1,129 856 552 615 586 578 552 589 526 516 62 Other 1,418 867 985 785 911 990 985 1,003 1,034 968 63 Other 2,860 3,129 2,467 3,780 2,966 3,005 2,467 2,091 2,598 3,665 64 Australia 2,037 2,186 1,622 2,639 2,095 1,969 1,622 1,822 2,243 2,645 65 Other 823 943 845 1,141 871 1,036 845 269 355 1,020 66 Nonmonetary international and regional organizations6 ... 2,405 4,591 1,931 2,827 1,658 1,421 1,931 2,302' 2,149 3,803 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

A56 International Statistics • July 1996 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 1996 TTyyppee ooff ccllaaiimm 11999933 11999944 11999955RR Sept. Oct. Nov. Dec.r Jan.r Feb. Mar.p 1 Total 575,613 599,521r 649,118 645,193 649,118 2 Banks' claims 488,497 483,242 526,351 515,573 522,646 533,906 526,351 522,939 515,575 525,095 3 Foreign public borrowers 29,228 23,416 22,500 22,439 20,863 19,351 22,500 23,133 23,710 27,622 4 Own foreign offices2 285,510 283,183 303,902 298,241 303,573 308,664 303,902 300,730 290,689 293,250 5 Unaffiliated foreign banks 100,865 109,228 98,700 107,532 103,949 99,555 98,700 97,238 98,137 101,568 6 Deposits 49,892 59,250 37,343 50,767 47,103 42,905 37,343 35,520 37,565 41,441 7 Other 50,973 49,978 61,357 56,765 56,846 56,650 61,357 61,718 60,572 60,127 8 All other foreigners 72,894 67,415 101,249 87,361 94,261 106,336 101,249 101,838 103,039 102,655 9 Claims of banks' domestic customers3 87,116 116,279R 122,767 129,620 122,767 10 Deposits 41,734 64,829 57,529 66,067 57,529 11 Negotiable and readily transferable instruments4 31,186 36,008 45,265 45,190 45,265 12 Outstanding collections and other claims 14,196 15,442' 19,973 18,363 19,973 MEMO 13 Customer liability on acceptances 7,918 8,427 8,379 8,821 8,379 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 29,150 32,796 30,717 35,041 33,828 31,355 30,717 27,793 32,749 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 1995R MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999922 11999933 11999944RR Mar. June Sept. Dec. 1 Total 195,119 202,566 200,042 200,864 220,180 216,976 222,347 By borrower 2 Maturity of one year or less 163,325 172,662 168,331 165,891 186,312 178,666 176,343 3 Foreign public borrowers 17,813 17,828 15,435 15,482 15,817 14,177 14,993 4 All other foreigners 145,512 154,834 152,896 150,409 170,495 164,489 161,350 5 Maturity of more than one year 31,794 29,904 31,711 34,973 33,868 38,310 46,004 6 Foreign public borrowers 13,266 10,874 7,838 8,150 7,892 8,220 7,506 7 All other foreigners 18,528 19,030 23,873 26,823 25,976 30,090 38,498 By area Maturity of one year or less 8 Europe 53,300 57,413 55,742 53,070 60,323 52,045 54,044 9 Canada 6,091 7,727 6,690 6,878 7,838 7,135 6,089 10 Latin America and Caribbean 50,376 60,490 58,877 61,946 68,630 71,319 72,397 11 Asia 45,709 41,418 39,851 37,605 43,945 42,536 40,152 12 Africa 1,784 1,820 1,376 1,227 1,447 1,261 1,272 13 All other3 6,065 3,794 5,795 5,165 4,129 4,370 2,389 Maturity of more than one year 14 Europe 5,367 5,310 4,203 5,626 4,240 4,594 4,737 15 Canada 3,287 2,581 3,505 4,005 3,685 3,581 2,741 16 Latin America and Caribbean 15,312 14,025 15,717 15,624 17,557 20,224 27,807 17 Asia 5,038 5,606 5,318 7,261 5,949 7,373 8,004 18 Africa 2,380 1,935 1,583 1,610 1,389 1,389 1,429 19 All other3 410 447 1,385 847 1,048 1,149 1,286 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

Nonbank-Reported Data A57 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 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. 1 Total 343.S 344.7 407.7 476.8 486.1 486.4 496.6 539.7 524.0 524.5 549.1 2 G-10 countries and Switzerland 137.5 131.3 161.8 178.4 173.3 182.6 190.6 208.7 200.5 195.5 200.3 3 Belgium and Luxembourg 6.0r 5.6 7.4 8.0 8.6 9.6 7.0 8.3 7.3 8.5 12.1 4 France 11.3 15.3 12.0 16.6 18.6 20.7 19.1 19.8 19.3 17.5 19.2 5 Germany 8.3 9.1 12.6 29.7 24.7 24.0 24.7 31.2 29.9 28.6 26.9 6 Italy 5.6 6.5 7.7 15.6 14.0 11.6 11.8 10.6 10.7 12.6 11.5 7 Netherlands 4.7r 2.8 4.7 3.8 3.4 3.4 3.6 3.5 4.3 3.9 3.3 8 Sweden 1.9 2.3 2.7 2.9 3.0 2.6 2.7 3.1 3.0 2.7 2.7 9 Switzerland 3.4 4.8 5.9 4.5 5.4 5.5 5.1 5.7 6.2 6.0 6.1 10 United Kingdom 68.4 59.7 84.3 69.9 64.9 78.4 85.7 89.9 86.7 79.8 80.7 11 Canada 5.8 6.3 6.9 7.8 9.9 10.2 10.0 10.5 11.1 11.9 9.4 12 Japan 22.2 18.8 17.6 19.6 20.7 16.5 20.7 25.9 22.1 24.0 28.5 13 Other industrialized countries 22.8 24.0 25.6 42.2 42.6 42.6 45.2 44.0 43.3 49.8 50.0 14 Austria .6 1.2 .4 1.0 1.0 1.0 1.1 .9 .7 1.2 .9 15 Denmark .9 .9 1.0 1.1 1.1 1.0 1.3 1.7 1.1 1.8 2.6 16 Finland .7 .7 .4 1.0 .8 .8 .9 1.1 .5 .7 .8 17 Greece 2.6 3.0 3.2 3.8 4.6 4.3 4.5 4.9 5.0 5.1 5.7 18 Norway 1.4 1.2 1.7 1.6 1.6 1.6 2.0 2.4 1.8 2.3 3.2 19 Portugal .6 .4 .8 1.2 1.1 1.0 1.2 1.0 1.2 1.7 1.1 20 Spam 8.3 8.9 9.9 13.2 12.6 14.0 13.6 14.1 13.3 13.3 11.6 21 Turkey 1.4 1.3 2.1 2.4 2.1 1.8 1.6 1.4 1.4 2.0 1.9 22 Other Western Europe 1.8 1.7 2.6 3.1 2.8 1.0 2.7 2.5 2.6 3.0 4.7 23 South Africa 1.9 1.7 1.1 1.2 1.2 1.2 1.0 1.5 1.4 1.3 1.2 24 Australia 2.7 2.9 2.3 12.7 13.7 15.0 15.4 12.6 14.3 17.4 16.4 25 OPEC2 14.5 15.8 17.4 22.9 21.6 21.7 23.9 19.5 20.3 22.3 22.3 26 Ecuador .7 .6 .5 .6 .5 .4 .5 .5 .7 .7 .7 27 Venezuela 5.4 5.2 5.1 4.6 4.4 3.9 3.7 3.5 3.5 3.0 2.7 28 Indonesia 2.7 2.7 3.3 3.4 3.2 3.3 3.8 4.0 4.1 4.4 5.0 29 Middle East countries 4.2 6.2 7.4 13.2 12.4 13.0 15.0 10.7 11.4 13.5 13.3 30 African countries 1.5 1.1 1.2 1.1 1.1 1.1 .9 .7 .6 .6 .6 31 Non-OPEC developing countries 64.3 72.6 83.1 94.7 94.8 93.2 96.0 98.5 103.6 103.6 112.0 Latin America 32 Argentina 4.8 6.6 7.7 8.7 9.8 10.5 11.2 11.4 12.3 10.9 12.9 33 Brazil 9.6 10.8 12.0 12.7 12.0 9.3 8.4 9.2 10.0 13.1 13.1 34 Chile 3.6 4.4 4.7 5.1 5.1 5.5 6.1 6.4 7.1 6.4 6.8 35 Colombia 1.7 1.8 2.1 2.2 2.4 2.4 2.6 2.6 2.6 2.9 2.9 36 Mexico 15.5 16.0 17.8 19.0 18.6 19.8 18.4 17.8 17.6 16.3 17.3 37 Peru .4 .5 .4 .6 .6 .6 .5 .6 .8 .7 .8 38 Other 2.1 2.6 3.1 2.9 2.7 2.8 2.7 2.4 2.6 2.6 2.8 Asia China 39 People's Republic of China .3 .7 2.0 .8 .8 1.0 1.1 1.1 1.4 1.7 1.8 40 Republic of China (Taiwan) 4.1 5.2 7.3 7.6 7.1 6.9 9.2 8.5 9.0 9.0 9.4 41 India 3.0 3.2 3.2 3.4 3.7 3.9 4.2 3.8 4.0 4.4 4.4 42 Israel .5 .4 .5 .4 .4 .4 .4 .6 .7 .5 .5 43 Korea (South) 6.8 6.6 6.7 14.1 14.3 14.4 16.2 16.9 18.7 18.0 19.1 44 Malaysia 2.3 3.1 4.4 5.2 5.2 3.9 3.1 3.9 4.1 4.3 4.4 45 Philippines 3.7 3.6 3.1 3.4 3.2 2.9 3.3 3.0 3.6 3.3 4.1 46 Thailand 1.7 2.2 3.1 3.0 3.3 3.5 2.1 3.3 3.8 3.9 4.9 47 Other Asia 2.4 3.1 3.1 3.1 3.2 3.4 4.7 4.9 3.5 3.7 4.5 Africa 48 Egypt .4 .2 .4 .4 .5 .3 .3 .4 .4 .4 .4 49 Morocco .7 .6 .7 .8 .7 .7 .6 .6 .9 .9 .7 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .7 1.0 .8 1.1 1.0 .9 .8 .7 .6 .7 .9 52 Eastern Europe 2.4 3.1 3.2 3.8 3.2 3.0 2.7 2.3 1.8 3.4 4.2 53 Russia4 .9 1.9 1.6 1.6 1.3 1.1 .8 .7 .4 .6 1.0 54 Yugoslavia5 .9 .6 .6 .5 .5 .5 .5 .4 .3 .4 .3 55 Other .7 .6 .9 1.6 1.4 1.5 1.4 1.2 1.0 2.3 2.8 56 Offshore banking centers 53.8 58.1 73.0 78.6 80.6 77.2 71.4 84.4 82.1 86.0 103.0 57 Bahamas 11.9 6.9 10.9 13.7 13.3 13.8 10.3 12.5 8.4 12.6 15.0 58 Bermuda 2.3 6.2 8.9 8.8 6.5 6.0 8.4 8.6 8.3 6.1 6.3 59 Cayman Islands and other British West Indies 15.5 21.5 18.0 17.8 23.8 21.5 19.9 19.4 23.7 23.4 32.1 60 Netherlands Antilles 1.2 1.1 2.6 3.4 2.5 1.7 1.3 .9 2.4 5.5 9.9 61 Panama6 1.4 1.9 2.4 2.0 2.0 1.9 1.3 1.1 1.3 1.3 1.4 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 14.3 13.9 18.7 19.7 21.8 20.3 19.9 22.5 23.1 23.7 25.1 64 Singapore 7.1 6.5 11.2 13.0 10.6 11.8 10.1 19.2 14.8 13.3 13.1 65 Other' .0 .0 .1 .0 .0 .0 .1 .0 .0 .1 .1 66 Miscellaneous and unallocated8 47.9 39.7 43.4 55.9 69.7 65.8 66.7 82.0 72.1 63.7 57.0 1. The banking offices covered by these data include U.S. 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

A58 International Statistics • July 1996 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1994 1995 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999922 11999933 11999944 Sept. Dec. Mar. June Sept. Dec.p 1 Total 45,511 50,597 54,309 57,630 54,309 50,187 49,973 47,673 46,494 2 Payable in dollars 37,456 38,728 38,298 41,879 38,298 35,903 34,281 33,908 33,949 J Payable in foreign currencies 8,055 11,869 16,011 15,751 16,011 14,284 15,692 13,765 12,545 By type 4 Financial liabilities 23,841 29,226 32,954 36,440 32,954 29,775 29,282 26,237 24,287 5 Payable in dollars 16,960 18,545 18,818 22,558 18,818 16,704 15,028 13,872 12,949 6 Payable in foreign currencies 6,881 10,681 14,136 13,882 14,136 13,071 14,254 12,365 11,338 7 Commercial liabilities 21,670 21,371 21,355 21,190 21,355 20,412 20,691 21,436 22,207 8 Trade payables 9,566 8.802 10,005 9,550 10,005 9,844 10,527 10,061 11,013 y Advance receipts and other liabilities 12,104 12,569 11,350 11,640 11,350 10,568 10,164 11,375 11,194 10 Payable in dollars 20,496 20,183 19,480 19,321 19,480 19,199 19,253 20,036 21,000 n Payable in foreign currencies 1,174 1,188 1,875 1,869 1,875 1,213 1,438 1,400 1,207 By area or country Financial liabilities 12 Europe 13,387 18,810 21,703 25,288 21,703 17,541 18,223 16,401 15,622 13 Belgium and Luxembourg 414 175 495 661 495 612 778 347 369 14 France 1,623 2,539 1.727 2,241 1,727 2,046 1,101 1,365 999 13 Germanv 889 975 1,961 1,467 1,961 1,755 1,589 1,670 1,974 10 Netherlands 606 534 552 648 552 633 530 474 466 17 Switzerland 569 634 688 633 688 883 1,056 948 895 18 United Kingdom 8,610 13,332 15,543 18,323 15,543 10,764 12,138 10,518 10,138 19 Canada 544 859 629 618 629 1,817 893 797 632 20 Latin America and Caribbean 4,053 3,359 2,034 1,977 2,034 2,065 1,950 1,904 11,,882299 21 Bahamas 379 1,148 101 121 101 135 81 79 6688 22 Bermuda 114 0 80 15 80 149 138 144 152 23 Brazil 19 18 207 7 207 58 58 111 57 24 British West Indies 2,850 1,533 998 1,173 998 1,068 1,030 930 898 2.*) Mexico 12 17 0 15 0 10 3 3 12 26 Venezuela 6 5 5 5 5 5 4 3 2 27 Asia 5,818 5,956 8,403 8,405 8,403 8,156 8,023 6,947 5,988 28 Japan 4,750 4,887 7,314 7,248 7,314 7,182 7,141 6,308 5,436 29 Middle Eastern oil-exporting countries' 19 23 35 31 35 27 25 25 27 30 Africa 6 133 135 133 135 156 151 149 150 31 Oil-exporting countries2 0 123 123 123 123 122 122 122 122 32 All other3 33 109 50 19 50 40 42 39 66 Commercial liabilities 33 Europe 7,398 6,827 6,773 6,868 6,773 6,642 6,776 7,263 7,700 34 Belgium and Luxembourg 298 239 241 287 241 271 311 349 331 35 France 700 655 728 744 728 642 504 528 481 36 Germany 729 684 604 552 604 482 556 660 767 37 Netherlands 535 688 722 674 722 536 448 566 500 38 Switzerland 350 375 327 391 327 327 432 255 413 39 United Kingdom 2,505 2,039 2,444 2,350 2,444 2,848 2,902 3,351 3,568 40 Canada 1,002 879 1,037 1,068 1,037 1,235 1,146 1,219 1,040 41 Latin America and Caribbean 1,533 1,658 1,857 1,783 1,857 11,,336688 1,836 11,,660077 11,,774400 42 Bahamas 3 21 19 6 19 88 3 11 11 43 Bermuda 307 350 345 200 345 260 397 219 205 44 Brazil 209 214 161 147 161 96 107 143 98 45 British West Indies 33 27 23 33 23 29 12 5 56 46 Mexico 457 481 574 672 574 356 420 357 416 47 Venezuela 142 123 276 189 276 273 204 175 221 48 Asia 10,594 10,980 10,741 10,370 10,741 10,151 9,978 10,275 10,421 49 Japan 3,612 4,314 4,555 4,128 4,555 4,110 3,531 3,475 3,315 50 Middle Eastern oil-exporting countries' 1,889 1,534 1,576 1,663 1,576 1,787 1,790 1,647 1,912 51 Africa 568 453 428 468 428 463 481 589 619 52 Oil-exporting countries* 309 167 256 264 256 248 252 241 254 53 Other3 575 574 519 633 519 553 474 483 687 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

Nonbank-Reported Data A59 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 11999922 11999933 11999944 Sept. Dec. Mar. June Sept. Dec.p 1 Total 45,073 49,159 57,888 54,833 57,888 52,218 58,051 53,424 52,483 2 Payable in dollars 42,281 45,161 53,805 50,460 53,805 48,425 54,138 49,696 48,687 3 Payable in foreign currencies 2,792 3,998 4,083 4,373 4,083 3,793 3,913 3,728 3,796 By type 4 Financial claims 26,509 27,771 33,897 32,236 33,897 29,606 34,574 29,891 27,398 5 Deposits 17,695 15,717 18,507 19,118 18,507 17,115 22,046 17,974 15,133 6 Payable in dollars 16,872 15,182 18,026 18,502 18,026 16,458 21,351 17,393 14,654 7 Payable in foreign currencies 823 535 481 616 481 657 695 581 479 8 Other financial claims 8,814 12,054 15,390 13,118 15,390 12,491 12,528 11,917 12,265 9 Payable in dollars 7,890 10,862 14,306 11,903 14,306 11,275 11,370 10,689 10,976 10 Payable in foreign currencies 924 1,192 1,084 1,215 1,084 1,216 1,158 1,228 1,289 11 Commercial claims 18,564 21,388 23,991 22,597 23,991 22,612 23,477 23,533 25,085 12 Trade receivables 16,007 18,425 21,158 19,825 21,158 20,415 21,326 21,409 22,973 13 Advance payments and other claims 2,557 2,963 2,833 2,772 2,833 2,197 2,151 2,124 2,112 14 Payable in dollars 17,519 19,117 21,473 20,055 21,473 20,692 21,417 21,614 23,057 15 Payable in foreign currencies 1,045 2,271 2,518 2,542 2,518 1,920 2,060 1,919 2,028 By area or country Financial claims 16 Europe 9,331 7,299 7,936 8,914 7,936 7,630 7,927 7,840 7,609 17 Belgium and Luxembourg 8 134 86 115 86 146 155 160 193 18 France 764 826 800 931 800 808 730 753 803 19 Germany 326 526 540 413 540 527 356 301 436 20 Netherlands 515 502 429 503 429 606 601 522 517 21 Switzerland 490 530 523 777 523 490 514 530 498 22 United Kingdom 6,252 3,585 4,649 5,023 4,649 4,040 4,790 4,924 4,303 23 Canada 1,833 2,032 3,581 3,812 3,581 3,848 3,705 3,526 2,851 24 Latin America and Caribbean 13,893 16,224 19,536 16,608 19,536 16,109 21,159 15,345 14,500 25 Bahamas 778 1,336 2,424 1,121 2,424 940 2,355 1,552 1,965 26 Bermuda 40 125 27 52 27 37 85 35 81 27 Brazil 686 654 520 411 520 528 502 851 830 28 British West Indies 11,747 12,699 15,228 13,694 15,228 13,531 17,013 11,816 10,393 29 Mexico 445 872 723 691 723 583 635 487 554 30 Venezuela 29 161 35 31 35 27 27 50 32 31 Asia 864 1,657 1,871 2,176 1,871 1,504 1,235 2,160 1,579 32 Japan 668 892 953 661 953 621 471 1,404 871 33 Middle Eastern oil-exporting countries' 3 3 141 19 141 4 3 4 3 34 Africa 83 99 373 197 373 141 138 188 276 35 Oil-exporting countries2 9 1 0 0 0 9 9 6 5 36 All other3 505 460 600 529 600 374 410 832 583 Commercial claims 37 Europe 8,451 9,105 9,540 8,810 9,540 8,947 9,200 8,862 9,822 38 Belgium and Luxembourg 189 184 213 178 213 199 218 224 231 39 France 1,537 1,947 1,881 1,766 1,881 1,790 1,669 1,706 1,830 40 Germany 933 1,018 1,027 883 1,027 977 1,023 997 1,070 41 Netherlands 552 423 311 331 311 324 341 338 452 42 Switzerland 362 432 557 538 557 556 612 438 520 43 United Kingdom 2,094 2,377 2,556 2,505 2,556 2,388 2,469 2,479 2,655 44 Canada 1,286 1,781 1,988 1,906 1,988 2,010 2,003 1,971 1,950 45 Latin America and Caribbean 3,043 3,274 4,117 3,963 4,117 4,140 4,370 4,359 4,348 46 Bahamas 28 11 9 34 9 17 21 26 30 47 Bermuda 255 182 234 246 234 208 210 245 272 48 Brazil 357 460 612 471 612 695 777 745 897 49 British West Indies 40 71 83 49 83 55 83 66 79 50 Mexico 924 990 1,243 1,137 1,243 1,106 1,109 1,026 985 51 Venezuela 345 293 348 388 348 295 319 325 285 52 Asia 4,866 6,014 6,982 6,679 6,982 6,200 . 6,516 6,826 7,307 53 Japan 1,903 2,275 2,655 2,591 2,655 1,911 2,011 1,998 1,868 54 Middle Eastern oil-exporting countries' 693 704 708 617 708 689 707 775 974 55 Africa 554 493 454 447 454 468 478 544 654 56 Oil-exporting countries2 78 72 67 61 67 71 60 74 87 57 Other3 364 721 910 792 910 847 910 971 1,004 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

A60 International Statistics • July 1996 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1996 1995 1996 Transaction, and area or country 1994 1995 J M an a . r - . Sept. Oct. Nov. Dec. Jan. Feb. Mar.p U.S. corporate securities STOCKS 1 Foreign purchases 350,593 462,884 150,400 44,450 41,492 41,937 46,479 43,574 52,262 54,564 2 Foreign sales 348,716 451,709 146,719 44,218 42,860 39,071 44,372 41,948 51,091 53,680 3 Net purchases, or sales (—) 1,877 11,175 3,681 232 -1,368 2,866 2,107 1,626 1,171 884 4 Foreign countries 1,867 11,380 3,853 295 -1,328 2,877 2,109 1,623 1,300 930 5 Europe 6,714 4,847 2,330 -1,319 1,647 954 1,028 1,954 -1,072 11,,444488 6 France -201 -1,099 671 -126 -54 -58 -382 164 -161 666688 / Germany 2,110 -1,837 298 -136 5 -131 -11 239 -37 96 8 Netherlands 2,251 3,507 898 197 528 230 373 660 20 218 9 Switzerland -30 -2,283 784 9 449 227 191 639 -441 586 10 United Kingdom 840 8,001 -628 -1,114 878 543 1,277 -165 -223 -240 11 Canada -1,160 -1,517 1,082 -197 -74 405 -175 645 518 -81 1 1 2 3 L M a i t d in d le A m Ea e s r t i 1 c a and Caribbean - - 2 1 , , 1 1 1 4 1 2 5 -3 ,8 3 1 7 4 - 1 8 ,8 2 5 6 9 - 7 7 5 7 2 -2,9 - 2 8 0 1 - ,3 6 6 3 1 2 1 1 4 9 8 - - 5 4 0 8 7 7 2 -2 ,6 8 8 5 8 -3 -3 4 4 2 14 Other Asia -1,234 2,503 -669 1,048 61 342 883 -40 -336 -293 15 Japan 1,162 -2,725 -789 -598 56 -406 1,231 94 -131 -752 lb Africa 29 2 -100 34 -17 -26 -1 6 -62 -44 1/ Other countries 771 68 177 54 -17 -96 7 52 -151 276 18 Nonmonetary international and regional organizations 10 -205 -172 -63 -40 -11 -2 3 -129 -46 BONDS2 19 Foreign purchases 289,586 293,030 98,526 28,187 26,424 31,642 21,698 26,591' 32,759 39,176 20 Foreign sales 229,665 206,951 66,414 17,759 19,199 20,741 21,117 17,726 23,608 25,080 21 Net purchases, or sales (—) 59,921 86,079 32,112 10,428 7,225 10,901 581 8,865r 9,151 14,096 22 Foreign countries 59,036 86,533 32,061 10,406 7,293 10,948 553 8,823r 9,230 14,008 23 Europe 37,065 69,815 20,473 7,934 6,418 9,759 1,309 5,624' 8,968 5,881 24 France 242 1,143 1,823 63 732 101 137 839 314 670 25 Germany 657 5,806 2,234 916 113 894 236 -26 1,859 401 2b Netherlands 3,322 1,463 496 203 204 219 101 156 365 -25 2/ Switzerland 1,055 494 -70 343 148 101 -381 56 -86 -40 28 United Kingdom 31,642 57,220 14,311 5,486 4,599 6,999 925 3,854' 6,280 4,177 29 Canada 2,958 2,569 482 349 139 20 181 104 235 143 3 3 0 1 L M a i t d in d le A m Ea e s r t i 1 c a and Caribbean 5, 7 4 7 4 1 2 6 1 , , 1 8 4 6 1 9 8 -5 ,5 1 1 5 9 1, 2 7 4 1 1 9 -2 -6 4 1 6 11,,44 11 22 88 66 88 -8 1 4 8 8 7 2 -1 ,0 9 9 4 6 - - 7 3 1 3 3 4 7,13 1 6 3 32 Other Asia 12,153 5,659 3,264 139 1,126 -705 -293 1,272 1,161 831 33 Japan 5,486 2,250 919 -371 645 -899 -904 338 336 245 34 Africa -7 234 -16 23 -223 240 86 -16 -40 40 33 Other countries 654 246 -146 1 140 20 -69 -63 -47 -36 36 Nonmonetary international and regional organizations 885 -454 51 22 -68 -47 28 42 -79 88 Foreign securities 37 Stocks, net purchases, or sales ( —) -48,071 -50,786 -22,240 -7,959 -5,769 -1,725 -6,830 -6,432 -5,490 -10,318 38 Foreign purchases 386,106 345,498 106,636 28,712 29,382 30,307 32,366 33,481 37,407 35,748 39 Foreign sales 434,177 396,284 128,876 36,671 35,151 32,032 39,196 39,913 42,897 46,066 40 Bonds, net purchases, or sales (-) -9,224 -47,159 -11,347 -5,483 -7,580 -6,235 -3,923 -4,472' -1,304 -5,571 41 Foreign purchases 848,368 889,143 272,825 81,022 76,889 78,563 80,310 84,508 95,095 93,222 42 Foreign sales 857,592 936,302 284,172 86,505 84,469 84,798 84,233 88,980' 96,399 98,793 43 Net purchases, or sales (—), of stocks and bonds .... -57,295 -97,945 -33,587 -13,442 -13,349 -7,960 -10,753 — 10,904r -6,794 -15,889 44 Foreign countries -57,815 -97,140 -33,497 -13,497 -13,240 -7,882 -10,812 — 10,935r -6,669 -15,893 45 Europe -3,516 -47,905 -10,648 -2,928 -7,249 -4,609 -6,033 -3,973' -2,279 -4,396 46 Canada -7,475 -7,871 -4,212 -3,471 1,311 -494 -14 -2,649 -60 -1,503 47 Latin America and Caribbean -18,334 -7,071 -3,592 781 -3,883 -184 -802 -3 -1,025 -2,564 48 Asia -24,275 -34,049 -12,996 -7,810 -2,511 -2,001 -4,389 -4,685 -2,557 -5,754 49 Japan -17,427 -25,070 -8,244 -5,637 -849 -1,388 -3,685 -3,427 -1,592 -3,225 30 Africa -467 -327 -693 -117 5 19 -44 -96 -161 -436 31 Other countries -3,748 83 -1,356 48 -913 -613 470 471 -587 -1,240 52 Nonmonetary international and regional organizations 520 -805 -90 55 -109 -78 59 31 -125 4 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

Securities Holdings and Transactions!Interest and Exchange Rates A61 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions' Millions of dollars; net purchases, or sales (—) during period 1996 1995 1996 AArreeaa oorr ccoouunnttrryy 11999944 11999955 Jan.- Sept. Oct. Nov. Dec. Jan. Feb. Mar.p Mar. 1 Total estimated 78,801 133,991 36,399 -11,072 4,819 15,307 -9,454 14,008 15,451 6,940 2 Foreign countries 78,637 133,552 36,224 -11,002 4,650 14,936 -9,016 13,703 16,192 6,329 3 Europe 38,542 50,000 19,737 6,377 -4,608 821 -1,120 7,281 8,462 3,994 4 Belgium and Luxembourg 1,098 591 110 143 -25 81 171 149 -120 81 5 Germany 5,709 6,136 4,170 2,568 2,831 52 452 1,385 1,829 956 6 Netherlands 1,254 1,891 -535 -1,915 160 833 381 807 354 -1,696 7 Sweden 794 358 1,130 61 92 -30 -285 -45 803 372 8 Switzerland 481 -472 225 818 174 -568 -664 76 84 65 9 United Kingdom 23,365 34,778 5,093 5,570 -5,965 1,309 -4,377 1,167 1,644 2,282 10 Other Europe and former U.S.S.R 5,841 6,718 9,544 -868 -1,875 -856 3,202 3,742 3,868 1,934 11 Canada 3,491 252 3,765 -2,284 -1,864 -43 208 1,867 1,863 35 1? Latin America and Caribbean -10,383 48,609 -10,560 -5,299 17,453 13,496 3,762 -2,648 -2,931 -4,981 13 Venezuela -319 -2 -279 -524 -92 232 61 -142 -93 -44 14 Other Latin America and Caribbean -20,493 25,152 4,334 1,171 3,033 3,723 4,710 8,922 -1,896 -2,692 15 Netherlands Antilles 10,429 23,459 -14,615 -5,946 14,512 9,541 -1,009 -11,428 -942 -2,245 16 47,317 32,319 22,477 -10,055 -6,879 -107 -11,843 6,920 8,616 6,941 17 Japan 29,793 16,863 8,131 -4,021 -10,115 1,316 -5,695 2,619 3,069 2,443 18 Africa 240 1,464 726 108 501 458 252 515 -100 311 19 Other -570 908 79 151 47 311 -275 -232 282 29 20 Nonmonetary international and regional organizations 164 439 175 -70 169 371 -438 305 -741 611 71 International 526 9 549 -196 2 368 -347 210 -308 647 22 Latin American regional -154 261 -287 -6 185 -43 -115 -45 -254 12 MEMO 73 Foreign countries 78,637 133,552 36,224 -11,002 4,650 14,936 -9,016 13,703 16,192 6,329 74 Official institutions 41,822 39,625 26,044 -4,525 5,705 -915 2,651 12,615 8,681 4,748 25 Other foreign 36,815 93,927 10,180 -6,477 -1,055 15,851 -11,667 1,088 7,511 1,581 Oil-exporting countries 76 Middle East2 -38 3,075 591 -50 -624 -826 -1,085 -658 112222 11,,112277 27 0 2 1 0 0 0 0 0 1 0 1. Official and private transactions in marketable U.S. 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. 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS1 Percent per year, averages of daily figures Rate on May 31, 1996 Rate on May 31, 1996 Country Country Month effective Austria. . 2.5 Apr. 1996 Germany .. . 2.5 Belgium. 2.5 Apr. 1995 Italy 9.0 Canada. . 5.0 Apr. 1996 Japan .5 Denmark 3.25 Apr. 1996 Netherlands . 2.5 France2 . 3.7 Apr. 1996 Switzerland . 1.5 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 RATES' Percent per year, averages of daily figures 1995 1996 TTyyppee oorr ccoouunnttrryy 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. May 1 Eurodollars 3.18 4.63 5.93 5.75 5.64 5.40 5.14 5.28 5.36 5.36 2 United Kingdom 5.88 5.45 6.63 6.61 6.42 6.31 6.13 6.02 5.97 6.03 3 Canada 5.14 5.57 7.14 6.02 5.91 5.58 5.22 5.23 5.03 4.82 4 Germany 7.17 5.25 4.43 3.91 3.82 3.51 3.26 3.25 3.22 3.19 5 Switzerland 4.79 4.03 2.94 1.98 1.94 1.65 1.61 1.68 1.68 1.99 6 Netherlands 6.73 5.09 4.30 3.73 3.58 3.20 3.00 3.09 2.83 2.61 7 France 8.30 5.72 6.43 5.74 5.47 4.56 4.29 4.14 3.87 3.78 8 Italy 10.09 8.45 10.43 10.65 10.58 10.05 9.90 9.82 9.60 8.88 9 Belgium 8.10 5.65 4.73 3.87 3.74 3.47 3.23 3.25 3.23 3.19 10 Japan 2.96 2.24 1.20 .54 .52 .55 .61 .60 .61 .62 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

A62 International Statistics • July 1996 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1995 1996 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999933 11999944 11999955 Dec. Jan. Feb. Mar. Apr. May 1 Australia/dollar" 67.993 73.161 74.073 74.053 74.171 75.557 77.136 78.566 79.700 2 Austria/schilling 11.639 11.409 10.076 10.142 10.296 10.321 10.391 10.580 10.782 3 Belgium/franc 34.581 33.426 29.472 29.615 30.081 30.115 30.371 30.902 31.502 4 Canada/dollar 1.2902 1.3664 1.3725 1.3693 1.3669 1.3752 1.3656 1.3592 1.3693 5 China, P.R./yuan 5.7795 8.6404 8.3700 8.3350 8.3384 8.3338 8.3495 8.3583 8.3479 6 Denmark/krone 6.4863 6.3561 5.5999 5.5791 5.6618 5.6749 5.7074 5.9414 5.9160 7 Finland/markka 5.7251 5.2340 4.3763 4.3361 4.4510 4.5532 4.6066 4.7288 4.7541 8 France/franc 5.6669 5.5459 4.9864 4.9565 5.0117 5.0440 5.0583 5.1049 5.1855 9 Germany/deutsche mark 1.6545 1.6216 1.4321 1.4406 1.4635 1.4669 1.4776 1.5048 1.5324 10 Greece/drachma 229.64 242.50 231.68 238.06 240.91 242.21 241.54 242.00 243.27 11 Hong Kong/dollar 7.7357 7.7290 7.7357 7.7345 7.7329 7.7323 7.7325 7.7345 7.7363 12 India/rupee 31.291 31.394 32.418 34.966 35.812 36.595 34.485 34.320 35.025 13 Ireland/pound2 146.47 149.69 160.35 159.18 158.18 158.10 157.21 156.51 156.29 14 Italy/lira 1,573.41 1,611.49 1,629.45 1,593.88 1,584.87 1,570.00 1,562.43 1,565.60 1,556.71 15 Japan/yen 111.08 102.18 93.96 101.85 105.75 105.79 105.94 107.20 106.34 16 Malaysia/ringgit 2.5738 2.6237 2.5073 2.5399 2.5563 2.5487 2.5417 2.5113 2.4936 17 Netherlands/guilder 1.8585 1.8190 1.6044 1.6127 1.6388 1.6424 1.6540 1.6805 1.7135 18 New Zealand/dollar2 54.127 59.358 65.625 64.996 66.195 67.495 68.079 68.242 68.571 19 Norway/krone 7.1009 7.0553 6.3355 6.3579 6.4275 6.4103 6.4277 6.4901 6.5748 20 Portugal/escudo 161.08 165.93 149.88 151.03 151.90 152.49 152.93 154.51 157.54 21 Singapore/dollar 1.6158 1.5275 1.4171 1.4148 1.4211 1.4115 1.4095 1.4082 1.4074 22 South Africa/rand 3.2729 3.5526 3.6286 3.6632 3.6413 3.7420 3.9293 4.2130 4.3679 23 South Korea/won 805.75 806.93 772.82 771.31 787.13 780.12 781.31 780.42 780.86 24 Spain/peseta 127.48 133.88 124.64 122.53 123.38 123.65 124.39 125.49 127.97 25 Sri Lanka/rupee 48.211 49.170 51.047 53.808 53.874 53.716 53.748 54.163 54.868 26 Sweden/krona 7.7956 7.7161 7.1406 6.6393 6.7405 6.8775 6.7318 6.7141 6.7984 27 Switzerland/franc 1.4781 1.3667 1.1812 1.1631 1.1818 1.1967 1.1959 1.2180 1.2539 28 Taiwan/dollar 26.416 26.465 26.495 27.315 27.406 27.485 27.400 27.188 27.352 29 Thailand/baht 25.333 25.161 24.921 25.164 25.298 25.250 25.251 25.290 25.289 30 United Kingdom/pound2 150.16 153.19 157.85 154.05 152.88 153.60 152.71 151.60 151.52 MEMO 31 United States/dollar3 93.18 91.32 84.25 85.07 86.23 86.41 86.57 87.46 88.28 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

A63 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases June 1996 A72 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 May 1995 August 1995 A68 August 1995 November 1995 A68 November 1995 February 1996 A68 February 1996 May 1996 A68 Assets and liabilities of U.S. branches and agencies of foreign banks March 31, 1995 October 1995 A68 June 30, 1995 November 1995 A72 September 30, 1995 February 1996 A72 December 31, 1995 May 1996 A72 Pro forma balance sheet and income statements for priced service operations March 31, 1995 August 1995 A76 June 30, 1995 October 1995 A72 September 30, 1995 January 1996 A68 March 31, 1996 July 1996 A64 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

A64 Special Tables • July 1996 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item Mar. 31, 1996 Mar. 31, 1995 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 557.2 343.3 Investment in marketable securities 5,014.8 3,089?7 Receivables 63.1 65.0 Materials and supplies 10.6 7.1 Prepaid expenses 39.8 39.6 Items in process of collection 1,827.4 1,867.7 Total short-term assets 7,512.9 5,412.4 Long-term assets (Note 2) 365.3 343.3 Furniture and equipment 146.6 157.0 Leases and leasehold improvements 21.5 22.9 Prepaid pension costs 254.3 212.6 787.7 735.8 Total assets 8,300.6 6,148.3 Short-term liabilities Clearing balances and balances arising from early credit of uncollected items 5,630.3 3,463.9 Deferred-availability items 1,769.1 1,836.8 Short-term debt 113.5 111.7 Total short-term liabilities 7,512.9 5,412.4 Long-term liabilities Obligations under capital leases 2.3 3.8 Long-term debt 176.3 156.0 179.7 166.8 Total long-term liabilities 358.3 326.6 Total liabilities 7,871.2 5,739.1 429.4 409.2 Total liabilities and equity (Note 3) 8,300.6 6,148.3 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 ending Mar. 31, 1996 Quarter ending Mar. 31, 1995 Revenue from services provided to depository institutions (Note 4) 194.1 182.0 Operating expenses (Note 5) 161.1 168.9 Income from operations 33.0 13.1 Imputed costs (Note 6) Interest on float 10.7 5.7 Interest on debt 4.3 4.1 Sales taxes 2.7 2.2 FDIC insurance 0.0 17.8 3.5 15.5 Income from operations after imputed costs 15.2 -2.4 Other income and expenses (Note 7) Investment income on clearing balances 71.5 63.9 65.4 6.1 54.3 95 Income before income taxes 21.3 7.1 Imputed income taxes (Note 8) 6.4 2.2 Income before cumulative effect of a change in accounting principle 14.9 4.9 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 Net income 14.9 -9.6 MEMO Targeted return on equity (Note 10) 10.3 8.1 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

Nonbank-Reported Data A65 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 first quarter of 1996 and 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. 1996 1995 Prepaid expenses include salary advances and travel advances for priced-service personnel. Items in process of collection is gross Federal Reserve cash items in process of collection Total float 1,386.7 666.5 (CIPC) stated on a basis comparable to that of a commercial bank. It reflects adjustments for Unrecovered float 19.2 3.6 intra-System items that would otherwise be double-counted on a consolidated Federal Float subject to recovery 1,367.5 662.9 Reserve balance sheet; adjustments for items associated with non-priced items, such as those Sources of float recovery collected for government agencies; and adjustments for items associated with providing fixed Income on clearing balances 136.6 64.6 availability or credit before items are received and processed. Among the costs to be As-of adjustments 590.9 268.3 recovered under the Monetary Control Act is the cost of float, or net CIPC during the period Direct charges 274.4 130.4 (the difference between gross CIPC and deferred-availability items which is the portion of Per-item fees 365.6 199.6 gross CIPC that involves a financing cost), valued at the federal funds rate. Unrecovered float includes float generated by services to government agencies and by other central bank services. Float recovered through income on clearing balances is the result of the (2) LONG-TERM ASSETS increase in investable clearing balances; the increase is produced by a deduction for float for cash items in process of collection, which reduces imputed reserve requirements. The income Consists of long-term assets used solely in priced services, the priced-services portion of on clearing balances reduces the float to be recovered through other means. As-of adjustments long-term assets shared with nonpriced services, and an estimate of the assets of the Board of and direct charges are mid-week closing float and interterritory check float, which may be Governors used in the development of priced services. Effective Jan. 1, 1987, the Reserve recovered from depositing institutions through adjustments to the institution's reserve or Banks implemented the Financial Accounting Standards Board's Statement of Financial clearing balance or by valuing the float at the federal funds rate and billing the institution Accounting Standards No. 87, Employers' Accounting for Pensions (SFAS 87). Accordingly, directly. Float recovered through per-item fees is valued at the federal funds rate and has been the Federal Reserve Banks recognized credits to expenses of $12.2 million in the first quarter added to the cost base subject to recovery in the first quarter of 1996. of 1996 and $7.2 million in the first quarter of 1995, and corresponding increases in this asset account. (7) OTHER INCOME AND EXPENSES (3) LIABILITIES AND EQUITY 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 Under the matched-book capital structure for assets that are not "self-financing," short-term three-month Treasury bills applied to the total clearing balance maintained, adjusted for the assets are financed with short-term debt. Long-term assets are financed with long-term debt effect of reserve requirements on clearing balances. Expenses for earnings credits granted to and equity in a proportion equal to the ratio of long-term debt to equity for the fifty largest depository institutions on their clearing balances are derived by applying the average federal bank holding companies, which are used in the model for the private-sector adjustment factor funds rate to the required portion of the clearing balances, adjusted for the net effect of (PSAF). The PSAF consists of the taxes that would have been paid and the return on capital reserve requirements on clearing balances. that would have been provided had priced services been furnished by a private-sector firm. Other short-term liabilities include clearing balances maintained at Reserve Banks and (8) INCOME TAXES deposit balances arising from float. Other long-term liabilities consist of obligations on capital leases. Imputed income taxes are calculated at the effective tax rate derived from the PSAF model (see note 3). (4) REVENUE (9) POSTEMPLOYMENT BENEFITS Revenue represents charges to depository institutions for priced services and is realized from Effective Jan. 1, 1995, the Reserve Banks implemented SFAS 112, Employers' Accounting each institution through one of two methods: direct charges to an institution's account or for Postemployment Benefits. Accordingly in the first quarter of 1995 the Reserve Banks charges against its accumulated earnings credits. recognized a one-time cumulative charge of $21.1 million to reflect the retroactive application 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 in the first quarter of 1996 and 1995. The credit to expenses first quarter of 1996 and $.3 million for the first quarter of 1995. The Reserve Banks plan to under SFAS 87 (see note 2) is reflected in operating expenses. recover these amounts, along with a finance charge, by the end of the year 2001. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Index to Statistical Tables References are to pages A3-A64 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Deposits—Continued Agricultural loans, commercial banks, 19, 20 Interest rates, 15 Assets and liabilities (See also Foreigners) Turnover, 16 Banks, by classes, 17-21 Discount rates at Reserve Banks and at foreign central banks and Domestic finance companies, 33 foreign countries (See Interest rates) Federal Reserve Banks, 10 Discounts and advances by Reserve Banks (See Loans) Financial institutions, 25 Dividends, corporate, 32 Foreign banks, U.S. branches and agencies, 21 Automobiles Consumer installment credit, 36 EMPLOYMENT, 42 Production, 44, 45 Eurodollars, 23 BANKERS acceptances, 10, 11, 19-22, 23 FARM mortgage loans, 35 Bankers balances, 17-21. (See also Foreigners) Federal agency obligations, 5, 9, 10, 11, 28, 29 Bonds (See also U.S. government securities) Federal credit agencies, 30 New issues, 31 Federal finance Rates, 23 Debt subject to statutory limitation, and types and ownership Branch banks, 21 of gross debt, 27 Business activity, nonfinancial, 42 Receipts and outlays, 25, 26 Business loans (See Commercial and industrial loans) Treasury financing of surplus, or deficit, 25 Treasury operating balance, 25 CAPACITY utilization, 43 Federal Financing Bank, 30 Capital accounts Federal funds, 6, 19, 20, 21, 23, 25 Banks, by classes, 17 Federal Home Loan Banks, 30 Federal Reserve Banks, 10 Federal Home Loan Mortgage Corporation, 30, 34, 35 Central banks, discount rates, 61 Federal Housing Administration, 30, 34, 35 Certificates of deposit, 23 Federal Land Banks, 35 Commercial and industrial loans Federal National Mortgage Association, 30, 34, 35 Commercial banks, 19, 20 Federal Reserve Banks Weekly reporting banks, 19-21 Condition statement, 10 Commercial banks Discount rates (See Interest rates) Assets and liabilities, 17-21 U.S. government securities held, 5, 10, 11, 27 Commercial and industrial loans, 17-21 Federal Reserve credit, 5, 6, 10, 11 Consumer loans held, by type and terms, 36 Federal Reserve notes, 10 Deposit interest rates of insured, 15 Federal Reserve System Loans sold outright, 20 Balance sheet for priced services, 64 Real estate mortgages held, by holder and property, 35 Condition statement for priced services, 64 Time and savings deposits, 4 Federally sponsored credit agencies, 30 Commercial paper, 22, 23, 33 Finance companies Condition statements (See Assets and liabilities) Assets and liabilities, 33 Construction, 42, 46 Business credit, 33 Consumer installment credit, 36 Loans, 36 Consumer prices, 42 Paper, 22, 23 Consumption expenditures, 49, 50 Financial institutions, loans to, 19, 20, 21 Corporations Float, 5 Profits and their distribution, 32 Flow of funds, 37-41 Security issues, 31, 61 Foreign banks, assets and liabilities of U.S. branches and Cost of living (See Consumer prices) agencies, 20, 21 Credit unions, 36 Foreign currency operations, 10 Currency in circulation, 5, 13 Foreign deposits in U.S. banks, 5, 20 Customer credit, stock market, 24 Foreign exchange rates, 62 Foreign trade, 51 DEBITS to deposit accounts, 16 Foreigners Debt (See specific types of debt or securities) Claims on, 52, 55, 56, 57, 59 Demand deposits Liabilities to, 20, 51, 52, 53, 58, 60, 61 Banks, by classes, 17-21 Ownership by individuals, partnerships, and corporations, 20, 21 GOLD Turnover, 16 Certificate account, 10 Depository institutions Stock, 5, 51 Reserve requirements, 8 Government National Mortgage Association, 30, 34, 35 Reserves and related items, 4, 5, 6, 12 Gross domestic product, 48 Deposits (See also specific types) Banks, by classes, 4, 17-21 Federal Reserve Banks, 5, 10 HOUSING, new and existing units, 46 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 INCOME and expenses, Federal Reserve System, 64 Repurchase agreements, 6 Income, personal and national, 42, 48, 49 Reserve requirements, 8 Industrial production, 42, 44 Reserves Installment loans, 36 Commercial banks, 17 Insurance companies, 27, 35 Depository institutions, 4, 5, 6, 12 Interest rates Federal Reserve Banks, 10 Bonds, 23 U.S. reserve assets, 51 Consumer installment credit, 36 Residential mortgage loans, 34 Deposits, 15 Retail credit and retail sales, 36, 42 Federal Reserve Banks, 7 Foreign central banks and foreign countries, 61 Money and capital markets, 23 SAVING Mortgages, 34 Flow of funds, 37^1 National income accounts, 48 Prime rate, 22 Savings institutions, 35, 36, 37 International capital transactions of United States, 50-61 Savings deposits (See Time and savings deposits) International organizations, 52, 53, 55, 58, 59 Securities (See also specific types) Inventories, 48 Investment companies, issues and assets, 32 Federal and federally sponsored credit agencies, 30 Investments (See also specific types) Foreign transactions, 60 Banks, by classes, 17-21 New issues, 31 Commercial banks, 4, 17-21 Prices, 24 Federal Reserve Banks, 10, 11 Special drawing rights, 5, 10, 50, 51 Financial institutions, 35 State and local governments Deposits, 19, 20 Holdings of US. government securities, 27 LABOR force, 42 New security issues, 31 Life insurance companies (See Insurance companies) Ownership of securities issued by, 19, 21 Loans (See also specific types) Rates on securities, 23 Banks, by classes, 17—21 Stock market, selected statistics, 24 Commercial banks, 17-21 Stocks (See also Securities) Federal Reserve Banks, 5, 6, 7, 10, 11 New issues, 31 Federal Reserve System, 64 Prices, 24 Financial institutions, 35 Insured or guaranteed by United States, 34, 35 Student Loan Marketing Association, 30 MANUFACTURING TAX receipts, federal, 26 Capacity utilization, 43 Thrift institutions, 4. (See also Credit unions and Savings Production, 43, 45 institutions) Margin requirements, 24 Time and savings deposits, 4, 13, 15, 17-21 Member banks (See also Depository institutions) Trade, foreign, 51 Federal funds and repurchase agreements, 6 Treasury cash, Treasury currency, 5 Reserve requirements, 8 Treasury deposits, 5, 10, 25 Mining production, 45 Treasury operating balance, 25 Mobile homes shipped, 46 Monetary and credit aggregates, 4, 12 Money and capital market rates, 23 UNEMPLOYMENT, 42 Money stock measures and components, 4, 13 U.S. government balances Mortgages (See Real estate loans) Commercial bank holdings, 17-21 Mutual funds, 32 Treasury deposits at Reserve Banks, 5, 10, 25 Mutual savings banks (See Thrift institutions) U.S. government securities Bank holdings, 17-21, 27 NATIONAL defense outlays, 26 Dealer transactions, positions, and financing, 29 National income, 48 Federal Reserve Bank holdings, 5, 10, 11, 27 Foreign and international holdings and OPEN market transactions, 9 transactions, 10, 27, 61 Open market transactions, 9 PERSONAL income, 49 Outstanding, by type and holder, 27, 28 Prices Rates, 23 Consumer and producer, 42, 47 U.S. international transactions, 50-62 Stock market, 24 Utilities, production, 45 Prime rate, 22 Producer prices, 42, 47 VETERANS Administration, 34, 35 Production, 42, 44 Profits, corporate, 32 WEEKLY reporting banks, 17-21 REAL estate loans Wholesale (producer) prices, 42, 47 Banks, by classes, 19, 20, 35 Terms, yields, and activity, 34 Type of holder and property mortgaged, 35 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ALICE M. RIVLIN, Vice Chair 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 MICHAEL J. PRELL, Director SCOTT G. ALVAREZ, Associate General Counsel EDWARD C. ETTIN, Deputy Director RICHARD M. ASHTON, Associate General Counsel DAVID J. STOCKTON, Deputy Director OLIVER IRELAND, Associate General Counsel MARTHA BETHEA, Associate Director KATHLEEN M. O'DAY, Associate General Counsel WILLIAM R. JONES, Associate Director ROBERT DEV. FRIERSON, Assistant General Counsel MYRON L. KWAST, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel PATRICK M. PARKINSON, Associate Director THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director OFFICE OF THE SECRETARY MARTHA S. SCANLON, Deputy Associate Director WILLIAM W. WILES, Secretary PETER A. TINSLEY, Deputy Associate Director JENNIFER J. JOHNSON, Deputy Secretary FLINT BRAYTON, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman DAVID S. JONES, Assistant Director STEPHEN A. RHOADES, Assistant Director CHARLES S. STRUCKMEYER, Assistant Director DIVISION OF BANKING ALICE PATRICIA WHITE, Assistant Director SUPERVISION AND REGULATION JOYCE K. ZICKLER, Assistant Director RICHARD SPILLENKOTHEN, Director JOHN J. MINGO, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director GLENN B. CANNER, Adviser WILLIAM A. RYBACK, Associate Director HERBERT A. BIERN, Deputy Associate Director DIVISION OF MONETARY AFFAIRS ROGER T. COLE, Deputy Associate Director JAMES I. GARNER, Deputy Associate Director DONALD L. KOHN, Director HOWARD A. AMER, Assistant Director DAVID E. LINDSEY, Deputy Director GERALD A. EDWARDS, JR., Assistant Director BRIAN F. MADIGAN, Associate Director STEPHEN M. HOFFMAN, JR., Assistant Director RICHARD D. PORTER, Deputy Associate Director JAMES V. HOUPT, Assistant Director VINCENT R. REINHART, Assistant Director JACK P. JENNINGS, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board MICHAEL G. MARTINSON, Assistant Director RHOGER H PUGH, Assistant Director DIVISION OF CONSUMER SIDNEY M. SUSSAN, Assistant Director AND COMMUNITY AFFAIRS MOLLY S. WASSOM, Assistant Director GRIFFITH L. GARWOOD, Director WILLIAM SCHNEIDER, Project Director, GLENN E. LONEY, Associate Director National Information Center DOLORES S. SMITH, Associate Director MAUREEN P. ENGLISH, Assistant Director IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 SUSAN M. PHILLIPS LAURENCE H. MEYER 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 JEFFREY C. MARQUARDT, Assistant Director JOHN R. WEIS, Associate Director JOHN H. PARRISH, Assistant Director JOSEPH H. HAYES, JR., Assistant Director FLORENCE M. YOUNG, Assistant Director FRED HOROWITZ, Assistant Director OFFICE OF THE INSPECTOR GENERAL OFFICE OF THE CONTROLLER BRENT L. BOWEN, Inspector General GEORGE E. LIVINGSTON, Controller DONALD L. ROBINSON, Assistant Inspector General STEPHEN J. CLARK, Assistant Controller (Programs and Budgets) BARRY R. SNYDER, Assistant Inspector General DARRELL R. PAULEY, Assistant Controller (Finance) DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director MARIANNE M. EMERSON, Assistant Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director EDWARD T. MULRENIN, Assistant Director DAY W. RADABAUGH, JR., Assistant Director ELIZABETH B. RIGGS, Assistant Director RICHARD C. STEVENS, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 Federal Reserve Bulletin • July 1996 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman EDWARD G. BOEHNE LAWRENCE B. LINDSEY GARY H. STERN JERRY L. JORDAN ROBERT D. MCTEER, JR. JANET L. YELLEN EDWARD W. KELLEY, JR. SUSAN M. PHILLIPS ALTERNATE MEMBERS J. ALFRED BROADDUS, JR. MICHAEL H. MOSKOW ERNEST T. PATRIKIS JACK GUYNN ROBERT T. PARRY STAFF DONALD L. KOHN, Secretary and Economist DAVID E. LINDSEY, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary FREDERIC S. MISHKIN, Associate Economist JOSEPH R. COYNE, Assistant Secretary LARRY J. PROMISEL, Associate Economist GARY P. GILLUM, Assistant Secretary ARTHUR J. ROLNICK, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel HARVEY ROSENBLUM, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel CHARLES J. SIEGMAN, Associate Economist MICHAEL J. PRELL, Economist THOMAS D. SIMPSON, Associate Economist EDWIN M. TRUMAN, Economist MARK S. SNIDERMAN, Associate Economist RICHARD W. LANG, Associate Economist DAVID J. STOCKTON, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL RICHARD G. TILGHMAN, President FRANK V. CAHOUET, Vice President WILLIAM M. CROZIER, JR., First District ROGER L. FITZSIMONDS, Seventh District WALTER V. SHIPLEY, Second District THOMAS H. JACOBSEN, Eighth District WALTER E. DALLER, JR., Third District RICHARD M. KOVACEVICH, Ninth District FRANK V. CAHOUET, Fourth District CHARLES E. NELSON, Tenth District RICHARD G. TILGHMAN, Fifth District CHARLES T. DOYLE, Eleventh District CHARLES E. RICE, Sixth District WILLIAM F. ZUENDT, 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

A71 CONSUMER ADVISORY COUNCIL KATHARINE W. MCKEE, Durham, North Carolina, Chairman JULIA M. SEWARD, Richmond, Virginia, Vice Chairman RICHARD S. AMADOR, LOS Angeles, California ERROL T. LOUIS, Brooklyn, New York THOMAS R. BUTLER, Riverwoods, Illinois WILLIAM N. LUND, Falmouth, Maine 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 HERIBERTO FLORES, Springfield, Massachusetts MARGOT SAUNDERS, Washington, D.C. EMANUEL FREEMAN, Philadelphia, Pennsylvania ANNE B. SHLAY, Philadelphia, Pennsylvania DAVID C. FYNN, Cleveland, Ohio REGINALD J. SMITH, Kansas City, Missouri ROBERT G. GREER, Houston, Texas GEORGE P. SURGEON, Arkadelphia, Arkansas KENNETH R. HARNEY, Chevy Chase, Maryland GREGORY D. SQUIRES, Milwaukee, Wisconsin GAIL K. HILLEBRAND, San Francisco, California JOHN E. TAYLOR, Washington, D.C. TERRY JORDE, Cando, North Dakota LORRAINE VANETTEN, Troy, Michigan FRANCINE JUSTA, New York, New York THEODORE J. WYSOCKI, JR., Chicago, Illinois EUGENE I. LEHRMANN, Madison, Wisconsin LILY K. YAO, Honolulu, Hawaii THRIFT INSTITUTIONS ADVISORY COUNCIL E. LEE BEARD, Hazleton, Pennsylvania, President DAVID F. HOLLAND, Burlington, Massachusetts, Vice President BARRY C. BURKHOLDER, Houston, Texas CHARLES R. RINEHART, Irwindale, California MICHAEL T. CROWLEY, JR., Milwaukee, Wisconsin JOSEPH C. SCULLY, Chicago, Illinois GEORGE L. ENGELKE, JR., Lake Success, New York RONALD W. STIMPSON, Memphis, Tennessee DOUGLAS A. FERRARO, Englewood, Colorado 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

A72 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, Securities Credit Transactions Handbook. $75.00 per year. MS-127, Board of Governors of the Federal Reserve System, The Payment System Handbook. $75.00 per year. Washington, DC 20551 or telephone (202) 452-3244 or FAX Federal Reserve Regulatory Service. Four vols. (Contains all (202) 728-5886. When a charge is indicated, payment should four Handbooks plus substantial additional material.) $200.00 accompany request and be made payable to the Board of Gover- per year. nors of the Federal Reserve System or may be ordered via Rates for subscribers outside the United States are as follows Mastercard or Visa. Payment from foreign residents should be and include additional air mail costs: drawn on a U.S. bank. Federal Reserve Regulatory Service, $250.00 per year. Each Handbook, $90.00 per year. FEDERAL RESERVE REGULATORY SERVICE FOR PERSONAL BOOKS AND MISCELLANEOUS PUBLICATIONS COMPUTERS. Diskettes; updated monthly. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Standalone PC. $300 per year. 1994. 157 pp. Network, maximum 1 concurrent user. $300 per year. ANNUAL REPORT. Network, maximum 10 concurrent users. $750 per year. ANNUAL REPORT: BUDGET REVIEW, 1994-95. Network, maximum 50 concurrent users. $2,000 per year. FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 Network, maximum 100 concurrent users. $3,000 per year. each in the United States, its possessions, Canada, and Subscribers outside the United States should add $50 to cover Mexico. Elsewhere, $35.00 per year or $3.00 each. additional airmail costs. ANNUAL STATISTICAL DIGEST: period covered, release date, num- THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTIber of pages, and price. COUNTRY MODEL, May 1984. 590 pp. $14.50 each. 1981 October 1982 239 pp. $ 6.50 INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. 1982 December 1983 266 pp. $ 7.50 440 pp. $9.00 each. 1983 October 1984 264 pp. $11.50 FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1984 October 1985 254 pp. $12.50 December 1986. 264 pp. $10.00 each. 1985 October 1986 231 pp. $15.00 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1986 November 1987 288 pp. $15.00 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 1980-89 March 1991 712 pp. $25.00 EDUCATION PAMPHLETS 1990 November 1991 185 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1991 November 1992 215 pp. $25.00 available without charge. 1992 December 1993 215 pp. $25.00 1993 December 1994 281 pp. $25.00 1994 December 1995 190 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages Consumer Handbook to Credit Protection Laws A Guide to Business Credit for Women, Minorities, and Small SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF Businesses CHARTS. Weekly. $30.00 per year or $.70 each in the United Series on the Structure of the Federal Reserve System States, its possessions, Canada, and Mexico. Elsewhere, The Board of Governors of the Federal Reserve System $35.00 per year or $.80 each. The Federal Open Market Committee THE FEDERAL RESERVE ACT and other statutory provisions affect- Federal Reserve Bank Board of Directors ing the Federal Reserve System, as amended through August Federal Reserve Banks 1990. 646 pp. $10.00. Organization and Advisory Committees A Consumer's Guide to Mortgage Lock-Ins REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL A Consumer's Guide to Mortgage Settlement Costs RESERVE SYSTEM. A Consumer's Guide to Mortgage Refinancings ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— Home Mortgages: Understanding the Process and Your Right Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. to Fair Lending Vol 11 (Irregular Transactions). 1969. 116 pp. Each volume How to File a Consumer Complaint $2.25. Making Deposits: When Will Your Money Be Available? GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 each. Making Sense of Savings FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated SHOP: The Card You Pick Can Save You Money monthly. (Requests must be prepaid.) Welcome to the Federal Reserve Consumer and Community Affairs Handbook. $75.00 per year. When Your Home is on the Line: What You Should Know Monetary Policy and Reserve Requirements Handbook. $75.00 About Home Equity Lines of Credit per year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 STAFF STUDIES: Only Summaries Printed in the 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- BULLETIN KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary Studies and papers on economic and financial subjects that are of Ann Taylor. March 1992. 37 pp. general interest. Requests to obtain single copies of the full text or 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by to be added to the mailing list for the series may be sent to James T. Fergus and John L. Goodman, Jr. July 1993. Publications Services. 20 pp. 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF Staff Studies 1-157 are out of print. MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- 1993. 18 pp. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by PRODUCTS, by Mark J. Warshawsky with the assistance of Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Dietrich Earnhart. September 1989. 23 pp. January 1994. Ill pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING Donald Savage. February 1990. 12 pp. PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, by Stephen A. Rhoades. July 1994. 37 pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by 168. THE ECONOMICS OF THE PRIVATE EQUITY MARKET, by Gregory E. Elliehausen and John D. Wolken. September George W. Fenn, Nellie Liang, and Stephen Prowse. Novem- 1990. 35 pp. ber 1995. 69 pp. 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, 169. BANK MERGERS AND INDUSTRYWIDE STRUCTURE, 1980-94, 1980-90, by Margaret Hastings Pickering. May 1991. by Stephen A. Rhoades. February 1996. 32 pp. 21pp. 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Maps of the Federal Reserve System M M M M B B ^ J ^. Minneapolis • 2 ^fi™ 7 YH CMCMX>M • 3 • EW 0RK ^ CLEVELAND PHILADELPHIA SANBunosco ]Q 4 J Kansas CityB _ • ^ Jmp, Richmond St. Louis r 5 6 • 11 • DALLAS ALASKA HAWAII LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city • Board of Governors of the Federal — Branch boundary Reserve System, Washington, D.C. NOTE The Federal Reserve officially identifies Districts by number of Puerto Rico and the U.S. Virgin Islands; the San and Reserve Bank city (shown on both pages) and by letter Francisco Bank serves American Samoa, Guam, and the (shown on the facing page). Commonwealth of the Northern Mariana Islands. The In the 12th District, the Seattle Branch serves Alaska, Board of Governors revised the branch boundaries of the and the San Francisco Bank serves Hawaii. System 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

A75 1-A 2-B 3-C 4-D 5-E Bavltimtorte/ M D t CT wv — \ B uff 1 a lo ' •Cincinnati •Charlotte f NY cr BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H •Nashville Birmingham- Ml ^ W| a. ; IS Detroit • Louisville MS GA IIAA • ^ LA Jacksonville AR H •Memphis New Orleans J ft ^ ttr Little" Miami ATLANTA CHICAGO ST. LOUIS 9-1 MINNEAPOLIS 10-J 12-L WY 1 NB CO Omaha* ^ MO • Denver ALASKA WA KM C OklahomaCitv I 3 Portland m OR ) KANSAS CITY m N V7 11-K alt £ake City ^ K ( S UT •Los Angele $ HAWAII ||s. A* DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 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 John C. Whitehead William J. McDonough Thomas W. Jones Ernest T. Patrikis Buffalo 14240 Joseph J. Castiglia Carl W. Turnipseed1 PHILADELPHIA 19105 Donald J. Kennedy Edward G. Boehne Joan Carter 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 John T. Ryan III Harold J. Swart1 RICHMOND* 23219 Claudine B. Malone J. Alfred Broaddus, Jr. Robert L. Strickland 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 Hugh M. Brown Jack Guynn Daniel E. Sweat, Jr. Patrick K. Barron James M. Mckee1 Birmingham 35283 Donald E. Boomershine Fred R. Herr1 Jacksonville 32231 Joan D. Ruffier James D. Hawkins1 Miami 33152 R. Kirk Landon James T. Curry III Nashville 37203 Paula Lovell Melvyn K. Purcell New Orleans 70161 Lucimarian Roberts Robert J. Musso CHICAGO* 60690 Robert M. Healey Michael H. Moskow Lester H. McKeever, Jr. William C. Conrad Detroit 48231 John D. Forsyth David R. Allardice1 ST. LOUIS 63166 John F. McDonnell Thomas C. Melzer Susan S. Elliott W. LeGrande Rives Little Rock 72203 Janet M. Jones Robert A. Hopkins Louisville 40232 John A. Williams Thomas A. Boone Memphis 38101 John V. Myers John P. Baumgartner MINNEAPOLIS 55480 Jean D. Kinsey Gary H. Stern David A. Koch Colleen K. Strand Helena 59601 Lane W. Basso John D.Johnson KANSAS CITY 64198 Herman Cain Thomas M. Hoenig A. Drue Jennings Richard K. Rasdall Denver 80217 Peter I. Wold Carl M. Gambs1 Oklahoma City 73125 Barry L. Eller Kelly J. Dubbert Omaha 68102 LeRoy W. Thorn Harold L. Shewmaker DALLAS 75201 Cece Smith Robert D. McTeer, Jr. Roger R. Hemminghaus Helen E. Holcomb El Paso 79999 Patricia Z. Holland-Branch Sammie C. Clay Houston 77252 Issac 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 John F. Moore Los Angeles 90051 Anita E. Landecker Mark Mullinix1 Portland 97208 Ross R. Runkel Raymond H. Laurence1 Salt Lake City 84125 Gerald R. Sherratt Andrea P. Wolcott Seattle 98124 George F. Russell, Jr. Gordon Werkema3 *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. 3. Executive Vice President Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis