Federal Reserve Bulletin, 1996-08

VOLUME 82 • NUMBER 8 • AUGUST 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 701 MONETARY POLICY REPORT TO THE practices on behalf of the Federal Reserve and CONGRESS says that the continuing growth in bank sales of mutual funds and other uninsured investments The U.S. economy performed well in the first necessitates a commitment on the part of the half of 1996. After rising only fractionally in the banking industry and bank supervisors to the fourth quarter of 1995, real gross domestic principle that effective disclosure of risks is in product posted a solid gain over the first half the best interest of the customer and the bankof 1996, providing a considerable lift to job ing organization, before the Subcommittee on growth. Moreover, the underlying trend of prices Capital Markets, Securities and Governmentstill appears to have been well contained: Over Sponsored Enterprises of the House Committee the past twelve months, the consumer price on Banking and Financial Services, June 26, index excluding food and energy items has risen 1996. 23/4 percent—near the lower end of the narrow range that has prevailed since early 1994. Looking ahead, the members of the Federal Open 727 ANNOUNCEMENTS Market Committee anticipate that economic Reappointment of Alan Greenspan as Chairman activity will grow more moderately, on average, of the Board of Governors. in coming quarters and that the unemployment rate will remain around the level it has averaged Appointment of Alice M. Rivlin as a member of over the past year and a half. the Board of Governors and as Vice Chair. Appointment of Laurence H. Meyer as a mem- 717 INDUSTRIAL PRODUCTION AND CAPACITY ber of the Board of Governors. UTILIZATION FOR JUNE 1996 Issuance of an Investment Scheme Advisory Industrial production increased 0.5 percent in about the proliferation of illegal "prime bank" June, to 125.7 percent of its 1987 average, after financial instruments and scams. a downward revised gain of 0.5 percent in May. Industrial capacity utilization rose 0.1 percent- Modification of prudential limitations estabage point in June, to 83.2 percent. lished by the Board for the "riskless principal" activities of bank holding companies. 720 STATEMENTS TO THE CONGRESS Proposal to simplify and update the require- Griffith L. Garwood, Director, Division of Con- ments of Regulation D. sumer and Community Affairs, Board of Gov- Issuance of a report on the combined statement ernors, comments on issues concerning the of condition of the Federal Reserve Banks. coverage of electronic benefit transfer (EBT) programs under the Electronic Fund Transfer Publication of the June 1996 update of the Bank Act (EFTA) and the Board's Regulation E and Holding Company Supervision Manual. says that coverage of EBT programs by the EFTA and Regulation E is appropriate under the 731 LEGAL DEVELOPMENTS law as it currently exists so that all citizens, Various bank holding company, bank service regardless of the source of their electronic transcorporation, and bank merger orders; and pendactions, are covered essentially by the same ing cases. rules, before the Subcommittee on Financial Institutions and Consumer Credit of the House Committee on Banking and Financial Services, 778 MEMBERSHIP OF THE BOARD OF June 19, 1996. GOVERNORS OF THE FEDERAL RESERVE SYSTEM, 1913-96 723 Edward W. Kelley, Jr., member, Board of Governors, discusses the supervision of bank sales List of appointive and ex officio members. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

780 COMBINED FINANCIAL STATEMENTS OF A63 GUIDE TO STATISTICAL RELEASES AND THE FEDERAL RESERVE BANKS These financial statements were prepared by an SPECIAL TABLES independent accounting firm and certify the combined statement of condition of the Federal A68 INDEX TO STATISTICAL TABLES Reserve Banks as of the end of 1995 together with related statements of income and changes A70 BOARD OF GOVERNORS AND STAFF in capital. A72 FEDERAL OPEN MARKET COMMITTEE AND STAFF; ADVISORY COUNCILS A1 FINANCIAL AND BUSINESS STATISTICS These tables reflect data available as of June 26, 1996. A74 FEDERAL RESERVE BOARD PUBLICATIONS A3 GUIDE TO TABULAR PRESENTATION A76 MAPS OF THE FEDERAL RESERVE SYSTEM A4 Domestic Financial Statistics A42 Domestic Nonfinancial Statistics A78 FEDERAL RESERVE BANKS, BRANCHES, A50 International Statistics AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress Report submitted to the Congress on July 18, 1996, inflationary forces to intensify would ultimately dispursuant to the Full Employment and Balanced rupt the growth process. The Federal Reserve recog- Growth Act of 19781 nizes that its contribution to promoting the optimal performance of the economy involves containing the rate of inflation and, over time, moving toward price stability. MONETARY POLICY AND THE ECONOMIC OUTLOOK The U.S. economy performed well in the first half of Monetary Policy, Financial Markets, and the 1996. In early February, when the Federal Reserve Economy over the First Half of 1996 prepared its last report on monetary policy, there was some concern about the strength and durability of the Information available around the turn of the year current economic expansion: The economy was oper- suggested that the economy had downshifted after ating at a relatively high level of resource utilization, posting a strong gain in the third quarter of 1995. The but it was not exhibiting a great deal of forward growth of final demand appeared to have slowed, momentum. As the year has unfolded, however, eco- reflecting importantly a deceleration of consumer nomic activity has proved quite robust. After rising spending. In addition, hesitant growth abroad and a only fractionally in the fourth quarter of 1995, real strengthening in the foreign exchange value of the gross domestic product posted a solid gain over the dollar relative to the levels prevailing at mid-1995 first half of 1996, providing a considerable lift to job were seen as limiting the prospects for further growth growth. Looking ahead, the members of the Federal in exports. The slowdown in the growth of final Open Market Committee (FOMC) anticipate that eco- demand had given rise to inventory buildups in nomic activity will grow more moderately, on aver- some industries; in turn, the production cutbacks age, in coming quarters and that the unemployment undertaken in response to those buildups were having rate will remain around the level it has averaged over a further damping effect on economic activity. Meanthe past year and a half. while, data on prices and wages suggested that infla- Although overall consumer price inflation was tion performance continued to be fairly satisfactory— boosted by higher energy prices during the first half indeed, better than many members of the FOMC had of the year, the underlying trend of prices still appears expected as of midyear 1995. To keep the stance of to have been well contained. Over the past twelve monetary policy from becoming effectively more months, the consumer price index excluding food and restrictive owing to the slowdown in inflation in the energy items has risen 23/4 percent—near the lower second half of last year and to promote sustainable end of the narrow range that has prevailed since early growth, the Committee eased the stance of policy in 1994. Moreover, the deflator for personal consump- December 1995 and again at the end of January 1996, tion expenditures on items other than food and energy bringing the federal funds rate down a half percentderived from data reported in the national income age point in total, to 5XA percent. and product accounts (NIPA) has continued to show a Most participants in financial markets were unsurslowing trend. prised by these policy adjustments, given the eco- The combination of brisk growth and favorable nomic backdrop. Moreover, they anticipated that underlying inflation so far this year has, of course, there would be scope for additional easing steps in been welcome. Nonetheless, mounting pressures on the coming months. Thus, between mid-December resources are apparent in some segments of the and the end of January, interest rates on Treasury economy—most notably in the labor market—and securities generally moved lower, especially at short these pressures must be monitored closely. Allowing and intermediate maturities, and stock price indexes edged higher on balance. The dollar strengthened 1. The charts for the report are available on request from Publica- slightly on net against the currencies of the other tions Services, Mail Stop 127, Board of Governors of the Federal Group of Ten (G-10) countries, reflecting, in part, Reserve System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

702 Federal Reserve Bulletin • August 1996 disappointing news about the pace of activity in has generally traded against an average of the cur- Europe and consequently larger declines in interest rencies of the other major industrial countries about rates there than in the United States. 4 percent above its level at the end of December. The underlying trends in the economy early in the During the first half of the year, credit remained year were obscured to a degree by extraordinarily easily available to most household and business adverse weather that affected a significant part of the applicants. Interest rate spreads on private debt over country. Through the course of the next few months, Treasury securities remained narrow. In response to however, it became increasingly clear that the econ- the recent increase in delinquencies on credit card omy had regained vitality. Consumer spending accounts, many banks have tightened their standards perked up after a lackluster holiday season and was for approval of new accounts, but this appears to only temporarily depressed by the severe winter. have only partially reversed a marked relaxation of Business demand for equipment proved quite strong, such standards earlier this decade, and banks overall as did housing demand. The strengthening in sales remain aggressive in the pursuit of new borrowers, facilitated businesses' efforts to control their inven- especially business clients. The debt of all domestic tories, and as that situation improved, industrial nonfinancial sectors combined expanded at about a production rebounded smartly. Overall employment 43/ percent annual pace, placing this aggregate near 4 growth was brisk, and by June the unemployment the middle of its monitoring range. M2 and M3 are rate reached its lowest level in six years. currently near the 5 percent and 6 percent upper Inflation during the first half of the year was gener- boundaries of their respective growth ranges, in line ally well behaved. Energy prices surged, mainly in with the FOMC's expectation as of last February. In response to a run-up in the world price of oil, and bad contrast to the experience of the early 1990s, growth news about grain crops raised the prospect of higher in the monetary aggregates relative to nominal gross food prices down the road. However, price inflation domestic product has been broadly in line with hisfor consumer items other than food and energy held torical relationships, given the structure of interest steady or moved a bit lower. Labor costs presented a rates. mixed picture. The increase in total hourly compensation over the first three months of the year, as measured by the employment cost index (ECI), was Economic Projections for 1996 and 1997 in line with its recent moderate trend. However, within total compensation, the wage and salary com- As noted previously, the members of the Board of ponent of the ECI surged in the first quarter, and Governors and the Reserve Bank presidents, all of further signals of wage acceleration came from a whom participate in the deliberations of the Federal more rapid increase in average hourly earnings in the Open Market Committee, generally think it likely second quarter. that economic activity will return to a moderate Against the backdrop of stronger activity but sub- growth path in the second half of 1996 and in 1997 dued inflation trends, the Federal Reserve made no after the larger gains in the first half of this year. The adjustments to its policy stance after January. With resulting increase in real GDP over 1996 as a whole economic activity more clearly on the upswing, how- would be in the range of 2Vi percent to 23/4 percent, ever, and prospects for a breakthrough on the federal somewhat above the forecasts in the February report budget seeming to fade, intermediate- and long-term on monetary policy. For 1997, the central tendency of interest rates reversed course in February and trended the forecasts spans a range of 13A percent to 2 XA perup over subsequent months. Since the end of Decem- cent. The civilian unemployment rate, which averber, the yield on the thirty-year Treasury bond has aged around 5V2 percent in the second quarter of increased about 1 percentage point, on net, while the 1996, is expected to stay near this level through the yield on the five-year note has risen about VA per- end of this year and perhaps to edge higher during centage points over the same period. The rate on 1997. three-month bills has edged up only slightly. Despite Economic activity clearly retains considerable the backup in bond yields, major stock-price indexes momentum. The trend in final demand is positive, rose considerably further through the first half of the and inventories appear to be well aligned with the year; most of those gains were erased in late June and current pace of sales—perhaps even a bit lean. the first half of July, however, as company reports Accordingly, the members of the FOMC recognize raised questions about the pace of earnings growth. the possibility that growth could remain elevated a The rise in bond yields has boosted the dollar in while, with the potential for putting greater pressure foreign exchange markets; since mid-April, the dollar on resources. Nonetheless, most members think that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 703 some slowing from the rapid growth pace recorded, are likely to add to overall inflation in 1996 after on average, in the first half is the most likely out- having damped it in 1995. Apart from these volatile come. Housing construction and other interest- sectors, inflation has remained in check so far this sensitive activity should be restrained to some degree year despite high levels of resource utilization and by the rise in long-term interest rates over the past reports that tightness in some parts of the labor several months. And although some of the lagging market is placing upward pressure on wages. Assumeconomies abroad are expected to perform better this ing no further adverse shocks to food and energy year, there are still concerns about the solidity of that prices, and in the context of the Federal Reserve's acceleration and the associated lift to U.S. exports. In intent to keep trend inflation well contained, the addition, growth in real business fixed investment Committee believes that overall CPI inflation should appears to be tapering off, although spending will recede. Accordingly, the central tendency of the likely remain buoyant because of the rapid rate of FOMC's forecasts shows CPI inflation dropping back product innovation and dramatic price declines in the to the range of 23A percent to 3 percent in 1997. computer area. Consumer spending is also expected The Committee's inflation projections incorporate to grow less rapidly in coming quarters. Household the technical improvements the Bureau of Labor wealth has been boosted substantially by the run-up Statistics is making to the CPI in 1996 and 1997; in stock prices over the past year and a half, but they are expected to shave a little from inflation in for many households, debt burdens have risen signifi- both years. The Committee also recognizes that the cantly in recent years and may represent a constraint remaining biases in the CPI are not negligible and on purchases of big-ticket items. may not be stable over time. Thus, it will continue to Most members of the FOMC expect the rise in the monitor a variety of alternative measures of price consumer price index over the four quarters of 1996 change as it attempts to gauge progress toward the to be in the range of 3 percent to 3lA percent, about long-run goal of price stability. VA percentage point higher than they predicted last The Administration has just released its midyear winter. The projected increase in the consumer price update to its economic and budgetary projections. Its index is also somewhat larger than that recorded in forecasts for real growth and inflation in 1996 and 1995. However, that step-up would mainly reflect 1997 are broadly in line with the central tendencies of developments in the food and energy sectors, which the forecasts of Federal Reserve policymakers. Money and Debt Ranges for 1996 and 1997 1. Economic projections for 1996 and 1997 Percent At its meeting earlier this month, the Committee Federal Reserve governors and Reserve Bank presidents reaffirmed the ranges for 1996 growth of money and IInnddiiccaattoorr AAddmmiinniissttrraattiioonn debt that it had established in February: 1 percent to n.nn. Central Range tendency 5 percent for M2, 2 percent to 6 percent for M3, and 1996 3 percent to 7 percent for the debt of the domestic nonfinancial sectors. In addition, the Committee CChhaannggee,, ffoouurrtthh qquuaarrtteerr ttoo ffoouurrtthh qquuaarrtteerr11 set provisional growth ranges for 1997 at the same NNoommiinnaall GGDDPP 444333///444---555%%% 555---555111///222 555...000 levels. Real GDP 222111///222---333 222555444---222***444 222...666 Consumer price index2 .. 333---333'''///444 333---333 VVV*** 333...222 In setting the ranges for M2 and M3, the Commit- Average level, tee intended to communicate its expectation as to the fourth quarter growth of these monetary aggregates that would Civilian unemployment 555VVV***---555333AAA AAAbbbooouuuttt 555VVViii 555...666 1997 CCChhhaaannngggeee,,, fffooouuurrrttthhh qqquuuaaarrrttteeerrr 2. Ranges for growth of monetary and debt aggregates tttooo fffooouuurrrttthhh qqquuuaaarrrttteeerrr111 Percent NNNooommmiiinnnaaalll GGGDDDPPP 44--5511//22 441144--55 55..11 Real GDP VV//ZZ--22VV22 PP//44--22''//44 22..33 Consumer price index2 .. 2211//22--33''//44 22^^//44--33 22..88 Aggregate 1995 1996 Provisional for 1997 Average level, fourth quarter M2 111---555 111---555 111---555 Civilian unemployment M3 222---666 222---666 222---666 rate 55VV44--66 55>>//22~~5533//44 55..77 Debt' 333---777 333---777 333---777 1. Change from average for fourth quarter of preceding year to average for NOTE. Change from average for fourth quarter of preceding year to average fourth quarter of year indicated. for fourth quarter of year indicated. 2. All urban consumers. 1. Monitoring range for debt of domestic nonfinancial sectors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

704 Federal Reserve Bulletin • August 1996 result under conditions of approximate price stability, tively upbeat. In the real estate market, sales of new assuming that the aggregates exhibit the same trends single-family dwellings have posted an average level relative to nominal spending that prevailed for many well above that of last year, thus encouraging buildyears until the early 1990s and that seem to have ers to boost housing starts. reemerged after an intervening period of marked Outlays for durable goods have continued to be the deviation. Based on that reemergence and on Com- strongest component of spending, extending the longmittee members' expectations for the growth of standing uptrend in the share of durables in total real nominal GDP in 1996 and 1997, the Committee consumption. Declining relative prices and the availanticipates that both M2 and M3 will probably finish ability of innovative products have continued to lift near the upper boundaries of their respective ranges demand for home electronic equipment and software each year. The Committee expects that the debt of the products. In addition, sales of light motor vehicles, domestic nonfinancial sectors will remain near the bolstered by relatively generous incentives and permiddle of its monitoring range in 1996 and 1997. In haps by the cash freed up by the surge in mortgage light of the rapid pace of technological change and refinancings last winter, averaged a healthy 15 milinnovation still occurring in the financial sector—and lion unit annual rate in the first half of 1996. the attendant uncertainty about the future behavior of After a lackluster performance in 1995, real outthe aggregates—the Committee will continue to rely lays for nondurable goods have also risen this year; on a wide range of other information in determining the average level of these expenditures in April and its policy stance. May was nearly 3 percent at an annual rate above that recorded in the fourth quarter. Meanwhile, spending on services has remained on a moderate uptrend, with ECONOMIC AND FINANCIAL DEVELOPMENTS short-run variations reflecting the effects of weather on household energy use. IN 1996 Consumer spending has been supported by brisk Economic activity has increased substantially thus far gains in wage and salary income associated with this year. Real gross domestic product grew at an the better pace of hiring this year. However, other annual rate of about 2lA percent in the first quarter of components of before-tax income, taken together, 1996, and the available data point to a much larger have risen less rapidly than they did in 1995, and increase in the second quarter. The increases in activ- gains in after-tax income were restrained by largerity have been facilitated by generally supportive than-usual tax bills (final payments less refunds) this financial conditions: Although long-term interest spring. Accordingly, the level of the personal saving rates have risen considerably on net since early 1996, rate in May was somewhat below that recorded in intermediaries have continued to supply credit to late 1995, although fragmentary data suggest that most borrowers on favorable terms, and interest rate saving rose sharply in June. In any event, taking a spreads on corporate securities over Treasury securi- longer perspective, spending and income have grown ties have remained narrow. In the foreign exchange at roughly similar rates over the past few years, and markets, the dollar has appreciated, on average, the saving rate has generally fluctuated in a fairly against the currencies of the other major industrial narrow band between 4 percent and 5 percent since countries. 1993—a low level historically. The recent developments in financial markets may have had an important influence on the spending Economic Developments decisions of individual households. In particular, households holding large stock portfolios have The Household Sector enjoyed sizable increases in wealth over the past year and a half, which may be inducing them to consume After a sluggish performance in late 1995, spending greater fractions of their incomes than they would by households has picked up noticeably this year. otherwise. At the same time, a growing number of Consumer expenditures increased about V/i percent households are apparently finding it difficult to meet at an annual rate in real terms in the first quarter and their debt-service obligations, judging from the appear to have posted another sizable gain in the appreciable rise in delinquency rates on consumer loans in recent years. In addition, it is possible that second quarter. In addition, according to indexes such job insecurity and longer-run concerns about retireas those compiled by the Survey Research Center ment income have caused many households to raise at the University of Michigan and the Conference their targets for asset accumulation. However, the Board, consumer sentiment has generally been rela- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 705 relative stability of the saving rate over the past few The Business Sector years suggests that the net effect of these factors on overall consumption—at least to date—has been Developments in the business sector were quite limited. favorable in the first half of 1996. After decelerating Residential construction has, on the whole, been in 1995, real business fixed investment rose at a robust this year. Private housing starts averaged \2Vi percent annual rate in the first quarter of 1996, nearly 1.5 million units at an annual rate through with sizable advances for both equipment and struc- June, a pace appreciably above that in 1995. In tures. And, although real investment appears to have addition, the volume of shipments of mobile homes decelerated again in the second quarter, it probably ("manufactured housing"), which has doubled over posted an appreciable gain. Over the past four years, the past five years, now stands around 350,000 units real investment has grown around 8 percent per year, at an annual rate, the highest level since 1974. on average, and now stands at a level that implies In the single-family sector, starts and sales of new quite substantial growth in the capital stock. The homes were surprisingly firm in the face of severe updating of capital and the increase in capital per weather in early 1996, and they moved still higher in worker are key to lifting productivity growth and the second quarter. Moreover, the regular survey of living standards. the National Association of Homebuilders continued Outlays for producers' durable equipment rose at to indicate solid demand through early July, and the an annual rate of about 14 percent in real terms in the Mortgage Bankers Association reported that loan first quarter, after a IVi percent rise over the course of applications for home purchases remained brisk 1995. As has been true throughout the expansion, through midyear. much of the first-quarter growth was in real outlays Relative to the lows reached in early 1996, the rate for computers and other information-processing on thirty-year conventional fixed-rate home mort- equipment; such investment received particular gages has risen nearly 1 Vi percentage points and has impetus from extensive price cutting in virtually all been fluctuating around 8'/4 percent in recent weeks. segments of the computer market and from a push However, a number of factors seem to have cush- to acquire the state-of-the-art equipment needed ioned the effects of these higher mortgage rates. In to take full advantage of popular new software and particular, rates on adjustable-rate mortgages have opportunities for information transfer. However, risen only about half as much as have those on incoming orders data and recent anecdotal reports thirty-year fixed-rate loans. Also, house prices have suggest that the growth in real outlays for computers firmed somewhat, which may have raised confidence may be slowing. Meanwhile, demand for other types in the investment value of residential real estate and of capital equipment, which had softened in 1995, thus contributed to the recent rise in the homeowner- firmed somewhat in the first quarter. ship rate, which is now at its highest level since the In the nonresidential construction area, real investearly 1980s. Probably more important in this regard, ment continued to expand in the first quarter. Howhowever, is the trend in the affordability of housing. ever, the monthly data suggest that outlays softened One simple measure of affordability is the monthly in the second quarter, an occurrence that is consistent mortgage payment on a new home having a given set with the downturn in contracts—a forward-looking of attributes, divided by average monthly household indicator of construction outlays—since late 1995. income. Despite the increase in mortgage rates this Trends within the construction sector have been year, this measure suggests that the cash-flow burden divergent. In the office sector, the modest recovery of homeownership is still only modestly above the that seemed to be under way appears to have waned lows of the past thirty years. even though vacancy rates have continued to fall and Construction of multifamily housing averaged transactions prices have continued to rise. Outlays about 300,000 units at an annual rate in the first half dropped noticeably in the fourth quarter of 1995 and of 1996, a rate somewhat above that in 1995 but the first quarter of 1996, and preliminary data suggest a fairly low one historically. Market conditions vary that they remained at a fairly low level in the second geographically, but the rental vacancy rate for the quarter. In contrast, spending for commercial strucnation as a whole seems to have tilted back up, after tures other than office buildings, which has been generally trending down between mid-1993 and mid- rising briskly since 1992, continued to advance 1995. Also, the absorption rate, which measures the through the first quarter—although further gains may percentage of apartments that are rented within three be limited by an emerging excess of retail space in months of their completion, edged back down in some parts of the country and the recent leveling out 1995 after several years of increases. of transactions prices. Elsewhere, outlays for indus- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

706 Federal Reserve Bulletin • August 1996 trial construction, which had moved up over 1994 in the unified budget over the first eight months of the and the first half of 1995, have been nearly flat over fiscal year—the period from October to May—was the past few quarters, while construction of hotels only $109 billion, $27 billion less than during the and motels, which account for less than 10 percent of comparable period of fiscal 1995. The improvement structures outlays, has boomed. in the deficit primarily reflected exceptionally rapid Investment in nonfarm business inventories slowed growth in receipts; outlays continued to rise at about dramatically in the fourth quarter of 1995 after run- the same pace as had been recorded, on average, over ning at a fairly rapid pace over much of last year, and the preceding four years. If present trends continue, it nearly ceased in the first quarter of 1996 as motor the fiscal 1996 deficit, when measured as a percentvehicle stocks plummeted. Automotive stocks had age of nominal GDP, will be the smallest since 1979. risen appreciably over the second half of 1995, and Federal receipts in the first eight months of fiscal some reduction was in train even before a March 1996 were 8 percent higher than in the same period a strike at General Motors curbed production; with year earlier; the rise was considerably greater than the strike, dealer stocks were drawn down sharply. that of nominal GDP. Boosted by the upswing in In addition, although firms outside motor vehicles business profits, corporate taxes have been increasing apparently made considerable progress in rectifying at double-digit rates since fiscal 1993, and that path inventory imbalances in late 1995, many continued to has extended into fiscal 1996. Individual income restrain production in response to continued weak taxes have also risen sharply this year; little informaorders in early 1996; producers of household dura- tion is available on the factors behind the surge in bles and textiles are notable examples. individual payments, but it may have resulted, at least Inventory investment evidently rebounded in the in part, from capital gains realizations associated second quarter, mainly because motor vehicle stocks with the strong performance in financial markets last stabilized as sales and production returned to year. rough balance. Outside of motor vehicles, stocks In total, federal outlays in the first eight months of accumulated moderately, on balance, in April and fiscal 1996 were 4 percent higher than during the May. As of May, inventory-sales ratios for all major corresponding period of fiscal 1995. Outlay growth sectors were noticeably below their levels in late was damped by the reductions in discretionary 1995; the decline in the ratio for retailers was espe- domestic spending implied by this year's appropriacially steep. tions legislation. However, expenditures for "manda- Economic profits of all U.S. corporations continued tory" programs continued to rise rapidly, and net to surge in the first quarter, extending the steep climb outlays for deposit insurance were less negative than that began in the early 1990s. The strength in profits in 1995 (that is, insurance premiums and the proin recent quarters has been attributable in large part to ceeds from net sales of thrift assets declined). In robust earnings growth at domestic financial institu- addition, net interest payments increased moderately, tions and a rebound in profits at foreign subsidiaries reflecting the growth in the stock of outstanding of U.S. corporations. In the domestic nonfinancial federal debt. corporate sector, the profit share—pretax profits Federal expenditures on consumption and divided by the sector's GDP—has been hovering investment—the part of federal spending included around 10 percent since mid-1994, after having risen directly in GDP—increased at an annual rate of about appreciably over the preceding few years; its current 6 percent in real terms in the first quarter of 1996 level is similar to the levels attained in the mid-1980s after declining about 13 percent in the fourth quarter but well below the highs of the 1960s and 1970s. of 1995. In part, real spending rose in the first quarter About half of the increase in the sector's profit share because the government shutdowns that occurred dursince the early 1990s has reflected a reduction in net ing the budget crisis depressed real spending less in interest expenses. the first quarter than in the fourth. Even so, given the enacted appropriations, the first-quarter increase was almost surely a transitory spike. The fiscal position of states and localities has been The Government Sector relatively stable in the aggregate over the past few years. As measured in the NIPA, the surplus (net of Although the nation continues to grapple with the social insurance funds) in the sector's operating prospect of growing federal budget deficits in the accounts has fluctuated in the range of $30 billion to years ahead, the incoming news on the budget for $40 billion (annual rate) since the beginning of 1994; fiscal 1996 has been extremely favorable. The deficit it stood around the middle of that range in the first Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 707 quarter. On the whole, these governments are in more than six months of declines, accounted for most considerably better shape than they were in the early of the increase in imports during the first four months 1990s. Even so, the sector remains under pressure to of 1996. balance rising demand for services—especially in The quantity of U.S. exports of goods and services education, corrections, and health care—against the expanded at a 2 percent annual rate during the first public desire for tax relief. quarter; it also appears to have expanded at about this Real expenditures on consumption and gross pace in April. The somewhat subdued pace of export investment—the part of state and local spending growth so far this year reflects, in part, a bunching of included directly in GDP—declined somewhat in the shipments, particularly of machinery, that resulted in first quarter of 1996. However, the decrease reflected an unusually strong increase in exports in the fourth primarily the effects of the unusually adverse winter quarter of last year. weather, and spending appears to have rebounded in Trends in economic activity have varied across the the second quarter. State and local employment major foreign industrial countries so far in 1996. In posted a respectable gain, on net, over the first six Japan, economic recovery appears to have taken hold, months of the year. In addition, outlays for construc- although the underlying pace of real GDP growth is tion rose about 3V2 percent in real terms over the year clearly less than the nearly 13 percent annual rate ending in the first quarter, reflecting higher spending reported for the first quarter; the first-quarter growth on highways and schools; monthly construction data rate was boosted, in part, by a temporary surge in through May suggest that spending rose substantially government spending and measurement practices in the second quarter. associated with the leap year.2 In Canada, growth Receipts of state and local governments rose about remained subdued in the first quarter as real GDP 4 percent in nominal terms over the year ending in rose only 1 lA percent at an annual rate despite much the first quarter, about matching the rise in nominal stronger growth in domestic demand; indicators for GDP. The sector's own-source general receipts, the second quarter suggest some strengthening. which comprise income, corporate, and indirect Economic performance so far this year in Europe business taxes, rose about 1 percentage point faster, has been mixed. In Germany, real GDP declined with solid gains in all major components. Federal another IV2 percent at an annual rate in the first grants have changed little, on net, over the past quarter, largely because severe weather caused a subfour quarters. stantial contraction in construction spending; preliminary data suggest that construction activity rebounded in the second quarter with the return to more normal weather. In contrast, French real GDP expanded The External Sector nearly 5 percent at an annual rate in the first quarter, supported by a very sizable rebound in consumption The nominal trade deficit in goods and services wid- as well as leap-year effects; strikes during the fourth ened from its low fourth-quarter level of $78 billion quarter of last year depressed economic activity and at an annual rate to $97 billion in the first quarter of contributed to a decline in private consumption 1996, slightly less than the deficit of $105 billion for spending. Indicators for the second quarter suggest 1995 as a whole. The current account deficit stood at that output growth moderated from its first-quarter $142 billion (annual rate) in the first quarter, about pace. In the United Kingdom, real GDP grew at an the same as the figure for 1995 as a whole. In April, annual rate of IV2 percent during the first quarter, the trade deficit increased from the average level for somewhat more slowly than during the second half of the first quarter. 1995. On the policy front, most European countries After expanding very slowly during the second are seeking to rein in their fiscal deficits during 1996 half of 1995, the quantity of U.S. imports of goods and 1997, in part to comply with the criterion in the and services rose about 10 percent at an annual rate Maastricht Treaty that countries participating in the in the first quarter, and preliminary data for April third stage of the European Monetary Union, now show another sizable increase. The rebound in scheduled to begin on January 1, 1999, not have imports largely reflected the strengthening of U.S. excessive fiscal deficits. As a reference value, the economic activity. In addition, non-oil import prices have declined somewhat since last fall, after having risen sharply in late 1994 and early 1995. A turn- 2. Although the statistical agencies in many countries take the around in imported automotive vehicles, consumer number of working days in the quarter into account when seasonally adjusting data, the statistical agencies in Japan, France, and Italy goods, and non-oil industrial supplies, following among the G-10 countries do not make working-day adjustments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

708 Federal Reserve Bulletin • August 1996 treaty specifies that deficits greater than 3 percent of a Labor Market Developments country's GDP are excessive, but it also provides scope for accepting deficits above that level in some Labor demand was strong over the first half of 1996. circumstances. Growth in nonfarm payroll employment exhibited In Mexico, robust growth of real GDP in the first considerable month-to-month variability but averquarter extended the recovery in economic activity aged a hefty 235,000 per month. In addition, the that began in the second half of 1995. Through June, civilian unemployment rate remained low, holding in the Mexican trade balance remained roughly stable the narrow range around 5V2 percent that has preat the level reached toward the end of last year vailed since late 1994. after having improved markedly over the course of Employment gains were fairly broadly based over 1995. Argentina also appears to be emerging from the first half of the year. The services sector, which the steep declines in output experienced during the now accounts for nearly 30 percent of nonfarm emfirst half of 1995, while Chile continues to enjoy ployment, continued to be a mainstay of job growth, steady growth. Activity in Brazil has begun to expand showing increases of nearly 120,000 per month, on again in recent months, following a sharp contraction average, over the first half. Within services, growth in mid-1995. in employment in business services remained rapid, Economic growth in our major Asian trading part- with large gains at computer and data processing ners (other than Japan) appears to have picked up firms as well as at temporary help agencies, and again this year after slowing noticeably during the employment in health services trended up further. second half of 1995 from the extremely rapid rates In addition, construction payrolls rose a brisk 30,000 recorded in 1994 and the first half of 1995. The per month, on average—an annual rate of about recent pickup in activity was associated with an eas- 7 percent. Elsewhere, payrolls at wholesale and retail ing of monetary policy in some of these countries in trade establishments continued to increase at about the second half of last year and the early part of this the same pace as that in 1995, and employment in the year. In China, output appears to have expanded finance, insurance, and real estate category picked up during the first quarter at around the 10 percent after having been nearly flat over 1994 and 1995. annual rate recorded in 1995, with a pickup in con- Developments in manufacturing were uneven but sumption spending compensating for weaker growth showed some improvement in the second quarter. As in the external sector. 1996 started, firms were still adjusting employment Consumer price inflation generally stayed low in to the slower path of output that had been evident the major foreign industrial countries and declined since early 1995, and payrolls—especially at firms or remained moderate elsewhere. In Japan, prices in producing nondurable goods—were reduced further. the second quarter, on average, were slightly above In the past three months, manufacturing employment their year-earlier levels because of the effects of yen has held fairly steady, buoyed by the pickup in indusdepreciation on import prices; this upturn followed a trial activity, and the average factory workweek, year of deflation. In western Germany, inflation which had contracted appreciably in 1995, trended up slowed through June to only about 1 lA percent. Infla- through June. tion in Italy remained higher than in the other major For the nonfarm business sector as a whole, proforeign industrial countries but slowed to below ductivity rose at an annual rate of about 2 percent in 4 percent through June. In Canada, inflation also the first quarter of 1996, echoing the acceleration in moved down further this year, to about IV2 percent in output. However, productivity had posted an outright May. decline in the fourth quarter of 1995; all told, produc- Inflation trends in Latin America have been mixed. tivity rose about 1 percent over the year ending in the In Mexico, the twelve-month change in consumer first quarter of 1996, in line with the average pace prices diminished to about 32 percent in June, com- this decade. In the manufacturing sector, productivity pared with a reading of 52 percent for the twelve rose 41/4 percent over the past year, although the months ending in December 1995. Consumer price reported increase was probably overstated because inflation has also declined further in Brazil and firms in this sector have been relying increasingly on remained low in Argentina. In contrast, prices have workers supplied by temporary help firms, who are picked up in Venezuela in response to the deprecia- counted as service industry employees rather than as tion of its currency associated with the adoption of a manufacturing employees in the establishment surprogram of macroeconomic stabilization. In Asia, vey of the Bureau of Labor Statistics. inflation has decreased so far in 1996 in China and Labor force participation has remained sluggish remained moderate to low elsewhere. this year. The participation rate, which measures the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 709 percentage of the working-age population that is Price Developments either employed or looking for work, did retrace the dip that occurred in late 1995. But taking a longer The underlying trend of prices has remained favorperspective, the overall participation rate (adjusted able this year—notably, the CPI excluding food and for the redesign of the household survey in 1994) has energy rose at an annual rate of 23A percent over the changed little, on net, since 1989 after rising fairly first six months of the year, near the lower end of the steadily from the mid-1960s to the late 1980s. The narrow range than has been evident since early 1994. flattening reflects mainly a marked deceleration in Developments in food and energy markets boosted women's participation, owing both to a leveling off overall inflation, however, and the total CPI rose at an in the percentage of women who are in the labor annual rate of 3V2 percent over the first half; this force for at least part of a given year and slower pattern was the reverse of that seen in 1995, when a growth in the average number of weeks they spend in small drop in energy prices, combined with only a the labor force that year. Moreover, with the average modest increase in food prices, held the rise in the number of weeks these women spend in the labor total CPI to just 2V2 percent. Meanwhile, the proforce having risen to a level only slightly below the ducer price index for finished goods rose about average for men, a significant rebound in participa- 23A percent over the twelve months ending in June; tion does not seem very likely over the near term. excluding food and energy, the PPI rose 1V2 percent, The sluggishness in participation tends to restrain the a bit less than over the preceding year. growth of potential output unless it is offset by a Consumer energy prices picked up around the turn better productivity performance or by faster growth of the year and rose at an annual rate of about in the working-age population—neither of which has 12 percent, on net, over the first six months of 1996. yet been in evidence. With crude oil stocks drained by strong worldwide Despite the tightness in labor markets in recent demand for heating oil and weather-related supply quarters, the broad trends in hourly compensation disruptions in the North Sea and elsewhere, the appear to have held fairly steady. The employment spot price of West Texas intermediate (WTI) soared cost index for private industry—a measure that from around $18 per barrel, on average, in the second includes wages and benefits—rose at an annual rate half of 1995 to a high of around $25 per barrel in of about 3 percent over both the first three months mid-April; the WTI price has since retraced much of 1996 and over the twelve months ending in of that run-up. Reflecting the surge in crude oil March; the ECI had also increased about 3 percent prices, retail prices of refined petroleum products over the twelve months ending in March 1995. Com- rose sharply through May, on balance. However, they pensation growth has continued to be damped by a fell markedly in June, and private surveys of gasoline marked deceleration in employer-paid benefits— prices imply a further decrease in early July. especially payments for medical insurance, which Retail food prices rose at an annual rate of about have been restrained by the slowing in medical care 4 percent over the first six months of 1996, somewhat costs, the switch in insurance arrangements from above the pace of the preceding few years. At the traditional indemnity plans to health maintenance farm level, prices of grains and other commodities organizations and other managed care plans, and rose to exceptionally high levels as adverse crop changes in the provisions of health plans (includ- conditions in some parts of the country exacerbated ing greater sharing of health care costs by employ- an already tight stock situation. For some foods— ees). On the whole, wages also seem to have been notably, dairy products, cereals and bakery products, held in check, although the most recent data may poultry, and pork—the pass-through tends to occur be hinting at some acceleration. Notably, the wage relatively rapidly, and retail prices of such items have and salary component of the ECI rose sharply in already risen appreciably. Beef prices fell through the first quarter; although the data are volatile May as producers sold off herds in response to higher and the first-quarter figure likely overstates current feed costs and poor range conditions; they turned wage trends, the twelve-month change in the series around in June and will likely rise further over the moved up to 3lA percent, nearly Vi percentage next several quarters as the selloff of breeding stock point larger than the increases in the preceding two will eventually lead to tighter supplies. years. Separate data on average hourly earnings of Price increases for consumer goods other than food production or nonsupervisory workers also show a and energy slowed to 1 percent at an annual rate recent acceleration in wages; the twelve-month over the first half of 1996, after averaging about change in this series moved up to about V/2 percent 1V2 percent per year over the preceding three years. in June. Increases in goods prices have been restrained, in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

710 Federal Reserve Bulletin • August 1996 part, by the uptrend in the dollar since mid-1995, succeeding ten years as that in the survey taken in the which has helped to damp import prices. In addition, fourth quarter of 1995. with the operating rate in the manufacturing sector having fallen to about its long-term average, pressure from the materials side has been limited. Indeed, the Financial Developments PPI for intermediate materials (excluding food and energy) actually fell a bit over the past twelve Credit months, after having risen IVi percent over the preceding year. Looking ahead, however, the latest Financial conditions in the first half of 1996 supreport from the National Association of Purchasing ported the pickup in the growth of spending. For the Managers suggests that vendor performance deterio- most part, lenders continued to pursue credit applirated markedly in June, a development that could cants aggressively as reflected, for example, in narportend some firming of prices of materials and sup- row spreads of interest rates on corporate securities plies over the near term. over those on Treasury securities. The debt of domes- Prices of non-energy services rose 33/4 percent at tic nonfinancial sectors increased about 43A percent an annual rate over the first half, about the same at an annual rate from the fourth quarter of 1995 as the rise over 1995 as a whole. Airfares accel- through May of this year, a pace that was a bit slower erated significantly in the first half. However, shelter than last year but still sufficient to place the level of costs increased less rapidly than they had in 1995, this aggregate in the middle of its monitoring range and prices of medical care continued to decelerate; for 1996. over the six months ending in June, the CPI for medical care services rose at an annual rate of only The Government Sector. Federal debt outstanding about 3j/4 percent, roughly 1 percentage point below increased about 4 percent at an annual rate over the the 1995 pace. Moreover, there is some evidence first half of 1996, a shade below the average rate of that the CPI may be understating the recent slow- increase last year. The impasse over the debt ceiling ing in medical care inflation, in part because it disrupted the timing and size of some Treasury aucdoes not fully capture the discounts negotiated tions but did not alter the longer-term trajectory of between medical providers and insurers, including federal debt. managed care plans. The price measure used to The pattern of net borrowing by state and local deflate consumer expenditures on medical care in the governments in the past several years has been NIPA better reflects such factors; it rose less than heavily influenced by their efforts to retire debt issued 2 percent over the year ending in the first quarter of at relatively high interest rates in the mid-1980s. 1996 after having risen AVi percent over the preced- They have pursued these efforts through a strategy of ing year. advance refunding: In the early 1990s, when bond Judging from the various surveys of consumers yields were seen as especially favorable, state and and forecasters, expectations of near-term CPI infla- local governments issued new debt, even before call tion deteriorated slightly in the first half of 1996. provisions on the older bonds could be exercised, and Notably, although both the University of Michigan placed the proceeds in escrow accounts. As it became and the Conference Board had reported a noticeable possible to do so, the issuing governments began drop in their one-year-ahead measures in the second calling the older debt, using the contents of the half of 1995, that improvement was not sustained in escrow accounts to complete the transactions. Re- 1996; the recent monthly readings have bounced flecting these retirements, the amount of state and around, but the June results from both surveys were local government debt outstanding declined about similar to those recorded, on average, in the first half 4 percent per year in 1994 and 1995. This process is of 1995. In contrast, longer-run inflation expecta- still in train but evidently on a smaller scale; availtions, which have presumably been less affected by able information suggests that state and local governthe recent news in food and energy markets, have ment debt outstanding declined only marginally durheld fairly steady. Smoothing through the monthly ing the first half of this year. data, the University of Michigan's measure of expected CPI inflation over the next five to ten years The Household Sector. The pace of borrowing by has not changed much since late 1994, and the survey households appears to have moderated somewhat of professional forecasters conducted by the Federal from the elevated rates of 1994 and 1995, but it Reserve Bank of Philadelphia during the second quar- remains substantial. In particular, consumer credit ter of 1996 produced the same expectation for the expanded at a 9Vi percent annual rate from the fourth Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 711 quarter of 1995 through May of this year, a rate that riskier borrowers—even those with a previous bankwas down from \4Vi percent over the four quarters of ruptcy on their records. 1995. Mortgage debt actually expanded somewhat Other indicators are less suggestive of a deterioramore rapidly during the first quarter than in 1995 tion in the financial condition of households. For (VA percent at an annual rate versus 6V2 percent), example, the delinquency rate for mortgage loans and available indicators suggest that growth during sixty days or more past due at all lenders is near its the second quarter dropped back only to about last lowest level in two decades, while the rate on closedyear's pace. The recent backup in mortgage rates, end consumer loans—despite having moved up over which only began in February, has had little effect on the past eighteen months—remains low by historical borrowing thus far and might even have increased it standards. Moreover, the aggregate balance sheet of temporarily by accelerating transactions. the household sector clearly is in very good shape; The rapid growth in household debt during the owing in large part to the surge in equity prices over past few years has resulted in a sizable increase in the past year and a half, the ratio of household net the estimated ratio of scheduled payments of princi- worth to disposable personal income moved up into pal and interest to disposable personal income. This record territory recently. measure of debt-servicing burden has trended up over Apparently in response to the recent run-up in the past two years, and as of the first quarter of 1996, delinquency and charge-off rates on consumer loans, was approaching—but still short of—the levels banks have selectively tightened their standards for attained toward the end of the last business cycle consumer lending. These actions reversed steps taken expansion. earlier in the decade, when many card issuers Several other recent indicators suggest that some increased the growth of their credit card receivables households are experiencing financial strains. For by offering accounts to customers who previously example, the Consolidated Report of Condition and would have been denied credit. The belief was that Income shows that the delinquency rate on credit- more sophisticated credit-scoring techniques would card receivables at commercial banks has increased control risks adequately, but it appears that some significantly in recent quarters, retracing about one- "adverse selection" occurred and that the uptick in third of the improvement that took place during the delinquencies has been larger than at least some first few years of the current economic expansion. banks had planned. About 20 percent of the respon- The delinquency rate on auto loans at the finance dents in the Federal Reserve's most recent survey of companies affiliated with the major manufacturers senior loan officers reported having tightened stanmoved up sharply beginning about two years ago and dards for approving applications for credit cards, and since late last year has hovered around historically 10 percent reported tightening standards for other high levels. Anecdotal evidence suggests that the rise consumer loans. Notwithstanding the recent tightenin both credit card and auto-loan delinquency rates ing of standards, supply conditions for loans from reflects a strategy to liberalize lending standards as banks to consumers still appear accommodative. part of an overall marketing effort. The auto loan delinquency rate has also been boosted a bit by the The Business Sector. The debt of nonfinancial increased prevalence of leasing. Lease customers tend businesses also appears to have expanded somewhat to be better credit risks than the average conventional less rapidly during the first half of 1996 than it did borrower, and the shift toward leasing has had the last year. In part, the moderation in borrowing can be effect of skimming the more financially secure car traced to the behavior of the financing gap for incorbuyers and thus degrading somewhat the remaining porated nonfinancial enterprises—the excess of their pool of people financing their purchases through con- capital expenditures (including inventory investment) ventional loan contracts. over their internally generated funds. During 1995, The personal bankruptcy rate also surged to a new this gap narrowed quite substantially, reflecting high this year. The extent to which this development strong profits and a marked reduction in inventory reflects mounting financial difficulties of households investment. Available indications are that the gap has is clouded, however, by changes in federal law (effec- remained small this year. tive at the start of 1995) that may have increased the External funding for business spending has been attractiveness of bankruptcy by increasing the value in plentiful supply thus far this year. One piece of of assets that can be protected from liquidation in evidence on this point is that interest rate spreads on bankruptcy proceedings. The "cost" of bankruptcy to investment-grade bonds have edged down slightly households has also been effectively lowered by the since the beginning of the year. Additionally, spreads greater willingness of lenders to extend credit to on high-yield bonds have declined markedly and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

712 Federal Reserve Bulletin • August 1996 are as low as they have been in at least a decade. the fourth quarter of last year and first quarter of this Also, supply conditions for loans from banks to busi- year, and commercial bank credit—a component of nesses continue to look quite favorable. According to total depository credit for which more recent data are the Federal Reserve's most recent survey of bank available—slowed further in the second quarter. The lending officers, standards for approval of commer- share of thrift institutions in total depository credit cial and industrial loans were about unchanged from has continued to decline in recent quarters. This January to May of this year, and terms on such loans long-standing trend may have been given additional were eased on net. Surveys by the National Federa- impetus last summer by the opening up of a differention of Independent Business indicate that small busi- tial between the premium rates paid by banks and nesses have not faced difficulty getting credit, and thrifts for their deposit insurance; this differential has stories abound of new small-business lending pro- reduced the cost of funds for banks relative to the grams of banks. cost of funds for thrift institutions. Gross offerings of long-term bonds by nonfinancial The reduction and subsequent elimination of the corporations have been running about in line with last deposit insurance premium for financially sound year's pace. However, the mix of issuers has shifted banks probably played a role in shifting bank funding somewhat, reflecting the changing structure of rates. toward deposits. During the first half of 1996, banks Late last year and early this year, investment-grade increased their deposit liabilities more rapidly than corporations were issuing a hefty volume of bonds to their nondeposit liabilities—a contrast from the prepay down commercial paper and to refinance existing ceding few years when banks relied disproportionlong-term debt. As the rates on investment-grade ately for their funding on nondeposit sources, includbonds increased this year, issuance of such debt ing borrowing from their foreign offices. dropped off. Rates on high-yield bonds moved up less, however, and issuers of those bonds continued to offer new debt at a rapid pace. The Monetary Aggregates Gross issuance of equity shares by nonfinancial corporations has been exceedingly strong this year. The increased reliance on deposit sources of funding Indeed, total offerings in each of the three months of by banks has helped support the growth of the broad the second quarter set successive monthly records. money aggregates of late. Between the fourth quarter This activity has been fueled by initial public offer- of last year and June of this year, M3 expanded at an ings and other equity issuance by relatively young annual rate of about 6 percent, putting it at the upper companies. Share retirements by nonfinancial corpo- boundary of its annual growth cone. As in 1995, the rations have also been very heavy. Announced stock growth in M3 this year was led by those components buybacks by such firms in both the first and second not included in M2. In the aggregate, these compoquarters ran at $28 billion per quarter—the fastest nents increased about 11 percent at an annual rate pace since the late 1980s. On net, available informa- between the fourth quarter of last year and June of tion suggests that nonfinancial corporations retired this year, only moderately below the 1995 average even more equity during the first half of 1996 than pace of W/2 percent. Institution-only money-market they had in 1995. mutual funds increased about 18 percent at an annual Share retirements and merger activity have gener- rate over this period. This component of the money ated much less issuance of debt recently than they did stock increased especially rapidly during the first in the 1980s. Recent share repurchases have been three months of the year. Often, the yields on these undertaken mostly by companies seeking to return funds lag changes in short-term market interest rates, the excess cash on their balance sheets to stockhold- making them particularly attractive investments when ers. And recent mergers and acquisitions have mainly short-term market rates are declining, as they were been accomplished through stock swaps between around the turn of the year when the Federal Reserve companies in similar lines of business, rather than the eased policy. leveraged transactions commonplace in the 1980s. In M2 increased 43A percent at an annual rate between line with the limited extent of debt financing, the the fourth quarter of 1995 and June of this year, mergers executed thus far in 1996 have resulted in leaving it near the upper boundary of its growth little net change in bond ratings—again in marked range. For many years before the early 1990s, the contrast to the experience of the 1980s. velocity of M2 (defined as the ratio of nominal GDP to M2) moved roughly in tandem with the oppor- Depository Intermediation. The growth of credit tunity cost of holding M2—that is, the interest earnprovided by depository institutions slowed sharply in ings forgone by holding M2 assets rather than market Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 713 instruments such as Treasury bills. This relationship The sluggish growth of currency has held down implied that M2 tended to move in proportion to expansion of the monetary base to only about 2 pernominal GDP, except as it was influenced by changes cent at an annual rate thus far this year. The other in the opportunity cost of holding it. When the oppor- restraint on the growth of the base has been the tunity cost rose, owners of M2 tended to economize turnaround in the behavior of required reserves. After on their holdings, driving up the velocity of M2. surging at double-digit rates in 1992 and 1993, Beginning around the early 1990s, however, this required reserves have been on a downward trend, historical relationship began to break down. Indeed, and at an increasing rate. Thus far this year, required in 1991 and 1992, the velocity of M2 rose sharply reserves have contracted about 7V2 percent at an even as the opportunity cost of holding M2 declined. annual rate. The emergence of this trend is perhaps A number of reasons for this development have been the most direct consequence of the spread of sweep adduced, including the unusually steeply sloped yield programs. Absent such programs, required reserves curve and very low level of short-term interest rates, probably would have increased about 10 percent over which helped to attract the public out of liquid bal- the same period, owing to strong growth in demand ances and into more readily available long-term deposits. Continued spread of sweep programs could mutual funds; the credit crunch at banks and the affect the federal funds market, perhaps leading to resolution of troubled thrift institutions, which re- greater volatility like that experienced in early 1991 duced the aggressiveness with which these institu- following the elimination of reserve requirements on tions sought retail deposits; and household balance- nontransactions deposits. Thus far, such instabilities sheet restructuring, which entailed in part repayment have not been realized, but the Federal Reserve is of loans out of liquid money balances. The divergent monitoring the situation carefully. movement of the velocity of M2 and its opportunity cost continued until the end of 1992. More recently, the variables have once again been moving essen- Interest Rates, Equity Prices, tially in parallel. In light of the rapid ongoing pace of and Exchange Rates innovation and technological change in financial services, however, it is impossible to know whether the Interest Rates. Interest rates on Treasury securinew parallel movement of velocity and the opportu- ties rose over the first half of 1996, with the most nity cost will persist. pronounced increases occurring for intermediate-term Ml declined about VA percent at an annual rate securities. Between the end of December 1995 and during the first half of 1996, just as it had done over the middle of July, the rate on three-month bills the four quarters of 1995. The recent sluggish behav- increased somewhat less than lA percentage point, the ior of Ml reflects the ongoing spread of so-called rate on five-year notes rose about VA percentage sweep programs, under which idle reservable depos- points, and the rate on thirty-year bonds rose about its are "swept" into money-market-deposit accounts 1 percentage point. Despite these increases, nominal (MMDAs). (The appendix provides additional infor- Treasury rates overall continued to be relatively low mation on sweep accounts.) Estimates based on by the standards of the past twenty years. initial amounts swept suggest that Ml would have The spread between interest rates on investmentexpanded at about a 7 percent annual rate during the grade private bonds and those on comparablefirst half of 1996 in the absence of these programs. maturity Treasury securities remained narrow during Another factor contributing to the recent weakness in the first half of the year. In particular, the average Ml has been the growth of currency, which has been spread on Baa-rated industrial bonds over thirty-year sluggish by the standards of the early 1990s. Foreign Treasury bonds continued to fluctuate near where it demand for currency apparently has tailed off some- has been for the past several years and well below the what. In large part, the slackening in net foreign levels typical of the 1980s. The spread on investmentdemand owes to substantial reflows from Argentina grade utility bonds continued to drift upward, but this and Mexico, where earlier worst-case fears about the appeared to reflect the market's increasing perception stability of the financial system have not been real- that some firms in that industry might become riskier ized. Reflows from Western Europe and Asia have as a result of deregulation and new competitive presalso been significant, but net shipments to the former sures. The rate spread on high-yield bonds over the Soviet Union remain sizable. On the whole, demand comparable Treasury notes narrowed sharply, reversfor the new $100 bill has been substantial, but this ing the upward drift of 1995, and returning this has not had any detectable effect on the stock of measure to the low end of its range over the past currency outstanding. decade. The continuing low level of spreads on most Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

714 Federal Reserve Bulletin • August 1996 investment-grade securities, as well as the marked fallen since the end of last year in some European decline of the spread on high-yield securities, countries, such as France and Italy, where political appeared to reflect in part market participants' and economic policy uncertainties have been reincreasing confidence in the durability of the eco- duced. In Japan, long-term interest rates have risen nomic expansion and consequent optimism about the about 30 basis points, on balance. Short-term market creditworthiness of corporate borrowers. interest rates abroad are generally lower than they were at the end of last year. German short-term Equity Prices. Share prices have fallen in recent market rates are down nearly 50 basis points, while weeks, most notably those of "high-tech" companies rates in France are down more than 100 basis points whose ability to maintain steep earnings trajectories and those in the United Kingdom are down 70 basis has come into question. On net, though, broad in- points. Official lending rates have been reduced by dexes of equity prices have held steady or moved up the central banks in Germany, France, the United slightly since the end of 1995. As of July 16, the Kingdom, and several other European countries in S&P 500 composite index of stock prices had 1996. In Japan, short-term market interest rates increased 2 percent thus far this year, while the remain near the historically low levels reached during NASDAQ index had returned to its beginning-of-year the second half of 1995 as the Bank of Japan's level. Even this performance has been impressive, official rates have been unchanged. Stock markets given that it occurred in the face of appreciable in the foreign G-10 countries have risen 3 percent to upward movement in long-term interest rates. 15 percent since the end of December, except in the United Kingdom, where stock prices, on balance, are Exchange Rates. Since mid-April, the weighted- about unchanged. average value of the dollar in terms of the other G-10 The Mexican peso traded during the first half of currencies has generally been about 4 percent above 1996 in a range somewhat stronger than that which its level at the end of December, although the dollar prevailed at the end of 1995. Mexican twenty-eighthas moved down somewhat in mid-July. When com- day treasury bill (cetes) rates have declined from pared with an index of currencies from a somewhat nearly 50 percent in December to around 30 percent broader group of U.S. trading partners, the dollar has as the rate of inflation has fallen. The economic appreciated 3 percent since December after adjust- positions of Mexican households and firms have ment for changes in relative consumer prices. The improved since early 1995, but problems in the finandollar has risen on balance about 4 percent in terms cial system remain, as evidenced by increasing of the German mark and about 6 percent in terms of amounts of nonperforming loans at banks. Stock the Japanese yen. prices have risen, on balance, about 5 percent in peso The dollar has been supported by perceptions of a terms since December, buoyed by the interest rate disparity in the performance of the U.S. economy declines and evidence of recovery in the Mexican relative to that of many of our major trading partners economy. and the resulting expectations for the course of rela- The pace at which private foreigners acquired U.S. tive interest rates. Specifically, while data suggesting assets increased markedly in the first quarter. robust growth in the United States caused interest Although private net purchases of U.S. Treasury securates to rise, questions remained about the strength of rities were small, there were large increases in the expansions in a number of other industrial countries, private holdings of U.S. government agency bonds particularly in Europe. Average long-term (ten-year) and U.S. corporate bonds, as U.S. corporations issued interest rates in the other G-10 countries have risen heavily in the Eurobond market. In addition, direct only slightly, about 20 basis points, since the end of investment capital inflows surged to almost $30 bil- December. With U.S. rates rising substantially more lion in the first quarter, reflecting a pickup in foreign than that, the appreciation of the dollar over this acquisitions of U.S. firms. Together, these gross period is consistent with the shift in the long-term inflows totaled nearly $80 billion, roughly twice the interest differential in favor of the dollar. In addition, U.S. current account deficit for the quarter. U.S. net the dollar was lifted to an extent against the yen by purchases of foreign stocks and bonds were also data early in the year showing that the Japanese sizable in the first quarter, with net purchases of external surpluses were narrowing. foreign stocks from Japan particularly large. U.S. direct investment abroad slowed somewhat between Despite a weak output performance, long-term the fourth quarter of 1995 and the first quarter of interest rates in Germany have risen about 50 basis 1996 but remained near the record pace for all of last points, with much of that increase coming during the year. In April and May, private foreign interest in first quarter. Long-term interest rates have actually Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 715 U.S. securities continued to be strong while U.S. 3. Sweeps of transaction deposits into savings accounts investor interest in foreign stocks cooled somewhat Billions of dollars from the strong first-quarter pace. Monthly averages of Period Cumulative total Foreign official holdings in the United States initial amounts increased about $52 billion in the first quarter of 1996 1994 after a record $110 billion rise in 1995. These January 5.3 5.3 February 2.2 7.5 increases reflected both intervention to support the .0 7.5 April .0 7.5 foreign exchange value of the dollar by certain indus- .0 7.5 trial countries and substantial reserve accumulation .0 7.5 July .0 7.5 by several developing countries. Data for April and .0 7.5 September 1.5 9.0 May indicated continued increases in official hold- October .6 9.6 ings in the United States but on a much more modest November .3 9.9 December .0 9.9 scale. 1995 January .0 9.9 February .0 9.9 .0 9.9 .0 9.9 APPENDIX: SWEEPS OF RETAIL 5.0 14.9 TRANSACTION DEPOSITS June 7.3 22.2 July .6 22.8 4.6 27.4 September 5.9 33.3 In January 1994, depository institutions began imple- 7.7 41.0 menting sweep programs for retail customers.3 In 4.3 45.3 December 9.2 54.5 such programs, balances in household transaction 1996 accounts (typically NOW accounts, but also some 13.7 68.2 demand deposits, both of which are included in Ml) February 7.0 75.2 6.4 81.6 are swept into savings deposits, which are part of the 7.8 89.4 May 8.4 97.8 non-Mi portion of M2. Such sweeps shift deposits from reservable (transactions) accounts to nonreserv- NOTE. Figures are the estimated total of transaction account balances initially swept into savings accounts owing to the introduction of new sweep programs. able (savings) accounts without impairing depositors' Monthly totals are averages of daily data. ability to access the funds for transactions purposes. Regular monthly updates of initial amounts swept may be obtained by email by sending an email address along with a phone number to Depositories have an incentive to establish these pro- sweeps-frb@frb.gov. Those without access to email may request data by grams because reserves held at the Federal Reserve calling (202) 872-7577. earn no interest. Retail sweep programs reduce reported reserves, the monetary base, and Ml. They savings balance is returned to the transaction account. have no effect on M2, because both transactions and Alternatively, in a weekend sweep program, all savings accounts are in M2. affected transaction account balances are swept Retail sweep programs have been established either into the special purpose savings account over the as daily sweeps or as weekend sweeps. Under a daily weekend and then returned on Monday. Some sweep, a depositor's transaction balances above a "weekend sweep" programs undertake sweeps on target level are shifted each night into a special certain holidays as well. savings account created for the purpose. If debits No information is available on the current amounts threaten to reduce the remaining transaction account of transaction balances that are being swept into balances below zero, enough funds are transferred savings accounts. The Federal Reserve has obtained back from the savings account to reestablish the data from depositories only on the initial amounts target level of transaction balances. Because only six swept on the date each program was established. The transfers are allowed out of a savings account within table, which is updated and made available to the a statement month, on the sixth transfer, the entire public on an ongoing basis, shows that the initial amounts swept under programs implemented through May 1996 have cumulated to $98 billion. With a marginal reserve requirement of 10 percent on 3. Sweep accounts for business customers of banks became wide- most of these balances, the cumulative reduction of spread in the mid-1970s. They involve sweeps of demand deposits required reserves attributable to the initial amounts into repurchase agreements or other money market instruments whose swept has been nearly $10 billion. minimum sizes are too large to accommodate households. (Table 4 appears on the following page.) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

716 Federal Reserve Bulletin • August 1996 4. Growth of money and debt Percent Domestic Period Ml M2 M3 nonfinancial debt Year1 1980 7.5 8.7 9.6 9.5 1981 5.4 (2.5 2) 9.0 12.4 10.2 1982 8.8 8.8 9.7 9.8 1983 10.3 11.8 9.5 11.9 1984 5.4 8.1 10.8 14.6 1985 12.0 8.6 7.7 14.4 1986 15.5 9.2 9.0 13.3 1987 6.3 4.2 5.9 10.0 1988 4.3 5.7 6.3 8.8 1989 .6 5.2 4.0 7.9 1990 4.1 4.1 1.8 6.8 1991 7.9 3.1 1.2 4.6 1992 14.3 1.8 .6 4.7 1993 10.5 1.4 1.0 5.2 1994 2.4 .6 1.6 5.2 1995 -1.8 4.0 5.9 5.6 Quarter (annual rate)3 1995:1 -.1 1.0 4.5 5.4 2 -.5 3.8 6.3 7.1 3 -1.5 6.9 7.9 4.9 4 -5.1 4.1 4.5 4.7 1996:1 -2.7 5.9 7.2 4.7 2 -.5 4.1 5.3 n.a. 1. From average for fourth quarter of preceding year to average for fourth 2. Adjusted for shifts to NOW accounts in 1981. quarter of year indicated. 3. From average for preceding quarter to average for quarter indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

717 Industrial Production and Capacity Utilization for June 1996 Released for publication July 16 At 125.7 percent of its 1987 average, total industrial production in June was 3.5 percent higher than it Industrial production increased 0.5 percent in June was in June 1995. For the second quarter, industrial after a downward revised gain of 0.5 percent in production increased at a seasonally adjusted annual May. The output of consumer durables, business rate of 5.6 percent, up from 3.0 percent in the first equipment, construction supplies, and materials quarter; the recovery in the output of motor vehicles advanced nearly 1 percent or more. After a relatively and parts after the General Motors strike in March hot May, however, the production of nondurable accounted for the acceleration. consumer goods fell as electricity output slackened. Industrial production indexes Twelve-month percent change Twelve-month percent change Materials 10 Products 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 C a p a c i t y ^— 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 Percent of capacity Percent of capacity Total industry Manufacturing 90 Utilization Utilization 80 70 I I I I I I J I L 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, June. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

718 Federal Reserve Bulletin • August 1996 Industrial production and capacity utilization, June 1996 Industrial production, index, 1987=100 Percentage change CCaatteeggoorryy 11999966 19961 JJuunnee 11999955 ttoo Mar.r Apr/ May' June? Mar/ Apr/ Mayr Junef JJuunnee 11999966 Total 123.6 124.5 125.1 125.7 -.5 .7 .5 .5 3.5 Previous estimate 123.6 124.4 125.3 -.5 .7 .7 Major market groups Products, total2 120.0 120.7 121.1 121.5 -.6 .6 .3 .3 3.0 Consumer goods 115.3 115.8 116.1 116.2 -1.1 .5 .2 .0 1.2 Business equipment 162.7 166.4 166.5 168.3 -1.3 2.3 .1 1.0 8.5 Construction supplies 111.5 109.5 110.6 111.5 2.0 -1.7 .9 .9 4.0 Materials 129.1 130.2 131.2 132.3 -.2 .9 .8 .8 4.3 Major industry groups Manufacturing 125.2 126.5 126.9 127.6 -.9 1.1 .3 .6 3.5 Durable 135.6 138.4 139.0 140.4 -1.4 2.0 .4 1.0 6.8 Nondurable 113.6 113.4 113.6 113.6 -.2 -.2 .1 .1 -.6 Mining 101.1 100.5 101.0 102.5 3.2 -.5 .5 1.5 1.5 Utilities 128.0 126.0 129.2 127.6 1.1 -1.6 2.6 -1.3 5.4 Capacity utilization, percent 1995 1996 Average, Low, High, 1967-95 1982 1988-89 June Mar.1 Apr.r Mayr June? Total 82.1 71.8 84.9 83.5 82.6 82.9 83.1 83.2 3.9 Previous estimate 82.6 82.9 83.2 Manufacturing 81.4 70.0 85.2 82.7 81.3 81.8 81.8 82.0 4.4 Advanced processing 80.7 71.4 83.5 80.8 79.6 80.4 80.2 80.4 5.1 Primary processing . 82.6 66.8 89.0 87.0 85.3 85.3 85.6 85.7 2.6 Mining 87.4 80.6 86.5 90.2 90.3 89.9 90.3 91.7 -.1 Utilities 86.9 76.2 92.6 89.7 94.0 92.4 94.6 93.3 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. Industrial capacity utilization rose 0.1 percentage the output of other components of this group, includpoint in June, to 83.2 percent. ing communications equipment, copiers, and measur- When analyzed by market group, the data show ing instruments also advanced strongly. Increases in that the output of consumer goods was unchanged in auto and light truck assemblies and in aircraft manu- June, with a 1.6 percent increase in the production of facturing boosted the output of transit equipment, durable consumer goods offset by a 0.4 percent although cuts in heavy and medium truck assemblies decrease in the output of the much larger consumer partly offset those gains. The production of industrial nondurables category. The increase in the output of equipment was unchanged for a second month, and durables resulted from roughly equal gains in auto- the output of other equipment edged up; production motive products and other durable goods; most of the in both groups has fallen off after having peaked in increase in the latter reflected a jump in the output of February. The output of defense and space equipappliances. About half of the decline in the produc- ment, pushed down by a strike at an aircraft manufaction of consumer nondurables resulted from the drop turer, more than reversed its 0.7 percent increase in in the residential use of electricity. The output of May. paper products, gasoline, and food also decreased. The output of construction supplies rose 0.9 per- The production of business equipment rose 1.0 per- cent for a second month. The production of durable cent, bolstered by sizable gains in both information goods materials grew 1 percent, with strength processing equipment and transit equipment. The throughout the components of this group, including 1.7 percent increase in the output of information semiconductors, computer parts, basic metals, and processing equipment was led by another large gain the parts used to make motor vehicles. The output of in the output of office and computing equipment, but nondurable materials edged up; a drop in paper partly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 719 offset gains in textiles, chemicals, and containers. trial use of electric power. The revision of IP and The production of energy materials rose, despite the capacity will both incorporate updated source data drop in electricity output, because of gains in natural for recent years and feature a change in the method of gas and crude oil extraction, as well as an increase in aggregating the indexes. From 1977 onward, the coal mining. value-added proportions used to weight individual When analyzed by industry group, the data show series will be updated annually rather than quinquenthat manufacturing output advanced 0.6 percent after nially. In addition, the production and capacity a gain of half that size in May. Gains were wide- indexes will be rebased so that 1992 actual output spread among industries in durable manufacturing; equals 100. the only easing was in the output of furniture and The aggregate IP indexes will be constructed with fixtures, which had increased 2.2 percent in May. a superlative index formulation similar to that intro- Production increased more than 1 percent for comput- duced by the Bureau of Economic Analysis in its ers, electrical machinery, steel, and motor vehicles December 1995 revision of the National Income and and parts. The output of nondurables rose 0.1 per- Product Accounts. At present, the aggregate IP cent, the same amount as in May. Although output indexes are computed as linked Laspeyres indexes, advanced in most of the industries within nondurable with the weights updated every five years. Because of manufacturing, the declines in the output of foods the rapid fall in the relative price of computing power, and paper and products offset most of the gains. After that periodic updating of weights is too infrequent to an increase in May, the production in mining rose provide reliable estimates of current changes in out- 1.5 percent; the output at utilities fell a similar put and capacity. With the publication of the revision, amount. we will update our value-added proportions annually The strength in durables and the weakness in non- and use a Fisher index-number methodology. This durables continue their patterns of the past year or new superlative index formulation will be applied to more; the output of durables has risen 6.8 percent all aggregates of IP, capacity, and gross value of since June 1995, and the production of nondurables product. has declined 0.6 percent over the same period. Utili- The regular updating of source data for IP will ties have also shown solid gains during the past year, include the introduction of annual data from the 1994 rising 5.4 percent. Utility output grew about l3/4 per- Annual Survey of Manufactures of the Bureau of the cent per year, on average, between 1977 and 1995. Census. The factory operating rate advanced 0.2 percentage The statistics on the industrial use of electric power point in June, to 82.0 percent, the same level as in the will be revised back to 1972. These revisions stem fourth quarter of 1995. Utilization rates increased for from three basic sources. First, the new figures incorboth advanced- and primary-processing industries, porate more complete reports received from utilities with most industries showing increases in operating for the past few years. Second, an updated panel of rates. The rate for iron and steel rose more than reporters on cogeneration will be fully integrated into 1 percentage point, while the rates for leather and our survey of electric power use. Third, the levels of products, tobacco, motor vehicles and parts, and tex- the monthly electric power series for manufacturing tile mill products rose more than Vi percentage point. industries will be benchmarked to indexes derived The largest decrease in utilization came in paper and from data published in the Census Bureau's annual products, where the operating rate fell 0.9 percentage surveys and censuses of manufactures. These indexes point. The utilization rate for mining increased will also be revised so that 1992 electric power usage 1.4 percentage points; although the rate for utilities equals 100. fell 1.3 percentage points, it remains more than 6 per- The revised data will be available at the Board's centage points above its 1967-95 average. World Wide Web site. The data will also be available This release and the history for all series pub- on diskettes from the Board of Governors of the lished here are available on the Internet at the Federal Reserve System, Publication Services, 202- Board of Governors' World Wide Web site, 452-3245. The revised data will also be available http://www.bog.frb.fed.us. through the Economic Bulletin Board of the Department of Commerce; for information call 202-482- 1986. In addition to the data currently provided, the 1996 REVISION ANNOUNCEMENT time series of implicit prices necessary for a user to aggregate IP and capacity under the new methodol- During the fourth quarter of 1996, the Federal ogy will be provided. For information on the plans Reserve will publish a revision of its measures of for these revisions, call 202-452-3151. industrial production, capacity utilization, and indus- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

720 Statements to the Congress Statement by Griffith L. Garwood, Director, Division more efficiently deliver benefits for both state and of Consumer and Community Affairs, Board of Gov- federal programs by reducing the cost of benefit ernors of the Federal Reserve System, before the delivery, facilitating the management of program Subcommittee on Financial Institutions and Con- funds, and helping to reduce fraud. sumer Credit of the Committee on Banking and As EBT programs developed in the early 1990s, Financial Services, U.S. House of Representatives, the Board considered whether, and in what manner, June 19, 1996 Regulation E ought to apply. The objective was to provide legal certainty so that agencies could make The Board of Governors of the Federal Reserve Sys- informed decisions about developing or expanding tem appreciates this opportunity to comment on programs. The EFTA, enacted in 1978, provides the issues concerning the coverage of electronic benefit basic framework that establishes the rights and transfer (EBT) programs under the Electronic Fund responsibilities of participants in electronic payment Transfer Act (EFTA) and the Board's Regulation E. systems. The Congress directed the Board to pre- Under amendments to Regulation E adopted by the scribe regulations implementing the law and to Board in February 1994, EBT programs are subject demonstrate—to the extent practicable—that the conto modified Regulation E requirements scheduled to sumer protection of the regulation outweighs the take effect on a mandatory basis on March 1, 1997. compliance costs necessary to provide this protection. This hearing will examine the potential impact of Transfers covered by the act and Regulation E applying Regulation E to these programs, particularly include transfers initiated through ATMs, point-ofthe potential costs of compliance with the rules that sale terminals, telephone bill-payment systems, or limit a recipient's liability for unauthorized transfers. home banking programs. The act and regulation I will discuss coverage of EBT programs under the restrict the unsolicited issuance of ATM cards and EFTA, which the Board is responsible for implement- other access devices. They provide for disclosure of ing; address the states' concern that the costs of the terms and conditions of an EFT service, limitacomplying with Regulation E could impede the tions on consumer liability for unauthorized transfers, development of EBT programs; and make some error resolution, and documentation of transfers comments about legislative proposals. through terminal receipts and periodic statements. Government agencies have developed EBT pro- Under the EFTA, the Board has a broad mandate to grams in which recipients use plastic cards and per- determine coverage when electronic services are sonal identification numbers (PINs) to access food offered by entities other than traditional financial stamp benefits at point-of-sale (POS) terminals in institutions. Section 904(d) of the act provides that if food stores and cash benefits at either automated EFT services are made available to consumers by a teller machines (ATMs) or at POS terminals. The person other than a financial institution holding a Board supports the nationwide effort to provide consumer's account, the Board shall ensure that the public benefits—such as social security, food stamps, act's provisions are made applicable to such persons and Aid to Families with Dependent Children—to and services. It was under this mandate that the citizens electronically. Board considered whether, and how, government The electronic transfer of benefits offers numerous agencies that offer EBT programs should be required advantages over paper-based delivery systems, both to comply. for recipients and for program agencies. For recipi- The legislative history of the EFTA provided guidents, these advantages include faster access to bene- ance on the Board's authority to determine if particufits, greater convenience in terms of times and loca- lar services should be covered by the act. Under tions for obtaining benefits, improved security section 904(c), rules issued by the Board "may conbecause funds may be accessed as needed, lower tain such classifications, differentiations, or other costs because recipients avoid check-cashing fees, provisions—as in the judgment of the Board are and greater privacy and dignity. For agencies, EBT necessary or proper to effectuate the purposes of this programs offer a single, integrated system that can title, [or] to prevent circumvention or evasion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

721 thereof. . . ." In discussing section 904(c), a Senate ATMs and POS terminals; EBT programs generally Banking Committee report stated that "since no one use existing payment systems or dedicated terminals, can foresee EFT developments in the future, regula- and both provide receipts. To address the cost contions would keep pace with new services and assure cerns of program agencies, the Board provided an that the act's basic protections continue to apply."1 exception from the periodic statement requirement In February 1993, the Board proposed amendments under certain circumstances. Instead of sending to Regulation E providing modified coverage of EBT monthly statements, EBT programs may provide programs. In February 1994, the Board adopted final account balance information by telephone or at a amendments. In adopting the amendments, the Board terminal and a written account history upon request. noted that the act's legislative history, the language The purpose of this modification was to eliminate of the act and regulation, and the strong similarity of paper. The attached chart summarizes the applicable EBT systems to other EFT services supported cover- provisions.2 age of EBT programs under the act and regulation. To enable states that are interested in EBT to test From a public viewpoint, an EBT program functions and implement their programs, the Board delayed the much like a checking account with direct deposit of date of mandatory compliance with the final rule to government benefits and ATM and POS services March 1, 1997. The Board approved the delay in available to access the benefits. response to a request made by the Federal EBT Task The Board considered the arguments presented by Force and endorsed by the Vice President. The task governments and agencies on why Regulation E force—which represents all the major federal agenought not to apply. Agencies suggested, for example, cies with benefit programs—has been working that it was inappropriate for Regulation E to apply toward a nationwide system for the electronic delivbecause government agencies differ from private- ery of government benefits. The task force asked for sector financial institutions in a number of ways the three-year delay so that, in cooperation with the related to how compliance costs can be borne. states, the agencies could take the necessary mea- Despite these arguments, the Board determined that sures for implementing EBT programs in compliance all consumers using EFT services are entitled to with Regulation E. receive substantially the same protections under the The Board was, and remains, aware of the states' EFTA and Regulation E and that this includes recipi- concern that the costs of complying with Regulaents of government benefits. Thus, the Board's rules tion E could impede the development of EBT proprovide benefit recipients much the same rights that grams. Before adopting the final rule, the Board are available to other users of electronic payment specifically solicited comment on the operational and mechanisms and apply to government agencies cost impacts of coverage, particularly in the areas of requirements that are largely equivalent to those that liability for unauthorized transfers and error resolugovern private-sector EFT services. In essence, the tion. In its proposal, the Board stated that any com- Board rejected the idea of treating benefit recipients ments opposing application of Regulation E on the differently from other citizens by denying them the basis of cost should be supported by substantial and rights and protections of the Electronic Fund Transfer persuasive data. While many states submitted cost Act. estimates in response to the proposal, the Board was To facilitate compliance, the Board made certain not persuaded that a case had been made for exemptmodifications to Regulation E as it would apply to ing programs from Regulation E. EBT. Under the rules that go into effect next March, Today, many states continue to assert that the applimodified requirements apply to EBT programs that cation of Regulation E would make EBT prohibirecognize their special characteristics. First, an tively expensive, primarily because of the rules that agency must disclose a recipient's liability for unau- limit the recipient's liability for unauthorized transthorized transfers, the types of transfers the recipient fers. Generally, Regulation E limits liability to $50 if may make, a notice about error resolution proce- the recipient notifies the agency within two business dures, and certain fees that may be imposed; gener- days of learning of the loss or theft of the card. States ally, EBT programs provide training for benefit express concern that potential losses from fraud and recipients that includes written disclosures. Second, misuse could force them to discontinue EBT proan agency must document EFTs through receipts at 2. The attachment to this statement is available from Publications 1. Fair Fund Transfer Act, Senate Report 95-915, 95 Cong. 2 Sess. Services, Mail Stop 127, Board of Governors of the Federal Reserve (GPO, 1978). System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

722 Federal Reserve Bulletin • August 1996 grams when compliance with Regulation E becomes established or administered by states or localities. mandatory next March. Other bills remain under consideration. Without minimizing the states' concern, it is Whether these legislative proposals to exempt EBT important not to overstate the risks. Regulation E programs from the EFTA are wise is obviously a does not mandate an automatic replacement of bene- decision for the Congress should it choose to amend fits when a claim of lost or stolen funds is made by a the law, and the Board would not object to such consumer. The agency will investigate the claim, action. However, the Board offers one observation. If consider the available evidence, and make a determi- an exemption is granted, limited to a particular catenation about whether a transfer was unauthorized or gory of EBT programs (such as needs-tested prowas made by the recipient or by someone to whom grams administered at the state and local level) withthe recipient furnished access. If it turns out that a out applying to EBT programs across the board, recipient has given a family member or someone else varying rules for different government benefit proaccess to benefits, the recipient is fully liable for grams would result. This could make it very difficult transfers. And although an agency may not routinely to implement the multipurpose, one-card, unified reject a claim because the recipient has filed a claim national delivery system envisioned by the Congress previously, the agency could factor in previous claims and by the federal government. Either the federal and and losses by the recipient in deciding whether to state programs would have to issue separate cards or honor a claim of unauthorized use. they would have to explain to recipients how and The Board recognizes that there are legitimate why different rules apply depending on the source of concerns about the need to control for fraudulent the funds. claims. But there are means that an agency may adopt In conclusion, the Board believes that coverage of to help minimize fraudulent claims that do not con- EBT programs by the EFTA and Regulation E is flict with Regulation E, means that exist today in the appropriate under the law as it currently exists. The paper-based system. For example: the agency could EFTA provides that all consumers using electronic put recipients on restricted issuance (such as credit- fund transfer services have certain rights and responing the recipient's benefits biweekly, rather than sibilities in connection with the transfer of their monthly); restrict the sites at which the recipient funds. Thus, the rule extends to benefit recipients the could receive benefits; or appoint a representative same rights that are available to other users of elecpayee. The agency could also place the recipient on a tronic payment services. The rule applies to governpaper back-up system. Although these limitations ment agencies requirements and responsibilities may be desirable only in certain circumstances, such equivalent to those that apply to private-sector EFT measures are possible approaches for dealing with services. Therefore all citizens, regardless of the recipients who misuse the EBT system. source of their electronic transactions, are covered by Since 1994, states have had an opportunity to essentially the same rules. develop effective management controls and operating The Board also believes that it should be possible rules to control the cost of compliance with Regula- to implement EBT programs in conformity with tion E. This has provided a chance to find other Regulation E and EFTA and at the same time mainpractical solutions to the liability exposure. In addi- tain the integrity of the programs and their accounttion, the Department of Agriculture has carried out ability for public funds. But to the extent that it is test programs that should provide useful data about necessary to balance the consumer protection the actual costs of coverage. afforded by the EFTA against concern about the The Board is aware of the various bills that would potential effect of the law's compliance costs on the exempt EBT programs from the EFTA. The "Per- nationwide delivery of EBT, the Congress may wish sonal Responsibility and Work Opportunity Act of to reexamine the scope of the law's coverage. 1995," H.R.4, which was passed by the Congress and Today's hearing provides a very useful forum for that vetoed by the President, would have exempted EBT examination, and we appreciate the opportunity to programs that distribute needs-tested benefits and are participate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 723 Statement by Edward W. Kelley, Jr., Member of the 60 percent of which were money market funds. As Board of Governors of the Federal Reserve System, you can see, the banking industry's share of total before the Subcommittee on Capital Markets, Securi- mutual funds outstanding is relatively small, particuties and Government-Sponsored Enterprises, Com- larly when money market funds are excluded. mittee on Banking and Financial Services, U.S. House With respect to sales volume, excluding money of Representatives, June 26, 1996 market funds, banks sold about $32 billion of equity and debt funds in 1995, up from $29 billion in 1994. It is a pleasure to appear before this subcommittee to These uninsured investment products—whose prices discuss the supervision of bank sales practices on are most susceptible to changes in interest rates and behalf of the Federal Reserve. The recent publication other market factors—generate the most concern that of various survey results has focused attention on the customers understand they could lose the principal performance of the banking and securities industries that they invested. Over the years, the banking agenin educating customers about the critical differences cies have consistently sought to protect and educate between FDIC-insured deposits and uninsured invest- customers who might incorrectly believe that such ment products sold on bank premises. investments are insured deposit instruments. The Board has a long history of concerns about possible customer confusion between insured deposit instruments and uninsured investment products sold INTERAGENCY STATEMENT on bank premises. We have worked and continue to work diligently to minimize customer confusion In February 1994, the banking agencies jointly issued through a number of supervisory and educational an Interagency Statement on the Retail Sales of Noninitiatives. These initiatives include coordination deposit Investment Products. The interagency stateamong the banking agencies to formulate clear and ment calls for banks selling such products on their comprehensive guidelines governing the conduct of premises to intensify their disclosure efforts to advise sales programs for nondeposit investment products retail customers that the investments are not deposits offered on bank premises; the development of insured by the FDIC, are not guaranteed by the bank, detailed examination procedures covering all aspects and are subject to the risk of loss of principal. These of sales of nondeposit products; and the development three disclosures are quite similar to those that have and implementation of an ambitious, multifaceted been required by the Federal Reserve since 1972, education program for consumers and for banks. We when it issued interpretations of Regulation Y peralso have developed a productive relationship with taining to bank holding company sales of uninsured the National Association of Securities Dealers investment instruments such as commercial paper. (NASD) that includes the coordination of examina- Banks were required to provide disclosures that were tions of bank-affiliated broker-dealers and the shar- intended to enhance customer awareness and miniing of examination information in appropriate cir- mize the mistaken notion that an investment product cumstances. Finally, the banking agencies and the purchased on bank premises was the same as an securities self-regulatory organizations have been insured deposit. working together to extend the same professional The interagency statement also formalized the qualification standards found in the securities indus- agencies' expectation that sales of investment prodtry to bank sales personnel. ucts would take place in an area of the lobby dis- Before discussing these matters in more detail, I tinctly separate from teller windows and other locabelieve it would be helpful to discuss briefly the tions where deposits could be made. Moreover, continuing growth of the banking industry's sale of advertisements and account statements that contain mutual funds and other nondeposit investment prod- information about both insured deposits and uninucts that has occurred since early 1994, when the sured investment products must separate the informa- Board last testified on this subject. tion and provide the three disclosures I mentioned earlier. Appropriate standards for training, compensation, suitability, and supervision also were discussed. MUTUAL FUND SALES Finally, the interagency statement addressed the relationship between banks and third parties that sell It is estimated that there were $3.1 trillion of mutual investment products on bank premises—by far the funds outstanding as of April 1996, up about 50 per- most typical scenario, because approximately 87 percent from year-end 1994. Of this amount, bank pro- cent of all sales on bank premises occur through prietary funds accounted for about $420 billion, about broker-dealers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

724 Federal Reserve Bulletin • August 1996 EXAMINATION PROCEDURES action in response to the problems, the NASD has addressed the matter with the affiliated broker-dealer, Shortly after issuing the interagency statement, the thereby ensuring that all parties to the business activ- Federal Reserve developed detailed examination pro- ity are responding to the supervisors' collective cedures for use in state member banks that sell mutual concerns. funds to retail customers. The procedures are Most important, we have established effective lines intended to enhance the supervision of these activi- of communication and a cooperative working relaties and to ensure bank compliance with the guide- tionship with the NASD. We think that this relationlines contained in the interagency statement. The ship has made our supervisory programs more procedures focus on the adequacy of disclosure, the effective. physical separation of securities sales from deposittaking activities, and other procedures intended to avoid customer confusion and ensure customer NASD PROPOSED RULEMAKING protection. In the two years since implementation, our examin- In late 1994, the NASD proposed new rules governers have found that banks generally have procedures ing sales of securities on bank premises by member in place that comply with the guidelines in the inter- firms. The Federal Reserve worked with NASD staff agency statement. In some cases, examiners have and provided extensive comments on the proposal, identified material deficiencies in sales programs and many of which were incorporated into its revised instructed that they be corrected. Although the Fed- rule. The NASD also relied on the expertise of the eral Reserve is prepared to initiate an enforcement many commenters as well as on the advice of a newly action against any bank found to operate a sales created committee of bank-affiliated broker-dealers program in a manner not consistent with principles of and third-party providers that sell through banks. The safety and soundness, in each case in which problems result is that the NASD's proposed rule now is generwere discovered the bank responded promptly. In ally consistent with the interagency statement with some cases this included a temporary suspension of respect to the important issues of separation and sale activities until deficiencies were corrected. We disclosure. We informally have communicated with have also found many banks to be proactive in their NASD representatives on issues, such as use of confiefforts to operate investment sales programs in a safe dential information, that need additional clarification. and sound manner, and our staff answers frequent The extensive communication in connection with this inquiries concerning compliance with the require- rulemaking demonstrates the commitment of both the ments of the interagency statement. industry and the regulators to achieve consistency in rules and guidelines governing this area. Our goal is to maximize the benefits and minimize the burdens NASD COORDINATION resulting from our joint jurisdiction in this area. In January 1995, the banking agencies entered into an Agreement in Principle with the NASD to coordinate BANKING AGENCIES' PROPOSED RULEMAKING the supervision and examination of bank-affiliated ON PROFESSIONAL QUALIFICATIONS broker-dealers between the NASD and the banking agencies. In the interest of functional supervision and The staff of the banking agencies is nearing completo avoid duplicative efforts to supervise and examine tion of a proposed rule to establish a professional entities subject to the legal jurisdiction of both the qualifications program for banks selling securities to NASD and the banking agencies, arrangements were retail customers that closely follows securities indusmade to share examination schedules, coordinate try requirements. We believe the establishment of examinations, and share pertinent findings relevant to professional qualification requirements is in the best the retail securities sales activities of such firms. interests of the banking industry and of consumers. Pursuant to the agreement, the Federal Reserve has Briefly, the proposed rule would require bank worked closely with the NASD on several occasions employees to take and pass a securities industry to address supervisory issues arising from the exami- professional qualification examination before beginnation of a state member bank and an affiliated ning to sell securities to retail customers. This will broker-dealer that conducts retail sales activities on ensure that bank securities representatives are approthe bank's premises. While the Federal Reserve has priately trained and educated as required by the interaddressed the issues with the bank to seek corrective agency statement and will enhance the ability of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 725 banks to serve their retail securities customers. federal government, the Federal Reserve launched a Continuing education requirements, such as those multidimensional, national education program required of broker-dealers and their employees, also designed to deliver this message to consumers. In would be imposed to ensure continued familiarity addition to the interagency statement, for the past with industry practices, securities issues, and regula- eighteen months the Federal Reserve has been tory requirements. Finally, bank sales personnel engaged in an intensive education program aimed at would be subject to a registration process under both retail customers and bankers. Mutual Funds: which employment and certain disciplinary and Understand the Risks, as the program is known, is customer complaint information could be accessed quite comprehensive. It includes material for both a by members of the public. The banking agencies are consumer seminar presentation and a banker compliworking with the NASD to arrange for the NASD's ance program; a video that can be used by bankers new Central Registration Depository to maintain and other professionals in their dealings with retail registration information filed with the banking customers; and compliance checklists to help bankers agencies. operate in a manner that complies with the inter- In our discussions with the trade organizations and agency statement. industry participants, we have encountered strong The goal of the consumer seminar program is to support for the proposed rule. We will encourage the help retail customers understand the differences banking industry to participate by commenting on the between insured deposits and uninsured investments; proposal as the banking agencies work closely with the goal of the banker education program is to the securities self-regulatory organizations to bring increase compliance with the interagency statement, this proposal to fruition. which in turn will help inform and protect customers. The program has been well received and has been discussed in numerous publications. The American MARKET TRENDS SURVEY Bankers Association has featured the program in its newsletter and has broadcast the video on its Skylink The FDIC recently released the results of its market System. trends survey, which show that some banks and secu- To date, seventy consumer seminars and fortyrities firms selling on bank premises need to improve seven banker training programs have been held their efforts to advise customers of the risks associaround the country, reaching more than 7,500 ated with nondeposit investment products. We agree. consumers—including a seminar in Spanish to an While there have been various consumer surveys that audience in Puerto Rico—and nearly 1,400 bankers. have shown an increasing awareness among the Materials have been distributed to another 3,150 coninvesting public that mutual funds and other investsumers via exhibits and town meetings sponsored by ment products purchased at banks are not FDICthe Securities and Exchange Commission. Nearly insured, more can be done. For those investors who 10,000 copies of the video, more than 7,000 copies do not understand the risks associated with the lack of the compliance checklists, and approximately of FDIC insurance, point-of-sale disclosures remain 1,500 copies of the consumer outreach package have important. In this regard, the Federal Reserve is been distributed. The materials have been shared working closely with the other federal banking agenwith federal and state regulators and are available cies to promote disclosure by banks through the from the Board. Selected materials have been transexamination process, promote greater consumer lated into Spanish. understanding through education, and promote pro- These seminars and educational initiatives appear fessional qualification standards for bank sales perto work. A comparison of knowledge levels before sonnel. We also will continue to work with the NASD and after a consumer seminar indicates that indito obtain further improvements in disclosure by viduals seem to have a better understanding of the broker-dealers selling securities on banks premises. risks associated with nondeposit investment prod- As I noted earlier, approximately 87 percent of all ucts: 91 percent know these products are not securities sold on bank premises are through sales FDIC-insured, compared with 65 percent before the representatives of NASD-registered broker-dealers. seminar; 87 percent know these products carry the risk of loss of principal, compared with 72 percent before the seminar. Bankers who attended our train- EDUCATION INITIATIVES ing sessions report that they feel better able to In an effort to help bank customers understand that comply with the interagency statement, especially with respect to disclosure and the physical separation not all products sold at banks are insured by the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

726 Federal Reserve Bulletin • August 1996 of the investment sales area from deposit-taking mitment on the part of the banking industry and bank activities. supervisors to the principle that effective disclosure We intend to do more. We have completed a video of risks is in the best interest of the customer and the public service announcement that will be distributed banking organization. Banks can best ensure that this summer to 145 stations in the top forty national their sales staffs are operating in a manner consistent television markets. Materials for the bankers training with this objective if they develop comprehensive program are currently being updated, and we hope to training programs and effectively monitor compliinitiate another round of banker education programs ance with policies and procedures governing sales of soon. nondeposit products. The Federal Reserve will continue to seek ways to strengthen its educational and supervisory programs to promote compliance with CONCLUSION the guidelines in the interagency statement so that bank customers are served in a safe and sound The continuing growth in bank sales of mutual funds manner consistent with principles of customer and other uninsured investments necessitates a com- protection. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

727 Announcements ALAN GREENSPAN: REAPPOINTMENT with our administration to safeguard the stability of global financial markets, recognizing that today even temporary AS CHAIRMAN OF THE BOARD OF GOVERNORS difficulties in one corner of the globe can have far-reaching effects in another. And more importantly, his decisions ALICE M. RIVLIN: APPOINTMENT have helped us to work toward a period of sustained AS A MEMBER OF THE BOARD OF GOVERNORS economic growth. AND AS VICE CHAIR I'm also proud to announce my intention to nominate LAURENCE H. MEYER: APPOINTMENT two distinguished economists to join Chairman Greenspan at the Fed. First, I am nominating Dr. Alice Rivlin as the AS A MEMBER OF THE BOARD OF GOVERNORS Vice Chair of the Federal Reserve Board. As a founding director of the Congressional Budget On February 22, 1996, President Clinton announced Office, a Senior Fellow at Brookings Institution, and Presihis intention to reappoint Alan Greenspan as Chair- dent of the American Economics Association, she is one of our nation's foremost experts on how to keep the economy man of the Board of Governors and to nominate growing. And as my Director of the Office of Management Alice M. Rivlin as a member of the Board of Goverand Budget, she has been my strong right arm as we have nors and Vice Chair, and Laurence H. Meyer as a cut wasteful spending and moved toward a balanced member of the Board of Governors. The three budget. appointments were confirmed by the Senate on I have come to deeply value her independence. She June 20, and the oaths of office were administered as always calls it as she sees it. And I know from working with her for three years that her ultimate test is how the follows: Dr. Greenspan on June 21, Dr. Meyer on decisions we make affect the lives and future of ordinary June 24, and Dr. Rivlin on June 25. A formal American citizens. swearing-in ceremony was held on June 25 for Alice Rivlin has the right combination of mind and heart Dr. Greenspan, with Secretary of the Treasury Robert to serve our country well as the Vice Chair of the Federal Rubin administering the oath of office. Reserve. I will miss her, and I appreciate her willingness to take on this new responsibility. The text of President Clinton's announcement For the position of Member of the Federal Reserve follows: Board I am today nominating Laurence Meyer. Dr. Meyer is a professor of economics at Washington University. He The President. Good afternoon. As we seek to sustain is renowned as one of our nation's leading economic economic growth there is no more important institution in forecasters. This year he received the annual award as the our country than the Federal Reserve. Its decision can help most accurate forecaster among blue-chip economists, an determine whether businesses can borrow and grow, award he also won in 1993. Because of that, his economic whether families can buy a home, and whether our finanforecasts are closely listened to at both OMB and CBO. cial system is sound. Its independence and its professional- Now, that is no small feat. (Laughter.) ism are an important safeguard for our economy. He consults widely for American businesses, and his Over the past three years, my administration has had a judgment and experience will serve our nation well at the respectful and productive relationship with the Federal Federal Reserve. Reserve. During this time, we have done our job to help If we all continue to do our part and the Federal Reserve grow this economy, first by cutting our deficit in half, and continues to be strong, forthright, and resolute, we can secondly, by increasing important investments in educacreate a climate for sustained growth and prosperity for the tion, technology and defense conversion. American people for years to come. I look forward to The Fed, in turn, has done its job making independent working with these nominees, and I hope the Senate will and professional judgments on monetary policy. Together give them speedy and favorable consideration. our efforts have helped to create a climate for sustained Thank you, Mr. Greenspan. Alice, Dr. Meyer, thank you economic growth—the lowest combination of unemployvery much. ment, inflation and mortgage rates in 27 years. This relationship has worked. Q. Do you have any guarantees from the Senate, Today I am pleased to announce my decision, first, to Mr. President? reappoint Alan Greenspan as the Chairman of the Federal The President. I don't know that there are any guaran- Reserve Board. He brings his years of experience as a tees left in this old world, but I feel quite confident that this prominent economist and, I might add, a leading Republi- team of people will be confirmed. can, and a career capped by eight years of service as the Q. Mr. President, do you think these three people will be Chairman of the Federal Reserve. During his tenure he has able to engage in the kind of debate you were talking about inspired confidence and for good reason. He has worked in New York last week? Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

728 Federal Reserve Bulletin • August 1996 The President. I do. And I feel good about it. After all, rize, sanction, or oversee any investment programs or what should our objective be? Our objective should be to plans involving "prime bank" products. The Federal achieve the maximum sustainable economic growth in our Reserve also does not license traders in "prime bank" country consistent with not letting inflation get out of hand. instruments or have agents abroad to sell or redeem And the Fed can't do that alone. The rest of us have to do our part, too. such financial instruments. I think balancing the budget is an important part of it. I think bringing the benefits of education and technology to all the members of the work force who are stuck in MODIFICATION OF PRUDENTIAL LIMITATIONS stagnant wages now is a very important part of it. I think creating incentives to invest in the areas where there aren't ON RISKLESS PRINCIPAL TRANSACTIONS enough jobs of any kind, in the inner cities and the rural areas, is an important part of it—that's what our empower- The Federal Reserve Board announced on June 11, ment zone meeting today is about. And I think paying 1996, the modification of the prudential limitations some special attention to all those people who have been established by the Board for the "riskless principal" downsized and trying to devise ways that will speed their activities of bank holding companies. Bank holding reentry into the job market at appropriate levels is an important part of it. companies that previously have received Board So no one can do this job alone, but I think that the truth approval to conduct riskless principal transactions is that we're entering a new economy and it's a subject that may engage in this activity subject to the modified ought to be open to honest debate. I was encouraged by the framework of limitations. comments that Chairman Greenspan made in his two appearances before the Congress in the last couple of days. And I feel good about this group of distinguished Americans being in the positions for which I have nominated PROPOSED ACTION them. Q. Thank you, Mr. President. The Federal Reserve Board on June 27, 1996, The President. Thank you. requested public comment on a proposal to simplify Q. Can we ask Dr. Rivlin a question? The President. Sure. and update the requirements of its Regulation D Q. What level of growth would you like to see, governing the reserve requirements of depository Dr. Rivlin? (Laughter.) And Dr. Meyer as well if you institutions. Comments should be received by could. August 16. Dr. Rivlin. A sustainable level consistent with low inflation. (Laughter.) Q. Dr. Rivlin, could we ask, have you had a change of heart? Didn't you indicate just recently that you weren't ISSUANCE OF A REPORT ON THE COMBINED really interested in this job? STATEMENT OF CONDITION OF THE FEDERAL Dr. Rivlin. Yes, I did. (Laughter.) RESERVE BANKS Q. Is the President persuasive or— The President. I haven't lost all my powers of persuasion. (Laughter.) Battered and bloody though I may be, The Federal Reserve Board issued on July 2, 1996, a I can still, once in a while, make a good argument. report by an independent accounting firm certifying (Laughter.) the combined statement of condition of the Federal Thank you. Reserve Banks as of the end of 1995 together with The Press. Thank you. related statements of income and changes in capital. This was the first financial audit of the combined ISSUANCE OF INVESTMENT SCHEME ADVISORY financial statements of the Reserve Banks performed by an independent accounting firm, in this case by The Federal Reserve Board on June 11, 1996, issued Coopers & Lybrand. The certified financial statean Investment Scheme Advisory alert cautioning the ments and footnotes appear in this issue of the public about the continued proliferation of illegal Bulletin on pages 780-89. "prime bank" financial instruments and scams. Audits of each Reserve Bank have long been con- This Investment Scheme Advisory updates an ducted by each Bank's general auditor and by the October 1993 interagency alert concerning fraudulent Board's financial examiners. This is the first year that "prime bank" financial instruments and investment the System has issued independently audited comprograms that supposedly invest in them. bined Reserve Bank financial statements and foot- The advisory also states that, contrary to state- notes similar to those provided in the private sector. ments in some of the written materials used by indi- Other audits of the Board and Reserve Banks are viduals involved with the fraudulent schemes, the conducted by the General Accounting Office and the Federal Reserve does not, among other things, autho- Board's Inspector General. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 729 PUBLICATION OF THE JUNE 1996 UPDATE and internal controls. In addition, the Manual OF THE BANK HOLDING COMPANY includes new or revised summaries of certain non- SUPERVISION MANUAL banking activities that have been approved by Board order—including Futures Commission Merchants, The June 1996 update of the Bank Holding Company Section 20 companies, futures (and options thereon) Supervision Manual, Supplement No. 10, has been involving financial and nonfinancial commodities, published. The inspection guidance dealing with and related advisory services. The sections for Regumortgage banking nonbank subsidiaries of bank hold- lation O (Loans to Executive Officers, Directors, and ing companies has been substantially revised. This Principal Shareholders of Member Banks) and interrevision provides supervisory guidance regarding company transactions have been changed to incorpooversight by a company's board of directors and rate the new definition of unimpaired capital and senior management; activities comprising loan pro- surplus. A more detailed list of changes is included in duction, marketing, servicing, and administration; the revision package. and issues relating to mortgage-servicing rights, finan- The public may obtain the Manual and the updates cial analysis, and intercompany transactions. (including pricing information) from Publications The update also includes inspection guidance on Services, Mail Stop 127, Board of Governors of the rating the adequacy of risk management processes Federal Reserve System, Washington, DC 20551. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

731 Legal Developments FINAL RULE-AMENDMENT TO REGULATION S Financial record means an original or copy of, or information known to have been derived from, any record held The Board of Governors is amending 12 C.F.R. Part 219, by a financial institution pertaining to a customer's rela- Subpart A of its Regulation S (Reimbursement for Provid- tionship with the financial institution. ing Financial Records; Recordkeeping Requirements for Government authority means any agency or department Certain Financial Records), which implements the require- of the United States, or any officer, employee or agent ment.,under the Right to Financial Privacy Act ("RFPA") thereof. that the Board establish the rates and conditions under Person means an individual or a partnership of five or which payment shall be made by a government authority to fewer individuals. a financial institution for assembling or providing financial records pursuant to RFPA. These amendments update the fees to be charged and streamline the subpart generally. Section 219.3—Cost reimbursement. Effective July 12, 1996, 12 C.F.R. Part 219 is amended as follows: (a) Fees payable. Except as provided in section 219.4, a government authority, or a court issuing an order or sub- Part 219—Reimbursement for Providing Financial poena in connection with grand jury proceedings, seeking Records; Recordkeeping Requirements for Certain access to financial records pertaining to a customer shall Financial Records (Regulation S) reimburse the financial institution for reasonably necessary costs directly incurred in searching for, reproducing or transporting books, papers, records, or other data as set Subpart A—Reimbursement to Financial Institutions forth in this section. The reimbursement schedule for a for Providing Financial Records financial institution is set forth in Appendix A to this section. If a financial institution has financial records that 1. The authority citation for Subpart A continues to read as are stored at an independent storage facility that charges a follows: fee to search for, reproduce, or transport particular records requested, these costs are considered to be directly incurred Authority: 12 U.S.C. 3415 by the financial institution and may be included in the reimbursement. 2. Subpart A is amended by revising sections 219.2 through (b) Search and processing costs. (1) Reimbursement of 219.6 to read as follows: search and processing costs shall cover the total amount of personnel time spent in locating, retrieving, reproduc- Section 219.2—Definitions. ing, and preparing financial records for shipment. Search and processing costs shall not cover analysis of material For the purposes of this subpart, the following definitions or legal advice. shall apply: (2) If itemized separately, search and processing costs may include the actual cost of extracting information Customer means any person or authorized representative of stored by computer in the format in which it is normally that person who uses any service of a financial institution, produced, based on computer time and necessary supor for whom a financial institution acts or has acted as a plies; however, personnel time for computer search may fiduciary in relation to an account maintained in the per- be paid for only at the rates specified in Appendix A to son's name. Customer does not include corporations or this section. partnerships comprised of more than five persons. (c) Reproduction costs. The reimbursement rates for repro- Financial institution means any office of a bank, savings duction costs for requested documents are set forth in bank, card issuer as defined in section 103 of the Consum- Appendix A to this section. Copies of photographs, films, ers Credit Protection Act (15 U.S.C. 1602(n)), industrial computer tapes, and other materials not listed in Appendix loan company, trust company, savings association, building A to this section are reimbursed at actual cost. and loan, or homestead association (including cooperative (d) Transportation costs. Reimbursement for transportation banks), credit union, or consumer finance institution, lo- costs shall be for the reasonably necessary costs directly cated in any State or territory of the United States, the incurred to transport personnel to locate and retrieve the District of Columbia, Puerto Rico, Guam, American Sa- requested information, and to convey such material to the moa, or the Virgin Islands. place of examination. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

732 Federal Reserve Bulletin • August 1996 Appendix A to Section 219.3—Reimbursement (j) General Accounting Office requests. Financial records Schedule sought by the General Accounting Office pursuant to an authorized proceeding, investigation, examination, or audit Reproduction: directed at a government authority. (k) Federal Housing Finance Board requests. Financial Photocopy, per page $.25 records or information sought by the Federal Housing Paper copies of microfiche, per frame $.25 Finance Board (FHFB) or any of the Federal home loan Duplicate microfiche, per microfiche $.50 banks in the exercise of the FHFB's authority to extend Computer diskette $5.00 credit to financial institutions or others. Search and Processing: (1) Department of Veterans Affairs. The disclosure of the name and address of any customer to the Department of Clerical/Technical, hourly rate $11.00 Veterans Affairs where such disclosure is necessary to, and Manager/Supervisory, hourly rate $17.00 used solely for, the proper administration of benefits programs under laws administered by that Department. Section 219.4—Exceptions. Section 219.5—Conditions for payment. A financial institution is not entitled to reimbursement under this subpart for costs incurred in assembling or (a) Direct costs. Payment shall be made only for costs that providing financial records or information related to: are both directly incurred and reasonably necessary to (a) Security interests, bankruptcy claims, debt collection. provide requested material. Search and processing, repro- Any financial records provided as an incident to perfecting duction, and transportation costs shall be considered sepaa security interest, proving a claim in bankruptcy, or other- rately when determining whether the costs are reasonably wise collecting on a debt owing either to the financial necessary. institution itself or in its role as a fiduciary. (b) Compliance with legal process, request, or authoriza- (b) Government loan programs. Financial records that are tion. No payment may be made to a financial institution necessary to permit the appropriate government authority until it satisfactorily complies with the legal process, the to carry out its responsibilities under a government loan, formal written request, or the customer authorization. loan guaranty or loan insurance program. When the legal process or formal written request is with- (c) Nonidentifiable information. Financial records that are drawn, or the customer authorization is revoked, or where not identified with or identifiable as being derived from the the customer successfully challenges disclosure to a grand financial records of a particular customer. jury or government authority, the financial institution shall (d) Financial supervisory agencies. Financial records dis- be reimbursed for the reasonably necessary costs incurred closed to a financial supervisory agency in the exercise of in assembling the requested financial records prior to the its supervisory, regulatory, or monetary functions with time the financial institution is notified of such event. respect to a financial institution. (c) Itemized bill or invoice. No reimbursement is required (e) Internal Revenue summons. Financial records disclosed unless a financial institution submits an itemized bill or in accordance with procedures authorized by the Internal invoice specifically detailing its search and processing, Revenue Code. reproduction, and transportation costs. Search and pro- (f) Federally required reports. Financial records required cessing time should be billed in 15-minute increments. to be reported in accordance with any federal statute or rule promulgated thereunder. Section 219.6—Payment procedures. (g) Government civil or criminal litigation. Financial records sought by a government authority under the Federal Rules of Civil or Criminal Procedure or comparable (a) Notice to submit invoice. Promptly following a service rules of other courts in connection with litigation to which of legal process or request, the court or government authorthe government authority and the customer are parties. ity shall notify the financial institution that it must submit (h) Administrative agency subpoenas. Financial records an itemized bill or invoice in order to obtain payment and sought by a government authority pursuant to an adminis- shall furnish an address for this purpose. trative subpoena issued by an administrative law judge in (b) Special notice. If a grand jury or government authority an adjudicatory proceeding subject to 5 U.S.C. 554, and to withdraws the legal process or formal written request, or if which the government authority and the customer are the customer revokes the authorization, or if the legal parties. process or request has been successfully challenged by the (i) Investigation of financial institution or its noncustomer. customer, the grand jury or government authority shall Financial records sought by a government authority in promptly notify the financial institution of these facts, and connection with a lawful proceeding, investigation, exami- shall also notify the financial institution that it must submit nation, or inspection directed at the financial institution in an itemized bill or invoice in order to obtain payment of possession of such records, or at an entity that is not a costs incurred prior to the time of the notice to the financial customer as defined in section 219.2 of this part. institution receives this notice. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 733 Section 219.7—[Removed] tions ("depository institutions") in Massachusetts.3 Bancorp is the tenth largest commercial banking organiza- 3. Section 219.7 is removed. tion in Massachusetts, controlling $1.4 billion of deposits, representing approximately 1.3 percent of total deposits in depository institutions in the state. On consummation of ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT the proposal, Bank of Boston would remain the largest commercial banking organization in Massachusetts, con- Orders Issued Under Section 3 of the Bank Holding trolling $16.8 billion of deposits, representing approxi- Company Act mately 16.5 percent of total deposits in depository institutions in Massachusetts. Bank of Boston Corporation Boston, Massachusetts Competitive Considerations Order Approving Acquisition of a Bank Holding The BHC Act prohibits the Board from approving an Company application under section 3 of the BHC Act if the proposal would result in a monopoly, or if the proposal would Bank of Boston Corporation ("Bank of Boston"), a bank substantially lessen competition in any relevant market, holding company within the meaning of the Bank Holding unless such anticompetitive effects are clearly outweighed Company Act ("BHC Act"), has requested the Board's in the public interest by the probable effect of the transacapproval under section 3 of the BHC Act (12 U.S.C. tion in meeting the convenience and needs of the commu- § 1842) to acquire The Boston Bancorp ("Bancorp") and nity to be served. Bank of Boston and Bancorp compete thereby indirectly acquire its wholly owned subsidiary, directly in the Boston banking market.4 South Boston Savings Bank ("Savings Bank"), all in Bos- Bank of Boston is the second largest depository instituton, Massachusetts.1 tion in the market, controlling deposits of approximately Notice of the proposal, affording interested persons an $12.2 billion, representing approximately 18.3 percent of opportunity to submit comments, has been published total deposits in depository institutions in the market (61 Federal Register 11,639 (1996)). The time for filing ("market deposits").5 Savings Bank is the tenth largest comments has expired, and the Board has considered the depository institution in the market, controlling deposits of application and all comments received in light of the $1.4 billion, representing approximately 1 percent of marfactors set forth in section 3(c) of the BHC Act.2 ket deposits. On consummation of this proposal, Bank of Bank of Boston, with consolidated assets of approxi- Boston would become the largest depository institution mately $47.4 billion, operates subsidiary banks in Massa- in the market, controlling deposits of approximately chusetts, Connecticut, Florida, and Rhode Island, and a $13.6 billion, representing approximately 20.1 percent of special purpose bank in Maine that provides cash manage- market deposits. The market would remain moderately ment services. Bank of Boston is the largest commercial concentrated as measured by the Herfindahl-Hirschman banking organization in Massachusetts, controlling depos- Index ("HHI"), and numerous competitors would remain its of $15.4 billion, representing approximately 15.2 per- in the market.6 cent in total deposits in commercial banks or thrift institu- 3. Asset data are as of December 31, 1995. State deposit data are as of June 30, 1995. 1. Bank of Boston proposes to acquire Bancorp by merging its 4. The Boston banking market is approximated by the Boston RMA wholly owned subsidiary, BancBoston Merger Co., into Bancorp with and the towns of Greenville, Lyndeborough, Mason, and New Ipswich Bancorp to be the surviving company. After consummation of this in Hillsborough County, all in New Hampshire. proposal, Bank of Boston would merge Savings Bank with and into its 5. Market share data are as of June 30, 1995, and are based on wholly owned subsidiary bank, The First National Bank of Boston calculations in which the deposits of thrift institutions are included at ("FNBB"). The Office of the Comptroller of the Currency ("OCC") 50 percent. The Board previously has indicated that thrift institutions has approved this merger under the Bank Merger Act (12 U.S.C. have become, or have the potential to become, significant competitors § 1828(c)). Bank of Boston also has requested Board approval to of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin acquire options for up to 19.9 percent of Bancorp's stock. 788 (1990); National City Corporation, 70 Federal Reserve Bulletin 2. The Board received comments from an individual ("Protestant") 743 (1984). Thus, the Board has regularly included thrift deposits in contending, without providing any supporting evidence, that acquisi- the calculation of market share on a 50-percent weighted basis. See, tions of small institutions by large bank holding companies have a e.g., First Hawaiian Inc., 11 Federal Reserve Bulletin 52 (1991). number of adverse effects, including decreased competition, increased Because the deposits of Savings Bank would be controlled by a risk of failure to the banking system, increased collusion to set fees for commercial banking organization after consummation of the proposal, banking products and services, and higher fees for fewer services to they have been included at 100 percent in the calculation of market customers, particularly small businesses. The Board has carefully shares for Bank of Boston after consummation of this proposal. See considered these comments in light of all the facts of record, including Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992). supervisory information and examination reports, in the Board's eval- 6. The HHI for the Boston banking market would increase by uation of the competitive effects of this proposal, and in its consider- 55 points to 1090. Under the revised Department of Justice Merger ation of the financial and managerial resources of the companies Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in involved, the future prospects of these companies and the effect of the which the post-merger HHI is between 1000 and 1800 is considered to proposal on the convenience and needs of the community served. be moderately concentrated. The Justice Department has informed the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

734 Federal Reserve Bulletin • August 1996 The Board sought comments from the Department of performance evaluation is a particularly important consid- Justice ("DOJ") on the competitive effects of this pro- eration in the applications process because it represents a posal, and DOJ advised the Board that the proposal is not detailed on-site evaluation of the institution's overall likely to have a significantly adverse effect on competition record of performance under the CRA by its primary in any relevant banking market.7 In light of all the facts of federal supervisor.8 In addition, the Board considers an record, and for the reasons discussed above, the Board institution's policies and practices for compliance with concludes that consummation of the proposal is not likely applicable fair lending laws. The Board also takes into to have a significantly adverse effect on competition or on account information on an institution's lending activities the concentration of banking services in the Boston bank- that assist in meeting the credit needs of low- and ing market or any other relevant market. moderate-income neighborhoods, including programs and activities initiated since the most recent CRA performance Other BHC Act Factors examination. Performance Examinations. All of Bank of Boston's The BHC Act also requires the Board to consider the subsidiary banks received a rating of "satisfactory" or factors specified in section 3 in light of all the facts of "outstanding" in their most recent examinations for CRA record presented by an application. Those factors include performance by their primary federal supervisors. FNBB, considerations relating to the financial and managerial re- which would survive the merger with Savings Bank, resources and future prospects of the institutions involved as ceived an "outstanding" rating in its most recent examinawell as other supervisory factors, and the convenience and tion for CRA performance by its primary supervisor, the needs of the community to be served. OCC, as of December 19, 1994 ("1994 Examination"). The Board has carefully considered the financial and Record of Performance by FNBB. The 1994 Examinamanagerial resources and future prospects of Bank of Bos- tion found that FNBB had initiated a number of successful ton and Bancorp, and their respective subsidiaries, and strategies to help address identified housing and small other supervisory factors in light of all the facts of record. business credit needs and that the volume of residential These facts include supervisory reports of examination mortgage, housing rehabilitation and small business loans assessing the financial and managerial resources of the originated and purchased was significant throughout the organizations, confidential financial information provided bank's community.9 Overall, credit extensions and loan by Bank of Boston and the relative size of the two institu- applications reflected a reasonable geographic distribution tions. Bank of Boston would incur no additional debt in in each of the bank's communities, including low- and connection with this proposal and has sufficient financial moderate-income areas. No evidence of prohibited discrimand managerial resources to effect this transaction without inatory or other illegal credit practices was noted in the impairing those resources. After consummation of this examination. Examiners also commended FNBB for its proposal, moreover, all of Bank of Boston's subsidiary leadership in working with government sponsored loan banks would remain well capitalized. Based on these and programs for affordable housing and small business,10 and all the facts of record, the Board concludes that all the its high level of participation in community development supervisory factors under the BHC Act weigh in favor of and redevelopment projects.11 approving this proposal. A. Convenience and Needs Factor 8. The Board notes that the Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act provides that a CRA examination is an important and often controlling The Board has long held that consideration of the convefactor in the consideration of an institution's CRA record and that nience and needs factor should include a review of the reports of these examinations will be given great weight in the records of the relevant depository institutions under the applications process. 54 Federal Register at 13,745. Community Reinvestment Act (12 U.S.C. § 2901 et seq.) 9. Protestant asserts that consolidation of the banking industry has ("CRA"). As provided in the CRA, the Board has evalu- substantially impaired the ability of small businesses to negotiate with banks, thereby making them vulnerable to high bank fees. The record ated this factor in light of examination by the primary indicates that FNBB has taken steps designed to provide special federal supervisor of the CRA performance records of the services to assist small businesses with their banking needs. FNBB relevant institutions. The institution's most recent CRA formed a Small Business Banking Department in 1993, for example, and introduced the "Business Focus Account" with overdraft protection and other special features. The bank also expanded its lending to Board that a bank merger or acquisition generally will not be chal- small businesses through its "Credit Initiative Program" and features lenged (in the absence of other factors indicating anticompetitive a simplified small business loan application. effects) unless the post-merger HHI is at least 1800 and the merger 10. FNBB participates in loan programs sponsored by the Small increases the HHI by more than 200 points. The Justice Department Business Administration ("SBA") and was the largest SBA lender in has stated that the higher than normal HHI thresholds for screening Massachusetts in 1994. FNBB also participates in other programs that bank mergers for anticompetitive effects implicitly recognizes the promote small business lending such as the Massachusetts Business competitive effect of limited-purpose lenders and other nondepository Development Corporation and the Economic Development Individual financial entities. Corporation. 7. Protestant presented no facts to indicate that Bank of Boston or 11. The record does not support Protestant's allegation about exces- Bancorp have colluded with any other party to set fees in violation of sive fees. The record indicates that Bank of Boston has an established federal antitrust laws. record of providing a full range of banking services in its delineated Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 735 FNBB's efforts to ascertain the credit needs of its com- this order, unless such period is extended for good cause by munity include contacts with community-based organiza- the Board or by the Federal Reserve Bank of Boston, tions and a review of demographic data in designing prod- acting pursuant to delegated authority. ucts to meet those needs. Examiners also noted that FNBB By order of the Board of Governors, effective June 3, uses effective marketing strategies that include marketing 1996. and advertising programs to reach residents in low- and moderate-income areas. Voting for this action: Chairman Pro Tempore Greenspan and Conclusion on Convenience and Needs Factor. As dis- Governors Lindsey, Phillips, and Yellen. Absent and not voting: Governor Kelley. cussed above, the Board has carefully reviewed the relevant CRA examination information, the programs and pol- JENNIFER J. JOHNSON icies implemented by the relevant institutions, comments Deputy Secretary of the Board and concerns raised by Protestant, and other facts of record in its consideration of the effect of this transaction on the Community Bancshares of Marysville, Inc. convenience and needs of the community. Based on this Marysville, Kansas review, the Board concludes that convenience and needs considerations are consistent with approval of this applica- Order Approving Acquisition of a Bank tion. Community Bancshares of Marysville, Inc., Marysville, Conclusion Kansas ("Community"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Based on the foregoing and all other facts of record, the Act") has applied for the Board's approval under section 3 Board has determined that the application should be, and of the BHC Act to acquire Community State Bank, hereby is, approved.12 The Board's approval is expressly Hanover, Kansas ("Bank").1 conditioned on Bank of Boston's compliance with all the Notice of the proposal, affording interested persons an commitments made in connection with this application. opportunity to submit comments, has been published The commitments and conditions relied on by the Board in (61 Federal Register 15,263 (1996)). The time for filing reaching this decision shall be deemed to be conditions comments has expired, and the Board has considered the imposed in writing by the Board in connection with its application and all comments received in light of the findings and decision, and, as such, may be enforced in factors set forth in section 3(c) of the BHC Act. proceedings under applicable law. Community is the 47th largest banking organization in The transaction shall not be consummated before the Kansas controlling $101.1 million in deposits, representing fifteenth calendar day following the effective date of this less than 1 percent of total deposits in commercial banks in order, or later than three months after the effective date of Kansas.2 Bank is the 226th largest banking organization in Kansas, with $21.3 million in deposits, representing less than 1 percent of total deposits in commercial banking communities, including substantial lending services and offers a range of retail banking services. Examiners noted, for example, that FNBB organizations in Kansas. On consummation of this prooffers a "First Step" product line with low-cost services including, a posal, Community would become the 35th largest banking low-fee checking account that waives fees for individuals over organization in Kansas, controlling deposits of $122.4 mil- 65 years of age, and under certain other circumstances. First Step also lion, representing less than 1 percent of total deposits in includes a basic savings account with no minimum balance, no charge for check cashing, and a monthly fee, which may be waived for commercial banking organizations in the state. individuals older than 65 or younger than 18. The record does not support the conclusion that the fees charged by Bank of Boston for checking accounts or other banking services are based in any way on a factor prohibited by law. 12. Protestant requested notification of any public meeting or hearing on this application but did not request that such a meeting or hearing be held as provided in the Board's Rules of Procedure. 12 C.F.R. 262.3(e). 1. On consummation of the proposal, Community would merge The Board notes that a hearing is required under section 3(b) of the Bank into its subsidiary bank, Citizens State Bank, Marysville, Kansas BHC Act only if the appropriate supervisory authority for the bank to ("CSB"). This transaction requires approval under the Bank Merger be acquired makes a timely written recommendation of denial. No Act (12 U.S.C. § 1828(c)) by the Federal Deposit Insurance Corporasupervisory agency has recommended denial of the proposal. Gener- tion, the primary federal supervisor of CSB. ally, under the Board's Rules of Procedure, the Board may, in its 2. All banking data are as of June 30, 1995. Market shares data are discretion, hold a public hearing or meeting on an application to based on calculations in which the deposits of thrift institutions are clarify factual issues related to the application and to provide an included at 50 percent. The Board previously has indicated that thrift opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and institutions have become, or have the potential to become, significant 262.25(d). All interested parties have had an opportunity to present competitors of commercial banks. See Midwest Financial Group, 75 their views and Protestant has submitted comments that have been Federal Reserve Bulletin 386 (1989); National City Corporation, 70 considered by the Board. On the basis of all the facts of record, the Federal Reserve Bulletin 143 (1984). Thus, the Board regularly has Board has determined that a public meeting or hearing is not neces- included thrift deposits in the calculation of market share on a 50sary to clarify the factual record of the application, or otherwise percent weighted basis. See, e.g., First Hawaiian, Inc., 11 Federal warranted in this case. Reserve Bulletin 52 (1991). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

736 Federal Reserve Bulletin • August 1996 Community and Bank compete directly in the Marshall- The Board concludes that the financial and managerial Washington County, Kansas, banking market.3 In the resources and future prospects of the organizations in- Marshall-Washington County banking market, Community volved in the proposal are consistent with approval as are is the largest depository institution in the market, control- the other supervisory factors the Board must consider ling deposits of $101.1 million, representing 28.7 percent under section 3 of the BHC Act.6 In addition, considerof total deposits in commercial banks in the market ("mar- ations relating to the convenience and needs of the commuket deposits"). Bank is the fourth largest depository institu- nities to be served are consistent with approval of the tion in the market, controlling $21.3 million in deposits, application.7 representing 6.0 percent of total market deposits. On con- Based on the foregoing and all the facts of record, the summation of the proposal, Community would remain Board has determined that the proposal should be, and the largest depository institution in the market with hereby is, approved. The commitments and conditions $122.4 million in deposits, representing 34.7 percent of relied on by the Board in reaching this decision are deemed market deposits. The Herfindahl-Hirschman Index to be conditions imposed in writing by the Board in con- ("HHI") would increase by 347 points to 1848 as a result nection with its findings and decision, and, as such, may be of the proposed transaction.4 enforced in proceedings under applicable law. The Board notes that the HHI levels are only guidelines The transactions shall not be consummated before the that are used by the Board, the Department of Justice, and fifteenth calendar day following the effective date of this the other banking agencies to help identify cases in which a order, and the transactions shall not be consummated later more detailed competitive analysis is appropriate to assure than three months after the effective date of this order, that the proposal would not have a significantly adverse unless such period is extended for good cause by the Board effect on competition in any relevant market. A proposal or the Federal Reserve Bank of Kansas City, acting pursuthat fails to pass the HHI market screen may, nonetheless, ant to delegated authority. be approved because other information may indicate that By order of the Board of Governors, effective June 17, the proposal would not have a significantly adverse effect 1996. on competition. In this case, the Department of Justice has reviewed the proposal and advised the Board that consummation of the proposal is not likely to have any significantly adverse competitive effects in the Marshall- Washington County banking market and any other relevant banking market. 6. Protestants have requested that the Board hold a public hearing Other facts indicate that the market concentration as on the application. Section 3(b) of the BHC Act does not require the Board to hold a hearing on an application unless the appropriate measured by the HHI tends to overstate the competitive supervisory authority of the bank to be acquired makes a timely effects of this proposal in the Marshall-Washington County written recommendation of denial of the application. In this case, the banking market. Thirteen commercial bank competitors Board has not received such a recommendation. Generally, under the and one thrift institution would remain in this sparsely Board's Rules of Procedure, the Board may, in its discretion, hold a populated, rural market after consummation of this pro- public hearing on an application to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriposal. Two of the commercial bank competitors would ate. 12 C.F.R. 262.3(e) and 262.25(d). Protestants have had an opporeach have more than 10 percent of market deposits. Kansas tunity to present written submissions, and have submitted written law, moreover, permits Kansas banks to branch statewide.5 comments that have been considered by the Board. Protestants' re- Accordingly, based on all the facts of record, the Board quest fails to demonstrate why their written submissions do not adequately present their allegations or why a public hearing is otherconcludes that consummation of the proposal would not wise warranted in this case. Based on all the facts of record, the Board result in a significantly adverse effect on competition in has determined that a public hearing is not necessary to clarify the any relevant market. factual record in this application and is not warranted in this case. Accordingly, Protestants' request for a public hearing is denied. 7. The Board carefully considered letters and a petition opposing the proposal from a number of residents in Barnes, Kansas (collectively "Protestants"), a town in the north central part of the state with a 3. The Marshall-Washington County, Kansas, banking market con- population of 150. Protestants object to Community's plans to close sists of all of Marshall and Washington Counties, in Kansas, except Bank's branch in Barnes following the merger of Bank with CSB. the town of Clifton. This branch is the only financial institution currently operating in 4. Under the revised Department of Justice Merger Guidelines Barnes. CSB has responded that its full-service branch in Waterville, (49 Federal Register 26,823 (June 29, 1984)), a market in which the Kansas, which is approximately six miles from Barnes, would conpost-merger HHI is over 1800 is considered to be concentrated. The tinue to provide banking services to the residents of Barnes as part of Justice Department has informed the Board that a bank merger or its primary service area. This branch also offers direct-deposit and acquisition generally will not be challenged (in the absence of other bank-by-mail services. factors indicating anti-competitive effects) unless the post-merger The Board notes that in connection with the proposal Bank has HHI is at least 1800 and the merger increases the HHI by 200 points. already contracted to sell the branch building in Barnes to another The Justice Department has stated that the higher than normal HHI bank and that purchasing bank has agreed to open a branch at the thresholds for screening bank mergers for anti-competitive effects Barnes location. In light of these facts, it appears that the convenience implicitly recognize the competitive effect of limited-purpose lenders and needs of the community, including banking services to the resiand other non-depository financial entities. dents of Barnes, would continue to be served after consummation of 5. Kan. Stat. Ann. § 9-1111(b) (Supp. 1995). the proposal. 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Legal Developments 737 Voting for this action: Governors Kelley, Lindsey, Phillips, and than 1 percent of total deposits in depository institutions in Yellen. Absent and not voting: Chairman Pro Tempore Greenspan. the state. On consummation of the proposal, Croghan would become the 54th largest commercial banking organi- JENNIFER J. JOHNSON zation in Ohio, controlling $287.8 million in deposits, Deputy Secretary of the Board representing less than 1 percent of total deposits in depository institutions in Ohio. Croghan Bancshares, Inc., Fremont, Ohio Competitive Considerations Order Approving the Acquisition of a Bank Holding Croghan and Union compete directly in the Fremont, Ohio, Company, the Merger of Banks, and the Establishment of banking market ("Fremont banking market").4 Croghan is Branches the largest commercial banking organization in the Fremont banking market, controlling deposits of approxi- Croghan Bancshares, Inc., Fremont, Ohio, ("Croghan"), a mately $205.9 million, representing approximately bank holding company within the meaning of the Bank 40.2 percent of total deposits in depository institutions in Holding Company Act ("BHC Act"), has requested the the market ("market deposits").5 Union is the 10th largest Board's approval under section 3 of the BHC Act commercial banking organization in the market, control- (12 U.S.C. § 1842) to acquire Union Bancshares Corp. ling deposits of approximately $7.6 million, representing ("Union"), and thereby indirectly acquire its wholly 1.5 percent of market deposits. On consummation of the owned subsidiary bank, Union Bank and Savings Comproposal, Croghan would remain the largest commercial pany, ("Union Bank"), both in Bellevue, Ohio.1 Croghan's banking organization in the market, controlling deposits of subsidiary bank, The Croghan Colonial Bank, Fremont, approximately $213.5 million, representing approximately Ohio ("Croghan Bank"), a state member bank, also has 41.7 percent of market deposits, and the Herfindahlrequested Board approval under section 18(c) of the Fed- Hirschman Index ("HHI") for the Fremont banking market eral Deposit Insurance Act (12 U.S.C. § 1828(c)) (the would increase by 119 points to 2326.6 This increase in "Bank Merger Act"), and section 9 of the Federal Reserve market concentration as measured by the HHI would not Act (12 U.S.C. § 321) to merge with Union Bank and exceed the Department of Justice Merger Guidelines. The establish branches at the current locations of Union Bank's Board notes, moreover, that ten competitors would remain branches.2 in the Fremont banking market. Four of these competitors Notice of the proposal, affording interested persons an are among the largest commercial banking organizations in opportunity to submit comments, has been published Ohio, and three of the competitors would each have more (61 Federal Register 15,946 (1996)) and given in accorthan 11 percent of market deposits. In addition, Ohio law dance with the Bank Merger Act and the Board's Rules of permits statewide branching.7 The Department of Justice Procedure (12 C.F.R. 262.3(b)). As required by the Bank has reviewed the proposal and advised the Board that Merger Act, reports on the competitive effects of the consummation of the proposal would not likely have any merger were requested from the United States Attorney General ("Department of Justice"), the Office of the Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC"). The time for filing comments has expired, and the Board has considered 4. The Fremont banking market is approximated by Sandusky the proposal and all comments received in light of the County, Ohio, excluding the areas of the Woodville Township and the factors set forth in section 3(c) of the BHC Act, the Bank City of Bellevue. 5. Market share data are as of June 30, 1995, and are based on a Merger Act, and section 9 of the Federal Reserve Act. calculation in which the deposits of thrift institutions are included at Croghan is the 71st largest commercial banking organi- 50 percent. The Board previously has indicated that thrift institutions zation in Ohio, controlling deposits of approximately have become, or have the potential to become, significant competitors $205.9 million, representing less than 1 percent of total of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin deposits in commercial banks or thrift institutions ("depos- 788 (1990); National City Corporation, 70 Federal Reserve Bulletin itory institutions") in Ohio.3 Union is the 148th largest 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, commercial banking organization in Ohio, controlling ap- e.g., First Hawaiian Inc., 77 Federal Reserve Bulletin 52 (1991). proximately $81.9 million in deposits, representing less 6. Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is above 1800 is considered to be highly concen- 1. Croghan proposes to acquire Union by merging its wholly owned trated. The Department of Justice has informed the Board that a bank subsidiary, Croghan Acquisition Corp., into Union, with Union as the merger or acquisition generally will not be challenged (in the absence surviving company. Union would be dissolved after the merger of of other factors indicating anticompetitive effects) unless the post- Croghan Bank and Union Bank. merger HHI is at least 1800 and the merger increases the HHI by more 2. Croghan Bank would establish branches at the following Union than 200 points. The Department of Justice has stated that the higher Bank locations: One Union Square, Bellevue; 114 N. Sandusky Street, than normal HHI thresholds for screening bank mergers for anticom- Bellevue; and 100 S. Main Street, Clyde; and 11 Monroe Street, petitive effects implicitly recognizes the competitive effect of limited- Monroeville, all in Ohio. purpose lenders and other nondepository financial entities. 3. State deposit data are as of June 30, 1995. 7. Ohio Rev. Code Ann. § 1111.03 (Anderson 1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

738 Federal Reserve Bulletin • August 1996 isignificantly adverse competitive effects in the Fremont Notice of the proposal, affording interested persons an banking market or any other relevant banking market.8 opportunity to submit comments, has been published Based on these and all of the facts of record, the Board (61 Federal Register 9459 (1996)). The time for filing concludes that consummation of the proposal is not likely comments has expired, and the Board has considered the to have a significantly adverse effect on competition or the application and all comments received in light of the concentration of banking services in the Fremont banking factors set forth in section 3 of the BHC Act. market or any other relevant market. In light of all the facts First Commerce is the 91st largest commercial banking of record, the Board also concludes that the financial and organization in Florida, controlling deposits of approximanagerial resources and future prospects of Croghan and mately $103.9 million, representing less than 1 percent of Union and their respective subsidiaries are consistent with total deposits in commercial banks in the state. Prime Bank approval, as are supervisory factors the Board must con- is the 177th largest commercial banking organization in sider under the BHC Act, the Bank Merger Act, and the Florida, controlling deposits of approximately $46.4 mil- Federal Reserve Act. In addition, considerations relating to lion, representing less than 1 percent of total deposits in the convenience and needs of the community to be served commercial banking organizations in the state. On consumare consistent with approval. mation of this proposal, First Commerce would become the For these reasons, and in light of all the other facts of 63d largest commercial banking organization in Florida, record, the Board has determined that the applications controlling approximately $150.3 million in deposits, repshould be, and hereby are, approved. The Board's approval resenting less than 1 percent of total deposits in commeris expressly conditioned on Croghan's compliance with all cial banking organizations in the state.2 the commitments made in connection with the applications. The commitments relied on by the Board in reaching Competitive Considerations this decision shall be deemed to be conditions imposed in writing by the Board in connection with its findings and The Board is prohibited from approving an application decision, and, as such, may be enforced in proceedings under section 3 of the BHC Act if the proposal would under applicable law. result in a monopoly, or if the proposal would substantially The transactions shall not be consummated before the lessen competition in any relevant market unless such fifteenth calendar day following the effective date of this anticompetitive effects are clearly outweighed in the public order, or later than three months after the effective date of interest by the probable effect of the transaction in meeting this order, unless such period is extended for good cause by the convenience and needs of the community to be served. the Board or by the Federal Reserve Bank of Cleveland, First Commerce and Prime Bank do not compete in any acting pursuant to delegated authority. banking market. Based on all the facts of record, the Board By order of the Board of Governors, effective June 10, concludes that consummation of this proposal would not 1996. result in any significantly adverse effect on competition or on the concentration of banking resources in any relevant Voting for this action: Chairman Pro Tempore Greenspan, and banking market. Governors Lindsey, Phillips, and Yellen. Absent and not voting: Governor Kelley. Other Factors under the BHC Act JENNIFER J. JOHNSON A. Supervisory Factors Deputy Secretary of the Board The BHC Act also requires the Board to consider the First Commerce Banks of Florida, Inc. financial and managerial resources and future prospects of Winter Haven, Florida the companies and banks involved, the convenience and needs of the community to be served, and certain other Order Approving the Acquisition of a Bank supervisory factors. The Board has carefully considered the financial and First Commerce Banks of Florida, Inc., Winter Haven managerial resources and future prospects of First Com- ("First Commerce"), a bank holding company within the merce, its subsidiary bank, and Prime Bank, as well as meaning of the Bank Holding Company Act ("BHC Act"), other supervisory factors in light of all the facts of record. has requested the Board's approval under section 3 of the These facts include supervisory reports of examination BHC Act (12 U.S.C. § 1842) to acquire all the voting assessing the financial and managerial resources of the shares of Prime Bank of Central Florida, Titusville, both in organizations and confidential financial information pro- Florida ("Prime Bank").1 be renamed Prime Bank of Central Florida. The Florida Department of 8. The OCC and FDIC also have not objected to the proposal. Banking and Finance approved the merger of Prime Bank with Prime Successor Bank on May 29, 1996, conditioned on the receipt of all 1. First Commerce proposes to merge Prime Bank into Prime required approvals and compliance with other filing requirements Successor Bank, an interim Florida state-chartered bank, with Prime under Florida law. Successor Bank surviving the merger. Prime Successor Bank would 2. State deposit data are as of December 31, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 739 vided by First Commerce. Based on these and all other stated that it is committed to assuring that all of its subsidfacts of record, the Board concludes that all the supervisory iary banks maintain satisfactory or outstanding CRA ratfactors under the BHC Act, including financial and mana- ings. gerial resources, weigh in favor of approving this proposal. An institution's most recent CRA performance evaluation is a particularly important consideration in the applica- B. Convenience and Needs Factor tions process because it represents a detailed on-site evaluation of the institution's overall record of performance The Board long has held that consideration of the conve- under the CRA by the institution's primary federal supervinience and needs factor includes a review of the records of sor.5 In addition, the Board considers an institution's polithe relevant depository institutions under the Community cies and practices for compliance with applicable fair lend- Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). ing laws. The Board also takes into account information on As provided in the CRA, the Board has evaluated this an institution's lending activities that assist in meeting the factor in light of examinations by the primary federal credit needs of LMI neighborhoods, including programs supervisor of the CRA performance records of the relevant and activities initiated since the institution's most recent institutions. CRA performance examination. The Board also has carefully considered comments from Performance Examinations. First Commerce's subsid- The Fair Housing Continuum, Inc., Cocoa, Florida ("Prot- iary bank, First Commerce Bank of Polk County, Winter estant"), contending that Prime Bank does not adequately Haven, Florida ("First Commerce Bank"), received a "satascertain, or assist in meeting, the credit needs of commu- isfactory" rating from its primary federal supervisor, the nities with predominately low- to moderate-income Federal Deposit Insurance Corporation ("FDIC"), in its ("LMI") and minority residents.3 Protestant also alleges, most recent examination for CRA performance as of Octoon the basis of data filed under the Home Mortgage Disclo- ber 1995 ("First Commerce Bank Examination").6 Prime sure Act (12 U.S.C. § 2801 et seq.) ("HMDA"), that Prime Bank also received a "satisfactory" rating from the FDIC Bank illegally discriminates in its mortgage lending.4 In at its most recent examination for CRA performance as of addition, Protestant alleges that Prime Bank opens April 1994 ("Prime Bank Examination"). branches only in neighborhoods with predominately non- Performance Record of First Commerce Bank. The First minority residents. Commerce Bank Examination stated that the bank's com- First Commerce states that it intends to continue Prime munity delineation was reasonable and did not exclude any Bank's current CRA program and would review and moni- LMI neighborhoods. Examiners found that First Comtor this program after consummation of the proposal. First merce Bank solicited loan applications from all segments Commerce believes that Prime Bank will benefit from the of the community and that First Commerce Bank had not collective resources of First Commerce, including addi- engaged in illegal credit practices or practices that discourtional lending resources and CRA experience, and has aged applications for any type of credit. Examiners also found that extensions of credit, applications, withdrawals, and denials were sufficiently distributed throughout First 3. Protestant also maintains that Prime Bank initiates but does not Commerce Bank's delineated community. In addition, excomplete community development projects, and has not completed aminers noted that employees of First Commerce Bank two projects involving the City of Titusville and one involving Habitat received training regarding fair lending and antifor Humanity ("Habitat"). Prime Bank has provided documentation discrimination laws, and that the board of directors refrom the City of Titusville that confirmed Prime Bank's participation in its housing incentive plan. This submission stated that the delays in viewed geocoding data to ensure that applications were implementing a new home buyers program were not related to any received from all areas of First Commerce Bank's delinaction or lack of action by Prime Bank. Prime Bank also noted that it eated community. Examiners also noted that First Compresented several real estate proposals to Habitat that were declined merce Bank advertised in newspapers and other publicafor reasons involving zoning issues or because Habitat had surplus tions that are distributed throughout the community. First real estate inventory at the time. 4. Protestant has filed a housing discrimination complaint with the Commerce Bank's branch offices were considered by ex- Department of Housing and Urban Development ("HUD"), alleging aminers to be readily accessible to all members of the that Prime Bank engaged in lending practices that discriminate on the community. basis of race and national origin. This complaint is in the initial stages of investigation by HUD and no finding of illegal discrimination has been made against Prime Bank. Moreover, under the Fair Housing Act (42 U.S.C. § 3601 et seq.), HUD has jurisdiction to determine 5. The Board notes that the Statement of the Federal Financial whether Prime Bank is in compliance with fair lending laws and to Supervisory Agencies Regarding the Community Reinvestment Act adjudicate Protestant's complaint. The Board previously has noted provides that a CRA examination is an important and often controlling that its limited jurisdiction under the specific statutory factors set forth factor in the consideration of an institution's CRA record and that in the BHC Act does not authorize the Board to adjudicate disputes reports of these examinations will be given great weight in the between a commenter and an applicant or target institution that arise applications process. 54 Federal Register 13,742, 13,745 (1989). under a statute administered and enforced by another agency. On the 6. First Commerce received approval from the Federal Reserve other hand, substantiated improper actions may be considered by the Bank of Atlanta to acquire First Mercantile National Bank, Long- Board in light of all facts of record of an application under the factors wood, Florida, in May 1996. First Mercantile National Bank received in the BHC Act or in the context of the Board's supervisory authority a "satisfactory" rating from the Office of the Comptroller of the over its regulated banking organizations. See Norwest Corporation, Currency in its most recent examination for CRA performance as of 82 Federal Reserve Bulletin 580 (1996). September 1993. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

740 Federal Reserve Bulletin • August 1996 First Commerce Bank engages in several lending and centrally located and reasonably accessible to all segments community development programs to help meet the credit of the delineated community. needs of its community, including LMI neighborhoods. For The Board has carefully reviewed HMDA data for Prime example, First Commerce Bank extended four loans in Bank in light of Protestant's comments.9 These data indiconnection with the Affordable Housing Program of the cate that the number and percentage of applications from City of Winter Haven, and also extended an interest-free and loans to individuals in LMI census tracts increased line of credit to the Habitat for Humanity, which assists in between 1993 and 1995. In addition, Prime Bank's percentthe construction of affordable housing for low-income fam- age of applications from and loans to African-American ilies throughout First Commerce Bank's community. Ex- applicants increased during this same period and is compaaminers also found that First Commerce Bank's officers rable to or exceeds the representation of Africanand directors were involved in a variety of community Americans in Prime Bank's service community. The perorganizations, including the Auburndale Redevelopment centage of loans that Prime Bank made to LMI applicants Committee, the Lakeland Housing Authority, and the Mi- also increased from 1994 to 1995. Moreover, the Prime nority Lending Advisory Council. Bank Examination found that the bank's 1993 HMDA data Performance Record of Prime Bank. Prime Bank is a disclosed a reasonable penetration of the various census small banking organization with assets of $53 million and tracts that comprise its delineated community, including deposits of less than $50 million. Accordingly, it is unable LMI neighborhoods. to originate a large number of mortgages for its own The HMDA data, however, also reflect disparities in the portfolio. Prime Bank, however, originates and processes rate of denials by racial group. The Board is concerned mortgages through a number of government loan programs when the record of an institution indicates disparities in that are designed to increase credit availability in its com- lending to minority applicants, and believes that all banks munity, including loans for LMI residents, such as the are obligated to ensure that their lending practices are Federal Housing Administration ("FHA"), Veterans Ad- based on criteria that assure not only safe and sound ministration ("VA"), and the Farmers Home Administra- lending, but also equal access to credit by creditworthy tion programs.7 The Prime Bank Examination noted Prime applicants regardless of race. The Board recognizes, how- Bank's participation in the Brevard County Housing Au- ever, that HMDA data alone provide an incomplete meathority Bond Program ("Bond Program"), which is de- sure of an institution's lending in its community because signed to benefit first-time LMI home buyers. As part of these data cover only a few categories of housing-related the Bond Program, Prime Bank originates VA and FHA lending and provide limited information about the covered loans. The record indicates that from 1991 through 1994, loans.10 HMDA data, therefore, have limitations that make Prime Bank originated FHA and VA loans totalling more the data an inadequate basis, absent other information, for than $9 million for the Bond Program. Prime Bank states concluding that an institution has engaged in illegal disthat, in 1995, it originated approximately $2.5 million in crimination in lending. Bond Program loans, most of which were FHA and VA The Prime Bank Examination, which, as noted, included loans. Examiners also found that Prime Bank is actively a review of Prime Bank's 1993 HMDA data, found no involved in local community development and redevelop- evidence of illegal discrimination or other prohibited credit ment projects. For example, Prime Bank has agreed to practices. In addition, examiners noted that Prime Bank's provide home purchase financing for a new subdivision loan policies and procedures revealed no practices dedevelopment that will provide housing for 32 low-income signed to discourage applications for credit, and found no families. substantive violations of fair lending laws or HMDA re- The Prime Bank Examination found that the bank main- porting requirements. Moreover, Prime Bank indicates that tained contact with government officials and community it has established a loan review program to assure that leaders in an effort to determine the credit needs within Prime Bank's community. In addition, examiners noted that Prime Bank had ongoing contact with community development organizations. The Prime Bank Examination 9. Protestant contends that Prime Bank defines its service area to also concluded that Prime Bank effectively advertised its exclude potential minority borrowers. The Board believes that an residential loans and other credit products throughout the assessment of an institution's delineated community can be most local community, including LMI neighborhoods.8 In addi- elfectively considered in an on-site examination by the institution's primary federal supervisor and that such an examination provides a tion, examiners noted that Prime Bank's branch offices are better opportunity to consider whether an institution's delineated community reflects illegal discrimination in light of all the institution's lending activities. See North Fork Bancorporation, 82 Federal Reserve Bulletin 338 (1996). The Prime Bank Examination found that 7. Prime Bank also is a Federal National Mortgage Association- Prime Bank's delineated community was reasonable and did not approved lender and servicer. arbitrarily exclude any areas, particularly LMI areas. 8. Prime Bank advertises its banking products in local newspapers 10. For example, these data do not provide a basis for an indepenand on local radio. Prime Bank also has sponsored several continuing dent assessment of whether an applicant who was denied credit was in education seminars for local realtors on conventional loans, FHA, VA, fact creditworthy. Credit history problems and excessive debt levels and other loan programs designed to meet the credit needs of LMI relative to income, reasons most frequently cited for a credit denial, individuals. are not available from HMDA data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 741 applicants receive equal treatment and are not denied credit Voting for this action: Chairman Pro Tempore Greenspan and on a prohibited basis. Governors Kelley, Lindsey, Phillips, and Yellen. Conclusion Regarding Convenience and Needs Factor. As discussed above, the Board has carefully reviewed the JENNIFER J. JOHNSON Deputy Secretary of the Board relevant CRA examination information, the programs implemented by the relevant institutions, the policies in place Flathead Holding Company of Bigfork to ensure fair lending, relevant HMDA and other lending data, comments and concerns raised by Protestant, and Bigfork, Montana other facts of record in its consideration of the effect of this transaction on the convenience and needs of the commu- Order Approving Acquisition of Shares of a Bank nity. Based on this review, the Board concludes that convenience and needs considerations, including the records of Flathead Holding Company of Bigfork, Bigfork ("Flatperformance of First Commerce and Prime Bank, are con- head"), a bank holding company within the meaning of the sistent with approval of this application. Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire up to 23.4 percent of the Conclusion voting shares of Bank West, N.A., Kalispell, both in Montana ("Bank West"). Based on the foregoing and all the facts of record, the Notice of this proposal, affording interested persons an Board has determined that the application should be, and hereby is, approved.11 The Board's approval of the pro- opportunity to submit comments, has been published (61 Federal Register 15,483 (1996)). The time for filing posal is conditioned on compliance by First Commerce comments has expired, and the Board has considered the with the commitments made in connection with this appliproposal and all comments received in light of the factors cation. The commitments and conditions relied on by the set forth in section 3 of the BHC Act. Board in reaching this decision shall be deemed to be Flathead is affiliated with Mountain Bank System, Inc., conditions imposed in writing by the Board in connection Whitefish, Montana ("MBS"), through common ownerwith its findings and decision, and, as such, may be enship.1 Together, Flathead and MBS are the 14th largest forced in proceedings under applicable law. depository institution in Montana, controlling approxi- The acquisition shall not be consummated before the mately $108 million in deposits, representing approxififteenth calendar day following the effective date of this mately 1.5 percent of total deposits in depository instituorder, or later than three months after the effective date of tions in the state.2 BankWest, with total consolidated assets this order, unless such period is extended for good cause by of approximately $40.9 million, is the 48th largest deposithe Board or the Federal Reserve Bank of Atlanta, acting tory institution in Montana, controlling approximately pursuant to delegated authority. $32.5 million in deposits, representing less than 1 percent By order of the Board of Governors, effective June 5, of total deposits in depository institutions in the state. On 1996. consummation of this proposal, Flathead and MBS collectively would become the 12th largest depository institution in Montana, controlling deposits of $140 million, representing approximately 2 percent of the total deposits in depository institutions in the state. 11. Protestant requests that the Board hold a public hearing or Flathead proposes to acquire less than 25 percent of the meeting on this proposal to permit oral presentations on the applica- voting shares of BankWest, which is not a normal acquisition and Protestant's comments. Section 3(b) of the BHC Act does not tion for a bank holding company. Nonetheless, the requirerequire the Board to hold a public hearing or meeting on an applicament in section 3(a)(3) of the BHC Act that the Board's tion unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial. In this approval be obtained before a bank holding company accase, neither the FDIC nor any state supervisory authority has recom- quires more than 5 percent of the voting shares of a bank mended denial. suggests that Congress contemplated the acquisition by Under the Board's rules, the Board may, in its discretion, hold a bank holding companies of between 5 and 25 percent of public hearing or meeting on an application to clarify factual issues and to provide an opportunity for testimony, if appropriate. 12 C.F.R. the voting shares of a bank or a bank holding company.3 262.3(e) and 262.25(d). The Board has carefully considered Protes- The Board has indicated that acquisitions of less than a tant's request in light of all the facts of record. Protestant has had ample opportunity to submit its views, and has, in fact, made written submissions that have been considered by the Board in acting on this application. Protestant does not indicate what, if any, additional views 1. MBS controls Mountain Bank, Whitefish ("Mountain Bank"), would be expressed at a public hearing or meeting, or why Protes- and Valley Bank of Belgrade, Belgrade, both in Montana. tant's written submissions do not adequately present its views. Based 2. Asset and deposit data are as of March 31, 1996. In this context, on all the facts of record, the Board has determined that a public depository institutions include commercial banks, savings banks, and hearing or meeting is not necessary to clarify the factual record in this savings associations. application, or otherwise warranted in this case. Accordingly, Protes- 3. Asset and deposit data are as of March 31, 1996. In this context, tant's request for a public hearing or meeting on this application is depository institutions include commercial banks, savings banks, and hereby denied. savings associations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

742 Federal Reserve Bulletin • August 1996 25-percent voting interest may nevertheless permit a bank the Court, this clustering facilitates the convenient access holding company to exercise a controlling influence over to these products and services and vests the cluster with the management and policies of another bank holding economic significance beyond the individual products and company.4 services that constitute the cluster.8 Other courts have On consummation of the proposal, Flathead would be followed this position.9 In addition, a study conducted by the largest shareholder of BankWest and would have the Board staff supports the conclusion that customers conability to elect at least one member to BankWest's board of tinue to seek to obtain this cluster of services.10 After directors. Flathead has indicated, moreover, that it might, carefully considering all the facts of record in light of from time to time, exercise a controlling influence over the relevant Board and judicial precedents, the Board conmanagement or polices of BankWest if, in its view, circum- cludes that the appropriate product market in this case is stances would warrant such action. Based on all the facts of the cluster of banking products and services. record, the Board concludes that Flathead would have the ability to exercise a controlling influence over the manage- B. Definition of Relevant Banking Market ment or policies of BankWest and thereby would control BankWest for purposes of the BHC Act.5 The Board and the courts have found that the relevant banking market for analyzing the competitive effect of a Competitive Considerations proposal must reflect commercial and banking realities and should consist of the local area where the banks involved The BHC Act provides that the Board may not approve a offer their services and where local customers can practicaproposal submitted under section 3 of the Act if the pro- bly turn for alternatives.11 Flathead and MBS compete posal would result in a monopoly or if the effect of the directly with BankWest in the Kalispell banking market, an proposal may be substantially to lessen competition in any area that is approximated by Flathead and Lincoln Counrelevant market unless the Board finds that the anticompeti- ties and the Bigfork-Swan River and Poison Divisions of tive effects of the proposed transaction are clearly out- Lake County, all in Montana ("Kalispell Banking Marweighed in the public interest by the probable effect of the ket"). In reaching this conclusion, the Board has carefully transaction in meeting the convenience and needs of the considered BankWest's argument that the relevant geocommunity to be served. In evaluating the competitive graphic market for this proposal should be limited to effects of this proposal, the Board has carefully considered Flathead County. BankWest's contentions that consummation of this pro- Kalispell, with a population of 11,917, is a regional trade posal would result in significantly adverse effects on com- center in Flathead County.12 In 1992, the Board considered petition for banking services, particularly for small busi- whether Lincoln County and Flathead County are in the ness loans, and that the relevant geographic banking market same banking market. The Board noted at that time that a is smaller than the market defined by the Federal Reserve number of considerations indicated an economic integra- Bank of Minneapolis ("Reserve Bank"). A. Relevant Product Market Phillipsburg National Bank, 399 U.S. 350 (1969) ("U.S. v. Phillipsburg"). 8. U.S. v. Phillipsburg, 399 U.S. at 361. The Board has long held that the product market for 9. See United States v. Central State Bank, 621 F.Supp. 1276 (W.D. evaluating bank mergers and acquisitions is the cluster of Mich. 1985), aff'dper curiam, 817 F.2d 22 (6th Cir. 1987). products and services offered by banking institutions,6 and 10. See Gregory E. Elliehausen and John D. Walken, Banking the Supreme Court has emphasized that it is the cluster of Markets and the Use of Financial Services by Small and Medium- Sized Businesses, 76 Federal Reserve Bulletin 726 (1990). For a products and services that, as a matter of trade reality, discussion of this study, see First Hawaiian, Inc., 77 Federal Reserve makes banking a distinct line of commerce.7 According to Bulletin 52(1991). 11. Protestant maintains that the relevant geographic market for analyzing the competitive effects of this proposal should be limited to the areas included in the delineated service areas of the subsidiary 4. See McLeod Bancshares, Inc., 73 Federal Reserve Bulletin 724 banks of Flathead and its affiliate, MBS. The Board believes that a (1987); Hudson Financial Associates, 72 Federal Reserve Bulletin bank's delineated community under the Community Reinvestment 150(1986). Act does not necessarily represent the appropriate geographic market 5. Flathead has acknowledged that, if the Board deems Flathead to for analyzing the competitive effects of a proposal. The geographic control BankWest, Flathead must serve as a source of financial and market for analyzing competitive effects takes into account the presmanagerial strength to BankWest and would be subject to cross- ence of other banks, access by the bank's customers to competitors of guarantee liability provisions of the Federal Deposit Insurance Corpo- and reasonable substitutes for the bank, and economic or demographic ration Act in connection with any default by or insurance fund factors that contribute to competition. See St. Joseph Valley Bank, 68 assistance to BankWest. See 12 C.F.R. 225.4(a); 12 U.S.C. Federal Reserve Bulletin 673 (1982). The key question to be consid- § 1815(e)(1). ered in making this selection "is not where the parties to the merger 6. See Chase Manhattan Corporation, 81 Federal Reserve Bulletin do business or even where they compete, but where, within the area of 883 (1995); The Bank of New York Company, Inc., 74 Federal Reserve competitive overlap, the effect of the merger on competition will be Bulletin 257, 261 (1988). direct and immediate." U.S. v. Philadelphia National, 374 U.S. at 357; 7. United States v. Philadelphia National Bank, 374 U.S. 321, 357 US. v. Phillipsburg, 399 U.S. at 364-65. (1963) ("U.S. v. Philadelphia National"). Accord United States v. 12. Population data are based on 1990 data from the United States Connecticut National Bank, 418 U.S. 656 (1974); United States v. Department of Commerce, Bureau of the Census ("Census Bureau"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 743 tion of Kalispell and the rest of Flathead County with C. Competitive Eifects in the Kalispell Banking Lincoln County and the northern part of Lake County, both Market of which are adjacent to Flathead County, and supported the conclusion that Lincoln County and the northern part of Flathead and MBS collectively are the fourth largest depos- Lake County are part of the Kalispell Banking Market.13 itory institution in the Kalispell Banking Market, control- Kalispell has continued to develop as a regional trade ling deposits of approximately $85 million, representing center and the number of health care and commercial approximately 11.4 percent of the total deposits in deposifacilities in Kalispell that are available to residents in the tory institutions in the market ("market deposits").17 Bankregion has increased.14 A recent survey by the Reserve West is the eighth largest depository institution in the Bank indicates that merchants in Kalispell regularly adver- market, controlling deposits of approximately $32.5 miltise in newspapers with substantial circulation in Lincoln lion, representing approximately 4.4 percent of market County and northern Lake County. Commuting data also deposits. On consummation of this proposal, Flathead and support the inclusion of northern Lake County in the MBS would become the second largest depository institu- Kalispell Banking Market.15 tion in the Kalispell Banking Market, controlling deposits Banking data also indicate that the relevant banking of approximately $117 million, representing approximately market should include Lincoln County. For example, ap- 15.8 percent of market deposits. The market, as measured proximately 18 percent of the loan accounts in Flathead's by the Herfindahl-Hirschman Index ("HHI"), would reaffiliate bank, Mountain Bank, and approximately 9.4 per- main moderately concentrated, and the HHI would incent of Mountain Bank's deposit accounts were held by crease by 100 points to 1474 as a result of this transac- Lincoln County residents.16 In addition, recent interviews tion.18 This increase would not exceed the threshold conducted by Reserve Bank staff with members of the standards in the Department of Justice Merger Guidelines Chambers of Commerce in the towns of Libby and Eureka ("Merger Guidelines"). In addition, ten depository instituin Lincoln County indicated that depository institutions in tion competitors would remain in the Kalispell Banking those towns ensure that interest rates for deposits and loans Market. are competitive with the rates for depository institutions in The Department of Justice has reviewed the proposal Flathead County. These interviews also indicated that small and advised the Board that consummation of the proposal business owners in Lincoln County considered Flathead would not likely have any significantly adverse competi- County banks as feasible alternatives to banks in Libby and tive effects in the Kalispell Banking Market or any other Eureka. relevant banking market.19 In light of all the facts of Based on all the facts of record, and for the reasons record, the Board concludes that consummation of the stated, the Board concludes that the relevant banking mar- proposal would not result in any significantly adverse ket within which to evaluate the competitive effects of this effects on competition or the concentration of banking proposal is the Kalispell Banking Market, which includes resources in the Kalispell Banking Market, or any other Flathead County, Lincoln County, and the northern part of relevant banking market.20 Lake County. 17. Market share data are as of March 31, 1996. These data are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board has previously indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). 13. These considerations included Kalispell's designation as a "sec- 18. Under the revised Merger Guidelines, 49 Federal Register ond level trading center" by the Bureau of Business and Economic 26,823 (June 29, 1984), a market in which the post-merger HHI is Research at the University of Montana in Missoula ("Bureau of between 1000 and 1800 is considered to be moderately concentrated Business"), the availability of hospitals and the region's only airport and a market above 1800 is considered to be highly concentrated. The in Kalispell, the number of stores in Kalispell and Lincoln County Department of Justice has informed the Board that a bank merger or residents shopping in Kalispell, and the limited number of banking acquisition generally will not be challenged (in the absence of other facilities in Lincoln County. See Glacier Bancorp, Inc., 78 Federal factors indicating anticompetitive eifects) unless the post-merger HHI Reserve Bulletin 713 (1992). These factors also were applicable to the is at least 1800 and the merger increases the HHI by more than 200 northern part of Lake County and supported its inclusion in the points. The Department of Justice has stated that the higher than Kalispell Banking Market. normal HHI thresholds for screening bank mergers for anticompeti- 14. The Bureau of Business has indicated that Kalispell has become tive effects implicitly recognize the competitive effect of limiteda more influential regional trade center since 1992. In addition, purpose lenders and other non-depository financial entities. Kalispell's population has grown approximately 16 percent between 19. The Office of the Comptroller of the Currency ("OCC") and the 1990 and 1994, including a 6 percent increase from 1992 to 1994. Federal Deposit Insurance Corporation ("FDIC") also have not ob- 15. 1990 data from the Census Bureau indicate that 18.6 percent of jected to the proposal. the Lake County workforce commutes to jobs in Flathead County. 20. The Board also notes that, if Flathead County alone were 16. Flathead also has indicated that residents of Lake County hold a considered to be the relevant banking market, the HHI increase (175 significant number of loan and deposit accounts at its subsidiary bank, points to 1860) based on the cluster of banking services would not Flathead Bank of Bigfork, Bigfork, Montana, which is located approx- exceed the threshold limits in the Merger Guidelines. In addition, the imately 2.5 miles from the border of Lake County. threshold limits in the Merger Guidelines would not be exceeded by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

744 Federal Reserve Bulletin • August 1996 Other Factors nities to be served also are consistent with approval of this application. The Board has carefully reviewed the financial and managerial resources and future prospects of Flathead, MBS and Conclusion BankWest, and their subsidiary banks, in light of all the facts of record, including comments from BankWest and Based on all the facts of record, the Board has determined relevant supervisory reports of examination.21 The Board that this application should be, and hereby is, approved.23 notes that Flathead and its affiliated banks and BankWest The Board's approval is specifically conditioned on comare in satisfactory financial condition and would remain so pliance by Flathead with all the commitments made in after consummation of the proposal. In addition, reports of connection with this application. For the purpose of this examination assessing the managerial resources of Flat- action, the commitments and conditions relied on by the head and MBS indicate this factor is consistent with ap- Board in reaching its decision are deemed to be conditions proval. imposed in writing by the Board in connection with its Based on all the facts of record, including comments findings and decision and, as such, may be enforced in received and supervisory information, and for the reasons proceedings under applicable law. discussed above, the Board concludes that considerations The proposed acquisition of BankWest's voting shares related to the financial and managerial resources and future shall not be consummated before the fifteenth calendar day prospects of Flathead, MBS, and BankWest, and their following the effective date of this order, and not later than subsidiary banks, are consistent with approval, as are other three months after the effective date of this order, unless supervisory factors the Board must consider.22 Consider- such period is extended for good cause by the Board or by ations relating to the convenience and needs of the commu- the Reserve Bank, acting pursuant to delegated authority. By order of the Board of Governors, effective June 24, 1996. this proposal in the Kalispell Banking Market if small business loans were considered as a separate product market. Thus, assuming that the relevant banking market is Flathead County alone and the relevant Voting for this action: Chairman Greenspan and Governors Kelley, banking product is small business loans—assumptions that the Board Lindsey, Phillips, and Yellen. Abstaining from this action: Governor rejects for the reasons discussed above—the Board does not believe Meyer. this transaction would have a significantly adverse effect on competition in light of all the facts of record. For example, five commercial WILLIAM W. WILES banking organization competitors would remain in Flathead County to Secretary of the Board serve a relatively small population. Four of those competitors each would hold more than 10 percent of the small business loans outstanding in Flathead County. In addition, the presence of Kalispell in this area makes Flathead County an attractive market for entry, and Montana banks are permitted to branch statewide without limitation. 21. BankWest contends that this proposal would weaken Flathead's 23. BankWest also has requested a formal hearing in connection financial condition and render Flathead unable to serve as a source of with this proposal to permit the bank the opportunity to present financial strength to BankWest. BankWest also maintains that an evidence, to challenge the representations made by Flathead, and to Order of Prohibition by the FDIC against a principal shareholder of obtain information from Flathead on the disputed issues in this case, Flathead and Mountain Bank presents adverse considerations. The including information on the principal shareholder's shares held by shareholder's voting shares in both organizations have been trans- the voting trust and the effects of the proposal in the relevant product ferred to independent trustees with the approval of the FDIC and the and geographic markets. Section 3(b) of the BHC Act does not require Federal Reserve System in order to prevent the shareholder from the Board to hold a public hearing on an application unless the participating directly or indirectly in the management or control of appropriate supervisory authority for the bank to be acquired makes a these organizations. Recent inspection and examination reports indi- timely written recommendation of denial of the application. In this cate that the shareholder has not exercised or attempted to exercise a case, the Board has not received such a recommendation from the controlling influence over the management and policies of Flathead or OCC, BankWest's primary federal supervisor. Mountain Bank. Under its rules, the Board may, in its discretion, hold a public 22. BankWest contends that this proposal would violate the Deposi- hearing or meeting on an application to clarify factual issues related to tory Institution Management Interlocks Act (12 U.S.C. § 3201) the application and to provide an opportunity for testimony, if appro- ("Interlocks Act") because Flathead would be able to elect at least priate. 12 C.F.R. 262.3(e) and 262.25(d). The Board has carefully one director to the bank's board of directors and an affiliate bank is considered BankWest's request in light of all the facts of record. In the located in the same community as BankWest. Under the Interlocks Board's view, BankWest has had ample opportunity to submit its Act and the Board's Regulation L (12 C.F.R. 212 et seq.), the views, and has in fact submitted materials that have been considered prohibition against interlocking management officials for banks lo- by the Board in acting on this application. BankWest's request fails to cated in the same community does not apply to institutions that are demonstrate why its substantial written submissions do not adequately affiliates. As noted above, Flathead would be considered to control present its allegations or why a public hearing or meeting is otherwise BankWest after consummation of the proposal, thereby making Flat- warranted in this case. After a careful review of all the facts of record, head and BankWest affiliates. Accordingly, a management official moreover, the Board has concluded that BankWest disputes the weight interlock between Flathead and BankWest would not be prohibited that should be accorded to, and the conclusions that may be drawn under the Interlocks Act. Another commenter has objected to Flat- from, the facts of record or disputes facts that are not material to the head's direct solicitation of BankWest shareholders to purchase shares Board's decision. For these reasons, and based on all the facts of instead of directing such offers to the bank's board of directors. There record, the Board has determined that a public hearing or meeting is is no legal or regulatory prohibition under applicable law against not necessary to clarify the factual record in the application, and is not direct offers to purchase shares of a bank or bank holding company, as warranted in this case. Accordingly, BankWest's request for a public long as there are no material misstatements or omissions. hearing or meeting is denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 745 R&G Financial Corporation on all the facts of record, finds these factors to be consis- Hato Rey, Puerto Rico tent with approval.3 Based on the foregoing and all the facts of record, the Order Approving the Formation of a Bank Holding Board has determined that the application and request for Company consent should be, and hereby are, approved. The Board's approval is specifically conditioned on compliance with all R&G Financial Corporation, Hato Rey ("Applicant"), has the commitments made in connection with the application applied for the Board's approval under section 3 of the and request for consent. The commitments and conditions Bank Holding Company Act (12 U.S.C. § 1842) ("BHC relied on by the Board in reaching this decision are deemed Act") to become a bank holding company by acquiring to be conditions imposed in writing by the Board in con- 88.1 percent of the voting shares of R-G Premier Bank of nection with its findings and decision and, as such, may be Puerto Rico, Hato Rey ("Bank"), both in Puerto Rico. enforced in proceedings under applicable law. Applicant also has requested the Board's consent under The acquisition of Bank shall not be consummated besection 4(c)(13) of the BHC Act and section 211.5(c) of the fore the fifteenth calendar day following the effective date Board's Regulation K (12 C.F.R. 211.5(c)) to acquire all of this order or later than three months after the effective the voting shares of R&G Mortgage Corporation, Hato date of this order, unless such period is extended for good Rey, Puerto Rico ("Company"), and thereby engage in cause by the Board or by the Federal Reserve Bank of New home mortgage lending and servicing activities in Puerto York, acting pursuant to delegated authority. The acquisi- Rico. tion of Company shall not be consummated later than one Notice of the proposal, aifording interested persons an year after the effective date of this order, unless such period opportunity to submit comments, has been published is extended for good cause by the Board. (61 Federal Register 15,070 (1996)). The time for filing By order of the Board of Governors, effective June 17, comments has expired, and the Board has considered the 1996. application and all comments received in light of the factors set forth in section 3(c) of the BHC Act. Voting for this action: Governors Kelley, Lindsey, Phillips, and Bank is the 12th largest commercial banking organi- Yellen. Absent and not voting: Chairman Pro Tempore Greenspan. zation in Puerto Rico, controlling total deposits of $479.6 million, representing 2.2 percent of total deposits in JENNIFER J. JOHNSON commercial banks in the commonwealth.1 The proposal Deputy Secretary of the Board represents a reorganization of his ownership interest by the Union Planters Corporation principal shareholder of Bank and would not result in the Memphis, Tennessee acquisition of any additional banking assets. Based on all the facts of record, the Board concludes that the proposal Order Approving the Acquisition of a Bank would not result in any significantly adverse effects on competition or concentration of banking resources in any Union Planters Corporation, Memphis, Tennessee ("Applirelevant banking market. cant"), a bank holding company within the meaning of the The BHC Act also requires the Board to consider the Bank Holding Company Act ("BHC Act"), has requested financial and managerial resources and future prospects of the Board's approval under section 3 of the BHC Act Applicant, Bank, and Company, the convenience and needs (12 U.S.C. § 1842) to acquire all the voting shares of of the community to be served, and certain other supervi- Eastern National Bank, Miami, Florida ("Bank").1 sory factors.2 The Board has carefully considered all these Notice of this proposal, affording interested persons an factors in light of all the facts of record, including reports opportunity to submit comments, has been published of examination and other supervisory information from the (60 Federal Register 56,151 (1995)).2 The time for filing bank's primary federal supervisor. Based on these and other facts of record, the Board concludes that all the factors the Board is required to consider under section 3 of 3. See 12 C.F.R. 211.5(c). Although these activities also are permisthe BHC Act are consistent with approval of the proposal. sible under the Board's Regulation Y (12 C.F.R. 225.25(b)(1)), Appli- Applicant also has applied under section 4(c)(13) of the cant is not required to obtain approval under Regulation Y because the BHC Act and section 211.5(c) of Regulation K for the Board is approving this acquisition under Regulation K. See 12 C.F.R. 225.22(g). Board's prior consent to acquire all the voting shares of Company. Company engages in home mortgage lending 1. Applicant proposes to merge its de novo subsidiary bank, Eastern and servicing activities in Puerto Rico and, under section Interim National Bank, Miami, Florida, with and into Bank. The 4(c)(13) and Regulation K, is deemed to operate outside Office of the Comptroller of the Currency ("OCC") has approved this the United States. The Board has considered all the factors merger pursuant to section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(c)). Bank's name would be changed to Union specified in section 4(c)(13) and Regulation K and, based Planters Bank of Florida, N.A., Miami, Florida. 2. Comments from the Mid-South Peace and Justice Center, Memphis, Tennessee ("Protestant"), maintain that two typographical errors 1. Deposit data are as of June 30, 1995. in the newspaper notice published in Memphis require republication. 2. See 12 U.S.C. § 1842(c)(2) and (3). The name of Bank and the street address of Applicant were misspelled Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

746 Federal Reserve Bulletin • August 1996 comments has expired and the Board has considered the Competitive Considerations proposal and all comments received in light of the factors set forth in section 3 of the BHC Act. The BHC Act prohibits the Board from approving an Applicant, with total consolidated assets of $11.3 billion, application under section 3 of the BHC Act if the proposal operates subsidiary banks in Arkansas, Kentucky, Louisi- would result in a monopoly, or if the proposal would ana, Missouri, Mississippi, and Tennessee, and thrifts in substantially lessen competition in any relevant banking Alabama and Tennessee.3 Applicant is the fourth largest market, unless such anticompetitive effects are clearly outcommercial banking organization in Tennessee, controlling weighed in the public interest by the probable effect of the deposits of $4.8 billion, representing approximately transaction in meeting the convenience and needs of the 9.2 percent of the total deposits in commercial banking community to be served. Applicant and Bank do not comorganizations in Tennessee. Bank, with total consolidated pete directly in any relevant banking market. Based on all assets of $266.9 million, is the 35th largest commercial the facts of record, the Board concludes that consummation banking organization in Florida, controlling deposits of of this proposal would not result in any significantly ad- $233.8 million, representing less than 1 percent of total verse effects on competition or on the concentration of deposits in commercial banking organizations in Florida. banking resources in any relevant banking market. Interstate Analysis Other Factors under the BHC Act Section 3(d) of the BHC Act, as amended by Section 101 The BHC Act also requires the Board to consider the of the Riegle-Neal Interstate Banking and Branching Effi- financial and managerial resources and future prospects of ciency Act of 1994, allows the Board to approve a proposal the companies and banks involved, the convenience and by a bank holding company to acquire control of a bank needs of the community to be served, and certain other located in a state other than the home state of such bank supervisory factors. holding company, if certain conditions are met. For purposes of the BHC Act, the home state of Applicant is A. Supervisory Factors Tennessee, and Applicant would acquire a bank in Florida.4 The conditions for an interstate acquisition under The Board has carefully considered the financial and mansection 3(d) are met in this case.5 In view of all the facts of agerial resources and future prospects of Applicant, its record, the Board is permitted to approve this proposal subsidiaries, and Bank, as well as other supervisory factors under section 3(d) of the BHC Act. in light of all the facts of record.6 These facts include supervisory reports of examination assessing the financial and managerial resources of the organizations and confidential financial information provided by Applicant.7 6. The Venezuelan Superintendent of Banks and Other Financial in this notice. As required by the Board's Rules of Procedure and Institutions ("Superintendent") has requested the Board to delay the Regulation Y, notice of the proposal was published correctly in the sale or transfer of shares of Bank to Applicant until alleged claims Federal Register and in a newspaper of general circulation in Miami, regarding ownership of Bank's stock arising from prior stock transfers Florida, where Bank is located. See 12 C.F.R. 262.3(b) and 225.14(b). can be resolved. The Superintendent has taken no legal action in or In light of the minor nature of the errors, the fact that the names of outside the United States to adjudicate its alleged claims regarding the Applicant and Bank were correctly spelled in the newspaper notices ownership of Bank's stock, and no such claims have been substantipublished in the respective cities where these institutions are located ated to date. In reviewing applications under section 3 of the BHC and in the Federal Register, and the fact that the misspellings did not Act, the Board is limited to considering the specific factors set forth in mask the identity or location of Applicant or Bank, the Board con- the BHC Act, and the Board has carefully considered the effects of cludes that notice was sufficient to provide interested parties the this proposal under the factors specified in the BHC Act. See Western opportunity to comment on the proposal, as evidenced by Protestant's Bancshares, Inc. v. Board of Governors, 480 F.2d 749 (10th Cir. submissions, and that republication of the notice in Memphis is not 1973). For example, the Board has reviewed the potential impact of warranted in light of all the facts of record. such claims on the financial resources of Applicant. The limited 3. Asset and deposit data are as of December 31, 1995. jurisdiction granted to the Board to review applications under the 4. 12 U.S.C. § 1842(d). Pub. L. No. 103-328, 108 Stat. 2338 (1994). BHC Act does not authorize the Board to adjudicate such claims. A bank holding company's home state is that state in which the Moreover, processing of this application has been delayed beyond the operations of the bank holding company's banking subsidiaries were time periods provided under the procedures in Regulation Y, and principally conducted on July 1, 1966, or the date on which the Applicant has informed the Board that the contract to purchase Bank company became a bank holding company, whichever is later. terminates on June 30th unless Applicant receives Board action and 5. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). all appropriate waiting periods have expired. Based on all the facts of Applicant's subsidiary banks are adequately capitalized and ade- record, and for the reasons discussed above, the Board concludes that quately managed. Bank has been in existence and continuously oper- the record is sufficient to act on the proposal and that a delay is not ated for the minimum periods of time required under Florida law. In warranted under the facts presented. addition, on consummation of this proposal, Applicant and its affili- 7. Protestant also contends that an action filed under the Racketeer ates would control less than 10 percent of the total amount of deposits Influenced and Corrupt Organizations Act (18 U.S.C. § 1961) in of insured depository institutions in the United States and less than connection with the sale of securitized automobile receivables by 30 percent of the total amount of deposits of insured depository three nonbank subsidiaries of Applicant on behalf of a third party institutions in Florida. raises adverse managerial considerations. In 1991, a federal jury in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 1A1 Based on all the facts of record, the Board concludes that eluding programs and activities initiated since its most all the supervisory factors under the BHC Act, including recent CRA performance examination. financial and managerial resources, weigh in favor of ap- Performance Examinations. All of Applicant's subsidproving this proposal. iary banks and thrifts that have been examined for CRA performance received "outstanding" or "satisfactory" rat- B. Convenience and Needs Factor ings from their primary federal supervisors in their most recent examinations. In particular, UPNB received a "satis- The Board has long held that consideration of the conve- factory" CRA performance rating from its primary federal nience and needs factor includes a review of the records of supervisor, the OCC, at its most recent examination as of the relevant depository institutions under the Community October 1994 ("1994 Examination"). The 1994 Examina- Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). tion found no evidence of prohibited discrimination or As provided in the CRA, the Board has evaluated this other illegal credit practices. Moreover, examiners found factor in light of examinations by the primary federal no evidence of practices intended to discourage applicasupervisor of the CRA performance records of the relevant tions for the types of credit listed in the bank's CRA institutions. statements.10 Bank received a "satisfactory" rating for The Board also has carefully considered comments from CRA performance from the OCC as of September 1994. Protestant criticizing Applicant's record of performance Previous Review of CRA Record. The Board has reunder the CRA in meeting the credit needs of minority viewed Applicant's CRA performance record in light of individuals and low- and moderate-income communities in substantially similar comments submitted by Protestant in Memphis, Tennessee, and contending that Applicant's connection with two recent applications filed by Applimanagement is insensitive to such credit needs. In addi- cant. " In these cases, the Board carefully considered UPtion, Protestant alleges that data filed under the Home NB's CRA performance record, including HMDA data, Mortgage Disclosure Act ("HMDA") (12 U.S.C. § 2801) lending activities, marketing and outreach activities,12 serindicate that Applicant's lead bank, Union Planters vices provided at branches, and branch closing policies. National Bank, Memphis, Tennessee ("UPNB"), illegally For the reasons discussed in detail in the Capital Order and discriminates in its lending activities and compares unfa- the First State Order, which are hereby incorporated by vorably to other banks operating in the Memphis communi- reference, the Board concluded that the convenience and ty.8 Protestant also generally references comments it sub- needs factor, including the CRA performance record of mitted in connection with prior applications, which include Applicant, was consistent with approval of acquisitions criticisms regarding Applicant's record of providing ser- under the BHC Act. vices at its branches and Applicant's branch closing poli- Conclusion on Convenience and Needs Factor. In this cies. case, the Board has carefully considered the entire record An institution's most recent CRA performance evalua- in its review of the convenience and needs factor under the tion is a particularly important consideration in the applica- BHC Act. Based on all the facts of record, including tions process because it represents a detailed on-site evalu- information provided by Protestant and Applicant, CRA ation of the institution's overall record of performance performance examinations and other information from Apunder the CRA by its primary federal supervisor.9 In addi- plicant's primary federal supervisors, and the previous tion, the Board considers an institution's policies and prac- reviews of Applicant's CRA record described in the Capitices for compliance with applicable fair lending laws. The tal Order and the First State Order, the Board concludes Board also takes into account information on an institution's lending activities that assist in meeting the credit 10. Protestant notes that several individuals have described inneeds of low- and moderate-income neighborhoods, instances in which Applicant's subsidiary banks may have illegally denied credit to minority borrowers. The Board has referred these comments to the appropriate federal supervisor of the institutions, which has sufficient regulatory authority to address these situations if this action found that Applicant's subsidiaries were civilly liable, the individuals can substantiate their allegations to the agency. under RICO, for losses that a savings association sustained after 11. See Union Planters Corporation, 82 Federal Reserve Bulletin purchasing these instruments from the subsidiaries in 1988 and 1989. 78 (1996) ("Capital Order"); and Union Planters Corporation, 81 Applicant's subsidiaries settled the case and have ceased engaging in Federal Reserve Bulletin 800 (1995) ("First State Order"). this activity. Moreover, corrective actions and operational controls to 12. Protestant contends that the absence of African-American loan ensure compliance with relevant laws have been implemented by officers in Applicant's newspaper advertisements indicates a focus on Applicant and found to be sufficient after review in subsequent exam- affluent, nonminority customers and an insensitivity to the credit inations by the Federal Reserve Bank of St. Louis. needs of the African-American community. Applicant responds that it 8. Protestant also contends that Applicant should present a plan to advertises credit products in newspapers and radio stations owned by community groups for redevelopment of low- and moderate-income minorities that focus on communities with predominantly minority neighborhoods in Memphis. residents throughout the Memphis community, and uses minority 9. The Board notes that the Statement of the Federal Financial actors in numerous newspaper and television advertisements. In addi- Supervisory Agencies Regarding the Community Reinvestment Act tion, the 1994 Examination found that UPNB's marketing program is provides that a CRA examination is an important and often controlling effective and designed to inform all segments of its delineated commufactor in the consideration of an institution's CRA record and that nity of the availability of credit products and services, and that UPNB reports of these examinations will be given great weight in the advertises its credit products and services throughout its delineated applications process. 54 Federal Register 13,742, 13,745 (1989). community. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

748 Federal Reserve Bulletin • August 1996 that the efforts of Applicant and Bank to help meet the Orders Issued Under Section 4 of the Bank Holding credit needs of all segments of the communities served, Company Act including low- and moderate-income neighborhoods and minority residents, are consistent with approval.13 In this The Bank of New York Company, Inc. light, the Board concludes that convenience and needs New York, New York considerations, including the CRA performance records of the companies and banks involved in this proposal, are Order Approving a Notice to Engage in Certain consistent with approval. Nonbanking Activities Conclusion The Bank of New York Company, Inc., New York, New York ("BNY"), a bank holding company within the mean- Based on the foregoing and all other facts of record, the ing of the Bank Holding Company ("BHC") Act, has Board has determined that the application should be, and hereby is, approved.14 The Board's approval is specifically requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of conditioned on compliance by Applicant with all committhe Board's Regulation Y (12 C.F.R. 225.23) to engage ments made in connection with this application as well as de novo in the following nonbanking activities through its the conditions discussed in this order and in the aboveindirect wholly owned subsidiary, BNY Capital Markets, referenced orders. For purposes of this action, these com- Inc., New York, New York ("Company"): mitments and conditions will both be considered conditions imposed in writing and, as such, may be enforced in (1) Making, acquiring and servicing loans and other extensions of credit, pursuant to section 225.25(b)(1) of proceedings under applicable law. Regulation Y (12 C.F.R. 225.25(b)(1)); The acquisition shall not be consummated before the (2) Providing investment and financial advisory serfifteenth day following the effective date of this order or vices, pursuant to section 225.25(b)(4) of Regulation Y later than three months after the effective date of this order, (12 C.F.R. 225.25(b)(4)); unless such period is extended for good cause by the Board or by the Federal Reserve Bank of St. Louis, acting pursu- (3) Providing discount and full-service securities brokerage services, pursuant to section 225.25(b)(15) of Reguant to delegated authority. lation Y (12 C.F.R. 225.25(b)(15)); By order of the Board of Governors, effective June 5, (4) Underwriting and dealing in obligations of the United 1996. States, general obligations of states and their political Voting for this action: Chairman Pro Tempore Greenspan and subdivisions, and other obligations in which state mem- Governors Kelley, Lindsey, Phillips, and Yellen. ber banks may underwrite and deal under 12 U.S.C. §§ 335 and 24(7) ("bank-eligible securities"), pursuant JENNIFER J. JOHNSON to section 225.25(b)(16) of Regulation Y (12 C.F.R. Deputy Secretary of the Board 225.25(b)(16)); (5) Underwriting and dealing in, to a limited extent, certain municipal revenue bonds (including certain un- 13. Protestant's comments also reiterate allegations regarding the rated and "private ownership" municipal revenue ineffective enforcement of the CRA by federal supervisors and certain management misconduct at a Mississippi state bank acquired by bonds), 1^1 family mortgage-related securities, con- Applicant in 1994. These matters were considered in the Capital sumer receivable-related securities, and commercial pa- Order and the First State Order. The Board also has referred Protes- per (collectively, "bank-ineligible securities"); and tant's comments regarding the state bank to the Federal Deposit (6) Acting as agent in the private placement of all types Insurance Corporation, the primary federal supervisor of the bank, for investigation and appropriate supervisory action if these allegations of securities, and buying and selling all types of securican be substantiated. ties on the order of customers as a "riskless principal." 14. Protestant alleges that the election of only one African-American director to UPNB's board of directors indicates illegal employment Company currently is a subsidiary of BNY's principal discrimination. Applicant responds that this director, who successfully bank subsidiary, The Bank of New York, New York, New manages one of the largest churches in Memphis and is influential throughout the community, was elected to provide additional insight York ("Bank of New York").1 Company would engage in and diversity to UPNB's board of directors. Applicant and UPNB are the proposed activities worldwide following a reorganizarequired under the regulations of the Department of Labor to file tion in which Company would become a subsidiary of annual reports with the Equal Employment Opportunity Commission BNY's wholly owned nonbank subsidiary, BNY Capital ("EEOC"), and the EEOC has jurisdiction to investigate and deter- Markets Holdings, Inc., New York, New York. mine whether companies are in compliance with federal equal employment laws. The Board has noted that unsubstantiated allegations of Notice of the proposal, affording interested persons an improper actions under a statute administered by another federal opportunity to submit comments, has been published agency is beyond the scope of the Board's review under the factors (61 Federal Register 19,627 (1996)). The time for filing specified in the BHC Act. On the other hand, substantiated improper comments has expired, and the Board has considered the actions may be considered by the Board in light of all the facts of record of an application under the BHC Act's factors or in the context of the Board's general supervisory authority over its regulated banking organizations. See Norwest Corporation, 82 Federal Reserve 1. Company currently engages in limited private placement and Bulletin 580 (1996). financial advisory activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 749 notice and all comments received in light of the factors set same methods and procedures and subject to the same forth in section 4(c)(8) of the BHC Act. prudential limitations established by the Board in the Sec- BNY, with total consolidated assets of approximately tion 20 Orders.6 $54 billion, is the 14th largest banking organization in the The Board has also previously concluded that underwrit- United States.2 BNY operates commercial bank subsidiar- ing and dealing in "private ownership" industrial developies in New York, New Jersey, and Connecticut, and en- ment bonds that qualify as "exempt facility bonds" under gages, through other subsidiaries, in various permissible section 142 of the Internal Revenue Code ("Code")7 is a nonbanking activities. Company is registered as a broker- permissible activity under section 4(c)(8) of the BHC Act.8 dealer with the Securities and Exchange Commission BNY will conduct this activity according to the prudential ("SEC") under the Securities Exchange Act of 1934 limitations set forth in the Section 20 Orders.9 (15 U.S.C. § 78a et seq.) and is a member of the National BNY proposes to have two director interlocks between Association of Securities Dealers, Inc. ("NASD"). Accord- Company and its affiliated banks. The interlocking direcingly, Company is subject to the recordkeeping and report- tors would not be officers of the affiliated banks and would ing obligations, fiduciary standards, and other requirements represent less than a majority of the board of directors of of the Securities Exchange Act of 1934, the SEC, and the Company and the affiliated banks. The directors also would NASD. not have authority to conduct the day-to-day business of the affiliated banks or to handle individual transactions. Activities Approved by Regulation The Board previously has permitted the type of limited As noted above, Company proposes to engage in lending, investment and financial advisory, securities brokerage, and bank-eligible securities underwriting and dealing activ- Modifications to Section 20 Orders, 75 Federal Reserve Bulletin 751 ities that have all been determined by regulation to be (1989) (collectively, "Section 20 Orders"). closely related to banking for purposes of section 4(c)(8) of 6. BNY has requested that the Board permit The Bank of New York the BHC Act.3 BNY has committed that Company will Capital Markets Ltd. United Kingdom ("BNY UK"), a foreign subsidconduct these activities in accordance with the limitations iary of the Bank of New York established under section 25(a) of the set forth in Regulation Y and the Board's orders relating to Federal Reserve Act (12 U.S.C. § 615(c)), to market the structured these activities.4 finance and loan syndication services of Company to overseas issuers and investors. The Board previously has permitted Regulation K subsidiaries of domestic banks, subject to certain conditions, to mar- Underwriting and Dealing in Bank-Ineligible Securities ket the services and securities of their section 20 affiliates. See BankAmerica Corporation, 80 Federal Reserve Bulletin 1104 (1994); Letter from Jennifer J. Johnson, Deputy Secretary of the Board, to The Board has determined that—subject to the prudential Marjorie E. Gross, Chemical Banking Corp. (Mar. 29, 1995). BNY framework of limitations established in previous decisions has committed that BNY UK will engage in these activities subject to to address the potential for conflicts of interests, unsound the conditions and restrictions previously relied on by the Board in banking practices, or other adverse effects—the proposed approving such cross-marketing activities. activities of underwriting and dealing in bank-ineligible 7. See 26 U.S.C. § 142. 8. See Bank South Corporation, 81 Federal Reserve Bulletin 1116 securities are so closely related to banking as to be a proper (1995) ("Bank South"). In addition to the private ownership bonds incident thereto within the meaning of section 4(c)(8) of discussed in Bank South, BNY proposes that Company be permitted the BHC Act.5 BNY has committed that Company will to underwrite and deal in, to a limited extent, private ownership bonds conduct these underwriting and dealing activities using the that are issued for the following traditional government services: airports, docks and wharves, mass commuting facilities, and highspeed intercity rail facilities, all of which qualify as "exempt facility bonds" under the Code. Under the Code, exempt facility bonds are 2. Asset and ranking data are as of December 31, 1995. issued to finance the acquisition or construction of facilities that 3. See 12 C.F.R. 225.25(b)(1), (b)(4), (b)(15) and (b)(16). provide certain types of traditional government services. 4. To address the potential conflicts of interests arising from Compa- 9. In connection with its proposal to underwrite and deal in unrated ny's conduct of both full-service brokerage activities and bank- municipal revenue bonds, including unrated public ownership and ineligible securities underwriting and dealing activities, BNY has "private ownership" industrial development bonds, BNY has commitcommitted that Company will inform its brokerage customers at the ted that Company will not underwrite any unrated municipal revenue commencement of the relationship that, as a general matter, Company bond until Company conducts an independent credit review to determay be a principal or may be engaged in underwriting with respect to, mine that the securities are of investment grade quality and that no or may purchase from an affiliate, those securities for which brokerage single issue of unrated municipal revenue bonds, including unrated and advisory services are provided. In addition, at the time any public ownership and "private ownership" industrial development brokerage order is taken, Company will inform brokerage customers bonds, underwritten by Company would exceed $7.5 million. BNY (usually orally) whether Company is acting as agent or principal with also has provided other commitments previously relied upon by the respect to a security. Confirmations sent to customers also will state Board in authorizing a section 20 company to underwrite and deal in, whether Company is acting as agent or principal. See PNC Financial to a limited extent, unrated municipal revenue bonds. See Letter Corporation, 75 Federal Reserve Bulletin 396 (1989); Bankers Trust Interpreting Section 20 Orders, 81 Federal Reserve Bulletin 198 New York Co., 74 Federal Resen>e Bulletin 695 (1988). (1995). In addition, BNY has committed that Company will not 5. See Citicorp, 73 Federal Reserve Bulletin 473 (1987) ("Citi- underwrite or deal in unrated municipal revenue bonds until BNY corp"), aff'd sub nom. Securities Industry Ass'n v. Board of Gover- submits and Board staif reviews the credit evaluation packages that nors of the Federal Reserve System, 839 F.2d 47 (2d Cir.), cert, Company will use to determine that unrated municipal revenue bonds denied, 486 U.S. 1059 (1988), as modified by Order Approving are of investment grade quality. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

750 Federal Reserve Bulletin • August 1996 director interlocks proposed by BNY.10 The Board expects Act.13 The Board also has determined that acting as agent BNY to ensure that the framework established pursuant to in the private placement of securities does not constitute the Section 20 Orders will be maintained in all other underwriting and dealing in securities for purposes of respects. section 20 of the Glass-Steagall Act, and that revenue The Board has determined that the conduct of the securi- derived from these activities is consequently not subject to ties underwriting and dealing activities proposed by BNY the 10-percent revenue limitation on bank-ineligible securiis consistent with section 20 of the Glass-Steagall Act ties underwriting and dealing.14 (12 U.S.C. § 377), provided that the company engaged in BNY has committed that Company will conduct its the underwriting and dealing activities derives no more private placement activities using the same methods and than 10 percent of its total gross revenue from underwrit- procedures, and subject to the same prudential limitations ing and dealing in bank-ineligible securities over any two- established by the Board in Bankers Trust and J.P. Morgan, year period.11 BNY has committed that Company will including the comprehensive framework of restrictions imconduct its bank-ineligible securities underwriting and posed by the Board in connection with underwriting and dealing activities subject to the 10-percent revenue test dealing in bank-ineligible securities, which were designed established by the Board in previous orders.12 to avoid potential conflicts of interests, unsound banking practices, and other adverse effects.15 Private Placement Activities Riskless Principal Activities Private placement involves the placement of new issues of securities with a limited number of sophisticated purchas- "Riskless principal" is the term used in the securities ers in a nonpublic offering. A financial intermediary in a business to refer to a transaction in which a broker-dealer, private placement transaction acts solely as an agent of the after receiving an order to buy (or sell) a security for a issuer in soliciting purchasers and does not purchase the customer, purchases (or sells) the security for its own securities and attempt to resell them. Securities that are account to offset a contemporaneous sale to (or purchase privately placed are not subject to the registration require- from) the customer.16 A broker-dealer acting as a riskless ments of the Securities Act of 1933 and are offered only to principal is not obligated to buy (or sell) a security for its financially sophisticated institutions and individuals and customer until after the broker-dealer executes the offsetnot to the public. Company would not privately place ting purchase (or sale) for its own account. The Board registered securities and would place securities only with previously has concluded that, subject to certain condicustomers that qualify as accredited investors. tions, riskless principal activities do not constitute the The Board has determined by order that, subject to underwriting, public sale, or distribution of securities for prudential limitations that address the potential for con- purposes of the Glass-Steagall Act.17 BNY has committed flicts of interests, unsound banking practices, or other that Company would comply with these conditions, as adverse effects, the proposed private placement activities listed in Appendix A. As a SEC registered broker-dealer, are so closely related to banking as to be a proper incident Company also will conduct its riskless principal activities thereto within the meaning of section 4(c)(8) of the BHC in accordance with federal securities laws and regulations. In Bankers Trust, the Board also determined that riskless principal activities are closely related to banking within the meaning of section 4(c)(8) of the BHC Act. In order to approve this notice, the Board must consider whether the activities proposed are a proper incident to 10. See Bank South Corporation, 79 Federal Reserve Bulletin 346 banking, that is whether the activities proposed "can rea- (1993). 11. See Section 20 Orders. Compliance with the 10-percent revenue sonably be expected to produce benefits to the public, such limitation shall be calculated in accordance with the method stated in as greater convenience, increased competition, or gains in J.R Morgan & Co. Inc., 75 Federal Reserve Bulletin 192 (1989), as efficiency, that outweigh possible adverse effects, such as modified by the Order Approving Modifications to the Section 20 undue concentration of resources, decreased or unfair com- Orders, 75 Federal Reserve Bulletin 751 (1989), the Order Approving petition, conflicts of interest, or unsound banking prac- Modifications to the Section 20 Orders, 79 Federal Resen>e Bulletin 226 (1993), and the Supplement to Order Approving Modifications to Section 20 Orders, 79 Federal Reserve Bulletin 360 (1993). The Board notes that BNY has not adopted the Board's alternative 13. See J.P. Morgan & Co. Inc., 76 Federal Reserve Bulletin 26 indexed-revenue test to measure compliance with the 10-percent limi- (1990) ("J.P. Morgan")-, Bankers Trust New York Corporation, 75 tation on bank-ineligible securities activities, and, absent such elec- Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). tion, BNY would continue to employ the Board's original 10-percent 14. See Bankers Trust. revenue test. 15. Among the prudential limitations discussed more fully in Bank- 12. Company also may engage in activities that are necessary ers Trust and J.P. Morgan, BNY has committed that Company will not incidents to the proposed underwriting and dealing activities, provided privately place registered investment company securities or securities that they are treated as part of the bank-ineligible securities activities. of investment companies that are sponsored or advised by BNY or any Unless Company receives specific approval under section 4(c)(8) of of its affiliates. In addition, Company will make no general solicitation the BHC Act to conduct the activities independently, any revenues or general advertising for securities it places. from the incidental activities must be counted as ineligible revenues 16. See SEC Rule 10b-10(a)(8)(i) (17 C.F.R. 240.10b-10(a)(8)(i)). subject to the 10-percent revenue limitation. 17. J.P. Morgan; Bankers Trust. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 751 tices."18 In reaching the conclusion that riskless principal confidential customer information to the underwriting subactivities were a proper incident to banking in Bankers sidiary (and vice-versa) without the customer's consent.22 Trust, the Board relied on commitments that the applicant As noted above, riskless principal activities have been in that case would conduct its riskless principal activities carefully defined to distinguish these activities from securisubject to many of the prudential limitations established by ties underwriting and dealing activities. These definitional the Board with respect to bank-ineligible securities under- limitations ensure that Company's riskless principal transwriting and dealing ("Underwriting Conditions").19 actions will be customer-driven and that Company will not BNY proposes in this case that Company be permitted to bear principal or reputational risk with respect to the secuact as a riskless principal without subjecting this activity to rities that it purchases (or sells) as a riskless principal.23 the Underwriting Conditions. The Board sought public Accordingly, BNY and its affiliates would not face the type comment on BNY's proposal seeking relief from the Un- of conflicts of interests sought to be addressed by the derwriting Conditions in connection with the conduct of its Underwriting Conditions. In addition, because banks themriskless principal activities. See 61 Federal Register 19,627 selves may engage in riskless principal activities,24 it does (1996). The Board received no comments on this aspect of not appear necessary to retain limitations that separate the proposal. operationally the riskless principal activities of a subsidiary In Bankers Trust, the Board concluded that riskless from its bank or thrift affiliates. principal transactions conducted in accordance with the BNY proposes to conduct Company's riskless principal conditions proposed by BNY do not constitute securities activities in accordance with the limitations established by underwriting or dealing and are essentially equivalent to the Board for the full-service securities brokerage activities brokerage transactions.20 Because securities brokerage of bank holding companies. These limitations require that transactions do not raise the potential for conflicts of Company make certain disclosures to its customers25 and interest, unsound banking practices or other adverse effects prohibit Company and its affiliates from sharing any confithat may be presented by bank-ineligible securities under- dential information concerning their respective customers writing and dealing activities, the Board has not required without the consent of the customer.26 bank holding companies to conduct securities brokerage Based on its experience in monitoring and examining activities in compliance with the Underwriting Condi- riskless principal activities conducted by bank holding tions.21 For the reasons set forth below and based on the companies since 1989, the Board has determined that risk- Board's experience in supervising riskless principal activi- less principal activities, when conducted in accordance ties, the Board concludes that riskless principal transac- with the federal securities laws and the definitional limitations conducted in accordance with the conditions dis- tions and customer disclosure requirements in Appendix A, cussed in this order also do not present the types of are not securities underwriting or dealing activities and are concerns that the Underwriting Conditions are designed to not likely to give rise to the potential adverse effects that address. the Underwriting Conditions are designed to address. For The Underwriting Conditions seek to prevent the con- these reasons, and based on all the facts of record, includflicts of interest and other potential adverse effects that may ing the commitments made by BNY, the Board has deterarise because an underwriting subsidiary bears principal mined to grant BNY's request to conduct riskless principal and reputational risks with respect to the bank-ineligible activities without applying the Underwriting Conditions securities in which it underwrites and deals and to prevent listed in Appendix B to the conduct of that activity.27 This the transfer of the risks associated with the underwriting does not affect the applicability of the Underwriting Condisubsidiary's bank-ineligible securities activities to its affil- tions to the private placement, or the underwriting, dealing, iated banks and thrifts. Because an underwriting subsidiary and other bank-ineligible securities activities conducted by is engaged in bank-ineligible securities activities, the Un- Company. derwriting Conditions also seek to separate, both operationally and in the public's mind, the underwriting subsidiary from its bank and thrift affiliates. In addition, the Underwriting Conditions seek to prevent unfair competition in 22. See Citicorp at 500. bank-ineligible securities activities by prohibiting the lend- 23. Although Company's customer (or counterparty) may fail to pay ing affiliates of an underwriting subsidiary from disclosing for securities purchased or fail to deliver securities sold in a riskless principal transaction, the Board previously has determined that this risk, which is similar to the risk incurred in brokerage transactions, does not transform a riskless principal transaction into a transaction 18. 12 U.S.C. § 1843(c)(8). for Company's own account. See Bankers Trust at 833. 19. Bankers Trust at 834. 24. See OCC Interp. Ltr. No. 626, reprinted in [1993-1994 Transfer 20. See Bankers Trust at 834. The SEC also has stated that riskless Binder] Fed. Banking L. Rep. (CCH) f 83,508 (July 7, 1993). principal transactions are functionally equivalent to agency transac- 25. See 12 C.F.R. 225.25(b)(15)(ii). These limitations are included tions. See Exchange Act Rel. No. 33,743, reprinted in [1993-1994 in Appendix A. Transfer Binder] Fed. Sec. L. Rep. (CCH) H 85,326 (March 9, 1994); 26. Id. Exchange Act Rel. No. 21,708, reprinted in [1984-1985 Transfer 27. The Board has today determined to grant relief from these Binder] Fed. Sec. L. Rep. (CCH) ^ 83,734 (Feb. 4, 1985). conditions to other bank holding companies conducting riskless prin- 21. See 12 C.F.R. 225.25(b)(15); see also BankAmerica Corpora- cipal activities. See Order Revising the Limitations Applicable to tion, 69 Federal Reserve Bulletin 105 (1983). Riskless Principal Activities, 82 Federal Reserve Bulletin 759 (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

752 Federal Reserve Bulletin • August 1996 Other Considerations Regarding the Proper Incident to cation or termination of the activities of a bank holding Banking Standard company or any of its subsidiaries as the Board finds necessary to assure compliance with, and to prevent eva- As part of the Board's evaluation of the proper incident to sion of, the provisions of the BHC Act and the Board's banking factors, the Board considers the financial and regulations and orders issued thereunder. In approving the managerial resources of the notificant and its subsidiaries proposal, the Board has relied on all the facts of record and and the effect the transaction would have on such resourc- all the representations and commitments made by BNY. es.28 Based on all the facts of record, the Board concludes These commitments and conditions shall be deemed to be that financial and managerial considerations are consistent conditions imposed in writing by the Board in connection with approval of the notice. with its findings and decisions, and may be enforced in As noted above, BNY has committed that Company will proceedings under applicable law. conduct its bank-ineligible securities underwriting and This transaction shall not be consummated later than dealing activities in accordance with the prudential frame- three months after the effective date of this order, unless work established by the Board's Section 20 Orders. Under such period is extended for good cause by the Board or the the framework and conditions established in this order and Federal Reserve Bank of New York, acting pursuant to the Section 20 Orders, the Board concludes that Compa- delegated authority. ny's proposed limited conduct of bank-ineligible securities By order of the Board of Governors, effective June 10, underwriting and dealing activities is not likely to result in 1996. significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of Voting for this action: Chairman Pro Tempore Greenspan and interest, or unsound banking practices. Similarly, the Board Governors Lindsey, Phillips and Yellen. Absent and not voting: Govfinds no evidence that Company's private placement and ernor Kelley. other activities—conducted under the framework and con- JENNIFER J. JOHNSON ditions established in this order—would likely result in any Deputy Secretary of the Board significantly adverse effects. The Board expects, moreover, that the de novo entry of Company into the market for the Appendix A proposed services would provide added convenience to BNY's customers, would lead to improved methods of BNY has committed that Company would comply with the meeting customer financing needs, and would increase the following conditions with respect to its riskless principal level of competition among existing providers of these activities: services. The Board also expects that Company's performance of the private placement and financial advisory activities, in which BNY currently engages to a limited (1) Company will engage in riskless principal transactions extent, will lead to greater efficiencies within the BNY only in the secondary market. corporate system and thereby permit BNY to provide bet- (2) Company will not act as riskless principal in selling ter services to its customers. Accordingly, the Board has bank-ineligible securities at the order of a customer that is determined that the performance of the proposed activities the issuer of the securities or in any transaction where by BNY can reasonably be expected to produce public Company has a contractual agreement to place the securibenefits that outweigh possible adverse effects under the ties as agent of the issuer. proper incident to banking standard of section 4(c)(8) of (3) Company will not engage in any riskless principal the BHC Act. transaction for any bank-ineligible security carried in its inventory. Based on all the facts of record, and subject to the (4) Company will not engage in riskless principal transaccommitments made by BNY, as well as the terms and tions on behalf of any U.S. affiliate that engages in bankconditions set forth in this order and in the Board orders ineligible securities underwriting and dealing, or any fornoted above, the Board has determined that the notice eign affiliate that engages in securities dealing activities should be, and hereby is, approved. Approval of the prooutside the United States. posal is specifically conditioned on compliance by BNY (5) Company will not act as a riskless principal in any and Company with the commitments made in connection transaction involving a bank-ineligible security for which with the notice and the conditions referenced in this order Company or an affiliate makes a market. and the above-cited Board regulations and orders. The (6) Neither Company nor its affiliates will hold themselves Board's determination also is subject to all the terms and out as making a market in the bank-ineligible securities conditions set forth in Regulation Y, including those in that Company buys and sells as riskless principal, nor enter sections 225.7 and 225.23(g) (12 C.F.R. 225.7 and quotes for specific bank-ineligible securities in any dealer 225.23(g)), and to the Board's authority to require modifiquotation system in connection with Company's riskless principal transactions; except that Company and its affiliates may enter bid or ask quotations, or publish "offering 28. See 12 C.F.R. 225.24; see also The Fuji Bank, Ltd., 75 Federal wanted" or "bid wanted" notices on trading systems other Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal than NASDAQ or an exchange, if Company or the affiliate Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 753 does not enter price quotations on different sides of the purchased (or sold) as riskless principal by Company for market for a particular security for two business days. the purpose of the payment of principal, interest or divi- (That is, Company or its affiliate must wait at least two dends on such securities, except that BNY and its subsidbusiness days after entering a "bid" quotation on a secu- iaries may extend credit to an issuer of securities purchased rity before entering an "ask" quotation with respect to the (or sold) as riskless principal by Company for purposes of same security, and vice-versa.) paying the principal on the securities, provided that at least (7) Company will not act as riskless principal for registered three years has elapsed since the date of Company's purinvestment company securities or for any securities of chase (or sale) and the credit extension meets prudent and investment companies that are advised by BNY or any of objective credit standards. its affiliates. (4) BNY shall adopt appropriate procedures, including (8) Company will maintain specific records, including maintenance of necessary documentary records, to assure records time-stamped in accordance with SEC require- that any extension of credit by it or any of its subsidiaries ments, that clearly identify all riskless principal transac- to issuers of ineligible securities purchased (or sold) as tions. riskless principal by Company are on an arm's length basis (9) Because BNY proposes to provide riskless principal for purposes other than payment of principal, interest or services in combination with investment advisory services, dividends on the issuer's ineligible securities being pur- Company will prominently disclose in writing to its cus- chased (or sold) as riskless principal by Company. tomers that: (5) The requirements relating to credit extensions to issuers (a) Company is solely responsible for its contractual noted in paragraphs above also shall apply to extenobligations and commitments; sions of credit to parties that are the major users of projects (b) Company is not a bank and is separate from any that are financed by industrial revenue bonds. affiliated bank; and (6) BNY's affiliated banks and thrifts may not express an (c) The securities sold, offered, or recommended by opinion on the value or the advisability of the purchase or Company are not insured by the FDIC and are not sale of ineligible securities that are purchased (or sold) as obligations of, or endorsed or guaranteed in any way by, riskless principal by Company unless the bank or thrift any bank (unless this is the case). affiliate notifies the customer that Company is purchasing (or selling) the security. These disclosures must be made before Company provides (7) Neither BNY nor its bank, thrift or trust or investment any riskless principal or advisory services to a customer, advisory subsidiaries shall purchase, as a trustee or in any and the disclosure in clause (a) also must be made by other fiduciary capacity, for accounts over which they have Company in its customer account statements. The disclo- investment discretion, ineligible securities that are pursures may be provided orally so long as written disclosures chased (or sold) as riskless principal by Company unless are provided to the customer immediately thereafter. In such purchase is specifically authorized under the instruaddition, Company and its affiliates will not share any ment creating the fiduciary relationship, by court order, or confidential information concerning their respective cus- by the law of the jurisdiction under which the trust is tomers without the consent of the customer. See 12 C.F.R. administered. 225.25(b)(15)(ii). (8) Neither BNY nor any of its subsidiaries shall purchase as principal ineligible securities that are sold as a riskless principal by Company.1 Appendix B (9) Company may only purchase (or sell) as riskless principal ineligible securities issued by (or representing interests BNY hereby is relieved from the following Underwriting in, or secured by, obligations of) affiliates if the securities Conditions with respect to Company's riskless principal are: activities: (a) Rated by an unaffiliated, nationally recognized statistical rating organization; (1) Neither BNY nor any subsidiary shall directly or indirectly extend credit, issue or enter into a stand-by letter of credit, asset purchase agreement, indemnity, guarantee, insurance or other facility that might be viewed as enhancing the creditworthiness or marketability of ineligible secu- 1. As noted above, BNY has committed that Company will conduct rities purchased (or sold) as a riskless principal by Com- its riskless principal activities in accordance with the limitations set forth in Appendix A. These limitations prohibit Company from engagpany. ing in riskless principal transactions on behalf of any foreign affiliate (2) Neither BNY nor any subsidiary (other than Company) that engages in securities dealing activities outside the United States, shall knowingly extend credit to a customer directly or or any U.S. affiliate that engages in bank-ineligible securities underindirectly secured by, or for the purpose of purchasing, any writing and dealing. In addition, these limitations prohibit Company from purchasing or selling as riskless principal any bank-ineligible ineligible security that Company purchases (or sells) as a security that Company holds in its inventory. Because BNY proposes riskless principal. to engage in riskless principal through its section 20 affiliate, the (3) Neither BNY nor any of its subsidiaries may, directly or structural limitations contained in the Underwriting Conditions conindirectly, extend credit to issuers of ineligible securities tinue to apply to that subsidiary. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

754 Federal Reserve Bulletin • August 1996 (b) Issued or guaranteed by FNMA, FHLMC, or GNMA and Three Houses Investment Company, Limited, London, (or represent interests in securities issued or guaranteed England ("Three Houses"), owns the remaining 25 perby FNMA, FHLMC, or GNMA); or cent.2 Three Houses is controlled by Lazard Freres & Co., (c) Purchased from or sold to sophisticated institutions. L.L.C., New York, New York; Lazard Freres et Cie, Paris, France; and Lazard Brothers & Co., Limited, London, Caisse Nationale de Credit Agricole, S.A. England (collectively, "Lazard Freres"). Lazard Freres Paris, France provides a wide array of advisory and brokerage services, and underwrites and deals in all types of debt and equity Order Approving a Notice to Engage in Various securities. Nonbanking Activities Through a Joint Venture Notice of this proposal, affording interested persons an opportunity to submit comments, has been published Caisse Nationale de Credit Agricole, S.A., Paris, France (60 Federal Register 62,092 and 63,527 (1995)). The time ("CNCA"), a foreign banking organization subject to the for filing comments has expired, and the Board has consid- Bank Holding Company Act ("BHC Act"), has requested ered the proposal and all comments received in light of the the Board's approval under section 4(c)(8) of the BHC Act factors set forth in section 4(c)(8) of the BHC Act. (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's CNCA, with total consolidated assets equivalent to ap- Regulation Y (12 C.F.R. 225.23) to engage through proximately $334.2 billion, is the 15th largest banking CALFP (US), Inc., New York, New York ("Company"), a organization in the world, and the largest banking organizajoint venture, in the following nonbanking activities: tion in France.3 In the United States, CNCA operates (1) Providing securities brokerage services pursuant to branches in Chicago, Illinois, and New York, New York; section 225.25(b)(15) of Regulation Y; and maintains representative offices in San Francisco, Cali- (2) Providing investment advisory services pursuant to fornia, and Houston, Texas. CNCA also engages directly section 225.25(b)(4) of Regulation Y; and through subsidiaries in permissible nonbanking activi- (3) Providing foreign exchange advisory and transac- ties in the United States and abroad. tional services pursuant to section 225.25(b)(17) of Reg- Company is, and will continue to be, a broker-dealer ulation Y; registered with the Securities and Exchange Commission (4) Acting as agent in the private placement of securi- ("SEC") under the Securities Exchange Act of 1934 ties, and providing related advisory services; (15 U.S.C. § 78a et seq.), and is a member of the National (5) Acting as riskless principal in the purchase and sale Association of Securities Dealers, Inc. ("NASD"). Accordof all types of securities on behalf of customers; ingly, Company is subject to the record-keeping and report- (6) Acting as broker and agent and providing advisory ing obligations, fiduciary standards, and other requirements services with respect to interest rate and currency swaps of the Securities Exchange Act of 1934, the SEC, and the and swap derivative products, and swaps, swap deriva- NASD.4 tive products and over-the-counter options linked to certain commodities, stock, bond or commodity indices, Private Placement and Riskless Principal Activities a hybrid of interest rates and such commodities or indices, a specially tailored basket of securities selected by The Board previously has determined that the proposed the parties, or particular equity securities; and private placement5 and riskless principal6 activities are so (7) Providing advisory services, including discretionary portfolio management services, with respect to futures 2. CNCA and Three Houses have equal voting rights in CALFP and options on futures on financial and nonfinancial Holding. Three Houses has an option to acquire additional voting commodities. shares of CALFP Holding that could raise its interest in CALFP Holding to 50 percent. Company would only provide these services to institutional 3. Asset data are as of December 31, 1995. 4. CNCA does not expect Company to conduct its business in such customers, as defined in section 225.2(g) of Regulation Y a way as to require it to register as a commodity trading advisor (12 C.F.R. 225.2(g)), and has proposed to conduct these ("CTA") under the Commodity Exchange Act (7 U.S.C. § 1 et seq.), activities worldwide. or as an investment adviser under the Investment Advisers Act of Company is an indirect subsidiary of Credit Agricole 1940(15 U.S.C. § 80b-1 et seq.). Lazard Financial Products Bank, London, England 5. Private placement involves the placement of new securities with a limited number of sophisticated purchasers in a nonpublic offering. A ("CALFP Bank"), and Credit Agricole Lazard Financial financial intermediary in a private placement transaction acts solely as Products Limited, London, England ("CALFP Holding").1 an agent for the issuer in soliciting purchasers, and does not purchase CNCA owns 75 percent of the capital of CALFP Holding, the securities and attempt to resell them. Securities that are privately placed are not subject to the registration requirements of the Securities Act of 1933, and are offered only to financially sophisticated institutions and individuals and not to the public. Company would not 1. CALFP Holding is the parent company of CALFP Bank, a U.K. privately place registered securities, and would only place securities company licensed as a bank in the United Kingdom. CALFP Bank with customers who qualify as accredited investors. intends to hold its investment in Company through a U.K. holding 6. "Riskless principal" is the term used in the securities business to company whose sole function would be to hold the shares of Com- refer to a transaction in which a broker-dealer, after receiving an order pany. to buy (or sell) a security from a customer, purchases (or sells) the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 755 closely related to banking within the meaning of section Other Activities 4(c)(8) of the BHC Act, provided that the activities are conducted within the prudential framework of limitations The Board previously has determined that a bank holding established in previous decisions to address the potential company may act as broker or agent and provide advisory for conflicts of interests, unsound banking practices, and services with respect to various swap transactions, includother adverse effects.7 The Board also previously has deter- ing commodity and index swaps based on a specially mined that acting as agent in the private placement of tailored basket of securities selected by the parties.10 The securities, and purchasing and selling securities on the Board also previously has determined by regulation or order of customers as riskless principal, do not constitute order that a bank holding company may provide securities underwriting or dealing in securities for purposes of sec- brokerage services, investment advisory services, foreign tion 20 of the Glass-Steagall Act, when conducted in the exchange advisory and transactional services, and advisory manner established by prior orders, and, accordingly, that services with respect to futures and options on futures on revenues derived from these activities are not subject to the financial and nonfinancial commodities.11 CNCA has com- 10-percent revenue limitation on bank-ineligible securities mitted that Company will conduct its activities in accorunderwriting and dealing activities.8 CNCA has committed dance with the limitations set forth in Regulation Y, the that Company will conduct its private placement and risk- Board's orders, and related interpretations. less principal activities using the same methods and procedures, and subject to the same prudential limitations, as Proper Incident to Banking Standard were established by the Board in J.P. Morgan and Bankers Trust.9 These methods, procedures, and prudential limita- In order to approve this proposal, the Board also must tions include the comprehensive restrictions designed to determine that the proposed activities are a proper incident avoid potential conflicts of interests, unsound banking to banking, that is, that the proposal "can reasonably be practices, and other adverse effects imposed by the Board expected to produce benefits to the public, such as greater in cases involving underwriting and dealing in bank- convenience, increased competition, or gains in efficiency, ineligible securities. that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."12 As part of its review of these factors, the Board considers the financial and managerial resources of the notificant and its subsidiaries and the effect the transaction would have on such resources.13 The Board notes that CNCA's security for its own account to offset a contemporaneous sale to (or capital ratios satisfy applicable risk-based capital standards purchase from) the customer. See Securities and Exchange Commisestablished under the Basle Accord, and are considered sion Rule 10b-10. 17 C.F.R. 249.10b-10(a)(8)(i). Riskless principal transactions are understood in the industry to include only transactions equivalent to the capital levels that would be required of a in the secondary market. U.S. banking organization. Based on all the facts of record, 7. 12 U.S.C. § 1843(c)(8). See J.P. Morgan & Company Incorpo- the Board concludes that financial and managerial considrated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan")-, and erations are consistent with approval of this proposal. Bankers Trust New York Corporation, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). The Board previously has expressed concern that joint 8. See Bankers Trust at 831-833. The term "bank-ineligible securi- ventures not lead to a matrix of relationships between ties" refers to all types of debt and equity securities that a bank may not underwrite or deal in directly under the Glass-Steagall Act (12 U.S.C. §§ 24(7) and 335). 9. Among the prudential limitations detailed more fully in J.P. 10. See Swiss Bank Corporation, 81 Federal Reserve Bulletin 185, Morgan and Bankers Trust are that Company will maintain specific 190 (1995). CNCA proposes that Company also act as broker or agent records that will clearly identify all riskless principal transactions, and with respect to swaps and swap derivative products linked to particuthat Company will not engage in any riskless principal transactions for lar equity securities. Company would not own or take possession of any securities carried in its inventory. When acting as a riskless any of the underlying securities, nor would it act as act as principal or principal, Company will engage only in transactions in the secondary counter-party in any such transaction. The Board believes that this market, and not at the order of a customer that is the issuer of the activity is operationally and functionally similar to the swaps activisecurities to be sold; will not act as riskless principal in any transac- ties previously approved by the Board and, therefore, the activity is tion involving a security for which it makes a market; and will not permissible for bank holding companies. hold itself out as making a market in the securities that it buys and 11. 12 C.F.R. 225.25(b)(4), (15), and (17); Credit Suisse, 81 Fedsells as a riskless principal. Moreover, Company will not engage in eral Reserve Bulletin 803 (1996) (providing futures-related discretionriskless principal transactions on behalf of any foreign affiliates that ary portfolio management services); J.P. Morgan & Company Incorengage in securities dealing activities outside the United States, and porated, 80 Federal Reserve Bulletin 151 (1994) (providing futureswill not act as riskless principal for registered open-end investment related advisory services with respect to contracts on nonfinancial company securities. In addition, Company will not act as a riskless commodities); and Security Pacific Corporation, 1A Federal Reserve principal with respect to any securities of investment companies that Bulletin 820 (1988) (providing futures-related advisory services withare advised by CNCA or any of its affiliates. With respect to private out registering as a CTA). placement activities, CNCA has committed that Company will not 12. 12 U.S.C. § 1843(c)(8). privately place registered investment company securities or securities 13. See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 of investment companies that are sponsored or advised by CNCA or Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 any of its affiliates. Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

756 Federal Reserve Bulletin • August 1996 co-venturers that could break down the legally mandated provisions of the BHC Act and the Board's regulations and separation of banking and commerce.14 The Board has orders issued thereunder. The Board's decision is specifistated that this concern is particularly acute where the joint cally conditioned on compliance with all the commitments venture involves a relationship between a bank holding made in connection with this proposal, including the comcompany and a securities firm, and the potential exists for mitments discussed in this order and in the above-noted the mingling of permissible and impermissible securities Board regulations and orders. These commitments and activities.15 In this case, CNCA would engage in the pro- conditions shall both be deemed to be conditions imposed posed activities in a manner consistent with previously in writing by the Board in connection with its findings and approved joint venture proposals and has made a number decision, and, as such, may be enforced in proceedings of commitments similar to those the Board has relied on in under applicable law. prior joint venture cases intended to separate the activities This transaction shall not be consummated later than of a bank holding company and the joint venture from the three months after the effective date of this order, unless impermissible activities of a securities co-venturer.16 These such period is extended for good cause by the Board or by include a commitment that CNCA and Lazard Freres con- the Federal Reserve Bank of Chicago, acting pursuant to duct their business on an arm's-length, non-preferential delegated authority. basis with no solicitation of business for, nor referral of By order of the Board of Governors, effective June 10, customers to, each other, and that CNCA not invest in, or 1996. nominate directors of, Lazard Freres in the United States. For the reasons discussed above, and in reliance on all Voting for this action: Chairman Pro Tempore Greenspan and the commitments made in connection with this proposal Governors Lindsey, Phillips, and Yellen. Absent and not voting: Governor Kelley. and the conditions discussed in this order, the Board believes that the proposal is not likely to result in decreased JENNIFER J. JOHNSON or unfair competition, conflicts of interests, unsound bank- Deputy Secretary of the Board ing practices, undue concentration of resources, or other adverse effects. The Board expects, moreover, that the Union Planters Corporation entry of Company into the market for the proposed ser- Memphis, Tennessee vices would provide added convenience to CNCA's customers, and would increase the level of competition among Order Approving the Acquisition of a Savings existing providers of these services. Accordingly, the Board Association has determined that the performance of the proposed activities by Company can reasonably be expected to produce Union Planters Corporation, Memphis, Tennessee ("Applipublic benefits that outweigh possible adverse eifects under cant"), a bank holding company within the meaning of the the proper incident to banking standard of section 4(c)(8) Bank Holding Company Act ("BHC Act"), has requested of the BHC Act. the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Conclusion Regulation Y (12 C.F.R. 225.23) to acquire all the voting shares of Franklin Financial Group, Inc., and thereby ac- Based on the foregoing and all the facts of record, includquire Franklin Federal Savings Bank ("FFSB"), both of ing the commitments discussed above and all commitments Morristown, Tennessee, and engage in the operation of a made in connection with this proposal, the Board has savings association pursuant to section 225.25(b)(9) of determined to, and hereby does, approve this proposal Regulation Y (12 C.F.R. 225.25(b)(9)).1 subject to all the terms and conditions set forth in this Notice of this proposal, affording interested persons an order, and in the above-referenced regulations and orders opportunity to submit comments, has been published that relate to the proposed activities. The Board's determi- (61 Federal Register 18,145 (1996)). The time for filing nation also is subject to all the terms and conditions set comments has expired, and the Board has considered the forth in the Board's Regulation Y, including those in secproposal and all comments received in light of the factors tions 225.7 and 225.23(g) (12 C.F.R. 225.7 and 225.23(g)), set forth in section 4(c)(8) of the BHC Act. and to the Board's authority to require such modification or Applicant, with total consolidated assets of $11.3 billion, termination of the activities of a bank holding company or operates subsidiary banks in Alabama, Arkansas, Kenany of its subsidiaries as the Board finds necessary to assure compliance with, and to prevent evasion of, the 1. Applicant also would acquire the subsidiaries of FFSB: 14. See, e.g., The Maybaco Company and Equitable Bancorpora- (1) Colonial Loan Association, Morristown, Tennessee, and thereby tion, 69 Federal Reserve Bulletin 375 (1983). make, acquire, and service loans pursuant to section 225.25(b)(1) of 15. See Amsterdam-Rotterdam Bank, N.V., 70 Federal Reserve Regulation Y (12 C.F.R. 225.25(b)(1)); and Bulletin 835 (1984); The Chuo Trust and Banking Company, Limited, (2) Franklin Insurance Group, Inc., Morristown, Tennessee, and 78 Federal Reserve Bulletin 446 (1992) ("Chuo Trust"). thereby act as agent in the sale of insurance directly related to 16. See Banque Nationale de Paris, 80 Federal Reserve Bulletin extensions of credit pursuant to section 225.25(b)(8)(i) and (ii) of 638 (1994); Chuo Trust. Regulation Y (12 C.F.R. 225.25(b)(8)(i) and (ii)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 757 tucky, Louisiana, Mississippi, Florida, and Tennessee.2 Ap- under the Department of Justice merger guidelines.8 After plicant is the third largest commercial banking organiza- considering the relatively small change in concentration as tion in Tennessee, controlling $4.9 billion in deposits, measured by the HHI, Applicant's share of total deposits in representing approximately 8.9 percent of total deposits in depository institutions9 in the market ("market share"), the depository institutions in the state.3 FFSB, with total con- number of competitors that would remain in this market, solidated assets of $125 million is the 74th largest deposi- and all other facts of record, the Board concludes that tory institution in Tennessee, controlling $108 million in consummation of this proposal would not result in any deposits, representing less than 1 percent of total deposits significantly adverse effects on competition or on the conin depository institutions in the state. On consummation of centration of banking resources in the Morristown, Tennesthe transaction, Applicant would remain the third largest see, banking market, or any other relevant banking market. commercial banking organization in Tennessee, controlling deposits of $5.0 billion, representing approximately Record of Performance under the Community 9.1 percent of total deposits in depository institutions in the Reinvestment Act state. In acting on a proposal to acquire a savings association Proposed Activities under section 4(c)(8) of the BHC Act, the Board reviews the records of the relevant depository institutions under the The Board has determined that the operation of a savings Community Reinvestment Act (12 U.S.C § 2901 et seq.) association by a bank holding company is closely related to ("CRA").10 As provided in the CRA, the Board has evalubanking for purposes of section 4(c)(8) of the BHC Act.4 ated this factor in light of examinations by the primary The Board requires savings associations acquired by bank federal supervisor of the CRA performance of the relevant holding companies to conform their direct and indirect institutions. activities to those that are permissible for bank holding The Board also has carefully considered comments from companies under section 4(c)(8) of the BHC Act and The Mid-South Peace and Justice Center, Memphis, Ten- Regulation Y. Applicant has committed to conform all nessee ("Protestant"), criticizing the record of perforactivities of FFSB to those requirements.5 The Board also mance of Applicant under the CRA in meeting the credit has determined by regulation that the proposed lending and needs of minority individuals and low- and moderatecredit-related insurance activities are closely related to income communities in Memphis, Tennessee, and contendbanking within the meaning of section 4(c)(8) of the BHC ing that Applicant's management is insensitive to such Act.6 Applicant has committed to conduct these activities subject to the limitations in Regulation Y. Under section 4(c)(8) of the BHC Act, the Board is 8. On consummation of the proposal, the HHI would increase 249 required to consider whether a proposal is likely to result in points to 1418. Under the revised Department of Justice Merger any significantly adverse effects, such as undue concentra- Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in tion of resources, decreased or unfair competition, conflicts which the post-merger HHI is between 1000 and 1800 is considered of interests, or unsound banking practices. Applicant and moderately concentrated. The Justice Department has informed the Board that a bank merger or acquisition generally will not be chal- FFSB compete directly in the Morristown, Tennessee, lenged (in the absence of other factors indicating anticompetitive banking market.7 Consummation of this proposal would effects) unless the post-merger HHI is at least 1800 and the merger not result in concentration levels in this market that would increases the HHI by more than 200 points. The Justice Department exceed the threshold standards of market concentration as has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the measured by the Herfindahl-Hirschman Index ("HHI") competitive effect of limited-purpose lenders and other non-depository financial entities. 9. Market share data before consummation are based on calculations 2. All data are as of June 30, 1995, and are adjusted to reflect in which the deposits of thrift institutions are included at 50 percent. acquisitions by Applicant consummated through January 26, 1996. The Board previously has indicated that thrift institutions have be- 3. In this context, depository institutions include commercial banks, come, or have the potential to become, significant competitors of savings banks, and savings associations. commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin 4. See 12 C.F.R. 225.25(b)(9). 743 (1984). Because the deposits of FFSB would be transferred to a 5. Applicant has committed that all impermissible real estate activi- commercial bank under this proposal, those deposits are included at ties will be divested or terminated within two years of consummation 100 percent in the calculation of Applicant's pro forma market share. of the proposal, that no new impermissible projects or investments See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); will be undertaken during this period, and that capital adequacy First Bank, Inc., 76 Federal Reserve Bulletin 669, 670 n.9 (1990). guidelines will be met, excluding specified real estate investments. 10. The Board previously has determined that the CRA by its terms Applicant also has committed that any impermissible securities or generally does not apply to applications by bank holding companies to insurance activities conducted by FFSB will cease on or before acquire nonbanking companies under section 4(c)(8) of the BHC Act. consummation. The Mitsui Bank, Ltd., 76 Federal Reserve Bulletin 381 (1990). The 6. See 12 C.F.R. 225.25(b)(1) and (b)(8)(i) and (ii). Board also has stated that, unlike other companies that may be 7. The Morristown, Tennessee, banking market is approximated by acquired by bank holding companies under section 4(c)(8) of the BHC Hamblen and Grainger Counties, minus the town of Blaine in Grainger Act, savings associations are depository institutions, as that term is County, and the towns of Baneberry, Jefferson City, Jefferson Estates, defined in the CRA, and thus acquisitions of savings associations are Leadvale, Talbot, and White Pine in Jeiferson County, all in Tennes- subject to review under the express terms of the CRA. Norwest see. Corporation, 76 Federal Reserve Bulletin 873 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

758 Federal Reserve Bulletin • August 1996 credit needs.11 The Board has reviewed Applicant's CRA listed in the bank's CRA statements. FFSB also received a performance record in light of substantially similar com- "satisfactory" rating for CRA performance from its priments that were submitted by Protestant in connection with mary federal supervisor, the Office of Thrift Supervision, recent applications filed by Applicant.12 as of October 1994. An institution's most recent CRA performance evalua- The Board has reviewed Applicant's CRA performance tion is a particularly important consideration in the applica- record in light of all the facts of record, including informations process because it represents a detailed on-site evalu- tion provided by Protestant and Applicant, CRA perforation of the institution's overall record of performance mance examinations and other information from Appliunder the CRA by its primary federal supervisor.13 In cant's primary federal supervisors, and the previous addition, the Board considers an institution's policies and reviews of Applicant's CRA record that have included practices for compliance with applicable fair lending laws. consideration of HMDA data, lending activities, marketing The Board also takes into account information on an insti- and outreach activities, services provided at branches, and tution's lending activities that assist in meeting the credit branch closing policies, as more fully described in the needs of low- and moderate-income neighborhoods, in- Union Planters Orders and incorporated herein by refercluding programs and activities initiated since its most ence. Based on all the facts of record, the Board concludes recent CRA performance examination. that the efforts of Applicant and FFSB to help meet the All of Applicant's subsidiary banks and thrifts that have credit needs of all segments of the communities served, been examined for CRA performance received "outstand- including low- and moderate-income neighborhoods and ing" or "satisfactory" ratings from their primary federal minority residents, are consistent with approval.16 supervisors in their most recent examinations. Applicant's lead bank, Union Planters National Bank, Memphis, Ten- Other Considerations nessee ("UPNB"), received a "satisfactory" CRA performance rating from its primary federal supervisor, the Office In order to approve this proposal, the Board also must of the Comptroller of the Currency ("OCC"), at its most determine that the proposed activities are a proper incident recent examination as of October 1994 ("1994 Examina- to banking, that is, that the proposal "can reasonably be tion").14 The 1994 Examination found no evidence of expected to produce benefits to the public, such as greater prohibited discrimination or other illegal credit practices.15 convenience, increased competition, or gains in efficiency, Moreover, examiners found no evidence of practices in- that outweigh possible adverse effects, such as undue contended to discourage applications for the types of credit centration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."17 11. Protestant cites the failure by Applicant to close its offices in observance of Martin Luther King Day as an example of management's insensitivity to African Americans. Applicant states that its holiday closing policy is designed to coincide with the holidays on 16. Protestant reiterates allegations of certain management misconwhich essentially all of its customers are closed for business, namely duct at a Mississippi state bank that was acquired by Applicant in New Year's Day, Independence Day, Thanksgiving Day, and Christ- 1994. Protestant requests the Board to delay action on all proposals by mas Day, and to provide banking services to its customers on all other Union Planters until these matters are resolved. The Board has previnationally recognized holidays. Applicant's employees may be ap- ously considered these allegations and referred the matter to the proved to take two additional holidays under this policy. primary federal supervisor of the state bank involved, the Federal 12. See Union Planters Corporation, 82 Federal Reserve Bulletin Deposit Insurance Corporation, for review and consideration. Based 745 (1996) (acquisition of Eastern National Bank) ("Eastern National on all the facts of record, and in light of applicable processing time Order"); Union Planters Corporation, 82 Federal Reserve Bulletin 78 frames prescribed by the BHC Act and the Board's Regulation Y, the (1996); and Union Planters Corporation, 81 Federal Reserve Bulletin Board believes that the record is sufficient to act on this proposal and 800 (1995) (collectively, "the Union Planters Orders"). that delay of consideration of this application is not warranted. 13. The Board notes that the Statement of the Federal Financial 17. 12 U.S.C. § 1843(c)(8). Protestant contends that allegations in Supervisory Agencies Regarding the Community Reinvestment Act pending lawsuits filed against Applicant raise adverse considerations provides that a CRA examination is an important and often controlling for the convenience and needs of the public if Applicant is permitted factor in the consideration of an institution's CRA record and that to engage in the sale of credit-related insurance as agent. These reports of these examinations will be given great weight in the allegations involve the forced placement of collateral insurance, a applications process. 54 Federal Register 13,742, 13,745 (1989). provision in the loan agreement that allows a lender to obtain insur- 14. Protestant requests that the Board review the 1995 data filed by ance for its collateral at the borrower's expense if coverage lapses. UPNB under the Home Mortgage Disclosure Act (12 U.S.C. § 2801) Protestant maintains, for example, that Applicant should not be per- ("HMDA"). HMDA data for 1995 are preliminary and have not been mitted to extend credit and simultaneously sell credit-related insurreleased to the public by the banking agencies. However, these data ance. indicate decreases in the denial ratios for applications received from Applicant states that the pending lawsuits in Mississippi are based low- and moderate-income census tracts compared to high income principally on activities conducted by a state-chartered bank before it census tracts, and for applications received from African Americans was acquired by Applicant. These activities have been terminated. compared to nonminorities, from 1994 to 1995. Applicant also denies that any improper activities have occurred, and 15. Protestant indicates, based on the experience of an unidentified there has been no adjudication of wrongdoing by Applicant in the housing developer, that delays in processing mortgage loan applica- pending actions. The Board notes, moreover, that Applicant may not tions from low- and moderate-income customers at the Whitehaven require a borrower to purchase credit-related insurance from Applibranch of UPNB may have been racially motivated. The Board has cant as a condition or requirement of obtaining an extension of credit referred these comments to the primary federal supervisor of the bank, from any affiliate of Applicant under applicable anti-tying restrictions. the OCC, for review and consideration. See 12 U.S.C. §§ 1972 and 1464(q); 12 C.F.R. 225.7. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 759 As part of its review of these factors, the Board has Board's regulations and orders issued thereunder. The comconsidered the financial and managerial resources of Appli- mitments and conditions relied on by the Board in reaching cant, FFSB, and their respective subsidiaries and the effect this decision are deemed to be conditions imposed in the transaction would have on such resources.18 Based on writing by the Board in connection with its findings and all the facts of record, the Board concludes that financial decision, and, as such, may be enforced in proceedings and managerial considerations are consistent with approval under applicable law. of this proposal.19 The transaction shall not be consummated later than For the reasons discussed above, and in reliance on all three months following the effective date of this order, the commitments made in connection with this proposal, unless such period is extended for good cause by the Board and the conditions discussed in this order, the Board con- or by the Federal Reserve Bank of St. Louis, acting pursucludes that the proposal is not likely to result in decreased ant to delegated authority. or unfair competition, conflicts of interests, unsound bank- By order of the Board of Governors, effective June 10, ing practices, undue concentration of resources, or other 1996. adverse effects. The Board expects, moreover, that the acquisition of FFSB by Applicant would provide added Voting for this action: Chairman Pro Tempore Greenspan and convenience to FFSB's customers. In particular, FFSB Governors Lindsey, Phillips, and Yellen. Absent and not voting: Governor Kelley. would be able to offer its customers additional products and services that are currently offered by Applicant and its JENNIFER J. JOHNSON subsidiaries, including discount brokerage services, invest- Deputy Secretary of the Board ment products, credit card services, trust services, and management advice. Accordingly, the Board has deter- Order Revising the Limitations Applicable to Riskless mined that this proposal can reasonably be expected to Principal Activities produce public benefits that outweigh any adverse effects under the proper incident to banking standard of section In 1989, the Board first authorized a bank holding com- 4(c)(8) of the BHC Act. pany to engage in buying and selling all types of securities on the order of customers as a "riskless principal."1 "Risk- Conclusion less principal" is the term used in the securities business to refer to a transaction in which a broker-dealer, after receiv- Based on all the facts of record, including commitments ing an order to buy (or sell) a security for a customer, made to the Board by Applicant in connection with this purchases (or sells) the security for its own account to proposal, the Board has determined that this proposal offset a contemporaneous sale to (or purchase from) the should be, and hereby is, approved. The Board's approval customer. A broker-dealer acting as a riskless principal is is specifically conditioned on compliance by Applicant not obligated to buy (or sell) a security for its customer with all commitments made in connection with this prountil after the broker-dealer executes the offsetting purposal and on Applicant receiving all necessary federal and chase (or sale) for its own account. state approvals. The Board has carefully defined riskless principal activi- The Board's determination is subject to all the condities and has imposed several limitations designed to distintions in the Board's Regulation Y, including those in secguish riskless principal activities from securities underwrittions 225.7 and 225.23(g)(3) (12 C.F.R. 225.7 and ing and dealing.2 In Bankers Trust, the Board concluded 225.23(g)(3)), and to the Board's authority to require such that riskless principal activities conducted in accordance modification or termination of the activities of a holding with these limitations do not constitute the underwriting, company or any of its subsidiaries as the Board finds public sale, or distribution of securities for purposes of necessary to assure compliance with, or to prevent evasion section 20 of the Glass-Steagall Act (12 U.S.C. § 377). of, the provisions and purposes of the BHC Act and the The Board also concluded that riskless principal activities are closely related to banking for purposes of section 4(c)(8) of the Bank Holding Company ("BHC") Act 18. See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 (12 U.S.C. § 1843(c)(8)). In determining that the conduct Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 of riskless principal activities is a proper incident to bank- Federal Reserve Bulletin 155 (1987). ing, the Board relied on the applicant's commitment to 19. Protestant contends that a suspension in processing Applicant's application to acquire Eastern National Bank, Miami, Florida conduct its riskless principal activities in accordance with ("Bank"), raises adverse managerial considerations about the extent many of the prudential limitations ("Underwriting Condiof the due diligence review of the transaction by Applicant. As tions") established by the Board in connection with apdiscussed in the Eastern National Order, the Venezuelan Superintenprovals authorizing bank holding companies to underwrite dent of Banks and other Financial Institutions requested the Board to delay action on the proposal by Applicant to acquire Bank until alleged claims against the selling parties regarding ownership of Bank's stock could be resolved. For the reasons discussed fully in the 1. See Bankers Trust New York Corporation, 75 Federal Reserve Eastern National Order, the Board found the statutory factors related Bulletin 829 (1989) ("Bankers Trust"); see also J.P. Morgan & to the acquisition of Bank, in that case, to be satisfied and approved Company, Inc., 76 Federal Reserve Bulletin 26 (1990). the proposal. 2. These limitations are set forth in Appendix A. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

760 Federal Reserve Bulletin • August 1996 and deal in securities in which state member banks may not the bank holding company continues to comply with the underwrite or deal ("bank-ineligible securities"). limitations set forth in Appendix A. This action does not In connection with a proposal considered today by a relieve bank holding companies that conduct riskless prinbank holding company to engage in riskless principal activ- cipal activities through subsidiaries that also engage in ities, the Board has reviewed the continued appropriateness bank-ineligible securities underwriting and dealing activiof applying the Underwriting Conditions to the conduct of ties or private placement activities from complying with riskless principal activities. In that case, the Board deter- the Underwriting Conditions or any other condition estabmined, based on its experience in monitoring and examin- lished by the Board with respect to those activities, including the conduct of riskless principal activities by bank ing conditions that limit a subsidiary's relationships with holding companies, that the Underwriting Conditions were its affiliates. In addition, this action does not grant relief not necessary to address identifiable adverse effects. Ac- from any other conditions or commitments. cordingly, the Board permitted the bank holding company By order of the Board of Governors, effective June 10, to engage in riskless principal transactions through a non- 1996. bank subsidiary without conducting this activity in accordance with the Underwriting Conditions.3 The riskless Voting for this action: Chairman Pro Tempore Greenspan and principal activities must be conducted in accordance with Governors Lindsey, Phillips and Yellen. Absent and not voting: Govthe limitations set forth in Appendix A, which are designed ernor Kelley. to distinguish riskless principal activities from securities JENNIFER J. JOHNSON underwriting and dealing activities. Deputy Secretary of the Board In reaching its decision, the Board noted that riskless principal transactions are essentially equivalent to securities brokerage transactions and must be conducted in com- Appendix A pliance with the federal securities laws.4 Bank holding companies are not required to conduct securities brokerage (1) The bank holding company subsidiary authorized to activities in accordance with the Underwriting Conditions. engage in riskless principal activities ("Company") may The Board concluded that the definitional limitations set engage in riskless principal transactions only in the secondforth in Appendix A would ensure that riskless principal ary market. transactions would be customer-driven and that the bank (2) Company may not act as riskless principal in selling holding company would not bear principal or reputational bank-ineligible securities at the order of a customer that is risk with respect to the securities that it would purchase (or sell) as a riskless principal.3 To ensure that customers are the issuer of the securities or in any transaction where Company has a contractual agreement to place the securiinformed, the bank holding company agreed that, if it ties as agent of the issuer. provides riskless principal services in combination with (3) Company may not engage in any riskless principal advisory services, it would provide its customers the distransaction for any bank-ineligible security carried in its closures established by the Board for the full-service brokerage activities of bank holding companies.6 inventory. (4) Company may not engage in riskless principal transac- In light of the Board's decision today in the application tions on behalf of any U.S. affiliate that engages in bankby The Bank of New York Company, Inc., the Board has ineligible securities underwriting and dealing, or any fordetermined to grant identical relief to other bank holding eign affiliate that engages in securities dealing activities companies previously approved to conduct riskless princioutside the United States. pal activities pursuant to section 4(c)(8) of the BHC Act. (5) Company may not act as a riskless principal in any Accordingly, for the reasons discussed in this order and in transaction involving a bank-ineligible security for which the BNY Order, the Board hereby determines that bank Company or an affiliate makes a market. holding companies that have been authorized by the Board (6) Neither Company nor its affiliates may hold themselves to engage in riskless principal activities pursuant to section out as making a market in the bank-ineligible securities 4(c)(8) of the BHC Act may conduct these activities withthat Company buys and sells as riskless principal, nor enter out applying the Underwriting Conditions set forth in Apquotes for specific bank-ineligible securities in any dealer pendix B to the conduct of these activities, provided that quotation system in connection with Company's riskless principal transactions; except that Company and its affili- 3. See The Bank of New York Company, Inc., 82 Federal Reserve ates may enter bid or ask quotations, or publish "offering Bulletin 748 (1996) ("BNY Order"). Notice of the bank holding wanted" or "bid wanted" notices on trading systems other company's proposal was published in the Federal Register in accorthan NASDAQ or an exchange, if Company or the affiliate dance with the Board's rules. See 61 Federal Register 19,627 (May 2, does not enter price quotations on different sides of the 1996). The Board received no comments on the proposal. 4. See Bankers Trust. market for a particular security for two business days. 5. The Board also noted that banks may engage in riskless principal (That is, Company or its affiliate must wait at least two transactions on behalf of their customers. See OCC Interp. Ltr. No. business days after entering a "bid" quotation on a secu- 626, reprinted in [1993-1994 Transfer Binder] Fed. Banking L. Rep. rity before entering an "ask" quotation with respect to the (CCH) % 83,508 (July 7, 1993). same security, and vice-versa.) 6. See 12 C.F.R. 225.25(b)(15)(ii). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 761 (7) Company may not act as riskless principal for regis- issuers of ineligible securities purchased (or sold) as tered investment company securities or for any securities riskless principal by the Riskless Principal Subsidiary of investment companies that are advised by the bank for the purpose of the payment of principal, interest or holding company or any of its affiliates. dividends on such securities, except that the bank hold- (8) Company will maintain specific records, including ing company and its subsidiaries may extend credit to an records time-stamped in accordance with SEC require- issuer of securities purchased (or sold) as riskless princiments, that clearly identify all riskless principal transac- pal by the Riskless Principal Subsidiary for purposes of tions. paying the principal on the securities, provided that at (9) If the bank holding company provides riskless principal least 3 years has elapsed since the date of the Riskless services in combination with investment advisory services, Principal Subsidiary's purchase (or sale) and the credit the bank holding company will prominently disclose in extension meets prudent and objective credit standards. writing to its customers that: (4) The bank holding company shall adopt appropriate (a) The bank holding company is solely responsible for procedures, including maintenance of necessary docuits contractual obligations and commitments; mentary records, to assure that any extension of credit (b) The bank holding company is not a bank and is by it or any of its subsidiaries to issuers of ineligible separate from any affiliated bank; and securities purchased (or sold) as riskless principal by (c) The securities sold, offered, or recommended by the Riskless Principal Subsidiary are on an arm's length bank holding company are not insured by the FDIC and basis for purposes other than payment of principal, interare not obligations of, or endorsed or guaranteed in any est or dividends on the issuer's ineligible securities way by, any bank (unless this is the case). being purchased (or sold) as riskless principal by Riskless Principal Subsidiary. These disclosures must be made before the bank holding (5) The requirements relating to credit extensions to company provides any riskless principal or advisory ser- issuers noted in paragraphs above also shall apply to vices to a customer, and the disclosure in clause (a) also extensions of credit to parties that are the major users of must be made by the bank holding company in its customer projects that are financed by industrial revenue bonds. account statements. The disclosures may be provided orally (6) The bank holding company's affiliated banks and so long as written disclosures are provided to the customer thrifts may not express an opinion on the value or the immediately thereafter. In addition, Company and its affili- advisability of the purchase or sale of ineligible securiates will not share any confidential information concerning ties that are purchased (or sold) as riskless principal by their respective customers without the consent of the cus- Riskless Principal Subsidiary unless the bank or thrift tomer. See 12 C.F.R. 225.25(b)(15)(ii). affiliate notifies the customer that Riskless Principal Subsidiary is purchasing (or selling) the security. Appendix B (7) Neither the bank holding company nor its bank, thrift or trust or investment advisory subsidiaries shall pur- Bank holding companies are hereby relieved from the chase, as a trustee or in any other fiduciary capacity, for following Underwriting Conditions in connection with the accounts over which they have investment discretion, conduct of riskless principal activities: ineligible securities that are purchased (or sold) as riskless principal by Riskless Principal Subsidiary unless (1) Neither the bank holding company nor any subsid- such purchase is specifically authorized under the instruiary shall directly or indirectly extend credit, issue or ment creating the fiduciary relationship, by court order, enter into a stand-by letter of credit, asset purchase or by the law of the jurisdiction under which the trust is agreement, indemnity, guarantee, insurance or other fa- administered. cility that might be viewed as enhancing the creditwor- (8) Neither the bank holding company nor any of its thiness or marketability of ineligible securities pur- subsidiaries shall purchase as principal ineligible securichased (or sold) as a riskless principal by Riskless ties that are sold as a riskless principal by Riskless Principal Subsidiary.1 Principal Subsidiary.2 (2) Neither the bank holding company nor any subsid- (9) The Riskless Principal Subsidiary may only purchase iary (other than the Riskless Principal Subsidiary) shall (or sell) as riskless principal ineligible securities issued knowingly extend credit to a customer directly or indirectly secured by, or for the purpose of purchasing, any 2. As noted above, a bank holding company may rely on the relief ineligible security that the Riskless Principal Subsidiary provided by this order only if the bank holding company conducts its purchases (or sells) as a riskless principal. riskless principal activities in accordance with the limitations set forth (3) Neither the bank holding company nor any of its in Appendix A. These limitations prohibit a bank holding company subsidiary from engaging in riskless principal transactions on behalf subsidiaries may, directly or indirectly, extend credit to of any foreign affiliate that engages in securities dealing activities outside the United States, or any U.S. affiliate that engages in bankineligible securities underwriting and dealing. In addition, these limi- I. "Riskless Principal Subsidiary" refers to any nonbank subsidiary tations prohibit a bank holding company subsidiary from purchasing of a bank holding company authorized to engage in riskless principal or selling as riskless principal any bank-ineligible security that the activities under section 4(c)(8) of the BHC Act. subsidiary holds in its inventory. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

762 Federal Reserve Bulletin • August 1996 by (or representing interests in, or secured by, obliga- Subsidiary or any subsidiary thereof. This limitation shall tions of) affiliates if the securities are: not apply to the purchase and sale of U.S. Treasury securi- (a) Rated by an unaffiliated, nationally recognized statis- ties or direct obligations of the Canadian federal governtical rating organization; ment that are not subject to repurchase or reverse repur- (b) Issued or guaranteed by FNMA, FHLMC, or GNMA chase agreements between Riskless Principal Subsidiary (or represent interests in securities issued or guaranteed and its bank and thrift affiliates. by FNMA, FHLMC, or GNMA); or (c) Purchased from or sold to sophisticated institutions. Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act The following limitations on the conduct of riskless principal activities are relieved only with respect to those Firstar Corporation bank holding company subsidiaries that engage in riskless Milwaukee, Wisconsin principal and securities brokerage activities, but that do not engage in bank-ineligible securities underwriting and deal- Firstar Corporation of Minnesota ing or private placement activities.3 Bloomington, Minnesota (10) There will be no officer, director, or employee inter- Order Approving the Acquisition of Bank Holding locks between Riskless Principal Subsidiary and any of the Companies bank holding company's bank or thrift subsidiaries. The Riskless Principal Subsidiary will have separate offices Firstar Corporation, Milwaukee, Wisconsin ("FCM"), and from any affiliated bank or thrift. its wholly owned subsidiary, Firstar Corporation of Minne- (11) The Riskless Principal Subsidiary will provide each of sota, Bloomington, Minnesota (together, "Firstar"), both its customers with a special disclosure statement describing bank holding companies within the meaning of the Bank the difference between the Riskless Principal Subsidiary Holding Company Act ("BHC Act"), have requested the and its bank and thrift affiliates and pointing out that an Board's approval under section 3 of the BHC Act affiliated bank or thrift could be a lender to an issuer and (12 U.S.C. § 1842) to acquire Jacob Schmidt Company referring the customer to the disclosure documents for ("Jacob"), and its subsidiary, American Bancorporation, details. Riskless Principal Subsidiary also should disclose Inc. ("American"),1 both in St. Paul, and thereby indirectly any material lending relationship between the issuer and a acquire American's subsidiary banks: American Bank, bank or lending affiliate of Company as required under the N.A. and American Commercial Bank, both in St. Paul; securities laws.4 American Bank Lake City, Lake City; and American Bank (12) No bank or thrift affiliate of a Riskless Principal Moorhead, Moorhead, all in Minnesota.2 In addition, Subsidiary will act as agent for, or engage in marketing Firstar has requested the Board's approval under section activities on behalf of, the Riskless Principal Subsidiary. In 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and secthis regard, prospectuses and sales literature relating to tion 225.23(a) of the Board's Regulation Y (12 C.F.R. securities being purchased (or sold) by Riskless Principal 225.23(a)) to acquire all the voting shares of American's Subsidiary as riskless principal may not be distributed by a wholly owned nonbank subsidiaries.3 bank or thrift affiliate, nor should any such literature be Notice of the proposal, affording interested persons an made available to the public at any offices of any such opportunity to submit comments, has been published affiliate, unless specifically requested by a customer. (61 Federal Register 13,496 (1996)). The time for filing (13) The bank holding company shall assure that no bank or thrift subsidiary shall, directly or indirectly, extend credit in any manner to a Riskless Principal Subsidiary or a 1. Jacob currently owns approximately 51 percent of the voting subsidiary thereof; or issue a guarantee, acceptance, or shares of American. Firstar has entered into agreements to purchase letter of credit, including an endorsement or standby letter the remaining voting share interest in American from the other shareof credit, for the benefit of Riskless Principal Subsidiary or holders. a subsidiary thereof. 2. The Office of the Comptroller of the Currency ("OCC") has approved Firstar's application under section 18(c) of the Federal (14) No bank or thrift affiliate of bank holding company Deposit Insurance Act (12 U.S.C. § 1828(c) (the Bank Merger Act), to shall, directly or indirectly, for its own account, purchase merge American Bank and Commercial Bank with and into Firstar financial assets of Riskless Principal Subsidiary or a sub- Bank of Minnesota, N.A., Minneapolis, Minnesota. Firstar intends to sidiary thereof or sell such assets to Riskless Principal sell Lake City Bank and Moorhead Bank. 3. Firstar would acquire American Credit Corporation, St. Paul, Minnesota, and thereby engage in asset-based lending pursuant to section 225.25(b)(l)(iv) of Regulation Y (12 C.F.R. 225.25(b)(l)(iv)). 3. As discussed above, this order does not relieve a bank holding In addition, Firstar would acquire Lake City Agency, Inc., Lake City, company authorized to engage in bank-ineligible securities underwrit- Minnesota, which engages in insurance agency activities pursuant to ing and dealing or private placement activities from any of the section 225.25(b)(8)(iv) of Regulation Y (12 C.F.R. 225.25(b)(8)(iv)). conditions established by the Board with respect to the conduct of Firstar also would acquire two inactive nonbank subsidiaries of Amerthose activities, including any of the limitations that apply generally to ican, First Agency of Barnesville, Barnesville, and Glasser-American the subsidiary conducting those activities. Mortgage Company, St. Paul, both in Minnesota, and has committed 4. The disclosures required to be made in the conduct of riskless not to engage in activities through these subsidiaries without the prior principal activities are listed in Appendix A. approval of the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 763 comments has expired, and the Board has considered this Firstar operates the third largest depository institution in proposal and all comments received in light of the factors the market, and controls deposits of approximately set forth in sections 3 and 4(c)(8) of the BHC Act. $1.6 billion, representing approximately 5.9 percent of Firstar, with total consolidated assets of $19.2 billion, total deposits in depository institutions in the market operates subsidiary banks in Arizona, Illinois, Iowa, Min- ("market deposits").9 American operates the fifth largest nesota, and Wisconsin.4 Firstar is the third largest banking depository institution in the market, and controls deposits or thrift organization ("depository institution") in Minne- of approximately $778.5 million, representing approxisota, controlling deposits of approximately $1.6 billion, mately 2.9 percent of market deposits. representing approximately 3.2 percent of total deposits in On consummation of this proposal, Firstar would remain depository institutions in the state.5 American is the sixth the third largest depository institution in the market, conlargest depository institution in Minnesota, controlling de- trolling deposits of $2.4 billion, representing approxiposits of $953 million, representing approximately mately 8.8 percent of market deposits. The change in 1.9 percent of total deposits in depository institutions in the market concentration, as measured by the Herfindahlstate. On consummation of this proposal, Firstar would Hirschman Index ("HHI"), would not exceed the threshold remain the third largest depository institution in Minne- levels in the Department of Justice merger guidelines.10 In sota, controlling deposits of $2.5 billion, representing ap- addition, numerous competitors would remain in this marproximately 5.1 percent of total deposits in depository ket. Based on all the facts of record, the Board concludes institutions in the state. that consummation of this proposal would not result in any significantly adverse effect on competition or concentration Interstate Analysis of banking resources in the Minneapolis-St.Paul banking market or any other relevant banking market. Section 3(d) of the BHC Act, as amended by Section 101 of the Riegle-Neal Interstate Banking and Branching Effi- Other Factors Under the BHC Act ciency Act of 1994, allows the Board to approve an application by a bank holding company to acquire control of a The BHC Act also requires the Board to consider the bank located in a state other than the home state of such a convenience and needs of the community to be served, the bank holding company, if certain conditions are met. For financial and managerial resources and future prospects of purposes of the BHC Act, the home state of Firstar is the companies and banks involved, and certain other super- Wisconsin, and Firstar would acquire banks in Minnesota.6 visory factors. The conditions for an interstate acquisition under section In its consideration of the convenience and needs factor, 3(d) are met in this case.7 In view of all the facts of record, the Board has carefully reviewed comments from the Fair the Board is permitted to approve this proposal under Lending Coalition, Inc. ("Protestant"), which maintain section 3(d) of the BHC Act. that the closing of the Teutonia Avenue branch in Milwaukee by Firstar Bank Milwaukee, N.A., Milwaukee, Wis- Competitive Considerations consin ("Milwaukee Bank") in April 1996, adversely af- Firstar and American compete directly in the Minneapolis- St. Paul, Minnesota banking market ("Minneapolis-St. Rockford, and Franklin Townships in Wright County, Minnesota; Paul banking market").8 Lanesburgh Township in Le Sueur County, Minnesota; and the Town of Hudson in St. Croix County, Wisconsin. 9. Market data are as of December 31, 1995. Market share data are based on calculations in which the deposits of thrift institutions are 4. Asset data are as of December 31, 1995. included at 50 percent. The Board previously has indicated that thrift 5. State deposit data are as of December 31, 1995. institutions have become, or have the potential to become, significant 6. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding competitors of commercial banks. See WM Bancorp, 76 Federal company's home state is that state in which the operations of the bank Reserve Bulletin 788 (1990); National City Corporation, 70 Federal holding company's banking subsidiaries were principally conducted Reserve Bulletin 743 (1984). Thus, the Board has regularly included on July 1, 1966, or the date on which the company became a bank thrift deposits in the calculation of market share on a 50-percent holding company, whichever is later. weighted basis. See, First Hawaiian Inc., 77 Federal Reserve Bulletin 7. See 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and 52 (1991). (B). Firstar is adequately capitalized and adequately managed. Ameri- 10. On consummation of this proposal, the HHI would increase by can's banks have been in existence and continuously operated for the 34 points to a level of 1866. Under the revised Department of Justice minimum period of time required under Minnesota law. In addition, Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a upon consummation of this proposal, Firstar and its affiliates would market in which the post-merger HHI is above 1800 is considered to control less than 10 percent of the total amount of deposits of insured be highly concentrated. The Justice Department has informed the depository institutions in the United States and less than 30 percent of Board that a bank merger or acquisition generally will not be chalthe total amount of deposits in Minnesota, as required by law. lenged (in the absence of other factors indicating anticompetitive 8. The Minneapolis-St. Paul banking market is approximated by all effects) unless the post-merger HHI is at least 1800 and the merger of Anoka, Hennepin, Ramsey, Washington, Carver, Scott, and Dakota increases the HHI by more than 200 points. The Justice Department Counties in Minnesota; Lent, Chisago Lake, Shafer, Wyoming and has stated that the higher than normal HHI thresholds for screening Franconia townships in Chisago County, Minnesota; Blue Hill, bank mergers for anticompetitive effects implicitly recognize the Orrock, Livonia, and Big Lake Townships and the City of Elk River in competitive effect of limited-purpose lenders and other non-depository Sherburn County, Minnesota; Monticello, Otsego, Bulfalo, Frankfort, financial entities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

764 Federal Reserve Bulletin • August 1996 fected access to banking services for African Americans related to banking for purposes of section 4(c)(8) of the and elderly persons residing in this low- to moderate- BHC Act. Firstar has committed that it will conduct these income area. Protestant also requests that the Board inves- activities in accordance with the Board's regulations and tigate whether the branch closing fostered racial and eco- orders approving these activities for bank holding companies. nomic segregation in Milwaukee. The Board has In order to approve this proposal, the Board also must considered these comments carefully in light of the limited determine that the performance of the proposed nonbankscope of the Board's authority under the BHC Act and the ing activities "can reasonably be expected to produce Community Reinvestment Act (12 U.S.C. § 2901 et seq.) benefits to the public . . . that outweigh possible adverse ("CRA") and all the facts of record, including the bank's effects, such as undue concentration of resources, de- "outstanding" rating at its most recent examination for creased or unfair competition, conflicts of interests or performance under the CRA, as of October 1995, by its unsound banking practices," 12 U.S.C. § 1843(c)(8). In evprimary federal supervisor, the OCC ("OCC examina- ery case under section 4 of the BHC Act, the Board tion"), and the branch closing information filed by Milwau- considers the financial condition and resources of the applikee Bank with the OCC under the Joint Agency Policy cant and its subsidiaries and the effect of the transaction on Statement on Branch Closings and section 42 of the Fed- these resources.11 Based on all the facts of record, the eral Deposit Insurance Act (12 U.S.C. § 1831r-l) ("FDIC Board has concluded that financial and managerial consid- Act"). erations are consistent with approval. The OCC examination found that the branch closing The Board also concludes that this proposal would enpolicy for Milwaukee Bank was satisfactory and noted no able Firstar to provide greater convenience and improved materially adverse effects from branch closings in low- to service to Firstar's customers and to customers of Amerimoderate-income neighborhoods during the examination can's nonbanking subsidiaries. The record in this case period. The branch closing policy required the bank to indicates that there are numerous providers of these nonstudy the economic impact of any proposed branch closing banking services, and there is no evidence in the record to on the community served by the branch, to solicit input indicate that consummation of this proposal is likely to from the community, and to consider whether alternative result in any significantly adverse effects, such as undue financial facilities were available to the affected customers concentration of resources, decreased or unfair competibefore deciding to close the Teutonia Avenue branch. tion, conflicts of interests, or unsound banking practices Firstar has indicated, moreover, that this branch was closed that would outweigh the public benefits of this proposal. because the bank's lease was not renewed. Marketing Accordingly, the Board has determined that the balance of studies conducted by Firstar over a five-month period public interest factors it must consider under section 4(c)(8) showed that 80 percent of the customers that used the of the BHC Act is favorable and consistent with approval Teutonia Avenue branch also used one or more of the of the notice to acquire American's nonbanking subsidiaries. bank's other branches, and 64 percent of the branch's customers that responded to a telephone survey stated that Conclusion another branch of Firstar could conveniently serve their banking needs. Firstar has three branches, and seven other Based on the foregoing, including the commitments made depository institution maintain branches, within three miles to the Board by Firstar in connection with this application of the Teutonia Avenue branch. and notice, and in light of all the facts of record, the Board Firstar does not propose to close any branches of the has determined that the application and notice should be, depository institution subsidiaries of American in connec- and hereby are, approved.12 The Board's approval is speciftion with this proposal. Based on all the facts of record, including the comments by Protestant, and for the reasons 11. See 12 C.F.R. 225.24. See also The Fuji Bank Limited, 75 discussed above, the Board concludes that convenience Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 and needs considerations are consistent with approval. For Federal Reserve Bulletin 155 (1987). these reasons, the Board also concludes that the facts of 12. Protestant requests that the Board hold a public hearing or record do not support Protestant's request to delay action public meeting on the adverse effects of closing the Teutonia Avenue branch. Section 3(b) of the BHC Act does not require the Board to on this application in order to conduct a special investigahold a public hearing or meeting on an application unless the approprition. ate supervisory authority for the bank to be acquired makes a timely In light of all the facts of record, the Board also con- written recommendation of denial of the application. In this case, the cludes that the financial and managerial resources and Board has not received such a recommendation from any state or federal supervisory authority. Under its rules, the Board may, in its future prospects of Firstar and Jacob, and their respective discretion, hold a public hearing or meeting on an application to subsidiaries, are consistent with approval, as are the other clarify factual issues related to the application and to provide an supervisory factors the Board must consider under sec- opportunity for testimony, if appropriate. 12 C.F.R. 262.3(e) and tion 3 of the BHC Act. 262.25(d). The Board has carefully considered Protestant's request in light of all the facts of record. In the Board's view, Protestant has had Firstar also has requested Board approval, pursuant to ample opportunity to submit its views, and has, in fact, submitted section 4(c)(8) of the BHC Act, to acquire the nonbanking materials that have been considered by the Board in acting on this subsidiaries of American. The Board previously has deter- application. Protestant's request fails to demonstrate why its substanmined by regulation or order that these activities are closely tial written submissions do not adequately present its allegations or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 765 ically conditioned on compliance by Firstar with all the (12 U.S.C. § 1828(c)) (the "Bank Merger Act") to merge commitments made in connection with the proposal. The with U. S. Bank of Idaho, National Association, Coeur Board's determinations on the proposed nonbanking activ- D'Alene, both in Idaho ("U.S. Bank"), with West One ities also are subject to all the conditions set forth in surviving the merger. West One also has requested the Regulation Y, including those in sections 225.7 and Board's approval under section 9 of the Federal Reserve 225.23(b)(3) of Regulation Y (12 C.F.R. 225.7 and Act (12 U.S.C. § 321) to establish branches at the current 225.23(b)(3)), and to the Board's authority to require such locations of the U.S. Bank branches.1 modification or termination of the activities of a bank Notice of the proposal, affording interested persons an holding company or any of its subsidiaries as the Board opportunity to submit comments, has been given in accorfinds necessary to ensure compliance with, and to prevent dance with the Bank Merger Act and the Board's Rules of evasion of, the provisions of the BHC Act and the Board's Procedure (12 C.F.R. 262.3(b)). As required by the Bank regulations and orders issued thereunder. For purposes of Merger Act, reports on the competitive effects of the this action, the commitments and conditions relied on by merger were requested from the United States Attorney the Board in reaching this decision are deemed to be General, the Office of the Comptroller of the Currency conditions imposed in writing by the Board in connection ("OCC"), and the Federal Deposit Insurance Corporation. with its findings and decision, and, as such, may be en- The time for filing comments has expired, and the Board forced in proceedings under applicable law. has considered the proposal and all comments received in The acquisition of American's subsidiary banks shall not light of the factors set forth in the Bank Merger Act and be consummated before the fifteenth calendar day follow- section 9 of the Federal Reserve Act. ing the effective date of this order, and this proposal shall West One and U.S. Bank are wholly owned subsidiaries not be consummated later than three months after the of U. S. Bancorp, Portland, Oregon ("U.S. Bancorp"). effective date of this order, unless such period is extended U.S. Bancorp, with total consolidated assets of $31.9 bilfor good cause by the Board or by the Federal Reserve lion, is the largest commercial banking organization in Bank of Chicago, acting pursuant to delegated authority. Idaho, controlling deposits of approximately $3.4 billion, By order of the Board of Governors, effective June 24, representing 37.8 percent of the total deposits in commer- 1996. cial banking organizations in Idaho.2 The Bank Merger Act prohibits the Board from approv- Voting for this action: Chairman Greenspan and Governors Kelley, ing a proposal under the Act if the proposal would result in Lindsey, Phillips, and Yellen. Abstaining from this action: Governor a monopoly or if the proposal would substantially lessen Meyer. competition in any relevant banking market unless such WILLIAM W. WILES anticompetitive effects are clearly outweighed in the public Secretary of the Board interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. The proposal represents a corporate reorganization of ORDERS ISSUED UNDER BANK MERGER ACT U.S. Bancorp's existing banking operations in Idaho. Based on all the facts of record, consummation of the proposal West One Bank, Idaho would not have any significantly adverse effects on compe- Boise, Idaho tition or the concentration of banking resources in any relevant banking market. Order Approving the Merger of Banks and Establishment The Bank Merger Act also requires the Board to conof Bank Branches sider the financial and managerial resources and future prospects of the banks involved. The Board has carefully West One Bank, Idaho, Boise ("West One"), a state memreviewed these factors in light of all the facts of record, ber bank, has requested the Board's approval under section including comments received from several individuals 18(c) of the Federal Deposit Insurance Act ("Commenters"), and relevant reports of examination and other supervisory information from federal supervisory why a public hearing or meeting is otherwise warranted in this case. agencies. Based on all the facts of record, the Board Protestant participated in several meetings that were held by Firstar on concludes that these factors are consistent with approval of the closing of the Teutonia Avenue branch. In addition, section 42 of the proposal.3 Considerations relating to the convenience the FDIC Act also provides a mechanism for interested persons to request a public meeting regarding a branch closing at the time the closing is announced and Protestant did not avail himself of this opportunity. After a careful review of all the facts of record, the Board 1. The locations of the branches that West One proposes to establish has concluded that Protestant disputes the weight that should be are listed in the Appendix. accorded to, and the conclusions that may be drawn from, the facts of 2. Asset data are as of December 31, 1995. Deposit data are as of record, or disputes facts that are not material to the Board's decision. June 30, 1995. For these reasons, and based on all the facts of record, the Board has 3. Commenters maintain that their pending legal actions against determined that a public hearing or meeting is not necessary to clarify West One have not been properly disclosed in the proposal or to the factual record in the application, and is not warranted in this case. shareholders, and that their claims adversely affect the financial re- Accordingly, Protestant's request for a public hearing or meeting is sources of the bank. These lawsuits are based on allegations that relate denied. to Commenters' loan transactions with West One that resulted in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

766 Federal Reserve Bulletin • August 1996 and needs of the community, also required to be reviewed the effective date of this order, and this proposal may not under the Bank Merger Act, are consistent with approval. be consummated later than three months after the effective The Board also has considered the factors it is required date of this order, unless such period is extended by the to consider when reviewing a proposal to establish Board or by the Federal Reserve Bank of San Francisco, branches under section 9 of the Federal Reserve Act acting pursuant to delegated authority. (12 U.S.C. § 321 et seq.), and has determined that those By order of the Board of Governors, effective June 17, factors are consistent with approval of the establishment of 1996. West One branches at the present sites of the U.S. Bank branch offices. Voting for this action: Governors Kelley, Lindsey, Phillips, and Based on the foregoing and all the facts of record, the Yellen. Absent and not voting: Chairman Pro Tempore Greenspan. Board has determined that these applications should be, and hereby are, approved.4 The Board's approval of the JENNIFER J. JOHNSON Deputy Secretary of the Board proposal is conditioned on compliance with the commitments made in connection with these applications. For purposes of this action, the commitments and conditions Appendix relied on in reaching this decision are both conditions Locations of branches of U.S. Bank to be established by imposed in writing by the Board and, as such, may be enforced in proceedings under applicable law. West One: The merger of U.S. Bank and West One may not be Coeur D'Alene consummated before the fifteenth calendar day following 301 North 3rd Street Coeur D'Alene, Idaho 83816 foreclosure proceedings by the bank more than ten years ago. The Board notes that Commenters litigated their claims in courts that had Eight & Bannock Branch the authority to provide Commenters with appropriate remedies, if 802 West Bannock improper actions could have been substantiated. Trial and appellate Boise, Idaho 83702 courts have not granted relief to Commenters. U.S. Bancorp, the only shareholder of West One, is aware of these legal actions. The Board has considered the effect of these claims on the financial resources of Bryden Avenue Financial West One in light of reports of examination and other information (Supermarket location) about the financial strength of the bank and its parent holding com- 332 Thain Road pany. Lewiston, Idaho 83501 One Commenter also contends that from 1984 through 1987, West One misreported its allowance for loan and lease losses. West One was a nationally chartered institution before it became a state member Silver Lake Mall Branch bank in 1992. The Board has consulted with the OCC, the primary 123 West Hanley Avenue federal supervisor of West One at that time, and has provided a copy Coeur D'Alene, Idaho 83814 of Commenter's allegations to the OCC. In addition, the Board has considered West One's record for accuracy in its reports since it became a state member bank. The Board also notes that the same Meridian Branch allegations of misreporting by West One were considered by the 132 East Fairview Securities and Exchange Commission ("SEC") in connection with Meridian, Idaho 83642 U.S. Bancorp's acquisition of West One Bancorp in 1995, and the SEC determined that the allegations did not warrant investigation under the securities laws. Post Falls Branch 4. Commenters have requested that the Board hold a public hearing 709 East Seltice Way or meeting on issues raised by their comments. Neither the Bank Post Falls, Idaho 83854 Merger Act nor section 9 of the Federal Reserve Act provide for public hearings or meetings on an application. Under the Board's Rules of Procedure, however, the Board may, in its discretion, hold a Caldwell Branch public hearing or meeting on an application to clarify factual issues 2615 East Cleveland Blvd. related to the application and to provide an opportunity for testimony, Caldwell, Idaho 83602 if appropriate. 12 C.F.R. 262.3(e). The Board notes that Commenters have had ample opportunity to submit their views and have, in fact, submitted comments on these applications. The requests fail to dem- Appleway Financial Market onstrate why the written submissions do not adequately present com- West 225 Apple Way menters' allegations or why a public hearing or meeting is otherwise Coeur D'Alene, Idaho 83814 warranted in the case. For these reasons, and based on all the facts of record, the Board has determined that a public hearing or meeting is not necessary to clarify the factual record in the proposal and are not Westpark Towne Plaza Branch warranted in this case. Accordingly, Commenters' request for a public 675 North Milwaukee Avenue hearing or meeting is denied. Boise, Idaho 83704 Commenters have also requested that the Board delay acting on the proposal until their allegations are investigated. Based on all the facts Vista Avenue Branch of record, and for the reasons previously discussed, the Board con- 1103 Vista Avenue cludes that a delay is not warranted and that the record is sufficient to act on the proposal. Boise, Idaho 93705 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 767 Colverdale McMillan Branch nity, including low- and moderate-income neighborhoods, 12195 West McMillan Road are consistent with approval.6 Boise, Idaho 83704 Based on the foregoing and all other facts of record, the Board has determined that this notice should be, and hereby is, approved. The Board's approval is specifically condi- ORDERS ISSUED UNDER FEDERAL RESERVE ACT tioned on Bank's compliance with all commitments made in connection with the application. The commitments and Iowa State Bank conditions relied on by the Board are deemed to be condi- Hull, Iowa tions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in Order Approving Establishment of a Branch proceedings under applicable law. The Hull office shall be in operation as a branch no later Iowa State Bank, Hull, Iowa ("Bank"), a state member than one year after the effective date of this order, unless bank, has requested the Board's approval under section 9 such period is extended for good cause shown by the Board of the Federal Reserve Act (12 U.S.C. § 321 et seq.) to or by the Federal Reserve Bank of Chicago, acting pursuestablish a branch at 1101 Main Street, Hull, Iowa.1 ant to delegated authority. Notice of the proposal, affording interested persons an By order of the Board of Governors, effective June 24, opportunity to submit comments, has been published in 1996. accordance with the Board's Rules of Procedure. The time for filing comments has expired, and the Board has consid- Voting for this action: Chairman Greenspan and Governors Kelley, ered the application and all comments received in light of Lindsey, Phillips and Yellen. Abstaining from this action: Governor the factors set forth in section 9 of the Federal Reserve Act. Meyer. Bank, with total assets of $33.9 million,2 is a wholly WILLIAM W. WILES owned subsidiary of Vogel Bancshares, Inc., Orange City, Secretary of the Board Iowa ("Vogel Bancshares"). Bank operates in the Sioux County, Iowa, banking market, which includes the towns Korea Long Term Credit Bank of Hull and Sheldon.3 Seoul, Korea The Board has carefully reviewed the factors it is required to consider in proposals to establish a branch under Order Approving Establishment of a Branch the Federal Reserve Act.4 Based on all the facts of record, the Board concludes that these factors, including the finan- Korea Long Term Credit Bank, Seoul, Korea ("Bank"), a cial condition of Bank, the general character of its manageforeign bank within the meaning of the International Bankment, and the proposed exercise of corporate powers, are ing Act (the "IBA"), has applied under section 7(d) of the consistent with approval and the purposes of section 9 of IBA (12 U.S.C. § 3105(d)) to establish a state-licensed the Federal Reserve Act.5 The Board also concludes that branch in New York, New York. The Foreign Bank Super- Bank's efforts to meet the credit needs of its entire commuvision Enhancement Act of 1991 ("FBSEA"), which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a branch in the United States. 1. Bank proposes to relocate its main office from Hull to Sheldon, Notice of the application, affording interested persons an Iowa, 16 miles away, and to retain the Main Street location in Hull as opportunity to submit comments, has been published in a a full-service branch. The Iowa Superintendent of Banking has ap- newspaper of general circulation in New York, New York proved the proposed relocation to Sheldon and the establishment of a (The New York Times, February 28, 1996). The time for branch in Hull. filing comments has expired, and all comments have been 2. Asset data are as of March 31, 1996. 3. The banking market is approximated by Sioux County and Floyd, considered. Carroll, Baker, and Caledonia townships in O'Brien County, Iowa. Bank, with assets of $27.5 billion,1 is primarily engaged 4. See 12 U.S.C. § 322. in wholesale banking, providing a broad range of financial 5. The Board has carefully considered comments from two banks in services to private business enterprises. Shares of Bank are Sheldon contending that the town is unable to support an additional competitor and that Bank's proposal would adversely affect the safety widely held, and no individual shareholder owns more than and soundness of the commercial banks that currently serve the town. 10 percent of any class of the voting securities of Bank. In The Board notes that there is no evidence of record to indicate that Korea, Bank operates 34 branches and has seven nonbank this proposal would have an adverse effect on the safety and soundsubsidiaries involved in activities such as investment bankness of Bank or Vogel Bancshares. In addition, the number of competitors in the Sioux County banking market would remain the same, and the residents of Sheldon would have the benefit of an additional provider of banking services. The increase in competition under these 6. Bank received a "satisfactory" rating from the Federal Reserve circumstances is a positive aspect of the proposal. Based on all the Bank of Chicago under the Community Reinvestment Act in its most facts of record, the Board concludes that these comments do not raise recent examination, as of July 25, 1995. adverse considerations under the statutory factors the Board is required to consider under the Federal Reserve Act. 1. Data are as of December 31, 1995, unless otherwise noted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

768 Federal Reserve Bulletin • August 1996 ing, credit card operations, consumer lending, factoring, under this standard, the Board has considered the following equipment rental, and investment management and advi- information. sory services. Bank's foreign operations include bank sub- Bank is licensed in Korea under the Long Term Credit sidiaries in London and Hong Kong, branches in Tokyo Bank Law of 1980 and is currently the only long-term and the Cayman Islands, and representative offices in Hong credit bank in Korea. The Long Term Credit Bank Law Kong, Singapore, New York, and China. grants the Ministry primary supervisory authority over Bank proposes to upgrade its New York representative long-term credit banks and sole authority in Korea to grant office to a state-licensed branch that would engage in a a license to, or to authorize the establishment of a branch variety of activities, including trade finance, lending, of, a long-term credit bank. The Ministry cooperates with deposit-taking, and fund management. Bank does not en- the Office of Bank Supervision and Examination of the gage directly or indirectly in any nonbanking activities in Bank of Korea (the "OBSE") in supervising Bank, in the United States and would be a qualifying banking orga- recognition of the OBSE's expertise in banking supervinization within the meaning of Regulation K (12 C.F.R. sory matters arising from its responsibilities in relation to 211.23) after establishing the proposed branch. commercial banks.3 Bank has received preliminary approval from Korea's Bank is required to submit a number of periodic reports Ministry of Finance and Economy (the "Ministry") to to the Ministry and the OBSE, and the Ministry may establish the proposed branch, subject to approval of the request any other information concerning Bank's business branch by the relevant U.S. authorities. that it deems appropriate. Bank must provide the Ministry In order to approve an application by a foreign bank to with annual consolidated financial statements covering its establish a branch in the United States, the IBA and Regu- worldwide operations. Other required reports include anlation K require the Board to determine that the foreign nual risk-based capital reports, semi-annual bank-only fibank applicant engages directly in the business of banking nancial statements, quarterly statements on foreign exoutside of the United States and has furnished to the Board change dealings, and monthly reports covering topics such the information it needs to assess the application ade- as classification of unsecured loans, funding, and investquately. The Board must also determine that the foreign ment and trust activities. The Ministry reviews the reports bank is subject to comprehensive supervision or regulation submitted directly by Bank or indirectly through the OBSE on a consolidated basis by its home country supervisor and is kept apprised of Bank's operations through regular (12 U.S.C. § 3105(d)(2); 12 C.F.R. 211.24(c)(1)). The and frequent contacts with Bank's senior management. Board may also take into account additional standards set In addition, the Ministry conducts regular and special forth in the IBA and Regulation K (12 U.S.C. § 3105(d)(3)- on-site examinations of Bank, often in conjunction with the (4); 12 C.F.R. 211.24(c)). OBSE. The Ministry's general examination policy is to Bank engages directly in the business of banking outside conduct on-site examinations of Bank once a year, alof the United States through its banking operations in though the Ministry may waive the on-site examination for Korea. Bank also has provided the Board with the informa- a given year. Each annual on-site examination includes the tion necessary to assess the application through submis- head office and approximately 10 percent of Bank's ransions that address the relevant issues. domly selected branches. These examinations generally Regulation K provides that a foreign bank will be con- cover matters such as capital adequacy, asset quality, comsidered to be subject to comprehensive supervision or pliance with applicable law, and the adequacy of internal regulation on a consolidated basis if the Board determines controls and record-keeping practices. Whenever it is that the bank is supervised and regulated in such a manner deemed necessary, the Ministry also conducts special onthat its home country supervisor receives sufficient infor- site examinations of Bank regarding specific matters or mation on the bank's worldwide operations, including the specific branch offices. relationship of the bank to any affiliates, to assess the The Ministry's supervisory authority extends to all nonoverall financial condition of the bank and its compliance bank business conducted by Bank through its domestic with law and regulation.2 In making its determination subsidiaries. Several of these subsidiaries also are subject (v) Evaluate prudential standards, such as capital adequacy and risk 2. In assessing this standard, the Board considers, among other asset exposure, on a worldwide basis. factors, the extent to which the home country supervisors: These are indicia of comprehensive, consolidated supervision; no (i) Ensure that the bank has adequate procedures for monitoring and single factor is essential and other elements may inform the Board's controlling its activities worldwide; determination. (ii) Obtain information on the condition of the bank and its subsid- 3. Commercial banks are licensed in Korea under the General iaries and offices through regular examination reports, audit reports, Banking Act rather than the Long Term Credit Bank Law and are or otherwise; subject to the primary supervisory authority of the OBSE. The Board (iii) Obtain information on the dealings with and relationship be- has previously determined, in connection with applications by Korean tween the bank and its affiliates, both foreign and domestic; commercial banks, that these banks were subject to home country (iv) Receive from the bank financial reports that are consolidated on supervision on a comprehensive, consolidated basis. See Donghwa a worldwide basis, or comparable information that permits analysis Bank, 81 Federal Reserve Bulletin 744 (1995); Cho Hung Bank, 81 of the bank's financial condition on a worldwide consolidated basis; Federal Reserve Bulletin 475 (1995); KorAm Bank, 80 Federal Reand serve Bulletin 184 (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 769 to regulation by other Korean governmental agencies. In hibited or impeded by law, Bank has committed to cooperaddition, Bank is prohibited by law from making a loan in ate with the Board in obtaining any consents or waivers an amount equal to or greater than 25 percent or more of its that might be required from third parties for disclosure. In capital and surplus to any single person or entity. The addition, subject to certain conditions, the Ministry and the Ministry monitors Bank's proposals regarding loans to OBSE may share information on Bank's operations with affiliates. other supervisors, including the Board. In light of these Under Korea's Foreign Exchange Control Law, Bank's commitments and other facts of record, and subject to the international operations are supervised by the OBSE pursu- condition described below, the Board has concluded that ant to authority delegated to it by the Ministry. The Minis- Bank has provided adequate assurances of access to any try may obtain supervisory information from the other necessary information the Board may request. Korean supervisory authorities, which directly oversee On the basis of all the facts of record, and subject to the Bank's domestic affiliates. commitments made by Bank, as well as the terms and The Ministry has various enforcement powers over conditions set forth in this order, the Board has determined Bank. The Ministry may suspend all or part of Bank's that Bank's application to establish a state-licensed branch business if it finds that Bank has violated any provision of should be, and hereby is, approved.5 Should any restricapplicable Korean law or has engaged in acts contrary to tions on access to information on the operations or activithe public interest. In addition, an officer or director of ties of Bank or any of its affiliates subsequently interfere Bank who knowingly submits false information in reports with the Board's ability to determine the safety and soundto the Ministry or who hinders the Ministry's supervision ness of Bank's U.S. operations or the compliance by Bank of Bank may be subject to fine or imprisonment. or any of its affiliates with applicable federal law, the Based on all the facts of record, the Board has deter- Board may require termination of any of Bank's direct or mined that Bank is subject to comprehensive supervision indirect activities in the United States. Approval of this and regulation on a consolidated basis by its home country application also is conditioned specifically on compliance supervisors. by Bank with the commitments made in connection with The Board has taken into account the additional stan- this application and with the conditions in this order. The dards set forth in section 7 of the IBA and in Regulation K. commitments and conditions referred to above are condi- (See 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). tions imposed in writing by the Board in connection with As noted above, Bank has received preliminary authority its decision and may be enforced in proceedings under from the Ministry to establish the state-licensed branch, 12 U.S.C. § 1818 or 12 U.S.C. § 1847 against Bank, its ofsubject to approval of the proposed branch by the relevant fices, or its affiliates. U.S. authorities. By order of the Board of Governors, effective June 24, Bank must comply with risk-based capital standards 1996. adopted by Korea.4 Bank's capital is in excess of the minimum levels that would be required by the Basle Capi- Voting for this action: Chairman Greenspan and Governors Kelley, tal Accord and is considered equivalent to capital that Lindsey, Phillips, and Yellen. Abstaining from this action: Governor Meyer. would be required of a U.S. banking organization. Managerial and other financial resources of Bank are also consid- WILLIAM W. WILES ered consistent with approval, and Bank appears to have Secretary of the Board the experience and capacity to support the proposed branch. Bank has established controls and procedures for the proposed branch in order to ensure compliance with ORDERS ISSUED UNDER INTERNATIONAL BANKING ACT applicable U.S. law, as well as controls and procedures for its worldwide operations generally. National Bank of Canada Bank has committed to make available to the Board such Montreal, Canada information on the operations or activities of Bank and any of its affiliates that the Board deems necessary to determine Order Approving Establishment of Representative Offices and enforce compliance with the IBA, the Bank Holding Company Act of 1956, as amended, and other applicable National Bank of Canada, Montreal, Canada ("Bank"), a federal law. The Board has reviewed the restrictions on foreign bank within the meaning of the International Bankdisclosure in Korea and has communicated with the appro- ing Act ("IBA"), has applied under section 10(a) of the priate authorities regarding access to information. To the IBA (12 U.S.C. § 3107(a)) to establish representative ofextent that the provision of such information may be pro- 5. The Board's authority to approve the establishment of the proposed branch parallels the continuing authority of the state of New 4. As of January 1, 1996, all Korean banking institutions, including York to license offices of a foreign bank. The Board's approval of this Bank, have been required to maintain a capital adequacy ratio of at application does not supplant the authority of the state of New York, least 8 percent in conformance with the minimum standards required and its agent, the New York State Banking Department, to license the by the Basle Capital Accord. Bank is currently in full compliance with proposed branch of Bank in accordance with any terms or conditions these standards. that the state of New York may impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

770 Federal Reserve Bulletin • August 1996 fices in Denver, Colorado; Boca Raton, Florida; Baltimore, directly in the business of banking outside of the United Maryland; Boston, Massachusetts; Southfield, Michigan; States and has furnished to the Board the information it Charlotte, North Carolina; Cincinnati, Ohio; Cleveland, needs to assess the application adequately. The Board also Ohio; Pittsburgh, Pennsylvania; Memphis, Tennessee; and shall take into account whether the foreign bank and any Richmond, Virginia. The Foreign Bank Supervision En- foreign bank parent is subject to comprehensive supervihancement Act of 1991 ("FBSEA"), which amended the sion or regulation on a consolidated basis by its home IBA, provides that a foreign bank must obtain the approval country supervisor (12 U.S.C. § 3105(d)(2); 12 C.F.R. of the Board to establish a representative office in the 211.24).3 The Board may also take into account additional United States. standards as set forth in the IBA and Regulation K Notice of the application, affording interested persons an (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)). opportunity to submit comments, has been published in the In this case, with respect to the issue of supervision by following newspapers of general circulation: The Denver home country authorities, the Board has considered the Post, February 26, 1996; The Miami Herald, February 26, following information. Bank is supervised and regulated 1996; The Baltimore Sun, February 26, 1996; The Boston by the Office of the Superintendent of Financial Institutions Globe, February 26, 1996; The Detroit Free Press, Febru- ("OSFI"). The OSFI is responsible for the prudential ary 26, 1996; The Charlotte Observer, February 26, 1996; supervision and regulation of federally regulated financial The Cincinnati Enquirer, February 26, 1996; The Cleve- institutions. The Board has previously determined, in conland Plain Dealer, February 26, 1996; The Pittsburgh nection with an application involving another Canadian Post-Gazette, February 26, 1996; The Memphis Commer- bank, Bank of Montreal, Montreal, Canada ("BOM"), that cial Appeal, February 26, 1996; and The Richmond Times- BOM was subject to home country supervision on a con- Dispatch, February 26, 1996. The time for filing comments solidated basis.4 Bank is supervised by the OSFI on the has expired, and all comments have been considered. same terms and conditions as BOM. Based on all the facts Bank, with total consolidated assets of approximately of record, the Board has determined that Bank is subject to $36 billion,1 is the sixth largest bank in Canada, providing comprehensive supervision and regulation on a consoliwholesale and retail financial services to customers dated basis by its home country supervisors. throughout Canada. The shares of Bank are publicly traded The Board also has taken into account the additional and widely held, with no shareholders owning more than standards set forth in section 7 of the IBA (See 12 U.S.C. 10 percent of Bank. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). The OSFI has Bank operates 644 domestic branches and 14 interna- approved the establishment of the proposed representative tional offices, including branches, representative offices offices. and banking and financial subsidiaries in Europe, Asia, and With respect to the financial and managerial resources of the Caribbean. In the United States, Bank operates Bank, taking into consideration Bank's record of operabranches in New York, New York, and Chicago, Illinois; tions in its home country, its overall financial resources, agencies in Atlanta, Georgia, and Los Angeles, California; and its standing with its home country supervisors, the representative offices in Buffalo, New York, and Dallas, Board has also determined that financial and managerial Texas; and a regional administrative office in New York, factors are consistent with approval of the proposed repre- New York. Bank also wholly owns a savings bank subsid- sentative offices. Bank appears to have the experience and iary in Pompano Beach, Florida, and a nonbanking subsid- capacity to support the proposed representative offices and iary engaged in permissible activities.2 also has established controls and procedures for the pro- Bank's primary purpose for establishing the proposed posed representative offices to ensure compliance with U.S. representative offices is to market the products and services law. of Bank, solicit loan business for Bank, and serve as a liaison between the head office in Montreal and potential and existing customers in the states served by the represen- 3. In assessing this standard, the Board considers, among other tative offices. The proposed representative offices would factors, the extent to which the home country supervisors: (i) Ensure that the bank has adequate procedures for monitoring and not solicit deposits for Bank; would not have authority to controlling its activities worldwide; make any business decisions for Bank; and would not have (ii) Obtain information on the condition of the bank and its subsidauthority to contract in the name of Bank. iaries and offices through regular examination reports, audit reports, In acting on an application to establish a representative or otherwise; (iii) Obtain information on the dealings with and relationship beoffice, the IBA and Regulation K provide that the Board tween the bank and its affiliates, both foreign and domestic; shall take into account whether the foreign bank engages (iv) Receive from the bank financial reports that are consolidated on a worldwide basis, or comparable information that permits analysis of the bank's financial condition on a worldwide consolidated basis; 1. Asset data are as of October 31, 1995. and 2. National Canada Finance Corporation ("NCFC"), New York, (v) Evaluate prudential standards, such as capital adequacy and risk New York, which engages in asset-based lending to middle market asset exposure, on a worldwide basis. companies, operates 13 offices in the United States. The proposed These are indicia of comprehensive, consolidated supervision. No representative offices would share premises with NCFC. Bank has single factor is essential and other elements may inform the Board's stated that the proposed representative offices would not represent nor determination. provide services to NCFC. 4. See Bank of Montreal, 80 Federal Reserve Bulletin 925 (1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 771 Finally, with respect to access to information about and enforce compliance by Bank or its affiliates with Bank's operations, the Board has reviewed the restrictions applicable federal statutes, the Board may require terminaon disclosure in relevant jurisdictions in which Bank oper- tion of any of the Bank's direct or indirect activities in the ates and has communicated with relevant government au- United States. Approval of this application is also specifithorities about access to information. Bank has committed cally conditioned on Bank's compliance with the committo make available to the Board such information on the ments made in connection with the application, and with operations of Bank and any affiliate of Bank that the Board the conditions in this order.5 The commitments and condideems necessary to determine and enforce compliance with tions referred to above are conditions imposed in writing the IBA, the BHC Act, as amended, and other applicable by the Board in connection with its decision, and may be federal law. To the extent that the provision of such infor- enforced in proceedings under 12 U.S.C. § 1818 or mation may be prohibited by law, Bank has committed to 12 U.S.C. § 1847 against Bank, its offices, and its affiliates. cooperate with the Board to obtain any necessary consents By order of the Board of Governors, effective June 10, or waivers that might be required from third parties for 1996. disclosure. In addition, subject to certain conditions, the OSFI may share information on Bank's operations with Voting for this action: Chairman Pro Tempore Greenspan and other supervisors, including the Board. In light of these Governors Lindsey, Phillips, and Yellen. Absent and not voting: commitments and other facts of record, and subject to the Governor Kelley. condition described below, the Board concludes that Bank JENNIFER J. JOHNSON has provided adequate assurances of access to any neces- Deputy Secretary of the Board sary information the Board may request. On the basis of all the facts of record, and subject to the commitments made by Bank, as well as the terms and conditions set forth in this order, the Board has determined 5. The Board's authority to approve the establishment of the prothat Bank's application to establish the representative of- posed representative office parallels the continuing authority of the fices should be, and hereby is, approved. Should any re- various state banking departments to license offices of foreign banks. The Board's approval of this application does not supplant the authorstrictions on access to information on the operations or ity of these states, and their agents, the state banking departments, to activities of Bank and its affiliates subsequently interfere license the proposed representative offices of Bank in accordance with with the Board's ability to obtain information to determine any terms or conditions that these states may impose. 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 Boatmen's Bancshares, Inc., Canadian Bancshares, Inc., June 5, 1996 St. Louis, Missouri Canadian, Texas First State Bank of Canadian, Canadian, Texas First Merchants Corporation, Union National Bancorp, June 11, 1996 Muncie, Indiana Liberty, Indiana The Union County National Bank of Liberty, Liberty, Indiana First National of Nebraska, Inc. Boulder Bancorporation, June 21, 1996 Omaha, Nebraska Boulder, Colorado First National of Colorado, The Bank of Boulder, Omaha, Nebraska Boulder, Colorado Horizon Bancorp, Inc., Twentieth Bancorp, Inc., June 28, 1996 Beckley, West Virginia Huntington, West Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

772 Federal Reserve Bulletin • August 1996 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 Acadiana Bancshares, Inc., LBA Savings Bank, Atlanta May 23, 1996 Lafayette, Louisiana Lafayette, Louisiana Associated Banc-Corp., Mid-America National Bancorp, Inc., Chicago May 23, 1996 Green Bay, Wisconsin Chicago, Illinois Associated Illinois Banc-Corp., Mid-America National Bank of Chicago, Illinois Chicago, Chicago, Illinois Brookwood Group, L.R, The Middle Tennessee Bank, Atlanta June 7, 1996 Columbia, Tennessee Columbia, Tennessee Central Wisconsin Bancorporation, Owen-Curtiss State Bank, Chicago June 4, 1996 Inc., Owen, Wisconsin Colby, Wisconsin The Colonial BancGroup, Inc., Commercial Bancorp of Georgia, Inc., Atlanta May 23, 1996 Montgomery, Alabama Lawrenceville, Georgia Commercial Bank of Georgia, Lawrenceville, Georgia The Colonial BancGroup, Inc., Southern Banking Corporation, Atlanta May 31, 1996 Montgomery, Alabama Orlando, Florida Southern Bank of Central Florida, Altamonte Springs, Florida Columbia Bancorp, Klickitat Valley Bank, San Francisco May 29, 1996 The Dalles, Oregon Goldendale, Washington Community Bankshares Commerce Bank of Virginia, Richmond June 4, 1996 Incorporated, Richmond, Virginia Petersburg, Virginia Delavan Bancshares, Inc., Community Bank Delavan, Chicago May 29, 1996 Delavan, Wisconsin Delavan, Wisconsin F&M Bancorporation, Community State Bank, Chicago June 5, 1996 Kaukauna, Wisconsin Algoma, Wisconsin First Community Bank Holding First Community Bank, Atlanta June 7, 1996 Corporation, Orange City, Florida Orange City, Florida First Hawaiian, Inc., ANB Financial Corporation, San Francisco June 17, 1996 Honolulu, Hawaii Kennewick, Washington First National Corporation, National Bank of York County, Richmond June 14, 1996 Orangeburg, South Carolina Rock Hill, South Carolina FNB Corporation, The First National Bank of Richmond May 29, 1996 Christiansburg, Virginia Christiansburg, Christiansburg, Virginia Fort Brooke Bancorporation, Fort Brooke Bank, Atlanta June 6, 1996 Brandon, Florida Brandon, Florida Goodenow Bancorporation, Jackson Bancorporation, Inc., Chicago June 18, 1996 Okoboji, Iowa Fairmont, Minnesota Bank Midwest, Minnesota Iowa, N.A., Fairmont, Minnesota Granville Bancshares, Inc., Sheridan State Bank, Chicago June 19, 1996 Granville, Illinois Sheridan, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 773 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Hills Bancorporation, Alliance Bancorporation, Chicago June 6, 1996 Hills, Iowa Lisbon, Iowa Trimpe's, Inc., Lisbon, Iowa Lisbon Bank and Trust Company, Lisbon, Iowa Horizon Bancorp Employee Stock Horizon Bancorp, Chicago June 14, 1996 Ownership Plan, Michigan City, Indiana Michigan City, Indiana HUBCO, Inc., Lafayette American Bank and Trust New York June 7, 1996 Mahwah, New Jersey Company, Bridgeport, Connecticut Independent Bancshares, Inc., Independent Bank & Trust Company, Atlanta May 30, 1996 Powder Springs, Georgia Powder Springs, Georgia Key Florida Bancorp, Inc., Liberty National Bank, Atlanta May 30, 1996 Bradenton, Florida Bradenton, Florida Lindoe, Inc., Pueblo Bancorporation, Inc., Kansas City June 18, 1996 Ordway, Colorado Pueblo, Colorado Newnan Holdings, Inc., Southside Financial Group, Inc., Atlanta May 23, 1996 Newnan, Georgia Fayetteville, Georgia Citizens Bank & Trust of Fayette County, Fayetteville, Georgia Outsource Capital Group, Inc., Outsource Delaware Capital Group, Dallas May 30, 1996 Lubbock, Texas Inc., Dover, Delaware First Bank & Trust Company, White Deer, Texas Outsource Delaware Capital Group, First Bank & Trust Company, Dallas May 30, 1996 Inc., White Deer, Texas Dover, Delaware Palm Beach National Holding Palm Beach National Bank and Trust Atlanta June 19, 1996 Company, Company, North Palm Beach, Florida North Palm Beach, Florida Piano Bancshares, Inc., First McKinney Bancshares, Inc., Dallas May 30, 1996 Piano, Texas McKinney, Texas Piano Bancshares of Delaware, Inc.. First Bank, Dover, Delaware McKinney, Texas Prairieland Employees Stock Prairieland Bancorp, Inc., Chicago June 13, 1996 Ownership Plan, Bushnell, Illinois Bushnell, Illinois Premier Financial Bancorp, Inc., Farmers Deposit Bancorp, Cleveland June 6, 1996 Georgetown, Kentucky Eminence, Kentucky Security Banc Corporation, CitNat Bancorp, Cleveland May 30, 1996 Springfield, Ohio Urbana, Ohio Citizens National Bank of Urbana, Urbana, Ohio Southeast Texas Bancshares, Inc., Port Neches Bancshares, Inc., Dallas May 29, 1996 Beaumont, Texas Port Neches, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

774 Federal Reserve Bulletin • August 1996 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date State National Bancshares, Inc. State National Bancshares of Delaware, Dallas June 14, 1996 Lubbock, Texas Inc., Dover, Delaware State National Bank of West Texas, Lubbock, Texas State National Bancshares of State National Bank of West Texas, Dallas June 14, 1996 Delaware, Inc., Lubbock, Texas Dover, Delaware Stichting Prioriteit ABN AMRO Comerica Bank-Illinois, Chicago May 29, 1996 Holding, Franklin Park, Illinois Amsterdam, The Netherlands Stichting Administratiekantoor ABN AMRO Holding, Amsterdam, The Netherlands ABN AMRO Holding N.V., Amsterdam, The Netherlands ABN AMRO Bank N.V., Amsterdam, The Netherlands ABN AMRO North America, Inc., Chicago, Illinois Thomson Investment Company, Inc., Gateway State Bank, Chicago June 6, 1996 Savanna, Illinois Clinton, Iowa Savanna Bancorp, Inc., Savanna, Illinois Savanna State Bank, Savanna, Illinois Van Diest Investment Company, East Des Moines National Bank, Chicago June 4, 1996 Ankeny, Iowa Des Moines, Iowa West Coast Bancorp, Vancouver Bancorp, San Francisco May 22, 1996 Lake Oswego, Oregon Vancouver, Washington Wildcat, Inc., Hartford-Carlisle Savings Bank, Chicago May 31, 1996 Cedar Rapids, Iowa Carlisle, Iowa XIT Bancshares, Inc., XIT Delaware, Inc., Dallas June 12, 1996 Littlefield, Texas Dover, Delaware Security State Bank, Littlefield, Texas XIT Delaware, Inc., Security State Bank, Dallas June 12, 1996 Dover, Delaware Littlefield, Texas Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Anita Bancorporation, To engage in making and servicing Chicago May 29, 1996 Atlantic, Iowa loans The Bank of Nova Scotia, Scotia Capital Markets (USA) Inc., New York June 11, 1996 Toronto, Ontario, Canada New York, New York Barnett Banks, Inc., Barnett Community Development Atlanta June 7, 1996 Jacksonville, Florida Corporation, Jacksonville, Florida Boscobel Bancorp, Inc., To engage in making and servicing Chicago May 23, 1996 Boscobel, Wisconsin loans Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 775 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Community Bancshares, Inc., Citizens Title and Escrow Service, Inc., San Francisco June 12, 1996 Joseph, Oregon Enterprise, Oregon Community Bank System, Inc., Mayer Management Co., Inc., New York June 4, 1996 Dewitt, New York Utica, New York D & D Bancshares, Inc., To engage de novo in making and Chicago May 24, 1996 Mount Auburn, Iowa servicing loans HSBC Holdings pic, HSBC Futures, Inc., New York June 7, 1996 London, England New York, New York HSBC Holdings BV, Amsterdam, The Netherlands Newnan Holdings, Inc., To engage in operating a savings Atlanta May 23, 1996 Newnan, Georgia association Norwest Corporation, Aman Collection Service, Inc., Minneapolis May 23, 1996 Minneapolis, Minnesota Aberdeen, South Dakota Norwest Financial Services, Inc., Des Moines, Iowa Norwest Corporation, Real Estate Financial, Minneapolis June 14, 1996 Minneapolis, Minnesota Palm Harbor, Florida Outsource Capital Group, Inc., Outsource Lease, Inc., Dallas May 30, 1996 Lubbock, Texas Lubbock, Texas Outsource Delaware Capital Group, Rail Mortgage Corporation, Inc., Lubbock, Texas Dover, Delaware Tattnall Bancshares, Inc., Reidsville Insurance Agency, Inc., Atlanta June 18, 1996 Reidsville, Georgia Reidsville, Georgia VCR Bancorporation Ltd., To engage de novo in the making and Chicago June 7, 1996 Carlisle, Iowa servicing of loans Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Center Bancorp, Inc., Union Center Interim National Bank, New York May 29, 1996 Union, New Jersey Union, New Jersey Lehigh Savings Bank, S.L.A., Union, New Jersey Grand Premier Financial, Inc., Northern Illinois Financial Corporation, Chicago May 24, 1996 Wauconda, Illinois Wauconda, Illinois Premier Insurance Services, Inc., Warren, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

776 Federal Reserve Bulletin • August 1996 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 Adams Bank & Trust, Adams Savings & Loan Association Kansas City May 29, 1996 Ogallala, Nebraska of Chappell, Chappell, Nebraska Baylake Bank, The Bank, Chicago June 12, 1996 Sturgeon Bay, Wisconsin Manawa, Wisconsin Centura Bank, Essex Savings Bank, F.S.B., Richmond May 30, 1996 Rocky Mount, North Carolina Virginia Beach, Virginia Harris Trust and Savings Bank, Household Bank, f.s.b., Chicago May 29, 1996 Chicago, Illinois Prospect Heights, Illinois PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the other things, bank examination material. The action was Federal Reserve Banks in which the Board of Governors is not dismissed by 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 Kuntz v. Board of Governors, No. 96-1137 (D.C. Cir., filed Bank to merge with The Chase Manhattan Bank, N.A., both April 25, 1996). Petition for review of a Board order dated of New York, New York. Petitioners' motion for an emergency stay of the transaction was denied following oral March 25, 1996, approving an application by CoreStates argument on March 26, 1996. The case has been consoli- Financial Corp., Philadelphia, Pennsylvania to acquire Medated for oral argument and decision with Lee v. Board of ridian Bancorp, Inc., Reading, Pennsylvania. The Board's Governors, No. 95^4134 (2d Cir.). motion to dismiss was filed on June 3, 1996. 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 bankruptcy court granting Board's motion for summary judg- February 7, 1996, approving applications by The Fifth ment in adversary proceeding challenging dischargeability Third Bank, Cincinnati, Ohio, and The Fifth Third Bank of of Board consent order. On June 21, 1996, appellant filed a Columbus, Columbus, Ohio, to acquire certain assets and notice of voluntary dismissal. 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 October 10, 1995). Complaint alleging sex, age, and handicap case with Kuntz v. Board of Governors, No. 95-1495. On discrimination in employment. April 8, 1996, the Board filed a motion to dismiss the 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 Research Triangle Institute v. Board of Governors, No. October 26, 1995. L96CV00102 (M.D.N.C., filed February 12, 1996). Con- Lee v. Board of Governors, No. 95^-134 (2nd Cir., filed tract dispute. On May 3, 1996, the Board filed a motion to August 22, 1995). Petition for review of Board orders dated dismiss the action. In re: Subpoena Duces Tecum, Misc. No. July 24, 1995, approving certain steps of a corporate reorga- 96-MS-43(TPJ) (D. D.C., filed February 7, 1996). Motion nization of U.S. Trust Corporation, New York, New York, to enforce a subpoena issued to the Board seeking, among and the acquisition of U.S. Trust by Chase Manhattan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 79 Corporation, New York, New York. On September 12, money penalty assessment by the Board. On September 17, 1995, the court denied petitioners' motion for an emergency 1991, the court issued an order temporarily restraining the stay of the Board's orders. The Board's brief was filed on transfer or disposition of the individual's assets. April 16, 1996. Beckman v. Greenspan, No. 95-35473 (9th Cir., filed May 4, 1995). Appeal of dismissal of action against Board and FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD others seeking damages for alleged violations of constitu- OF GOVERNORS tional and common law rights. The appellants' brief was filed on June 23, 1995; the Board's brief was filed on Gary S. Missner July 12, 1995. New York, New York Board of Governors v. Scott, Misc. No. 95-127 (LFO/PJA) (D. D.C., filed April 14, 1995). Application to enforce an ad- The Federal Reserve Board announced on June 11, 1996, ministrative investigatory subpoena for documents and tes- the issuance of a combined Cease and Desist Order and timony. On August 3, 1995, the magistrate judge issued an Assessment of a Civil Money Penalty against Gary S. order granting in part and denying in part the Board's Missner, a former employee of BT Securities Corporation, application. On September 18, 1995, the intervenor moved New York, New York, a subsidiary of Bankers Trust New for reconsideration of a portion of the magistrate's ruling. York Corporation, New York, New York. On May 6, 1996, the court denied the motion for reconsideration. The intervenors' notice of appeal was filed May 31, 1996. TERMINATION OF ENFORCEMENT ACTIONS Money Station, Inc. v. Board of Governors, No. 95-1182 (D.C. Cir., filed March 30, 1995). Petition for review of a The Federal Reserve Board announced on June 3, 1996, Board order dated March 1, 1995, approving notices by the termination of the following enforcement actions: Bank One Corporation, Columbus, Ohio; CoreStates Financial Corp., Philadelphia, Pennsylvania; PNC Bank Corp., Bank of White Sulphur Springs Pittsburgh, Pennsylvania; and KeyCorp, Cleveland, Ohio, White Sulphur Springs, West Virginia to acquire certain data processing assets of National City Corporation, Cleveland, Ohio, through a joint venture sub- Written Agreement dated February 28, 1992—terminated sidiary. On April 23, 1996, the court vacated the Board's May 10, 1996. order. The Board's petition for rehearing and suggestion for rehearing in banc was filed on June 7, 1996. Bank Bumiputra Malaysia Berhard In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed Kuala Lumpur, Malaysia January 6, 1995). Action to enforce subpoena seeking predecisional supervisory documents sought in connection with Written Agreement dated April 26, 1991—terminated an action by Bank of New England Corporation's trustee in May 13, 1996. bankruptcy against the Federal Deposit Insurance Corporation. The Board filed its opposition on January 20, 1995. Dyer F&M Bancshares Oral argument on the motion was held July 14, 1995. Dyer, Tennessee Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New York, filed September 17, 1991). Action to freeze assets of Cease and Desist Order dated January 14, 1994— individual pending administrative adjudication of civil terminated May 3, 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

778 Membership of the Board of Governors of the Federal Reserve System, 1913-96 APPOINTIVE MEMBERS 1 Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 Charles S. Hamlin Boston Aug. 10, 1914 Reappointed in 1916 and 1926. Served until Feb. 3, 1936.3 Paul M. Warburg New York Aug. 10, 1914 Term expired Aug. 9, 1918. Frederic A. Delano Chicago Aug. 10, 1914 Resigned July 21, 1918. W.P.G. Harding Atlanta Aug. 10, 1914 Term expired Aug. 9, 1922. Adolph C. Miller San Francisco Aug. 10, 1914 Reappointed in 1924. Reappointed in 1934 from the Richmond District. Served until Feb. 3, 1936.3 Albert Strauss New York Oct. 26, 1918 Resigned Mar. 15, 1920. Henry A. Moehlenpah . Chicago Nov. 10, 1919 Term expired Aug. 9, 1920. Edmund Piatt New York June 8, 1920 Reappointed in 1928. Resigned Sept. 14, 1930. David C. Wills Cleveland Sept. 29, 1920 Term expired Mar. 4, 1921. John R. Mitchell Minneapolis May 12, 1921 Resigned May 12, 1923. Milo D. Campbell Chicago Mar. 14, 1923 Died Mar. 22, 1923. Daniel R. Crissinger Cleveland May 1, 1923 Resigned Sept. 15, 1927. George R. James St. Louis May 14, 1923 Reappointed in 1931. Served until Feb. 3, 1936.4 Edward H. Cunningham Chicago May 14, 1923 Died Nov. 28, 1930. Roy A. Young Minneapolis Oct. 4, 1927 Resigned Aug. 31, 1930. Eugene Meyer New York Sept. 16, 1930 Resigned May 10, 1933. Way land W. Magee Kansas City May 18, 1931 Term expired Jan. 24, 1933. Eugene R. Black Atlanta May 19, 1933 Resigned Aug. 15, 1934. M.S. Szymczak Chicago June 14, 1933 Reappointed in 1936 and 1948. Resigned May 31, 1961. J.J. Thomas Kansas City June 14, 1933 Served until Feb. 10, 1936.3 Marriner S. Eccles San Francisco Nov. 15, 1934 Reappointed in 1936, 1940, and 1944. Resigned July 14, 1951. Joseph A. Broderick New York Feb. 3, 1936 Resigned Sept. 30, 1937. John K. McKee Cleveland Feb. 3, 1936 Served until Apr. 4, 1946.3 Ronald Ransom Atlanta Feb. 3, 1936 Reappointed in 1942. Died Dec. 2, 1947. Ralph W. Morrison Dallas Feb. 10, 1936 Resigned July 9, 1936. Chester C. Davis Richmond June 25, 1936 Reappointed in 1940. Resigned Apr. 15, 1941. Ernest G. Draper New York Mar. 30, 1938 Served until Sept. 1, 1950.3 Rudolph M. Evans Richmond Mar. 14, 1942 Served until Aug. 13, 1954.3 James K. Vardaman, Jr. St. Louis Apr. 4, 1946 Resigned Nov. 30, 1958. Lawrence Clayton Boston Feb. 14, 1947 Died Dec. 4, 1949. Thomas B. McCabe .... Philadelphia Apr. 15, 1948 Resigned Mar. 31, 1951. Edward L. Norton Atlanta Sept. 1, 1950 Resigned Jan. 31, 1952. Oliver S. Powell Minneapolis Sept. 1, 1950 Resigned June 30, 1952. Wm. McC. Martin, Jr. . New York April 2, 1951 Reappointed in 1956. Term expired Jan. 31, 1970. A.L. Mills, Jr San Francisco Feb. 18, 1952 Reappointed in 1958. Resigned Feb. 28, 1965. J.L. Robertson Kansas City Feb. 18, 1952 Reappointed in 1964. Resigned Apr. 30, 1973. C. Canby Balderston ... Philadelphia Aug. 12, 1954 Served through Feb. 28, 1966. Paul E. Miller Minneapolis Aug. 13, 1954 Died Oct. 21, 1954. Chas. N. Shepardson ... Dallas Mar. 17, 1955 Retired Apr. 30, 1967. G.H. King, Jr Atlanta Mar. 25, 1959 Reappointed in 1960. Resigned Sept. 18, 1963. George W. Mitchell Chicago Aug. 31, 1961 Reappointed in 1962. Served until Feb. 13, 1976.3 J. Dewey Daane Richmond Nov. 29, 1963 Served until Mar. 8, 1974.3 Sherman J. Maisel San Francisco Apr. 30, 1965 Served through May 31, 1972. Andrew F. Brimmer Philadelphia Mar. 9, 1966 Resigned Aug. 31, 1974. William W. Sherrill Dallas May 1, 1967 Reappointed in 1968. Resigned Nov. 15, 1971. Arthur F. Burns New York Jan. 31, 1970 Term began Feb. 1, 1970. Resigned Mar. 31, 1978. John E. Sheehan St. Louis Jan. 4, 1972 Resigned June 1, 1975. Jeffrey M. Bucher San Francisco June 5, 1972 Resigned Jan. 2, 1976. Robert C. Holland Kansas City June 11, 1973 Resigned May 15, 1976. Henry C. Wallich Boston Mar. 8, 1974 Resigned Dec. 15, 1986. Philip E. Coldwell Dallas Oct. 29, 1974 Served through Feb. 29, 1980. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

779 Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 Philip C. Jackson, Jr. Atlanta July 14, 1975 Resigned Nov. 17, 1978. J. Charles Partee Richmond Jan. 5, 1976 Served until Feb. 7, 1986.3 Stephen S. Gardner .. Philadelphia Feb. 13, 1976 Died Nov. 19, 1978. David M. Lilly .Minneapolis June 1, 1976 Resigned Feb. 24, 1978. G. William Miller ... San Francisco Mar. 8, 1978 Resigned Aug. 6, 1979. Nancy H. Teeters Chicago Sept. 18, 1978 Served through June 27, 1984. Emmett J. Rice New York June 20, 1979 Resigned Dec. 31, 1986. Frederick H. Schultz Atlanta July 27, 1979 Served through Feb. 11, 1982. Paul A. Volcker Philadelphia Aug. 6, 1979 Resigned August 11, 1987. Lyle E. Gramley Kansas City May 28, 1980 Resigned Sept. 1, 1985. Preston Martin San Francisco Mar. 31, 1982 Resigned April 30, 1986. Martha R. Seger Chicago July 2, 1984 Resigned March 11, 1991. Wayne D. Angell Kansas City Feb. 7, 1986 Served through Feb. 9, 1994. Manuel H. Johnson . Richmond Feb. 7, 1986 Resigned August 3, 1990. H. Robert Heller San Francisco Aug. 19, 1986 Resigned July 31, 1989. Edward W. Kelley, Jr. Dallas May 26, 1987 Reappointed in 1990. Alan Greenspan New York Aug. 11, 1987 Reappointed in 1992. John P. LaWare Boston Aug. 15, 1988 Resigned April 30, 1995. David W. Mullins, Jr. St. Louis May 21, 1990 Resigned Feb. 14, 1994. Lawrence B. Lindsey Richmond Nov. 26, 1991 Susan M. Phillips Chicago Dec. 2, 1991 Alan S. Blinder Philadelphia June 27, 1994 Term expired Jan. 31, 1996. Janet L. Yellen San Francisco Aug. 12, 1994 Laurence H. Meyer . St. Louis June 24, 1996 Alice M. Rivlin Philadelphia June 25, 1996 Chairmen 4 Vice Chairmen4 Charles S. Hamlin Aug. 10, 1914-Aug. 9, 1916 Frederic A. Delano Aug. 10, 1914-Aug. 9, 1916 W.P.G. Harding Aug. 10, 1916-Aug. 9, 1922 Paul M. Warburg Aug. 10, 1916-Aug. 9, 1918 Daniel R. Crissinger May 1, 1923-Sept. 15, 1927 Albert Strauss Oct. 26, 1918-Mar. 15, 1920 Roy A. Young Oct. 4, 1927-Aug. 31, 1930 Edmund Piatt July 23, 1920-Sept. 14, 1930 Eugene Meyer Sept. 16, 1930-May 10, 1933 J.J. Thomas Aug. 21, 1934-Feb. 10, 1936 Eugene R. Black May 19, 1933-Aug. 15, 1934 Ronald Ransom Aug. 6, 1936-Dec. 2, 1947 Marriner S. Eccles Nov. 15, 1934-Jan. 31, 19485 C. Canby Balderston Mar. 11, 1955-Feb. 28, 1966 Thomas B. McCabe Apr. 15, 1948-Mar. 31, 1951 J.L. Robertson Mar. 1, 1966-Apr. 30, 1973 Wm. McC. Martin, Jr. Apr. 2, 1951-Jan. 31, 1970 George W. Mitchell May 1, 1973-Feb. 13, 1976 Arthur F. Burns Feb. 1, 1970-Jan. 31, 1978 Stephen S. Gardner Feb. 13, 1976-Nov. 19, 1978 G. William Miller Mar. 8, 1978-Aug. 6, 1979 Frederick H. Schultz July 27, 1979-Feb. 11, 1982 Paul A. Volcker Aug. 6, 1979-Aug. 11, 1987 Preston Martin Mar. 31, 1982-Apr. 30, 1986 Alan Greenspan Aug. 11, 1987—6 Manuel H. Johnson Aug. 4, 1986-Aug. 3, 1990 David W. Mullins, Jr. July 24, 1991-Feb. 14, 1994 Alan S. Blinder June 27, 1994-Jan. 31, 1996 Alice M. Rivlin June 25, 1996- Ex- OFFICIO MEMBERS1 Secretaries of the Treasury Comptrollers of the Currency W.G. McAdoo Dec. 23, 1913-Dec. 15, 1918 John Skelton Williams Feb. 2, 1914-Mar. 2, 1921 Carter Glass Dec. 16, 1918-Feb. 1, 1920 Daniel R. Crissinger Mar. 17, 1921-Apr. 30, 1923 David F. Houston Feb. 2, 1920-Mar. 3, 1921 Henry M. Dawes May 1, 1923-Dec. 17, 1924 Andrew W. Mellon Mar. 4, 1921-Feb. 12, 1932 Joseph W. Mcintosh Dec. 20, 1924-Nov. 20, 1928 Ogden L. Mills Feb. 12, 1932-Mar. 4, 1933 J.W. Pole Nov. 21, 1928-Sept. 20, 1932 William H. Woodin Mar. 4, 1933-Dec. 31, 1933 J.F.T. O'Connor May 11, 1933-Feb. 1, 1936 Henry Morgenthau Jr Jan. 1, 1934-Feb. 1, 1936 1. Under the provisions of the original Federal Reserve Act, the Federal ive members in office on the date of that act should continue to serve until Feb. 1, Reserve Board was composed of seven members, including five appointive 1936, or until their successors were appointed and had qualified; and that members, the Secretary of the Treasury, who was ex-officio chairman of the thereafter the terms of members should be fourteen years and that the Board, and the Comptroller of the Currency. The original term of office was ten designation of Chairman and Vice Chairman of the Board should be for a term of years, and the five original appointive members had terms of two, four, six, four years. eight, and ten years respectively. In 1922 the number of appointive members was 2. Date after words "Resigned" and "Retired" denotes final day of service. increased to six, and in 1933 the term of office was increased to twelve years. 3. Successor took office on this date. The Banking Act of 1935, approved Aug. 23, 1935, changed the name of the 4. Chairman and Vice Chairman were designated Governor and Vice Federal Reserve Board to the Board of Governors of the Federal Reserve System Governor before Aug. 23, 1935. and provided that the Board should be composed of seven appointive members; 5. Served as Chairman Pro Tempore from February 3, 1948, to April 15, that the Secretary of the Treasury and the Comptroller of the Currency should 1948. continue to serve as members until Feb. 1, 1936; that the appoint- 6. Served as Chairman Pro Tempore from March 3, 1996, to June 20, 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

780 Combined Financial Statements of the Federal Reserve Banks The financial statements of the Federal Reserve Banks were audited by Coopers & Lybrand, independent public accountants, for the year ended December 31, 1995 I Coopers Coopers & Lybrand L.L.R I &Lybrand a professional firm REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Governors of The Federal Reserve System and the Board of Directors of The Federal Reserve Banks: We have audited the accompanying combined statement of condition of The Federal Reserve Banks (the "Reserve Banks") as of December 31, 1995, and the related statements of income and changes in capital for the year then ended. These financial statements are the responsibility of the Reserve Banks' management. Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurances about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 3, the combined financial statements were prepared in conformity with the accounting principles, policies, and practices established by the Board of Governors of The Federal Reserve System. These principles, policies, and practices, which were designed to meet the specialized accounting and reporting needs of The Federal Reserve System, are set forth in the Financial Accounting Manual for Federal Reserve Banks and constitute a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Reserve Banks at December 31, 1995, and combined results of their operations for the year ended, on the basis of accounting described in Note 3. This report is intended solely for the information and use of the Board of Governors of The Federal Reserve System and the Boards of Directors and management of The Federal Reserve Banks, and should not be used for any other purpose. Washington, D.C. March 22, 1996 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

781 FEDERAL RESERVE BANKS COMBINED STATEMENT OF CONDITION December 31, 1995 (in millions) ASSETS Gold certificates $ 11,050 Special drawing rights certificates 10,168 Coin 425 Items in process of collection 4,769 Loans to depository institutions 135 U.S. government and federal agency securities, net 396,491 Investments denominated in foreign currencies 21,099 Accrued interest receivable 4,101 Bank premises and equipment, net 1,646 Other assets 1,271 Total assets $451,155 LIABILITIES AND CAPITAL LIABILITIES Federal Reserve notes outstanding, net $400,935 Deposits Depository institutions 29,611 U.S. Treasury, general account 5,979 Other deposits 669 Deferred credit items 4,538 Interest on Federal Reserve notes due U.S. Treasury 650 Accrued benefit cost 672 Other liabilities 169 Total liabilities 443,223 CAPITAL Capital paid-in 3,966 Surplus 3,966 Total capital 7,932 Total liabilities and capital $451,155 The accompanying notes are an integral part of these financial statements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

782 Federal Reserve Bulletin • August 1996 FEDERAL RESERVE BANKS COMBINED STATEMENT OF INCOME for the year ended December 31, 1995 (in millions) Interest income Interest on U.S. government securities $23,826 Interest on foreign currencies 784 Interest on loans to depository institutions 11 Total interest income 24,621 Other operating income Income from services 739 Reimbursable services to government agencies 221 Foreign currency gains, net 1,005 Government securities gains, net 6 Other income 56 Total other operating income 2,027 Operating expenses Salaries and other benefits 1,226 Occupancy expense 165 Equipment expense 243 Cost of unreimbursed Treasury services 38 Assessments by Board of Governors 532 Other expenses 452 Total operating expenses 2,656 Income before cumulative effect of accounting change 23,992 Cumulative effect of change in accounting principle (89) Net income prior to distribution $23,903 Distribution of net income Dividends paid to member banks $ 231 Transferred to surplus 283 Payments to U.S. Treasury 23,389 $23,903 The accompanying notes are an integral part of these financial statements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 783 FEDERAL RESERVE BANKS COMBINED STATEMENT OF CHANGES IN CAPITAL for the year ended December 31, 1995 (in millions) Capital Total paid-in Surplus capital Balance at December 31, 1994 (73.67 million shares) $3,683 $3,683 $7,366 Net income transferred to surplus 283 283 Net change in capital stock issued (5.66 million shares) 283 283 Balance at December 31, 1995 (79.33 million shares) $3,966 $3,966 $7,932 The accompanying notes are an integral part of these financial statements. NOTES TO COMBINED FINANCIAL STATEMENTS OF THE FEDERAL RESERVE BANKS, DECEMBER 31, 1995 (1) ORGANIZATION AND BASIS OF PRESENTATION Board of Directors The twelve Federal Reserve Banks (Reserve Banks) are part of The Federal Reserve Act specifies the composition of Reserve the Federal Reserve System (System) created by Congress under Bank boards of directors. Each board is composed of nine memthe Federal Reserve Act of 1913 (Federal Reserve Act) which bers serving three-year terms: three directors, including those established the central bank of the United States. The Reserve designated as Chairman and Deputy Chairman, are appointed by Banks are federal instrumentalities chartered by the federal gov- the Board of Governors; and six directors are elected by member ernment and possess a unique set of governmental, corporate, and banks. Of the six elected by member banks, three represent the central bank characteristics. Other major elements of the System public and three represent member banks. Member banks are are the Board of Governors of the Federal Reserve System (Board divided into three classes according to size. Member banks in of Governors), the Federal Open Market Committee, and the each class elect one director representing member banks and one Federal Advisory Council. The Reserve Banks are not subject to representing the public. In any election of directors, each member federal or state income taxes. bank receives one vote, regardless of the number of shares of Although the Reserve Banks are chartered as independent Reserve Bank stock it holds. organizations overseen by the Board of Governors, the Reserve Banks work jointly to carry out their statutory responsibilities. The majority of the assets, liabilities, and income of the Reserve (2) OPERATIONS AND SERVICES Banks is derived from central bank activities and responsibilities with regard to monetary policy and currency. For this reason, the The System performs a variety of services and operations. Funcaccompanying combined set of financial statements for the twelve tions include formulating and conducting monetary policy; particiindependent Reserve Banks is prepared, adjusted to eliminate pating actively in the payments mechanism, including large-dollar interdistrict accounts and transactions. transfers of funds, automated clearing house operations, and check processing; distribution of coin and currency; fiscal agency func- Corporate Structure tions for the U.S. Treasury and certain federal agencies; serving as the federal government's bank; providing short-term loans to The Reserve Banks serve twelve Federal Reserve Districts nation- depository institutions; serving the consumer and the community wide. In accordance with the Federal Reserve Act, each Reserve by providing educational materials and information regarding Bank has a corporate structure with supervision and control consumer laws; supervising bank holding companies and state exercised by a Board of Directors chosen partly by nomination member banks; and administering other regulations of the Board and election by member banks and partly by the Board of Gover- of Governors. The Board of Governors' operating costs are funded nors. Banks that are members of the System include all national through assessments on the Reserve Banks. banks and any state-chartered bank that elects to become a member. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

784 Federal Reserve Bulletin • August 1996 (3) SIGNIFICANT ACCOUNTING POLICIES (B) Special Drawing Rights Certificates In carrying out various responsibilities as the nation's central Special drawing rights (SDRs) are issued by the International bank, the Reserve Banks participate in activities that result in Monetary Fund (the Fund) to its members in proportion to each income, particularly interest income from securities held in the member's quota in the Fund at the time of issuance. SDRs serve System Open Market Account (SOMA). The income is incidental as a supplement to international monetary reserves and may be to the Reserve Banks' public responsibilities and does not moti- transferred from one national monetary authority to another. vate activities or policy decisions. Specialized accounting prin- Under the law providing for U.S. participation in the SDR system, ciples for entities with the unique powers and responsibilities of the Secretary of the U.S. Treasury is authorized to issue SDR the nation's central bank have not been formulated by the Finan- certificates, somewhat like gold certificates, to the Reserve Banks. cial Accounting Standards Board. The Board of Governors has At such time, equivalent amounts in dollars are credited to the developed specialized accounting principles and practices that it account established for the U.S. Treasury, and Reserve Banks' believes are appropriate for the significantly different nature and SDR certificate account is increased. The Reserve Banks are function of a central bank as compared to the private sector. These required to purchase SDRs, at the direction of the U.S. Treasury, accounting principles and practices are generally documented in for the purpose of financing SDR certificate acquisitions or for the Financial Accounting Manual for Federal Reserve Banks (the financing exchange stabilization operations. Financial Accounting Manual), which is published by the Board of Governors. All Reserve Banks are required to adopt and apply (C) Loans to Depository Institutions accounting policies and practices that are consistent with the Financial Accounting Manual. The financial statements have been The Depository Institutions Deregulation and Monetary Control prepared in accordance with the Financial Accounting Manual. Act of 1980 provides that all depository institutions that maintain Differences exist between the policies of the System and generally reservable transaction accounts or nonpersonal time deposits, as accepted accounting principles (GAAP). The primary difference defined in Regulation D issued by the Board of Governors, have is the presentation of all security holdings at amortized cost rather borrowing privileges at the discretion of the Reserve Banks. than at the fair value presentation requirements of GAAP. Borrowers execute certain lending agreements and deposit suffi- Accounting policies and practices for U.S. government and fedcient collateral before credit is extended. Loans are evaluated for eral agency securities and investments denominated in foreign collectibility, and currently all are considered collectible and fully currencies are further described in note 3(D). In addition, the collateralized. If any loans were deemed to be uncollectible, an Board of Governors and the Reserve Banks have elected not to appropriate reserve would be established. Interest is recorded on include a Statement of Cash Flows, as the liquidity and cash the accrual method and is charged at the discount rate established position of the Reserve Banks are not of primary concern to the at least every fourteen days by the Boards of Directors of the shareholders and other users of these financial statements. Other Reserve Banks, subject to review by the Board of Governors. information regarding the Reserve Banks' activities is provided, However, Reserve Banks retain the option to impose a surcharge or may be derived from, the Statements of Condition, Income, and above that rate in certain circumstances. Changes in Capital. Therefore, a Statement of Cash Flows would not provide any additional useful information. There are no other significant differences between the policies outlined in the Finan- (D) U.S. Government and Federal Agency Securities and cial Accounting Manual and GAAP. The preparation of financial Investments Denominated in Foreign Currencies statements in conformity with the Financial Accounting Manual requires management to make estimates and assumptions that The Federal Open Market Committee (FOMC) is composed of affect the reported amounts of assets and liabilities and disclosure members of the Board of Governors, the president of the Federal of contingent assets and liabilities at the date of the financial Reserve Bank of New York (FRBNY), and, on a rotating basis, statements and the reported amounts of income and expenses four other Reserve Bank presidents. The FOMC has designated during the reporting period. Actual results could differ from those the FRBNY to execute open market transactions on its behalf. The estimates. Unique accounts and significant accounting policies are FOMC establishes policy regarding open market operations, overexplained below. sees these operations, and issues authorizations and directives to the FRBNY for its execution of transactions. Authorized transac- (A) Gold Certificates tion types include direct purchases and sales of securities, matched sale-purchase transactions, and the purchase of securities under agreements for repurchase. These transactions are conducted in The Secretary of the Treasury is authorized to issue gold certifi- U.S. government and federal agency securities. cates to the System to monetize gold held by the U.S. Treasury. Specifically, the FRBNY provides or absorbs reserve deposits Payment for the gold certificates by the Reserve Banks is made by of depository institutions by purchasing or selling government crediting equivalent amounts in dollars into the account estabsecurities respectively in the open market. While the application lished for the U.S. Treasury. These gold certificates held by the of current market prices to the securities currently held by the Reserve Banks are required to be backed by the gold of the U.S. Reserve Banks may result in values substantially above or below Treasury. The U.S. Treasury may reacquire the gold certificates at their carrying values, these unrealized changes in value would any time, and the Reserve Banks must deliver them to the U.S. have no necessary effect on the quantity of reserves available to Treasury. At such time, the U.S. Treasury's account is charged the banking system or on the prospects for future Reserve Bank and the Reserve Banks' gold certificate account is lowered. The earnings or capital. value of gold for purposes of backing the gold certificates is set by In addition to conducting outright sales and purchases of seculaw at $42% a fine troy ounce. rities, FRBNY is also authorized by the FOMC to enter into matched sale-purchase transactions. These are generally overnight transactions in which FRBNY sells a security and buys it Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 785 back the next day at the rate specified at the commencement of the securities. These notes are identified as issued to a specific transaction. These transactions are accounted for as separate sale Reserve Bank. The Federal Reserve Act provides that the collatand purchase transactions. At December 31, 1995, matched sale- eral security tendered by the Reserve Bank to the Federal Reserve purchase transactions involving U.S. government securities with a agent must be equal to the sum of the notes applied for by such par value of $12.3 billion were outstanding. Reserve Bank. The collateral value is equal to the par value of the In addition to authorizing and directing operations in the securities tendered. The Board of Governors may, at any time, call domestic securities market, the FOMC authorizes and directs the upon a Reserve Bank for additional security to adequately collat- FRBNY to execute operations in foreign exchange markets for eralize the Federal Reserve notes. To satisfy the obligation to major currencies and to invest the resulting balances, to the extent provide sufficient collateral for its outstanding Federal Reserve possible, in assets with maturities of twelve months or less. notes, the Reserve Banks have entered into an agreement that Balances and changes in balances arise from transactions to provides that certain assets of the Reserve Banks are jointly counter disorderly conditions in exchange markets and other pledged as collateral for the Federal Reserve notes of all Reserve needs specified by the FOMC in carrying out the System's central Banks. In the event that this collateral is insufficient, the Act bank responsibilities. provides that Federal Reserve notes become a first and paramount The above activities result in income for the Reserve Banks. lien on all the assets of the Reserve Banks. Finally, as obligations Although the resulting portfolio generates interest income and the of the United States, Federal Reserve notes are backed by the full transactions can result in gains or losses when holdings are sold faith and credit of the U.S. government. The Federal Reserve prior to maturity, decisions regarding the securities and foreign notes outstanding, net account represents Federal Reserve notes currencies, including their purchase and sale, are motivated by reduced by cash held in the vaults of the Reserve Banks. monetary policy objectives rather than profit. Accordingly, earnings and any gains or losses resulting from the sales of such (G) Capital Paid-in currencies and securities are incidental to the open market operations and do not motivate its activities or policy decisions. The Federal Reserve Act requires that each member bank sub- In order to ensure the effective conduct of open market opera- scribe to the capital stock of the Reserve Bank in an amount equal tions, the FOMC authorizes the Reserve Banks to lend U.S. to 6 percent of the capital and surplus of the member bank. As a government securities held in SOMA to U.S. government securi- member bank's capital and surplus changes, its holdings of the ties dealers and to banks participating in U.S. government securi- Reserve Bank's stock must be adjusted. Member banks are those ties clearing arrangements conducted through a Reserve Bank, state-chartered banks that choose to join the System and all under such instructions as the FOMC may specify from time to national banks. Currently, only one-half of the subscription is time. At December 31, 1995, U.S. government securities with a paid-in and the remainder is subject to call. These shares are par value of $1.1 billion were loaned. These securities-lending nonvoting with a par value of $100. They may not be transferred transactions are fully collateralized by other U.S. government or hypothecated. securities. It is the FOMC's policy to take possession of the By law, each member bank is entitled to receive an annual collateral in amounts in excess of the market values of the dividend of 6 percent on the paid-in capital stock. This cumulative securities loaned. The market values of the collateral and the dividend is paid semiannually. A member bank is liable for securities loaned are monitored by the Reserve Banks on a daily Reserve Bank liabilities up to twice the par value of stock subbasis, with additional collateral obtained as necessary. The securiscribed by it. ties lent continue to be carried in SOMA. Income earned by the Reserve Banks on securities-lending transactions is reported as (H) Surplus "Other income." In accordance with the Federal Reserve Act, and as further The Board of Governors requires Reserve Banks to maintain a explained in note 3(F), all domestic securities and investments surplus equal to the amount of capital paid-in as of December 31 denominated in foreign currencies are available as collateral for of the prior year. This amount is intended to provide additional net Federal Reserve notes outstanding. At December 31, 1995, capital and reduce the possibility that the Reserve Banks would be securities with a par value of $379.7 billion were pledged as required to call on member banks for additional capital. Reserve collateral. Banks are required by the Board of Governors to transfer to the U.S. Treasury excess earnings, after providing for the costs of (E) Bank Premises and Equipment operations, payment of dividends, and reservation of an amount necessary to equate surplus with capital paid-in, as payment of Bank premises and equipment are stated at cost less accumulated interest on Federal Reserve notes outstanding. In the event of depreciation. Depreciation is calculated on a straight-line basis losses, payments to the U.S. Treasury are suspended until such over estimated useful lives of assets ranging from two to fifty losses are recovered through subsequent earnings. Weekly payyears. New assets, major alterations, renovations, and improvj- ments to the U.S. Treasury vary significantly. ments are capitalized at cost as additions to the asset accounts. Maintenance, repairs, and minor replacements are charged to (I) Cost of Unreimbursed Treasury Services operations in the year incurred. Reserve Banks are required by the Federal Reserve Act to serve as (F) Federal Reserve Notes fiscal agents and depositories of the United States. By statute, the Department of the Treasury is permitted, but not required, to pay Federal Reserve notes are the circulating currency of the United for these services. The costs of providing fiscal agency and States. These notes are issued through the various Federal Reserve depository services to the Treasury Department that have been agents to the Reserve Banks upon deposit with such agents of billed but will not be paid are reported as the "Cost of unreimcertain classes of collateral security, typically U.S. government bursed Treasury services." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

786 Federal Reserve Bulletin • August 1996 (J) Accounting Change Par value Federal agency $ 2,633,995 U.S. Treasury Effective January 1, 1995, the Financial Accounting Manual was Bills 183,115,712 changed to require that Reserve Banks use the accrual method of Notes 151,013,150 Bonds 44,068,604 accounting to recognize the obligation to provide benefits to Total par value 380,831,461 former or inactive employees consistent with Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Unamortized premiums 4,508,183 Unaccreted discounts (3,477,093) Accounting for Postemployment Benefits." Prior to 1995, the Reserve Banks recognized costs for postemployment benefits $381,862,551 when paid. The cumulative effect of this change in accounting for benefits was recognized by the Reserve Banks as a one-time Securities held under repurchase agreements at December 31, charge to expense of $54.8 million. Additionally, the Reserve 1995, were as follows (in thousands): Banks recognized an increase in 1995 operating expenses of approximately $4.7 million, net of a one-time credit of $1.5 mil- Par value Federal agency $ 1,100,000 lion that reflects the effect of a special early retirement benefit U.S. Treasury 12,762,000 offered by one District during 1995. Total par value 13,862,000 Effective January 1, 1995, the Reserve Banks also began accru- Unamortized premiums 902,643 ing a liability for employees' rights to receive compensation for Unaccreted discounts (136,641) future absences consistent with SFAS No. 43, "Accounting for $14,628,002 Compensated Absences." Prior to 1995, the Reserve Banks recognized these costs when paid. The cumulative effect of this change The maturities of investment securities held at December 31, in accounting for compensated absences was recognized by the 1995, that were bought outright were as follows (in thousands): Reserve Banks as a one-time charge to expense of $19.3 million. Ongoing operating expenses for the year ended December 31, Par value 1995, were not materially affected by the change in accounting for U.S. Federal these costs. Maturities of government agency Effective January 1, 1995, the Reserve Banks began recogniz- securities held securities obligations ing impairment losses consistent with SFAS No. 121, "Account- Within 15 days $ 7,580,018 $ 240,000 ing for the Impairment of Long-Lived Assets and for Long-Lived 16 days to 90 days 93,738,368 474,000 91 days to 1 year 123,216,569 527,295 Assets to Be Disposed Of." Prior to 1995, the Reserve Banks did Over 1 year to 5 years 85,272,558 840,950 not recognize impairment losses. The cumulative effect of this Over 5 years to 10 years 31,469,096 526,750 Over 10 years 36,920,857 25,000 change in accounting for impairment losses was recognized as a Total $378,197,466 $2,633,995 one-time charge to expense of $14.5 million. The impairment loss represented the impairment in value of certain bank buildings. Fair value of the buildings was based on management's estimate The maturities of all repurchase agreements are fifteen days or less. of market value. The impairment recognized was a result of management's intention to relocate and resulted from structural (5) INVESTMENTS DENOMINATED IN FOREIGN defects and asbestos. An additional impairment loss was recog- CURRENCIES nized during 1995, as discussed in note 6. The FRBNY, on behalf of the Reserve Banks, holds foreign currency deposits and government debt instruments denominated (4) U.S. GOVERNMENT AND FEDERAL AGENCY in foreign currencies with foreign central banks and the Bank for SECURITIES International Settlements. Investments denominated in foreign currencies are limited to maturities of one year or less and are Securities bought outright and held under repurchase agreements accounted for at cost on a settlement date basis, adjusted for are held in the SOMA at the FRBNY. These securities are amortization of premiums and accretion of discounts. Foreign recorded at cost on a settlement-date basis, adjusted for the currency-denominated assets of the Reserve Banks are revalued amortization of premiums and accretion of discounts. Interest monthly at current market exchange rates in order to report these income is recorded on the accrual method and is reported as assets in U.S. dollars, with any gains or losses reported as "For- "Interest on U.S. government securities." Gains and losses resulteign currency gains, net." Interest income is recorded on the ing from sales of securities are determined by the specific identifiaccrual basis and is reported as "Interest on foreign currencies." cation method and are reported as "Government securities gains, These investments are guaranteed as to principal and interest by net." the foreign governments or are contracts with the central banks or Securities held at December 31, 1995, that were bought outthe Bank for International Settlements. right were as follows (in thousands): During 1995, the FRBNY was authorized to hold balances of, and to have outstanding spot and forward contracts to receive or to deliver, the following foreign currencies: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 787 Austrian schillings Italian lire initiating the transaction (the drawer) bears the exchange rate risk Belgian francs Japanese yen upon maturity. The FRBNY will generally invest the foreign Canadian dollars Mexican pesos currency received under an F/X swap in interest-bearing instru- Danish kroner Netherlands guilders ments. As of December 31, 1995, there was an open F/X swap of Pounds sterling Norwegian kroner $650 million, which was drawn at the direction of a foreign French francs Swedish kroner central bank. Interest income on the resulting foreign currency German marks Swiss francs holdings is accrued and reported as "Interest on foreign currencies." Unrealized gains and losses on revaluation of the resulting currency holdings are reported as a component of "Other assets," In addition, at the direction of the FOMC, the FRBNY is since there is no exchange rate risk to FRBNY at maturity of the authorized to maintain reciprocal currency arrangements (F/X F/X swap. swaps) for SOMA for periods up to a maximum of twelve months The FOMC has an agreement to "warehouse" foreign currenwith the following foreign central banks: cies for the U.S. Treasury and the Exchange Stabilization Fund (ESF). This is an arrangement under which the FOMC agrees to Amount of arrangement (millions of dollars exchange, at the request of the Treasury, U.S. dollars for foreign Foreign central bank equivalent) currencies held by the Treasury or ESF over a limited period of time. The purpose of the warehousing facility is to supplement the Austrian National Bank $ 250 U.S. dollar resources of the Treasury and ESF for financing National Bank of Belgium 1,000 Bank of Canada 2,000 purchases of foreign currencies and related international opera- National Bank of Denmark 250 tions. As of December 31, 1995, this facility was $20 billion, with Bank of England 3,000 nothing outstanding. Bank of France 2,000 German Federal Bank 6,000 Bank of Italy 3,000 Bank of Japan 5,000 (6) BANK PREMISES AND EQUIPMENT Bank of Mexico 6,000' Netherlands Bank 500 Bank of Norway 250 A summary of bank premises and equipment at December 31, Bank of Sweden 300 1995, is as follows (in millions): Swiss National Bank 4,000 Bank for International Settlements: Bank premises Dollars against Swiss francs 600 Land $ 167 Dollars against authorized European currencies Buildings 883 other than Swiss francs 1,250 Building machinery and equipment 231 Construction in progress 129 1 The swap arrangement with the Bank of Mexico consisted of a regular 1,410 $3 billion line and a special temporary $3 billion line. The special line expired Less accumulated depreciation 284 on January 31, 1996. As of December 31, 1995, the Bank of Mexico had Bank premises, net $1,126 $650 million outstanding under its facility; however, this amount was repaid in January 1996. Furniture and equipment $1,192 Less accumulated depreciation 672 Furniture and equipment, net $ 520 In connection with its foreign currency activities, the FRBNY, on behalf of the Reserve Banks, enters into contracts that may Bank premises and equipment, net $1,646 involve off-balance-sheet market risk and credit risk because they may represent contractual commitments involving future settle- Depreciation expense for the year ended December 31,1995 was ment. The credit risk is controlled through credit approvals, limits, $180 million. and daily monitoring procedures. Bank premises and equipment include the following amounts Foreign exchange contracts are contractual agreements between for leases that have been capitalized (in millions): two parties to exchange specified currencies, at a specified price, on a specified date. Spot foreign contracts normally settle two Bank premises and equipment $92.5 days after the trade date, whereas the settlement date on forward Accumulated depreciation 29.0 contracts is negotiated between the contracting parties but will Capitalized leases, net $63.5 extend beyond two days from the trade date. FRBNY generally enters into spot contracts, with any forward contracts generally Certain of the Reserve Banks lease unused space to outside limited to the second leg of a swap/warehousing transaction. As of tenants. Those leases have terms ranging from one to fifteen December 31, 1995, the Reserve Banks had no open foreign years. Rental income from such leases was $16 million in 1995. exchange contracts except as noted below. Future minimum lease payments under agreements existing at An F/X swap arrangement is a renewable, short-term reciprocal December 31, 1995, were (in thousands): currency arrangement, generally for up to one year, between two parties, the FRBNY, on behalf of the Reserve Banks, and an 1996 $12,953 authorized foreign central bank, who agree to exchange their 1997 11,846 currencies up to a prearranged maximum amount and for an 1998 10,366 1999 9,225 agreed upon period of time. These arrangements give the Federal 2000 8,953 Reserve temporary access to the foreign currencies that it needs Thereafter 19,227 for intervention operations to support the dollar or give the partner $72,570 foreign central bank temporary access to dollars it needs to support its own currencies. Drawings under the F/X swap arrange- During 1995, one Reserve Bank recognized impairment losses ments can be initiated by either the FRBNY or the partner foreign of $16.3 million on the value of bank buildings. Fair value of the central banks. The F/X swaps are structured so that the party buildings was based on appraised value. The impairment was Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

788 Federal Reserve Bulletin • August 1996 recognized as a result of management's intention to relocate and tributed by the participating employers, and net pension costs for resulted from a general decline in real estate values in the area in the period is the required contribution for the period. which the buildings were located. This loss is included on the Following is a reconciliation between the plan's funded status Statement of Income as a component of "Other expenses." and amounts included in the Reserve Banks' balance sheet at December 31, 1995 (in millions): (7) COMMITMENTS Accumulated benefit obligation Vested $ 1,679 At December 31, 1995, the Reserve Banks were obligated under Nonvested 91 noncancelable leases for premises and equipment with terms, Total $ 1,770 including renewal options, ranging from one to approximately twenty-eight years. These leases provide for increased rentals Plan assets at fair value, primarily listed stocks and bonds $ 3,628 Less: Actuarial present value of projected benefit obligation (2,130) based upon increases in real estate taxes, operating costs, or Plan assets in excess of projected benefit obligation 1,498 selected price indices. Rental expense under operating leases for certain operating Less: Unrecognized net transition obligation 272 Unrecognized net gain 606 facilities, warehouses, data processing, and office equipment Unrecognized prior service cost (156) (including taxes, insurance, and maintenance when included in Prepaid pension cost $ 776 rent), net of sublease rentals, was $64 million in 1995. Certain of the Reserve Banks' leases have options to renew. Costs were projected using a 7 percent discount rate. The rate Future minimum rental payments under capital leases and nonof compensation increase used was 5 percent per year and a cancelable operating leases, net of sublease rentals with terms of 9 percent long-term rate of return on plan assets was assumed. one year or more, at December 31, 1995, were (in thousands): The components of the net pension credit for 1995 are shown below (in millions): Operating Capital 1996 $18,121 $ 4,681 Service costs—benefits earned during the year $ 49 1997 8,087 3,878 Interest cost on projected benefit obligation 133 1998 16,518 1,337 Actual return on plan assets (842) 1999 14,987 122 Net amortization and deferral 537 2000 14,375 Cost of special termination benefits 4 Thereafter 23,924 $96,012 $10,018 Net pension (credit) $(119) Amounts representing interest 653 Present value of net minimum The net periodic cost for 1995 is based on a discount rate of lease payments $ 9,365 8.75 percent, average compensation increase rate of 5.5 percent, and expected long-term rate of return on assets of 9 percent. The Reserve Banks had the following other material commit- Employees of the Reserve Banks may also participate in the ments and long-term obligations at December 31, 1995: Federal Reserve System's Thrift Plan. Under the Thrift Plan, employees may contribute a percentage of their salaries up to a Contractual commitments and long-term obligations totaling maximum 19 percent limit as prescribed by the Internal Revenue $258.2 million through 1999 for the land, construction, relo- Service. Matching contributions by the Reserve Banks are based cation, and other costs related to new buildings. As of on a fixed percentage of each employee's basic contributions. December 31, 1995, $70.1 million of this amount was Currently, the Reserve Banks match 80 percent of the first 6 perrecognized. cent of salary contributed by the employee. The Reserve Banks' Contractual commitments totaling $81.3 million through 1996 for Thrift Plan contributions totaled $38 million in 1995. the purchase of high-speed currency processing machines. (8) RETIREMENT AND THRIFT PLANS (9) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Substantially all of the Reserve Banks' employees participate in the Retirement Plan for Employees of the System. The System's In addition to the Reserve Banks' defined benefit retirement plan, plan is a defined benefit plan which covers employees of the employees who have met certain age and length-of-service re- Reserve Banks, the Board of Governors, and the Plan Administra- quirements are eligible for both medical benefits and life insurtive Office. Benefits are based on length of service and level of ance coverage during retirement. The retiree medical plan is compensation. FRBNY acts as the plan sponsor. The prepaid contributory and provides benefits to retirees, their covered depenpension cost is reported as a component of Other assets. The dents, and beneficiaries. The life insurance plan is noncontribuprepaid pension cost includes amounts related to Board of Gover- tory and covers retirees only. nors participation in the plan. The Reserve Banks fund benefits payable under the medical Contributions to the System's plan are actuarially determined and life insurance plans as due. The Reserve Banks use a January and fully funded by participating employers at amounts prescribed 1 measurement date. The following is a reconciliation between the by the Plan Administrator (with the exception of a mandatory plan's funded status and the amounts recognized in the Reserve contribution of 7 percent of salary by employees of the Board of Banks' combined balance sheet as of December 31, 1995, (in Governors). No separate accounting is maintained of assets con- millions): Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 789 Accumulated postretirement benefit obligation The Reserve Banks began using the accrual method of account- Retirees and covered spouses $303.0 ing to recognize the obligation to provide benefits to former or Actives eligible to retire 54.8 Other actives and disabled 238.5 inactive employees, consistent with SFAS 112, "Employers Accounting for Postemployment Benefits," effective January 1, Total accumulated postretirement benefit obligation 596.3 1995. Benefits include medical and dental insurance, survivor Unamortized net transition obligation 0.0 income, disability income, and those workers' compensation Unrecognized net loss (61.7) Unrecognized prior service cost 77.4 expenses self-insured by individual Reserve Banks. Costs were projected using the same discount and health care trend rates as Accrued postretirement benefit cost $612.0 were used for projecting postretirement costs. The accrued postemployment benefit costs recognized by the Reserve Banks at Costs for the Reserve Banks were projected using a 7 percent December 31, 1995, were $59.6 million. This cost is included as a discount rate and the following health care cost trend rates. The component of Accrued benefit cost on the Statement of Condition. initial trend rate for medical costs for 1996 is 10 percent for Net periodic costs of $13.6 miilion were inciuded in 1995 operatretirees over sixty-five and for retirees under sixty-five with the ing expenses. ultimate trend rate decreasing to 5.5 percent by 2004. Changing the assumed health care cost trend rates by 1 percentage point in (10) CONTINGENCIES each year would change the accumulated postretirement benefit obligation at December 31, 1995, by approximately $111.5 mil- The Reserve Banks are involved in certain legal actions and lion, and the aggregate service and interest cost components of net claims arising in the ordinary course of business. Although it is periodic postretirement benefit cost recognized as of December 31 difficult to predict the ultimate outcome of these actions, in by approximately $12.0 million. management's opinion, based on discussions with counsel, the The following is a summary of the components of net periodic aforementioned litigation and claims will be resolved without postretirement cost for the year ended December 31, 1995 (in material adverse effect on the financial position of the Reserve millions): Banks or results of operations. Service cost $13.0 Interest cost of accumulated benefit obligation 42.5 Net amortization and deferral (5.1) Cost of special termination benefits .6 Net periodic cost $51.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1 Financial and Business Statistics Federal Finance A3 GUIDE TO TABULAR PRESENTATION A25 Federal fiscal and financing operations DOMESTIC FINANCIAL STATISTICS A26 U.S. budget receipts and outlays A27 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 A7 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 Monetary and Credit Aggregates A34 Mortgage markets 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 All Assets and liabilities, Wednesday figures A39 Summary of financial transactions A40 Summary of credit market debt outstanding Weekly Reporting Commercial Banks— A41 Summary of financial assets and liabilities 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 • August 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 INTERNATIONAL STATISTICS A60 Foreign transactions in securities A61 Marketable U.S. Treasury bonds and Summary Statistics notes—Foreign transactions A50 U.S. international transactions—Summary A51 U.S. foreign trade Interest and Exchange Rates 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 SPECIAL TABLES A52 Liabilities to and claims on foreigners A53 Liabilities to foreigners A55 Banks' own claims on foreigners SPECIAL TABLE A56 Banks' own and domestic customers' claims on A64 Terms of lending at commercial banks, May 1996 foreigners A56 Banks' own claims on unaffiliated foreigners A57 Claims on foreign countries— Combined domestic offices and foreign branches A68 INDEX TO STATISTICAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

A4 Domestic NonfinancialS tatistics • August 1996 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1995 1996 1996 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q2 Q3 Q4 Q1 Jan. Feb. Mar. Apr. May Reserves of depository institutions2 1 Total -7.5 -1.5 -6.9 -7.9 -16.1 -16.4 19.2 -11.7 -20.5 2 Required -6.6 -2.5 -7.7 -8.5 -21.0 -2.7 13.2 -11.6 -15.4 3 Nonborrowed. -8.2 -2.4 -6.4 -6.5 -11.5 -16.3 19.6 -13.2 -21.3 4 Monetary base 5.8 1.7 2.7 1.5 .4 -4.1 8.8 -.7 1.0 Concepts of money, liquid assets, and debt4 5 Ml -.4 -1.5 -5.1 -2.7 -6.1 -2.0 10.0 -3.1 -6.6 6 M2 3.8 6.9 4.1r 5.9r 4.8 5.4r 11.1' 2.0r -1.6 7 M3 6.3 8.0 4.5r 1.2' 7.4r 10.0r 11.0' 1.8r 3.5 8 L 7.3 9.1 5.9 5.\' 4.0r 4.4r 12.5 4.5 n.a. 9 Debt 7.0 4.6 4.5 5.4r 5.3r 1.1' 4.3r 4.8 n.a. Nontransaction components 10 In M25 5.8 10.9 8.3r 9.1' 9.7 8.6' 12.4r 4.2r .6 11 In M3 only6 16.9 12.1 6.3 12.5' 17.9r 28.5r 8.3r .9' 23.1 Time and savings deposits Commercial banks 12 Savings, including MMDAs -6.5 9.0 13.1 22.6 28.2 16.5 25.2 8.8 4.1 13 Small time7 20.4 11.0 4.8r 2.5r 5.0r - 1.2r -4.5r -3.5r -2.3 14 Large time8,9 13.6 13.0r 19.4 8.8 -6.3 19.7 27.4r 8.5r 19.2 Thrift institutions 15 Savings, including MMDAs -14.5 -7.3 -2.8 -.3 -3.0 6.0 5.7 14.3 4.9 16 Small time7 23.5 4.r 5.0r —2.4r — 8.7r .3' -8.7r - 1.7r -2.7 17 Large time8 16.7 13.7 8.0 6.2 16.0 1.6 -9.5 1.6 -9.5 Money market mutual funds 18 Retail 14.2 36.9 16.5 14.7 9.0 15.6 32.6 2.7 -3.2 19 Institution-only 30.5 27.6 10.3 27.9 18.0 69.2 21.6 -13.0 -10.3 Repurchase agreements and Eurodollars 20 Repurchase agreements10 7.4 -5.0 -14.6 1.3 45.9 11.7 -13.5 -7.8r 91.9 21 Eurodollars10 18.6 9.4 -6.7 15.7r 56.6' 11.3r - 34.9r 25.6r 16.3 Debt components4 22 Federal 5.4 4.6 2.3 2.1' -2.0' 1.6' 11.2' 3.0 n.a. 23 Nonfederal 7.6 4.7 5.3 6.3r 1.9' 1.0' 1.9' 5.5 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 Ml. 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 U.S. 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. May Apr. 17 Apr. 24 May 1 May 8 May 15 May 22 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 421,821 415,263 U.S. government securities2 2 Bought outright—System account 377,309 378,891 380,178 379,270 380,152 379,507 380,618 379,272 380,634 3 Held under repurchase agreements 2,398 4,566 1,983 5,830 6,126 529 1,405 727 2,315 Federal agency obligations 4 Bought outright 2,559 2,492 2,442 2,491 2,491 2,444 2,444 2,444 2,444 5 6 Ac H ce e p ld t a u n n ce d s e r repurchase agreements 417 0 180 0 503 0 22 0 266 0 17 0 9 99 0 0 2 876 0 Loans to depository institutions 7 Adjustment credit 10 57 24 4 179 21 22 27 26 9 8 E Se x a te s n o d na e l d c c r r e e d d i i t t 1 0 0 33 0 10 0 6 24 0 36 0 64 0 78 0 92 0 113 0 10 Float 614 315 517 397 140 -10 932 867 393 11 Other Federal Reserve assets 31,025 31,857 31,054 32,094 32,431 31,968 31,937 31,832 30,143 12 Gold stock 11,053 11,052 11,051 11,053 11,052 11,052 11,051 11,051 11,051 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 24,221 24,281 24,343 24,278 24,292 24,306 24,320 24,334 24,348 ABSORBING RESERVE FUNDS 15 Currency in circulation 415.770 418,246 419,977 419,308 417,635 416,902 418,248 419,385 419,663 16 Treasury cash holdings 297 312 276 319 319 292 306 265 265 Deposits, other than reserve balances, with Federal Reserve Banks 1 1 7 8 T Fo re r a e s ig u n ry 5,6 1 1 8 0 6 7,3 1 1 8 8 7 5,7 1 1 9 4 6 7,6 1 5 8 5 9 8,2 1 5 8 1 0 8,7 1 0 7 9 7 6,5 1 3 8 7 9 5,6 1 7 8 3 5 5,1 2 2 2 7 4 19 Service-related balances and adjustments .. 5,992 5,938 6,188 5,800 6,053 6,055 6,001 6,037 6,006 20 Other 394 370 362 363 366 381 368 381 365 21 Other Federal Reserve liabilities and capital .. 13,022 12,813 12,885 12,950 12,898 12,664 12,705 12,930 12,929 22 Reserve balances with Federal Reserve Banks' 18,515 18,709 16,771 19,047 21,632 15,048 18,721 15,961 17,932 End-of-month figures Wednesday figures Apr. May Apr. 17 Apr. 24 May 1 May 8 May 15 May 22 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 415,996 416,892 420,961 436,292 427,165 418,328 423,609 U.S. government securities2 2 Bought outright—System account 377,056 381,806 381,346 379,827 380,316 379,571 380,121 380,134 380,661 3 Held under repurchase agreements 3,896 0 5,704 13,412 17,544 3,701 6,392 5,089 7,903 Federal agency obligations 4 5 6 Ac B H ce o e p u ld t g a h n u t n ce o d s u e r t ri r g e h p t u rchase agreements 2 1 , , 5 0 2 0 6 0 0 2,444 0 0 2 1 , , 4 3 2 5 8 0 0 2,4 1 9 5 1 0 2 2 1 , , 4 8 9 2 1 0 0 2 1 , , 4 2 4 5 4 0 0 2, 6 44 2 4 0 0 2,44 1 4 0 5 2 1 , , 4 8 4 6 4 7 0 7 Lo A an d s j u to s tm de e p n o t s c it r o e r d y i t institutions 34 21 1 78 21 21 23 18 9 8 E Se x a te so n n d a e l d c c r r e e d d i i t t 9 0 71 0 148 0 34 0 51 0 71 0 8 0 0 103 0 124 0 10 Float 28 821 -341 336 302 -17 5,190 573 62 11 Other Federal Reserve assets 31,447 31,728 30,318 32,532 33,691 32,060 32,298 29,948 30,529 12 Gold stock 11,053 11,052 11,051 11,053 11,052 11,052 11,051 11,051 11,051 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 24,250 24,306 24,376 24,278 24,292 24,306 24,320 24,334 24,348 ABSORBING RESERVE FUNDS 15 Currency in circulation 416,261 422,332 419,404 417,793 417,918 419,742 420,381 421,021 16 Treasury cash holdings 314 265 319 316 313 265 265 264 Deposits, other than reserve balances, with Federal Reserve Banks 1 1 7 8 F T o re re a i s g u n r y 7,0 1 2 9 1 1 11,0 1 4 6 2 6 3,7 1 5 6 7 0 15, 2 6 2 6 4 8 7,8 2 3 1 7 0 11,9 1 6 8 7 7 5,8 1 7 7 7 3 4,0 2 7 2 9 9 4,9 1 0 7 6 5 19 Service-related balances and adjustments . . 5,928 6,055 6,237 5,800 6,053 6,055 6,001 6,037 6,006 20 Other 348 360 300 358 370 414 361 376 353 21 Other Federal Reserve liabilities and capital , 12,714 12,559 13,148 12,755 12,771 12,239 12,779 12,712 12,805 22 Reserve balances with Federal Reserve Banks' 18,690 14,268 20,358 19,758 36,455 15,534 27,508 19,803 23,648 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 NonfinancialS tatistics • August 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. Nov. Dec. Jan. Feb. Mar. Apr. May 1 Reserve balances with Reserve Banks" 29,374 24.658 20,440 20,066 20,440 17,763 16,792 18,426 19,181 16,752 2 Total vault cash3 36,818 40,378 42,117 40,576 42,117 44,790 42,205 40,968 40,967 41,229 3 Applied vault cash4 33,484 36,682 37,460 36,332 37,460 39,170 36,957 36,458 36,688 36.393 4 Surplus vault cash5 3,334 3,696 4,657 4,244 4,657 5,620 5,248 4,510 4,278 4,836 5 Total reserves6 62,858 61,340 57,900 56,397 57,900 56,934 53,749 54,884 55,869 53,145 6 Required reserves 61,795 60.172 56.622 55,454 56,622 55,449 52,898 53,747 54,750 52,274 7 Excess reserve balances at Reserve Banks7 1,063 1,168 1,278 943 1,278 1,485 851 1,137 1,120 871 8 Total borrowings at Reserve Banks8 82 209 257 204 257 38 35 21 91 127 9 Seasonal borrowings 31 100 40 73 40 7 7 10 34 105 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. 31 Feb. 14 Feb. 28 Mar. 13 Mar. 27 Apr. 10 Apr. 24 May 8 May 22 June 5 1 Reserve balances with Reserve Banks* 15,055 15.546 17,938 18,192 18,492 18,954 20,331 16,876r 16,946 16,339 2 Total vault cash3 46,042 44,132 40,326 41,536 40,438 40,977 40,478 42,089 40,901 40,976 3 Applied vault cash4 39,626 38.455 35,468 36,845 36,011 36,767 36,417 37,190 36,091 36,156 4 Surplus vault cash" 6,416 5,677 4,858 4,691 4,428 4,210 4,061 4,900 4,810 4,820 5 Total reserves6 54,681 54,001 53,406 55,037 54,502 55,721 56,748 54,065r 53.037 52,495 6 Required reserves 53,356 53,288 52,436 53,926 53,346 54,567 55,629 53,002 52,201 51,741 7 Excess reserve balances at Reserve Banks7 1,326 713 970 1,111 1,156 1,154 1,119 l,063r 836 754 8 Total borrowings at Reserve Banks8 16 24 47 15 20 47 122 92 129 156 9 Seasonal borrowings 5 7 8 8 12 16 30 71 103 138 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 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 May. 6 May. 13 May. 20 May. 27 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 83,135 93,383 90.606 87,706 81,920 90,634 90,281 87,271 83,461 2 For all other maturities 13,693 15,245 13,622 15,649 17,657 17.658 18,091 17,719 18,158 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 20,235 20,089 23.383 24,078 19,054 19,876 26,513 22,613 21,793 4 For all other maturities 17,583 17,066 17.877 18,141 19,418 21,270 21,738 21,868 23,296 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 24,315 14.939 21,031 19,212 16,707 19,490 20,268 24,202 21,354 6 For all other maturities 28,287 33.927 32,227 37,802 40,479 41,910 44,427 38,923 40,445 All other customers 7 For one day or under continuing contract 35,665 34.918 36,844 34,546 35,314 36,149 37.594 38,331 39,166 8 For all other maturities 14.188 18.634 13,684 13,150 13,962 13,732 14,125 14,259 14,130 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 59.288 65,123 64.862 64,377 68,117 74,721 68,708 65,644 65,153 10 To all other specified customers" 23,208 27,200 26.093 25,851 26,548 29,922 26,396 26,432 25,647 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 credit" Extended credit Federal Reserve Bank 7/ O 5/ n 9 6 Previous rate 7/ O 5/ n 9 6 Effective date 7/ O 5/ n 9 6 Boston 2/1/96 7/5/96 7/5/96 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. 1/31/96 7/5/96 7/5/96 Range of rates for adjustment credit in recent years Range (or F.R. Bank Range (or F.R. Bank Range (or level)—All of level)—All of level)—All F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks In effect Dec. 31, 1977 1981—Nov. 2 13-14 13 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 1V 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. 7.75 7.75 16 10.5 10.5 1991—Feb. 1.... 6-6.5 6 Sept. •>•> 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 ?0 8.5 8.5 Oct. 12 9.5-10 9.5 May 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. 61 ..... ... 4.5-5 4.5 1979—July 20 10 10 Dec. 14 8.5-9 9 4.5 4.5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 Dec. 20 ... . 3.5^.5 3.5 ->0 10.5 10.5 17 8.5 8.5 24 .... 3.5 3.5 Sept. 19 10.5-11 11 >\ 11 11 1984—Apr. 9 8.5-9 1992—July 21 ..... ... 3-3.5 3 Oct. 8 11-12 12 13 9 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 18 3.5 3.5 19 13 13 Aug. 16 3.5—4 4 May 79 12-13 13 1985—May 20 7.5-8 7.5 18 4-44 .15 4 <0 12 12 24 7.5 7.5 Nov. 15 4.75 June 13 11-12 11 17 .... 4.75 4.75 16 11 11 1986—Mar. 7 7-7.5 7 July 9>8 9 10-11 10 10 7 7 1995—Feb. 1 . . . . 4.75-5.25 5.25 10 10 Apr. 21 6.5-7 6.5 9 ... . 5.25 5.25 Sept. 96 11 11 23. 6.5 6.5 Nov. 17 12 1123 July 11 6 6 1996—Jan. 31 5.00-5.25 5.00 Dec. 5 12-13 Aug. 21 5.5-6 5.5 Feb. 5 . . . . 5.00 5.00 13 13 22 5.5 5.5 1981—May 5 13-14 14 In effect July 5, 1996 5.00 5.00 8 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 • August 1996 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Requirement TTyyppee ooff ddeeppoossiitt Percentage of deposits Effective date 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 Annual 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 '/2 years was reduced from 3 percent to 1 l/l 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 by check, draft, debit card, or similar order) nonpersonal time deposits with an original maturity of less than 1Vi years was reduced from 3 are savings deposits, not transaction 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 l/l 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 the reserve requirement on nonpersonal time million to $52.0 million. deposits with an original maturity of less than 1 [/2 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 TRANSACTIONS' Millions of dollars 1995 1996 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 17,717 17,484 10,932 1,350 4,271 0 0 0 0 88 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 332,229 376,277 398,487 29,397 39,057 31,535 31,476 39,332 30,556 32,218 4 Redemptions 0 0 900 900 0 0 0 0 0 0 Others within one year 5 Gross purchases 1,223 1,238 390 0 0 390 0 0 0 35 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 31,368 0 0 1,745 6,108 0 2,048 2,746 0 3,511 8 Exchanges -36,582 -21,444 0 -2,049 -4,937 0 -3,287 -7,575 0 -4,824 9 Redemptions 0 0 0 0 0 0 1,228 0 0 787 One to five years 10 Gross purchases 10,350 9,168 4,966 0 0 2,317 0 0 0 1,899 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -27,140 -6,004 0 -1,745 -5,292 0 -2,048 -1,908 0 3,511 13 Exchanges 0 17,801 0 2,049 3,237 0 3,287 5,175 0 4,824 Five to ten years 14 Gross purchases 4,168 3,818 1,239 0 400 0 0 0 0 479 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts 0 -3,145 0 0 -816 0 0 -818 0 0 17 Exchanges 0 2,903 0 0 1,700 0 0 1,500 0 0 More than ten years 18 Gross purchases 3,457 3,606 3,122 0 0 1,884 0 0 0 1,065 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts 0 -918 0 0 0 0 0 -20 0 0 21 Exchanges 0 775 0 0 0 0 0 900 0 0 All maturities 22 Gross purchases 36,915 35,314 20,649 1,350 4,671 4,591 0 0 0 3,566 23 Gross sales 0 0 0 0 0 0 0 0 0 0 24 Redemptions 767 2,337 2,376 1,385 0 0 1,228 0 0 787 Matched transactions 25 Gross purchases 1,475,941 1,700,836 2,197,736 216,755 226,340 227,858 260,425 274,290 251,623 253,482 26 Gross sales 1,475,085 1,701,309 2,202,030 213,161 228,419 228,071 259,186 275,979 251,086 251,510 Repurchase agreements 27 Gross purchases 475,447 309,276 331,694 28,825 44,569 34,325 16,040 6,230 31,602 48,869 28 Gross sales 470,723 311,898 328,497 32,980 39,876 28,546 28,802 6,230 27,706 50,345 29 Net change in U.S. Treasury securities 41,729 29,882 17,175 -597 7,285 10,157 -12,751 -1,689 4,433 3,274 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 83 120 58 0 0 108 82 Repurchase agreements 33 Gross purchases 35,063 52,696 36,851 3,740 3,763 2,888 9,793 765 5,640 2,372 34 Gross sales 34,669 52,696 36,776 3,605 3,973 1,788 10,893 765 4,640 3,372 35 Net change in federal agency obligations -380 -1,002 -1,228 52 -330 1,042 -1,100 0 892 -1,082 36 Total net change in System Open Market Account. .. 41,348 28,880 15,948 -545 6,955 11,199 -13,851 -1,689 5,325 2,192 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market Account; all other figures increase such holdings. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • August 1996 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1996 1996 May 1 May 8 May 15 May 22 May 29 Mar. 31 Apr. 30 May 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,052 11,051 11,051 11,051 11,051 11,053 11,052 11,051 2 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 3 574 579 575 569 538 579 574 552 Loans 4 To depository institutions 92 101 126 142 161 43 93 155 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 2,444 2,444 2,444 2,444 2,428 22,,552266 22,,444444 22,,442288 8 Held under repurchase agreements 1,250 620 15 1,867 850 1,000 0 1,350 9 Total U.S. Treasury securities 383,272 386,513 385,223 388,564 385,154 380,952 381,806 387,050 10 Bought outright* 379,571 380,121 380,134 380,661 381,789 377,056 381,806 381,346 11 Bills 183,026 183,576 183,589 184,116 185,244 183,202 185,262 184,801 1? Notes 150,102 150,102 150,102 150,102 150,102 148,885 150,102 150,102 13 Bonds 46,443 46,443 46,443 46,443 46,443 44,969 46,443 46,443 14 Held under repurchase agreements 3,701 6,392 5,089 7,903 3,365 3,896 0 5,704 15 Total loans and securities 387,058 389,678 387,808 393,017 388,593 384,521 384,343 390,983 16 Items in process of collection 6,450 11,677 6,268 5,388 8,200 4,197 8,452 4,007 17 Bank premises 1,158 1,161 1,171 1,171 1,170 1,150 1,158 1,171 Other assets 18 Denominated in foreign currencies3 19,706 19,713 19,721 19,729 19,737 19,985 19,705 19,561 19 All other4 11,131 11,344 9,306 9,585 9,693 10,333 10,760 9,538 20 Total assets 447,297 455,372 446,068 450,678 449,151 441,986 446,211 447,032 LIABILITIES 21 Federal Reserve notes 394,498 396,265 396,887 397,505 400,169 392,903 394,236 398,773 22 Total deposits 34,285 40,424 30,924 35,245 28,579 32,301 31,975 30,901 23 Depository institutions 21,716 34,013 26,241 29,811 22,660 24,740 20,407 26,685 24 U.S. Treasury—General account 11,967 5,877 4,079 4,906 5,381 7,021 11,042 3,757 25 Foreign—Official accounts 187 173 229 175 180 191 166 160 26 Other 414 361 376 353 357 348 360 300 27 Deferred credit items 6,275 5,904 5,545 5,123 7,622 4,069 7,441 4,210 28 Other liabilities and accrued dividends5 4,064 4,328 4,226 4,217 4,153 4,261 4,061 4,542 29 Total liabilities 439,122 446,921 437,583 442,091 440,523 433,534 437,713 438,426 CAPITAL ACCOUNTS 30 Capital paid in 4,023 4,020 4,050 4,100 4,100 4,037 4,023 4,154 31 Surplus 3,957 3,966 3,966 3,966 3,966 3,966 3,957 3,960 32 Other capital accounts 195 465 469 521 562 449 518 492 33 Total liabilities and capital accounts 447,297 455,372 446,068 450,678 449,151 441,986 446,211 447,032 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 549,259 551,297 553,043 550,963 553,973 550,496 555500,,666622 556,832 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 507,902 510,367 511,322 513,625 513,943 506,144 507,928 514,098 36 LESS: Held by Federal Reserve Banks 113,404 114,102 114,435 116,120 113,774 113,241 113,691 115,325 37 Federal Reserve notes, net 394,498 396,265 396,887 397,505 400,169 392,903 394,236 398,773 Collateral held against notes, net 38 Gold certificate account 11,052 11,051 11,051 11,051 11,051 11,053 11,052 11,051 39 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10.168 10,168 4f Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 373,278 375,046 375,668 376,286 378,950 371,682 373,017 377,554 42 Total collateral 394,498 396,265 396,887 397,505 400,169 392,903 394,236 398,773 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 May 1 May 8 May 15 May 22 May 29 Mar. 31 Apr. 30 May 31 1 Total loans 92 101 126 142 161 43 92 156 2 Within fifteen days' 36 37 52 135 148 36 59 75 3 Sixteen days to ninety days 56 64 74 7 12 7 33 80 4 Total U.S. Treasury securities 383,349 386,513 385,223 388,564 385,154 377,056 381,806 381,346 5 Within fifteen days' 21,349 20,117 19,563 23,838 20,249 8,963 15,945 2,926 6 Sixteen days to ninety days 87,527 89,053 84,416 86,962 92,031 99,039 91,464 98,950 7 Ninety-one days to one year 111,381 114,327 117,906 114,426 109,536 109,875 111,381 116,114 8 One year to five years 91,995 91,995 91,676 91,676 91,676 89,228 91,995 91,694 9 Five years to ten years 32,299 32,299 32,941 32,941 32,941 32,151 32,299 32,941 10 More than ten years 38,721 38,721 38,721 38,721 38,721 37,801 38,721 38,721 11 Total federal agency obligations 3,694 3,064 2,459 4,311 3,278 2,526 2,443 2,428 12 Within fifteen days' 1,250 620 31 2,215 1,222 280 154 372 13 Sixteen days to ninety days 685 841 845 513 473 569 685 473 14 Ninety-one days to one year 731 575 575 575 575 600 577 575 15 One year to five years 512 512 512 512 512 526 512 512 16 Five years to ten years 492 492 472 472 472 527 492 472 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 NonfinancialS tatistics • August 1996 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1995 1996 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 . Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 54.37 60.52 59.36 56.36 56.84 56.33 56.36 55.61 54.85 55.73 55.18 54.24 2 Nonborrowed reserves4 54.24 60.44 59.16 56.11 56.59 56.13 56.11 55.57 54.81 55.71 55.09 54.11 3 Nonborrowed reserves plus extended credit5 54.24 60.44 59.16 56.11 56.59 56.13 56.11 55.57 54.81 55.71 55.09 54.11 4 Required reserves 53.21 59.46 58.20 55.09 55.76 55.39 55.09 54.12 54.00 54.59 54.06 53.37 5 Monetary base6 351.24 386.88 418.72 435.01 432.74 433.21 435.01 435.17 433.67 436.86 436.60 436.95 Not seasonally adjusted 6 Total reserves7 56.06 62.37 61.13 58.02 56.56 56.57 58.02 56.95 53.80 54.97 56.00 53.30 7 Nonborrowed reserves 55.93 62.29 60.92 57.76 56.31 56.37 57.76 56.91 53.77 54.95 55.90r 53.17 8 Nonborrowed reserves plus extended credit3 55.93 62.29 60.92 57.76 56.31 56.37 57.76 56.91 53.77 54.95 55.90r 53.17 9 Required reserves8 54.90 61.31 59.96 56.74 55.48 55.63 56.74 55.47 52.95 53.84 54.88 52.43 10 Monetary base9 354.55 390.59 422.51 439.03 431.60 433.22 439.03 436.01 430.29 434.85 437.07r 436.08 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves'1 56.54 62.86 61.34 57.90 56.40 56.40 57.90 56.93 53.75 54.88 55.87 53.15 12 Nonborrowed reserves 56.42 62.78 61.13 57.64 56.15 56.19 57.64 56.90 53.72 54.86 55.78 53.02 13 Nonborrowed reserves plus extended credit5 56.42 62.78 61.13 57.64 56.15 56.19 57.64 56.90 53.72 54.86 55.78 53.02 14 Required reserves 55.39 61.80 60.17 56.62 55.32 55.45 56.62 55.45 52.90 53.75 54.75 52.27 15 Monetary base12 360.90 397.62 427.25 444.45 436.34 438.19 444.45 441.96 436.26 440.75 442.91 442.11 16 Excess reserves'3 1.16 1.06 1.17 1.28 1.08 .94 1.28 1.49 .85 1.14 1.12 .87 17 Borrowings from the Federal Reserve .12 .08 .21 .26 .25 .20 .26 .04 .04 .02 .09 .13 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 MEASURES1 Billions of dollars, averages of daily figures 1996 1992 1993 1994 1995 IItteemm Dec. Dec. Dec. Dec. Feb. Mar.r Apr. May Seasonally adjusted Measures2 1 Ml 1,024.4 1,128.6 1,148.7 1,124.9 1,117.3 1,126.6 1,123.7 1,117.5 2 M2 3,438.7 3,494.1 3,509.4 3,662.6r 3,693.9r 3,729.9 3,736. lr 3,731.1 3 M3 4,187.3 4,249.6 4,319.7 4,576.0r 4,642.9r 4,685.5 4,692.4r 4,705.9 4 L 5,075.8 5,164.5 5,303.7 5,685.5' 5,725.lr 5,784.5 5,806.1 n.a. 5 Debt 11,881.7 12,516.4 13,153.2 13,871.3 14,015.6r 14,066.2 14,122.6 n.a. Ml components 6 Currency3 292.9 322.4 354.9 373.2 373.3 375.2 375.9 377.0 7 Travelers checks4 8.1 7.9 8.5 8.9 8.9 8.9 8.9 8.7 8 Demand deposits' 339.1 384.3 382.4 389.8 397.4 407.1 406.3 409.7 9 Other checkable deposits6 384.2 414.0 402.9 353.0 337.8 335.4 332.6 322.1 Nontransaction components 10 In M27 2,414.3 2,365.4 2,360.7 2,537.7r 2,576.6r 2,603.3 2,612.4r 2,613.6 11 In M3 only8 748.6 755.6 810.3 913.4 949.0r 955.6 956.3r 974.7 Commercial hanks 12 Savings deposits, including MMDAs 754.1 785.0 751.9 775.0 804.1 821.0 827.0 829.8 13 Small time deposits9 509.3 470.4 505.4 578.5r 580.3r 578.1 576.4r 575.3 14 Large time deposits'0, " 286.6 272.3 298.7 342.4 346.2 354.1 356.6' 362.3 Thrift institutions 15 Savings deposits, including MMDAs 433.0 433.8 397.0 359.5 360.4 362.1 366.4 367.9 16 Small time deposits9 361.9 317.6 318.2 359.6r 357.r 354.5 354.0r 353.2 17 Large time deposits'0 67.1 61.5 64.8 75.0 76.1 75.5 75.6 75.0 Money market mutual funds 18 Retail 356.0 358.7 388.1 465.1 474.7 487.6 488.7 487.4 19 Institution-only 199.8 197.9 183.7 227.2 243.9 248.3 245.6 243.5 Repurchase agreements and Eurodollars 20 Repurchase agreements'2 128.1 157.5 180.8 177.6 186.2 184.1 182.9' 196.9 21 Eurodollars'2 66.9 66.3 82.3 91.2 96.4r 93.6 95.6' 96.9 Debt components 22 Federal debt 3,068.6 3,328.3 3,497.6 3,644.6 3,661.7r 3,696.0 3,705.2 n.a. 23 Nonfederal debt 8,813.1 9,188.1 9,655.6 10,226.7 10,353.9r 10,370.2 10,417.4 n.a. Not seasonally adjusted Measures2 24 Ml 1,046.0 1,153.7 1,174.2 1,150.7 1,103.6 1,115.9 1,130.0 1,104.3 25 M2 3,455.1 3,514.1 3,529.8 3,682.3r 3,674.4r 3,722.7 3,749.0' 3,716.6 26 M3 4,205.3 4,271.3 4,341.5 4,597. lr 4,624. lr 4,675.4 4,697.3' 4,690.8 5,103.1 5,194.2 5,333.2 5,715.0r 5,714.2r 5,785.3 5,811.7 n.a. 28 Debt 11,883.2 12,509.3 13,145.8 13,858.0 13,965.8r 14,023.9 14,052.9 n.a. MI components 29 Currency3 295.0 324.8 357.5 376.1 370.8 374.3 375.8 377.5 30 Travelers checks4 7.8 7.6 8.1 8.5 8.5 8.6 8.6 8.6 31 Demand deposits5 354.4 401.8 400.1 407.9 388.3 397.5 406.1 399.5 32 Other checkable deposits6 388.9 419.4 408.4 358.1 336.0 335.5 339.5 318.7 Nontransaction components 33 In M27 2,409.1 2,360.4 2,355.6 2,531.5r 2,570.8r 2,606.8 2,619.0' 2,612.3 34 In M3 only8 750.2 757.1 811.7 914.8 949.6r 952.7 948.3' 974.2 Commercial banks 35 Savings deposits, including MMDAs 752.9 784.3 751.6 775.0 798.9 819.0 826.0 827.8 36 Small time deposits9 507.8 468.2 502.5 574.5r 579.4r 579.3 578.3' 577.4 37 Large time deposits10, " 286.2 272.1 298.5 342.3 344.7 352.6 353.9' 364.6 Thrift institutions 38 Savings deposits, including MMDAs 432.4 433.4 396.9 359.5 358.1 361.2 365.9 367.0 39 Small time deposits9 360.9 316.1 316.4 357.1' 356.4r 355.3 355.2' 354.5 40 Large time deposits'0 67.0 61.5 64.8 75.0 75.8 75.2 75.0 75.5 Money market mutual funds 41 Retail 355.1 358.3 388.2 465.4 478.0 492.1 493.5 485.5 42 Institution-only 201.1 199.4 185.5 229.4 249.6 248.7 242.8 241.1 Repurchase agreements and Eurodollars 43 Repurchase agreements'2 127.2 156.6 179.6 176.1 183.5 182.3 182.3' 197.2 44 Eurodollars'2 68.7 67.6 83.4 91.9 96. lr 94.0 94.3' 95.7 Debt components 45 Federal debt 3,069.8 3,329.5 3,499.0 3,645.9 3,655.5r 3,698.1 3,697.6 n.a. 46 Nonfederal debt 8,813.4 9,179.8 9,646.8 10,212.1 10,310.3r 10,325.8 10,355.3 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic NonfinancialS tatistics • August 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 U.S. 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 M1. 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), (31 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 1995 1996r 1993 1994r Dec. Dec. Sept. Oct. Nov. Dec.r Jan. Feb. Mar. Apr. May Interest rates (annual effective yields)2 INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts 1.86 1.96 1.92 1.91 1.93 1.91 1.90 1.91 1.85 1.89 1.88 2 Savings deposits3 2.46 2.92 3.13r 3.11 3.13 3.10 3.01 2.98 2.91 2.91 2.89 Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.65 3.79 4.10 4.11 4.13 4.10 4.02 3.99 4.02 4.01 3.99 4 92 to 182 days 2.91 4.45 4.75 4.75 4.74 4.68 4.57 4.45 4.49 4.51 4.51 5 183 days to 1 year 3.13 5.12 5.13 5.15 5.11 5.02 4.91 4.79 4.83 4.86 4.89 6 More than 1 year to 2 Vi years 3.55 5.74 5.32 5.31 5.27 5.17 5.03 4.89 4.94 5.03 5.11 7 More than 2Vl years 4.28 6.30 5.59 5.56 5.49 5.40 5.26 5.10 5.19 5.28 5.36 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts 1.87 1.94 2.00 1.98 1.94 1.91 1.85 1.84 1.83 1.84 1.82 9 Savings deposits3 2.63 2.87 2.95 2.96 2.99 2.98 2.95 2.92 2.86 2.85 2.84 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 2.81 3.80 4.27 4.32 4.43 4.43 4.38 4.26 4.37 4.42 4.49 11 92 to 182 days 3.02 4.89 5.07 5.05 5.02 4.95 4.86 4.77 4.76 4.77 4.83 12 183 days to 1 year 3.31 5.52 5.35 5.31 5.28 5.18 5.06 4.91 4.89 4.91 4.96 13 More than 1 year to 2 x/i years 3.67 6.09 5.52 5.51 5.47 5.33 5.22 5.10 5.15 5.23 5.25 14 More than 2Vl years 4.62 6.42 5.73 5.68 5.64 5.46 5.34 5.24 5.24 5.32 5.38 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 305,237 304,901 253,568 258,175 257,098r 248,417 245,749 242,930 218,604 228,736 208,932 16 Savings deposits3 767,035 737,081 746,351 745,936r 753,139r 776,466 768,071 784,035 827,666 805,431 839,656 1/ Personal 598,276 580,449 585,762 585,896r 588,995 615,113 612,321 623,110 661,919 640,003 670,277 18 Nonpersonal 168,759 156,633 160,589 160,040r 164,144' 161,353 155,750 160,925 165,748 165,428 169,379 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 29,362 32,218 29,794 29,906r 31,093r 32,170 33,783 35,719 35,377 34,076 33,417 20 92 to 182 days 109,050 96,461 92,250 93,390r 95,513r 93,941 95,350 97,219 97,141 96,064 96,272 21 183 days to 1 year 145,386 163,282 189,663r 187,727r 184.7041" 183,834 184,046 184,095 186,158 190.045 193,043 22 More than 1 year to 2 x/i years 139,781 164,499 204,869 206,579 208,315r 208,601 212,394 210,493 208,915 208,277 207,849 23 More than 2 '/> years 180,461 192,632 201,006 199,47 lr 199,389r 199,002 199,254 198,922 198,980 197,797 196,558 24 IRA and Keogh plan deposits 144,011 144,092 150,298 150,101r 149,647r 150,067 150,366 149,965 150,496 150,586 150,089 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts 11,191 10,698 10,884 10,789 11,088 11,918 11,139 11,597 11,703 11,492 11,744 26 Savings deposits3 80,376 68,223 67,726 67,732 68,345 68,643 66,702 67,614 67,276 66,808 67,715 27 Personal 77,263 65,396 64,519 64,432 64,932 65,366 63,377 64,524 64,208 63,559 64.199 28 Nonpersonal 3,113 2,826 3,207 3,300 3,413 3,277 3,325 3,090 3,068 3,249 3,516 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 2,746 2,068 1,656 1,691 1,819 2,001 2,009 2,131 2,140 2,179 2,345 30 92 to 182 days 12,974 10,867 10,757 10,790 11,394 12,140 12,334 13,247 13,477 13,911 13,934 31 183 days to 1 year 17,469 17,484 23,654 24,006 24,833 25,686 26,304 26,863 26,534 27,265 28,079 32 More than 1 year to 2'/? years 16,589 16,964 26,558 26,678 27,149 27,482 26,582 26,945 25,934 25,684 25,422 33 More than l'/2 years 20,501 20,339 22,251 22,411 22,552 22,866 22,449 21,819 22,646 22,526 22,638 34 IRA and Keogh plan accounts 19,791 18,376 21,029 21,042 21,23 lr 21,408 20,827 20,845 20,615 20,553 20,543 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 • August 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 1199993322 Oct. Nov. Dec. Jan. Feb. Mar. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 334,784.1 369,029.1 397,649.3 413,927.0 409,460.9 397,538.3 430,522.2r 447,959.6r 422,702.6 2 Major New York City banks 171,224.3 191,168.8 201,161.4 210,336.6 204,484.0 203,977.5 229,379.9 238,537.8 224,066.4 3 Other banks 163,559.7 177,860.3 196,487.9 203,590.4 204,976.9 193,560.8 201,142.2' 209,421.7r 198,636.2 4 Other checkable deposits4 3,481.5 3,798.6 4,207.4 4,690.4 4,891.5 4,595.5 4,960.5r 5,034.7 5,024.1 5 Savings deposits (including MMDAs)5 3,497.4 3,766.3 4,507.8 5,328.6 5,679.4 5,703.6 6,025.9r 6,397.2r 6,340.6 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 785.9 817.4 874.1 907.5 905.5 852.7 917.1 950.8 881.0 7 Major New York City banks 4,198.1 4,481.5 4,867.3 5,269.7 5,222.3 5,069.7 5,368.0 5,852.3 5,608.2 8 Other banks 424.6 435.1 475.2 489.2 496.3 454.4 471.4 486.6 451.6 9 Other checkable deposits4 11.9 12.6 15.4 18.0 19.1 18.6 20.8 21.6 22.1 10 Savings deposits (including MMDAs)5 4.6 4.9 6.1 7.1 7.5 7.4 7.7 8.1 7.8 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 334,899.2 369,121.8 397,657.8 413,547.6 398,219.1 411,802.7 429,314.0r 414,903.0r 442,983.8 12 Major New York City banks 171,283.5 191,226.0 201.182.6 212,506.0 202,744.5 210,780.0 227,293.7 222,007.5 236,954.2 13 Other banks 163,615.7 177,895.7 196,475.3 201,041.7 195,474.6 201,022.7 202,020.3r 192,895.5r 206,029.6 14 Other checkable deposits4 3,481.7 3,795.6 4,202.6 4,565.4 4,566.6 4,784.8 5,385.9 4,638.6r 5,072.7 15 Savings deposits (including MMDAs)5 3,498.3 3,764.4 4,500.8 5,075.1 5,388.7 6,013.9 6,299.2r 5,790.4r 6,503.7 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 786.1 818.2 874.6 895.4 860.5 847.5 895.6 901.1 947.0 17 Major New York City banks 4,197.9 4,490.3 4,873.1 5,292.2 5,046.6 4,900.9 5,109.7 5,427.5 6,060.5 18 Other banks 424.8 435.3 475.4 476.7 462.5 453.9 464.5 459.8 480.6 19 Other checkable deposits4 11.9 12.6 15.3 17.7 17.8 19.0 22.0 19.9 22.2 20 Savings deposits (including MMDAs)5 4.6 4.9 6.1 6.8 7.1 7.8 8.1 7.3 8.0 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 1996r 1996 May Nov. Dec. Jan. Feb. Mar. Apr. May May 8 May 15 May 22 May 29 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,491.4' 3,593.1' 3,605.1' 3,631.6 3,642.4 3,633.5 3,649.4 3,653.8 3,655.2 3,650.6 3,661.7 3,648.2 2 Securities in bank credit 985.7r gsgxf 990.7' 990.1 995.8 979.7 978.6 985.5 982.8 988.7 986.7 985.4 3 U.S. government securities 710.7r 714.5 710.8 702.9 715.8 705.2 704.9 713.5 715.2 715.6 713.4 712.7 4 Other securities 275.0r 274.5r 279.8' 287.2 280.0 274.5 273.7 272.0 267.6 273.1 273.3 272.7 5 Loans and leases in bank credit2 . .. 2,505.7 2,604.1 2,614.5' 2,641.5 2,646.7 2,653.7 2,670.8 2,668.3 2,672.4 2,661.9 2,675.0 2,662.9 6 Commercial and industrial 687.8 713.6 716.6 722.5 725.5 723.1 728.5 732.7 731.5 734.5 734.6 730.6 7 Real estate 1,043.8 1,078.1 1,079.3 1,086.2 1,089.3 1,094.2 1,095.8 1,095.7 1,095.4 1,096.1 1,096.0 1,095.2 8 Revolving home equity 77.2 78.8 79.1 79.7 79.9 79.8 80.0 79.8 79.7 79.7 79.6 79.7 9 Other 966.6 999.3 1,000.2 1,006.6 1,009.4 1,014.3 1,015.8 1,015.9 1,015.8 1,016.4 1,016.3 1,015.5 10 Consumer 472.9 492.9 495.7 500.4 500.5 503.6 506.2 503.8 503.6 502.6 502.7 504.8 11 Security3 88.3 86.9 83.7 84.9 85.7 85.1 85.6 81.8 87.8 74.6 85.6 78.7 12 Other 213.0 232.5' 239.2 247.4 245.6 247.8 254.7 254.2 254.0 254.2 256.1 253.5 13 Interbank loans4 185.6 196.4 196.8 204.0 194.2 205.4 212.2 212.1 213.8 215.8 208.4 209.1 14 Cash assets5 210.5 216.2 223.7 233.1 219.1 215.7 221.6 218.6 223.1 221.6 222.0 209.6 15 Other assets6 223. lr 230.9' 239.6' 237.0 242.6 241.6 243.5 243.8 245.9 244.2 241.4 238.8 16 Total assets7 4,053.r 4,180.1r 4,208.7' 4,249.0 4,241.8 4,239.5 4,269.9 4,271.6 4^81.4 4,275.4 4,276.8 4,249.1 Liabilities 17 Deposits 2,570.6 2,642.1 2,659.2 2,687.3 2,681.0 2,701.5 2,717.4 2,716.7 2,709.5 2,737.3 2,714.6 2,703.0 18 Transaction 786.7 768.2 773.9 783.4 766.6 768.4 771.9 758.4 757.5 778.0 754.6 743.3 19 Nontransaction 1,784.0 1,873.9 1,885.3 1,903.9 1,914.4 1,933.1 1,945.5 1,958.2 1,952.0 1,959.2 1,960.1 1,959.7 20 Large time 391.6 423.3 421.3 421.7 425.8 428.3 432.5 439.2 434.6 438.4 439.6 443.4 21 Other 1,392.3 1,450.6 1,464.0 1,482.1 1,488.5 1,504.8 1,513.0 1,519.1 1,517.4 1,520.8 1,520.5 1,516.3 22 Borrowings 677.5 674.7 690.5' 705.3 691.4 687.2 707.7 707.1 726.1 704.8 702.2 699.6 23 From banks in the U.S 185.3 198.5 198.4 208.2 195.5 207.7 209.9 209.5 212.6 213.5 204.8 206.0 24 From nonbanks in the U.S 492.2 476.2 492.2 497.1 495.9 479.5 497.8 497.6 513.5 491.4 497.5 493.5 25 Net due to related foreign offices 241.1' 263.5' 262.6' 270.1 276.5 261.4 254.4 255.8 268.2 237.8 265.6 255.1 26 Other liabilities8 222.8r 228.4' 238.7' 231.1 234.4 225.6 233.6 222.8 221.4 227.3 219.2 218.2 27 Total liabilities 3,712.1r 3,808.6' 3,851.0" 3,893.8 3,8833 3,875.7 3,913.1 3,902-3 3,925.2 3,907.1 3,901.7 3,875.8 28 Residual (assets less liabilities)9 341.6r 371.5' 357.7' 355.2 358.5 363.8 356.8 369.3 356.1 368.3 375.1 373.2 Not seasonally adjusted Assets 29 Bank credit 3,489.8' 3,599.4' 3,612.9' 3,622.5 3,634.1 3,627.8 3,650.5 3,650.7 3,657.8 3,649.5 3,649.1 3,644.6 30 Securities in bank credit 991.4' mff 980.9' 977.9 990.9 984.2 983.9 989.9 992.6 992.6 987.6 988.0 31 U.S. government securities 712.2' 712.9 706.2 697.6 711.2 709.6 711.0 714.3 718.1 715.9 713.1 711.9 32 Other securities 279.2' 275.0' 274.7' 280.3 279.6 274.7 272.9 275.6 274.5 276.7 274.5 276.1 33 Loans and leases in bank credit2 . . . 2,498.5 2,611.5 2,632.0' 2,644.6 2,643.3 2,643.6 2,666.6 2,660.8 2,665.2 2,656.9 2,661.5 2,656.6 34 Commercial and industrial 692.7 711.9 714.7 719.6 723.6 727.0 734.4 738.2 739.0 739.9 738.9 735.2 35 Real estate 1,041.0 1,083.8 1,084.0 1,086.0 1,086.2 1,088.6 1,091.9 1,092.7 1,092.3 1,093.6 1,092.1 1,092.3 36 Revolving home equity 77.1 79.3 79.2 79.5 79.4 79.1 79.4 79.7 79.6 79.7 79.5 79.6 37 Other 963.9 1,004.5 1,004.9 1,006.5 1,006.8 1,009.5 1,012.5 1,013.0 1,012.8 1,013.9 1,012.6 1,012.7 38 Consumer 471.3 493.7 501.5 505.0 501.1 499.3 503.4 502.1 501.7 501.2 501.2 503.2 39 Security3 83.8 88.3' 87.6 86.8 88.7 85.0 86.4 77.7 83.2 71.5 80.0 74.6 40 Other 209.7 233.8 244.C 247.3 243.7 243.7 250.4 250.2 249.0 250.6 249.3 251.4 41 Interbank loans4 179.9 199.6 209.2 213.0 196.1 203.2 209.2 205.5 207.4 208.5 198.5 204.3 42 Cash assets5 208.4 220.3 238.4 240.6 219.9 208.5 216.1 216.0 214.4 217.0 206.3 226.2 43 Other assets6 223.7' 230.4' 239.3' 237.7 242.0 240.1 241.0 244.8 249.6 245.0 237.2 242.2 44 Total assets7 4,045.0r 4,193.1r 4,243.1' 4,257.2 4,235.5 4,222.8 4,260.2 4,260.2 4,272.4 4,263.2 4,234.5 4,260.7 Liabilities 45 Deposits 2,560.2 2,658.0 2,690.4 2,694.0 2,672.0 2,687.8 2,714.3 2,706.3 2,697.5 2,725.3 2,678.4 2,713.0 46 Transaction 774.4 781.7 809.2' 795.1 759.5 753.6 770.9 746.0 743.3 765.2 717.8 750.5 47 Nontransaction 1,785.8 1,876.3 1,881.2 1,898.9 1,912.6 1,934.2 1,943.4 1,960.3 1,954.2 1,960.1 1,960.5 1,962.4 48 Large time 396.5 424.3 420.3 418.8 426.4 429.8 432.4 444.6 439.6 443.7 446.2 449.1 49 Other 1,389.3 1,452.0 1,461.0 1,480.1 1,486.1 1,504.4 1,511.0 1,515.7 1,514.7 1,516.4 1,514.3 1,513.4 50 Borrowings 676.2 683.7 695.2 692.2 685.4 678.7 693.3 704.5 718.7 700.6 699.4 698.9 51 From banks in the U.S 183.0 200.6' 211.4' 215.2 197.2 202.7 208.6 206.6 208.8 209.6 199.6 205.6 52 From nonbanks in the U.S 493.2 483.1 483.8' 477.0 488.2 476.0 484.7 497.9 509.9 491.1 499.8 493.3 53 Net due to related foreign offices 244.3' 262.6' 263.8' 277.2 278.2 262.1 254.7 258.3 263.6 244.0 271.3 260.6 54 Other liabilities8 225.1' 230.4' 233.8' 232.9 234.8 227.1 229.9 225.4 226.0 229.9 219.6 221.6 55 Total liabilities 3,705.8' 3,834.7' 3,883.1r 3,896.4 3,870.5 3,855.7 3,892.3 3,894.5 3,905.7 3,899.8 3,868.7 3,894.1 56 Residual (assets less liabilities)' 339.2 358.4 ma 360.9 365.0 367.1 368.0 365.7 366.6 363.4 365.7 366.5 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic NonfinancialS tatistics • August 1996 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1—Continued Billions of dollars Monthly averages Wednesday figures Account 1995 1995 1996r 1996 May Nov. Dec. Jan. Feb. Mar. Apr. May May 8 May 15 May 22 May 29 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 3,079.3 3,162.6 3,176.4 3,197.8 3,196.3 3,197.6 3,209.3 3,211.7 3,215.2 3,213.4 3,213.4 3,206.3 58 Securities in bank credit 858.3r 854.5 855.0 854.6 853.3 843.8 842.2 846.0 846.4 850.1 845.5 844.1 59 U.S. government securities 645.5r 647.4 643.9 640.1 643.3 635.5 635.0 637.4 639.5 640.1 636.5 635.8 60 Other securities 2X2.1' 207.0 211.1 214.5 210.0 208.3 207.1 208.6 207.0 210.0 209.0 208.3 61 Loans and leases in bank credit2 2,221.1 2,308.1 2,321.4 2.343.1 2,343.0 2,353.8 2,367.1 2,365.8 2,368.8 2,363.3 2,367.9 2,362.2 62 Commercial and industrial 515.4 534.9 535.2 540.1 540.5 540.6 544.8 549.0 549.0 550.4 549.5 547.6 63 Real estate 1,005.3 1,041.1 1,043.0 1,051.0 1,055.0 1,060.9 1,062.6 1,062.6 1,062.5 1,063.2 1,062.5 1,062.1 64 Revolving home equity 77.2 78.8 79.1 79.6 79.8 79.8 80.0 79.8 79.7 79.7 79.6 79.7 65 Other 928.1 962.2 963.9 971.3 975.2 981.1 982.6 982.9 982.8 983.5 982.9 982.4 66 Consumer 472.9 492.9 495.7 500.4 500.5 503.6 506.2 503.8 503.6 502.6 502.7 504.8 67 Security3 53.4 53.5 56.2 55.6 52.3 51.5 53.2 50.8 54.4 47.6 53.0 48.6 68 Other 174.1 185.7 191.2r 196.1 194.7 197.2 200.4 199.5 199.2 199.6 200.2 199.0 69 Interbank loans4 161.7 169.1 173.7 182.2 173.5 184.6 191.2 190.8 194.3 198.8 188.3 181.2 70 Cash assets5 183.0 186.2 193.6 202.0 189.8 188.3 195.5 192.5 196.7 196.1 195.4 183.4 71 Other assets6 169.8 177.7 184.4 182.6 186.0 186.6 188.6 188.4 192.0 187.5 185.3 184.1 72 Total assets7 3,537.1 3,639.1 3,671.7 3,707.7 3,689.1 3,700.5 3,727.7 3,726.8 3,741.6 3,739.2 3,725.8 3,6983 Liabilities 73 Deposits 2,411.4 2,473.6 2,491.9r 2,523.4 2,516.2 2,533.6 2,547.9 2,544.0 2,539.9 2,565.1 2.542.2 2,526.9 74 Transaction 777.1 758.3 763.4 772.7 756.0 758.6 761.4 747.5 746.4 766.9 743.7 732.5 75 Nontransaction 1,634.3 1,715.3 1,728.4 1,750.7 1,760.2 1,775.0 1,786.5 1,796.6 1,793.5 1,798.2 1,798.5 1,794.4 76 Large time 246.0 267.7 270.1 272.1 273.9 272.5 274.8 278.6 277.3 278.9 279.2 278.9 77 Other 1,388.3 1,447.6 1,458.3 1,478.6 1,486.4 1,502.5 1,511.7 1,518.0 1,516.2 1,519.3 1,519.3 1,515.6 78 Borrowings 560.1 565.7 577.5r 591.0 573.7 575.4 588.3 582.1 602.4 577.2 575.3 577.4 79 From banks in the U.S 163.2 178.7 179.9r 186.7 176.0 187.2 186.7 186.0 191.1 185.0 181.8 186.1 80 From nonbanks in the U.S 396.9 387.0 397.6 404.3 397.7 388.2 401.6 396.1 411.4 392.2 393.5 391.3 81 Net due to related foreign offices .... 86.3 89.6 91.0 93.0 90.5 81.2 84.6 87.9 95.8 83.7 93.7 82.3 82 Other liabilities8 143.8 148.1 155.3r 153.5 155.7 149.8 157.9 150.5 152.0 153.7 147.5 144.3 83 Total liabilities 331.6 3,277.0 3,315.7 3,360.9 3,336.0 3,339.9 3378.6 3,364.6 3390.2 3379.7 3358.7 3330.9 84 Residual (assets less liabilities)9 335.5 362.1 356.0 346.8 353.1 360.6 349.1 362.1 351.4 359.4 367.1 367.4 Not seasonally adjusted Assets 85 Bank credit 3,080.4 3,172.3 3.182.4 3,186.1 3,188.3 3,190.5 3,212.1 3,212.2 3,219.0 3,214.9 3,207.6 3,206.4 86 Securities in bank credit 862.1 855.3 848.5 843.6 849.4 847.2 847.5 849.3 852.5 853.1 846.5 846.3 87 U.S. government securities 647.6r 646.6 640.2' 632.9 639.3 638.7 640.8 639.0 642.0 641.7 637.6 636.4 88 Other securities 214.5r 208.8 208.4 210.7 210.2 208.5 206.6 210.3 210.5 211.4 208.9 210.0 89 Loans and leases in bank credit2 2,218.3 2,317.0 2,333.9 2,342.5 2,338.9 2,343.3 2,364.7 2,362.9 2,366.6 2,361.8 2,361.0 2,360.1 90 Commercial and industrial 520.4 533.9 533.2 537.0 539.7 543.7 550.7 554.5 556.3 556.0 554.2 552.2 91 Real estate 1,002.7 1,046.5 1,047.7 1,050.8 1,051.7 1,055.2 1,059.1 1,059.7 1,059.4 1,060.7 1,058.9 1,059.5 92 Revolving home equity 77.1 79.3 79.2 79.5 79.4 79.1 79.4 79.7 79.5 79.6 79.5 79.6 93 Other 925.6 967.3 968.6 971.3 972.4 976.1 979.7 980.1 979.8 981.1 979.4 979.9 94 Consumer 471.3 493.7 501.5 505.0 501.1 499.3 503.4 502.1 501.7 501.2 501.2 503.2 95 Security3 52.1 55.4 56.9 54.0 53.3 51.6 54.1 49.6 53.1 46.9 50.9 47.2 96 Other 171.9 187.4 194.5 195.7 193.0 193.5 197.3 196.9 196.1 196.9 195.8 198.0 97 Interbank loans4 155.9 173.2 184.7 189.9 177.2 183.2 189.0 184.0 188.1 191.2 177.5 176.0 98 Cash assets5 181.5 190.7 208.5 209.8 191.7 181.5 190.6 190.2 188.7 192.0 180.4 200.0 99 Other assets6 169.8 176.3 183.7 183.5 184.9 185.9 187.8 188.6 194.2 187.5 181.1 186.6 100 Total assets7 3,530.7 3,655.8 3,702.6 3,712.8 3,685.5 3,6843 3,723.0 3,7183 3,733.2 3,728.9 3,689.9 3,712.5 Liabilities 101 Deposits 2,399.3 2,488.5 2,522.1 2,529.2 2.507.5 2,519.5 2,547.1 2,532.3 2,527.5 2,552.5 2,504.2 2,534.2 102 Transaction 765.4 771.8 798.3 784.3 748.8 743.9 760.9 735.8 733.1 754.9 707.8 740.0 103 Nontransaction 1,634.0 1,716.8 1,723.8 1,744.9 1,758.7 1,775.5 1,786.2 1,796.5 1,794.5 1,797.6 1,796.4 1,794.2 104 Large time 248.7 267.4 265.8 269.4 275.3 273.0 276.2 281.8 280.8 282.1 283.0 281.8 105 Other 1.385.2 1,449.3 1,458.1 1,475.5 1,483.4 1,502.6 1,510.0 1,514.7 1,513.7 1.515.5 1,513.4 1,512.4 106 Borrowings 560.6 576.8 584.0' 581.7 572.5 567.5 573.0 581.3 593.2 576.5 576.9 579.3 107 From banks in the U.S 162.3 181.2 191.8' 193.7 178.5 182.1 186.3 184.9 188.4 183.8 179.8 186.1 108 From nonbanks in the U.S 398.4 395.6 392.2 388.0 394.0 385.5 386.7 396.4 404.8 392.8 397.1 393.2 109 Net due to related foreign offices .... 91.8 88.4 89.3 92.9 92.3 84.5 85.0 93.2 97.6 87.7 101.5 91.3 110 Other liabilities8 145.0 149.8r 153.3 154.2 154.1 151.6 156.0 152.0 154.2 154.8 147.6 147.1 111 Total liabilities 3,196.7 3303.4 3348.8 3358.0 3326.4 3323.1 3361.0 3358.7 3372.6 3371.5 3330.2 3352.0 112 Residual (assets less liabilities)9 334.0 352.4 353.8 354.8 359.1 361.2 361.9 359.6 360.6 357.4 359.7 360.5 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 Apr. 3 Apr. 10 Apr. 17 Apr. 24 May 1 May 8 May 15 May 22 May 29 ASSETS 1 Cash and balances due from depository institutions 113,267 113,019 117,100 127,447 117,760 118.673 119,831 111,182 123,090 2 U.S. Treasury and government securities 282.446 286,488 283,560 281,055 281,287 283.773 284,139 280,103 279,703 3 Trading account 22,237 24,467 21,686 19,411 19,002 21,981 23,863 22,017 22.965 4 Investment account 260.209 262,021 261,874 261,644 262,285 261,792 260,276 258,086 256,737 5 Mortgage-backed securities' 113,268 112,767 113,273 114,323 116,027 115,626 116,562 116,001 115,604 All others, by maturity 6 One year or less 36,039 37.568 36,182 35,363 35,950 35,602 33,392 32,722 33,337 7 One year through five vears 61.755 62,575 63,577 63,498 62,094 62,703 62,682 61,815 60,835 8 More than five vears 49,147 49,112 48,843 48,460 48,215 47,860 47,641 47,547 46,961 9 Other securities 118.950r 119,879' 118,988' 119,007' 123,995 123.802 124,607 122,294 123,354 in Trading account 1,840 1,911 1,542 1,641 2,014 1,830 2.481 1,123 1,237 11 Investment account 64,181 63,792 63,425 63,411 63,385 63,387 63,557 63,397 63,411 12 State and local government, bv maturity 18,978 18,955 19,019 19,065 18,931 18,800 18,789 18,815 18,829 13 One year or less 4,222 4,220 4,205 4,219 4,074 4,037 4,016 4,032 4,019 14 More than one year 14,756 14.735 14,814 14,847 14,857 14,762 14,773 14,784 14,811 15 Other bonds, corporate stocks, and securities 45,203 44.838 44,406 44,346 44,454 44,588 44,768 44,581 44,582 16 Other trading account assets 52,929 54,176' 54,021 53.955' 58,596 58,584 58,570 57,775 58,706 17 Federal funds sold" 111,299 116,084 114,112 118.498 125,734 121,656 119,912 112,698 106,695 18 To commercial banks in the United States 72.837 81,396 75,435 79.263 87,062 83,777 87,610 78,385 74,940 19 To nonbank brokers and dealers in securities 32,078 28,716 33,823 35.032 34,525 33,468 26,860 28,966 26,801 20 To others1 6.384 5,973 4,854 4.203 4,146 4,412 5,443 5,348 4,953 21 Other loans and leases, gross l,290.073r 1.293,902' 1,296,727' 1,297.023' 1.302,723 1,297,559 1,295.867 1,293,845 1,296,182 22 Commercial and industrial 356.920r 357.048' 359,959' 359.721' 363,620 361,247 360,797 359,063 356,880 23 Bankers acceptances and commercial paper 1.618 1,603 1,458 1.431 1,501 1,489 1,432 1,373 1,418 24 All other 355,302' 355,446' 358.501' 358.289' 362,119 359,758 359,365 357,690 355.462 25 U.S. addressees 352.601' 352,765' 355,762' 355.551' 359,354 356,983 356,543 354,877 352,687 26 Non-U.S. addressees 2,702 2,681 2,739 2,738 2,765 2,775 2,822 2,812 2,775 27 Real estate loans 506,887 508,717 508,812 507,879 505.936 506,170 505,496 503,691 504.185 28 Revolving, home equity 47.014 47.033 47,967 48,191 48,776 48,095 48,102 47,996 48,046 29 All other 459,873 461.684 460,845 459.688 457,161 458,075 457,393 455,695 456,139 30 To individuals for personal expenditures 247,995' 248.359' 249,404' 249,929' 250,460 250,763 249,981 250,345 251.739 31 To depository and financial institutions 73.287' 74,462' 73,059' 73,539 73,852 74,151 72,666 71,717 74,426 32 Commercial banks in the United States 40,666' 41,144' 40,950' 41,242 42,580 42,332 42,673 41.619 43,517 33 Banks in foreign countries 3,033 3,900 3,021 3,510 4.104 3,813 2,877 3,532 3,780 34 Nonbank depository and other financial institutions 29,588 29,418 29,088 28.787 27,168 28,006 27,116 26,566 27,129 35 For purchasing and carrying securities 14,187 14.894 15.122 15,795 15,864 14,031 14,517 16,614 15,015 36 To finance agricultural production 6,518 6,575 6,587 6,645 6,697 6,762 6,814 6,902 6,913 37 To states and political subdivisions 10,470' 10,407' 10,415' 10,317 10,188 10,260 10,359 10,507 10,461 38 To foreign governments and official institutions 1.123 1.323 1,237 1,095 1,124 1,080 1,117 1,096 1,086 39 All other loans 27,918 26,697 26,563 26,397 29,080 26,628 27,507 27,202 28,597 40 Lease-financing receivables 44,767 45,420 45,569 45,706 45,903 46,467 46,614 46,707 46,880 41 LESS: Unearned income 1.764 1.812 1,813 1,808 1,805 1.869 1,877 1,880 1,865 42 Loan and lease reserve" 33,250 33,062 33,049 32.968 33,117 33,228 33,181 33,087 33,033 43 Other loans and leases, net 1,255,059' 1,259,027' 1,261.866' 1,262,246' 1,267.801 1,262.462 1,260,809 1,258,878 1,261,284 44 All other assets 149,526' 148,647' 148,091' 141,600' 147,023 148,727 150,537 143,923 143,349 45 Total assets 2,030,547r 2,043,145r 2,043,717r 2,049,854r 2,063,598 2,059,092 2,059,836 2,029,078 2,037,475 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic NonfinancialS tatistics • August 1996 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1996 AAccccoouunntt Apr. 3 Apr. 10 Apr. 17 Apr. 24 May 1 May 8 May 15 May 22 May 29 LIABILITIES 46 Deposits 1,236,948R 1,232,452' 1,236,517' 1,212,132 1,231,923 1,215,696 1,236,930 1,202,246 1,221,291 47 Demand deposits 315,277R 311,202' 316,236' 302,621 322,658 301,096 323,033 294,104 315,572 48 Individuals, partnerships, and corporations 270,698 267,244 269,122 254,789 274,400 258,201 275,727 252,379 267,838 49 Other holders 44,579R 43,958' 47,113' 47,832 48,258 42,896 47,306 41,725 47,734 50 States and political subdivisions 8,128 8,690 8,123 8,820 9,802 8,264 8,914 8,303 8,535 51 U.S. government 2,258 2,493 5,178 6,535 3,136 1,731 3,075 1,739 1,470 52 Depository institutions in the United States 21,446R 19,894' 20,939' 19,640 21,798 20,457 22,383 19,637 24,101 53 Banks in foreign countries 4,977 5,403 4,567 5,279 5,042 5,293 5,443 5,004 5,546 54 Foreign governments and official institutions 621 665 640 578 663 594 691 590 776 55 Certified and officers' checks 7,149 6,813 7,666 6,979 7,818 6,557 6,800 6,452 7,306 56 Transaction balances other than demand deposits4 86,892 86,267 89,990 82,854 80,823 80,250 76,766 71,437 72,032 57 Nontransaction balances 834,779 834,984 830,291 826,658 828,442 834,349 837,131 836,705 833,687 58 Individuals, partnerships, and corporations 807,932' 807,935' 803,515' 797,958' 799,310 804,613 807,569 806,910 804,219 59 Other holders 26,847' 27,048' 26,775' 28,699' 29,132 29,736 29,562 29,795 29,468 60 States and political subdivisions 22,981 23,073 22,367 22,325 22,872 23,441 23,261 23,478 23,225 61 U.S. government 2.037' 2,265' 2,558' 4,032' 4,014 4,019 4,042 4,040 4,040 62 Depository institutions in the United States 1,524' 1,406' 1,537' 2,039' 1,941 1,966 1,948 1,958 1,884 63 Foreign governments, official institutions, and banks .. 305 305 312 303 306 310 311 318 319 64 Liabilities for borrowed money5 392,692' 406,785' 398,615' 416,631' 411,525 421,002 406,865 405,250 406,709 65 Borrowings from Federal Reserve Banks 0 0 0 0 0 0 0 0 0 66 Treasury tax and loan notes 11,355 5,921 24,794 26,456 24,225 14,238 3,648 2,782 3,355 67 Other liabilities for borrowed money6 381,337' 400,864' 373,821' 390,175' 387,300 406,764 403,217 402,468 403,354 68 Other liabilities (including subordinated notes and debentures) .. . 207,175' 208,103' 212,936' 224,582' 225,242 227,195 220,868 225,742 213,297 69 Total liabilities l,836,815r l,847,340r l,848,068r l,853,345r 1,868,689 1,863,893 1,864,663 1,833,238 1,841,296 70 Residual (total assets less total liabilities)7 193,732' 195.805' 195,649' 196,509 194,909 195,199 195,173 195,840 196,178 MEMO 71 Total loans and leases, gross, adjusted, plus securities8 1,689,264' 1,693,813' 1,697,002' 1,695,077' 1,704,096 1,700,680 1,694,243 1,688,936 1,687,476 72 Time deposits in amounts of $100,000 or more 119,407 118,241 119,119 122,439 121,537 123,988 125,319 125,591 124,714 73 Loans sold outright to affiliates9 1,116 1,106 1,098 1,088 1,080 1,056 1,048 1,039 1,032 74 Commercial and industrial 268 268 268 268 268 268 268 268 268 75 Other 848 838 829 820 812 789 780 771 765 76 Foreign branch credit extended to U.S. residents10 26,901 27,107 27,861 27,837 27,527 27,113 28,057 27,880 28,262 77 Net owed to related institutions abroad 71,204' 67,716' 73,346' 95,160' 91,145 93,087 83,508 97,840 87,464 1. Includes certificates of participation, issued or guaranteed by agencies of the U.S. 8. Excludes loans to and federal funds transactions with commercial banks in the government, in pools of residential mortgages. United States. 2. Includes securities purchased under agreements to resell. 9. Affiliates include a bank's own foreign branches, nonconsolidated nonbank affiliates of 3. Includes allocated transfer risk reserve. the bank, the bank's holding company (if not a bank), and nonconsolidated nonbank 4. Includes negotiable order of withdrawal (NOWs) and automatic transfer service (ATS) subsidiaries of the holding company. accounts, and telephone and preauthorized transfers of savings deposits. 10. Credit extended by foreign branches of domestically chartered weekly reporting banks 5. Includes borrowings only from other than directly related institutions. to nonbank U.S. residents. Consists mainly of commercial and industrial loans, but includes 6. Includes federal funds purchased and securities sold under agreements to repurchase. an unknown amount of credit extended to other than nonfinancial businesses. 7. This balancing item is not intended as a measure of equity capital for use in capitaladequacy analysis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.28 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS Assets and Liabilities Millions of dollars, Wednesday figures 1996 AAccccoouunntt Apr. 3 Apr. 10 Apr. 17 Apr. 24 May 1 May 8 May 15 May 22 May 29 ASSETS 1 Cash and balances due from depository institutions 16,273 15,855 15,506 15,572 15,133 15,613 15,215 15,727 15,991 2 U.S. Treasury and government agency securities 46,342r 46,785r 44,960r 44,910r 47,839 49,834 48,825 49,549 49,983 3 Other securities 42,660r 43,614r 44,864r 45,378r 44,309 42,792 43,770 43,888 44,567 4 Federal funds sold' 24,361 26,693 31,479 28,065 28,785 26,813 21,056 25,291 27,644 5 To commercial banks in the United States 5,248 7,100 6,907 8,634 7,079 6,889 5,720 7,242 10,570 6 To others2 19,113 19,593 24,573 19,431 21,706 19,923 15,337 18,049 17,075 7 Other loans and leases, gross 185,40lr 184,827r 183,795r 185,495r 185,595 183,506 185,905 187,250 187,162 Commercial and industrial 122,743r 121,945r 121,761r 121,027r 119,407 118,350 119,599 119,906 119,734 9 Bankers acceptances and commercial paper . 5,163 5,429 5,154 5,162 4,735 4,792 4,787 4,756 4,912 10 All other 117,580r 116,516r 116,607r 115,865r 114,671 113,558 114,812 115,150 114,823 11 U.S. addressees 11 l,364r 110,362r 110,229r 109,674r 108,344 107,269 108,613 108,953 108.625 12 Non-U.S. addressees 6,216 6,154 6,378 6,191 6,327 6,288 6,199 6,197 6,197 13 Loans secured by real estate 20,207r 20,226r 20,224r 20,380r 20,322 20,374 20,389 20,612 20.533 14 Loans to depository and financial institutions 30,564 31,001r 30,110 31,676 33,165 33,279 33,939 34,024 34,482 15 Commercial banks in the United States 2,376 2,548 2,244 2,560 2,138 2,171 2,466 2,627 2,895 16 Banks in foreign countries 3,061 3,110 3,051 3,120 3,271 3,089 3,328 3,008 3,021 17 Nonbank financial institutions 25,127 25,343r 24,815 25,997 27,755 28,018 28,145 28,389 28,567 18 For purchasing and carrying securities 4,937 4,952 4,862 5,134 5,668 4,517 4,608 5,325 5,036 19 To foreign governments and official institutions 621 582 689 605 575 585 584 601 596 20 All other 4,372 4,228 4,247 4,610 4,462 4,423 4,687 4,685 4,684 21 Other assets (claims on nonrelated parties) 37,119r 37,752r 37,413r 37,080r 38,649 39,085 40,867 39,636 39,469 22 Total assets3 384,801r 387,305r 393,819r 392,324r 395,636 393,997 394,132 397,039 401,131 LIABILITIES 23 Deposits or credit balances owed to other than directly related institutions 105,656 101,344 105,173 108,433 108,436 108,354 109,334 111,375 112,528 24 Demand deposits4 3,996 3,936 4,036 4,216 4,202 4,253 4,203 4,104 4,355 25 Individuals, partnerships, and corporations .... 3,119 3,217 3,311 3,481 3,481 3,422 3,550 3,510 3,573 26 Other 877 719 725 735 721 831 652 594 783 27 Nontransaction accounts 101,660 97,408 101,137 104,217 104,234 104,100 105,131 107,271 108,172 28 Individuals, partnerships, and corporations .... 72,501 69,256 72,258 74,789 75,123 74,808 77,091 79,368 79,222 29 Other 29,159 28,153 28,879 29,428 29,110 29,293 28,040 27,903 28,951 30 Borrowings from other than directly related institutions 74,049 76,140 82,875 75,963 88,351 85,024 83,075 82,707 79,485 31 Federal funds purchased' 47,698 45,281 52,877 44,693 55,066 50,405 49,206 46,632 45,657 32 From commercial banks in the United States . . 12,094 9,753 12,657 8,762 16,175 10,602 13,804 8,888 8,760 33 From others 35,604 35,528 40,220 35,931 38,890 39,804 35,402 37,744 36,897 34 Other liabilities for borrowed money 26,351 30,859 29,998 31,270 33,285 34,619 33,869 36,075 33,828 35 To commercial banks in the United States 4,357 4,251 4,328 4,543 4,068 4,221 4,201 4,472 4,100 36 To others 21,994 26,608 25,670 26,727 29,218 30,398 29,667 31,604 29,728 37 Other liabilities to nonrelated parties 59,469r 62,373r 62,623r 60,354r 60,558 60,368 62,440 60,571 61,855 38 Total liabilities6 384,801r 387,305r 393,819r 392,324r 395,636 393,997 394,132 397,039 401,131 MEMO 39 Total loans (gross) and securities, adjusted7 291,141r 292,272r 295,949r 292,655r 297,312 293,884 291,371 296,109 295,893 40 Net owed to related institutions abroad 112,983r 115,670r 107,347r 111,749r 102,966 103,897 100,790 106,688 110,949 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 NonfinancialS tatistics • August 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 Nov. Dec. Jan. Feb. Mar. Apr. Commercial paper (seasonally adjusted unless noted otherwise) 11 AAllll iissssuueerrss 528,832 545,619 555,075 595,382 674,927 669,661 674,927 685,797 687,669 695,201 710,749 FFiinnaanncciiaall ccoommppaanniieess'' 22 DDeeaalleerr--ppllaacceedd ppaappeerr22,, ttoottaall 212,999 226,456 218,947 223,038 275,814 276,222 275,814 288,368 293,313 292,533 303,567 33 DDiirreeccttllyy ppllaacceedd ppaappeerr33,, ttoottaall 182,463 171,605 180,389 207,701 210,853 213,578 210,853 208,166 208,046 208,880 211,833 44 NNoonnffiinnaanncciiaall ccoommppaanniieess44 133,370 147,558 155,739 164,643 188,260 179,861 188,260 189,264 186,310 193,788 195,349 Bankers dollar acceptances (not seasonally adjusted)" 5 Total 43,770 38,194 32,348 29,835 29,242 By holder 6 Accepting banks 11,017 10,555 12,421 11,783 7 Own bills 9,347 9,097 10,707 10,462 8 Bills bought from other banks 1,670 1,458 1.714 1,321 Federal Reserve Banks6 9 Foreign correspondents 1,739 1,276 725 410 10 Others 31,014 26,364 19,202 17.642 By basis 11 Imports into United States 12,843 12,209 10,217 10,062 12 Exports from United States 10,351 8,096 7,293 6,355 13 All other 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 te a ge Period Av r e a r te a ge Period Av r e a r te a 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 8.83 Mar 6.06 Mar. 9.00 Apr. 19 6.75 Apr. 6.45 Apr 9.00 May 17 7.25 1993—Jan 6.00 May 6.99 May 9.00 Aug. 16 7.75 Feb 6.00 June 7.25 June 9.00 Nov. 15 8.50 Mar 6.00 July 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 Oci 8.75 Dec 20 88..5500 July 6.00 8.15 8.75 Aug 6.00 Dec 8.50 Dec 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 June 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 Feb. Mar. Apr. May May 3 May 10 May 17 May 24 May 31 MONEY MARKET INSTRUMENTS 1 Federal funds ''2'3 3.02 4.21 5.83 5.22 5.31 5.22 5.24 5.30 5.22 5.26 5.22 5.19 2 Discount window borrowing"'4 3.00 3.60 5.21 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Commercial paper3'^b 3 1-month 3.17 4.43 5.93 5.29 5.39 5.40 5.38 5.40 5.40 5.38 5.36 5.38 4 3-month 3.22 4.66 5.93 5.15 5.31 5.39 5.39 5.40 5.40 5.38 5.37 5.38 5 6-month 3.30 4.93 5.93 4.99 5.26 5.38 5.42 5.41 5.44 5.40 5.40 5.41 Finance paper, directly placed3'^'1 6 1-month 3.12 4.33 5.81 5.20 5.29 5.31 5.29 5.29 5.31 5.28 5.28 5.27 7 3-month 3.16 4.53 5.78 5.00 5.18 5.28 5.29 5.29 5.29 5.28 5.27 5.28 8 6-month 3.15 4.56 5.68 4.77 5.04 5.20 5.23 5.21 5.24 5.23 5.23 5.24 Bankers acceptances3'5'8 9 3-month 3.13 4.56 5.81 5.07 5.21 5.28 5.29 5.29 5.30 5.28 5.27 5.30 10 6-month 3.21 4.83 5.80 4.91 5.17 5.28 5.31 5.31 5.33 5.30 5.29 5.33 Certificates of deposit, secondary market3'9 II 1-month 3.11 4.38 5.87 5.23 5.31 5.34 5.32 5.33 5.33 5.31 5.31 5.31 12 3-month 3.17 4.63 5.92 5.15 5.29 5.36 5.36 5.36 5.37 5.36 5.35 5.36 13 6-month 3.28 4.96 5.98 5.03 5.30 5.42 5.47 5.46 5.49 5.45 5.45 5.47 14 Eurodollar deposits, 3-month310 3.18 4.63 5.93 5.14 5.28 5.36 5.36 5.36 5.38 5.36 5.34 5.35 U.S. Treasury bills Secondary market3'5 15 3-month 3.00 4.25 5.49 4.83 4.96 4.95 5.02 5.00 5.00 5.01 5.04 5.04 16 6-month 3.12 4.64 5.56 4.77 4.96 5.06 5.12 5.10 5.12 5.11 5.12 5.14 17 1-year 3.29 5.02 5.60 4.69 5.06 5.23 5.33 5.33 5.35 5.28 5.27 5.39 Auction average3'5'" 18 3-month 3.02 4.29 5.51 4.87 4.96 4.99 5.02 5.00 5.02 5.02 5.03 5.03 19 6-month 3.14 4.66 5.59 4.79 4.96 5.08 5.12 5.08 5.14 5.14 5.11 5.14 20 1-year 3.33 5.02 5.69 4.64 4.98 5.17 5.31 5.30 n.a. n.a. n.a. 5.32 U.S. TREASURY NOTES AND BONDS Constant maturities'' 21 1-year 3.43 5.32 5.94 4.94 5.34 5.54 5.64 5.63 5.67 5.59 5.59 5.70 22 2-year 4.05 5.94 6.15 5.03 5.66 5.96 6.10 6.08 6.14 6.04 6.03 6.17 23 3-year 4.44 6.27 6.25 5.14 5.79 6.11 6.27 6.24 6.33 6.21 6.20 6.34 24 5-year 5.14 6.69 6.38 5.38 5.97 6.30 6.48 6.46 6.55 6.42 6.41 6.55 25 7-year 5.54 6.91 6.50 5.64 6.19 6.48 6.66 6.65 6.74 6.60 6.57 6.69 26 10-year 5.87 7.09 6.57 5.81 6.27 6.51 6.74 6.74 6.82 6.68 6.65 6.77 27 20-year 6.29 7.49 6.95 6.30 6.74 6.98 7.11 7.13 7.21 7.05 7.02 7.09 28 30-year 6.59 7.37 6.88 6.24 6.60 6.79 6.93 6.96 7.02 6.87 6.84 6.93 Composite 29 More than 10 years (long-term) 6.45 7.41 6.93 6.28 6.72 6.94 7.08 7.10 7.17 7.03 6.99 7.07 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 Aaa 5.38 5.77 5.80 5.24 5.33 5.62 5.75 5.72 5.85 5.79 5.70 5.70 31 Baa 5.83 6.17 6.10 5.59 5.72 5.94 5.97 6.00 5.89 5.87 6.10 6.01 32 Bond Buyer series14 5.60 6.18 5.95 5.43 5.79 5.94 5.98 6.06 6.08 5.96 5.87 5.94 CORPORATE BONDS 33 Seasoned issues, all industries15 7.54 8.26 7.83 7.27 7.65 7.80 7.91 7.94 8.01 7.86 7.82 7.89 Rating group 34 Aaa 7.22 7.97 7.59 6.99 7.35 7.50 7.62 7.65 7.72 7.57 7.53 7.61 35 Aa 7.40 8.15 7.72 7.16 7.52 7.68 7.77 7.80 7.87 7.72 7.68 7.75 36 A 7.58 8.28 7.83 7.31 7.68 7.83 7.94 7.97 8.04 7.90 7.85 7.92 37 Baa 7.93 8.63 8.20 7.63 8.03 8.19 8.30 8.33 8.40 8.25 8.20 8.27 38 A-rated, recently offered utility bonds16 7.46 8.29 7.86 7.31 7.75 7.90 8.02 8.22 8.01 7.92 7.90 8.08 MEMO Dividend-price ratio11 39 Common stocks 2.78 2.82 2.56 2.22 2.22 2.24 2.21 2.21 2.26 2.20 2.17 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 Domestic Nonfinancial Statistics • August 1996 1.36 STOCK MARKET Selected Statistics 1995 1996 IInnddiiccaattoorr 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 249.71 254.16 291.18 310.41 311.78 317.58 327.90 329.22 346.46 346.73 347.50 354.84 2 Industrial 300.10 315.32 367.40 390.42 389.63 398.66 412.11 413.05 435.92 439.55 441.99 452.63 3 Transportation 242.68 247.17 270.14 295.54 291.16 300.06 303.53 300.43 315.29 324.77 326.42 334.66 4 Utility 114.55 104.96 114.61 114.67 123.59 119.49 173.95 127.09 135.51 122.83 122.44 124.86 5 Finance 216.55 209.75 238.48 260.72 265.12 266.12 273.36 274.96 290.97 290.44 287.92 290.43 6 Standard & Poor's Corporation (1941-43 = 10)' 451.63 460.42 541.72 578.77 582.92 595.53 614.57 614.42 649.54 647.07 647.17 661.23 7 American Stock Exchange (Aug. 31, 1973 = 50): 438.77 449.49 498.13 547.64 530.26 529.93 538.01 540.48 562.34 565.69 580.60 600.93 Volume of trading (thousands of shares) X New York Stock Exchange 263.374 290.652 345,729 352,184 365.108 360,199 384,310 416,048 434,607 426,198 419,941 404,184 9 American Stock Exchange 18.188 17,951 20.354r 25,422 17,672r 16,724 21,085 21,069 27,107 22.988 24,886 28,127 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers3 60,310 61,160 76,680 77,076 75,005 77,875 76,680 73,530 77,090 78,308 81,170 86,100 Free credit balances at brokers4 11 Margin accounts5 12,360 14,095 16,250 14,806 14.753 15,590 16.250 14,950 15,840 15.770 15,780 16,890 12 Cash accounts 27,715 28,870 34,340 29,796 29,908 30,340 34,340 32,465 34,700 33,113 33,100 33,760 Margin requirements (percent of market value and effective date)6 Mar. 11, 1968 June 8, 1968 May 6. 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. In July 1976 a financial group, composed of banks and insurance companies, was added collateralized by securities. Margin requirements on securities other than options are the to the group of stocks on which the index is based. The index is now based on 400 industrial difference between the market value (100 percent) and the maximum loan value of collateral stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60). and as prescribed by the Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, 40 financial. effective May 1. 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective 2. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Nov. 1, 1971. previous readings in half. On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the 3. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has initial margin required for writing options on securities, setting it at 30 percent of the current included credit extended against stocks, convertible bonds, stocks acquired through the market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the exercise of subscription rights, corporate bonds, and government securities. Separate report- required initial margin, allowing it to be the same as the option maintenance margin required ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in by the appropriate exchange or self-regulatory organization; such maintenance margin rules April 1984. must be approved by the Securities and Exchange Commission. Effective Jan. 31, 1986, the 4. Free credit balances are amounts in accounts with no unfulfilled commitments to SEC approved new maintenance margin rules, permitting margins to be the price of the option brokers and are subject to withdrawal by customers on demand. plus 15 percent of the market value of the stock underlying the option. 5. Series initiated in June 1984. Effective June 8, 1988, margins were set to be the price of the option plus 20 percent of the 6. Margin requirements, stated in regulations adopted by the Board of Governors pursuant market value of the stock underlying the option (or 15 percent in the case of stock-index to the Securities Exchange Act of 1934, limit the amount of credit that can be used to options). purchase and carry "margin securities" (as defined in the regulations) when such credit is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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 Dec. Jan. Feb. Mar. Apr. May U.S. budget1 1 Receipts, total 1,153,535 1,257,737 1,355,213 138,271 142,922 89,349 89,011 203,386 90,044 2 On-budget 841,601 922,711 1,004,134 110,322 110,615 60,912 56,677 160,774 60,106 3 Off-budget 311,934 335,026 351,079 27,949 32,307 28,437 32,334 42,612 29,938 4 Outlays, total 1,408,675 1,460,841 1,519,133 132,984 123,647 133,644 136,286 130,993 143,342 5 On-budget 1,142,088 1,181,469 1,230,469 121,753 98,057 105,711 108,365 105,131 114,486 6 Off-budget 266,587 279,372 288,664 11,232 25,591 27,933 27,921 25,862 28,856 7 Surplus or deficit (—), total -255,140 -203,104 -163,920 5,286 19,274 -44,295 -47,275 72,393 -53,298 8 On-budget -300,487 -258,758 -226,335 -11,431 12,558 -44,799 -51,688 55,643 -54,380 9 Off-budget 45,347 55,654 62,415 16,717 6,716 504 4,413 16,750 1,082 Source of financing (total) 10 Borrowing from the public 248,594 184,998 171,288 -18,358 -4,747 47,022 39,189 -35,466 20,633 11 Operating cash (decrease, or increase (-)) 6,283 16,564 -2,007 5,610 -16,959 6,297 9,283 -26,449 43,809 12 Other2 429 1,542 -5,361 7,462 2,432 -9,024 -197 -10,478 -11,144 MEMO 13 Treasury operating balance (level, end of period) 52,506 35,942 37,949 20,495 37,454 31,157 21,874 48,323 4,514 14 Federal Reserve Banks 17,289 6,848 8,620 5,979 8,210 5,632 7,021 11,042 3,757 15 Tax and loan accounts 35,217 29,094 29,329 14,515 29,243 25,525 14,853 37,281 757 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 NonfinancialS tatistics • August 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 Mar. Apr. May RECEIPTS 1 All sources 1,257,737 1,355,213 652,235r 625,556" 710,542 656,402' 89,011 203,386 90,044 2 Individual income taxes, net 543,055 590,244 275,052 273,315' 307,498 292,393 22,523 107,513 29,914 3 Withheld 459,699 499,927 225,387 240,063' 251,398 256,916 41,834 38,930 45,399 4 Nonwithheld 160,363r 175,786 111,929' 42,029' 132,001' 43,100 5,790 89,392 6,352 5 Refunds 11,011' 85,538 68,325 8,787' 75,959' 1100,,005588 25,118 2200,,882222 2211,,885500 Corporation income taxes 6 Gross receipts 154,205 174,422 80,535r 78,393' 92,132 88,302 17,793 26,912 3,647 7 Refunds 13,820 17,418 6,932' 7,747' 10,399 7,518 2,332 1,975 1,077 8 Social insurance taxes and contributions, net ... 461,475 484,473 248,301 220,140' 261,837 224,269 41,763 60,588 48,676 9 Employment taxes and contributions2 428,810 451,045 228,715r 206,615' 241,557' 211,323 41,086 56,615 38,104 10 Unemployment insurance 28,004 28,878 17,301 11,177 18,001 10,702 258 3,628 10,155 11 Other net receipts3 4,661 4,550 2,284 2,349 2,279' 2,247 419 346 417 12 Excise taxes 55,225 57,484 26,443r 30,178' 27,452 30,014 4,133 4,577 4,113 13 Customs deposits 20,099 19,301 9,499r 11,041' 8,848' 9,849 1,528 1,388 1,427 14 Estate and gift taxes 15,225 14,763 8,196' 7,067' 7,425' 7,718 1,137 22,,770044 1,415 15 Miscellaneous receipts4 22,274 31,944 11,141' 13,169' 15,750' 11,374 2,467 11,,668800 1,929 OUTLAYS 16 All types 1,460,841 1,519,133 710,620 752,151 760,824 752,511 136,286 130,993 143,342 17 National defense 281,642 272,066 133,844 141,885 135,678' 132,954 22,479 22,725 26,609 18 International affairs 17,083 16,434 5,800 11,889 4,797' 6,994 1,391 988 1,165 19 General science, space, and technology 16,227 16,724 8,502 7,604 8,611 8,810 1,381 1,534 1,584 20 Energy 5,219 4,936 2,237 2,923 2,357 2,203 131 17 216 21 Natural resources and environment 21,064 22,105 10,111 11,911 10,272 12,633 1,592 1,660 1,757 22 Agriculture 15,046 9,773 7,451 7,623 4,040 3,062 -62 -249 -175 23 Commerce and housing credit -5,118 -14,441 -4,962 -4,270 -13,937 -4,412 -1,443 -1,741 256 24 Transportation 38,066 39,350 16,739 21,835 18,192' 19,931 2,864 2,864 3,324 25 Community and regional development 10,454 10,641 4,571 6,283 5,043' 6,085 1,007 11,,002266 826 26 Education, training, employment, and social services 46,307 54,263 19,262 27,450 25,875' 24,894 4,301 4,014 3,961 27 Health 107,122 115,418 53,195 54,147 58,917' 57,078 10,317 10,458 11,201 28 Social security and Medicare 464,312 495,701 232,777 236,817 251,975 251,387 43,239 44,216 46,727 29 Income security 214,031 220,449 109,080 101,806 117,347' 104,078 25,927 21,417 21,407 30 Veterans benefits and services 37,642 37,938 16,686 19,761 19,268 18,684 3,300 2,974 5,254 31 Administration of justice 15,256 16,223 7,718 7,753 8,053' 8,117 1,341 1,585 1,683 32 General government 11,303 13,835 5,084 7,355 5,795' 7,621 766 -25 180 33 Net interest5 202,957 232,173 99,844 109,434 116,169 119,350 20,244 20,463 20,359 34 Undistributed offsetting receipts6 -37,772 -44,455 -17,308 -20,066 -17,632 -26,994 -2,490 -2,932 -2,991 1. Functional details do not sum to total outlays for calendar year data because revisions to 4. 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 5. Includes interest received by trust funds. outlays do not correspond to calendar year data because revisions from the Budget have not 6. 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. Federal employee retirement contributions and civil service retirement and Government, Fiscal Year 1997; monthly and half-year totals: U.S. Department of the Treadisability fund. sury, Monthly Treasury Statement of Receipts and Outlays of the U.S. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A27 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 holder 4 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 US. 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 • August 1996 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1996 1996, week ending IItteemm Feb. Mar. Apr. Apr. 3 Apr. 10 Apr. 17 Apr. 24 May 1 May 8 May 15 May 22 May 29 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 65,579 56,391 55,901 70,854 57,295 52,787 50,364 54,108 46,741 46,521 40,748 50,427 Coupon securities, by maturity 2 Five years or less 125,757 107,071 97,390 89,934 100,814 102,533 102,601 86,613 108,826 94,074 83,123 92,097 3 More than five years 67,611 49,903 41,998 40,022 41,521 44,926 39,363 43,591 60,332 52,906 46,403 38,724 4 Federal agency 26,759 27,395r 28,936 26,832 20,583 30,480 30,338 35,186 28,211 30,051 28,324 28,629 5 Mortgage-backed 40,755r 42,087r 34,788' 44,091' 47,964 33,798 24,402 28,855 53,716 42,084 23,317 23,526 By type of counterparty With interdealer broker 6 U.S. Treasury 148,665 124,458 112,758 111,975 115,861 114,531 112,998 107,725 126,461 113,545 98,482 104,682 7 Federal agency 1,107 671 795 586 648 697 1,046 907 616 824 710 474 8 Mortgage-backed 14,640r 15,597r 11,326' 15,704' 13,976' 12,030 8,046 8,614 18,088 13,906 8,543 10,361 With other 9 U.S. Treasury 110,281 88,907 82,531 88,835 83,768 85,715 79,331 76,586 89,438 79,956 71,792 76,566 10 Federal agency 25,652 26,725r 28,141 26,246 19,935 29,783 29,291 34,279 27,595 29,227 27,615 28,155 11 Mortgage-backed 26,114r 26,490r 23,461' 28,387' 33,987' 21,768 16,356 20,240 35,628 28,178 14,774 13,165 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 346 487 369 212 541 302 581 131 426 859 96 256 Coupon securities, by maturity 13 Five years or less 2,269 2,055 1,203 1,216 1,435 1,443 1,031 876 1,645 1,532 1,327 1,598 14 More than five years 17,420 14,824 11,717 10,186 12,738 14,023 10,297 10,736 17,060 12,218 10,771 10,765 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 2,730 2,775 1,582 2,213 1,376 1,585 1,408 1,526 1,328 3,217 2,640 2,126 19 More than five years 4,580 3,073 3,773 3,117 3,712 4,669 3,625 3,391 4,099 3,982 4,878 2,987 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 1,341 1,125 1,110 1,250 1,401 979 1,116 868 1,565 1,417 625 541 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 saleo 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 deliveiy 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 repotted at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1996 1996, week ending Feb. Mar. Apr. Apr. 3 Apr. 10 Apr. 17 Apr. 24 May 1 May 8 May 15 May 22 Positions" NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 8,316 20.889 17,119 44.826 24.141 12,884 7.229 11,554 12,031 16,296 14,951 Coupon securities, by maturity 2 Five years or less 11,937 6,296 7.771 4,387 8,709 4.651 12,474 6,523 6,242 1,796 -462 3 More than five years -14,139 -24,377 -27.702 -26.494 -31.028 -28.372 -25,451 -26,268 -25,003 -23,338 -22,041 4 Federal agencv 23,424 25,754 26,566 24,016 25,682 23.995 27,192 31,139 28.135 23,321 24,464 Mortgage-backed 40,161 36,887 32,583 31.979 31,757 33,353 32,930 32,543 30,376 35,251 35,657 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -2,582 -2.842 -3,560 -3.298 -2,626 -2,685 -4,636 -4,547 -4.610 -4,898 -4,563 Coupon securities, by maturity / Five years or less -587 623 1.073 346 1,419 1.222 1.132 788 1.062 1,267 401 8 More than five years -9.037 -4.361 -4,285 -5,215 -1,462 -3,418 -6.664 -5,351 -2.783 -2,466 -4,541 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 II U.S. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 12 Five years or less 5 1,381 1,542 2,257 1.720 1,796 1.250 1,023 691 676 -307 13 More than five years 2,706 177 1,081 2.377 1.946 572 727 429 -1,491 -1,366 688 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 3,052 4,949 4,435 3.662 4,896 4,275 4,144 4,808 4,570 3.688 3,603 Financing5 Reverse repurchase agreements lb Overnight and continuing 264,559r 258,213R 256.694 249,264r 273,465 264.387 239,1 10 252,381 245,232 271,735 252.858 17 Term 424,730 435.402 467.590 425,695 445,217 475.409 490,874 478,354 499,560 416,344 448,774 Securities borrowed 18 Overnight and continuing 166,781 172,347 166,490 164,068 170,460 166,267 163,797 166,473 168,222 175,434 178.128 19 Term 65,051 66,212 67,330 65,146 64,465 67,651 69,072 69,357 69,339 62,296 62,976 Securities received as pledge 20 Overnight and continuing 1,878 4,477 3,275 3,910 4,377 3,532 2,529 2,241 2,063 2,487 2,446 21 Term 126 65 53 92 53 81 31 27 39 29 41 Repurchase agreements 22 Overnight and continuing 562,396 557.094 577.949 562,672 594,664 600.073 554,265 567,907 560.778 577,866 564,022 23 Term 387,953 393,406 399,259 374,236 377,959 392.801 425,905 413,066 426,042 357,241 392,652 Securities loaned 24 Overnight and continuing 4,714 5,202 4,728 4.909 4,852 4,592 4.589 4,812 4,803 4,579 4,769 25 Term 2,409 2.362 2,611 2,270 n.a. n.a. 2,217 3.242 3,223 3,086 n.a. Securities pledged 26 Overnight and continuing 33,230 40.936 37.160 36,223 36,552 38,533 37,322 36,547 36,965 41,397 43,031 27 Term 7,230 8,343 8.518 8,148 8,088 8,837 8,831 8.465 8,025 6,738 6,163 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 14,667 12.176 14,052 14,555 14,443 15,108 15,317 10,638 13,316 12,567 12,697 MEMO: Matched book6 Securities in 31 Overnight and continuing 253,15lr 239,030* 244,480 243,714r 253,469 248,186 231,552 245,137 236,730 259,949 250,282 32 Term 426,056r 433,86 lr 464,018 424,355 437,701 471.000 486,355 480,346 488,139 407,901 437,150 Securities out 33 Overnight and continuing 333,340 328,321 348,557 339,129 364,716 359,919 328,711 344,315 341,079 345,621 334,007 3344 330,450 333388..009966 334499,,226633 332233,,113344 332244,,995555 334455,,115588 337744,,885599 336655,,661144 337722,,221133 330033,,336699 333322,,883311 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 tiled 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 NonfinancialS tatistics • August 1996 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1995 1996 AAggeennccyy 11999922 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. 1 Federal and federally sponsored agencies 483,970 570,711 738,928 n.a. n.a. n.a. n.a. n.a. 2 Federal agencies 41.829 45.193 39,186 37,347 39.207 37,347 37,273 31,986 3 Defense Department1 7 6 6 6 6 6 6 6 4 Export-Import Bank2'3 7.208 5.315 3,455 2,050 2.512 2,050 2,050 2,050 5 Federal Housing Administration4 374 255 116 97 93 97 31 35 n.a. 6 Government National Mortgage Association certificates of participation5 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 5,765 5,765 300 8 Tennessee Valley Authority 23,580 29,885 27,536 29,429 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. 10 Federally sponsored agencies7 442,141 523,452 699,742 807.264 791.660 807,264 799,547 808,398 815,523 11 Federal Home Loan Banks 114.733 139.512 205,817 243.194 239.034 243,194 234,664 233,404 239,253 1? Federal Home Loan Mortgage Corporation 29,631 49,993 93,279 119,961 115,603 119,961 120,868 123,777 124,278 n Federal National Mortgage Association 166,300 201,112 257,230 299,174 289.768 299,174 297,657 304,159 306,815 14 Farm Credit Banks8 51,910 53,123 53,175 57,379 56.694 57,379 58,659 57,536 59,428 15 Student Loan Marketing Association9 39,650 39.784 50,335 47,529 50,535 47,529 47,673 49,495 • 45,723 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 Corporation1" 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 81,693 78,681 78,512 68,037 Lending to federal and federally sponsored agencies 2(1 Export-Import Bank3 7.202 5,309 3,449 2,044 2,506 2,044 2,044 2,044 21 Postal Service6 10.440 9.732 8.073 5,765 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. 23 Tennessee Valley Authority 6.975 6.325 3,200 3,200 3,200 3,200 3,200 n.a. n.a. 24 United States Railway Association6 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 21.015 21.015 21,015 21,015 26 Rural Electrification Administration 18.172 17.578 17.392 17,144 17.141 17,144 17,026 17,040 27 Other 64.436 45.864 37.984 29,513 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 ii oo ss rr ss uu uu ee ss ee oo rr iissssuueerr,, 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 1 All issues, new and refunding' 279,945 153,950 143,101 13,898 16,839 16,978 11,545 11,598 15,244 13,199 14,991 By type of issue 2 General obligation 90,599 54,404 55,737 6,184 6,194 5,489 6,074 2,063 4,846 5,083 5,476 3 Revenue 189,346 99,546 86,555 7,714 10,645 11,489 5,471 9,535 10,398 8,116 9,515 By type of issuer 4 State 27,999 19,186 14,215 1,825 1,491 951 1,630 695 904 926 2,807 5 Special district or statutory authority2 178,714 95,896 91,419 8,155 10,736 11,678 7,052 7,820 10,141 9,571 9,824 6 Municipality, county, or township 73,232 38,868 36,658 3,918 4,612 4,349 2,863 3,083 4,199 2,702 2,360 7 Issues for new capital 91,434 105,972 94,412 7,868 11,415 11,070 6,517 6,383 10,621 9,487 9,594 By use of proceeds 8 Education 16,831 21,267 24,926 1,785 3,377 2,968 2,065 2,226 1,847 2,142 2,442 9 Transportation 9,167 10,836 11,887 367 1,469 1,178 573 359 1,417 682 778 10 Utilities and conservation 12,014 10,192 9,618 1,780 554 1,664 439 582 892 592 1,368 11 Social welfare 13,837 20,289 18,612 1,716 2,177 1,614 935 904 2,715 1,669 1,764 12 Industrial aid 6,862 8,161 6,566 227 650 1,325 322 110 785 751 302 13 Other purposes 32,723 35,227 26,518 1,993 3,188 2,321 2,183 2,202 2,965 3,651 2,940 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 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 All issues' 769,088 583,240 n.a. 57,262 52,112 55,349 40,149 47,394r 60,715r 54,524r 44,978 2 Bonds2 646,634 498,039 n.a. 49,905 43,452 47,568 34,619 42,643r 51,560r 47,356r 32,500 By type of offering 3 Public, domestic 487,029 365,222 408,806 43,137 36,692 43,336 32,219 33,882r 44,904 40,612r 27,000 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 6,768 6,760 4,232 2,399 8,761 6,656r 6,744 5,500 By industry group 6 Manufacturing 88,160 43,423 42,950 3,284 3,397 4,017 3,205 3,809r 2,472 3,210 2,210 7 Commercial and miscellaneous 58,559 40,735 37,139 2,607 3,532 4,178 3,099 2,151 2,601 3,852 3,064 8 Transportation 10,816 6,867 5,727 908 187 225 1,240 664 584r 57 120 9 Public utility 56,330 13,322 11,974 911 1,241 485 685 1,821 955 678 471 10 Communication 31,950 13,340 18,158 2,829 2,389 3,333 648 748 2,691 1,873 535 11 Real estate and financial 400,820 380,352 369,769 39,365 32,706 35,330 25,742 33,450r 42,258 37,686r 26,100 12 Stocks2 122,454 85,155 n.a. 7,357 8,660 7,781 5,530 4,756r 9,160r 7,393r 12,478 By type of offering 13 Public preferred 18,897 12,570 10,964 1,035 836 2,210 890 2,167 3,258 967 22,,000000 14 Common 82,657 47,828 57,809 6,322 7,824 5,571 4,640 2,589r 5,902r 6,426r 10,478 15 Private placement3 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 2,383 1,815 2,209 681 295r l,543r 2.036r 3,966 17 Commercial and miscellaneous 25,761 15,713 n.a. 2,801 4,628 3,274 2,632 2,52 r 2,659r 3,577r 4,112 18 Transportation 2,237 2,203 32 39 97 156 38 141 232r 37 19 Public utility 7,050 2,214 190 60 36 322 115 809 319 149 20 Communication 3,439 494 47 0 0 0 200 122 100r 144 21 Real estate and financial 61,004 46,733 1,905 2,118 2,166 1,739 1,588 3,719r 1,130 4,070 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 Domestic NonfinancialS tatistics • August 1996 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets' Millions of dollars 1995 1996 IItteemm 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Sales of own shares2 841,286 871,415 68,694 72,730 70,499 94,719 112,332 90,370 93,856 101,847 2 Redemptions of own shares 699,823 699,497 54,473 56,174 52,727 67,945 75,354 60,398 65,748 81,008 3 Net sales3 141,463 171,918 14,221 16,556 17,772 26,774 36,978 29,972 28,108 20,839 4 Assets4 1,550,490 2,067,337 1,962,817 1,963,496 2,032,958 2,067,337 2,143,185 2,181,711 2,212,517r 2,292,722 5 Cash5 121,296 142,572 127,446 133,653 141,489 142,572 150,772 144,520 142,697 148,794 6 Other 1,429,195 1,924,765 1,835,371 1,829,843 1,891,470 1,924,765 1,992,414 2,037,191 2,069,820 2,143,928 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 Qi Q2 Q3 Q4 Qi 1 Profits with inventory valuation and capital consumption adjustment 464.5 526.5 588.6 531.5 549.8 568.9 559.6 561.1 614.9 618.6 652.0 2 Profits before taxes 464.3 528.2 600.8 523.2 547.5 570.4 594.1 588.4 609.6 611.0 649.0 3 Profits-tax liability 163.8 195.3 218.7 192.8 203.4 213.5 217.3 214.2 224.5 218.7 233.4 4 Profits after taxes 300.5 332.9 382.1 330.4 344.1 356.8 376.8 374.1 385.1 392.3 415.6 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 103.3 121.9 154.7 121.7 131.6 138.3 155.1 149.6 156.6 157.6 175.7 7 Inventory valuation -6.6 -13.3 -28.1 -9.8 -16.5 -22.8 -51.9 -42.3 -9.3 -8.8 — 17.4r 8 Capital consumption adjustment 6.7 11.6 15.9 18.1 18.8 21.3 17.4 15.0 14.6 16.5 20.4r 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 Liabilities' Billions of dollars, end of period; not seasonally adjusted 1994 1995 AAccccoouunntt 11999933 11999944 11999955 Q2 Q3 Q4 QI 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 8 All other 170.9 183.4 210.7 174.6 177.2 183.4 194.6 198.1 198.1 210.7 9 Total assets 591.8 666.9 748.0 621.9 638.1 666.9 691.4 709.2 717.8 748.0 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 99.5 106.2 89.9 95.0 99.5 102.5 102.1 102.4 106.2 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 591.8 666.9 748.0 621.9 638.1 666.9 691.4 709.2 717.8 748.0 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 Credit' Millions of dollars, amounts outstanding, end of period 1995 19 96 TTyyppee ooff ccrreeddiitt 11999933 11999955 Nov. Dec. Jan. Feb. Mar.' Apr. Seasonally adjusted 1 Total 546,103r 615,618r 691,616r 687,894r 691,616r 696,099r 700,977r 702,925 707,741 2 Consumer 160,227r 176,085r 198,861r 196,773r 198,861r 200,162' 202,548' 203,280 205,184 3 Real estate2 72,043r 78,910r 87,077r 87,550r 87,077r 88,084' 88,188' 89,502 89,943 4 Business 313,833r 360,624r 405,678r 403,57 lr 405,678' 407,853' 410,241' 410,144 412,614 Not seasonally adjusted 5 Total 550,751 620,975 697,340 687,944 697,340 697,312 701,576r 705,173 710,154 6 Consumer 162,770 178,999 202,101 198,072 202,101 201,774 202,108 202,337 203,532 7 Motor vehicles 56,057 61,609 70,061 68,167 70,061 71,420 73,312 72,129 73,810 8 Other consumer3 60,396 73,221 81,988 78,926 81,988 81,186 81,214 79,779 79,489 9 Securitized motor vehicles4 36,024 31,897 33,633 34,394 33,633 32,128 30,364 31,093 30,476 10 Securitized other consumer4 10,293 12,272 16,419 16,585 16,419 17,040 17,218 19,336 19,757 11 Real estate2 71,727 78,479 86,606 87,672 86,606 88,495 88,520 89,056 89,975 12 Business 316,254 363,497 408,633 402,200 408,633 407,043 410,948' 413,780 416,647 13 Motor vehicles 95,173 118,197 133,277 129,708 133,277 132,062 132,153 133,621 133,892 14 Retail5 18,091 21,514 25,304 24,564 25,304 25,906 26,591 26,663 27,346 15 Wholesale6 31,148 35,037 36,427 33,519 36,427 34,198 33,386 33,910 32,155 16 Leasing 45,934 61,646 71,546 71,625 71,546 71,958 72,176 73,048 74,391 17 Equipment 145,452 157,953 177,297 173,183 177,297 175,984 176,461' 177,285 178,507 18 Retail 35,513 39,680 48,843 44,194 48,843 48,737 48,660 48,696 47,913 19 Wholesale6 8,001 9,678 10,266 10,889 10,266 9,260 8,914 9,213 9,663 20 Leasing 101,938 108,595 118,188 118,100 118,188 117,987 118,887' 119,376 120,931 21 Other business7 53,997 61,495 65,363 66,678 65,363 66,643 68,070 69,497 69,193 22 Securitized business assets4 21,632 25,852 32,696 32,631 32,696 32,354 34,264 33,377 35,055 23 Retail 2,869 4,494 4,723 4,974 4,723 4,467 4,252 4,067 4,367 24 Wholesale 10,584 14,826 21,327 21,208 21,327 21,130 23,460 22,622 24,327 25 Leasing 8,179 6,532 6,646 6,449 6,646 6,757 6,552 6,688 6,361 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 • August 1996 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1995 1996 IItteemm 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. May Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 163.1 170.4 175.8 178.6 181.7 179.2 181.7 184.5 175.2 179.5 2 Amount of loan (thousands of dollars) 123.0 130.8 134.5 136.4 140.9 135.8 143.2 141.5 133.2 137.6 3 Loan-to-price ratio (percent) 78.0 78.8 78.6 78.9 79.1 77.3 80.3 77.8 78.4 79.3 4 Maturity (years) 26.1 27.5 27.7 27.7 27.6 27.7 27.8 26.4 27.1 27.2 5 Fees and charges (percent of loan amount)* 1.30 1.29 1.21 1.22 1.21 1.07 1.24 1.3(1 1.17 1.16 Yield (percent per year) 6 Contract rate1 7.03 7.26 7.65 7.27 7.20 7.15 7.00 7.25 7.57 7.61 7 Effective rate1,3 7.24 7.47 7.85 7.46 7.40 7.32 7.20 7.49 7.76 7.80 8 Contract rate (HUD series)4 7.37 8.58 8.05 7.46 7.30 7.23 7.56 7.97 8.22 8.34 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 7.46 8.68 8.18 7.51 7.52 7.11 7.57 8.09 8.52 8.57 10 GNMA securities6 6.65 7.96 7.57 7.01 6.82 6.71 6.85 7.40 7.63 7.81 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total. . 190,861 222.057 253.51 1 249,928 253.511 255.619 257.970 262.014 263.809 267,330 12 FHA/VA insured 23,857 27,558 28,762 28,901 28.762 28,622 28.502 28,744 29.132 30,442 13 Conventional 167,004 194,499 224.749 221,027 224.749 226,997 229.468 233.270 234,677 236.888 14 Mortgage transactions purchased (during period) . . . 92,037 62,389 56,598 6.148 6,243 4,810 5.371 7.681 5.339 6,720 Mortgage commitments (during period) 15 Issued7 92,537 54.038 56.092 6.038 4,765 5.750 7,013 6.293 5,599 5.228 16 To sell8 5,097 1.820 360 10 0 3 0 29 0 13 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 17 Total 55,012 72,693 107.424 102.997 107.424 111,143 114,793 117,420 119,520 121.058 18 FHA/VA insured 321 276 267 271 267 226 223 220 216 212 19 Conventional 54,691 72,416 107.157 102.726 107.157 110.917 114,570 117.200 119,304 120,846 Mortgage transactions (during period) 20 Purchases 229,242 124,697 98,470 9,989 13,108 13.357 10,891 11.9X4 12,740 12,385 21 Sales 208,723 117,110 85,877 9,011 11,712 11.624 9.733 1 1.384 11.958 11.904. 22 Mortgage commitments contracted (during period)9 . 274,599 136.067 118,659 11,339 14,609 12,765 10.378 14.520 13.009 11.075 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 sw ap 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 A3 5 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1995 1996 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999922 11999933 11999944 Qi Q2 Q3 Q4 Qlp 1 All holders 4,092,984 4,268,420r 4,473,100r 4,515,854" 4,584,566' 4,663,864" 4,715,884 4,773,998 By type of property One- to tour-tamilv residences 3.037,408 3,227.134r 3,430,023r 3,465.065' 3.524,378' 3,593,966' 3,634,698 3,682,610 3 Multit'amily residences 274,234 270.796 275.303r 276,398 280,390 284,238' 288,090 292,448 4 Commercial 700,604 689.296 684.803 690,988 695,947 701,241' 708,467 713,751 5 80.738 81,194 82,971 83,403 83,850 84.420 84,629 85,189 B\ type of holder 6 Major financial institutions 1,769.187 1,767.835 1,815,810 1,841,815 1,868.175 1,895,285 1,890,539 1,895,878 7 Commercial banks- 894,513 940,444 1,004,280 1,024.854 1,053,048 1.072,780 1,080,373 1,087,174 X One- to four-familv 507.780 556,538 611.697 625.378 648,705 662,126 663,588 666,306 9 Multifamilv 38,024 38.635 38,916 39,746 40,593 43,003 43,846 45,201 10 Commercial 328,826 324,409 331,100 336,795 340,176 343,826 349,109 351,736 1 1 Farm 19,882 20,862 22,567 22,936 23,575 23,824 23,829 23,931 12 Savings institutions 627,972 598,330 596,199 601,777 599,745 604,614 596,789 595,903 13 One- to four-familv 489.622 469,959 477.499 483,625 482,005 489,150 482.765 484,020 14 Multifamilv 69,791 67,362 64.400 63,778 64,404 63,569 61.926 60,494 15 Commercial 68,235 60,704 54.011 54,085 53,054 51,604 51.809 51,089 16 Farm 324 305 289 288 282 291 288 299 17 Life insurance companies 246,702 229,061 215,332 215.184 215,382 217,892 213,377 212,801 18 One- to tour-family 11,441 9.458 7.910 7,892 7,911 8,006 7,833 7,815 19 Multit'amily 27,770 25,814 24,306 24,250 24,310 24,601 24,070 24,013 20 Commercial 198,269 184,305 173,539 173,142 173,565 175,643 171,855 171,445 21 Farm 9,222 9,484 9,577 9,900 9,596 9,643 9,619 9,528 22 Federal and related agencies 286.263 327,014r 319.401' 317,753' 315,722' 319,923' 320,828 322,131 23 Government National Mortgage Association 30 22 6 15 7 2 2 2 24 One- to four-familv 30 15 6 15 7 2 2 2 25 Multit'amily 0 7 0 0 0 0 0 0 26 Farmers Home Administration4 41,695 41,386 41,781 41.857 41.917 41,858 41.791 41,594 27 One- to four-familv 16,912 15.303 13,826 13.507 13,217 12,914 12,643 12,327 28 Multifamilv 10.575 10.940 11,319 11,418 11.512 11,557 11,617 11,636 29 Commercial 5,158 5,406 5,670 5,807 5,949 6,096 6,248 6,365 30 Farm 9,050 9.739 10,966 11,124 11,239 11,291 11,282 11,266 31 Federal Housing and Veterans' Administrations 12,581 12,215 10,964 10.890 10,098 9,535 9,809 8,439 32 One- to four-family 5,153 5,364 4,753 4,715 4.838 4,918 5,180 4,228 33 Multifamilv 7,428 6.851 6,211 6.175 5,260 4,617 4,629 4,211 34 Resolution Trust Corporation 32.045 17.284 10,428 9,342 6,456 4,889 1.864 0 35 One- to four-familv 12,960 7,203 5,200 4,755 2,870 2,299 691 0 36 Multit'amily 9,621 5,327 2,859 2,494 1.940 1,420 647 0 37 Commercial 9,464 4,754 2,369 2.092 1,645 1,170 525 0 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 0 14,112 7,821 6,730 6,039 5,015 4,303 5,553 40 One- to four-familv 0 2,367 1,049 840 731 618 492 1.848 41 Multit'amily 0 1,426 1,595 1,310 1,135 722 428 560 42 Commercial 0 10,319 5.177 4,580 4,173 3,674 3,383 3,145 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 137,584 166,642 178.059 177,615 178,462 182,229 183,782 183,531 45 One- to four-family 124,016 151,310 162,160 161.780 162,674 166,393 168,122 167,895 46 Multifamilv 13.568 15,332 15,899 15,835 15,788 15,836 15,660 15.636 47 Federal Land Banks 28.664 28,460 28,555 28,065 28,005 28,151 28,428 28,891 48 One- to four-familv 1.687 1.675 1,671 1,651 1,648 1.656 1,673 1,700 49 Farm 26,977 26.785 26.885 26.414 26,357 26,495 26,755 27,191 50 Federal Home Loan Mortgage Corporation 33,665 46,892r 41.786r 43.239r 44,738' 48,243' 50,849 54,120 51 One- to four-family 31,032 44,345r 38,956r 40,105' 41.477' 44,809' 46,997 50,058 52 Multit'amily 2,633 2,547 2,830 3,134 3,261 3.434 3,852 4,062 53 Mortgage pools or trusts' 1,434,264 1,564.57 lr l,718,297r 1,731,468' 1,759,091' 1,795,041' 1,853,613 1,895,309 54 Government National Mortgage Association 419,516 414.066 450,934 454,401 457,101 463,654 472,298 475,823 55 One- to four-family 410,675 404,864 441,198 444,632 446,855 453,114 461,453 464,644 56 Multit'amily 8.841 9,202 9,736 9,769 10,246 10,540 10,845 11,179 57 Federal Home Loan Mortgage Corporation 407,514 447,147r 490,85 lr 492,194' 498,216' 503.370' 515,051 524,326 58 One- to four-family 401.525 442,612r 487,725r 489,114' 495,182' 500.417' 512,238 521,721 59 Multit'amily 5.989 4.535 3,126 3,080 3,034 2,953 2,813 2,605 60 Federal National Mortgage Association 444,979 495,525 530.343 533,262 543,669 559.585 582,959 599,546 61 One- to four-family 435,979 486,804 520,763 523,903 533,091 548,400 569,724 585,527 62 Multifamily 9,000 8,721 9,580 9,359 10,578 11,185 13,235 14,019 63 Farmers Home Administration4 38 28 19 14 13 12 11 10 64 One- to four-family 8 5 3 2 i 2 1 65 Multifamily 0 0 0 0 0 0 0 66 Commercial 17 13 9 7 6 5 5 5 67 Farm 13 10 7 5 5 5 4 4 68 Private mortgage conduits 162,217 207.806 246.1501" 251.597' 260,093' 268,420' 283,294 295,604 69 One- to four-family 140,718 173,635 194,45 lr 198,040' 202,718' 207,679' 214,635 220,022 70 Multifamily 6,305 8,701 14,925 15,743 17,281 18,903 21,279 24,477 71 Commercial 15,194 25,469 36,774 37.814 40,094 41,838 47,380 51,104 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others6 603,270 609,000r 619,592' 624,819' 641,578' 653,615' 650,904 660,680 74 One- to four-familv 447,871 455,676r 461.157' 465,111' 480,447' 491,463' 486,660 494,495 75 Multifamily 64,688 65.397 69,601' 70,305 71,050' 71,897' 73,243 74,354 76 Commercial 75,441 73,917 76.153 76,667 77,284 77,384' 78,152 78,861 77 Farm 15.270 14.009 12.681 12,736 12,796 12,872 12,850 12,970 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 NonfinancialS tatistics • August 1996 1.55 CONSUMER INSTALLMENT CREDIT1 Millions of dollars, amounts outstanding, end of period 1995r 1996r HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999933'' 11999944rr 11999955rr Nov. Dec. Jan. Feb. Mar. Apr. Seasonally adjusted 1 Total 844,118 966,457 1,103,164 1,094,352 1,103,164 1,113,509 1,124,253 1,133,642 1,140,181 2 Automobile 279,786 317,182 351,052 347,234 351,052 352,461 354,810 356,310 359,507 3 Revolving 287,011 339,337 413,894 407,381 413,894 419,030 425,778 431,196 438,460 4 Other2 277,321 309,939 338,218 339,737 338,218 342,018 343,666 346,136 342,214 Not seasonally adjusted 5 Total 863,924 990,247 1,131,747 1,101,356 1,131,747 1,123,813 1,121,348 1,123,315 1,129,433 By major holder 6 Commercial banks 399,683 462,923 507,414 495,978 507,414 502,400 500,140 499,762 504,652 7 Finance companies 116,453 134,830 152,624 147,093 152,624 152,606 154,365 151,749 153,299 8 Credit unions 101,634 119,594 131,939 130,940 131,939 131,257 130,839 130,837 131,873 9 Savings institutions 37,855 38,468 40,106 40,505 40,106 40,000 40,000 40,000 39,999 10 Nonfinancial business3 77,229 86,621 85,061 77,948 85,061 80,733 78,138 76,681 73,765 11 Pools of securitized assets4 131,070 147,811 214,603 208,892 214,603 216,817 217,866 224,286 225,845 By major type of credi? 12 Automobile 281,538 319,715 354,260 351,029 354,260 351,969 352,583 352,634 355,073 13 Commercial banks 122,000 141,895 149,094 147,995 149,094 148,186 147,703 148,455 150,455 14 Finance companies 56,057 61,609 70,626 68,167 70,626 71,420 73,312 72,129 73,810 15 Pools of securitized assets4 39,561 36,376 44,616 44,691 44,616 42,569 41,755 42,868 40,596 16 Revolving 302,201 357,307 435,674 410,493 435,674 426,024 424,657 425,823 431,733 1/ Commercial banks 149,920 182,021 210,298 197,088 210,298 200,080 198,886 196,836 201,858 18 Nonfinancial business3 50,125 56,790 53,525 48,536 53,525 50,520 48,613 47,416 44,526 19 Pools of securitized assets4 80,242 96,130 147,934 141,934 147,934 151,640 153,390 157,690 161,185 20 Other 280,185 313,225 341,813 339,834 341,813 345,820 344,108 344,858 342,627 21 Commercial banks 127,763 139,007 148,022 150,895 148,022 154,134 153,551 154,471 152,339 22 Finance companies 60,396 73,221 81,998 78,926 81,998 81,186 81,053 79,620 79,489 23 Nonfinancial business3 27,104 29,831 31,536 29,412 31,536 30,213 29,525 29,265 29,239 24 Pools of securitized assets4 11,267 15,305 22,053 22,267 22,053 22,608 22,721 23,728 24,064 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. INTEREST RATES Commercial banks2 1 48-month new car 8.09 8.12 9.57 n.a. 9.36 n.a. n.a. 9.12 2 24-month personal 13.47 13.19 13.94 n.a. 13.80 n.a. n.a. 13.63 n.a. n.a. Credit card plan 3 All accounts n.a. 15.69 16.02 n.a. 15.81 n.a. n.a. 15.82 n.a. 4 Accounts assessed interest n.a. 15.77 15.79 n.a. 15.71 n.a. n.a. 15.41 n.a. n.a. Auto finance companies 5 New car 9.48 9.79 11.19 10.89 10.84 10.52 9.74 9.86 9.77 9.64 6 Used car 12.79 13.49 14.48 14.06 13.98 13.83 13.27 13.28 13.19 13.26 OTHER TERMS1 Maturity (months) 7 New car 54.5 54.0 54.1 54.6 54.5 53.6 51.8 52.3 51.8 51.5 8 Used car 48.8 50.2 52.2 52.3 52.2 51.8 52.2 52.1 52.0 51.8 Loan-to-value ratio 9 New car 91 92 92 92 92 92 92 91 91 91 10 Used car 98 99 99 99 99 99 99 98 98 99 Amount financed (dollars) 11 New car 14,332 15,375 16,210 16,430 16,583 17,034 16,698 16,627 16,520 16,605 12 Used car 9,875 10,709 11,590 11,883 12,012 12,152 12,059 11,990 11,934 12,024 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 MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1994 1995r 1996 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 Q3 Q4 Ql Q2 Q3 Q4 Ql Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 481.7R 543.0R 628.5R 618.9R 732.9 587.6R 634.8R 880.4 888.3 584.8 578.2 863.5 By sector and instrument ? U.S. government 278.2 304.0 256.1 155.9 144.4 135.6 150.1 266.8 202.8 65.8 42.4 288.7 Treasury securities 292.0 303.8 248.3 155.7 142.9 132.8 155.7 268.0 201.2 65.4 37.2 291.0 4 Budget agency issues and mortgages -13.8 .2 7.8 .2 1.5 2.9 -5.7 -1.2 1.6 .4 5.1 -2.3 5 Private 203.5r 239.0r 372.3r 463.1r 588.5 452.0r 484.7r 613.6 685.6 519.1 535.9 574.8 By instrument Municipal securities 87.8 30.5 74.8 -29.3 -41.3 -58.4 -53.8 -45.8 -4.3 -107.4 -7.6 -6.4 7 Corporate bonds 78.8 67.6 75.2 23.3 73.3 15.4 6.2 53.0 98.4 59.8 82.0 58.9 8 Mortgages 158.4 130.9 157.2 194.3r 237.5 205.5r 210.6r 222.5 239.6 290.5 197.4 285.4 Home mortgages 173.6 187.6 187.9 202.4r 204.7 210.3r 216.8r 196.8 207.2 256.8 157.8 250.1 in Multifamily residential -5.5 -10.4 -6.0 1.3 11.0 5.6 -4.2 2.7 14.2 13.7 13.6 15.6 i II ? C Fa o r m m m ercial -10.0 .4 -47 1 .8 .4 -25. . 0 5 -11 1 .1 .8 20 1 . . 1 7 -12 2 . . 7 2 -3 1 .4 .4 21 1 . . 2 7 16 1 . . 3 8 1 2 7 . . 3 7 25. . 2 8 1 2 7 . . 2 4 n Consumer credit - 13.7r 5.0r 61.5r 124.9r 142.9 133.8r 141.8r 138.3 156.9 158.5 118.2 121.7 14 Bank loans n.e.c -40.9 -13.7 3.8 73.lr 103.0 92. r 16.1' 152.5 96.8 76.8 86.0 52.8 15 Commercial paper -18.4 8.6 10.0 21.4 18.1 28.5r 30.7r 12.3 39.1 13.9 7.2 37.9 16 Other loans and advances -48.5 10.1 -10.2 55.4 54.9 35.1 72.4 80.8 59.1 27.1 52.7 24.5 By borrowing sector 17 Household 183.81 198.41 249.lr 362.2r 383.5 385.3r 392.41 358.6 393.0 448.1 334.5 338877..77 18 Nonfinancial business -61.9 19.5 61.0 144.3 250.6 132.r 160.8r 300.1 303.6 181.5 217.4 190.7 19 Farm 2.1 1.3 2.0 2.8 2.0 2.4 -2.0 .9 3.6 4.3 -.8 .9 ?o Nonfarm noncorporate -11.0 -16.0 7.0 12.1 35.9 8.8 16.5 51.3 34.4 29.8 28.2 29.3 ?i Corporate -53.0 34.1 52.0 129.3 212.7 120.9r 146.3' 247.9 265.6 147.4 190.0 160.5 22 State and local government 81.6 21.1 62.3 -43.4 -45.7 -65.4 -68.5 -45.1 -11.1 -110.6 -16.0 -3.7 Foreign net borrowing in United States 14.8 22.6 68.8 -20.3 67.7 19.6 33.5 61.4 40.4 94.1 75.1 36.9 ?4 Bonds 15.0 15.7 81.3 7.1 46.5 20.8 27.7 13.5 49.9 52.1 70.6 45.4 75 Bank loans n.e.c 3.1 2.3 .7 1.4 8.5 4.7 -.5 8.1 5.6 8.2 11.9 8.7 26 Commercial paper 6.4 5.2 -9.0 -27.3 13.6 -8.1 5.9 37.9 -11.1 30.9 -3.4 -13.8 27 Other loans and advances -9.8 -.6 -4.2 -1.6 -.8 2.2 .4 1.9 -4.0 2.9 -4.1 -3.3 28 Total domestic plus foreign 496.5R 565.6R 697.3R 598.6R 800.7 607.2R 668.3R 941.8 928.8 678.9 653.3 900.4 Financial sectors 29 Total net borrowing by financial sectors 155.6R 240.0R 291.LR 467.9R 444.9 428.7R 536.8R 273.1 436.1 490.0 580.4 313.6 By instrument 30 U.S. government-related 145.7 155.8 164.2 288.6r 205.1 250.3r 321.2r 89.4 192.1 221.4 317.5 147.2 31 Government-sponsored enterprise securities 9.2 40.3 80.6 176.9 106.9 152.1 249.0 62.9 127.2 101.5 136.1 37.4 3? Mortgage pool securities 136.6 115.6 83.6 116.5r 98.2 98.3r 12.2' 26.4 64.9 119.9 181.4 109.8 33 Loans from U.S. government .0 .0 .0 —4.8 .0 .0 .0 .0 .0 .0 .0 .0 34 9.8r 84.2r 126.91" 179.2r 239.8 178.3r 215.6r 183.7 244.0 268.6 262.9 166.4 35 Corporate bonds 69.9r 82.7r i2o.r 117.5r 185.5 103.9r 84.9r 167.5 182.3 208.1 184.0 136.2 36 Mortgages .5 .6 3.6 9.8 5.3 12.0 4.9 5.2 5.2 5.2 5.6 5.5 37 Bank loans n.e.c 8.8 2.2 -13.0 -12.3 3.0 -11.7 1.9 -3.0 21.2 7.1 -13.4 7.6 38 Open market paper -32.0 -.7 -6.2 41.6 42.6 41.3 85.9 38.5 34.0 43.3 54.7 22.6 39 Other loans and advances -37.3 -.6 22.4 22.6 3.4 32.8 38.1 -24.5 1.3 4.9 32.0 -5.5 By borrowing sector 40 Government-sponsored enterprises 9.1 40.2 80.6 172.1 106.9 152.1 249.0 62.9 127.2 101.5 136.1 37.4 41 Federally related mortgage pools 136.6 115.6 83.6 116.5r 98.2 98.3r 12.2' 26.4 64.9 119.9 181.4 109.8 47 Private financial sectors 9.8r 84.2r 126.9r 179.2r 239.8 178.3r 215.6r - 183.7 244.0 268.6 262.9 166.4 43 Commercial banks -10.7 7.7 4.6 9.9 8.1 23.9 4.1 6.3 18.2 8.8 -.9 -4.8 44 Bank holding companies -2.5 2.3 8.8 10.3 14.4 11.5 16.0 16.3 20.8 28.2 -7.8 -25.8 45 Funding corporations -6.5 13.2 2.9 24.2 32.0 47.3 11.1 61.5 21.7 52.1 -7.3 26.6 4 4 7 6 C Sa re v d in it g s u n in io s n ti s t utions -44.7 .0 -7.0 .0 11 . .3 2 12. . 8 2 - 2 .1 .6 14 . . 5 8 36. . 1 2 -1 - 8 . . 3 9 -7 -. . 1 2 5. . 1 1 31. . 5 0 1 - 0 .1 . 9 48 Life insurance companies .0 .0 .2 .3 -.1 .0 1.3 .0 .1 -.1 -.4 2.5 49 Finance companies 17.7 -1.6 .2 50.2 51.6 16.3 57.3 83.1 57.2 6.5 59.6 50.0 50 Mortgage companies -2.4 8.0 .0 -11.5 -2.1 -7.0 1.1 -7.4 14.8 4.0 -20.0 .7 51 Real estate investment trusts (REITs) 1.2 .3 3.4 13.7 5.4 18.8 6.3 5.2 5.2 5.2 6.0 5.9 5? Brokers and dealers 3.7 2.7 12.0 .5 -5.0 -7.6 19.3 -29.5 -.1 2.1 7.7 -31.8 53 Issuers of asset-backed securities (ABSs) 54.0r 58.5r 83.3r 68.5r 133.0 59.8r 62.8r 67.6 113.2 156.5 194.5 132.2 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • August 1996 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued 1994 1995' 1996 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944 11999955'' Q3 Q4 Qi Q2 Q3 Q4 QI All sectors 54 Total net borrowing, all sectors 652.1r 805.6r 988.4r l,066.5r 1,245.6 1,035.9' l,205.2r 1,214.8 1,364.9 1,169.0 1,233.7 1,214.0 55 U.S. government securities 424.0 459.8 420.3 449.3' 349.5 386.0' 471.3' 356.2 394.9 287.2 359.9 435.9 56 Municipal securities 87.8 30.5 74.8 -29.3 -41.3 -58.4 -53.8 -45.8 -4.3 -107.4 -7.6 -6.4 57 Corporate and foreign bonds 163.6r 166.0r 276.6r 147.9' 305.3 140.1' 118.8' 234.0 330.6 320.0 336.7 240.5 58 Mortgages 158.9 131.5 160.8 204.1' 242.8 217.5' 215.5' 227.7 244.8 295.7 202.9 290.9 59 Consumer credit — 13.7r 5.0r 61.5r 124.9' 142.9 133.8' 141.8' 138.3 156.9 158.5 118.2 121.7 60 Bank loans n.e.c —29.1 -9.3 — 8.5 62.2' 114.5 85.1' 78.1' 157.6 123.7 92.1 84.5 69.0 61 Open market paper -44.0 13.1 — 5.1 35.7 74.3 61.7' 122.5' 88.8 61.9 88.1 58.5 46.6 62 Other loans and advances -95.6 8.9 8.0 71.7 57.5 70.2 111.0 58.1 56.5 34.9 80.6 15.7 Funds raised through mutual funds and corporate equities 63 Total net share issues 209.4 294.9 442.1 150.8 159.3 113.2 -81.1 40.0 156.7 196.1 244.3 273.4 64 Mutual funds 147.2 209.1 323.7 128.9 173.9 129.7 -12.6 78.5 173.3 195.3 248.6 290.9 65 Corporate equities 62.2 85.8 118.4 21.9 -14.7 -16.4 -68.5 -38.5 -16.6 .7 -4.3 -17.6 66 Nonfinancial corporations 18.3 27.0 21.3 -44.9 -74.2 -50.0 -118.0 -60.0 -71.3 -92.8 -72.8 -118.0 67 Financial corporations 13.3 28.1 36.6 24.1 12.3 10.5 16.3 8.7 17.7 9.7 13.3 11.5 68 Foreign shares purchased by U.S. residents 30.7 30.7 60.5 42.7 47.2 23.1 33.2 12.8 37.0 83.9 55.3 89.0 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables F.2 through F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995r 1996 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 11999955rr Q3 Q4 Qi Q2 Q3 Q4 Qi NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 652.1r 805.6r 988.4r l,066.5r 1,245.6 l,035.9r l,205.2r 1,214.8 1,364.9 1,169.0 1,233.7 1,214.0 2 Private domestic nonfinancial sectors 105.21" 87.9r 65.6r 258.9r -84.8 213.4r 221.8' 35.3 -142.3 -54.9 -177.3 -133.6 3 Households 29.0r 81.7r 52.2r 304.7r 51.5 292.3r 343.4' 170.8 -77.2 203.2 -90.7 -103.6 4 Nonfarm noncorporate business -5.3 -.1 .6 .7 1.0 .7 .9 .5 1.1 1.1 1.2 1.2 5 Nonfinancial corporate business 30.7 27.8 9.1r 48.lr -3.5 31.3' 53.2' -41.1 39.5 -50.2 37.6 52.7 6 State and local governments 50.8 -21.5 3.7 -94.6 -133.7 -117.0 -169.7 -94.9 -105.7 -209.0 -125.3 -83.9 7 U.S. government 10.5 -11.9 -18.4 -24.2 -21.3 -11.3 -24.4 -13.2 -24.3 -23.9 -23.9 -24.6 8 Rest of the world 13.3 98.2 128.3 134.4 271.7 137.5 210.9 241.2 326.1 358.0 161.7 327.6 9 Financial sectors 523.T 631.5 812.8 697.4' 1,080.0 696.3r 790.8r 951.6 1,205.3 889.8 1,273.1 1,044.5 10 Government sponsored enterprises 15.1 68.8 90.2 119. r 94.7 121.9r 171,4r 28.2 97.5 61.5 191.7 42.3 11 Federally related mortgage pools 136.6 115.6 83.6 116.5r 98.2 98.3r 12.2' 26.4 64.9 119.9 181.4 109.8 12 Monetary authority 31.1 27.9 36.2 31.5 12.7 29.7 30.0 16.3 20.8 -11.1 24.7 14.3 13 Commercial banking 80.8 95.3 142.2 163.4 266.3 183.4 174.5 343.1 315.6 248.9 157.7 130.7 14 U.S. chartered banks 35.7 69.5 149.6 148.1 186.6 155.6 174.2 183.4 222.4 227.5 112.9 85.9 15 Foreign banking offices in United States 48.5 16.5 -9.8 11.2 75.4 22.9 -5.6 158.8 83.9 24.1 35.0 51.1 16 Bank holding companies -1.5 5.6 .0 .9 -.3 2.7 -2.4 -1.5 5.3 -9.6 4.6 -5.3 17 Banks in U.S. affiliated areas -1.9 3.7 2.4 3.3 4.7 2.2 8.3 2.4 4.0 7.0 5.2 -.9 18 Funding corporations 8.2 17.7 -19.4' -27.4 6.2 —43.4r -4.2r 39.8 -3.5 5.5 -17.0 154.9 19 Thrift institutions -146.1 -61.3 -1.7 34.9 8.7 53.8 32.4 28.2 9.7 43.6 -46.8 -2.1 20 Life insurance companies 86.5 78.5 100.9 66.3 98.7 89.5 79.4 132.4 131.2 77.0 54.3 122.1 21 Other insurance companies 30.0 6.7 27.7 24.9 21.4 25.3 30.4 19.2 21.7 21.8 22.8 22.2 22 Private pension funds 35.4 41.1 45.9 47.0 61.3 42.5 74.7 58.9 57.2 50.5 78.5 77.8 23 State and local government retirement funds 41.1 23.0 19.8 29.0 21.4 -11.1 36.6 62.4 3.2 6.8 13.2 87.3 24 Finance companies -9.2 7.5 -9.0 68.2 63.6 63.8r 81.7r 92.5 65.7 43.7 52.7 56.7 25 Mortgage companies 11.2 .1 .0 -22.9 -3.4 -14.0 2.1 -14.4 29.9 7.3 -36.4 1.7 26 Mutual funds 80.1 126.2 159.5 -7.1 52.5 -29.3 -70.4 -15.1 21.5 52.0 151.5 62.9 27 Closed-end funds 12.8 18.2 11.0 -5.5 5.8 -13.6 -10.0 3.5 6.4 8.4 5.0 -1.2 28 Money market mutual funds 32.7 4.7 20.4 30.0 86.5 57.7 53.9 53.1 135.2 33.2 124.6 170.1 29 Real estate investment trusts (REITs) -.7 1.1 .6 4.7 1.8 5.5 .2 1.8 1.8 1.8 1.9 1.9 30 Brokers and dealers 17.5 -1.3 14.8 -44.2 90.1 -21.9 -8.0 30.5 146.2 -1.8 185.6 -101.1 31 Asset-backed securities issuers (ABSs) 50.0r 53.7r 80.8r 61,9r 112.3 50.6r 42.6r 55.5 100.9 144.6 148.0 112.2 32 Bank personal trusts 10.0 8.0 9.5 7.1 -18.8 7.7 1.4 -10.8 -20.6 -23.7 -20.2 -18.1 RELATION OF LIABILITIES TO FINANCIAL ASSETS 33 Net flows through credit markets 652.11" 805.6r 988.4r l,066.5r 1,245.6 l,035.9r l,205.2r 1,214.8 1,364.9 1,169.0 1,233.7 1,214.0 Other financial sources 34 Official foreign exchange -5.9 -1.6 .8 -5.8 8.8 .2 -8.6 17.8 10.3 9.0 -1.9 -2.1 35 Special drawing rights certificates .0 -2.0 .0 .0 2.2 .0 .0 .0 .0 8.6 .0 .0 36 Treasury currency .0 .2 .4 .7 .6 .8 .7 .7 .7 .8 .0 .0 37 Life insurance reserves 25.7 27.3 35.2 34.0 49.9 67.7 21.6 54.0 49.9 29.9 66.0 56.0 38 Pension fund reserves 198.2 238.6 247.3 248.0 258.5 238.0 293.4 302.5 310.7 223.0 197.7 301.5 39 Interbank claims -3.4 49.4r 50.5r 89.7r 10.1 4.1 99.9r -13.6 25.2 -43.2 71.8 -80.9 40 Checkable deposits and currency 86.3 113.5 117.3 -9.7 -12.5 -66.0 -40.5 42.8 133.5 -151.5 -75.0 51.7 41 Small time and savings deposits 1.5 -57.2 -70.3 -40.0 96.5 -51.8 -46.9 18.1 112.0 142.2 113.6 174.7 42 Large time deposits -58.5 -73.2 -23.5 19.6 65.6 84.0 36.5 116.8 69.2 76.3 .3 52.0 43 Money market fund shares 41.6 4.5 20.2 43.3 142.3 56.4 86.5 59.9 233.5 121.2 154.8 225.6 44 Security repurchase agreements -16.5 43.1 71.2 78.3 110.7 86.0 51.9 161.8 130.7 85.1 65.2 -31.6 45 Foreign deposits -26.5 -3.5 -18.5 45.8 5.8 28.1 97.9 39.2 90.6 -63.8 -42.8 -32.0 46 Mutual fund shares 147.2 209.1 323.7 128.9 173.9 129.7 -12.6 78.5 173.3 195.3 248.6 290.9 47 Corporate equities 62.2 85.8 118.4 21.9 -14.7 -16.4 -68.5 -38.5 -16.6 .7 -4.3 -17.6 48 Security credit 51.4 4.6 61.4 -.1 26.7 -59.3 37.1 -10.7 30.8 35.4 51.3 80.3 49 Trade payables 31.0 46.6 54.4r 111.0' 106.0 91.2' 149.4r 113.6 30.5 183.2 96.8 129.7 50 Taxes payable -7.4r 9.7r 5.2r 3.2r 1.3 10.2' 4.2r 15.3 -4.3 4.0 -9.8 9.5 51 Noncorporate proprietors' equitv ,5r 16.7r 3.4r 22.6r 38.7 46.0r 23.1' 26.9 33.5 48.6 45.7 53.1 52 Investment in bank personal trusts 16.1 — 7.1 1.6 18.8 -47.7 23.6 11.9 -44.3 -45.6 -63.9 -37.1 -47.3 53 Miscellaneous 278.2r 280.5r 364.6r 236.8r 461.9 264.8r 303.4r 327.2 505.1 347.6 667.6 466.0 54 Total financial sources l,473.9r l,790.4r 2,351.7r 2,113.5r 2,730.1 l,979.2r 2,245.7r 2,482.9 3,237.8 2,357.5 2,842.3 2,893.5 Floats not included in assets ( —) 55 U.S. government checkable deposits -13.1 .7 -1.5 -4.8 -6.0 7.4 -24.4 13.2 -16.3 3.5 -24.3 17.8 56 Other checkable deposits 4.5 1.6 -1.3 -2.8 -3.8 -3.3 -2.3 -3.7 -3.9 -3.5 -4.2 -3.9 57 Trade credit 36.1 11.3 —6.6r -7.8r -14.8 12.6r —44.0r 79.5 12.7 -44.1 -107.3 -71.6 Liabilities not identified as assets ( —) 58 Treasury currency -.6 -.2 -.2 -.2 -.5 -.2 -.2 -.2 -.4 -.3 -1.0 -.9 59 Interbank claims 26.2 -4.9 4.2 -2.7 -3.1 10.1 -1.7 .8 8.2 7.6 -29.1 12.4 60 Security repurchase agreements -9.5 3.6 34.3 31.5r 11.0 -53.5r 86.7r 64.4 -47.3 39.6 -12.7 -76.7 61 Foreign deposits -24.0 -2.8 ~1.0' 36.9 -1.5 39.5 55.7r 45.6 81.6 -93.6 -39.5 -41.5 62 Taxes payable -2.2r 11.9r 11. lr 8.6r 8.7 10.8 — .9' -8.9 31.6 10.8 1.4 -24.0 63 Miscellaneous 9.1' -A' -126.T -138.7r -29.8 —44.3r -107.31" -230.6 -36.9 -4.8 153.1 123.3 64 Total identified to sectors as assets l,446.8r l,769.3r 2,444.9r 2,193.7r 2,769.8 2,000.1r 2,284.2r 2,522.7 3,208.3 2,442.4 2,905.9 2,958.8 1. Data in this table also appear in the Board's Z. 1 (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 • August 1996 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1994 1995' 1996 tyyz Q3 Q4 QI Q2 Q3 Q4 QI Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors ll,894.5r 12,537.8' 13,163.0r 13,895.9 12,965.8r 13,163.0' 13,339.3 13,548.4 13,707.8 13,895.9 14,072.1 By sector and instrument 2 U.S. government 3,080.3 3,336.5 3,492.3 3,636.7 3,432.3 3,492.3 3,557.9 3,583.5 3,603.4 3,636.7 3,717.2 3 Treasury securities 3,061.6 3,309.9 3,465.6 3,608.5 3,404.1 3,465.6 3,531.5 3,556.7 3,576.5 3,608.5 3,689.6 4 Budget agency issues and mortgages 18.8 26.6 26.7 28.2 28.2 26.7 26.4 26.8 26.9 28.2 27.6 5 Private 8,814.2r 9,201.3' 9.670.7' 10,259.2 9,533.6' 9,670.7' 9,781.4 9,964.9 10,104.4 10,259.2 10,354.9 By instrument 6 Municipal securities 1,302.8 1.377.5 1.348.2 1,307.0 1,362.6 1,348.2 1,335.4 1,331.7 1,309.9 1,307.0 1,304.1 / Corporate bonds 1,154.5 1,229.7 1,253.0 1,326.3 1,251.5 1,253.0 1,266.3 1,290.9 1,305.8 1,326.3 1,341.0 8 Mortgages 4,088.7 4,260.0 4,454.4' 4,691.8 4,400.5' 4.454.4' 4.495.8 4,563.2 4.641.2 4,691.8 4,748.6 9 Home mortgages 3,037.4 3.227.6 3,430.0' 3,634.7 3,374.6' 3,430.0' 3,465.1 3,524.4 3,594.0 3,634.7 3,682.6 10 Multifamily residential 272.5 267.8 269.1 280.2 270.2 269.1 269.8 273.3 276.8 280.2 284.1 11 Commercial 698.1 683.4 672.3 692.4 673.1 672.3 677.6 681.6 686.1 692.4 696.7 12 Farm 80.7 81.2 83.0 84.6 82.6 83.0 83.4 83.9 84.4 84.6 85.2 13 Consumer credit 802.4' 863.9' 988.8' 1,131.7 933.9' 988.8' 989.3 1,029.7 1,077.5 1,131.7 1,123.3 14 Bank loans n.e.c 672.2 676.0 749.0' 852.0 724.9' 749.0' 782.8 810.6 825.6 852.0 861.9 15 Commercial paper 107.1 117.8 139.2 157.4 138.7 139.2 149.8 162.9 163.3 157.4 173.2 16 Other loans and advances 686.5 676.3 738.0 792.9 721.6 738.0 762.0 775.8 781.2 792.9 802.7 By borrowing sector 1/ Household 4,021.4' 4,272.9' 4,634.7' 5,018.3 4,515.1' 4,634.7' 4,676.5 4,784.1 4,908.0 5,018.3 5,063.2 18 Nonfinancial business 3.696.8 3,770.3 3,921.1 4.171.8 3,885.6 3,921.1 4,002.7 4,084.0 4,122.3 4,171.8 4,224.8 19 Farm 136.3 138.3 141.2 143.2 143.1 141.2 138.9 142.8 144.9 143.2 140.9 20 Nonfarm noncorporate 1,122.9 1,129.9 1.142.0 1,178.0 1,137.4 1,142.0 1,154.5 1,163.3 1,170.4 1,178.0 1,185.0 21 Corporate 2,437.6 2,502.0 2,638.0 2.850.7 2,605.0 2,638.0 2,709.2 2,777.8 2,807.0 2,850.7 2,898.9 22 State and local government 1,095.9 1,158.2 1.114.8 1,069.1 1,132.8 1,114.8 1,102.2 1,096.8 1,074.1 1,069.1 1,066.9 23 Foreign credit market debt held in United States 313.1 381.9 361.6 429.4 352.4 361.6 376.8 387.6 409.9 429.4 438.5 24 Bonds 146.2 227.4 234.6 281.1 227.6 234.6 237.9 250.4 263.4 281.1 292.4 25 Bank loans n.e.c 23.9 24.6 26.1 34.6 26.3 26.1 28.2 29.6 31.6 34.6 36.8 26 Commercial paper 77.7 68.7 41.4 55.0 39.9 41.4 50.9 48.1 55.8 55.0 51.5 27 Other loans and advances 65.3 61.1 59.6 58.7 58.6 59.6 59.8 59.5 59.0 58.7 57.8 28 Total credit market debt owed bv nonfinancial sectors, domestic and foreign 12,207.6' 12,919.7r 13,524.6' 14,325.3 13,318.3' 13,524.6r 13,716.1 13,935.9 14,117.7 14,325.3 14,510.7 Financial secto 29 Total credit market debt owed by financial sectors 3,025.0' 3,321.5' 3,794.6r 4,242.1 3,656.2r 3,794.6r 3,861.4 3,971.8 4,093.9 4,242.1 4,317.1 By instrument 30 U.S. government-related 1,720.0 1,884.1 2,172.7' 2,377.8 2.093.3' 2,172.7' 2,196.2 2,247.1 2,300.1 2,377.8 2,416.6 31 Government-sponsored enterprises securities 443.1 523.7 700.6 807.5 638.3 700.6 716.3 748.1 773.5 807.5 816.9 32 Mortgage pool securities 1,272.0 1,355.6 1,472.1' 1,570.3 1,454.9' 1,472.1' 1,479.9 1,499.0 1,526.6 1,570.3 1,599.7 33 Loans from U.S. government 4.8 4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1,305.1' 1,437.4' 1.621.9' 1.864.3 1,563.0' 1,621.9' 1,665.2 1,724.7 1,793.8 1,864.3 1,900.6 35 Corporate bonds 738.4' 858.5' 973.5' 1.158.9 949.5' 973.5' 1,012.3 1,056.4 1,110.2 1,158.9 1,189.6 36 Mortgages 5.4 8.9 18.7 24.0 17.5 18.7 20.0 21.3 22.6 24.0 25.4 37 Bank loans n.e.c 80.5 67.6 55.3 58.3 53.4 55.3 53.4 58.4 60.3 58.3 59.1 38 Open market paper 394.3 393.5 442.8 488.1 420.5 442.8 454.1 462.8 473.6 488.1 492.8 39 Other loans and advances 86.6 108.9 131.6 135.0 122.0 131.6 125.4 125.7 127.0 135.0 133.6 Bv borrowing sector 40 Government-sponsored enterprises 447.9 528.5 700.6 807.5 638.3 700.6 716.3 748.1 773.5 807.5 816.9 41 Federally related mortgage pools 1,272.0 1,355.6 1.472.1' 1,570.3 1,454.9' 1,472.1' 1,479.9 1,499.0 1,526.6 1,570.3 1,599.7 42 Private financial sectors 1,305.1' 1,437.4' 1,621.9' 1,864.3 1,563.0' 1,621.9' 1.665.2 1,724.7 1,793.8 1,864.3 1,900.6 43 Commercial banks 80.0 84.6 94.5 102.6 92.6 94.5 95.0 99.9 102.0 102.6 100.5 44 Bank holding companies 114.6 123.4 133.6 148.0 129.6 133.6 137.7 142.9 150.0 148.0 141.6 45 Funding corporations 161.6 169.9 199.3 233.9 200.6 199.3 221.0 229.9 240.0 233.9 244.6 46 Savings institutions 88.4 99.6 112.4 115.0 103.4 112.4 107.7 105.9 107.2 115.0 117.8 47 Credit unions .0 .2 .5 .4 .4 .5 .4 .3 .4 .4 .4 48 Life insurance companies .0 .2 .6 .5 .3 .6 .6 .6 .6 .5 1.1 49 Finance companies 390.4 390.5 440.7 492.3 420.9 440.7 456.7 467.2 471.9 492.3 499.8 50 Mortgage companies 30.2 30.2 18.7 16.6 18.5 18.7 16.9 20.6 21.6 16.6 16.8 51 Real estate investment trusts (REITs) 13.9 17.4 31.1 36.5 29.5 31.1 32.4 33.7 35.0 36.5 38.0 52 Brokers and dealers 21.7 33.7 34.3 29.3 29.4 34.3 26.9 26.8 27.4 29.3 21.4 53 Issuers of asset-backed securities (ABSs) 404.3' 487.6' 556.1' 689.1 537.7' 556.1' 570.0 596.8 637.8 689.1 718.8 All sectors 54 Total credit market debt, domestic and foreign. ... 15,232.6r 16,241.2r 17,319.2r 18,567.4 16,974.5r 17,319.2' 17,577.5 17,907.8 18,211.5 18,567.4 18,827.8 55 U.S. government securities 4,795.5 5.215.8 5.665.0' 6,014.6 5,525.6' 5,665.0' 5,754.1 5,830.6 5,903.5 6,014.6 6,133.8 56 Municipal securities 1,302.8 1,377.5 1,348.2 1,307.0 1.362.6 1,348.2 1,335.4 1,331.7 1,309.9 1,307.0 1,304.1 5/ Corporate and foreign bonds 2,039.0' 2,315.6' 2,461.0' 2,766.3 2,428.6' 2,461.0' 2,516.5 2,597.7 2,679.5 2,766.3 2,823.1 58 Mortgages 4,094.1 4,269.0 4,473.1' 4,715.9 4,418.0' 4,473.1' 4,515.9 4,584.6 4,663.9 4,715.9 4,774.0 59 Consumer credit 802.4' 863.9' 988.8' 1,131.7 933.9' 988.8' 989.3 1,029.7 1,077.5 1,131.7 1,123.3 60 Bank loans n.e.c 776.6 768.2 830.4' 944.9 804.5' 830.4' 864.4 898.6 917.4 944.9 957.8 61 Open market paper 579.0 580.0 623.5 700.4 599.2 623.5 654.7 673.8 692.7 700.4 717.6 62 Other loans and advances 843.1 851.1 929.1 986.6 902.2 929.1 947.2 961.0 967.1 986.6 994.2 1. Data in this table also appear in the Board's Z. 1 (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 LIABILITIES1 Billions of dollars except as noted, end of period 1994 1995r 1996 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999944 11999955rr Q3 Q4 Q1 Q2 Q3 Q4 Qi CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 15,232.6r 16,241.2r 17,319.2r 18,567.4 16,974.5r 17,319.2r 17,577.5 17,907.8 18,211.5 18,567.4 18,827.8 2 Private domestic nonfinancial sectors 2,671.6r 2,730. r 3,019.3r 2,930.4 2,900.6r 3,019.3r 2,984.8 2,935.1 2,942.2 2,930.4 2,858.6 3 Households l,618.5r l,658.9r l,993.9r 2,041.3 l,857.7r l,993.9r 2,013.6 1,974.3 2,048.3 2,041.3 2,001.8 4 Nonfarm noncorporate business 38.1 38.8 39.5 40.4 39.3 39.5 39.6 39.9 40.2 40.4 40.7 5 Nonfinancial corporate business 257.8 271.5r 319.7r 316.1 295.3r 319.7r 291.0 302.8 290.4 316.1 306.6 6 State and local governments 757.2 760.8 666.3 532.5 708.3 666.3 640.6 618.1 563.4 532.5 509.4 7 U.S. government 235.0 230.7 206.5 185.2 212.6 206.5 203.2 197.1 191.2 185.2 179.0 8 Rest of the world 1,022.8 1,146.6 1,255.7 1,527.5 1,240.7 1,255.7 1,324.4 1,402.6 1,493.1 1,527.5 1,617.8 9 Financial sectors 11,303.2r 12,133.8r 12,837.7r 13,924.3 12,620.6r 12,837.7r 13,065.2 13,372.9 13,585.1 13,924.3 14,172.5 10 Government-sponsored enterprises 457.8 548.0 667. r 761.8 624.3r 667. r 673.5 698.6 714.0 761.8 771.7 11 Federally related mortgage pools 1,272.0 • 1,355.6 l,472.1r 1,570.3 1,454.9r l,472.1r 1,479.9 1,499.0 1,526.6 1,570.3 1,599.7 12 Monetary authority 300.4 336.7 368.2 380.8 356.8 368.2 367.1 375.7 370.6 380.8 379.6 13 Commercial banking 2,948.6 3,090.8 3,254.3 3,520.6 3,203.9 3,254.3 3,327.8 3,409.8 3,474.2 3,520.6 3,541.4 14 U.S. chartered banks 2,571.9 2,721.5 2,869.6 3,056.1 2,822.3 2,869.6 2,906.5 2,963.7 3,023.7 3,056.1 3,068.8 15 Foreign banking offices in United States 335.8 326.0 337.1 412.6 335.5 337.1 373.6 396.0 401.1 412.6 422.3 16 Bank holding companies 17.5 17.5 18.4 18.0 19.0 18.4 18.0 19.3 16.9 18.0 16.7 17 Banks in U.S. affiliated areas 23.4 25.8 29.2 33.8 27.1 29.2 29.8 30.8 32.5 33.8 33.6 18 Funding corporations 162.5 149.2r 129.5r 138.3 130.2r 129.5r 140.8 137.4 143.1 138.3 174.9 19 Thrift institutions 1,134.5 1,132.7 1,167.6 1,176.3 1,160.4 1,167.6 1,173.4 1,177.4 1,188.9 1,176.3 1,174.6 20 Life insurance companies 1,309.1 1,420.6 1,487.0 1,585.7 1,470.7 1,487.0 1,523.1 1,557.1 1,575.5 1,585.7 1,619.2 21 Other insurance companies 389.4 422.7 446.4 471.9 439.1 446.4 451.8 458.5 464.4 471.9 478.1 22 Private pension funds 571.7 617.6 664.6 725.9 645.9 664.6 679.3 693.6 706.2 725.9 745.3 23 State and local government retirement funds 417.5 437.3 466.3 487.7 454.3 466.3 480.7 482.1 481.8 487.7 508.2 24 Finance companies 496.4 482.8 551.0 614.6 524.1 551.0 568.5 586.9 594.7 614.6 623.3 25 Mortgage companies 60.5 60.4 37.5 34.1 37.0 37.5 33.9 41.4 43.2 34.1 34.5 26 Mutual funds 566.4 725.9 718.8 771.3 741.8 718.8 719.3 724.8 739.2 771.3 791.7 27 Closed-end funds 67.7 78.6 73.1 78.9 75.6 73.1 74.0 75.6 77.7 78.9 78.6 28 Money market mutual funds 408.6 429.0 459.0 545.5 437.9 459.0 480.6 508.0 505.7 545.5 595.6 29 Real estate investment trusts (REITs) 8.1 8.6 13.3 15.1 13.3 13.3 13.8 14.2 14.7 15.1 15.6 30 Brokers and dealers 122.7 137.5 93.3 183.4 95.3 93.3 101.0 137.5 137.0 183.4 158.2 31 Asset-backed securities issuers (ABSs) 378.0r 458.8r 520.7r 632.9 507.3r 520.7r 531.5 555.2 593.2 632.9 657.6 32 Bank personal trusts 231.5 240.9 248.0 229.2 247.7 248.0 245.3 240.2 234.2 229.2 224.7 RELATION OF LIABILITIES TO FINANCIAL ASSETS 15,232.6r 1166,,224411..22rr 1177,,331199..22rr 1188,,556677..44 1166,,997744..55rr 1177,,331199..22rr 1177,,557777..55 1177,,990077..88 1188,,221111..55 1188,,556677..44 1188,,882277..88 Other liabilities 34 Official foreign exchange 51.8 53.4 53.2 63.7 55.5 53.2 64.1 67.1 65.1 63.7 62.1 35 Special drawing rights certificates 8.0 8.0 8.0 10.2 8.0 8.0 8.0 8.0 10.2 10.2 10.2 36 Treasury currency 16.5 17.0 17.6 18.2 17.5 17.6 17.8 18.0 18.2 18.2 18.2 37 Life insurance reserves 433.0 468.2 502.2 552.1 496.8 502.2 515.7 528.1 535.6 552.1 566.1 38 Pension fund reserves 4,055.1 4,471.6 4,693.9 5,499.6 4,677.0 4,693.9 4,895.7 5,095.4 5,318.1 5,499.6 5,745.6 39 Interbank claims 138.5r 189.3 280.0' 290.7 250.1 280.0r 273.0 265.9 267.4 290.7 266.2 40 Deposits at financial institutions 5,050.2 5,154.9 5,296.0 5,704.4 5,212.4 5,296.0 5,389.5 5,572.4 5,615.3 5,704.4 5,799.1 41 Checkable deposits and currency 1,134.4 1,251.7 1,242.0 1,229.5 1,205.0 1,242.0 1,193.9 1,246.3 1,200.4 1,229.5 1,183.8 42 Small time and savings deposits 2,293.5 2,223.2 2,183.3 2,279.7 2,199.1 2,183.3 2,200.1 2,222.4 2,255.6 2,279.7 2,336.4 43 Large time deposits 415.2 391.7 411.2 476.9 402.6 411.2 441.1 456.2 477.4 476.9 490.6 44 Money market fund shares 539.5 559.6 602.9 745.3 578.7 602.9 634.0 678.5 702.7 745.3 816.9 45 Security repurchase agreements 399.9 471.1 549.4 660.1 548.1 549.4 603.4 629.3 655.6 660.1 666.5 46 Foreign deposits 267.7 257.6 307.1 312.9 278.9 307.1 316.9 339.6 323.6 312.9 304.9 47 Mutual fund shares 992.5 1,375.4 1,477.3 1,852.8 1,515.8 1,477.3 1,553.3 1,661.0 1,782.0 1,852.8 2,004.8 48 Security credit 217.7 279.0 279.0 305.6 263.9 279.0 269.5 277.9 286.2 305.6 318.3 49 Trade payables 995.1 l,049.4r l,160.5r 1,266.5 l,099.8r l,160.5r 1,159.8 1,174.2 1,217.3 1,266.5 1,269.7 50 Taxes payable 79.7 84.9r 88.0r 89.3 87.1r 88.0r 94.3 89.2 91.9 89.3 94.2 51 Investment in bank personal trusts 660.6 691.3 699.4 767.4 701.1 699.4 719.7 739.7 758.6 767.4 781.6 52 Miscellaneous 4,785.2r 5,165.2r 5,397.3r 5,769.9 5,373.0r 5,397.3r 5,459.7 5,537.2 5,626.9 5,769.9 5,836.4 53 Total liabilities 32,716.4r 35,248.7r 37,271.6r 40,757.9 36,732.4r 37,271.6r 37,997.6 38,941.9 39,804.3 40,757.9 41,600.4 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 19.6 20.1 21.1 22.1 21.0 21.1 22.7 22.9 22.1 22.1 22.1 55 Corporate equities 5.462.9 6,278.5 6,293.4 8,345.4 6,228.7 6,293.4 6,835.8 7,393.0 8,013.8 8,345.4 8,820.5 56 Household equity in noncorporate business 2,458.3 2,476.3 2,564.6 2,657.7 2,550.9 2,564.6 2,576.7 2,607.0 2,619.3 2,657.7 2,669.9 Floats not included in assets (-) 57 U.S. government checkable deposits 6.8 5.6 3.4 3.1 1.2 3.4 4.2 2.0 .6 3.1 .0 58 Other checkable deposits 42.0 40.7 38.0 34.2 30.6 38.0 33.3 35.7 27.3 34.2 29.6 59 Trade credit -251. LR -251.4' -260.1' -274.9 -323.2r -260.1r -297.1 -315.8 -331.3 -274.9 -356.1 Liabilities not identified as assets (-) 60 Treasury currency -4.9 -5.1 -5.4 -5.8 -5.3 -5.4 -5.4 -5.5 -5.6 -5.8 -6.0 61 Interbank claims -9.3 -4.7 -6.5 -9.0 -3.4 -6.5 -2.7 -2.9 .1 -9.0 -2.5 62 Security repurchase agreements 43.0 77.3 108.8r 119.8 100.7r 108.8r 132.9 114.5 136.4 119.8 108.7 63 Foreign deposits 217.6 218.4r 258.7 257.2 241.3 258.7 270.1 290.5 267.1 257.2 246.8 64 Taxes payable 25.2r 26.8r 25.0r 33.7 22.8r 25.0r 10.0 25.6 28.7 33.7 13.5 65 Miscellaneous —514.5r -667.2r -830.5r -859.2 -688.2r -830.5r -892.2 -878.5 -884.9 -859.2 -896.0 66 Total identified to sectors as assets 41,102.3r 44,583.2r 46,819.3r 52,483.9 46,156.5r 46,819.3r 48,179.7 49,699.2 51,221.1 52,483.9 53,975.0 1. Data in this table also appear in the Board's Z. 1 (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 • August 1996 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1987=100, except as noted 1995 1996r 11999933 11999944 11999955 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 1 Industrial production 111.5 118.1 121.9 122.8 122.2 122.6 122.8 122.5 124.2 123.6 124.4 125.3 Market groupings 2 Products, total 110.0 115.6 118.3 119.4 118.3 118.8 119.2 118.6 120.7 120.0 120.9 121.6 3 Final, total 112.7 118.3 121.4 122.6 121.3 121.9 122.1 121.9 124.5 123.5 124.9 125.6 4 Consumer goods 109.5 113.7 115.1 116.0 114.9 115.9 115.7 114.6 116.6 115.3 116.1 116.5 5 Equipment 117.5 125.3 131.4 133.1 131.5 131.4 132.3 133.7 137.3 136.7 139.3 140.4 6 Intermediate 101.8 107.3 109.0 109.5 109.2 109.3 110.1 108.5 109.3 109.4 108.7 109.4 7 Materials 113.8 122.0 127.4 128.1 128.1 128.4 128.4 128.5 129.4 129.2 129.8 131.0 Industry groupings 112.3 119.7 123.9 124.9 124.4 124.5 124.8 124.5 126.2 125.2 126.5 127.2 8 Manufacturing 80.6 83.3 83.0 82.8 82.2 8-2.0 81.9 81.4 82.3 81.3 81.9 82.0 9 Capacity utilization, manufacturing (percent)* 10 Construction contracts3 105.0r 114.2 118.0r 120.0 120.0 121.0 116.0r 119.0 113.0 124.0 124.0 120.0 11 Nonagricultural employment, total4 1 9 0 4 8 . . 3 6 r 1 9 1 5 2 . . 6 0 r 1 9 1 8 5 . . 2 0 r 1 9 1 8 5 . . 0 4 r r 1 9 1 7 5 . . 9 5 r 1 9 1 7 5 . . 8 6 r 1 9 1 1 5 . .9 9 r ' 1 9 1 7 5 . . 7 8 1 9 1 8 6 . . 3 3 1 9 1 8 6 . . 1 5 1 9 1 8 6 . . 1 6 1 9 1 8 7 . . 2 0 12 Goods-producing, total 94.8 95.1 96.9 96.9r 96.1' 96.6r 96.1' 96.4 96.5 96.2 96.2 96.2 13 Manufacturing, total 95.3 97.4 98.3 98.4r 98.1' 98.0r 98.1' 97.7 97.8 97.4 97.4 97.4 14 Manufacturing, production workers 112.9 116.3 119.5 120.9r 121.r 121.3r 121.6' 121.6 122.1 122.3 122.5 122.9 15 Service-producing 141.3 148.3 157.4 158.8 159.6 160.1 161.1 161.2 162.5 163.2 164.0 n.a. 16 Personal income, total 136.0 142.6 150.5 152.0 153.0 152.9 153.7 153.4 155.1 155.8 156.6 n.a. 17 Wages and salary disbursements 119.3 125.0 129.3 129.6 129.5 129.5 129.8 128.4 129.8 129.1 131.0 n.a. 18 Manufacturing 142.4 149.2 157.8 159.3 160.0 160.6 161.7 161.7 162.8 163.4 162.5 n.a. 2 1 0 9 Ret D ai i l s p s o a s l a e b s5 l e personal income5 134.7 144.8 152.2 153.4 153.0 154.3 155.3 155.3 158.6 159.3 159.0 160.2 Prices6 21 Consumer (1982-84=100) 144.5 148.2 152.4 153.2 153.7 153.6 153.5 154.4 154.9 155.7 156.3 156.6 22 Producer finished goods (1982=100) 124.7 125.5 127.9 127.9 128.7 128.7 129.1 129.4 129.4 130.2 130.8 131.0 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 Sun>ey 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 1995r 1996r CCaatteeggoorryy 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 128,040 131,056 132,304 132,473 132,471 132,352 132,903 133,018 133,655 133,361 133,910 Employment 2 Nonagricultural industries-1 116.232 119,651 121,460 121,810 121,739 121,656 121,698 122,143 122,664 122,726 122,971 3 Agriculture 3,074 3,409 3,440 3,434 3,323 3,325 3,529 3,519 3,487 3,368 3,491 Unemployment 4 Number 8,734 7,996 7,404 7,229 7,409 7,371 7,677 7,355 7,504 7,266 7,448 5 Rate (percent of civilian labor force) 6.8 6.1 5.6 5.5 5.6 5.6 5.8 5.5 5.6 5.4 5.6 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 110,525 113,423 116,597 117,749 117,899 118,136 118,070 118,579 118,737 118,900 119,248 7 Manufacturing 18,003 18,064 18,406 18,378 18,353 18,367 18,309 18,332 18,282 18,278 18,284 8 Mining 611 604 579 573 569 570 569 573 574 574 575 9 Contract construction 4,642 4,916 5,244 5,200 5,211 5,223 5,234 5,349 5,340 5,351 5,379 10 Transportation and public utilities 5,787 5,842 6,194 6,212 6,233 6,249 6,254 6,270 6,289 6,288 6,305 11 Trade 25,675 26,362 27,156 27,728 27,778 27,832 27,780 27,869 27,891 27,970 28,022 12 Finance 6,712 6,789 6,948 6,859 6,871 6,887 6,894 6,919 6,932 6,940 6,960 13 Service 30,278 31,805 32,788 33,460 33,546 33,661 33,694 33,902 34,035 34,100 34,281 14 Government 18,817 19,041 19,282 19,339 19,338 19,347 19,336 19,365 19,394 19,399 19,442 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 SSeerriieess Q2 Q3 Q4 Qlr Q2 Q3 Q4 QI Q2 Q3 Q4 Qir Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 121.4 122.3 122.5 123.4 145.0 146.3 147.7 149.1 83.7 83.6 82.9 82.8 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 117.7 117.1 117.1 116.6 134.3 135.2 136.1 136.9 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 80.2 5 Durable goods 131.4 133.0 134.2 136.0 159.2 161.7 164.2 166.7 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 119.1 118.2 118.8 118.6 128.1 128.8 129.5 130.3 92.9 91.8 91.8 91.0 8 Iron and steel 121.9 121.3 121.3 122.6 132.4 132.9 133.5 134.4 92.1 91.3 90.9 91.2 9 Nonferrous 115.1 113.9 115.3 113.1 122.5 123.3 124.0 124.8 94.0 92.4 93.0 90.7 10 Industrial machinery and equipment 174.4 178.9 186.8 195.6 200.5 206.1 212.0 218.1 87.0 86.8 88.1 89.7 11 Electrical machinery 171.2 178.4 182.9 186.4 199.0 206.3 213.9 221.8 86.0 86.5 85.5 84.0 12 Motor vehicles and parts 140.5 140.7 140.5 132.6 174.4 176.8 179.2 181.3 80.6 79.6 78.4 73.2 13 Aerospace and miscellaneous transportation equipment . . . 88.7 86.9 79.0 83.9 130.9 130.1 129.3 128.6 67.7 66.8 61.1 65.2 14 Nondurable goods 114.4 114.3 113.9 113.5 137.1 137.7 138.4 139.0 83.5 83.0 82.3 81.6 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 124.0 124.6 126.4 127.0 154.7 155.6 156.5 157.5 80.2 80.1 80.7 80.6 18 Plastics materials 122.9 118.3 123.1 126.9 133.8 135.4 137.1 138.6 91.9 87.3 89.7 91.6 19 Petroleum products 108.0 109.2 107.7 109.6 116.2 116.4 116.6 116.8 92.9 93.8 92.4 93.9 20 Mining 100.7 100.2 98.2 98.7 112.0 111.9 111.9 111.9 89.9 89.5 87.8 88.2 21 Utilities 120.7 124.7 124.1 126.7 134.8 135.2 135.6 136.0 89.5 92.3 91.5 93.2 22 Electric 120.4 125.0 123.7 126.4 132.1 132.5 133.0 133.4 91.1 94.3 93.1 94.8 1973 1975 Previous cycle5 Latest cycle6 1995 1996 High Low High Low High Low May Dec. Jan. Feb.r Mar/ Apr. Mayp Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 83.7 82.9 82.4 83.3 82.6 82.9 83.2 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 82.8 81.9 81.4 82.3 81.3 81.9 82.0 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 87.8 86.0 85.4 84.9 85.2 85.0 85.2 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.1 80.8 80.2 79.7 81.1 79.6 80.5 80.6 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 82.3 81.7 81.3 82.5 81.0 82.3 82.5 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.1 85.7 88.1 84.8 84.8 88.1 89.6 88.9 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.2 93.3 92.6 93.5 89.8 89.6 90.5 90.2 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.0 93.0 91.8 95.6 88.9 89.1 90.1 88.6 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.2 93.7 93.5 90.7 91.0 90.2 91.1 92.1 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 71.8 87.1 88.8 88.8 89.9 90.3 89.8 90.0 11 Electrical machinery 87.8 63.8 89.4 71.1 84.9 77.0 86.0 84.4 83.2 85.1 83.8 83.0 83.0 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 56.6 79.6 78.4 75.0 77.9 66.7 79.1 79.3 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 78.8 67.6 61.5 63.8 65.5 66.3 66.7 66.9 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.3 83.5 82.1 81.4 81.9 81.6 81.2 81.2 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.8 87.1 81.2 78.0 79.4 81.6 78.9 79.4 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.7 93.0 88.1 85.3 84.1 85.0 85.1 85.8 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 79.0 80.2 80.6 80.8 80.7 80.2 79.7 79.5 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 91.9 89.6 90.8 91.3 92.6 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 84.6 92.4 93.3 93.3 94.3 94.0 94.3 93.6 20 Mining 94.4 88.4 96.6 80.6 86.5 86.1 89.7 87.7 86.8 87.6 90.4 89.2 89.2 21 Utilities 95.6 82.5 88.3 76.2 92.6 83.1 90.6 92.2 92.4 93.1 93.9 92.1 94.8 22 Electric 99.0 82.7 88.3 78.7 94.8 86.7 91.7 93.1 94.2 94.9 95.2 93.7 97.3 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 Reserve 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 • August 1996 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted _ 1992 1995 1996 roup pro- 1995 por- avg. tion May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb.r Mar/ Apr. Mayp Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 121.9 121.3 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 124.2 123.6 124.4 125.3 2 Products 60.6 118.3 117.5 117.9 118.0 119.2 119.4 118.3 118.8 119.2 118.6 120.7 120.0 120.9 121.6 3 Final products 46.3 121.4 120.6 121.1 121.2 122.4 122.6 121.3 121.9 122.1 121.9 124.5 123.5 124.9 125.6 4 Consumer goods, total 28.6 115.1 114.1 114.8 114.6 115.9 116.0 114.9 115.9 115.7 114.6 116.6 115.3 116.1 116.5 Durable consumer goods 5.6 124.2 121.6 122.3 121.4 124.0 125.8 123.4 124.9 126.3 120.3 125.1 119.3 126.0 126.4 6 Automotive products 2.5 130.7 127.1 129.1 125.3 130.7 132.9 128.5 130.5 132.8 125.9 133.1 120.3 134.5 135.2 7 Autos and trucks 1.6 131.4 127.4 129.5 123.9 132.0 133.1 128.6 129.8 132.1 124.1 133.5 111.1 135.9 135.9 8 Autos, consumer .9 103.1 99.4 99.2 101.0 100.6 102.6 100.2 100.2 99.5 92.8 99.7 77.0 104.1 107.1 9 Trucks, consumer .7 181.7 177.1 183.6 163.9 188.2 187.7 179.1 182.8 190.6 180.4 194.4 173.1 192.7 187.0 10 Auto parts and allied goods .9 127.8 125.0 126.8 126.6 126.6 130.8 126.7 130.2 132.7 128.1 130.7 137.3 130.0 132.3 11 Other 3.0 118.6 116.7 116.3 118.1 118.1 119.6 118.9 119.9 120.5 115.5 118.1 118.4 118.5 118.7 12 Appliances, televisions, and air conditioners .7 135.5 131.2 131.4 132.2 135.8 139.4 140.1 145.3 141.9 132.2 137.5 135.9 139.9 137.6 13 Carpeting and furniture .8 105.8 103.0 101.8 107.9 104.4 106.9 105.6 104.1 107.4 101.1 103.4 107.2 104.4 105.0 14 Miscellaneous home goods 1.5 118.2 118.1 118.0 117.4 118.0 117.8 116.9 117.6 118.3 116.2 117.7 116.9 117.0 118.0 15 Nondurable consumer goods 23.0 112.9 112.4 113.1 113.0 113.9 113.7 112.9 113.8 113.2 113.3 114.5 114.4 113.7 114.1 16 Foods and tobacco 10.3 111.3 111.5 113.1 112.8 111.8 111.6 111.1 110.9 110.6 110.6 112.0 112.2 112.2 111.9 17 Clothing 2.4 94.8 96.7 94.6 93.6 93.9 93.4 92.9 91.5 89.7 88.2 90.3 89.0 88.7 88.6 18 Chemical products 4.5 131.3 127.3 128.6 128.6 132.6 134.0 135.7 135.0 136.5 138.1 138.1 136.8 134.6 134.8 19 Paper products 2.9 106.6 106.5 106.3 107.6 106.7 107.3 106.6 108.4 106.3 104.9 106.0 105.8 106.3 107.0 20 Energy 2.9 116.5 115.8 115.8 116.1 122.3 119.0 113.1 121.1 119.5 121.0 122.6 123.8 121.3 124.8 21 Fuels .9 108.8 108.2 108.8 108.2 108.4 111.4 107.3 108.2 108.6 108.6 111.8 112.2 112.2 113.0 22 Residential utilities 2.1 119.6 119.0 118.7 119.4 128.2 122.2 115.4 126.6 124.1 126.1 127.2 128.7 125.1 129.8 23 Equipment 17.7 131.4 130.8 131.2 131.6 132.9 133.1 131.5 131.4 132.3 133.7 137.3 136.7 139.3 140.4 24 Business equipment 13.7 155.7 154.3 155.1 155.7 157.5 158.2 156.5 156.9 158.4 160.5 164.8 163.0 166.4 167.7 25 Information processing and related 5.7 198.1 193.9 196.0 197.2 201.0 203.0 206.5 208.1 209.4 213.3 220.5 222.8 225.5 229.3 26 Computer and office equipment 1.4 373.5 362.1 363.2 371.7 379.6 390.0 402.9 417.8 431.7 442.9 463.3 481.0 495.4 506.5 27 Industrial 4.0 127.5 126.5 126.2 127.1 129.1 128.7 128.6 129.1 129.5 129.6 131.3 130.5 130.1 130.6 28 Transit 2.6 136.3 139.6 140.3 139.8 138.0 137.9 122.3 119.6 124.5 128.1 133.2 120.4 135.3 134.2 29 Autos and trucks 1.2 140.1 137.8 139.5 139.9 141.3 143.3 135.7 134.2 135.3 129.1 136.0 113.6 140.0 138.6 30 Other 1.4 123.2 122.7 122.6 122.6 122.2 123.3 120.9 121.4 121.7 122.1 123.5 122.5 122.3 121.0 31 Defense and space equipment 3.3 65.9 66.8 66.8 66.5 66.1 65.2 64.4 62.9 62.0 61.6 63.1 64.0 63.8 64.0 32 Oil and gas well drilling .6 87.1 90.5 86.8 88.4 89.5 88.3 83.5 83.1 83.8 85.1 89.7 96.3 100.6 104.3 33 Manufactured homes .2 152.7 148.3 149.6 148.6 155.9 158.0 158.9 161.8 164.4 158.1 157.8 168.2 170.7 34 Intermediate products, total 14.3 109.0 108.2 108.2 108.5 109.4 109.5 109.2 109.3 110.1 108.5 109.3 109.4 108.7 109.4 35 Construction supplies 5.3 108.2 106.6 107.2 107.3 107.0 108.4 108.3 108.7 110.5 107.2 109.3 111.0 110.4 110.7 36 Business supplies 9.0 109.6 109.4 109.1 109.5 111.0 110.3 109.9 109.9 110.0 109.6 109.5 108.5 107.9 108.7 37 Materials 39.4 127.4 127.2 126.8 126.8 128.1 128.1 128.1 128.4 128.4 128.5 129.4 129.2 129.8 131.0 38 Durable goods materials 20.8 141.5 139.8 139.7 140.2 142.3 144.1 143.9 145.3 144.8 145.8 147.3 145.7 147.7 149.1 39 Durable consumer parts 4.0 138.5 135.9 135.8 133.9 138.4 139.8 138.6 140.1 139.3 140.6 141.1 132.3 142.3 143.9 40 Equipment parts 7.5 163.0 160.3 161.7 164.4 167.1 169.1 169.4 171.0 170.8 171.7 176.3 177.3 177.9 180.2 41 Other 9.2 126.2 125.6 124.5 124.4 124.9 126.8 126.5 127.9 127.2 128.2 127.8 127.4 127.1 127.7 42 Basic metal materials 3.1 125.7 125.5 123.5 124.9 123.1 127.0 124.3 128.1 126.6 125.7 123.7 124.2 123.5 123.3 43 Nondurable goods materials 8.9 119.8 122.2 120.4 118.9 118.8 117.8 118.7 116.6 117.4 115.7 116.1 116.2 116.1 116.4 44 Textile materials 1.1 109.2 112.8 109.0 102.6 109.2 106.2 107.3 104.8 103.3 100.3 101.8 103.1 100.8 102.6 45 Paper materials 1.8 120.5 125.6 121.0 123.9 120.4 117.0 121.4 114.3 115.2 113.4 113.4 112.9 113.3 114.9 46 Chemical materials 3.9 124.4 126.2 125.2 124.4 123.1 123.3 122.9 122.7 121.9 121.8 121.3 121.6 121.6 121.0 47 Other 2.1 116.5 116.9 117.4 113.8 114.6 115.1 114.6 114.1 118.9 115.2 117.1 116.4 117.1 116.9 48 Energy materials 9.7 106.6 107.2 107.2 107.5 108.5 105.8 105.5 105.7 106.0 105.9 106.1 108.3 106.7 108.1 49 Primary energy 6.3 101.9 102.3 103.0 102.3 101.4 101.2 101.7 100.8 101.0 100.6 101.3 104.0 102.1 103.3 50 Converted fuel materials 3.3 116.0 116.9 115.5 118.1 122.8 115.0 113.1 115.4 116.2 116.6 115.5 117.0 115.8 117.8 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 121.5 121.0 121.1 121.2 122.3 122.4 121.9 122.3 122.5 122.4 123.8 123.9 124.0 124.9 52 Total excluding motor vehicles and parts 95.2 120.9 120.5 120.5 120.7 121.7 121.8 121.3 121.7 121.9 121.9 123.3 123.7 123.4 124.3 53 Total excluding computer and office equipment 98.2 118.2 117.8 117.8 117.8 118.9 118.9 118.1 118.4 118.5 118.0 119.5 118.7 119.4 120.1 54 Consumer goods excluding autos and trucks . 27.0 114.0 113.3 113.9 114.0 114.8 114.9 114.0 115.0 114.7 114.0 115.5 115.6 114.8 115.2 55 Consumer goods excluding energy 25.7 114.9 113.9 114.7 114.5 115.1 115.7 115.1 115.3 115.3 113.9 115.9 114.3 115.5 115.5 56 Business equipment excluding autos and trucks 12.5 157.0 155.8 156.5 157.2 158.9 159.5 158.4 159.0 160.5 163.5 167.5 167.9 168.9 170.5 57 Business equipment excluding computer and office equipment 12.2 133.0 132.5 133.2 133.2 134.4 134.3 131.6 130.8 131.3 132.6 135.5 132.3 134.7 135.1 58 Materials excluding energy 29.7 134.9 134.4 133.8 133.7 135.1 136.1 136.2 136.6 136.4 136.6 137.8 136.7 138.1 139.1 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 S co IC de Z p p r o o r - - 1 a 9 v 9 g 5 . tion May June July Aug. Sept Feb/ Mar.1" Apr. Mayp Index (1987 = 100) MAJOR INDUSTRIES 59 Total index 100.0 121.9 121.3 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 124.2 123.6 124.4 125.3 60 Manufacturing 85.4 123.9 123.2 123.3 123.3 124.2 124.9 124.4 124.5 124.8 124.5 126.2 125.2 126.5 127.2 61 Primary processing 26.6 117.6 117.9 117.1 116.9 116.6 117.8 117.0 117.1 117.3 116.7 116.3 116.9 116.9 117.4 62 Advanced processing 58.9 126.8 125.7 126.3 126.3 127.8 128.2 127.9 128.0 128.4 128.2 131.0 129.1 131.1 131.8 63 Durable goods 45.0 132.5 131.1 131.5 131.5 133.2 134.4 133.5 134.3 134.8 134.9 137.5 135.7 138.6 139.7 64 Lumber and products " ' 24 2.0 104.5 101.7 103.0 103.7 103.7 106.2 105.7 104.8 106.9 103.1 103.3 107.4 109.5 108.8 65 Furniture and fixtures 25 1.4 111.6 110.8 111.3 111.1 110.9 112.0 110.9 109.8 109.3 109.3 110.5 108.7 109.0 111.2 66 Stone, clay, and glass products 32 2.1 104.1 104.1 103.8 103.2 103.0 103.8 104.5 104.9 104.3 105.5 104.1 103.0 104.3 104.6 67 Primary metals 33 3.1 119.2 119.5 117.5 118.3 115.4 121.0 115.7 120.8 120.0 121.5 117.1 117.1 118.6 118.4 68 Iron and steel 331,2 1.7 122.4 123.0 119.2 119.3 117.7 127.0 115.1 126.1 122.7 128.1 119.5 120.2 121.9 120.3 69 Raw steel 331PT .1 114.7 113.0 112.9 111.5 114.2 118.6 111.3 116.4 118.0 113.9 112.5 114.9 112.9 70 Nonferrous 333-6,9 1.4 114.8 114.8 114.9 116.5 111.9 113.2 115.8 113.8 116.2 113.0 113.6 112.8 114.1 115.6 71 Fabricated metal products.. . 34 5.0 113.9 113.7 113.7 112.4 114.3 115.1 114.0 114.5 115.0 115.6 117.0 116.0 115.8 116.8 72 Industrial machinery and equipment 35 8.0 177.8 174.6 174.4 176.0 179.5 181.3 183.8 186.5 190.1 191.9 196.1 198.7 199.6 202.1 73 Computer and office equipment 357 1.8 373.5 362.1 363.2 371.7 379.6 390.0 402.9 417.8 431.7 442.9 463.3 481.0 495.4 506.5 74 Electrical machinery 36 7.2 174.9 171.1 173.0 175.7 178.7 180.8 182.4 183.6 182.8 182.4 188.7 188.0 188.5 190.8 75 Transportation equipment. . . 37 9.5 113.3 113.2 113.4 111.6 114.1 114.1 109.3 108.6 109.7 108.3 112.1 102.9 114.3 114.8 76 Motor vehicles and parts . 371 4.8 141.9 138.8 139.7 136.7 142.1 143.3 139.7 140.7 141.2 135.5 141.1 121.3 144.3 145.0 77 Autos and light trucks . 371PT 2.5 131.3 127.3 129.2 124.3 131.6 132.8 128.4 129.6 131.5 123.5 132.8 109.9 135.5 135.8 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.7 85.8 88.5 88.1 87.6 87.2 85.9 80.0 77.7 79.4 82.2 84.2 85.2 85.5 85.7 79 Instruments 38 5.4 110.7 109.6 110.9 110.2 111.4 111.3 111.4 111.5 109.7 111.0 113.4 113.0 112.7 113.7 80 Miscellaneous 39 1.3 122.7 122.3 123.1 121.4 122.4 122.9 122.2 123.3 123.5 122.1 124.0 124.0 122.7 122.5 81 Nondurable goods 40.5 114.3 114.4 114.3 114.3 114.3 114.4 114.3 113.7 113.8 113.1 113.8 113.6 113.2 113.4 82 Foods " ' 20 9.4 115.3 115.9 116.1 115.3 115.5 115.5 115.4 114.8 114.8 114.8 116.0 115.8 115.8 115.9 83 Tobacco products 21 1.6 90.2 89.3 96.4 99.1 91.3 90.2 88.2 88.9 88.4 87.1 90.9 91.7 93.1 90.1 84 Textile mill products 22 1.8 112.6 113.6 110.4 109.9 112.4 110.5 111.1 108.9 108.3 104.1 106.2 109.3 105.7 106.6 85 Apparel products 23 2.2 95.7 97.5 95.5 94.8 94.5 94.5 93.3 92.4 91.5 89.2 90.9 89.6 90.2 90.4 86 Paper and products 26 3.6 119.8 122.4 119.9 121.3 118.6 118.5 119.7 116.2 118.2 114.9 113.5 114.9 115.3 116.6 87 Printing and publishing 27 6.8 99.4 99.0 98.6 99.0 100.5 99.8 98.9 99.3 98.8 97.9 98.7 96.8 96.4 96.6 88 Chemicals and products .... 28 9.9 125.0 124.0 124.4 124.0 124.4 125.3 126.7 126.0 126.5 127.1 127.1 126.6 126.1 126.0 89 Petroleum products 29 1.4 108.3 107.4 108.6 109.0 108.5 110.0 106.9 107.4 108.9 108.9 110.2 109.9 110.3 109.6 90 Rubber and plastic products . 30 3.5 139.4 138.2 137.8 137.7 138.7 139.8 139.7 140.3 139.3 139.0 139.7 140.6 138.0 140.1 91 Leather and products 31 .3 81.3 83.0 81.2 78.7 80.8 80.5 79.7 78.2 76.8 75.6 77.1 76.6 75.4 75.3 92 Mining 6.9 99.9 100.5 101.0 100.7 100.0 100.0 98.2 98.3 98.1 97.1 98.0 101.1 99.8 99.8 93 Metal 10 .5 169.3 164.3 166.8 172.2 172.1 170.8 178.3 175.9 172.8 159.5 157.1 166.0 160.5 158.3 94 Coal 12 1.0 112.9 110.8 112.2 117.0 109.7 116.2 112.3 109.5 108.5 103.3 108.0 114.8 109.5 111.9 95 Oil and gas extraction 13 4.8 91.9 93.4 93.6 91.9 92.4 91.2 89.2 90.1 90.1 90.8 90.2 92.7 92.6 92.5 96 Stone and earth minerals 14 .6 112.3 111.1 111.9 113.5 111.6 113.1 112.4 110.9 112.4 108.9 117.2 117.5 114.0 111.9 97 Utilities 7.7 122.0 122.1 121.0 122.7 128.8 122.7 121.6 125.4 125.1 125.6 126.6 127.9 125.6 129.4 98 Electric 491,493PT 6.1 122.1 121.2 121.2 122.2 130.0 122.7 123.7 123.6 123.9 125.5 126.6 127.1 125.3 130.3 99 Gas 492.493PT 1.6 121.7 125.5 120.6 124.5 124.3 122.4 113.6 132.5 129.9 125.6 126.3 131.1 126.6 125.8 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.6 122.8 122.2 122.3 122.5 123.1 123.8 123.4 123.6 123.9 123.9 125.4 125.4 125.5 126.1 101 Manufacturing excluding office and computing machines... 83.7 119.5 118.9 119.1 118.9 119.8 120.3 119.6 119.6 119.7 119.3 120.7 119.4 120.6 121.1 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,002.9 2,245.6 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 2,293.1 2,268.4 2,303.8 2,312.8 103 Final 1,552.2 1,748.7 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 1,794.2 1,767.0 1,803.7 1,811.9 104 Consumer goods 1,033.4 1,130.5 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 1,148.4 1,128.9 1,146.7 1,150.0 105 Equipment 518.8 618.3 615.1 617.1 619.2 624.8 627.1 616.7 617.5 622.9 628.4 645.8 638.1 657.0 661.9 106 Intermediate 450.7 496.9 494.0 493.5 495.6 497.3 499.9 498.4 499.0 503.8 495.9 498.8 501.3 500.1 500.9 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 • August 1996 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1995 1996r item iyy.5 iyy4 iyyo July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,199 1,372 l,332r l,358r l,379r l,427r l,393r l,450r l,487r 1,378 1,417 1,423 1,459 2 One-family 987 1,068 997 1,017r 1,046r l,079r l,050r l,073r 1,123r 1,056 1,087 1.097 1,115 3 Two-family or more 213 303 335 34 r 333r 348r 343r 377r 364r 322 330 326 344 4 Started 1,288 1,457 1,354 1,450 1,401 1,401 1,351 1,458 1,425 1,453 1,514 1,439 1,505 5 One-family 1,126 1.198 1,076 1,125 1.135 1,130 1,109 1,129 1,150 1,146 1,183 1,163 1,201 6 Two-family or more 162 259 278 325 266 271 242 329 275 307 331 276 304 7 Under construction at end of period' 680 762 776 762 772 783 781 790 800 803 800 819 832 8 One-family 543 558 547 539 547 555 560 562 569 569 565 582 592 9 Two-family or more 137 204 229 223 225 228 221 228 231 234 235 237 240 10 Completed 1,193 1,347 1,313 1,332 1,247 1,267 1,320 1,360 1,225 1,403 1,328 1,390 1,334 11 One-family 1,040 1,160 1,066 1,034 1,019 1,009 1,039 1,081 1,003 1,113 1,052 1,112 1,063 12 Two-family or more 153 187 247 298 228 258 281 279 222 290 276 278 271 13 Mobile homes shipped 254 304 340 337 344 352 354 355 352 352 341 364 378 Merchant builder activity in one-family units 14 Number sold 666 670 665 782 707 684 673 679 683 743 786 727 776 15 Number for sale at end of period' 293 337 372 344 349 350 360 368 372 370 357 368 370 Price of units sold (thousands of dollars)' 16 Median 126.1 130.4 133.4 131.0 134.9 130.0 135.2 137.0 138.6 131.9 139.5 137.0 138.7 17 Average 147.6 153.7 157.6 154.2 162.0 155.6 156.2 160.7 165.6 155.3 164.1 162.0 173.7 EXISTING UNITS (one-family) 18 Number sold 3.800 3,946 3,801 3.970 4,050 4,090 4,070 4,000 3,870 3,720 3,940 4,200 4,200 Price of units sold (thousands of dollars)' 19 Median 106.5 109.6 112.2 116.0 117.6 114.8 113.2 114.3 113.9 114.8 114.0 115.7 116.5 20 Average 133.1 136.4 138.4 142.5 144.5 140.2 138.7 139.5 138.7 141.2 138.7 140.1 141.9 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 464,504 506,904 526,597 528,673 528,397 535,106 534,488 531,710 535,143 540,566 531,344 544,012 551,744 22 Private 339,161 376,566 383,887 384,307 385,653 386,960 388,882 386,666 390,266 392,738 390,450 397,832 403,479 23 Residential 210,455 238,884 236,114 231,002 233,982 237,618 237,741 239,427 241,950 241,565 242,029 247,877 251,332 24 Nonresidential 128,706 137,682 147,773 153,305 151,671 149,342 151,141 147,239 148,316 151,173 148,421 149,955 152,147 25 Industrial buildings 19,533 21,121 24,154 24,399 24,202 24,096 24,964 24,579 24,153 25,125 23,746 23,458 23,370 26 Commercial buildings 42,627 48,552 55,159 57.015 55,709 55.079 56,472 55,482 57,596 56,185 55,301 56,624 57,636 2/ Other buildings 23,626 23,912 23,990 24.525 24,015 23,962 24,547 23,753 24,033 24,511 24,438 24,849 25,516 28 Public utilities and other 42,920 44,097 44,470 47.366 47,745 46,205 45,158 43,425 42,534 45,352 44,936 45,024 45,625 29 Public 125,342 130,337 142,713 144,366 142,744 148,146 145,606 145,044 144,877 147,828 140,894 146,180 148,265 30 Military 2,454 2,319 2,905 3,124 3,010 3,090 2,527 3,195 3,216 3,176 3,225 2,608 2,917 31 Highway 37,431 39,882 42,221 44,274 42,902 42,942 44,351 43,361 43,914 43,735 46,483 45,377 44,941 32 Conservation and development 5.978 6,228 6,316 6,603 6,769 6,469 5,191 6,048 5,823 5,618 5,187 5,668 5,108 33 Other 79,479 81,908 91,271 90,365 90,063 95,645 93,537 92,440 91,924 95,299 85,999 92,527 95,299 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 earliei months earlier (annual rate) Index level, Item 1995 1996 1996 May 1995 1996 1996 1 May May June Sept. Dec. Mar. Jan. Feb. Mar. Apr. May CONSUMER PRICES2 (1982-84=100) 1 3.2 2.9 3.5 1.6 2.4 4.0 ..44 .2 .4 .4 .3 156.6 3.3 2.5 3.6 2.7 1.9 3.2 ..11 .1 .6 .3 .1 152.0 3.3 6.2 5.8 -10.5 1.9 15.8 1.9 .4 1.4 3.2 1.1 112.9 4 3.1 2.7 3.0 2.8 2.2 3.5 .3 .2 .3 .1 .2 165.1 "S 1.5 1.5 .9 2.0 1.7 2.6 .4 -.1 .4 -.1 .0 141.7 33..88 33..22 44..33 33..00 22..55 33..44 .3 .3 .2 .3 .3 178.4 PRODUCER PRICES (1982=100) 7 22..22 2.3 1.3 1.6 4.4 2.5 .2 -.R .5 .4 -.1 131.0 R 11..11 2.6 -2.5 8.8 4.4 .3 — ,4r -,2r .6 -.3 .0 131.3 q 5.5 5.0 1.5 -10.2 10.8 17.8 2.41 2.4 2.8 -.6 84.4 111000 2.1 1.7 2.9 22..33 3.4 .3 -.R .1 .1 .0 .1 144.1 111111 11..88 11..44 1.8 11..88 2.9 -.3 .1 -.1 .2 -.1 138.4 Intermediate materials P 7.4 .0 3.9 -.6 -.6 -1.0 .R -A' .1 .3 .2 126.0 1133 77..99 --11..00 4.2 1.5 --22..99 --33..22 —— ..33rr -,3r -.2 -.2 .2 134.2 Crude materials M -9.2 27.9 4.0 34.8 20.8 -3.8 -,4r -,6r .1 4.0 6.3 127.4 15 -1.4 15.9 14.6 -21.0 33.9 38.1 1.1' -5.0r 5.9 10.9 -3.8 83.9 1166 Other 1199..22 --1122..55 33..99 --1177..66 --1188..44 --1100..22 --,,22rr — .7r --11..88 -.5 -.3 158.0 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 • August 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 QI Q2 Q3 Q4 Qir 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 7,417.8 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 5,062.7 3 Durable goods 530.7 580.9 606.4 593.0 604.0 615.8 612.8 625.2 4 Nondurable goods 1,368.9 1,429.7 1,486.1 1,471.6 1,486.9 1,491.4 1,494.8 1,522.6 Services 2,554.6 2,688.1 2,831.8 2,771.7 2,817.9 2,852.8 2,884.7 2,914.9 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 1,068.9 / Fixed investment 850.5 954.9 1,028.2 1,013.9 1,016.3 1,036.6 1,046.2 1,070.7 8 Nonresidential 598.8 667.2 738.5 723.6 734.4 746.3 749.7 769.0 y Structures 171.8 180.2 199.7 194.5 197.6 202.5 204.0 208.4 10 Producers' durable equipment 427.0 487.0 538.8 529.0 536.8 543.8 545.7 560.6 11 Residential structures 251.7 287.7 289.8 290.4 281.9 290.3 296.5 301.7 12 Change in business inventories 20.6 59.5 37.0 58.1 34.0 38.2 17.8 -1.7 13 Nonfarm 26.8 48.0 39.6 60.8 36.1 41.5 19.9 2.7 14 Net exports of goods and services -64.9 -96.4 -102.3 -106.6 -122.4 -100.8 -79.3 -97.5 15 Exports 660.0 722.0 804.5 778.6 796.9 812.5 829.9 832.2 16 Imports 724.9 818.4 906.7 885.1 919.3 913.3 909.2 929.7 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 1,383.7 18 Federal 522.1 516.3 516.7 519.9 522.6 516.7 507.8 518.6 19 State and local 767.8 798.4 841.7 826.1 837.3 847.7 855.7 865.1 By major type of product 20 Final sales, total 6,529.7 6.871.8 7,208.8 7,089.7 7,162.5 7,260.3 7,322.6 7,419.6 21 Goods 2,400.9 2,534.2 2,660.3 2,617.3 2,642.3 2,684.5 2,697.1 2,749.1 22 Durable 1,013.8 1.085.9 1,144.9 1,118.6 1,134.0 1,162.5 1,164.5 1,191.4 23 Nondurable 1,387.2 1,448.3 1,515.4 1,498.7 1,508.3 1,522.1 1,532.6 1,557.7 24 Services 3,581.7 3,742.4 3,920.9 3,852.6 3,904.5 3,943.2 3,983.1 4,019.1 2B Structures 547.0 595.3 627.6 619.8 615.7 632.6 642.3 651.4 26 Change in business inventories 20.6 59.5 37.0 58.1 34.0 38.2 17.8 -1.7 2/ Durable goods 15.7 31.9 34.9 54.4 28.5 29.2 27.3 12.3 28 Nondurable goods 4.9 27.7 2.2 3.7 5.4 9.1 -9.4 -14.0 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 6,812.7 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 6,001.4 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 4,325.7 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 3,521.6 33 Government and government enterprises 584.2 602.5 621.7 616.3 619.6 624.1 626.9 634.0 34 Other 2,511.0 2,653.4 2,797.9 2,746.6 2,773.6 2,818.2 2,853.2 2,887.6 35 Supplement to wages and salaries 714.2 752.4 789.5 778.6 785.6 793.7 800.1 804.1 36 Employer contributions for social insurance 333.3 350.2 365.5 360.8 363.6 367.8 369.8 375.0 37 Other labor income 380.9 402.2 424.0 417.7 422.0 425.9 430.2 429.1 38 Proprietors' income1 420.0 450.9 478.3 472.0 474.7 479.6 486.7 499.5 39 Business and professional1 388.1 415.9 449.3 443.5 447.1 451.5 454.9 461.1 40 Farm1 32.0 35.0 29.0 28.5 27.6 28.1 31.8 38.4 41 Rental income of persons2 102.5 116.6 122.2 120.6 121.6 120.9 125.8 126.9 42 Corporate profits1 464.5 526.5 588.6 559.6 561.1 614.9 618.6 652.0 43 Profits before tax3 464.3 528.2 600.8 594.1 588.4 609.6 611.0 649.0 44 Inventory valuation adjustment -6.6 -13.3 -28.1 -51.9 -42.3 -9.3 -8.8 -17.4 45 Capital consumption adjustment 6.7 11.6 15.9 17.4 15.0 14.6 16.5 20.4 46 Net interest 398.1 392.8 401.0 403.9 402.6 397.8 399.7 397.3 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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 QI Q2 Q3 Q4 Qlr 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 6,288.4 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 3,520.2 3 Commodity-producing industries 781.3 825.0 858.7 856.2 855.0 859.9 863.5 866.2 4 Manufacturing 593.1 621.3 642.8 643.4 640.5 642.9 644.5 643.0 Distributive industries 698.4 739.3 787.9 768.8 778.6 795.4 808.9 821.6 6 Service industries 1,026.6 1,074.3 1,151.3 1,120.2 1,140.0 1,162.8 1,182.2 1,198.4 7 Government and government enterprises 584.2 602.5 621.7 616.3 619.6 624.1 626.9 634.0 8 Other labor income 380.9 402.2 424.0 417.7 422.0 425.9 430.2 429.1 9 Proprietors' income1 420.0 450.9 478.3 472.0 474.7 479.6 486.7 499.5 10 Business and professional' 388.1 415.9 449.3 443.5 447.1 451.5 454.9 461.1 11 Farm' 32.0 35.0 29.0 28.5 27.6 28.1 31.8 38.4 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 647.3 661.6 714.6 701.9 713.9 717.5 725.2 724.2 15 Transfer payments 910.7 956.3 1,022.6 1,002.4 1,016.8 1,029.9 1,041.4 1,063.0 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 259.6 278.1 294.5 290.2 292.7 296.2 298.8 301.0 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 6,288.4 19 LESS: Personal tax and nontax payments 689.9 731.4 794.3 770.0 801.5 798.4 807.2 824.9 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 5,463.5 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 216.4 192.4 240.8 253.3 211.4 232.6 265.8 248.8 MEMO Per capita (chained 1992 dollars) 23 Gross domestic product 24,724.1 25,332.7 25,613.7 25,559.1 25,540.2 25,695.9 25,668.7 25,747.1 24 Personal consumption expenditures 16,807.4 17,150.5 17,402.2 17,280.4 17,391.6 17,465.4 17,477.5 17,592.7 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 18,988.0 26 Saving rate (percent) 4.5 3.8 4.5 4.8 4.0 4.4 4.9 4.6 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 1,207.5 28 Gross private saving 964.5 1,006.0 1,062.5 1,039.9 1,007.3 1,076.1 1,126.6 1,123.6 29 Personal saving 216.4 192.4 240.8 253.3 211.4 232.6 265.8 248.8 30 Undistributed corporate profits' 103.4 120.2 142.5 120.6 122.3 162.0 165.2 178.7 31 Corporate inventory valuation adjustment -6.6 -13.3 -28.1 -51.9 -42.3 -9.3 -8.8 -17.4 Capital consumption allowances 32 Corporate 417.0 441.0 454.0 444.4 451.3 456.9 446633..66 446655..66 33 Noncorporate 223.1 237.7 225.2 220.2 222.4 224.7 233.4 229.1 34 Gross government saving -26.1 49.9 79.1 70.5 85.0 79.6 81.3 83.9 35 Federal -186.5 -119.3 -88.8 -99.9 -86.3 -87.7 -81.1 -82.2 36 Consumption of fixed capital 68.2 70.6 73.8 73.5 74.2 73.8 73.8 73.2 37 Current surplus or deficit (-), national accounts -254.7 -189.9 -162.6 -173.3 -160.5 -161.6 -154.9 -155.5 38 State and local 160.5 169.2 167.9 170.4 171.3 167.3 162.4 166.1 39 Consumption of fixed capital 65.6 69.4 72.9 71.4 72.3 73.4 74.3 75.1 40 Current surplus or deficit (-), national accounts 94.9 99.7 95.0 99.0 99.0 93.9 88.1 91.0 41 Gross investment 993.5 1,087.2 1,146.1 1,146.7 1,113.9 1,150.7 1,173.0 1,168.0 42 Gross private domestic investment 871.1 1,014.4 1,065.3 1,072.0 1,050.3 1,074.8 1,064.0 1,068.9 43 Gross government investment 210.6 212.3 221.9 219.1 223.7 224.7 220.1 228.8 44 Net foreign investment -88.2 -139.6 -141.1 -144.4 -160.1 -148.9 -111.0 -129.8 45 Statistical discrepancy 55.1 31.3 4.5 36.2 21.6 -5.0 -34.9 -39.5 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 • August 1996 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1995r 1996 IItteemm ccrreeddiittss oorr ddeebbiittss 11999933rr 11999944rr 11999955rr Q1 Q2 Q3 Q4 Qlp 1 Balance on current account -99,936 -148.405 -148,154 -39,054 -40,976 -37.688 -30.435 -35,588 2 Merchandise trade balance2 -132,609 -166.121 -173,424 -44,923 -47,927 -42.548 -38.026 -42,738 3 Merchandise exports 456,832 502.463 575,940 138,551 142,983 144.984 149.422 150.019 4 Merchandise imports -589,441 -668.584 -749,364 -183.474 -190,910 -187,532 -187.448 -192,757 Military transactions, net 881 1.963 3,585 628 859 1,120 978 628 6 Other service transactions, net 59.690 59.779 64,775 14.780 15,244 17.093 17.657 17,758 7 Investment income, net 9.742 -4.159 -8,016 -900 -862 -4,361 -1.890 -395 8 U.S. government grants -16.823 -15.816 -10.959 -2.846 -2.381 -2,933 -2,799 -4,340 y U.S. government pensions and other transfers -4,081 -4.544 -3,420 -758 -967 -964 -731 -1,026 10 Private remittances and other transfers -16,736 -19.506 -20,696 -5.035 -4,942 -5,095 -5,624 -5.475 n Change in U.S. government assets other than official reserve assets, net (increase, -) -342 -341 -280 -154 -179 252 -199 52 12 Change in U.S. official reserve assets (increase, -) -1.379 5.346 -9,742 -5,318 -2.722 -1.893 191 17 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -537 -441 -808 -867 -156 362 -147 -199 15 Reserve position in International Monetary Fund -44 494 -2,466 -526 -786 -991 -163 -849 16 Foreign currencies -797 5.293 -6.468 -3,925 -1,780 -1.264 501 1,065 17 Change in U.S. private assets abroad (increase, —) -192.889 -155.700 -297,834 -56.275 -105.398 -37,954 -98.206 -55.801 18 Bank-reported claims3 29.947 -8.161 -69.146 -29.114 -41,236 8,476 -7,272 4,510 iy Nonbank-reported claims 1,581 -32.804 -34.219 -4,537 -22,904 7,500 -14.278 20 U.S. purchases of foreign securities, net -146.253 -60.270 -98,960 -7.571 -23,011 -35,839 -32,539 -33.492 21 U.S. direct investments abroad, net -78,164 -54.465 -95.509 -15.053 -18.247 -18,091 -44,117 -26.819 22 Change in foreign official assets in United States (increase, +) 72,153 40.253 109,757 21,822 37.380 39,186 11.369 51,582 23 U.S. Treasury securities 48,952 30.745 68,813 10.132 25.208 20.489 12.984 55.600 24 Other U.S. government obligations 4.062 6.077 3.734 1,126 1,326 518 764 52 25 Other U.S. government liabilities4 1,713 2.344 1,082 -331 235 -71 1,249 -195 2b Other U.S. liabilities reported bv U.S. banks3 14.841 3.560 32.862 10,630 7.662 18.478 -3.908 -3.664 27 Other foreign official assets5 2,585 -2.473 3,266 265 2.949 -228 280 -211 28 Change in foreign private assets in United States (increase, +) 178,843 245.123 314,705 69.173 78.041 79.630 87,860 47,234 29 U.S. bank-reported liabilities3 20.859 111.842 25,283 3,860 10.200 -21,542 32.765 -29.449 30 U.S. nonbank-reported liabilities 10,489 -7.710 34.578 9,076 7.285 6.945 11,272 31 Foreign private purchases of U.S. Treasury securities, net 24.381 34,225 99.340 29,969 30.368 37,269 1.734 11,734 32 Foreign purchases of other U.S. securities, net 80.092 57.006 95,268 15,480 20.496 31.971 27.321 35.437 33 Foreign direct investments in United States, net 43,022 49.760 60,236 10,788 9.692 24.987 14,768 29.512 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy 43,550 13.724 31.548 9.806 33,854 -41,533 29,420 -7.496 36 Due to seasonal adjustment 6.519 -266 -7,407 1.153 6.365 3/ Before seasonal adjustment 43,550 13.724 31.548 3,287 34.120 -34.126 28.267 -13.861 MEMO Changes in official assets 38 U.S. official reserve assets (increase. -) -1.379 5.346 -9.742 --55,,331188 — 2 722 --11,,889933 191 17 3Y Foreign official assets in United States, excluding line 25 (increase, +) 70,440 37.909 108.675 22.153 37.145 39.257 10,120 51,777 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -3,717 -1.529 3.959 -412 -341 6.147 -1.435 -1,417 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 1995r 1996 IItteemm 11999933'' 11999944rr 11999955rr Oct. Nov. Dec. Jan.r Feb/ Mar. Apr.p 1 Goods and services, balance -72,037 -104,381 -105,064 -6,902 -6,098 -6,399 -9,686 -6,654 -8,012 -8,629 2 Merchandise -132,607 -166,123 -173,424 -13,109 -12,324 -12,601 -15,505 -12,784 -14,450 -14,656 3 Services 60,570 61,742 68,360 6,207 6,226 6.202 5,819 6,130 6,438 6,027 4 Goods and services, exports 642,953 698,301 786,529 67,534 67,997 68,088 66,493 69,163 69,277 69,941 5 Merchandise 456,834 502,462 575,939 49,528 49,777 50,120 48,645 50,883 50,490 51,670 6 Services 186,119 195,839 210,590 18,006 18,220 17,968 17,848 18,280 18,787 18,271 7 Goods and services, imports -714,990 -802,682 -891,593 -74,436 -74,095 -74,487 -76,179 -75,817 -77,289 -78,570 8 Merchandise -589,441 -668,585 -749,363 -62,637 -62,101 -62,721 -64,150 -63,667 -64,940 -66,326 9 Services -125,549 -134,097 -142,230 -11,799 -11,994 -11,766 -12,029 -12,150 -12,349 -12,244 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Mayp 1 Total 71,323 73,442 74,335 86,224 85,755 85,832 82,717 84,270 84,212 83,710 83,469 2 Gold stock, including Exchange Stabilization Fund1 11.056 11,053 11,051 11,051 11,050 11,050 11,052 11,053 11,053 11,052 11,052 3 Special drawing rights 8,503 9,039 10,039 10,949 11,034 11,037 10,778 11,106 11,049 10,963 11,037 4 Reserve position in International Monetary Fund" 11,759 11,818 12,030 14.700 14,572 14,649 14,312 14,813 15,249 15,117 15,227 5 Foreign currencies4 40,005 41,532 41,215 49,524 49,099 49,096 46,575 47,298 46,861 46,578 46,153 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Mayp 1 Deposits 205 386 250 275 194 386 165 209 191 166 160 Held in custody 2 U.S. Treasury securities2 314,481 379,394 441,866 507,075 522,950 522,170 532,776 559,741 573,435 573,924 578,608 3 Earmarked gold3 13,118 12,327 12,033 11,709 11,702 11,702 11,702 11,689 11,590 11,445 11,339 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 • August 1996 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1995 1996 IItteemm 11999933 11999944 Oct. Nov. Dec. Jan. Feb. Mar. Apr.p 1 Total1 482,915 520,934r 618,072r 632,860r 630,645r 644,570r 670,229r 682,470r 686,645 By type 2 Liabilities reported by banks in the United States 69,721 73,386 108,235r 109,646r 107,128r 103,919' 103,242r 103,512r 110,447 3 U.S. Treasury bills and certificates 151,100 139,571r 157,277 171,366 116688,,553344 117733,,994499 119911,,118888 119988,,338822 118866,,663388 U.S. Treasury bonds and notes 4 Marketable 212,237 254,059 291,948 291,033 293,684 306,299 314,980 319,728 327,981 5 Nonmarketable4 5,652 6,109 6,407 6,449 6,491 6,120 6,159 6,199 6,236 6 U.S. securities other than U.S. Treasury securities5 44,205 47,809 54,205 54,366 54,808 54,283 54,660 54,649 55,343 By area 7 207,034 215,374 222,003 228,180 222,184 223,569 231,389 242,589r 241,161 8 Canada 15,285 17,235 20,355 19,535 19,473 19,078 18,850 20,846 20,878 9 Latin America and Caribbean 55,898 41,492 61,694r 62,474r 66,720r 70,28 lr 70,497r 72,557r 70,503 10 197,702 236,824 305,025 311,638 310,966 320,512 338,999r 335,006 341,360 11 Africa 4,052 4,180r 4,761 6,086 6,296 6,924 6,574 6,584 7,388 12 Other countries 2,942 5,827 4,232 4,945 5,004 4,204 3,918 4,886 5,353 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 1996 IItteemm 11999922 11999933 11999944 June Sept.' Dec. Mar. 1 Banks' liabilities 72,796 78,259 89,284 106,621 102,147 112,556r 109,620 2 Banks' claims 62,799 62,017 60,689 77,138 69,508 74,874 69,548 3 Deposits 24,240 20,993 19,661 28,909 25,712 22,688 22,220 4 Other claims 38,559 41,024 41,028 48,229 43,796 52,186 47,328 5 Claims of banks' domestic customers2 4,432 12,854 10,878 10,244 6,624 6,145 6,064 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr.P BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 926,672 l,014,808r l,095,603r 1,098,512 1,104,705 l,095,603r l,094,332r l,097,342r 1,096,389 1,096,416 2 Banks' own liabilities 626,919 718,440 749,483r 762,723 755,089 749,483r 743,153' 728,352' 725,768 731,691 3 Demand deposits 21,569 23,386 24,460r 23,161 23,114 24.4601 22,182 23,507 23,852 24,410 4 Time deposits2 175,106 186,512 193,238 202,532 193,884 193,238 198,513 192,152' 193,121 191,770 5 Other3 111,971 112,984 139,247r 146,456 154,115 139,247r 141,963' 149,000' 138,334 146,597 6 Own foreign offices4 318,273 395,558 392,538 390,574 383,976 392,538 380,495 363,693' 370,461 368,914 7 Banks' custodial liabilities5 299,753 296,368r 346,120 335,789 349,616 346,120 351,179 368,990 370,621 364,725 8 U.S. Treasury bills and certificates6 176,739 162,908' 197,341 188,575 201,845 197,341 203,478 223,395 228,705 217,106 9 Other negotiable and readily transferable instruments7 36,289 42,532 52,246 47,911 49,969 52,246 46,973 43,404 40,483 44,707 10 Other 86,725 90,928 96,533 99,303 97,802 96,533 100,728 102,191 101,433 102,912 11 Nonmonetary international and regional organizations8. .. 10,936 8,606 1 l,039r 10,294 9,794 1 l,039r 10,622' 11,057' 9,476 11,216 12 Banks' own liabilities 5,639 8,176 10,347r 8,466 8,339 10,347r 9,628' 10,262' 8,558 10,390 13 Demand deposits 15 29 21 77 33 21 30 43 16 28 14 Time deposits2 2,780 3,298 4,656 3,901 3,631 4,656 4,385 3,479' 3,527 3,979 15 Other3 2,844 4,849 5,670r 4,488 4,675 5,670r 5,213' 6,740' 5,015 6,383 16 Banks' custodial liabilities5 5,297 430 692 1,828 1,455 692 994 795 918 826 17 U.S. Treasury bills and certificates6 4,275 281 350 1,342 962 350 764 555 564 426 18 Other negotiable and readily transferable instruments7 1,022 149 341 486 493 341 230 230 298 400 19 Other 0 0 1 0 0 1 0 10 56 0 20 Official institutions9 220,821 212,957r 275,662r 265,512r 281,012r 275,662r 277,868' 294,430' 301,894 297,085 21 Banks' own liabilities 64,144 59,935 83,18 lr 83,997' 85,681r 83,181r 85,040' 84,077' 88,055 91,032 22 Demand deposits 1,600 1,564 2,098 1,646 1,690 2,098 1,522 1,655 1,423 1,679 23 Time deposits2 21,653 23,511 31,120r 30,794r 30,757r 31,120r 28,069' 29,861' 31,877 35,810 24 Other3 40,891 34,860 49,963 51,557 53,234 49,963 55,449 52,561' 54,755 53,543 25 Banks' custodial liabilities5 156,677 153,022r 192,481 181,515 195,331 192,481 192,828 210,353 213,839 206,053 26 U.S. Treasury bills and certificates6 151,100 113399,,5577 llrr 168,534 115577,,227777 171,366 116688,,553344 117733,,994499 119911,,118888 119988,,338822 186,638 27 Other negotiable and readily transferable instruments7 5,482 13,245 23,603 24,000 23,610 23,603 18,532 18,138 14,970 19,065 28 Other 95 206 344 238 355 344 347 1,027 487 350 29 Banks10 592,171 678,367r 687,620r 698,949r 687,285' 687,620' 682,872' 666,209' 663,190 661,499 30 Banks' own liabilities 478,755 563,466 564,045r 575,518r 561,985r 564,045r 554,643' 536,903' 536,108 533,978 31 Unaffiliated foreign banks 160,482 167,908 171,507r 184,944r 178,009r 171,507' 174,148' 173,210' 165,647 165,064 32 Demand deposits 9,718 10,633 ll,756r 11,341 11,232 11,756' 10,247 10,948 11,453 11,905 33 Time deposits2 105,262 111,171 103,687r 114,24 lr 105,27 lr 103,687' 110,515' 104,309' 101,117 96,810 34 Other3 45,502 46,104 56,064 59,362 61,506 56,064 53,386 57,953 53,077 56,349 35 Own foreign offices4 318,273 395,558 392,538 390,574 383,976 392,538 . 380,495 363,693' 370,461 368,914 36 Banks' custodial liabilities5 113,416 114,901r 123,575 123,431 125,300 123,575 128,229 129,306 127,082 127,521 37 U.S. Treasury bills and certificates6 1100,,771122 llll,,225511rr 1155,,886699 1166,,442299 16,687 1155,,886699 1155,,999922 17,947 15,967 16,801 38 Other negotiable and readily transferable instruments7 17,020 14,505 13,035 9,754 13,070 13,035 13,590 12,094 11,864 10,699 39 Other 85,684 89,145 94,671 97,248 95,543 94,671 98,647 99,265 99,251 100,021 40 Other foreigners 102,744 114,878r 121,282 123,757 126,614 121,282 122,970 125,646' 121,829 126,616 41 Banks' own liabilities 78,381 86,863 91,910 94,742 99,084 91,910 93,842 97,110' 93,047 96,291 42 Demand deposits 10,236 11,160 10,585 10,097 10,159 10,585 10,383 10,861 10,960 10,798 43 Time deposits2 45,411 48,532 53,775 53,596 54,225 53,775 55,544 54,503' 56,600 55,171 44 Other3 22,734 27,171 27,550 31,049 34,700 27,550 27,915 31,746' 25,487 30,322 45 Banks' custodial liabilities5 24,363 28,015r 29,372 29,015 27,530 29,372 29,128 28,536 28,782 30,325 46 U.S. Treasury bills and certificates6 10,652 11,805r 12,588 13,527 12,830 12,588 12,773 13,705 13,792 13,241 47 Other negotiable and readily transferable instruments7 12,765 14,633 15,267 13,671 12,796 15,267 14,621 12,942 13,351 14,543 48 Other 946 1,577 1,517 1,817 1,904 1,517 1,734 1,889 1,639 2,541 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,567 17,895 9,099 10,290 9,837 9,099 10,479 10,544 10,005 8,306 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 pustomers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • August 1996 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1995 1996 IItteemm 11999933 11999944 11999955RR Oct. Nov. Dec. Jan. Feb. Mar. Apr." AREA 50 Total, all foreigners 926,672 l,014,808r l,095,603r 1,098,512 1,104,705 l,095,603r l,094,332r l,097,342r l,096,389r 1,096,416 51 Foreign countries 915,736 l,006,202r l,084,564r 1,088,218 1,094,911 l,084,564r 1,083,710 l,086,285r l,086,913r 1,085,200 52 377,911 390,710R 362,786 376,427 384,013 362,786 368,325 374,048 370,572R 375,642 53 Austria 1,917 3,588 3,537 4,887 4,755 3,537 3,437 2,996 2,848R 3,477 54 Belgium and Luxembourg 28,670 21.877 24,842 25,192 28,357 24,842 24,881 27,182 25,584R 27,572 53 Denmark 4,517 2,884 2,921 3,177 3,418 2,921 2,979 3,861 2,876 2,787 56 Finland 1,872 1,436 2,831 2,419 2,315 2,831 2,421 2,409 1,768 2,203 37 France 40,316 44,36 lr 39,204 43,134 40,415 39,204 39,697 41,099 41,330R 41,364 58 Germany 26,685 27,109 24,035 26,362 26,798 24,035 25,988 24,695 25,229R 24,854 39 Greece 1,519 1,393 2,011 2,033 2,265 2,011 1,998 2,063 1,966 1,714 60 Italy 11,759 10,885 10.875 10,251 10,759 10,875 9,616 12,468 11,475 10,178 61 Netherlands 16,096 16,033 13,724 14,933 15,317 13,724 11,350 12,173 12,839R 12,397 62 Norway 2,966 2,338 1,394 1,048 1,287 1,394 1,067 1,246 L,034R 915 63 Portugal 3,366 2.846 2,761 2,902 2,718 2,761 3,055 2,931 2,843 2,529 64 Russia 2,511 2,726 7,950 7,338 8,979 7,950 7,858 9,180 9,321 8,798 63 Spain 20,496 14.675 10,012 13,467 10,809 10,012 11,838 11,589 18,976 19,548 66 Sweden 2,738 3,094 3,245 2,035 3,720 3,245 2,555 2,813 2,256 3,943 6/ Switzerland 41,560 40,515 43,627 42,588 41,178 43,627 40.806 42,010 39,083 36,805 68 Turkey 3,227 3,341 4,124 4,067 4,010 4,124 4,350 4,559 4,103 4.453 69 United Kingdom 133,993 163,795R 139,127 147.448 148,384 139,127 152,654 146,985 144,129 146,669 70 Yugoslavia11 372 245 177 210 171 177 163 163 143 145 /I Other Europe and other former U.S.S.R.12 33,331 27,769 26,389 22,936 28,358 26,389 21,612 23,626 22,769R 25.291 72 Canada 20,235 24,768 26,373R 35,378 27,450 26,373R 28,625 27,434 27,360R 26,749 73 Latin America and Caribbean 362,238 423,830R 440,216 439,920 436,580 440,216 435,703 422,029R 433,725R 431,101 74 Argentina 14,477 17,203 12,236 11.539 13,031 12,236 13,524 11,764 11,985 14,117 /3 Bahamas 73,820 104,002 94,991 96,287 87,719 94,991 96,850 91,203 88,09 R 85,910 76 Bermuda 8,117 8,424 4,897 6,589 6,561 4,897 4,633 4,702 5,035 4,262 II Brazil 5,301 9.145 23,797 27,366 27,364 23,797 22,715 21,761 21,489R 20,107 78 British West Indies 193,699 229,599' 239,083 236,053 240,353 239,083 233,383 227.438R 240,630R 239,269 19 Chile 3,183 3,127R 2,825 2,574 2,696 2,825 2,978 2,772 2,815 2,838 80 Colombia 3,171 4,615 3,666 3,399 3,443 3,666 3,713 3,890 3,846 3,990 81 Cuba 33 13 8 13 8 8 7 7 7 57 82 Ecuador 880 875 1,315 1,311 1,307 1,315 1,236 1,201 1,274 1,265 83 Guatemala 1,207 1,121 1,275 1,068 1,210 1,275 1,058 L,075R 1,060R 1,085 84 Jamaica 410 529 481 430 447 481 500 495 503 516 83 Mexico 28,019 12,227R 24,555 20,894 20,993 24,555 23,643 23,899 24,574R 23,330 86 Netherlands Antilles 4,686 5,217 4,672 5,349 5,644 4,672 4,448 4,461 4,402 5,272 8/ Panama 3,582 4.551 4,265 4.561 4,287 4,265 4,030 4,166R 4,026R 3,889 88 929 900 974 897 916 974 1,025 1,092 962R 1,081 89 Uruguay 1,611 1,597 1,835 1,856 1.912 1,835 1,799 1,726 1,908 1,748 90 Venezuela 12,786 13,985R 11,810 12,642 11,622 11,810 12,662 12,611 13,255R 14,244 91 Other 6,327 6,700 7,531 7,092 7,067 7,531 7,499 1,166' 7,863' 8,121 92 144,527 154,334R 240,775 222,967 232,222 224400,,777755 223388,,117755 224499,,444477RR 224411,,994444RR 223377,,882200 China 93 People's Republic of China 4,011 10,066 33,750 22,341 29,875 33,750 35,733 32,200 24,430 25,861 94 Republic of China (Taiwan) 10,627 9,844 11,714 10,729 11,365 11,714 12.311 12,955 15,513 14,953 93 Hong Kong 17,132 17,104R 20,304 21,893 20,287 20,304 20,307 22,286 20,187 18,479 96 India 1,114 2.338 3,373 3,010 3,272 3,373 3,263 3.527 3,990 3,752 97 Indonesia 1,986 1.587 2,708 2,174 2,485 2,708 2,011 2,349 2,169 2,627 98 Israel 4,435 5,157 4,073 3,812 4.090 4,073 4,348 5,780 5,344R 5.450 99 Japan 61,466 62.98 lr 109,193 104,566 105,546 109,193 106,728 113,36 lr 117,313R 111,654 100 Korea (South) 4,913 5.124 5,782 5,368 5,593 5,782 5,092 5,607 5,875R 5,860 101 Philippines 2,035 2.714 3,089 2,839 2,880 3,089 2,394 2,366 2,336 2,463 102 Thailand 6,137 6,466 12,279 10,458 12,144 12,279 13,121 13,389 12,158 12,905 103 Middle Eastern oil-exporting countries13 15,822 15,482 15,582 17,350 16,238 15,582 14,417 13.491 13,741R 14,895 104 Other 14,849 15,471 18,928 18,427 18,447 18,928 18,450 22,136 18,888 18,921 105 Africa 6,633 6,524R 7,641 7,211 7,793 7,641 7,679 7,818 7,089 7,832 106 Egypt 2,208 1,879 2,136 1,948 1,907 2,136 1,848 2,375 2,057 2,002 107 Morocco 99 97 104 66 60 104 99 52 65 114 108 South Africa 451 433 739 934 1,206 739 1,217 665 413r 1,001 109 Zaire 12 9 10 4 9 10 11 8 9r 8 110 Oil-exporting countries14 1,303 1,343 1.797 1,544 1,826 1,797 1.774 1,968 1,706 1,904 111 Other 2,560 2,163' 2,855 2,715 2,785 2,855 2,730 2,750 2,839 2,803 112 Other 4,192 6.036 6,773 6,315 6,853 6,773 5.203 5,509 6,223 6,056 113 Australia 3,308 5,142 5.644 5,007 5,758 5,644 4,326 4,503 5,239 4,896 114 Other 884 894 1,129 1,308 1,095 1,129 877 1,006 984 1,160 115 Nonmonetary international and regional organizations. .. 10,936 8,606 11.039r 10,294 9,794 ll,039r 10,622' 1 l,057r 9,476 11,216 116 International15 6,851 7.537 9,300r 8,458 8,470 9,300r 9,639r 10,023r 7,938 9,932 117 Latin American regional16 3,218 613 893 552 371 893 349 292r 758 422 118 Other regional17 867 456 846 1,284 953 846 634 742 780 862 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 States1 Payable in U.S. Dollars Millions of dollars, end of period 1995 1996 AArreeaa oorr ccoouunnttrryy 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar, Apr.P 1 Total, all foreigners 488,497 483,242 526,341r 522,636r 533,891r 526,34lr 522,929r 516,195r 525,176 521,174 2 Foreign countries 486,092 478,651 524,410r 520,978r 532,470r 524,410r 520,627r 513,416r 521,362 518,458 3 Europe 123,741 123,380 130,316 131,519 131,660 130,316 133,923 138,574 137,429 134,650 4 Austria 412 692 565 880 639 565 683 773 792 1,083 5 Belgium and Luxembourg 6,532 6,738 7,599 7,103 10,691 7,599 8,365 8,519 5,778 8,611 6 Denmark 382 1,129 403 634 602 403 541 599 398 293 7 Finland 594 512 1,055 1,916 1,097 1,055 1,397 1,313 1,782 1,305 8 France 11,822 12,146 14,799 14,807 15,259 14,799 12,253 13,161 13,732 11,488 9 Germany 7,724 7,608 8,864 8,081 8,431 8,864 8,072 8,774 9,260 8,647 10 Greece 691 604 449 404 378 449 555 603 507 622 11 Italy 8,834 6,043 5,364 5,530 5,390 5,364 5,010 4,838 5,855 5,696 12 Netherlands 3,063 2,959 5,051 4,592 4,909 5,051 4,305 4,722 5,553 6,264 13 Norway 396 504 665 1,457 1,376 665 1,098 1,408 1,016 793 14 Portugal 834 938 888 1,036 862 888 853 743 773 889 15 Russia 2,310 973 660 696 949 660 678 775 868 741 16 Spain 3,717 3,530 2,166 3,162 3,191 2,166 3,811 4,041 5,420 5,349 17 Sweden 4,254 4,098 2,060 2,642 2,362 2,060 2,315 2,151 2,056 3,514 18 Switzerland 6.605 5,746 7,074 6,335 5,925 7,074 4,613 4,016 4,841 6,374 19 Turkey 1,301 878 785 830 926 785 732 707 810 973 20 United Kingdom 62,013 66,846 67,388 69,015 66,911 67,388 75,147 78,040 73,175 68,576 21 Yugoslavia2 473 265 147 233 237 147 481 118 120 208 22 Other Europe and other former U.S.S.R.3 1,784 1,171 4,334 2,166 1,525 4,334 3,014 3,273 4,693 3,224 23 Canada 18,617 18,490 16,095r 17,810r 17,000r 16,095r 15,680r 13,824r 13,395 17,339 24 Latin America and Caribbean 225,238 223,523 257,399 251,325 266,635 257,399 257,146 248,554 252,724 245,773 25 Argentina 4,474 5,844 6,439 6,003 6,090 6,439 6,185 6,057 6,214 6,206 26 Bahamas 63,353 66,410 59,258 55,788 60,030 59,258 60,284 63,311 65,628 54,496 27 Bermuda 8,901 8,481 5,718 5,537 8,096 5,718 5,011 4,742 4,829 5,031 28 Brazil 11,848 9,583 13,297 13,334 12,983 13,297 13,252 13,915 13,817 14,270 29 British West Indies 99,319 95,741 123,914 123,700 129,472 123,914 122,759 108,833 113,236 118,566 30 Chile 3,643 3,820 5,024 4,660 4,775 5,024 4,996 4,593 4,559 4,653 31 Colombia 3,181 4,004 4,550 4,593 4,516 4,550 4,622 4,492 4,547 4,523 32 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 681 682 825 846 847 825 841 842 977 959 34 Guatemala 288 366 457 385 424 457 439 461 465 473 35 Jamaica 195 258 323 289 285 323 299 362 332 335 36 Mexico 15,879 17,749 18,028 16,657 16,826 18,028 17,114 17,167 16,951 17,193 37 Netherlands Antilles 2,683 1,396 9,229 9,233 12,048 9,229 11,043 12,973 10,902 8,728 38 Panama 2,894 2,198 3,018 2,846 3,049 3,018 2,845 2,820 2,612 2,503 39 Peru 657 997 1,829 1,501 1,577 1,829 1,762 1,928 1,936 2,129 40 Uruguay 969 503 466 441 434 466 422 463 623 579 41 Venezuela 2,910 1,831 1,661 1,826 1,695 1,661 1,575 1,572 1,559 1,375 42 Other 3,363 3,660 3,363 3,686 3,488 3,363 3,697 4,023 3,537 3,754 43 111,775 107,079 115,406 114.575 11 l,438r 115,406 108,989 106,987 111,265 114,590 China 44 People's Republic of China 2,271 836 1,023 1,241 1,069 1,023 1,014 1,351 2,439 3,405 45 Republic of China (Taiwan) 2,625 1,448 1,713 1,595 1,484 1,713 1,407 1,404 1,729 1,625 46 Hong Kong 10,828 9,161 12,895 12,539 10,713 12,895 13,254 13,867 15,545 15,320 47 India 589 994 1,846 1,924 1,823 1,846 1,864 1,859 1,869 1,796 48 Indonesia 1,527 1,470 1,678 1,623 l,578r 1,678 1,458 1,478 1,604 1,479 49 Israel 826 688 739 886 728 739 668 683 665 642 50 Japan 60,032 59,151 61,308 61,878 60,522 61,308 55,897 55,077 52,771 54,543 51 Korea (South) 7,539 10,286 14,136 13,357 14,115 14,136 14,501 15,454 17,242 16,922 52 Philippines 1,410 662 1,350 673 789 1,350 814 779 1,202 779 53 Thailand 2,170 2,902 2,597 2,568 2,538 2,597 2,397 3,256 3,061 2,972 54 Middle Eastern oil-exporting countries4 15,115 13,748 9,639 9,963 9,604 9,639 8,053 6,410 7,145 7,300 55 Other 6,843 5,733 6,482 6,328 6,475 6,482 7,662 5,369 5,993 7,807 56 Africa 3,861 3,050 2,727 2,783 2,732 2,727 2,798 2,879 2,884 2,743 57 Egypt 196 225 210 224 268 210 208 237 247 225 58 Morocco 481 429 514 457 433 514 514 561 585 594 59 South Africa 633 671 465 604 462 465 483 520 567 493 60 Zaire 4 2 1 1 1 1 1 1 1 1 61 Oil-exporting countries5 1,129 856 552 586 578 552 589 526 516 501 62 Other 1,418 867 985 911 990 985 1,003 1,034 968 929 63 Other 2,860 3,129 2,467 2,966 3,005 2,467 2,091 2,598 3,665 3,363 64 Australia 2,037 2,186 1,622 2,095 1,969 1,622 1.822 2,243 2,645 2,620 65 Other 823 943 845 871 1,036 845 269 355 1,020 743 66 Nonmonetary international and regional organizations6 . .. 2,405 4,591 1,931 1,658 1,421 1,931 2,302 2,779r 3,814 2,716 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 • August 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 1995r 1996 TTyyppee ooff ccllaaiimm 11999933 11999944 11999955rr Oct. Nov. Dec. Jan.r Feb.r Mar. Apr.p 1 Total 575,818r 599,521 649,108 649,108 651,067 2 Banks' claims 488,497 483,242 526,341 522,636 533,891 526,341 522,929 516,195 525,176 521,174 3 Foreign public borrowers 29,228 23,416 22,522 20,878 19,368 22,522 23,148 24,365 27,668 25,111 4 Own foreign offices2 285,510 283,183 303,902 303,573 308,664 303,902 300,730 290,691 293,465 294,167 5 Unaffiliated foreign banks 100,865 109,228 98,700 103,947 99,555 98,700 97,238 98,137 101,620 99,686 6 Deposits 49,892 59,250 37,343 47,103 42,905 37,343 35,520 37,565 41,609 37,621 7 Other 50,973 49,978 61,357 56,844 56,650 61,357 61,718 60,572 60,011 62,065 8 All other foreigners 72,894 67,415 101,217 94,238 106,304 101.217 101,813 103,002 102,423 102,210 9 Claims of banks' domestic customers3 87,32 lr 116,279 122,767 122,767 125,891 10 Deposits 41.734 64,829 58,519 58,519 68,800 11 Negotiable and readily transferable instruments4 3311,,118866 36,008 44,161 44,161 39,274 12 Outstanding collections and other claims 14.40T 15,442 20,087 20,087 17,817 MEMO 13 Customer liability on acceptances 7.920r 8,427 8.410 8,410 9,026 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 29.150 32,796 30,717 33,828 31,355 30,717 27,830 32,777 35,042 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 tiled 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 1995 1996 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa"" 11999922 11999933 11999944 June Sept. Dec/ Mar.p 1 Total 195,119 202,566 200,042 220,289r 216,966r 222,338 231,724 By borrower 2 Maturity of one year or less 163,325 172,662 168,331 186,312 178,666 176,177 191,916 3 Foreign public borrowers 17,813 17,828 15,435 15,822r 14,192r 15,015 19,574 4 All other foreigners 145,512 154,834 152,896 170,490r 164,474r 161,162 172,342 5 Maturity of more than one year 31,794 29,904 31,711 33,977r 38,300r 46,161 39,808 6 Foreign public borrowers 13,266 10,874 7,838 7,892 8,220 7,506 8,110 7 All other foreigners 18,528 19,030 23,873 26,085r 30,080r 38,655 31,698 By area Maturity of one year or less 8 Europe 53,300 57,413 55,742 60,323 52,045 53,897 56,631 9 Canada 6,091 7,727 6,690 7,838 7,135 6,089 4,966 10 Latin America and Caribbean 50,376 60,490 58,877 68,630 71,319 72,397 84,407 11 45,709 41,418 39,851 43,945 42,536 40,133 40,212 1? Africa 1,784 1,820 1,376 1,447 1,261 1,272 1,302 13 All other3 6,065 3,794 5,795 4,129 4,370 2,389 4,398 Maturity of more than one year 14 Europe 5,367 5,310 4,203 4,240 4,594 4,885 6,827 15 Canada 3,287 2,581 3,505 3,685 3,57 lr 2,731 2,563 16 Latin America and Caribbean 15,312 14,025 15,717 17,557 20,224 27,807 19,546 17 Asia 5,038 5,606 5,318 6,058r 7,373 8,023 8,467 18 Africa 2,380 1,935 1,583 1,389 1,389 1,429 1,474 19 All other3 410 447 1,385 1,048 1,149 1,286 931 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 1994 1995 1996 AArreeaa oorr ccoouunnttrryy 11999922 11999933 Mar. June Sept. Dec. Mar. June Sept. Dec. Mar.p 1 Total 344.7 407.7 475.7r 484.8r 485.7r 495.6r 540.9r 525.0r 526.3r 549.7r 568.8 2 G-10 countries and Switzerland 131.3 161.8 177.8r 172.4r 182.2r 189.9r 2io.r 201.6r 196.6r 203.7r 201.3 3 Belgium and Luxembourg ,0r 7.4 7.9r 8.6 9.6 7.0 10.2r 9.4r 10.7r 13.5r 10.5 4 France 15.3 12.0 16.6 18.6 20.7 19.1 19.8 19.3 17.4r 19.2 17.9 5 Germany 9.1 12.6 29.7 24.7 24.0 24.7 31.2 29.8r 27.2r 26.8r 31.5 6 Italy 6.5 7.7 15.6 14.0 11.6 11.8 10.6 10.7 12.6 11.5 13.1 7 Netherlands ,0r 4.7 3.8 3.4 3.4 3.6 3.5 4.3 4.r 3.4r 3.0 8 Sweden 2.3 2.7 2.9 3.0 2.6 2.7 3.1 3.0 2.7 2.7 3.2 9 Switzerland 4.8 5.9 4.5 5.4 5.5 5.1 5.7 6.2 6.3r 6.3r 5.2 10 United Kingdom 59.7 84.3 69.4r 64.0r 78.1r 85.2r 89.4r 85.9r 79.8 82.4r 84.8 11 Canada 6.3 6.9 7.8 9.9 10.2 10.0 10.5 11.1 11.9 9.4 9.2 12 Japan 18.8 17.6 19.6 20.7 16.5 20.7 25.9 22.1 24.0 28.5 22.9 13 Other industrialized countries 24.0 25.6 42.0r 42.5r 42.5r 45.0r 43.9r 43.lr 50.0r 50.0 60.7 14 Austria 1.2 .4 1.0 1.0 1.0 1.1 .9 .7 1.2 .9 1.2 15 Denmark .9 1.0 1.0r 1.1 ,9r 1.3 1.7 1.1 1.8 2.6 3.1 16 Finland .7 .4 1.0 .8 .8 .9 1.1 .5 .7 .8 .7 17 Greece 3.0 3.2 3.7r 4.6 4.2r 4.4r 4.8r 4.9r 5.0r 5.6r 5.5 18 Norway 1.2 1.7 1.6 1.6 1.6 2.0 2.4 1.8 2.3 3.2 2.1 19 Portugal .4 .8 1.2 1.1 1.0 1.2 1.0 1.2 1.9r l.3r 1.6 20 Spain 8.9 9.9 13.2 12.6 14.0 13.6 14.1 13.3 13.3 11.6 17.5 21 Turkey 1.3 2.1 2.4 2.1 1.8 1.6 1.4 1.4 1.9r 1.8r 1.9 22 Other Western Europe 1.7 2.6 3.1 2.8 1.0 2.7 2.5 2.6 3.0 4.7 3.8 23 South Africa 1.7 1.1 1.2 1.2 1.2 1.0 1.5 1.4 1.3 1.2 1.7 24 Australia 2.9 2.3 12.7 13.7 15.0 15.4 12.6 14.3 17.4 16.4 21.7 25 OPEC2 15.8 17.4 22.9 21.6 21.6r 23.8r 19.5 20.2r 22.4r 22.r 21.1 26 Ecuador .6 .5 .6 .5 .4 .5 .5 .7 .7 .7 .8 27 Venezuela 5.2 5.1 4.6 4.4 3.9 3.7 3.5 3.5 3.0 2.7 2.9 28 Indonesia 2.7 3.3 3.4 3.2 3.3 3.8 4.0 4.1 4.4 4.8r 4.7 29 Middle East countries 6.2 7.4 13.2 12.4 13.0 15.0 10.7 11.4 13.6r 13.3 12.3 30 African countries 1.1 1.2 1.1 1.1 1.1 ,8r .7 .5r .6 .6 .5 31 Non-OPEC developing countries 72.6 83.1 94.5r 94.7r 93.1' 95.9r 98.4r 103.6 104.0r 112.5r 116.2 Latin America 32 Argentina 6.6 7.7 8.7 9.8 10.5 11.2 11.4 12.3 10.9 12.9 12.7 33 Brazil 10.8 12.0 12.7 12.0 9.3 8.4 9.2 9.9r 13.6r 13.7r 17.2 .34 Chile 4.4 4.7 5.1 5.1 5.5 6.1 6.4 7.1 6.4 6.8 6.4 35 Colombia * 1.8 2.1 2.r 2.4 2.4 2.6 2.6 2.6 2.9 2.9 2.9 36 Mexico 16.0 17.8 19.0 18.6 19.8 18.4 17.8 17.6 16.3 17.3 16.1 37 .5 .4 .6 .6 .6 .5 .6 .8 .7 .8 .9 38 Other 2.6 3.1 2.9 2.7 2.8 2.7 2.4 2.6 2.6 2.8 3.1 Asia China 39 People's Republic of China .7 2.0 .8 .8 1.0 1.1 1.1 1.4 1.7 1.8 3.3 40 Republic of China (Taiwan) 5.2 7.3 7.6 7.1 6.9 9.2 8.5 9.0 9.0 9.4 9.7 41 3.2 3.2 3.4 3.7 3.9 4.2 3.8 4.0 4.4 4.4 4.7 42 .4 .5 .4 .4 .4 .4 .6 .7 .5 .5 .5 43 Korea (South) 6.6 6.7 14.1 14.3 14.4 16.2 16.9 18.7 18.0 19.1 19.4 44 Malaysia 3.1 4.4 5.2 5.2 3.9 3.1 3.9 4.1 4.3 4.4 4.7 45 Philippines 3.6 3.1 3.4 3.2 2.9 3.3 3.0 3.6 3.3 4.1 3.9 46 Thailand 2.2 3.1 3.0 3.3 3.5 2.1 3.3 3.8 3.9 4.9 5.2 47 Other Asia 3.1 3.1 3.1 3.2 3.4 4.7 4.9 3.5 3.7 4.5 4.3 Africa 48 Egypt .2 .4 .3r ,4r .3 .3 .4 .4 .4 .4 .2 49 Morocco .6 .7 .8 .7 .7 .6 .6 .9 ,8r .7 .7 50 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 1.0 .8 1.1 1.0 .9 .8 .7 .6 .7 .9 .7 52 Eastern Europe 3.1 3.2 3.8 3.2 3.0 2.7 2.3 1.8 3.4 4.2 6.2 53 Russia4 1.9 1.6 1.6 1.3 1.1 .8 .7 .4 .6 1.0 1.4 54 Yugoslavia5 .6 .6 .5 .5 .5 .5 .4 .3 .4 .3 .3 55 Other .6 .9 1.6 1.4 1.5 1.4 1.2 1.0 2.3 2.8 4.5 56 Offshore banking centers 58.1 73.0 78.5r 80.5r 77.r 71.3' 84.3r 82.1 85.9r 99.5r 100.2 57 Bahamas 6.9 10.9 13.7 13.3 13.8 10.3 12.5 8.4 12.6 11.5r 13.4 58 Bermuda 6.2 8.9 8.8 6.5 6.0 8.4 8.6 8.3 6.1 6.3 5.3 59 Cayman Islands and other British West Indies 21.5 18.0 17.8 23.8 21.5 19.9 19.4 23.7 23.4 32.1 28.5 60 Netherlands Antilles 1.1 2.6 3.4 2.5 1.7 1.3 .9 2.4 5.5 9.9 10.7 61 Panama6 1.9 2.4 2.0 2.0 1.8r 1.3 1.1 1.3 1.2r 1.4 1.1 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 13.9 18.7 19.7 21.8 20.3 19.9 22.4r 23.1 23.7 25.1 25.6 64 Singapore 6.5 11.2 13.0 10.6 11.8 10.1 i9.r 14.8 13.3 13.1 15.4 65 Other' .0 .1 .0 .0 .0 .1 .0 .0 .1 .1 .1 66 Miscellaneous and unallocated8 39.7 43.4 55.9 69.6r 65.7r 66.6r 82.2r 72.3r 63.9r 57.4r 62.5 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 • August 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 3 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 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 9 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 11 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 (5 Germany 889 975 1,961 1,467 1,961 1,755 1,589 1,670 1,974 16 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 23 Mexico 12 17 0 15 0 10 3 3 12 26 Venezuela 6 5 5 5 5 5 4 3 2 27 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 33 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 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 32 Oil-exporting countries2 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 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 2277,,339988 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 • August 1996 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1996 1995 1996 Transaction, and area or country 1994 1995 » J A a p n r . . - Oct. Nov. Dec. Jan. Feb. Mar. Apr.p U.S. corporate securities STOCKS 1 Foreign purchases 350,593 462,884 204,159 41,492 41,937 46,479 43,574 52,260r 55,280 53,045 2 Foreign sales 348,716 451,709 196,253 42,860 39,071 44,372 41,948 51,083r 54,450 48,772 3 Net purchases, or sales (-) 1,877 11,175 7,906 -1,368 2,866 2,107 1,626 l,177r 830 4,273 4 Foreign countries 1,867 11,380 7,934 -1,328 2,877 2,109 1,623 l,306r 876 4,129 5 Europe 6,714 4,847 3,687 1,647 954 1,028 1,954 -1,072 1,376 1,429 6 France -201 -1,099 328 -54 -58 -382 164 -161 661 -336 7 Germany 2,110 -1,837 462 5 -131 -11 239 -37 86 174 8 Netherlands 2,251 3,507 1,125 528 230 373 660 20 208 237 9 Switzerland -30 -2,283 1,381 449 227 191 639 -441 566 617 10 United Kingdom 840 8,001 -284 878 543 1,277 -165 -223 -242 346 11 Canada -1,160 -1,517 1,125 -74 405 -175 645 518 -90 52 12 Latin America and Caribbean -2,111 5,814 2,697 -2,920 1,361 219 -487 2,694r -318 808 13 Middle East1 -1,142 -337 -831 -8 -63 148 -507 -285 -33 -6 14 Other Asia -1,234 2,503 1,185 61 342 883 -40 -336 -291 1,852 15 Japan 1,162 -2,725 660 56 -406 1,231 94 -131 -749 1,446 16 Africa 29 2 -69 -17 -26 -1 6 -62 -44 31 17 Other countries 771 68 140 -17 -96 7 52 -151 276 -37 18 Nonmonetary international and regional organizations 10 -205 -28 -40 -11 -2 3 -129 -46 144 BONDS2 19 Foreign purchases 289,586 293,030 122,765 26,424 31,642 21,698 26,591 32,759 39,308 24,107 20 Foreign sales 229,665 206,951 85,140 19,199 20,741 21,117 17,726 23,608 25,113 18,693 21 Net purchases, or sales (-) 59,921 86,079 37,625 7,225 10,901 581 8,865 9,151 14,195 5,414 22 Foreign countries 59,036 86,533 37,543 7,293 10,948 553 8,823 9,230 14,107 5,383 23 Europe 37,065 69,815 24,515 6,418 9,759 1,309 5,624 8,968 5,976 3,947 24 France 242 1,143 2,608 732 101 137 839 314 670 785 25 Germany 657 5,806 3,021 113 894 236 -26 1,859 467 721 2261 Netherlands 3,322 1,463 403 204 219 101 156 365 -66 -52 Switzerland 1,055 494 -212 148 101 -381 56 -86 -38 -144 28 United Kingdom 31,642 57,220 16,643 4,599 6,999 925 3,854 6,280 4,245 2,264 29 Canada 2,958 2,569 847 139 20 181 104 235 149 359 30 Latin America and Caribbean 5,442 6,141 8,556 -61 1,426 -848 2,096 -713 7,140 33 31 Middle East1 771 1,869 -393 -246 188 187 -194 -334 13 122 32 Other Asia 12,153 5,659 4,349 1,126 -705 -293 1,272 1,161 831 1,085 33 Japan 5,486 2,250 1,045 645 -899 -904 338 336 245 126 34 Africa -7 234 30 -223 240 86 -16 -40 37 49 35 Other countries 654 246 -361 140 20 -69 -63 -47 -39 -212 36 Nonmonetary international and regional organizations 885 -454 82 -68 -47 28 42 -79 88 31 Foreign securities 37 Stocks, net purchases, or sales (-) -48,071 -50,786 -29,115 -5,769 -1,725 -6,830 -6,432 -5,704r -10,341 -6,638 38 Foreign purchases 386,106 345,498 144,801 29,382 30,307 32,366 33,481 37.457r 36,117 37,746 39 Foreign sales 434,177 396,284 173,916 35,151 32,032 39,196 39,913 43,161r 46,458 44,384 40 Bonds, net purchases, or sales (-) -9,224 -47,159 -11,779 -7,580 -6,235 -3,923 -4,472 -1,304 -6,115 112 41 Foreign purchases 848,368 889,143 354,041 76,889 78,563 80,310 84,508 95,095 93,239 81,199 42 Foreign sales 857,592 936,302 365,820 84,469 84,798 84,233 88,980 96,399 99,354 81,087 43 Net purchases, or sales (—), of stocks and bonds .... -57,295 -97,945 -40,894 -13,349 -7,960 -10,753 -10,904 -7,008r -16,456 -6,526 44 Foreign countries -57,815 -97,140 -40,747 -13,240 -7,882 -10,812 -10,935 —6,883r -16,460 -6,469 45 Europe -3,516 -47,905 -12,817 -7,249 -4,609 -6,033 -3,973 —2,451r -4,584 -1,809 46 Canada -7,475 -7,871 -3,957 1,311 -494 -14 -2,649 -59r -1,863 614 47 Latin America and Caribbean -18,334 -7,071 -4,714 -3,883 -184 -802 -3 — 1,03 lr -2,582 -1,098 48 -24,275 -34,049 -16,990 -2,511 -2,001 -4,389 -4,685 —2,557 -5,755 -3,993 49 Japan -17,427 -25,070 -9,194 -849 -1,388 -3,685 -3,427 — 1,592 -3,225 -950 50 Africa -467 -327 -707 5 19 -44 -96 -161 -436 -14 51 Other countries -3,748 83 -1,562 -913 -613 470 471 -624r -1,240 -169 52 Nonmonetary international and regional organizations 520 -805 -147 -109 -78 59 31 -125 4 -57 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.- Oct. Nov. Dec. Jan. Feb. Mar. Apr.p Apr. 1 Total estimated 78,801 133,991 52,965 4,819 15,307 -9,454 14,008 15,451 7,017 16,489 2 Foreign countries 78,637 133,552 54,165 4,650 14,936 -9,016 13,703 16,192 6,406 17,864 3 Europe 38,542 50,000 29,277 -4,608 821 -1,120 7,281 8,462 4,075 9,459 4 Belgium and Luxembourg 1,098 591 509 -25 81 171 149 -120 8811 399 5 Germany 5,709 6,136 6,005 2,831 52 452 1,385 1,829 995588 1,833 6 Netherlands 1,254 1,891 -2,573 160 833 381 807 354 -1,597 -2,137 7 Sweden 794 358 1,416 92 -30 -285 -45 803 372 286 8 Switzerland 481 -472 1,554 174 -568 -664 76 84 65 1,329 9 United Kingdom 23,365 34,778 11,140 -5,965 1,309 -4,377 1,167 1,644 2,262 6,067 10 Other Europe and former U.S.S.R 5,841 6,718 11,226 -1,875 -856 3,202 3,742 3,868 1,934 1,682 11 Canada 3,491 252 5,531 -1,864 -43 208 1,867 1,863 35 1,766 1? Latin America and Caribbean -10,383 48,609 -8,580 17,453 13,496 3,762 -2,648 -2,931 -4,985 1,984 13 Venezuela -319 -2 -275 -92 232 61 -142 -93 -44 4 14 Other Latin America and Caribbean -20,493 25,152 8,186 3,033 3,723 4,710 8,922 -1,896 -2,696 3,856 15 Netherlands Antilles 10,429 23,459 -16,491 14,512 9,541 -1,009 -11,428 -942 -2,245 -1,876 16 47,317 32,319 26,955 -6,879 -107 -11,843 6,920 8,616 6,941 4,478 17 Japan 29,793 16,863 10,513 -10,115 1,316 -5,695 2.619 3,069 2,443 2,382 18 Africa 240 1,464 976 501 458 252 515 -100 311 250 19 Other -570 908 6 47 311 -275 -232 282 29 -73 20 Nonmonetary international and regional organizations 164 439 -1,200 169 371 -438 305 -741 611 -1,375 ?1 International 526 9 135 2 368 -347 210 -308 647 -414 22 Latin American regional -154 261 -1,295 185 -43 -115 -45 -254 12 -1,008 MEMO 23 Foreign countries 78,637 133,552 54,165 4,650 14,936 -9,016 13,703 16,192 6,406 17,864 74 Official institutions 41,822 39,625 34,297 5,705 -915 2,651 12,615 8,681 4,748 8,253 25 Other foreign 36,815 93,927 19,868 -1,055 15,851 -11,667 1,088 7,511 1,658 9,611 Oil-exporting countries ?6 Middle East" -38 3,075 1,454 -624 -826 -1,085 -658 122 1,127 863 27 0 2 1 0 0 0 0 1 0 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 BANKS' Percent per year, averages of daily figures Rate on June 30, 1996 Rate on June 30, 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 . , 3.6 June 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 Dec. Jan. Feb. Mar. Apr. May June 1 Eurodollars 3.18 4.63 5.93 5.64 5.40 5.14 5.28 5.36 5.36 5.46 2 United Kingdom 5.88 5.45 6.63 6.42 6.31 6.13 6.02 5.97 6.03 5.80 3 Canada 5.14 5.57 7.14 5.91 5.58 5.22 5.23 5.03 4.82 4.87 4 Germany 7.17 5.25 4.43 3.82 3.51 3.26 3.25 3.22 3.19 3.29 5 Switzerland 4.79 4.03 2.94 1.94 1.65 1.61 1.68 1.68 1.99 2.53 6 Netherlands 6.73 5.09 4.30 3.58 3.20 3.00 3.09 2.83 2.61 2.81 7 France 8.30 5.72 6.43 5.47 4.56 4.29 4.14 3.87 3.78 3.84 8 Italy 10.09 8.45 10.43 10.58 10.05 9.90 9.82 9.60 8.88 8.73 9 Belgium 8.10 5.65 4.73 3.74 3.47 3.23 3.25 3.23 3.19 3.23 10 Japan 2.96 2.24 1.20 .52 .55 .61 .60 .61 .62 .57 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 • August 1996 3.28 FOREIGN EXCHANGE RATES' Currency units per dollar except as noted 1996 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999933 11999944 11999955 Jan. Feb. Mar. Apr. May June 1 Australia/dollar* 67.993 73.161 74.073 74.171 75.557 77.136 78.566 79.700 79.122 2 Austria/schilling 11.639 11.409 10.076 10.296 10.321 10.391 10.580 10.782 10.755 3 Belgium/franc 34.581 33.426 29.472 30.081 30.115 30.371 30.902 31.502 31.433 4 Canada/dollar 1.2902 1.3664 1.3725 1.3669 1.3752 1.3656 1.3592 1.3693 1.3658 5 China, P.R./yuan 5.7795 8.6404 8.3700 8.3384 8.3338 8.3495 8.3583 8.3479 8.3424 6 Denmark/krone 6.4863 6.3561 5.5999 5.6618 5.6749 5.7074 5.9414 5.9160 5.8941 7 Finland/markka 5.7251 5.2340 4.3763 4.4510 4.5532 4.6066 4.7288 4.7541 4.6710 8 France/franc 5.6669 5.5459 4.9864 5.0117 5.0440 5.0583 5.1049 5.1855 5.1787 9 Germany/deutsche mark 1.6545 1.6216 1.4321 1.4635 1.4669 1.4776 1.5048 1.5324 1.5282 10 Greece/drachma 229.64 242.50 231.68 240.91 242.21 241.54 242.00 243.27 241.75 11 Hong Kong/dollar 7.7357 7.7290 7.7357 7.7329 7.7323 7.7325 7.7345 7.7363 7.7404 12 India/rupee 31.291 31.394 32.418 35.812 36.595 34.485 34.320 35.025 35.100 13 Ireland/pound2 146.47 149.69 160.35 158.18 158.10 157.21 156.51 156.29 158.31 14 Italy/lira 1,573.41 1,611.49 1.629.45 1,584.87 1,570.00 1,562.43 1,565.60 1,556.71 1,542.30 15 Japan/yen 111.08 102.18 93.96 105.75 105.79 105.94 107.20 106.34 108.96 16 Malaysia/ringgit 2.5738 2.6237 2.5073 2.5563 2.5487 2.5417 2.5113 2.4936 2.4967 17 Netherlands/guilder 1.8585 1.8190 1.6044 1.6388 1.6424 1.6540 1.6805 1.7135 1.7120 18 New Zealand/dollar2 54.127 59.358 65.625 66.195 67.495 68.079 68.242 68.571 67.650 19 Norway/krone 7.1009 7.0553 6.3355 6.4275 6.4103 6.4277 6.4901 6.5748 6.5376 20 Portugal/escudo 161.08 165.93 149.88 151.90 152.49 152.93 154.51 157.54 157.40 21 Singapore/dollar 1.6158 1.5275 1.4171 1.4211 1.4115 1.4095 1.4082 1.4074 1.4090 22 South Africa/rand 3.2729 3.5526 3.6286 3.6413 3.7420 3.9293 4.2130 4.3679 4.3519 23 South Korea/won 805.75 806.93 772.82 787.13 780.12 781.31 780.42 780.86 798.45 24 Spain/peseta 127.48 133.88 124.64 123.38 123.65 124.39 125.49 127.97 128.87 25 Sri Lanka/rupee 48.211 49.170 51.047 53.874 53.716 53.748 54.163 54.868 55.529 26 Sweden/krona 7.7956 7.7161 7.1406 6.7405 6.8775 6.7318 6.7141 6.7984 6.6807 27 Switzerland/franc 1.4781 1.3667 1.1812 1.1818 1.1967 1.1959 1.2180 1.2539 1.2579 28 Taiwan/dollar 26.416 26.465 26.495 27.406 27.485 27.400 27.188 27.352 27.674 29 Thailand/baht 25.333 25.161 24.921 25.298 25.250 25.251 25.290 25.289 25.354 30 United Kingdom/pound2 150.16 153.19 157.85 152.88 153.60 152.71 151.60 151.52 154.16 MEMO 31 United States/dollar3 93.18 91.32 84.25 86.23 86.41 86.57 87.46 88.28 88.16 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

63 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 August 1995 November 1995 A68 November 1995 February 1996 A68 February 1996 May 1996 A68 May 1996 August 1996 A64 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 • August 1996 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 6-10, 19961 Commercial and industrial loans Type a o n f d l o m an a turity (t A ho m u l o o sa u a n n n s d t s o f o f (thousand s s iz o e f m W a a v e t e i u g r r a h i g t t e y e d 2 Wei L g o h a t n ed rate (percent) s L ec o b u a y r n e s d Lo c a o u n m n s d m e m i r t a - de pat P io a n rt ic lo i- ans dollars) dollars) average collateral ment (percent) Days effective3 (percent) (percent) ALL BANKS 1 Overnight6 8,721 2 One month or less (excluding overnight) 11,628,749 1,031 6.37 15.1 82.4 5.7 3 Fixed rate 9,131,845 3,109 6.18 9.0 79.0 4.0 4 Floating rate 2,496,904 299 7.06 37.4 94.8 12.1 5 More than one month and less than one year 13,696,214 191 125 7.53 48.6 86.7 6.9 6 Fixed rate 6,405,619 263 95 6.85 38.7 87.1 10.4 7 Floating rate 7,290,596 154 151 8.12 57.2 86.3 3.8 8 Demand7 14,525,096 350 7.24 47.4 56.9 4.8 9 Fixed rate 4,619,674 1,237 5.94 18.3 33.9 9.1 10 Floating rate 9,905,422 263 7.85 61.0 67.7 2.9 11 Total short-term 56,742,099 449 6.76 30.7 70.5 12 Fixed rate (thousands of dollars) 37,021,716 1,122 22 6.17 16.9 66.4 13 1-99 363,323 14 138 9.54 82.3 51.7 14 100-499 467,930 197 99 8.31 68.9 69.4 6.1 15 500-999 659,429 685 65 7.34 55.1 80.3 7.9 16 1,000-4,999 4,338,235 2,236 42 6.71 29.8 81.1 6.6 17 5,000-9,999 4,192,103 6,644 38 6.55 28.7 73.6 8.3 18 10,000 or more 27,000,695 21,730 13 5.92 10.3 62.8 4.6 19 Floating rate (thousands of dollars) 19,720,383 211 117 7.85 56.5 78.0 4.4 20 1-99 1,788,525 25 173 9.64 81.1 88.2 1.4 21 100-499 3,401,205 200 166 9.10 76.4 90.1 4.9 22 500-999 1,538,485 655 165 8.69 71.2 89.9 6.6 23 1,000-4,999 4,247,062 2,106 114 7.88 53.3 84.2 5.1 24 5,000-9,999 1,991,186 6,647 97 7.08 43.4 83.4 6.7 25 10,000 or more 6,753,920 24,059 64 6.75 42.4 61.1 3.2 26 Total long-term 9,793,519 300 7.96 56.5 72.7 27 Fixed rate (thousands of dollars) .. 2,323,557 173 7.91 57.2 64.4 15.6 28 1-99 239,945 22 9.68 93.5 32.4 4.7 29 100-499 383,381 206 8.85 84.9 34.5 8.9 30 500-999 177,088 665 7.97 55.0 49.8 15.4 31 1,000 or more 1,523,143 4,037 7.39 44.8 78.6 19.1 32 Floating rate (thousands of dollars) 7,469,963 389 7.97 56.3 75.4 6.5 33 1-99 327,790 28 9.62 85.8 74.0 3.2 34 100-499 1,098,232 208 8.99 81.3 88.3 7.1 35 500-999 627,999 655 8.63 71.8 88.5 11.6 36 1,000 or more 5,415,941 4,935 7.59 47.7 71.3 6.0 Loan rate (percent) Days Effective Nominal LOANS MADE BELOW PRIME1" 37 Overnight6 16,528,837 11,037 5.91 5.74 10.9 60.0 3.1 38 One month or less (excluding overnight) 10,761,821 3,797 6.12 5.95 10.1 82.0 5.8 39 More than one month and less than one year 8,812,694 691 6.52 6.34 34.0 88.9 8.9 40 Demand7 8,625,015 2,267 5.99 5.88 33.2 37.5 5.2 41 Total short-term 44,728,367 2,141 42 Fixed rate 35,423,032 3,465 6.02 5.86 14.0 65.9 5.4 43 Floating rate 9,305,335 873 6.38 6.20 40.7 69.4 5.0 44 Total long-term 4,937,917 824 45 Fixed rate 1,382,264 507 6.63 6.46 34.9 67.9 20.6 46 Floating rate .. . 3,555,652 6.69 6.52 38.6 60.6 1.7 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A65 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 6-10, 1996'—Continued Commercial and industrial loans—Continued Weighted Loan rate (percent) Loans Loans made Amount of Average size average secured under Partici- Type o an f d l o m an a turity (tho d u o lo s ll a a a n n r s d s s ) of (tho d u o s ll a a n r d s s ) of ma D tu a r y i s t y2 W e a f v f e e e i c g r t a h i g t v e e e d 3 Standard c (p o e ll r b a c y t e e n ra t) l ( c p o m e m r e c m n e t n i t t - ) pa ( t p io e n rc e l n o t a ) n s LARGE BANKS 1 Overnight6 12,857,346 11,265 2 One month or less (excluding overnight) 9,097,408 2,592 6.27 13.2 86.6 5.9 3 Fixed rate 7,357,538 7,053 6.18 9.3 84.1 3.8 4 Floating rate 1,739,870 705 6.63 29.6 97.1 14.7 5 More than one month and less than one year 8,443,491 765 7.19 42.0 91.6 7.8 6 Fixed rate 4,598,409 2,507 76 6.82 36.2 90.5 11.4 7 Floating rate 3,845,082 418 124 7.63 49.0 92.8 3.6 8 Demand7 11,627,780 561 6.93 40.8 48.4 5.1 9 Fixed rate 4,368,228 3,095 5.85 15.9 31.4 9.6 10 Floating rate 7,259,552 376 7.58 55.8 58.7 2.5 11 Total short-term 42,026,025 1,155 6.54 25.9 70.9 5.2 12 Fixed rate (thousands of dollars) 29,159,556 5,373 18 6.13 15.1 69.5 5.5 13 1-99 43,684 33 94 8.32 72.9 73.1 2.2 14 100-499 171,520 230 70 7.63 68.5 88.4 8.6 15 500-999 348,287 695 53 7.25 49.5 81.9 10.8 16 1,000-4,999 2,965,152 2,274 38 6.77 31.9 80.4 6.8 17 5,000-9,999 3,503,268 6,735 32 6.54 26.4 74.7 6.8 18 10,000 or more 22,127,646 21,688 12 5.95 10.0 66.9 5.0 19 Floating rate (thousands of dollars) 12,866,469 415 90 7.47 50.2 74.1 4.4 20 1-99 651,580 32 161 9.48 76.4 86.7 1.1 21 100-499 1,640,954 203 146 9.01 73.3 90.1 3.8 22 500-999 833,081 668 150 8.55 65.4 90.8 5.9 23 1,000-4,999 2,498,922 2,137 101 7.52 47.6 82.9 5.9 24 5,000-9,999 1,445,855 6,787 81 7.00 41.6 81.0 7.8 25 10,000 or more 5,796,077 27,524 55 6.74 41.7 60.3 3.4 26 Total long-term 5,444,213 769 7.86 55.7 88.8 11.8 27 Fixed rate (thousands of dollars).. 1,016,549 906 6.89 38.6 81.4 29.0 28 1-99 16,917 31 8.83 79.0 59.7 1.0 29 100-499 65,170 228 8.38 73.3 71.1 10.5 30 500-999 86,571 685 7.86 69.1 81.2 29.1 31 1,000 or more 847,891 5,040 6.64 32.0 82.6 31.0 32 Floating rate (thousands of dollars) 4,427,664 743 59.6 90.5 7.8 33 1-99 91,502 41 74.8 88.9 5.8 34 100-499 530,070 220 72.1 95.3 6.7 35 500-999 394,793 675 8.59 61.1 93.1 7.9 36 1,000 or more 3,411,299 4,578 7.87 57.1 89.6 8.1 Loan rate (percent) Days Effective' Nominal LOANS MADE BELOW PRIME10 37 Overnight6 12,638,649 12,557 5.90 5.73 9.4 66.2 3.0 38 One month or less (excluding overnight) 8,714,304 6,756 6.13 5.95 10.7 86.2 5.8 39 More than one month and less than one year 6,372,214 2,913 6.54 6.35 31.4 91.0 9.1 40 Demand' 7,850,723 3,361 5.96 5.85 32.0 31.8 5.5 41 Total short-term 35,575,891 5,217 6.08 18.7 42 Fixed rate 28,240,286 7,396 6,03 5.87 13.0 68.8 5.5 43 Floating rate 7,335,604 2,444 6,30 6.13 40.6 64.6 4.7 44 Total long-term 2,689,074 2,236 42 6.44 82.4 45 Fixed rate 786,859 1,871 6.24 6.10 30.1 80.2 32.0 46 Floating rate ... 1,902,215 2,431 6.77 6.57 52.9 83.4 2.7 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Special Tables • August 1996 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 6-10, 1996'—Continued Commercial and industrial loans—Continued Type o an f d l o m an a turity (t A ho m u l o o s u a a n n n s t d s o f o f ( A th v o e u ra sa g n e d s s iz o e f W m a a v e t e i u g r r a h i g t t e y e d 2 Wei L g o h a t n e d rate (percent) s L ec o b u a y r n e s d Lo c a o u n m n s d m e m i r t a - de pat P io a n rt ic lo i- ans dollars) dollars) average collateral ment (percent) Days effective3 (percent) (percent) OTHER BANKS 1 Overnight6 4,034,693 5,072 2 One month or less (excluding overnight) 2,531,341 326 6.74 22.1 67.2 5.1 3 Fixed rate 1,774,307 937 6.18 7.9 57.7 4.6 4 Floating rate 757,033 129 8.04 55.4 89.5 6.1 5 More than one month and less than one year 5,252,723 167 8.07 59.1 78.8 5.3 6 Fixed rate 1,807,209 141 6.94 45.3 78.2 7.8 7 Floating rate 3,445,514 181 8.66 66.3 79.1 4.0 8 Demand7 2,897,316 140 8.48 73.7 91.1 3.6 9 Fixed rate 251,446 108 7.44 60.1 77.4 .2 10 Floating rate 2,645,870 144 8.58 75.0 92.4 3.9 11 Total short-term 14,716,073 164 7.37 44.4 69.1 4.4 12 Fixed rate (thousands of dollars) 7,862,159 285 37 6.33 23.5 55.0 4.5 13 1-99 319,639 13 141 9.70 83.6 48.8 .6 14 100-499 296,410 182 115 8.70 69.1 58.4 4.6 15 500-999 311,143 675 76 7.44 61.4 78.4 4.7 16 1,000-4,999 1,373,083 2,156 50 6.60 25.2 82.5 6.2 17 5,000-9,999 688,835 6,217 61 6.61 40.1 68.1 15.8 18 10,000 or more 4,873,049 21,925 18 5.78 11.6 44.1 2.7 19 Floating rate (thousands of dollars) 6,853,914 110 152 8.56 68.4 85.4 4.2 20 1-99 1,136,945 22 176 9.73 83.8 89.1 1.6 21 100-499 1,760,251 197 177 9.19 79.4 90.0 5.9 22 500-999 705,404 641 179 8.85 78.1 88.8 7.4 23 1,000-4,999 1,748,140 2,064 131 8.39 61.4 86.0 4.1 24 5,000-9,999 545,331 6,303 139 7.30 48.3 89.9 3.8 25 10,000 or more 957,843 13,655 6.82 46.9 66.1 2.4 26 Total long-term 4,349,306 170 8.08 57.6 52.6 27 Fixed rate (thousands of dollars) . . 1,307,008 106 8.70 71.7 51.2 5.2 28 1-99 223,028 22 9.75 94.6 30.4 5.0 29 100-499 318,211 201 8.95 87.3 27.1 8.6 30 500-999 90,518 647 8.08 41.4 19.7 2.3 31 1,000 or more 675,252 3,230 8.33 60.9 73.6 4.2 32 Floating rate (thousands of dollars) 3,042,299 230 7.81 51.5 53.2 4.6 33 1-99 236,288 24 9.74 90.0 68.3 2.2 34 100-499 568,162 198 9.09 89.9 81.8 7.4 35 500-999 233.206 624 89.8 80.7 17.8 36 1,000 or more 2,004,643 5,690 31.6 40.2 2.5 Loan rate (percent) Days Effective3 Nominal8 LOANS MADE BELOW PRIME10 37 Overnight6 3,890,187 7,922 5.94 5.77 15.7 39.9 3.4 38 One month or less (excluding overnight) 2,047,517 1,326 12 6.10 5.92 7.5 63.9 5.7 39 More than one month and less than one year 2,440,480 231 139 6.48 6.30 40.6 83.5 8.4 40 Demand7 774,292 527 6.31 6.14 45.3 94.8 2.8 41 Total short-term 9,152,476 5.98 42 Fixed rate 7,182.746 1,121 31 6.01 5.84 18.0 54.6 4.9 43 Floating rate 1,969,730 257 112 6.67 6.48 41.2 87.0 6.3 44 Total long-term 2,248,842 27.2 45 Fixed rate 595,405 258 7.14 6.94 41.2 51.7 5.5 46 Floating rate . .. 1,653.437 666 6.60 6.45 22.2 34.3 .5 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A67 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 6-10, 1996'—Continued NOTES 1. The survey of terms of bank lending to business collects data on gross loan extensions 4. The chances are about two out of three that the average rate shown would differ by less made during the first full business week in the mid-month of each quarter by a sample of 340 than the amount of the standard error from the average rate that would be found by a complete commercial banks of all sizes. A sample of 250 banks reports loans to farmers. The sample survey of lending at all banks. data are blown up to estimate the lending terms at all insured commercial banks during that 5. The rate used to price the largest dollar volume of loans. Base pricing rates include the week. The estimated terms of bank lending are not intended for use in collecting the terms of prime rate (sometimes referred to as a bank's "basic" or "reference" rate); the federal funds loans extended over the entire quarter or residing in the portfolios of those banks. Construc- rate; domestic money market rates other than the federal funds rate; foreign money market tion and land development loans include both unsecured loans and loans secured by real rates; and other base rates not included in the foregoing classifications. estate. Thus, some of the construction and land development loans would be reported on the 6. Overnight loans mature on the following business day. statement of condition as real estate loans and the remainder as business loans. Mortgage 7. Demand loans have no stated date of maturity. loans, purchased loans, foreign loans, and loans of less that $1,000 are excluded from the 8. Nominal (not compounded) annual interest rate calculated from the stated rate and other survey. As of September 30, 1990 assets of most of the large banks were at least $7.0 billion. terms of the loans and weighted by loan size. For all insured banks, total assets averaged $275 million. 9. Calculated by weighting the prime rate reported by each bank by the volume of loans 2. Average maturities are weighted by loan size; excludes demand loans. reported by that bank, summing the results, and then averaging over all reporting banks. 3. Effective (compounded) annual interest rate calculated from the stated rate and other 10. The proportion of loans made at rates below the prime may vary substantially from the terms of the loans and weighted by loan size. proportion of such loans outstanding in banks' portfolios. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 Index to Statistical Tables References are to pages A3-A67 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Deposits (See also specific types) Agricultural loans, commercial banks, 19, 20 Banks, by classes, 4, 17—21 Assets and liabilities (See also Foreigners) Federal Reserve Banks, 5, 10 Banks, by classes, 17—21 Interest rates, 15 Domestic finance companies, 33 Turnover, 16 Federal Reserve Banks, 10 Discount rates at Reserve Banks and at foreign central banks and Financial institutions, 25 foreign countries (See Interest rates) Foreign banks, U.S. branches and agencies, 21 Discounts and advances by Reserve Banks (See Loans) Automobiles Dividends, corporate, 32 Consumer installment credit, 36 Production, 44, 45 EMPLOYMENT, 42 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 Federal Financing Bank, 30 CAPACITY utilization, 43 Federal funds, 6, 19, 20, 21, 23, 25 Capital accounts Federal Home Loan Banks, 30 Banks, by classes, 17 Federal Home Loan Mortgage Corporation, 30, 34, 35 Federal Reserve Banks, 10 Federal Housing Administration, 30, 34, 35 Central banks, discount rates, 61 Federal Land Banks, 35 Certificates of deposit, 23 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, 64-67 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 Federally sponsored credit agencies, 30 Loans sold outright, 20 Finance companies Assets and liabilities, 33 Real estate mortgages held, by holder and property, 35 Business credit, 33 Terms of lending, 64-67 Loans, 36 Time and savings deposits, 4 Paper, 22, 23 Commercial paper, 22, 23, 33 Financial institutions, loans to, 19, 20, 21 Condition statements (See Assets and liabilities) Float, 5 Construction, 42, 46 Consumer installment credit, 36 Flow of funds, 37-41 Consumer prices, 42 Foreign banks, assets and liabilities of U.S. branches and Consumption expenditures, 49, 50 agencies, 20, 21 Corporations Foreign currency operations, 10 Profits and their distribution, 32 Foreign deposits in U.S. banks, 5, 20 Security issues, 31, 61 Foreign exchange rates, 62 Cost of living (See Consumer prices) Foreign trade, 51 Credit unions, 36 Foreigners Currency in circulation, 5, 13 Claims on, 52, 55, 56, 57, 59 Customer credit, stock market, 24 Liabilities to, 20, 51, 52, 53, 58, 60, 61 GOLD DEBITS to deposit accounts, 16 Certificate account, 10 Debt (See specific types of debt or securities) Stock, 5, 51 Demand deposits Government National Mortgage Association, 30, 34, 35 Banks, by classes, 17-21 Gross domestic product, 48 Ownership by individuals, partnerships, and corporations, 20, 21 HOUSING, new and existing units, 46 Turnover, 16 Depository institutions INCOME, personal and national, 42, 48, 49 Reserve requirements, 8 Industrial production, 42, 44 Reserves and related items, 4, 5, 6, 12 Installment loans, 36 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

69 Insurance companies, 27, 35 Repurchase agreements, 6 Interest rates Reserve requirements, 8 Bonds, 23 Reserves Commercial banks, 64-67 Commercial banks, 17 Consumer installment credit, 36 Depository institutions, 4, 5, 6, 12 Deposits, 15 Federal Reserve Banks, 10 Federal Reserve Banks, 7 U.S. reserve assets, 51 Foreign central banks and foreign countries, 61 Residential mortgage loans, 34 Money and capital markets, 23 Retail credit and retail sales, 36, 42 Mortgages, 34 Prime rate, 22 SAVING International capital transactions of United States, 50-61 Flow of funds, 37-41 International organizations, 52, 53, 55, 58, 59 National income accounts, 48 Inventories, 48 Savings institutions, 35, 36, 37 Investment companies, issues and assets, 32 Savings deposits (See Time and savings deposits) Investments (See also specific types) Securities (See also specific types) Banks, by classes, 17-21 Federal and federally sponsored credit agencies, 30 Commercial banks, 4, 17-21 Foreign transactions, 60 Federal Reserve Banks, 10, 11 New issues, 31 Financial institutions, 35 Prices, 24 Special drawing rights, 5, 10, 50, 51 LABOR force, 42 State and local governments Life insurance companies {See Insurance companies) Deposits, 19, 20 Loans (See also specific types) Holdings of U.S. government securities, 27 Banks, by classes, 17—21 New security issues, 31 Commercial banks, 17-21 Ownership of securities issued by, 19, 21 Federal Reserve Banks, 5, 6, 7, 10, 11 Rates on securities, 23 Financial institutions, 35 Stock market, selected statistics, 24 Insured or guaranteed by United States, 34, 35 Stocks (See also Securities) New issues, 31 MANUFACTURING Prices, 24 Capacity utilization, 43 Production, 43, 45 Student Loan Marketing Association, 30 Margin requirements, 24 TAX receipts, federal, 26 Member banks (See also Depository institutions) Federal funds and repurchase agreements, 6 Thrift institutions, 4. (See also Credit unions and Savings Reserve requirements, 8 institutions) Mining production, 45 Time and savings deposits, 4, 13, 15, 17-21 Mobile homes shipped, 46 Trade, foreign, 51 Monetary and credit aggregates, 4, 12 Treasury cash, Treasury currency, 5 Money and capital market rates, 23 Treasury deposits, 5, 10, 25 Money stock measures and components, 4, 13 Treasury operating balance, 25 Mortgages (See Real estate loans) UNEMPLOYMENT, 42 Mutual funds, 32 U.S. government balances Mutual savings banks (See Thrift institutions) Commercial bank holdings, 17-21 Treasury deposits at Reserve Banks, 5, 10, 25 NATIONAL defense outlays, 26 U.S. government securities National income, 48 Bank holdings, 17-21, 27 Dealer transactions, positions, and financing, 29 OPEN market transactions, 9 Federal Reserve Bank holdings, 5, 10, 11, 27 Foreign and international holdings and PERSONAL income, 49 transactions, 10, 27, 61 Prices Open market transactions, 9 Consumer and producer, 42, 47 Outstanding, by type and holder, 27, 28 Stock market, 24 Rates, 23 Prime rate, 22 U.S. international transactions, 50-62 Producer prices, 42, 47 Utilities, production, 45 Production, 42, 44 Profits, corporate, 32 VETERANS Administration, 34, 35 REAL estate loans WEEKLY reporting banks, 17-21 Banks, by classes, 19, 20, 35 Wholesale (producer) prices, 42, 47 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

70 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 DONALD L. KOHN, Director JAMES I. GARNER, Deputy Associate Director DAVID E. LINDSEY, Deputy Director HOWARD A. AMER, Assistant Director BRIAN F. MADIGAN, Associate Director GERALD A. EDWARDS, JR., Assistant Director RICHARD D. PORTER, Deputy Associate Director STEPHEN M. HOFFMAN, JR., Assistant Director VINCENT R. REINHART, Assistant Director JAMES V. HOUPT, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board JACK P. JENNINGS, Assistant Director MICHAEL G. MARTINSON, Assistant Director DIVISION OF CONSUMER RHOGER H PUGH, Assistant Director 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

71 SUSAN M. PHILLIPS LAURENCE H. MEYER JANET L. YELLEN OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PA YMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director SHEILA CLARK, EEO Programs Director DAVID L. ROBINSON, Deputy Director (Finance and Control) 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

72 Federal Reserve Bulletin • August 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 ALICE M. RIVLIN JERRY L. JORDAN ROBERT D. MCTEER, JR. GARY H. STERN EDWARD W. KELLEY, JR. LAURENCE H. MEYER JANET L. YELLEN 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

73 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

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

75 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, Studies and papers on economic and financial subjects that are of Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary general interest. Requests to obtain single copies of the full text or Ann Taylor. March 1992. 37 pp. to be added to the mailing list for the series may be sent to 164. THE 1989—92 CREDIT CRUNCH FOR REAL ESTATE, by Publications Services. James T. Fergus and John L. Goodman, Jr. July 1993. 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, 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- by Stephen A. Rhoades. July 1994. 37 pp. 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. 21 pp. 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

76 Maps of the Federal Reserve System * TETON MINNEAPOLIS • pm TO CHI .cCJAomU UH MM J1 • • NEW YORK 12 CLEVELAND PHILADELPHIA F FRANCISCO 10 CCAANNSSAASS CCIITTYY •• I i i i i l i i i ii JPt RICHMOND ST. LOUIS 8 5 6 • A ATLANTA 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

77 1-A 2-B 3-C 4-D 5-E Bavltim<ore/ md l CT li. VT NH Buffalo Bj •Cincinnati •Charlotte MA I S NY cr sc BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H •Nashville Birmingham _ A- ; IN ^ Detroit • • f, Lo•u. isv.i.l. le -TN LA Jacksonville •Memphis New Orleans H, Little) J Rock ( MS Miami ATLANTA CHICAGO ST. LOUIS 9-1 MINNEAPOLIS 10-J 12-L WY 1 NB CO Omaha* Denver ALASKA WA MM 1 Seattle Oklahoma City Pwtland OK OR ) KANSAS CITY ID NV~7 11-K rx • ) MM Salt lake City B LA w ?l Paso ""^Xtlcaiston •Los Ang eles • A? San An tomo HAWAII AZ DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 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 vacancy 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 JeanD. 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

Publications of Interest FEDERAL RESERVE REGULATORY SERVICE To promote public understanding of its regulatory func- The Payment System Handbook deals with expedited tions, the Board publishes the Federal Reserve Regu- funds availability, check collection, wire transfers, and latory Service, a four-volume loose-leaf service con- risk-reduction policy. It includes Regulations CC, J, and taining all Board regulations as well as related statutes, EE, related statutes and commentaries, and policy interpretations, policy statements, rulings, and staff statements on risk reduction in the payment system. opinions. For those with a more specialized interest in For domestic subscribers, the annual rate is $200 for the Board's regulations, parts of this service are pub- the Federal Reserve Regulatory Service and $75 for lished separately as handbooks pertaining to monetary each Handbook. For subscribers outside the United policy, securities credit, consumer affairs, and the pay- States, the price including additional air mail costs is ment system. $250 for the Service and $90 for each Handbook. These publications are designed to help those who The Federal Reserve Regulatory Service is also availmust frequently refer to the Board's regulatory materi- able on diskette for use on personal computers. For a als. They are updated monthly, and each contains cita- standalone PC, the annual subscription fee is $300. For tion indexes and a subject index. network subscriptions, the annual fee is $300 for 1 con- The Monetary Policy and Reserve Requirements current user, $750 for a maximum of 10 concurrent Handbook contains Regulations A, D, and Q, plus users, $2,000 for a maximum of 50 concurrent users, related materials. and $3,000 for a maximum of 100 concurrent users. The Securities Credit Transactions Handbook con- Subscribers outside the United States should add $50 tains Regulations G, T, U, and X, dealing with exten- to cover additional airmail costs. For further informasions of credit for the purchase of securities, together tion, call (202) 452-3244. with related statutes, Board interpretations, rulings, All subscription requests must be accompanied by a and staff opinions. Also included are the Board's list check or money order payable to the Board of Goverof marginable OTC stocks and its list of foreign margin nors of the Federal Reserve System. Orders should be stocks. addressed to Publications Services, mail stop 127, Board The Consumer and Community Affairs Handbook of Governors of the Federal Reserve System, Washingcontains Regulations B, C, E, M, Z, AA, BB, and DD, ton, DC 20551. and associated materials. GUIDE TO THE FLOW OF FUNDS ACCOUNTS A recent Federal Reserve publication, Guide to the Flow dures as seasonal adjustment, extrapolation, and of Funds Accounts, explains in detail how the U.S. interpolation. financial flow accounts are prepared. The accounts, The balance of the Guide contains explanatory tables which are compiled by the Division of Research and corresponding to the tables of financial flows data that Statistics, are published in the Board's quarterly Z.l appeared in the September 1992 Z.l release. These statistical release, "Flow of Funds Accounts, Flows and tables give, for each data series, the source of the data or Outstandings." The Guide updates and replaces Intro- the methods of calculation, along with annual data for duction to Flow of Funds, published in 1980. 1991 that were published in the September 1992 release. The 670-page Guide begins with an explanation of Guide to the Flow of Funds Accounts is available for the organization and uses of the flow of funds accounts $8.50 per copy from Publications Services, Board of and their relationship to the national income and Governors of the Federal Reserve System, Washington, product accounts prepared by the U.S. Department of DC 20551. Orders must include a check or money order, Commerce. Also discussed are the individual data in U.S. dollars, made payable to the Board of Governors series that make up the accounts and such proce- of the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

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