Federal Reserve Bulletin, 1996-09

VOLUME 82 • NUMBER 9 • SEPTEMBER 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 791 DERIVATIVES DISCLOSURES BY MAJOR U.S. ing law enforcement's ability to prosecute BANKS, 1995 wrongdoers may prove useful, before the Senate Committee on Banking, Housing, and Urban This review of the 1995 annual reports of ten Affairs, July 17, 1996. major U.S. commercial banks shows that public disclosure about derivatives activities continues 811 Alan Greenspan, Chairman, Board of Goverto improve. Compared with reports for earlier nors, discusses the performance of the U.S. years, banks are providing more types of infor- economy in the first half of 1996 and the conmation in greater depth and in ways that make duct of monetary policy and says that even the information more easily understood by read- though the U.S. economy is using its productive ers of public financial statements. These large resources intensively, inflation has remained quibanks, in response to standards and recommen- escent and that looking forward, there are a dations promulgated by various groups as well number of reasons to expect demands to moderas by shareholder concerns, have made signifi- ate and economic activity to settle back toward a cant strides in increasing the transparency of more sustainable pace in the months ahead, their derivatives activities. before the Senate Committee on Banking, Housing, and Urban Affairs, July 18, 1996. [Chair- 802 TREASURY AND FEDERAL RESERVE man Greenspan presented identical testimony FOREIGN EXCHANGE OPERATIONS before the Subcommittee on Domestic and International Monetary Policy of the House Commit- Over the second quarter of 1996, the dollar tee on Banking and Financial Services on appreciated 3.2 percent against the German July 23, 1996.] mark, 2.2 percent against the Japanese yen, and 1.6 percent on a trade-weighted basis against the 815 Janet L. Yellen, member, Board of Governors, other Group of Ten currencies. The U.S. monediscusses trends in consumer lending and the tary authorities did not undertake any interven- Federal Reserve Board's view of how recent tion operations in the foreign exchange market developments in this sector are affecting U.S. during the quarter. commercial banks and says that although the recently emerging trend of higher delinquencies 806 INDUSTRIAL PRODUCTION AND CAPACITY and personal bankruptcies has prompted the UTILIZATION FOR JULY 1996 Federal Reserve to devote more attention to the Industrial production edged up 0.1 percent in monitoring of consumer loan exposures, both on July, to 126.2 percent of its 1987 average, after and off balance sheets, and to the evaluation of an upward revised gain of 0.6 percent in June. risk-management practices, the industry's condi- Industrial capacity utilization decreased 0.2 per- tion is strong in terms of its profitability, capital centage point, to 83.2 percent. ratios, loss reserves, and overall asset quality, before the Subcommittee on Financial Institutions and Regulatory Relief of the Senate Com- 809 STATEMENTS TO THE CONGRESS mittee on Banking, Housing, and Urban Affairs, Herbert A. Biern, Deputy Associate Director, July 24, 1996. Division of Banking Supervision and Regulation, discusses actions that the Federal Reserve 819 Chairman Greenspan addresses certain recent has taken over the past several years to address reports on the Federal Reserve's operations, in the problem of "prime bank" financial instru- particular some issues raised by the General ments and says that the Board believes that Accounting Office (GAO) with respect to the continuing successful prosecution of cases management of the Federal Reserve System, and involving fraudsters selling these instruments is says that in summary, although the Board crucial and that new statutory authority enhanc- believes that much of the GAO's analysis and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

recommendations have merit, the Board takes 833 LEGAL DEVELOPMENTS exception to the broad implication of the GAO Various bank holding company, bank service report that the Federal Reserve has not exercised corporation, and bank merger orders; and pendappropriate budget constraint and that it has not ing cases. adequately addressed the changing technological and financial environment in which it operates; Chairman Greenspan says that in his A1 FINANCIAL AND BUSINESS STATISTICS experience the Federal Reserve is as well run an These tables reflect data available as of organization as any with which he has been July 29, 1996. associated, private or public, before the Senate Committee on Banking, Housing, and Urban Affairs, July 26, 1996. A3 GUIDE TO TABULAR PRESENTATION A4 Domestic Financial Statistics 824 ANNOUNCEMENTS A42 Domestic Nonfinancial Statistics Nominations sought for appointments to the A50 International Statistics Consumer Advisory Council. Final rule amending Regulation K. A63 GUIDE TO STATISTICAL RELEASES AND Extension of comment period on proposal to SPECIAL TABLES amend Regulation E; proposal to modify the conditions under which section 20 subsidiaries of bank holding companies may underwrite and A76 INDEX TO STATISTICAL TABLES deal in securities. Availability of the revised lists of over-the- A78 BOARD OF GOVERNORS AND STAFF counter stocks and of foreign stocks that are subject to margin regulations. A80 FEDERAL OPEN MARKET COMMITTEE AND STAFF; ADVISORY COUNCILS 826 MINUTES OF THE FEDERAL OPEN MARKET COMMITTEE MEETING HELD ON MAY 21, 1996 A82 FEDERAL RESERVE BOARD PUBLICATIONS At its meeting on May 21, 1996, the Committee adopted a directive that called for maintaining A84 MAPS OF THE FEDERAL RESERVE SYSTEM the existing degree of pressure on reserve positions and that did not include a presumption about the likely direction of any adjustments to A86 FEDERAL RESERVE BANKS, BRANCHES, policy during the intermeeting period. AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Derivatives Disclosures by Major US. Banks, 1995 Gerald A. Edwards, Jr., and Gregory E. Eller, of the and their pricing can be opaque, making their risks Board's Division of Banking Supervision and Regula- difficult to understand, measure, and manage. tion, prepared this article. Terrill Garrison provided One approach to increasing public understanding research assistance. of derivatives has been the implementation of more comprehensive accounting practices and disclosure The use of derivative contracts has grown rapidly requirements. In particular, these two tools are helpduring the 1990s. These off-balance-sheet instru- ful in characterizing more accurately the effects of ments, whose market value (and cash flow) changes these instruments on firms' financial performance with that of an underlying variable (such as an inter- and in explaining those effects through public finanest rate, a foreign currency exchange rate, an equity cial reporting. The benefits of these tools are not price, or a commodity price), are a powerful tool limited to derivatives, however. They should also for companies in managing their exposure to risk.1 lead to better understanding of how firms manage The increasing importance of derivatives to finan- risks arising from nonderivative financial contracts as cial institutions (including banks that are dealers of well as from other sources. The goals are to demysthese instruments), as well as to other enterprises, has tify derivatives, to facilitate the assessment of firms' heightened the need to understand them better. derivatives activities by readers of financial state- Public awareness of these instruments has also ments, and thereby to help improve the allocation of grown, a consequence of highly publicized losses capital by financial markets. by some large businesses and municipalities that had Many groups have been involved in bringing about entered into derivative contracts. In a few instances, changes in derivatives accounting and reporting: the losses were blamed on derivatives even though authorities that set accounting standards, regulators they had in fact resulted from the trading of tradi- and bank supervisors, and industry associations. tional financial instruments. Nevertheless, these These groups have set various regulatory requireevents illustrate the need for firms entering into ments and have made numerous recommendations contracts, shareholders of these firms, policymakers, (see box "Requirements and Recommendations for and the public to understand derivative instruments Public Disclosure"). As a result, the nature of the more fully. information publicly disclosed by firms has been The risks associated with derivatives are no differ- evolving in several ways, including the amount and ent from the risks that firms have always had to type of information disclosed and the way informarecognize and control (see box "Risks Associated tion is presented. with Derivatives"). All financial contracts carry some The published annual reports to shareholders and degree of risk. Nonderivative contracts, in fact, can other public financial reports of banks and other combe riskier and more complex than derivatives. For panies play an important role in disseminating inforexample, a junk-rated bond that is tied to a foreign mation to investors, creditors, and other stakeholders interest rate and is convertible into the issuer's com- in the enterprises. The information they convey about mon stock carries credit and market risk that would derivatives has improved significantly in the past few be difficult to quantify. In contrast, the risks of some years. A survey of the annual reports of the top ten derivatives, such as futures contracts, can be easily U.S. banks that deal in derivatives showed that their assessed because prices are observable from trading 1994 reports were substantially more "transparent" on exchanges and cash changes hands daily to main- than their 1993 reports, with more discussion and tain collateral, mitigating credit risk. Nonetheless, analysis of, and more quantitative information about, derivatives can be highly complex in their design, their use of these instruments.2 2. Gerald A. Edwards, Jr., and Gregory E. Eller, "Overview of 1. See box "Classes of Derivatives" for an explanation of the Derivatives Disclosures by Major U.S. Banks," Federal Reserve different types of derivatives and the ways they are used. Bulletin, vol. 81 (September 1995), pp. 817-31. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

792 Federal Reserve Bulletin • September 1996 Classes of Derivatives Derivatives are contracts that derive their market values by Swap Contracts. An interest rate swap can be viewed as a reference to a physical commodity, another contract (such contract that bundles a series of forward rate agreements as a debt or equity instrument), or an interest rate or equity into a single instrument, with one FRA for each swap index (collectively referred to as "goods"). Some deriva- payment through maturity of the swap contract. In a simple tive contracts may be settled either by delivery of the interest rate swap, one party agrees to make fixed cash contracted-for good or by the payment of cash, while others payments (equivalent to a fixed rate of interest based on a are settled only in cash. Derivative contracts make reference notional principal amount) and the other party agrees to to a notional amount. The amount is "notional" because it make variable cash payments (equivalent to a floating-rate is only an artifice for calculating the amount of cash due index such as the London Interbank Offered Rate, LIBOR). periodically. There are two basic classes of derivatives, Besides interest rates, the structure of exchanging a fixed forwards and options. Both types of instruments are used as payment for a floating payment has been applied to such a means of transferring, between the parties to the contract, goods as foreign exchange, precious metals, and bulk risk associated with possible changes in prices. commodities. Forward Contracts Option Contracts A forward contract is a bilateral agreement in which one An option contract is a unilateral agreement in which one party, the buyer, is obligated to purchase the contracted-for party, the option writer, is obligated to perform under the good and the second party, the seller, is obligated to sell the contract if the option holder exercises his or her option. The good to the buyer. At the inception of the forward contract, option holder pays a fee, or "premium," to the writer for the quantity and grade of the good, the price to be paid, and this privilege. The option holder is under no obligation, the date and location of delivery are fixed. The price to be however, and will exercise the option only when the exerpaid in the future under a new forward contract will be cise price is favorable relative to current market prices. If, closely related to the good's current market price (its spot on the one hand, prices move unfavorably for the option price), with adjustments to cover the costs of carrying an holder, the holder loses only the premium. If, on the other inventory of the good during the interim period, such as the hand, prices move favorably for the option holder, the costs of storage, insurance, and interest. holder gains (a theoretically unlimited amount) at the expense of the option writer. In an option contract, the exer- Futures. A futures contract is a type of forward that cise (or "strike") price, the delivery date, and the quantity has standard commodity-unit and delivery terms and and quality of the commodity are fixed. is traded on an organized exchange. A clearinghouse nor- Options can be either calls or puts. A call option grants mally serves as counterparty to both the buyer and the the holder of the contract the right to purchase a good from seller. This arrangement reduces credit risk because the the option writer, while a put option grants the holder the parties look to the clearinghouse for performance. Clearing- right to sell the underlying good to the option writer. houses typically reduce their credit risk by requiring that the Interest rate caps and floors can be viewed as a series of counterparties put up collateral and by marking to market call options packaged into a single financial instrument in frequently. Futures are available for agricultural products which the underlying good is an interest rate index. For and other commodities, bonds and other interest-bearing example, a borrower arranges to borrow at a variable rate instruments, equity interests, and foreign exchange. reset quarterly at LIBOR. He also purchases a 6.5 percent rate cap. If LIBOR rises to 9 percent, the borrower pays his Forward Rate Agreements (FRAs). An FRA is a forward creditor 9 percent and receives from the cap writer 2.5 percontract between two parties seeking to fix a future interest cent (9 percent minus the 6.5 percent option exercise price). rate. The parties agree on an interest rate for a specified The borrower has effectively limited his interest expense to period associated with a specified notional principal amount a maximum of 6.5 percent plus the premium paid for the (though no commitment to lend or borrow that amount interest rate cap. is made). The contract is settled in cash; the payment Under a floor contract, the borrower writes an option in amount is equal to the product of the notional principal which he agrees to pay the difference between the strike amount and the difference between a spot market rate and price and the interest rate index specified in the contract. the contractual forward rate. If the spot rate on the maturity The premium received offsets a portion of the overall interdate is higher than the contracted rate, the seller pays the est expense of the obligation; however, the debtor retains difference; if the spot rate is lower, the buyer pays the exposure to higher interest rates and forgoes the benefit of difference. lower interest rates on his floating-rate obligation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Derivatives Disclosures by Major U.S. Banks, 1995 793 Risks Associated with Derivatives The risks associated with derivative contracts are no differ- other positions. The value of these contracts may change ent from those associated with other bank financial instru- because of changes in interest rates (interest rate risk), ments. The major categories of risk are described here. foreign exchange rates (foreign exchange rate risk), or commodity prices or other indexes. Credit risk is the possibility of loss from the failure of a For some larger institutions, disclosure of information counterparty to fully carry out its contractual obligations. about internal value-at-risk measures and methodology can The types of information about credit risk associated with help financial statement readers understand the institution's derivatives that institutions might disclose include the exposure to market risk. Using value-at-risk methods following: involves the assessment of potential losses in portfolio value resulting from adverse movements in market risk • Gross positive market value—the gross replacement factors for a specified statistical confidence level over a cost of a contract, excluding the effects of any netting defined holding period. arrangements • Current credit exposure—the fair value on a given date Liquidity risk has two broad types: market liquidity risk of contracts that are favorable to the holder (that is, are and funding risk. Market liquidity risk arises from the assets) possibility that a position cannot be eliminated quickly • Potential credit exposure—a statistical measure of the either by liquidating it or by establishing offsetting posipossible future value of contracts held today if prices or tions. Funding risk arises from the possibility that a firm rates move favorably for the holder before the contracts will be unable to meet the cash requirements of its contracts. mature • Credit risk concentrations—indicators of diversifica- Operational risk is the possibility that losses may occur tion by geographic area or industry group because of inadequate systems and controls, human error, or • Collateral and other credit enhancements that may mismanagement. reduce credit risk • Counterparty credit quality, nonperforming contracts, Legal risk is the possibility of loss that arises when a and actual credit losses. contract cannot be enforced because of, for example, poor Market risk is the possibility that the value of a financial documentation, insufficient capacity or authority of the contract (or of a real asset, for that matter) will adversely counterparty, or uncertain enforceability of the contract in a change before the contract can be liquidated or offset with bankruptcy or insolvency proceeding. This article follows up on the previous survey by improving the overall quality of reporting about reviewing the 1995 annual reports of the top ten derivatives activities. banks that deal in derivatives. Although disclosure requirements did not change during the intervening period, banks nonetheless improved their reporting of REVIEW OF 1995 ANNUAL REPORTS derivatives activities in 1995 compared with 1994. In particular, they expanded their discussions of deriva- The institutions whose annual reports were surveyed tives activities and provided more quantitative infor- for this article were the ten U.S. commercial banks mation. The vastly greater amount of information having the greatest credit risk exposure from derivapresented in the 1995 reports is especially evident tives on December 31, 1995 (taking into account the when they are compared with the financial statements effects of netting agreements) (table l).4 Nine of the issued for 1992, in which banks typically disclosed little more than the total value of their trading assets 4. In this article, "bank" refers to a banking organization, comprisand liabilities, their total trading profits, their overall ing bank holding companies, their banking affiliates, and other subsidiaries that are consolidated for purposes of public financial reporting. net credit exposure across all counterparties, and the Credit risk exposure as of a particular date (current credit exposure) notional amounts of their derivative contracts.3 Regu- is a measure of the potential loss resulting from a hypothetical default lators and industry groups that have advocated fuller by a counterparty. It is the fair value on the date of measurement of disclosure have clearly had significant influence in those contracts that are favorable to the bank (that is, those that are assets). If a legally enforceable bilateral netting agreement is in place, credit risk exposure is the net fair value of all contracts subject to the 3. The notional amount is the face amount of a contract to which an agreement. For example, if a bank has two contracts with a counterinterest rate, a price, or a rate of exchange is applied to determine the party, one worth $10 and the other worth -$6, the bank's credit risk contractual cash payments or receipts. In general, the notional amount exposure is $10. If, however, the bank and its counterparty have is not exchanged and does not reflect the risk of a transaction. agreed to net their contracts, the bank's credit risk exposure is $4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

794 Federal Reserve Bulletin • September 1996 Ten U.S. commercial banks with the greatest exposure • Management's discussion and analysis provides, to credit risk from derivatives on December 31, 1995 in narrative form supported by tabular or graphical Billions of dollars data, an analysis of the bank's financial condition and Total notional performance. As part of its analysis, management Credit risk amount of Institution exposure1 derivatives typically describes the bank's exposures to risk and outstanding its techniques for managing risk. This section is not J.P. Morgan & Company 3333..66 33,,440033 usually audited by independent accountants. Chase Manhattan Corporation2 2288..00 44,,772288 • The annual financial statement presents state- 1199..44 22,,330011 Bankers Trust New York Corporation .. 1122..11 11,,774422 ments of financial position, income, changes in BankAmerica Corporation 88..33 11,,551155 stockholders' equity, and cash flow. The financial First Chicago NBD Corporation 77..33 880011 statement and any accompanying footnotes are typi- NationsBank Corporation 33..33 11,,000066 Republic New York Corporation 33..00 226688 cally audited by independent accountants. State Street Boston Corporation ..66 5588 Bank of New York ..66 5566 1. Exposure taking into account the effects of legally enforceable bilateral This survey considered disclosures in both sections netting agreements. of the annual reports. The analysis was "binary," 2. Pro forma combination for Chemical Banking Corporation and Chase Manhattan Corporation. with coverage judged to be either present or not SOURCE. Publicly available regulatory reports filed by bank holding com- present, and the decision about whether or not a panies with the Federal Reserve. particular disclosure was present was in many instances subjective. Information on derivatives used ten banks were also included in the survey of 1994 for trading purposes was analyzed separately from annual reports. Two of the 1994 banks, Chemical information on derivatives intended for risk manage- Banking Corporation and Chase Manhattan Corpora- ment or other end-user purposes. Because groups tion, merged in 1996 and published a combined that set disclosure standards also recommend that annual report for year-end 1995. Moving into the firms report on their trading of nonderivative finangroup for 1995 was State Street Boston Corporation.5 cial instruments and nonfinancial items (such as precious metals or other physical commodities), we These ten banks dominate the banking industry's share of the derivatives market: Collectively, they accounted for more than 95 percent of the derivatives 2. Derivatives positions and trading activity of the top ten held or issued by all U.S. banks at year-end 1995 in banks and all U.S. banks, 1995 terms of notional amounts; they accounted for a Billions of dollars similar share of the industry's trading portfolios in Item Top ten banks All banks terms of fair value (table 2). Of the derivatives they held or had issued as of year-end, approximately Notional amount of derivatives outstanding two-thirds were interest rate contracts and one-third as of year-end were foreign exchange contracts, with a small amount TYPE OF DERIVATIVE INSTRUMENT of equity and commodity exposures. The ten banks Interest rate contracts 10,231 10,800 also accounted for nearly 90 percent of the profits Foreign exchange contracts 5,286 5,366 from trading that were earned by all U.S. banks in Equity, commodity, or other contracts 361 361 Total 15,878 16,527 1995. Fair value as of year-end In their annual reports, banks disclose information about derivative instruments on a consolidated basis POSITIONS IN TRADING PORTFOLIO (that is, combining all legal entities that make up the Trading assets 255 275 enterprise). The information is usually presented in Derivatives 95 100 two main sections of the report: Trading liabilities 159 169 Derivatives 97 102 Total trading positions (absolute value) 414 444 Derivatives 191 202 ($10 - $6). Note that the current credit exposure of the ten banks on Trading profit December 31, 1995, was approximately 1 percent of the total notional from all sources for year amount of their outstanding derivative contracts (see table 1). 5. Also included in the tables in this article, to provide a baseline TYPE OF RISK ASSUMED TO EARN PROFIT for assessing the extent of change, are data on disclosures in the 1993 Interest rate 2.9 3.3 annual reports of the top ten banks. The group of banks for that year Foreign exchange 2.0 2.4 was essentially the same as in 1994. Continental Bancorp, which was Equity, commodity, or other .8 Total 5.7 6.5 ranked in the top ten in 1993, was acquired by BankAmerica Corporation in 1994. It was replaced in the 1994 survey by Bank of New York, SOURCE. Publicly available regulatory reports filed by bank holding comwhich had been eleventh in 1993. panies with the Federal Reserve. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Derivatives Disclosures by Major U.S. Banks, 1995 795 also reviewed the reports for disclosures about those 3. Number of top ten banks discussing their management objectives and the risks of derivatives in their annual instruments. A look at the trading books of the ten reports, 1993-95 banks gives some perspective on the extent of the use of derivatives as a trading vehicle: Derivatives Number of banks disclosing accounted for less than half of the fair value of their TTyyppee ooff qquuaalliittaattiivvee ddiisscclloossuurree 1993 1994 1995 trading assets and liabilities on December 31 (table 2). In this article, information for all trading DISCUSSION OF MANAGEMENT OBJECTIVES AND STRATEGIES account items is presented to give a more complete picture of trading. For trading activities 44 99 1100 For nontrading activities 44 1100 1100 DISCUSSION OF RISKS AND MANAGEMENT TECHNIQUES QUALITATIVE INFORMATION Placed in context with balance sheet 77 1100 1100 Managers give qualitative information in the narra- Credit risk 66 99 1100 Market risk 66 99 1100 tive portions of their annual reports in which they Liquidity risk 44 66 99 identify the risks presented by their business activi- Operating and legal risks 11 33 33 ties and their methods for measuring and controlling those risks. The depth of these narratives on risk has depth of discussion was roughly commensurate with increased substantially over the past few years. The the importance of trading profits to the institution's banks' 1993 reports typically had only limited dis- overall income. For example, some banks earned cussions about trading and perfunctory information more on deposit account service charges than they about derivatives. The 1994 reports had much richer did from trading, and the limited level of disclosure disclosure on these topics. The overriding characteris- about trading may have reflected that priority. tics of the 1995 annual reports were refinement of Similarly, banks' discussions of funding liquidity methods of disclosure first used in 1994 and further risk at their institutions and their means of controlling diffusion of these methods among the top ten banks; it were generally more informative in 1995. Banks for example, whereas a 1994 report might have dis- summarized their processes for identifying their fundcussed overall value at risk, the 1995 report broke ing requirements, their procedures for predicting cash down value at risk into its elements and discussed needs, and contingency plans for unexpected cash exposure to different kinds of risk.6 demands. None of the banks, however, discussed the market liquidity of their financial instrument portfolios. Discussion of Specific Risks Disclosures of operating and legal risks were somewhat more detailed in 1995, but discussions of Although nearly all of the banks described credit and management techniques for controlling these risks market risk in 1994, the 1995 reports contained fuller, remained rather shallow. This shallowness may more coherent explanations of exposures to those reflect the difficulty of reliably quantifying these risks (table 3). The 1995 reports as a rule broadened risks. However, it is noteworthy that the roots of the approaches used in 1994 to frame discussions and some of the more notorious trading debacles in recent analyses of other products (such as bonds) and other years can be traced to operating or legal problems; lines of business (such as selling foreign currency to therefore, more discussion of these risks might have customers or trading for the firm's own account as been appropriate. opposed to marketmaking). Also, the reports gener- Most of the ten banks described their processes for ally integrated discussions of derivatives into clearer controlling the risks arising from trading and other discussions of identical risks inherent in traditional business activities by identifying the management banking books; in contrast, disclosures about market group responsible for setting trading policies and by and credit risk in some of the 1994 reports focused describing the managerial functions responsible for solely on derivatives. In 1995, as in earlier years, the ensuring compliance with those policies. The typical report gave an overview of risk management that sketched the bank's business objectives and its management philosophies (for example, by describ- 6. Value at risk is a method of measuring risk by estimating potential losses in portfolio value that could result from adverse ing the extent to which its management responsimovements in market prices and other risk factors. The method is bilities are centralized or diffuse). Most banks also based on statistics in which a confidence level and a portfolio holding briefly described the information systems and period are specified. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

796 Federal Reserve Bulletin • September 1996 Requirements and Recommendations for Public Disclosure Although authorities that set accounting standards, regula- anticipated transactions (such as the amount of gains or tors, and industry groups have long recognized that there losses that were deferred). The fair values of end-user are deficiencies in accounting practices for and disclosure derivatives must be disclosed separately from the fair of financial instruments in general, the growing use of values of items hedged by the derivatives. Encouraged but derivatives has brought these deficiencies into sharp focus. not required is the disclosure of quantitative information The Financial Accounting Standards Board (FASB), the that managers use as a basis for controlling risk exposure. organization that sets accounting standards, in 1986 created a task force on financial instruments to address these defi- Proposed Requirements ciencies. After some study, the FASB decided that the accounting issues surrounding derivatives would be best Disclosures in the 1995 annual reports were influenced by addressed by first establishing minimum disclosure require- requirements formally proposed in December 1995 by the ments and then devising consistent accounting methods. Securities and Exchange Commission (SEC), the agency The FASB has so far published three statements of account- responsible for administering federal securities laws and ing standards (SFAS) affecting disclosures about deriva- for regulating accounting and disclosure by publicly traded tives and other financial instruments. Financial statements companies. The SEC has delegated much of its authority that conform to generally accepted accounting principles for setting accounting standards for publicly traded companecessarily follow these standards. nies to the Financial Accounting Standards Board, but it SFAS 105, Disclosure of Information about Financial also occasionally issues supplemental guidance. The pro- Instruments with Off-Balance-Sheet Risk and Financial posed amendments to current requirements focus on the Instruments with Concentrations of Credit Risk, became disclosure of market risk. If adopted, they would become effective with 1990 annual reports. It requires the disclosure effective for 1996 annual reports. of the basic contractual terms of certain derivative contracts The SEC proposal requires more detailed disclosure of and discussion of their market and credit risks. It also quantitative and qualitative information about the market requires the disclosure of large concentrations in credit risk risks associated with derivatives. Quantitative information and, for certain derivative instruments, the disclosure of the could be disclosed by means of (1) a table showing conloss the firm could incur if counterparties were to default on tract terms and other information, including fair value, their obligations. expected cash flows, and effective rates and prices; (2) a SFAS 107, Disclosure about Fair Value of Financial sensitivity analysis of a hypothetical loss of earnings, fair Instruments, requires the disclosure of the fair value of values, or cash flows resulting from an arbitrary change in derivatives (as well as that of most traditional banking current interest rates, foreign exchange rates, or commodinstruments). The standard first applied to 1992 annual ity or other prices; or (3) a statement of value at risk reports; it was amended by SFAS 119 for the purpose of expressing the companywide (that is, in trading as well as making fair value disclosures better organized and more in other lines of business) loss of fair values, earnings, or understandable to readers of financial statements. cash flows of market-risk-sensitive instruments that might SFAS 119, Disclosure about Derivative Financial Instru- arise from price movements of a given likelihood of occurments and Fair Value of Financial Instruments, became rence over some time interval, with a separate estimate of effective for 1994 annual reports. It requires firms to differ- value at risk for each type of market risk to which the firm entiate in their disclosures between derivatives used for is exposed. Also required would be the disclosure of limitatrading purposes and those used for risk management or tions that might cause the quantitative information about other "end-user" purposes. market risk to not fully reflect the overall market risk to the company. • Trading activities. For derivatives used for trading, The SEC proposal also requires that companies disclose firms must report the fair value of their derivatives posimore detail than currently required by the FASB about tions (both as of year-end and as an annual average) and their procedures for accounting for derivatives, including must report their profits from the trading of derivatives information about the accounting methods used, the types separately; these trading profits may be reported as a total or of derivatives to which each method was applied, and the may be broken down by, for example, line of business (such criteria for choosing which method to apply. as sales of foreign currency) or exposure to market risk (such as interest rate or foreign exchange risk). Recommendations • End-user activities. Firms must explain their objectives in using derivatives for hedging or other risk-management In the past two years, several industry groups and regulapurposes and must discuss their strategies for achieving tors, either individually or in association with other agenthose objectives. They must also indicate where in then- cies, have called for additional disclosure of derivatives financial statements end-user derivatives are presented and activities. These groups have generally stressed the advigive certain details about derivatives used to hedge sory nature of their recommendations, in an effort to encour- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Derivatives Disclosures by Major U.S. Banks, 1995 797 Requirements and Recommendations for Public Disclosure—Continued age firms to develop better ways of informing readers of sions (IOSCO), international associations of national regufinancial statements and of enhancing market discipline. lators, made several recommendations for the disclosure of Their recommendations, though nonbinding, appear to have more qualitative and quantitative information about trading influenced disclosures in the 1994 and 1995 annual reports. and derivatives activities and their effect on credit risk and earnings. The groups agreed on using a common set of data Euro-currency Standing Committee provided by regulated enterprises to assess the use of derivatives by these enterprises. The recommendations In 1994, a working group of the Euro-currency Standing were issued in connection with a survey of disclosures in Committee of the Group of Ten central banks (ECSC) the 1994 annual reports of seventy-nine large international recommended that firms disclose quantitative information banks and securities firms in the Group of Ten (G-10) about their market and credit risk exposures and their succountries. The 1994 and 1995 annual reports described in cess at managing those risks, to provide a framework for this article provided virtually all the data recommended by their qualitative discussions. At a minimum, quantitative these groups. information about the market risk of the trading portfolio should be disclosed; also desirable is similar disclosure about the consolidated portfolio (that is, about derivatives Other Information about Derivatives and financial instruments relating to traditional banking activities as well as to trading). The information should Available to the Public reveal the portfolio's riskiness by indicating the volatility of Regulators have long required that banking organizations its market value. report notional amounts and fair values of the derivative The ECSC also recommended that firms increase the instruments they hold or have issued. Since 1995, the transparency of their disclosures about credit risk. Sugges- Federal Reserve and the other federal banking agencies, tions include the reporting of current and potential credit under the auspices of the Federal Financial Institutions exposure and the quantification of the variability of credit Examination Council (FFIEC), have required that notional exposure over time. Reporting of actual credit losses, amounts and fair values be reported by risk exposure and arrangements for collateral, and other credit enhancements management objective. Information about trading revenues were suggested to give an indication of the quality of the and the effects of end-user derivatives on accrual-basis firm's risk-management practices. income has also been required since 1995, as has the past-due status of derivative contracts and actual credit Basle Supervisors Committee and losses. This information is available to the public. The International Organisation of Securities Commissions information required in these regulatory reports appears to In November 1995, the Basle Supervisors Committee (BSC) have influenced the disclosures made by the larger of the and the International Organisation of Securities Commis- top ten banks in their 1995 annual reports. management tools used to assess the results of their discussed their reasons for using derivatives, identiefforts to control risk. fied where in the financial statement information about derivatives was presented, and explained how Explanation of the derivatives were accounted for (that is, by fair value Financial Presentation of Derivatives or on an accrual basis; see box "Accounting for Derivative Contracts"). In general, their 1995 descriptions were better organized and more specific Under generally accepted accounting principles, than those in earlier reports. The 1995 reports also firms have long been required to describe their provided much more detailed and more useful accounting policies in general terms. More recently descriptions of the methods and assumptions used they have had to disclose their means of determining in valuing financial instruments that did not have the fair value (sometimes called the fair market value) observable market prices. of many financial instruments they hold or issue. For derivatives, firms must describe not only the way they determine fair value but also the accounting QUANTITATIVE INFORMATION methods under which they recognize income and expense and the legal techniques that underlie their Quantitative information illuminates management's presentation of net credit exposure in financial discussion of the firm's financial performance. With reports. In meeting these requirements, all ten banks respect to derivatives and trading, these data give Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

798 Federal Reserve Bulletin • September 1996 Accounting for Derivative Contracts Derivative instruments, like some other financial instru- Future benefits or obligations associated with off-balancements such as traditional loan commitments, are executory sheet contracts, then, are not well captured in financial contracts. That is, the two parties to the contract have made statements and therefore lack transparency. mutual promises but have not carried out all the obligations Although executory contracts may not be recognized for specified in the contract. Under generally accepted account- accounting purposes, they nonetheless have economic ing principles, an executory contract is reported in a finan- value. For example, an interest rate swap entitling a firm to cial statement only after some economic performance (in receive a fixed rate of 8 percent is more valuable than one what may be a series of requirements) has taken place— entitling the firm to receive 7 percent, even though the under a firm commitment to lend, for example, when funds comparative benefit does not appear on the balance sheet. In are drawn. The commitment is "off balance sheet" until some financial reporting situations (such as in reporting some performance occurs. When the cash disbursement is trading activities), using economic value is more relevant reported as a loan, the financial contract can be said to be than using accrual accounting conventions to represent "on balance sheet." derivatives. The accounting practice of estimating eco- In keeping with this accounting principle for executory nomic value, called marking to market, involves detercontracts, the accounting treatment of derivative instru- mining the fair value of the contract (by market quote, if ments may reflect only the next required contractual perfor- available; otherwise through estimation techniques), recordmance during the period covered by the financial statement ing that value on the balance sheet, and recognizing the (such as the accrual of a cash receipt or disbursement change in value as a gain or a loss. When derivative characterized as income or expense). Under this procedure, contracts are marked to market, their fair value is reflected an example of accrual accounting, even though a party to a in accounting statements at a point in time (the balance derivative contract—an interest rate swap, for example— sheet date) and their volatility is demonstrated through the could be obligated to make a series of cash payments over a change in fair value reported in earnings. number of years if interest rates change adversely, these Accountants may disagree about which procedure— potential future obligations are not reflected on the balance marking to market or accruing cash flows—more faithfully sheet. Hence, the derivative contract is "off balance sheet," represents a particular transaction. However, they do agree and its potential risks and rewards are obscure. Also, when that more thorough disclosure of the contractual terms of derivative contracts are used as hedges, losses or gains on derivative contracts and discussion by management of their them may be deferred to match revenue from loans or hedging programs and the results of those efforts improve interest expenses on deposits or other items being hedged. the transparency of off-balance-sheet instruments. readers of financial statements an indication of the and, for interest rate contracts held for trading purlevels of market and credit risk assumed by the bank poses at year-end, detailed schedules of interest rates and finer detail on the profit the organization earned and maturities. by taking those risks. Disclosures about Traded Derivatives Basic Information on Derivatives Positions Most of the ten banks gave more detail about their trading positions and trading revenues in 1995 than The top ten banks continued in 1995 to disclose the had been done in 1994. This enhancement follows a general contractual terms of their derivative contracts significant change in the 1994 reports: For that year, (table 4). All ten reported the notional amounts of generally accepted accounting principles for the first such contracts, in all cases distinguishing derivatives time required that firms separate the fair values of used in trading from those intended for other (so derivative contracts in a gain position (assets) from called end-user) purposes. Most of the ten provided those in a loss position (liabilities), under much more details on their annual average and year-end trading stringent rules for netting for accounting purposes.7 positions, giving the dollar values of assets and These details were supplemented in 1995 with more liabilities in their trading portfolios disaggregated information on the types of instruments, both derivaamong the different classes of derivatives and other items therein. Some types of information published 7. As a result of this accounting change, the assets and liabilities of in 1994 appeared less frequently in 1995: gross posione of the ten banks increased $14 billion. The change had no effect tive and negative fair values of derivatives positions on income, however. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Derivatives Disclosures by Major U.S. Banks, 1995 799 4. Number of top ten banks disclosing the general terms volatility during the year of their credit exposures of their derivative contracts in their annual reports, resulting from their trading activities. 1993-95 Reflecting a general shortcoming of annual finan- Number of banks disclosing cial statements—one that is not limited to the report- TTyyppee ooff qquuaannttiittaattiivvee ddiisscclloossuurree ing of derivatives—the ten banks furnished only 1993 1994 1995 limited data on the credit quality of the financial NOTIONAL AMOUNTS instruments they held or their portfolios as a whole. Dealer (trading account) positions ... 5 9 10 Five banks disaggregated credit exposures for their End-user (nontrading account) derivatives portfolios according to whether or not the positions 10 10 10 Derivatives traded over the counter counterparty was investment grade (as rated by an separated torn those traded on an exchange 3 4 outside agency or internally), but banks generally did Maturity schedule not publish this information for loan or investment Dealer (trading account) positions ... 1 6 2 portfolios. Disclosure about geographic concentra- End-user (nontrading account) positions 7 10 8 tion was less common in 1995 than in 1994. The Combined 2 1 3 extent of disclosure of nonperforming contracts was Contract rates unchanged: Six banks either quantified their actual Receive or pay rates 3 10 4 Receive or pay notional amounts 2 10 4 credit losses and their derivative contracts for which FAIR VALUE DATA payments were past due or explicitly stated that the amounts were immaterial. In most instances, losses Gross positive fair value 7 7 4 Gross negative fair value 0 6 4 were reported in the context of a discussion of losses Trading account incurred from traditional banking activities. Trading assets separated from trading liabilities 0 10 10 As a supplement to their disclosures of credit risk Nonderivative instrument detail and capital adequacy, seven banks reported the End-of-period fair value 0 8 10 Average-for-period fair value 0 6 7 risk-based-capital credit-equivalent amount of their Derivative instrument detail End-of-period fair value 0 9 10 off-balance-sheet contracts in describing their risk- Average-for-period fair value 0 7 7 weighted assets and risk-based capital ratios.9 End-user positions Overall fair value 9 9 10 By related asset or liability being hedged 6 9 6 9. The risk-based-capital credit-equivalent amount is a measure By type of derivative contract 2 6 4 resulting from the conversion of off-balance-sheet contracts into an equivalent balance sheet asset. Regulatory calculations of risk-basedcapital amounts and ratios are used by supervisors to assess capital adequacy. tive and nonderivative, that made up the year-end fair value (and annual average fair value) of the trading portfolio. 5. Number of top ten banks disclosing in their annual reports data on credit risk relating to derivatives they trade, 1993-95 Credit risk Number of banks disclosing Type of quantitative disclosure The state of disclosure about credit risk in 1995 1993 1994 1995 compared with 1994 was mixed (table 5). As in 1994, Current credit exposure (net) 10 10 10 all ten banks reported their current credit exposure Reduction of exposure attributed to bilateral netting agreements .. 7 7 6 taking into account the effects of bilateral netting Potential credit exposure 1 2 3 Volatility of credit exposure 0 0 0 agreements. However, additional information about credit risk exposure was generally lacking. Six banks Counterparty credit quality By counterparty type (for showed how much their gross credit risk exposure on example, bank, other December 31 had been reduced through bilateral By in c t o e r r p n o a r l a o ti r o n ex , t g er o n v a er l n c m re e d n i t t ) 4 4 1 netting agreements. Of these six, three also quantified rating of counterparty 0 1 5 the potential credit exposure of their positions.8 None Concentration of the banks gave a quantitative measure of the E E x x p p o o s s u u r r e e b b y y g in e d o u g s r t a r p y h g ic r o a u r p ea o r 4 4 1 government entity 4 6 5 Collateral and other credit enhancements 0 2 1 8. Potential credit exposure is a measure of the probable loss to the Actual credit losses 4 6 6 bank if the contracts held on a certain date were to become more Nonperforming contracts 1 6 6 Risk-based-capital credit equivalent valuable before they mature because of favorable market price for derivatives 4 7 7 changes and then counterparties were to default. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

800 Federal Reserve Bulletin • September 1996 Market risk "Requirements and Recommendations"). These banks not only described the market risks of their Most of the ten banks reported details of their trading portfolios in terms of value at risk but also measurements of market risk in their 1995 annual published data on their exposure to specific kinds of reports. Seven reported using value at risk as a means market risk (for example, interest rate and foreign of assessing market risk and gave daily, monthly, or exchange) as well as a measure of how these risks quarterly data. These seven gave varying amounts of interacted or correlated to reduce overall market detail on the assumed holding period, the high, low, exposure through diversification. and average value at risk, and portfolio performance The larger dealers among the ten banks wove these versus management's intended limits on losses that quantitative details into their discussions of riskcould result from market risk exposure (table 6). One management policies, giving some flavor of the bank gave portfolio performance figures without dynamics of their risk-taking during the year by giving details of management's limits on losses. Four disclosing their actual trading portfolio results relareported both management's limits and actual trading tive to their risk measurements and their risk-control profits and losses. The disclosure of numerical details objectives. Several banks used graphics to more fully on value at risk was a significant innovation in the convey information about their trading portfolios in 1994 reports and became more widespread in the general, about daily value at risk, and about daily 1995 reports. Indeed, inclusion of these details is changes in portfolio value. the single most remarkable development in annual report disclosures over the past two years. In their 1993 reports, several institutions indicated that they Liquidity risk relied on a value-at-risk method but did not disclose value-at-risk data, and in their 1992 reports they were Quantitative information about liquidity risk was limlargely silent about how they managed market risk ited in the 1995 annual reports, as it was in the 1994 and gave little or no measure of their market risk reports. The topic generally was addressed through exposure. discussion of overall institutional liquidity require- Several banks included in their 1995 reports addi- ments and policies. tional data on value at risk that reflected a recent proposal by the Securities and Exchange Commission regarding market risk disclosures (see box Disclosures about End-User Derivatives The most common disclosure about end-user der- 6. Number of top ten banks disclosing in their annual ivatives was general information about positions: reports data on the management of market risk relating notional amounts, maturities, and fair values to derivatives, 1993-95 (table 4). The most prevalent means of conveying Number of banks disclosing information about how derivatives were used to man- TTyyppee ooff qquuaannttiittaattiivvee ddiisscclloossuurree age a bank's interest rate risk continued to be a gap 1993 1994 1995 position schedule (table 6).10 All banks publishing a TRADING ACTIVITIES gap schedule cautioned that it represented only a Value-at-risk information point in time and did not capture option and other High and low value at risk for the dynamic characteristics of the balance sheet. In sev- 0 5 6 Average daily value at risk 0 7 5 eral reports the gap schedule was supplemented Daily change in value of portfolio ... 0 4 7 Average daily change in value either by a discussion of the effect of a hypothetical of portfolio 0 3 4 rate shock on capital or earnings or by a discussion of Frequency of changes in portfolio value exceeding earnings-at-risk methods applied to nontrading portvalue-at-risk limit 0 4 5 Confidence interval used in folios. Publishing these alternatives to gap analysis value-at-risk analysis 0 6 7 Aggregation across risk factors 0 0 4 was new in the 1994 reports and became more widespread in 1995. Most banks, in varying detail, END-USER ACTIVITIES Effect of derivatives on duration1 ... 1 2 0 Effect of derivatives on gap positions . 8 8 8 Scenario analysis—Impact of rate 10. Gap analysis is a method used to estimate interest rate risk in shock 3 5 6 which financial instruments are categorized by maturity in a series of Value at risk for nontrading time bands. Liabilities are subtracted from assets in each time interval, portfolio 0 3 1 and the magnitude of the difference gives an indication of interest 1. Duration is a method of measuring interest sensitivity that is based on sensitivity. Banks can use derivatives to adjust their sensitivity to financial instrument cash flows weighted by the time to receipt or payment. interest rate risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Derivatives Disclosures by Major U.S. Banks, 1995 801 described whether the derivatives were linked to spe- in which most banks gave only the minimum cific components of the balance sheet or were used to required information (that is, they reported only about manage overall, or macro, exposures. Reflecting the derivatives). As a result, the 1995 reports gave a expansion of value-at-risk methods to activities not more complete picture of profits and risks from related to trading, one bank furnished quantitative trading both derivative and nonderivative financial information on the value at risk related to its nontrad- instruments. ing portfolios. In contrast, fewer banks gave details about the As a result of minor changes in generally accepted effects of end-user derivatives on accrual-basis accounting principles, the 1994 annual reports con- accounting income and expense. Only four banks tained clearer, more understandable information reported the effect on operating income of derivatives about the fair value of the financial instruments in the accounted for on an accrual basis, compared with firms' portfolios. Firms were required to disclose the eight in 1994. And only three banks disclosed gains fair value of financial assets and liabilities carried at or losses from end-user derivatives that had been historical cost separately from the fair value of deferred and provided details on when the deferrals derivatives used to hedge these instruments. This would be reflected in future earnings, down from five approach makes it much more obvious whether an in 1994. The absence of these details makes it someinstrument was favorable (that is, an asset from which what more difficult to assess the accounting consethe bank could expect to receive cash) or unfavorable quences of a bank's hedging activities (for example, (a liability on which the bank probably would pay whether income will decrease in future years when cash), given year-end prices or interest rates. The losses that had been deferred are recognized.) 1995 reports showed little change in how this information was presented. CONCLUSION Disclosures about Earnings The detail and clarity of information about derivatives and trading published by the top ten U.S. dealer For 1995, all ten banks disaggregated their trading banks continues to improve. The banks that had the revenues: Nine reported their results according to more innovative annual reports in 1994 also led the line of business or risk exposure with little differen- group in 1995, reporting more quantitative details on tiation between derivative and other instruments, and value at risk and the results of their trading activities. one reported about derivatives only (table 7). These Also as was the case in 1994, the disclosures of those numbers compare favorably with the 1994 reports, banks whose trading revenues make up a larger share of their income tended to be more informative about derivatives and trading. Institutions with larger tradi- 7. Number of top ten banks disclosing data on income tional banking segments devoted more attention to relating to derivatives in their annual reports, 1993-95 those lines of business than to trading. The experimentation in better approaches to disclo- Number of banks disclosing TTyyppee ooff qquuaannttiittaattiivvee ddiisscclloossuurree sure that has been encouraged by standards setters 1993 1994 1995 and others is evident in the variety of methods used to present information about derivatives activities— INCOME FROM TRADING ACTIVITIES and also in the discarding of some information that Disaggregation of income By risk exposure or line of business . 2 5 9 was provided in 1994. None of the reports can be By specific instrument (for example, interest rate swaps) .. 8 7 1 singled out as the best; most of the banks had a novel By derivative versus nonderivative approach to reporting on some aspect of their derivainstruments 5 6 4 tives activities that was not used by the others. Dis- INCOME RELATED TO END-USER ACTIVITIES closures about market risk have been greatly improved, but it appears to us that credit risk dis- Effect of derivatives on income from operations 4 8 4 closures are lagging and need more depth. Further Amount of deferred gains or losses .. Amortization period for deferred 6 5 3 experimentation should be encouraged, as these prigains or losses 2 5 3 vate efforts have made significant strides in increas- Unrealized gains or losses on derivatives 7 10 10 ing the transparency of derivatives activities. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

802 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report describes Treasury and System mark, the dollar appreciated early in April, then proforeign exchange operations for the period from April ceeded to trade between DM 1.51 and DM 1.55 for through June 1996. It was presented by Peter R. the duration of the quarter. Throughout the period the Fisher, Executive Vice President, Federal Reserve dollar was supported by expectations of an increase Bank of New York, and Manager for Foreign Opera- in U.S. interest rates by the end of 1996. Meanwhile, tions, System Open Market Account. Daniel Katzive evolving market views of the likely course of German was primarily responsible for preparation of the and Japanese monetary policy contributed to fluctuareport.1 tions within the trading range. Over the quarter, the dollar appreciated 3.2 percent against the German During the second quarter of 1996, the dollar traded mark, 2.2 percent against the Japanese yen, and in a relatively narrow range against the Japanese yen, 1.6 percent on a trade-weighted basis against other fluctuating between ¥104 and ¥110. Against the Group of Ten (G-10) currencies.2 The U.S. monetary 1. The charts for the report are available on request from Publica- 2. The dollar's movements on a trade-weighted basis against ten tions Services, Mail Stop 127, Board of Governors of the Federal major currencies are measured using an index developed by staff of Reserve System, Washington, DC 20551. the Board of Governors of the Federal Reserve System. 1. Foreign exchange holdings of U.S. monetary authorities, based on current exchange rates Millions of dollars Quarterly changes in balances by source BBaallaannccee,, BBaallaannccee,, IItteemm MMaarr.. 3311,, 11999966 Net purchases Impact of Investment Currency JJuunnee 3300,, 11999966 and sales' sales2 income ad v j a u l s u t a m ti e o n n t s3 FEDERAL RESERVE Deutsche marks 13,266.0 0 0 103.4 -387.3 12,982.1 Japanese yen 6,636.6 0 0 4.0 -143.3 6,497.3 Interest receivables6 75.7 . 74.0 Other cash flow from investments7 7.1 .5 Total 19,985.4 19,553.9 U.S. TREASURY EXCHANGE STABILIZATION FUND Deutsche marks 6,715.5 0 0 51.7 -196.0 6,571.2 Japanese yen 9,730.5 0 0 6.1 -213.3 9,523.3 Mexican pesos4 — ,3 , 10,500.0 -235.3 0 235.3 05 10,500.0 Interest receivables6 272.7 277.3 Other cash flow from investments7 7.5 4.4 Total 27,226.2 26,876.2 NOTE. Figures may not sum to totals because of rounding. 5. Valuation adjustments on peso balances do not affect profit and loss 1. Purchases and sales include foreign currency sales and purchases related to because the effect is offset by the unwinding of the forward contract at the official activity, swap drawings and repayments, and warehousing. repayment date. Note that the ESF does not mark to market its peso holdings, 2. Calculated using marked-to-market exchange rates; represents the differ- but the Federal Reserve System does. ence between the sale exchange rate and the most recent revaluation exchange 6. Interest receivables for the ESF are revalued at month-end exchange rates. rate. Realized profits and losses on sales of foreign currencies, computed as the Interest receivables for the Federal Reserve System are carried at cost and are difference between the historic cost-of-acquisition exchange rate and the sale not marked to market until interest is paid. exchange rate, are shown in table 2. 7. Cash flow differences from payment and collection of funds between 3. Foreign currency balances are marked to market monthly at month-end quarters. exchange rates. 4. See table 4 for a breakdown of Mexican swap activities. Note that the investment income on Mexican swaps is sold back to the Bank of Mexico. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

803 authorities did not undertake any intervention opera- THE DOLLAR BENEFITS AGAINST THE MARK tions in the foreign exchange market during the IN APRIL AND MAY FROM EXPECTATIONS quarter. OF GERMAN MONETARY EASING In June, the dollar became increasingly entrenched in tight ranges, pinned between DM 1.51 and Early in the period, expectations of a further easing DM 1.54 and between ¥107.60 and ¥110. After the of money market rates by the German Bundesbank first week of June, the dollar's Friday closing levels were supported by official policy actions. On against the mark and yen never varied more than April 18, the Bundesbank announced that it would 1 percent from the preceding week's close. In this cut its discount and Lombard rates, effectively lowerenvironment, implied volatility on dollar-mark and ing the range within which German money market dollar-yen one-month options declined to levels rates fluctuate. Although the key repurchase rate seldom seen. The probability distribution of future remained fixed at 3.3 percent, the change in official exchange rates implied by one-month currency option rates spurred expectations that cuts in the repurchase prices became notably tighter during the second rate would follow in subsequent weeks. quarter, reflecting expectations of lower exchange These perceptions were bolstered by weak ecorate volatility and market participants' greater will- nomic data and by downward revisions of projections ingness to bear the risks of selling options. for 1996 growth made by several German economic institutes. Consumer price index data released in late April for western Germany confirmed that inflationary pressures remained subdued; together with Bundesbank officials' hints that scope for easing SUPPORT FOR THE DOLLAR FROM existed, this development appeared to reinforce the EXPECTATIONS OF A HIKE IN U.S. RATES prospects of an ease. In this environment the dollar broke above the Throughout the quarter U.S. economic data releases trading range in which it had been contained for led many market participants to anticipate a near- much of March. After decisively breaking DM 1.50 term Federal Reserve tightening. Most notably, non- on April 11, the U.S. currency continued to apprecifarm payroll reports for March and April provided ate, closing on May 28 at a high for the quarter of evidence that the U.S. labor market remained strong. DM 1.5470. Initial reports (although later revised down) that firstquarter gross domestic product (GDP) had grown at a 2.8 percent year-on-year rate reinforced the percep- RETREAT OF THE DOLLAR IN JUNE tion of strength in the economy. Expectations of FROM ITS HIGHS AGAINST THE MARK monetary tightening were reflected in forward rates, with three-month rates on December Eurodollar The Bundesbank did not, in fact, reduce money marfutures rising nearly 60 basis points from April 1 to ket rates during the second quarter, and the repurmid-June. chase rate remained fixed at 3.3 percent. Anticipation The perception of underlying economic strength in of additional Bundesbank easing during the cycle had the United States prompted dollar buying during epi- begun to fade by late May as indicators of improved sodes of dollar weakness, providing support for the business sentiment were released. Stronger-thandollar at the bottom of its trading range. In the last expected industrial orders and continued growth of week of the second quarter, expectations of an immi- M3—well above the 7 percent ceiling of the Bundesnent Federal Reserve tightening were sharply scaled bank's target range in April and May—further dampback after several press and market research reports ened expectations. By mid-June, prices in German suggested that a change in policy in the near term credit markets began to reflect an expectation of was unlikely. The dollar had little reaction to these Bundesbank rate hikes by the autumn of 1996, and late developments, with foreign exchange market forward rate agreement (FRA) rates for three-month participants focusing instead on developments in Euromark deposits three months out moved sharply Germany and Japan. higher than cash rates, after having traded in a range Shifting expectations about U.S. monetary policy roughly equal to or lower than that of cash rates for caused sporadic disturbances in U.S. asset markets. most of the quarter. Declines in U.S. stock and bond prices, which had Dissipating expectations of German monetary easweighed on the dollar in previous periods, did not ing weighed on the dollar-mark exchange rate. The significantly weaken the dollar during this quarter. dollar's continued failure to break through DM 1.55 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

804 Federal Reserve Bulletin • September 1996 prompted market participants to scale back long dol- policies of the 1980s and the ensuing "bubble lar positions, and the U.S. currency retreated from its economy." highs in May to close at a low for June of DM 1.5122 At the peak of these concerns and with December on June 18. Apparently capped at DM 1.55 but well Euroyen futures contracts reflecting three-month rates supported above DM 1.51, the dollar proceeded to nearly 90 basis points above cash rates, at the end trade in a narrow corridor, and implied volatility on of April the dollar traded to the bottom of its range one-month dollar-mark options approached record for the quarter. The dollar briefly traded below ¥104, lows. At the same time, although the dispersion of the and dollar-yen one-month implied options volatility probability distribution of the future dollar-mark spiked to a high of 11.25 percent for the quarter. The exchange rate implied by currency options declined, dollar was supported at these levels by a market it became increasingly skewed toward a weaker perception that the Japanese monetary authorities dollar. would not tolerate a weaker dollar because this might jeopardize Japan's economic recovery. EXPECTATIONS OF A HIKE IN JAPANESE INTEREST RATES WEIGH ON THE DOLLAR-YEN RECOVERY OF THE DOLLAR AGAINST THE YEN EXCHANGE RATE By early June, anticipation of an imminent Japanese Early in the second quarter, the dollar fell against the rate hike began to ebb. Analysts concluded that ongoyen as sentiment grew that the Bank of Japan's ing problems in Japan's financial sector and the accommodative monetary policy stance could end absence of compelling evidence that Japan's ecoas early as the later part of the quarter. This percepnomic recovery could sustain itself without fiscal tion was supported by data released in April that stimulus precluded such a step. That perception suggested recovery in the retail, manufacturing, and became more prevalent on May 15 after Governor housing sectors of the economy. Official comments Matsushita said that Japan's recovery was not "selfalso fueled interest rate anxieties. Market participants sustaining." The Bank of Japan's Tanken survey, were particularly wary of April comments from Govreleased on June 7, was somewhat stronger than ernor Matsushita, of the Bank of Japan, suggesting expected but still too weak to alter these expectations. that rising rates were "natural" in a recovering econ- Forward rates declined in this environment, and the omy and noting the link between Japan's easy money dollar recovered against the yen, appreciating from its early-May lows to trade above ¥109 in early June. 2. Net profits or losses (-) on U.S. Treasury The June 18 announcement that Japan's annualized and Federal Reserve foreign exchange operations, first-quarter GDP growth rate was 12.7 percent based on historical cost-of-acquisition exchange rates briefly revived speculation that a Bank of Japan tight- Millions of dollars ening might be imminent, and the dollar traded off its U.S. Treasury highs to below ¥108 in tandem with a sell-off in Federal Exchange Period and item Reserve Stabilization Japanese credit markets. The dollar and Japanese Fund bonds recovered, however, as market participants Valuation profits and losses on ultimately concluded that the strong GDP figure outstanding assets and liabilities, Mar. 31, 1996 would not in itself prompt a rate hike. Deutsche marks 2,505.9 859.5 Japanese yen 1,487.9 2,188.9 In the final week of the quarter, remaining anticipation of a Bank of Japan tightening by summer's end Total 3,993.8 3,048.3 subsided with the release of weaker-than-expected Realized profits and losses from foreign currency sales, industrial production figures and reports that in May, Mar. 31, 1996-June 30, 1996 unemployment had surged to a record high of 3.5 per- Deutsche marks .0 .0 Japanese yen .0 .0 cent. December Euro-yen contracts ended the quarter Total .0 .0 reflecting three-month rates only 53 basis points above cash rates, and the dollar rose to close the Valuation profits and losses on outstanding assets and liabilities, quarter at a twenty-nine-month high of ¥109.65. June 30, 1996> Deutsche marks 2,118.7 663.5 As in preceding quarters, Japan reported declining Japanese yen 1,337.5 1,968.3 trade surpluses and sharp contractions of its trade Total 3,456.1 2,631.7 surplus with the United States. These data releases NOTE. Figures may not sum to totals because of rounding. provided support for the dollar throughout the period, 1. Valuation profits or losses are not affected by peso holdings, which are although immediate reaction to individual data canceled by forward contracts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 805 releases was muted. Data for March, April, and May amid continued positive news on the Mexican econindicated that, in each month the bilateral surplus had omy. Waning expectations of an imminent Federal declined more than 30 percent from the previous Reserve tightening in the final week of the quarter year's level. also benefited the peso, and the currency partially recovered, closing the quarter at NP 7.58. WEAKENING OF THE MEXICAN PESO AMID CONCERNS ABOUT A POSSIBLE U.S. RATE HIKE TREASURY AND FEDERAL RESERVE FOREIGN EXCHANGE RESERVES Through April and May, the Mexican peso traded against the dollar in a steady range between NP 7.40 The U.S. monetary authorities did not undertake any and NP 7.55 despite a backup in U.S. bond yields. In intervention operations this quarter. At the end of the June, growing concerns about a possible U.S. mone- quarter, the foreign currency reserve holdings of the tary tightening sparked a correction, pushing the peso Federal Reserve System and the ESF were valued at out of its recent range to trade above NP 7.60 against $19.5 billion and $16.1 billion, respectively, and conthe dollar. sisted of German marks and Japanese yen. Toward the end of the period, markets reacted The U.S. monetary authorities invest all their forpositively to the Mexican authorities' announcement eign currency balances in a variety of instruments that in August they intended to repay a substantial that yield market-related rates of return and have a portion of the $10.5 billion outstanding under the high degree of liquidity and credit quality. A signifi- U.S. Treasury's Exchange Stabilization Fund (ESF) cant portion of these balances is invested in German medium-term swap facility. This announcement came and Japanese government securities that are held directly or under repurchase agreement. As of June 30, outright holdings of government securities 3. Currency arrangements by U.S. monetary authorities totaled $4.6 billion and Millions of dollars included investments in Japanese treasury bills and Amount of Outstanding, German government bonds. facility June 30, 1996 Japanese and German government securities held FEDERAL RESERVE under repurchase agreement are arranged either RECIPROCAL CURRENCY ARRANGEMENTS through transactions executed directly in the market or through agreements with official institutions. Gov- Austrian National Bank 250 0 National Bank of Belgium 1.000 ernment securities held under repurchase agreements Bank of Canada 2,000 National Bank of Denmark 250 by the U.S. monetary authorities totaled $12.3 billion Bank of England 3,000 at the end of the second quarter. Foreign currency Bank of France 2,000 Deutsche Bundesbank 6,000 reserves are also invested in deposits at the Bank for Bank of Italy 3,000 Bank of Japan 5,000 International Settlements and in facilities at other N Ba e n th k e r o l f a n M ds e x B i a c n o1 k 3, 5 0 0 0 0 0 official institutions. Bank of Norway 250 In addition, the ESF held $10.5 billion equivalent Bank of Sweden 300 Swiss National Bank 4,000 in nonmarketable Mexican government securities in Bank for International Settlements connection with the ESF's medium-term swap Dollars against Swiss francs 600 Dollars against other authorized arrangement. • European currencies 1,250 Total 32,400 t^MPllli^l 0 4. Drawings/rollovers and repayments (-) by Mexican U.S. TREASURY monetary authorities EXCHANGE STABILIZATION FUND CURRENCY ARRANGEMENTS Millions of dollars Deutsche Bundesbank 1,000 0 Out- Out- Bank of Mexico1 standing, standing, Regular swaps 3,000 0 Item Mar. 31, Apr. May June June 30, United Mexican States' OH) i 19% 1996 Medium-term swaps 10,500 Total1 10,500 Currency arrangements with the US. Treasury Exchange Stabilization 1. Facilities available to Mexico comprise short-term swaps between the Fund Bank of Mexico and both the Federal Reserve and the ESF, as well as medium- Bank of Mexico term swaps and government guarantees between the government of Mexico and Regular 0 0 0 0 0 the ESF. The total amount available from both medium-term swaps and govern- Medium-term 10,500 0 0 0 10,500 ment guarantees is $20 billion, less any outstanding drawings on the shortterm facilities. NOTE. Data are on a value-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

806 Industrial Production and Capacity Utilization for July 1996 Released for publication August 15 seasonally adjusted annual rate of 13.4 million units; the decrease at utilities reflected cooler-than-normal Industrial production edged up 0.1 percent in July weather on the East Coast. At 126.2 percent of its after an upward revised gain of 0.6 percent in June. 1987 average, total industrial production in July was A 4.3 percent gain in the output of motor vehicles 3.8 percent higher than it was in July 1995. Industrial and parts was mostly offset by a 1.8 percent decrease capacity utilization decreased 0.2 percentage point, to in the output of utilities in July; output in other 83.2 percent. categories was unchanged, on balance. The gain in When analyzed by market group, the data show the production of motor vehicles and parts was led that the production of consumer goods increased by an increase in car and truck assemblies to a 0.3 percent because of the strength in the output of Industrial production indexes Twelve-month percent change Twelve-month percent change Capacity and industrial production Ratio scale, 1987 production = 100 Ratio scale, 1987 production = 100 — Total industry Capacity 140 - - ^ 120 ^ Production - 100 80 1 1 1 1 1 1 1 Percent of capacity Total industry Utilization 9900 80 70 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1982 1984 1986 1988 1990 1992 1994 1996 1982 1984 1986 1988 1990 1992 1994 1996 All series are seasonally adjusted. Latest series, July. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

807 Industrial production and capacity utilization, July 1996 Industrial production, index, 1987= 100 Percentage change Category 1996 19961 July 1995 to Apr.' Mayr Juner Julyp Apr.r Mayr Juner July f July 1996 Total 124.5 125.2 126.0 126.2 .8 .5 .6 .1 3.8 Previous estimate 124.5 125.1 125.7 .7 .5 .5 Major market groups Products, total2 120.8 121.2 121.8 122.0 .6 .3 .5 .2 3.3 Consumer goods 115.9 116.1 116.1 116.5 .5 .2 .0 .3 1.6 Business equipment 166.3 166.2 168.5 169.3 2.2 -.1 1.4 .5 8.7 Construction supplies 109.2 110.4 112.8 112.8 -2.1 1.1 2.2 .0 5.2 Materials 130.3 131.4 132.5 132.6 .9 .8 .8 .1 4.5 Major industry groups Manufacturing 126.5 127.2 128.1 128.6 1.1 .5 .7 .3 4.3 Durable 138.3 139.2 141.2 142.0 2.0 .6 1.4 .6 8.0 Nondurable 113.5 114.0 113.8 113.8 -.1 .4 -.2 -.1 -.4 Mining 100.4 100.2 101.9 101.6 -.7 -.2 1.7 -.3 .8 Utilities 126.4 127.9 125.9 123.6 -1.3 1.2 -1.5 -1.8 .8 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1995 1996 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, JJJuuulllyyy 111999999555 11996677--9955 11998822 11998888--8899 tttooo July Apr/ May Juner JulyP JJJuuulllyyy 111999999666 Total 82.1 71.8 84.9 83.3 83.0 83.2 83.4 83.2 3.9 Previous estimate 82.9 83.1 83.2 Manufacturing 81.4 70.0 85.2 82.4 81.9 82.0 82.3 82.3 4.4 Advanced processing 80.7 71.4 83.5 80.6 80.4 80.3 80.6 80.7 5.1 Primary processing . 82.6 66.8 89.0 86.7 85.5 86.0 86.5 86.2 2.5 Mining 87.4 80.6 86.5 90.0 89.7 89.6 91.1 90.9 -.1 Utilities 86.9 76.2 92.6 90.8 92.7 93.7 92.2 90.3 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. automotive products. Production of other durable grouping has risen 5.2 percent during the past twelve consumer goods edged down 0.1 percent, and output months. of nondurable consumer goods decreased 0.3 percent. The output of industrial materials edged up despite Apart from a drop in the residential use of electricity, the drop in electricity generation. The output of duraoutput of nondurables was little changed: Production ble goods materials advanced 0.4 percent, reflecting gains in chemical and paper products were offset by gains in computer parts and semiconductors. A declines in foods, tobacco, and fuels. rebound in paper and paperboard production helped The output of business equipment increased the output of nondurable goods materials post a 0.5 percent. The gain in motor vehicle assemblies 0.2 percent increase. boosted the output of transit equipment, but the pro- When analyzed by industry group, the data show duction of other types of transit equipment was little that manufacturing production increased 0.3 percent; changed. The output of industrial equipment declined excluding motor vehicles and parts, the gain was 0.2 percent, its fifth consecutive monthly decrease. 0.1 percent. Although the output of durable goods This string of declines is the most pronounced cumu- advanced 0.6 percent, the gain was concentrated in lative drop in this grouping since 1991. Despite a electrical machinery and in office and computing 1.7 percent rise in the production of computers and equipment in addition to motor vehicles and parts. office equipment, the output of information process- The production indexes for lumber, furniture, priing equipment edged up only 0.2 percent; the produc- mary metals, instruments, miscellaneous manufaction of some types of communications equipment and tures, and stone, clay, and glass products declined instruments fell. The output of construction supplies xh percent or more. The output of nondurable goods held steady after increasing substantially in the pre- edged down 0.1 percent. Among nondurable goods, ceding two months; the production of goods in this only the paper and products industry posted more Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

808 Federal Reserve Bulletin • September 1996 than negligible gains; the output of food, tobacco, weights is too infrequent to provide reliable estimates apparel, petroleum products, and leather and products of current changes in output, capacity, and capacity fell V2 percent or more. Mining output decreased utilization. With the publication of the revision, 0.3 percent. value-added proportions will be updated annually, The factory capacity utilization rate held steady at and the new index number formula will be applied 82.3 percent. The operating rate for the advanced- to all aggregates of IP, capacity, and gross value of processing grouping edged up 0.1 percentage point, product. For the most part, relative price movements to 80.7 percent, but the rate for the primary- among the 260 individual components of the IP index processing grouping fell 0.3 percentage point, to are likely to have little visible effect on total IP. 86.2 percent. Capacity utilization in manufacturing is However, the more frequent updating of the relalittle changed from its level a year ago. As was the tive price of the output of the computer industry case a year ago, the rate for advanced-processing could lower overall IP growth in some years by as industries stood at its 1967-95 average in July. The much as xh percentage point; in other years, the rate for primary-processing industries has slipped updating of weights will have virtually no effect. 0.5 percentage point since July 1995, but it remains Because the new index number formula will slow 3.6 percentage points above its long-run average. The capacity growth as well as IP growth, the effect of the operating rate for mining decreased 0.2 percentage reaggregation on overall capacity utilization should point in July, and the rate for utilities fell 1.9 percent- be small. age points; rates for both of these sectors remain The regular updating of source data for IP will more than 3 percentage points above their 1967-95 include the introduction of annual data from the 1994 averages. Annual Survey of Manufactures and selected 1995 This release and the history for all series pub- Current Industrial Reports of the Bureau of the Cenlished here are available on the Internet at sus. Available annual data on mining for 1994 and http://www.bog.frb.fed.us, the Board of Governors' 1995 from the Department of the Interior will also be World Wide Web site. introduced. Revisions to the monthly indicators for each industry (physical product data, production worker hour, or electric power usage) and revised 1996 ANNUAL REVISION seasonal factors will be incorporated back to 1992. The statistics on the industrial use of electric power During the fourth quarter, the Federal Reserve will will be revised back to 1972. These revisions stem publish revisions of its measures of industrial produc- from three basic sources. First, the new figures incortion (IP), capacity, capacity utilization, and industrial porate more complete reports received from utilities use of electric power; the current target month for the for the past few years. Second, an updated panel of release is November. The revisions of IP, capacity, reporters on cogeneration will be fully integrated into and capacity utilization will incorporate updated our survey of electric power use. Third, the levels of source data for recent years and will feature a change the monthly electric power series for manufacturing in the method of aggregating the indexes. From 1977 industries will be benchmarked to indexes derived onward, the value-added proportions used to weight from data published in the Census Bureau's annual individual series will be updated annually rather than surveys and censuses of manufactures. These indexes quinquennially. In addition, the IP indexes and the will also be revised so that 1992 electric power usage capacity measures will be rebased so that 1992 actual equals 100. output equals 100. Capacity utilization, the ratio of IP More detail on the plans for this revision is availto capacity, will be recomputed on the basis of able on the Internet at http://www.bog.frb.fed.us. revised IP and capacity measures. Once the revision is published, the revised data will The aggregate IP indexes will be constructed with be available at that site and on diskettes from the a superlative index formula similar to that introduced Board of Governors of the Federal Reserve System, by the Bureau of Economic Analysis as the featured Publications Services, 202-452-3245. The revised measure of real output in its January 1996 compre- data will also be available through the Economic hensive revision of the National Income and Product Bulletin Board of the Department of Commerce, Accounts. At present, the aggregate IP indexes are 202-482-1986. In addition to the data currently procomputed as linked Laspeyres indexes, with the vided, the time series of implicit prices necessary for weights updated every five years. Because of the a user to aggregate IP and capacity under the new rapid fall in the relative price of computers and methodology will be provided by the Industrial Outperipheral equipment, that periodic updating of put Section, 202-452-3151. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

809 Statements to the Congress Statement by Herbert A. Biern, Deputy Associate 3. The financial instrument that was being pur- Director, Division of Banking Supervision and Regu- chased was traded on a worldwide secret exchange. lation, before the Committee on Banking, Housing, 4. The documentation related to a "prime bank" and Urban Affairs, U.S. Senate, July 17, 1996 investment was extremely complex and difficult to comprehend. I am pleased to appear before the Committee on 5. A secure escrow account maintained at a Banking, Housing, and Urban Affairs to discuss "prime bank" or by an attorney would be used to actions that the Federal Reserve has taken over the hold the investors' funds, and payments into this past several years to address the problem of "prime account would be made by some sort of "key tested bank" financial instruments and related illegal finan- telex" message. cial schemes. The Federal Reserve has taken an 6. The financial instruments being issued were in active role in alerting the banking industry and the formats purportedly approved by the International public about the illicit activities of individuals trying Chamber of Commerce or fully sanctioned by the to peddle nonexistent financial instruments here in Federal Reserve, the World Bank, or some other the United States and abroad, and we have worked known international organization. closely with the law enforcement community to assist Some "prime bank" schemes appeared to be tartheir efforts to investigate and prosecute these geted to individuals and companies who needed wrongdoers. loans. These potential borrowers were advised that their loans would be funded by a "prime bank" provided they paid a large, up-front fee to secure the funding. Board staff members believed that the "PRIME BANK" SCHEMES AND ADVISORIES proposed payment of unrealistic rates of return was indicative of a fraudulent scheme and contacted In late 1993, Federal Reserve staff members were several banks to make sure that legitimate banking alerted by domestic and foreign banking organiza- organizations were not referring to themselves as tions that their names were being used for apparently "prime banks" or using financial instruments that in unlawful purposes in connection with the attempted any manner referred to "prime banks." Once assured sale of questionable financial instruments. We were that there was no legitimate use of the term "prime also contacted by individuals who had been bank" or lawful use of a "prime bank" instrument, approached to purchase questionable, highly complex we drafted an interagency advisory on "prime bank" investment-type instruments. schemes and began to work through the Department The transactions that were brought to our attention of Justice's Interagency Bank Fraud Working Group involved notes, guarantees, letters of credit, deben- to issue the pronouncement. Coordination efforts to tures, or other seemingly legitimate types of financial address the problem were also initiated with some of instruments being issued by an unidentified "prime the other twelve agencies participating in the Workbank" or by a domestic or foreign banking organiza- ing Group, including the Securities and Exchange tion that was said to be keeping the issuance of the Commission (SEC), as well as with international law instruments secret. The various proposals that enforcement authorities, including Britain's Scotland involved "prime bank"-related financial instruments Yard and Department of Trade and Industry. had similar characteristics: On October 21, 1993, the Federal Reserve and the 1. The investor could realize extremely high rates other federal banking agencies issued the first interof return on an instrument described as risk free. agency advisory entitled "Warning Concerning 2. The investor was buying a part of a large 'Prime Bank' Notes, Guarantees, and Letters of tranche of securities or financial instruments that was Credit and Similar Financial Instruments." The advialmost fully subscribed by other investors or was part sory, which is attached to my prepared statement, of a "roll program" that automatically put the inves- informed banking organizations and the public that tor into an investor group of some sort. the Federal Reserve and the other regulators know of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

810 Federal Reserve Bulletin • September 1996 no legitimate use of any "prime bank"-related finan- ceptions that the Federal Reserve plays a role in cial instrument.1 The advisory also asked the public "prime bank"-related investments. The recent advito contact agency representatives if approached to sory is also included with my statement. invest in a "prime bank" instrument or pay an advance fee to secure a loan funded by a "prime bank" note, letter of credit, or other type of questionable financial instrument. The banking agencies com- THE EFFECT OF "PRIME BANK" SCHEMES mitted to refer cases of potential illegal conduct asso- The Federal Reserve is not aware that banking ciated with supposed "prime bank" documents to a organizations supervised by the Board or any other senior official in the Washington, D.C., office of the federal banking agency have engaged, or otherwise SEC and to the local offices of the Federal Bureau of knowingly participated, in any illegal "prime bank"- Investigation because almost all "prime bank" related conduct. We know of no domestic bank that schemes appeared to involve fraud, including securihas suffered losses from "investments" in "prime ties fraud. bank" financial instruments or from any other enter- The advisory prompted numerous calls and letters prise involving such instruments. Most "prime bank" about "prime bank" matters. Between late 1993 and scams entail multimillion dollar investments, and as mid-1995, hundreds of inquiries were received from such we are not aware of losses to individual, as individuals who had been solicited to purchase opposed to institutional, investors. Some well-known "prime bank" financial instruments, from investment organizations, however, have suffered large losses advisers considering potential investments on behalf because of their investments in phony "prime bank" of clients, and from banking organizations that financial instruments. had received faxed solicitations. Calls and letters In criminal matters involving "prime bank" came from as far away as South Africa, Germany, schemes, U.S. Attorney's Offices have prosecuted Australia, France, and Singapore. The correspondents and won cases under existing criminal statutes, and were highly suspicious of the proposed schemes, and the SEC has been able to freeze accounts of wrongmany indicated they wanted to check with the govdoers and obtain other injunctive relief. ernment "to be sure" that their suspicions were justified. During this period, Board staff members assisted federal prosecutors in New Jersey, Oklahoma, Virginia, and in other districts to investigate and LEGISLATION eventually convict individuals for "prime bank"associated federal criminal law violations. The committee has asked the Federal Reserve to Calls and letters to the Federal Reserve regarding comment on the need for additional legislation "prime bank" scams began to slow in late 1995 and addressing misconduct by fraudsters selling these early 1996 but, unfortunately, began again in recent instruments. The Board generally defers to the law months. The new inquiries have focused on the role enforcement community and to the securities regulaof the Federal Reserve itself, with callers asking tors regarding legislative proposals such as S.1009, whether the Federal Reserve registers agents in cer- the "Financial Instruments Anti-Fraud Act of 1995" tain European countries, licenses traders on secret proposed by Senator D'Amato. It is our view, how- "prime bank" exchanges, clears the transfers of ever, that continuing successful prosecution of these "prime bank" securities, or oversees investment cases is crucial in sending a message to potential plans comprising "prime bank" instruments. "prime bank" fraudsters. Thus, new statutory author- The Federal Reserve responded with a new advi- ity enhancing law enforcement's ability to prosecute sory, released on June 11, 1996, to dispel any miscon- wrongdoers may prove useful. I am happy to address any questions you may have about the Federal Reserve's efforts to address the 1. The attachment to this statement is available from Publications problems associated with these illegal financial Services, Mail Stop 127, Board of Governors of the Federal Reserve schemes. System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 811 Statement by Alan Greenspan, Chairman, Board of longer-term interest rates were low. Among the influ- Governors of the Federal Reserve System, before the ences accounting for this were optimism about pro- Committee on Banking, Housing, and Urban Affairs, spective budget-deficit reduction, small easings of U.S. Senate, July 18, 1996 the stance of monetary policy in the second half of 1995 and early 1996, and the possibility of a further Before I take this opportunity to discuss the per- moderation in credit demands owing to a potentially formance of the U.S economy and the conduct of soft economy. Credit remained readily available, with monetary policy, I would first like to thank the chair- banks and other lenders in financial markets generman and the other members of this committee for ally pursuing credit opportunities aggressively. And a their support during my confirmation process.1 I am rising stock market reduced the cost of capital to grateful for the opportunity to serve the nation in this businesses and bolstered household balance sheets. capacity for another term. Looking forward, there are a number of reasons to expect demands to moderate and economic activity to settle back toward a more sustainable pace in the months ahead. REVIEW OF THE FIRST HALF OF 1996 First, the bond markets have taken a turn toward Nineteen ninety-six has been a good year for the restraint this year as they have responded to incoming American economy. By all indications, spending and data depicting an economy that was stronger than had production were robust in the first half of this year. been anticipated. Intermediate- and longer-term inter- Gross domestic product increased at a 2XA percent est rates have risen from 1 percentage point to annual rate in the first quarter. Partial data suggest a 1 lA percentage points since January. significantly stronger increase in the second quarter, Second, the value of the dollar on foreign exchange as the economy, as expected, accelerated out of its markets has appreciated significantly on a tradesoft patch around the turn of the year. During the weighted basis against the currencies of other indussecond quarter, industrial production rose at an annual trial countries over the past year or so. This appreciarate of 5V2 percent, and manufacturers are currently tion importantly reflects the market perception that running their plant and equipment at utilization rates the U.S. economy has been performing better than that are a touch above their postwar averages. About those of many of our major trading partners. The rise 1.4 million workers have been added to nonfarm in the dollar helps to keep down price pressures, but payrolls in the first six months of the year, and the it also tends to divert domestic demand toward unemployment rate fell to 5.3 percent in June. imported goods and damp exports some. Even though the U.S. economy is using its produc- Third, the support to economic growth provided by tive resources intensively, inflation has remained qui- expenditures on durable goods, both for household escent. The core inflation rate, measured by the con- consumption and business fixed investment, is likely sumer price index less food and energy prices, at a to wane in coming quarters. Consumer spending in 2.8 percent annual rate over the first six months of the the past few years has been boosted as households year, is about V2 percentage point slower than the have made up for the purchases of big-ticket items same period one year ago. While increases in energy that they had deferred during the recession and the prices have boosted the overall CPI inflation rate to early, weaker phase of the recovery. Five years after 3.5 percent thus far in 1996, a partial reversal of the the business cycle trough, however, we should expect jump in petroleum product prices observed in the first that this pent-up demand has been largely exhausted. half appears to be in train. I shall be discussing in Moreover, many households have built up sizable greater detail later some possible reasons for this debt burdens in recent years, and coping with debt favorable inflation experience and offering some repayments could hold down their spending. The thoughts about how long it might last. business sector has been adding considerably to Economic activity thus far this year has turned out capacity; opportunities to invest profitably in new to be better than many analysts expected. An impor- capital should be increasing less rapidly as final tant supporting factor, as I pointed out in February, demand slows some. was favorable conditions in financial markets in the While these are all good reasons to anticipate that latter part of 1995 and early 1996. Intermediate- and economic growth will moderate some, the timing and extent of that downshift are uncertain. We have not, as yet, seen much effect of the rise in interest rates on, for example, the housing market. In many other 1. See "Monetary Policy Report to the Congress," in the aspects, financial market conditions remain quite sup- August 1996 issue of the Bulletin, pp. 701-16. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

812 Federal Reserve Bulletin • September 1996 portive to domestic spending, and the economies of As we have discussed before, powerful forces have many foreign countries are showing signs of achiev- evolved in the past few years to help contain inflaing more solid growth, which should help support our tionary tendencies. An ever-increasing share of our export sales. Moreover, and perhaps of most rel- nation's work force uses the tools of new technoloevance, a desire to build inventories could add sig- gies. Microchips embodied in physical capital make nificantly to production in the near term. Data avail- it work more efficiently, and sophisticated software able for 1996 through May show that inventories adds to intellectual capital. The consequent waves of were reduced relative to sales and are now fairly lean improvements in production techniques have quickly in many important industries. Although the use of altered the economic viability of individual firms and just-in-time inventory and production systems sometimes even entire industries, as well as the encourages purchasing managers to keep stocks lean, market value of workers' skills. With such fast and any evidence that deliveries of previously ordered changeable currents, it is not surprising that workers goods are being delayed for extended periods would may be less willing to test the waters of job change. quickly alert companies to the need for higher safety Indeed, voluntary job leaving to seek other employstocks. Indeed, indications of some mounting deliv- ment appears to be quite subdued despite evidence of ery delays in June do raise warning flags in this a tight labor market. Because workers are more worregard. The reversal of earlier draw-downs in inven- ried about their own job security and their marketabiltories, of course, could potentially impart an impor- ity if forced to change jobs, they are apparently tant boost to incomes and production as we enter the accepting smaller increases in their compensation at second half of the year. The economy is already any given level of labor market tightness. Moreover, producing at a high level—and some early signs of a growing share of all output competes in an increaspressures on resources are emerging, especially in the ingly global marketplace, allowing fixed costs to be labor market. spread over ever-broader markets, promoting greater specialization and efficiency and enhancing price competition. THE RECENT BEHAVIOR OF INFLATION As I indicated in February, these forces, to the extent that they are operative, exert a transitory, not There are, to be sure, legitimate questions about how permanent, effect in reducing wage and price inflamuch margin in resource utilization currently exists. tion. These trends leave the level of both wages and Historically, current levels of slack, measured in prices lower than historical relationships would preterms of either the unemployment rate or capacity dict. But, at some point, greater job security will no utilization, have often been associated with a gradual longer be worth the further sacrifice of gains in real strengthening of price and wage pressures. Yet, the wages. The growth of wages will then again be more recent evidence of such pressures is scant. I have responsive to tightness of labor markets, potentially already noted the lack of a distinct trend in the putting pressure on profit margins and ultimately growth rate of the so-called core CPI. Increases in prices. Moreover, the reductions in unit costs that are more comprehensive, and perhaps more representa- a consequence of the ever-expanding global reach of tive, chain-weighted measures of consumer prices, many companies must ultimately be bound by the based on the national income and product accounts, limits of geography. To be sure, production and sales actually have continued to edge lower. The same is will continue to be diversified across geographic true of a still broader measure of price change, the areas, but the world can only figuratively shrink so chain-weighted price index for gross domestic pur- far. At some point, possibly well into the future, chases, which covers both consumers and businesses. increasing returns from ever-greater globalization Although nominal wage rates have accelerated must also ebb. recently, the rate of increase has been lagging signifi- Perhaps reflecting these unusual influences, we cantly behind that predicted on the basis of historical have yet to see early signs in prices themselves of relationships with unemployment and past inflation. intensifying pressures, despite anecdotal and statisti- And domestic profit margins have held up far later cal evidence that the amount of operating slack in our into this economic expansion than is the norm. economy has been at low levels by historical stan- Have we moved into a new environment where dards for some time. Among the encouraging indicainflation imbalances no longer threaten the stability tors, industrial commodity prices have remained and growth of our economy in ways they once did? roughly flat, and the list of reported shortages of The simple answer, in our judgment, is no. But the materials has been exceptionally small. This pattern issue is not a simple one. is consistent with the view that American businesses, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 813 by and large, have felt comfortable that inflation has for economic performance over the remainder of this been subdued, and it offers little evidence of the year and the next reflect the view that sustainable advance buying and expanded commitments that economic growth is likely in store. The growth rate would come if businesses were expecting significant of real GDP is most commonly seen as between price pressures in the reasonably near future. 2V2 percent and 23/4 percent over the four quarters of Nonetheless, there are early indications that this 1996 and 13A percent to 2lA percent in 1997. Given episode of favorable inflation developments, espe- the strong performance of real GDP in the last two cially with regard to labor markets, may be drawing quarters, this outcome implies slower growth in the to a close. The surprising strength in the employment second half of this year. Nonetheless, for the remaincost index for wages and salaries in the first quarter der of this year and the next in these projections, the raises the possibility that workers' willingness to unemployment rate remains in the range of the past surrender wage gains for job security may be lessen- 1V2 years. Inflation, as measured by the four-quarter ing. Wage data since March have been somewhat percentage change in the consumer price index, is difficult to read. Average hourly earnings clearly expected to be 3 percent to 3lA percent in 1996. The accelerated in the second quarter. However, in look- governors and bank presidents, however, view the ing at those figures, one must be mindful that they prospects for inflation to be more favorable going can reflect not only changes in wage rates but also forward. The expected reversal of some of the recent shifts in the composition of employment. And in run-up in energy prices would contribute to that recent months, a significant part, although not all of result, but policymakers' forecasts also reflect their the pickup, has been accounted for by a tendency for determination to hold the line on inflation. The cenemployment to shift to relatively high-pay industries, tral tendency of their inflation forecasts for 1997 is such as durable goods manufacturing. Whether such 23/4 to 3 percent, returning to the range from 1991 to shifts also imply a correspondingly higher level of 1995. output per worker will determine whether unit labor costs also accelerated to impart upward pressures to price inflation. Increases in pay, of course, are not THE PURSUIT OF PRICE STABILITY inflationary so long as they are matched by gains in productivity. Without question, we would applaud We at the Federal Reserve would welcome faster such trends, which increase standards of living. How- economic growth, provided that it were sustainable. ever, wage gains that increase unit costs and are eaten As I emphasized last February, we do not have firm up by inflation help no one and ultimately place judgments on the specific level or growth rate of economic growth in jeopardy. output that would engender economic strains. Instead, Clearly, in this environment, the Federal Reserve we respond to evidence that those strains themselves has had to become especially vigilant to incipient are developing. Whatever the long-run potential for inflation pressures that could ultimately threaten the sustainable growth, we believe that a necessary conhealth of the expansion. The relatively good inflation dition for achieving it is low inflation. As a conseperformance of the past few years, as best we can quence, the Federal Reserve remains committed to judge, owes, in part, to transitional forces that are preventing a sustained pickup in inflation and ultionly temporarily damping the wage-price inflation mately achieving and preserving price stability. process. We cannot be confident that we can ascertain Price stability is an appropriate and desirable goal when that process will come to an end. This makes for policy, not only because it allows financial marpolicy responses more difficult than usual because, as kets and the economy to work most efficiently but always, the impact of policy will be felt with a also because it most likely raises productivity and significant lag. Of course, if the economy grows so living standards in the long run. Specifically, in an strongly as to strain available resources, transitional inflationary environment, business managers are disforces notwithstanding, history persuasively indicates tracted from their basic function of building profits that imbalances will develop that will bring the through prudent investment and cost control. My expansion to a halt. own observation of business practices over the years suggests that the inability to pass cost increases through to higher prices provides a powerful incen- THE FOMC's OUTLOOK FOR THE REMAINDER tive to firms to increase profit margins through OF 1996 AND 1997 innovation and greater efficiency, which boosts productivity and ultimately standards of living over time. The forecasts of the governors of the Federal Reserve Holding the line on inflation, thus, does not impose a Board and presidents of the Federal Reserve Banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

814 Federal Reserve Bulletin • September 1996 speed limit on economic growth. On the contrary, it 5 percent for M2 and 2 percent to 6 percent for M3. induces the private sector to focus more on efforts The Committee reaffirmed its range of 3 percent to that yield faster long-term economic growth. 7 percent for the debt of the domestic nonfinancial In this context, we can readily understand why sectors for this year and chose the same range provifinancial markets welcome sustained low inflation. sionally for next year. The Committee's expectations Uncertainty about future inflation raises the risks for inflation and nominal GDP expansion in 1996 and associated with investing for that future. Lowering 1997 suggest growth of the monetary aggregates at that uncertainty by keeping inflation down dimin- the upper ends of their benchmark ranges as a distinct ishes those risks, so that all commitments concerning possibility this year and next, though debt should be future income become more valuable. During periods in the middle portion of its range. of low inflation, stock and bond prices tend to reflect The experience of the first part of the 1990s— the higher valuation that comes from harnessing our when money growth diverged from historical relaphysical plant more efficiently to provide improved tionships with income and interest rates—severely opportunities in the future, including higher wages set back most analysts' confidence in the usefulness and profits. What investors fear, what all Americans of M2. Recently, there have been tentative signs that should fear, are inflationary instabilities. They dimin- the historical relationship linking the velocity of ish our ability to provide the wherewithal for the M2—or the ratio of nominal GDP to the money standards of living of the next generation and the stock—to the cost of holding M2 assets has reasretirement incomes of our current work force. The serted itself. For now, though, the Committee is interests of investors as expressed in bond and stock satisfied with watching these developments carefully, markets do not conflict with those of average waiting for more compelling evidence that M2 has Americans—they coincide. some predictive content in forecasting current and In order to realize the benefits of low and declining prospective spending. Such evidence, however, at inflation, Federal Reserve policy has, for some time best will only accumulate gradually over time. now, been designed to act preemptively—as I indicated earlier—to look beyond current data readings and base action on its assessment of where the econ- BUDGETARY POLICY omy is headed. Policy restraint initiated in February 1994 followed from the judgment that unchanged Monetary policy is, of course, only one factor shappolicy would encourage subsequent inflationary ing the macroeconomic environment. I thus would be imbalances that would ultimately cut short the eco- remiss if I did not again emphasize the critical impornomic expansion. The three easing steps in the past tance to our nation's economic welfare of continuing year were instituted when we anticipated that infla- to reduce our federal budget deficit. We have made tionary imbalances would be less threatening and that significant and welcome progress on this score in lower rates would be compatible with promoting recent years. But unless further legislative steps are sustainable economic expansion. Similarly, I am con- taken, that progress will be reversed. Inevitably, such fident that the Federal Open Market Committee changes will require addressing the consequences for would move to tighten reserve market conditions entitlement spending of the anticipated shift in the should the weight of incoming evidence persuasively nation's demographics in the first few decades of the suggest an oncoming intensification of inflation pres- next century. Lower budget deficits are the surest and sures that would jeopardize the durability of the most direct way to increase national saving. Higher economic expansion. national saving would help to lower real interest rates, spurring spending on capital goods so as to put cutting-edge technology in the hands of more American workers. With a greater volume of modern equip- THE RANGES FOR THE DEBT AND MONETARY ment at their disposal, American workers will be able AGGREGATES to produce goods that compete even more effectively on world markets. The Committee selected provisional ranges for the monetary aggregates in 1997 that once again encom- The rally in capital markets last year that trimmed pass the growth rates associated with conditions of as much as 2 percentage points from longer-term approximate price stability, provided that these aggre- Treasury yields was almost surely, in part, a response gates act in accord with their historical relationships to the developing positive dialogue on deficit reducwith nominal income and interest rates. These ranges tion. While the backup in intermediate- and longerare identical to those endorsed for 1996—1 percent to term market interest rates this year has mostly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 815 reflected the unexpected vigor of economic activity, correction of emerging imbalances, reflected in part market participants must also have been struck by the in the persistence of low inflation. dying out of serious discussions that might lead to a To be sure, the economy is not free of problems. bipartisan agreement to eliminate the budget deficit But as we address those problems, policymakers also over time. need to recognize the limitations of our influence and the wellspring of our success. The good performance of the American economy in the most fundamental sense rests on the actions of millions of people, who CONCLUSION have been given the scope to express themselves in free and open markets. In this, we are a model for the Our economy is now in its sixth year of economic rest of the world, which has come to appreciate the expansion. The staying power of the expansion has power of market economies to provide for the pubowed importantly to the initial small size and rapid lic's long-term welfare. Chairman Greenspan presented identical testimony before the Subcommittee on Domestic and International Monetary Policy of the Committee on Banking and Financial Services, U.S. House of Representatives, July 23, 1996. Statement by Janet L. Yellen, Member, Board of focus my comments on a discussion of credit card Governors of the Federal Reserve System, before the lending activities. Finally, I shall discuss the steps Subcommittee on Financial Institutions and Regula- taken by the Federal Reserve throughout the past tory Relief, Committee on Banking, Housing, and year to caution its examiners, state member banks, Urban Affairs, U.S. Senate, July 24, 1996 and bank holding companies about the risks inherent in weakening credit standards and to ensure that I am pleased to appear before this subcommittee financial institutions are taking appropriate action to today to discuss trends in consumer lending and the address emerging problems in consumer loan Federal Reserve Board's view of how recent develop- portfolios. ments in this sector are affecting U.S. commercial banks. As the subcommittee knows, consumer delinquencies on nonmortgage debt have increased in ECONOMIC TRENDS recent periods and are beginning to affect profit margins at some financial institutions. The Federal Economic conditions in the United States have in Reserve has been monitoring these conditions and recent years been favorable to growth in spending discussing their implications with individual banking and borrowing by the household sector and to organizations and industry groups. However, given strong growth in consumer lending by U.S. banks. the generally strong financial condition of the institu- Just since early 1992, nonfarm payroll employment tions most affected by these developments and that has increased nearly IIV2 million, driving the U.S. of the U.S. banking system, we believe that these unemployment rate to 5.3 percent in June of this year, adverse trends do not currently present a material its lowest level in six years. As one consequence, threat either to individual banking organizations or to personal income has risen substantially. The dramatic the overall banking system. rise in stock and bond prices in recent years has also In my remarks, I would like to begin with an produced sharp gains in wealth for some households. overview of the economic developments that have During this same time period, rates and fees on caused the Federal Reserve to devote greater attention consumer financing products have been coming to consumer lending matters. I shall then turn to the down. Average credit card rates, which stood at about emerging—and still well-contained—consequences W/4 percent in late 1991, declined to less than that these developments are having on the banking 151/2 percent by May of this year. At the same time, organizations that are most affected and on the indus- annual fees on credit cards were dropped by many try overall. Because current concerns are predomi- institutions. In addition, declining residential mortnantly centered on revolving credit portfolios, I shall gage rates throughout most of this interval contrib- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

816 Federal Reserve Bulletin • September 1996 uted to a significant reduction in monthly payments and nonmortgage payments, peaked in late 1989 at on such debts. While mortgage rates have recently about YlVi percent and then declined over the next backed up, the relatively low mortgage rates of the four years to about \5Vi percent in 1993, as houseearly 1990s precipitated a refinancing boom that holds curtailed their borrowing and average interest allowed many consumers to significantly reduce their rates on their debts fell. Since then, the ratio has risen monthly mortgage obligations. to about 163/4 percent. This standard measure is based Combined, these generally favorable developments on aggregates that include households without debt have given consumers the confidence and financial and uses estimates of scheduled payments. The Surfoundation to incur additional debt to finance major vey of Consumer Finances, conducted periodically purchases. Nevertheless, some concerns remain about by the Federal Reserve, suggests that the median the increase in consumer debt. Aggregate statistics do ratio of actual debt payments to pretax income of not address conditions in individual households, an debt-holders was relatively constant from 1989 to important consideration because the economic expan- 1995, as was the proportion of the debt-holders that sion has not affected all households equally. Further, had very high debt repayment to income ratios. What while for some households the use of credit in mak- has tended to rise over time is the proportion of ing a purchase is simply a matter of convenience or a low-income households with an unusually high fracmeans of managing liquidity, for others borrowing tion of their income absorbed by debt repayments. may be a means of sustaining consumption through a Unfortunately, the latest data—which are still period of household economic distress. preliminary—are a year old. Nonmortgage consumer debt has grown at double- To be sure, some of the increase in consumer debt digit rates over the past two to three years. This rapid is merely a reflection of the greater prevalence of pace is not unusual for a period of economic expan- convenience use of credit cards as a substitute for sion. Indeed, as the economy emerged from recession cash or check payment, with card balances paid in in 1991, growth in nonmortgage consumer debt was full each month. This trend has been reinforced in much slower than typical, reflecting sluggish spend- recent years by a variety of incentives, such as the ing on durable goods and lingering fears about long- availability of frequent flier miles. But—as our Surterm layoffs and other threats to job security. How- vey of Consumer Finances suggests—there are also ever, by 1994, consumer confidence had recovered signs that some households have let their debts build considerably, and demand for autos and other durable up to the point where they may have difficulty servicgoods had strengthened. Nonmortgage consumer debt ing them: Loan delinquency rates and personal bankgrew about 15 percent that year and the next, but ruptcies are both up. even this rapid pace remained below that of a decade Generally speaking, delinquency rates on nonmortearlier. Lower inflation in recent years can account gage consumer loans have been trending up for the for some of the difference. past year, with some of the increase in delinquency Recently, revolving credit—primarily credit card rates merely the result of the "seasoning" of recently debt—has been, by far, the fastest growing compo- underwritten loans, a typical pattern. However, for nent of consumer debt, averaging annual increases of credit cards, the widely followed statistics of the 20 percent over the past two years. However, that American Bankers Association show that the delinperformance—rapid growth during an expansion—is quency rate by number of accounts is historically also typical of the past two decades. The cumulative high. The more comprehensive figures from the offieffect has been a dramatic rise in the relative impor- cial bank Call Reports based on the dollar volumes of tance of revolving credit. In 1977, when first reported loan balances, however, show a much milder upturn separately to the Federal Reserve, revolving debt of in delinquencies—but still one warranting our U.S. consumers totaled $30 billion, or 14 percent of attention. all consumer debt. In May of this year, the amount outstanding was $444 billion, or nearly 40 percent of the total. Surveys show that 80 percent of U.S. house- CREDIT CARD LENDING BY COMMERCIAL holds now have at least one credit card. BANKS A consequence of the increase in consumer borrowing of recent years is that debt-servicing These economic and market developments have had requirements—that is, the amount of scheduled pay- clear effects on banks. As a percentage of total bank ments of principal and interest—have consumed a loans, consumer debt (including mortgages) has been bigger share of disposable income. Our staff esti- increasing steadily for some time—from 33 percent mates that this ratio, which includes both mortgage of total bank loans in 1980 to roughly 40 percent five Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 817 years ago and about 44 percent today. This shift in card loans. These roughly thirty entities most recently asset allocation by banks reflects several factors, not reported an average return on assets of 2 percent, the least of which is a declining market share of the compared with 1.1 percent for all insured commercial credit extended to commercial customers. In part, it banks. They also maintained average equity to asset also reflects substantial growth in credit card debt. and loan-loss reserve to total loan ratios well above Since late 1991, credit card debt has risen about twice industry averages. as fast as total loans. If one adds back estimates of the The strong earnings profiles of the credit card outstanding securitized credit card debt of banks, banks, and their associated capital and reserve allocasuch credit has risen almost three times as fast as tions, are reflections of the risks associated with this total loans at banks. form of lending. Higher risk and higher return go The industry's total increase in credit card loans hand in hand, and the higher capital and reserves has come about with the growing popularity of cards, associated with this form of credit are required to supported by their aggressive marketing by some balance the risk. Put another way, lenders active in banks. Marketing campaigns typically involve broad- the credit card business are conscious of higher based, regional, or nationwide solicitations and often potential loss rates and expect returns that will fully include pre-approved lines of credit based on the absorb these losses and still provide an adequate results of "credit scoring" models that statistically profit margin. They are also aware of the necessity to evaluate an individual's creditworthiness. In addi- take steps to assure that the variance in returns on tion, banks' success in securitizing consumer debt these loans does not create significant solvency coninstruments for resale in capital markets has increased cerns for their organizations. both their willingness and their ability to make such loans. Also encouraging more aggressive competition INCREASED INCIDENCE OF PERSONAL have been heavy investments in the technological BANKRUPTCY infrastructure needed to evaluate, originate, and manage effectively such credits. Indeed, the major On several occasions during the past year or so, competitors have increasingly used special promo- various industry and professional groups have tions offering reduced fees and rates to obtain market expressed concern about perceived weakening of share and maximize the scale economies of their credit standards within consumer lending, including operations. Some have also been more willing to take the aggressive marketing of credit cards. At these on greater risk in the interest of increasing loan meetings, some of the private sector participants volumes. Such competitive zeal all too often attracts have given anecdotal evidence of practices that weak or otherwise marginal borrowers. The resultant they believe to be potentially harmful in the long adverse selection of credit risks has contributed to a run, either to financial institutions or to the condecline in asset quality at some banks. sumer lending market in general. Similar, and still While these problems have eroded returns at indi- anecdotal, indications of declining standards and vidual institutions, a critical factor that continues to increased competition have been provided by various contribute to the emphasis on such lending has been state banking delegations that periodically visit the the significant, overall long-term profitability of the Federal Reserve and other bank regulatory agencies. credit card business. This is not irrelevant for a One concern cited with increased frequency is a banking system whose largest institutions had been higher incidence of borrowers with substantial credit under earnings pressure through much of the 1980s card debt declaring bankruptcy, without any previous because of their exposures to developing countries, record of missed or delinquent payments. Bankers energy sector borrowers, and commercial real estate often cite borrowers who have tens of thousands of markets. dollars of outstanding loans on a number of credit One indication of the profitability of credit card card accounts with various financial institutions. Such lending can be seen in analyzing the so-called credit borrowers may not always be readily detected by card banks (defined here to include banks with more controls and monitoring procedures and could conthan $1 billion in assets and with credit card balances tribute to increased charge-offs at card issuers. comprising more than 50 percent of total assets). For Several factors are said to be contributing to higher various legal, tax, and operating reasons, most large rates of personal bankruptcy, including greater social banking organizations find it convenient to establish acceptability of the practice, changes in law that have such banks, separate from their other operations, as a made bankruptcy less onerous for individuals, and vehicle for booking most, if not all, of their credit increased advertising by bankruptcy attorneys. What- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

818 Federal Reserve Bulletin • September 1996 ever the underlying causes, it is a reality that credit Earlier this year, we also implemented procedures card issuers and others must address. Moreover, whereby examiners assign specific ratings to an instibanks and nonbanks that issue credit cards and other tution's overall risk-management processes, includconsumer lines of credit should also consider the ing its internal controls. This requirement, we extent to which the trend is fueled by their willing- believe, further highlights the importance of sound ness to lend to individuals whose credit history is management practices and should help to provide dubious. One may not wish to foreclose the possibil- more specific feedback to senior management of the ity of renewed credit access to those who have been examined institution. In the context of consumer forced by uncontrollable circumstances to seek the lending, such assessments generally address a bankprotection of bankruptcy, but it should be recognized ing organization's operating strategies for increasing that undue generosity on this score only encourages market share, its goals, and the controls in place to greater use of the bankruptcy remedy and consequent maintain credit standards, including ongoing review chargeoffs. of the credit strength of its loan portfolio. Examiners also typically evaluate the adequacy of the institution's information systems and the appropriateness of the information provided to directors and senior SUPERVISORY RESPONSE managers. Recently, our supervisory activities, surveys of In response to these and other indications that terms examiners, and discussions with bankers all have of credit and credit standards may have been declin- supported the view that banks are recognizing weaking, about a year ago the Federal Reserve issued nesses in the consumer lending market and are an advisory letter to its examiners and supervised actively adjusting their underwriting and monitoring banking organizations cautioning them about the risk procedures for these loans. Some banks have also of weakening standards. This advisory also requested increased their levels of reserves for these loans in Federal Reserve examiners to discuss any question- recent months. able easing of standards with bank management, I should also note that in each of the two most regardless of whether quantitative measures of prob- recent Federal Reserve Senior Loan Officer Surveys, lem loans had begun to increase. approximately one-quarter of the respondent banks, Since March 1995, the Federal Reserve has also on net, had tightened underwriting standards for been conducting a quarterly survey of its most senior approving new credit card applications. More examiners to track their assessments of conditions in broadly, the proportion of respondents less willing to the banking market, including their assessments of make consumer installment loans slightly exceeded any changes in lending terms and conditions for the proportion that was more willing to lend, for the consumer loans. To supplement these surveys, regu- first time since 1991. Such a revisiting of current lar discussions are conducted with bankers and super- credit standards and practices seems well considered, visory officials at the Reserve Banks to ascertain their given the length of the current period of economic opinions on current lending conditions. expansion and the signs of weakness in some ele- The Federal Reserve has also recently undertaken a ments of consumer finances that we have seen. number of initiatives to focus its examinations more tightly on the activities exposing financial institutions to significant risks and to heighten its emphasis on CONCLUSION evaluating management processes to identify, measure, monitor, and control the risk of banking activi- To sum up, the rapid growth in consumer lending by ties. We believe that these enhancements to our banks, particularly that involving credit card loans, supervisory procedures will further improve our abil- reflects a natural evolution of banking activities ity to detect nascent problems—such as those arising toward the household sector and has generally from the increased and more accommodating con- enhanced consumer convenience and produced sigsumer lending of recent years—and will foster appro- nificant profits for banks. In recent years, this growth priate responses by bank management. Consistent has been caused, in part, by aggressive solicitations with these initiatives, an inter-District task force of of credit card customers by a relatively small number Federal Reserve examiners is currently conducting a of large bank and nonbank organizations and by an comprehensive review of the retail credit and credit- active market for securitized credit card debt. scoring operations of several large bank holding The recently emerging trend of higher delinquencompanies. cies and personal bankruptcies has certainly increased Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 819 the costs of making consumer credit card loans and measured in terms of its profitability, capital ratios, is forcing some institutions to review and modify loss reserves, and overall asset quality. Moreover, their marketing strategies and underwriting stan- banks price and reserve for credit card loans with the dards. It has also prompted the Federal Reserve to expectation of occasional periods of relatively high devote more attention to the monitoring of consumer rates of loss. Therefore, unless future conditions deteloan exposures, both on and off bank balance sheets, riorate dramatically, we believe that the industry is and to the evaluation of risk-management practices, well positioned to absorb any problems resulting including internal controls, for these activities. Nev- from the competitive consumer underwriting pracertheless, the industry's condition is strong when tices of the recent past. Statement by Alan Greenspan, Chairman, Board of changing environment with some foresight and as Governors of the Federal Reserve System, before the effectively as possible. To that end, in 1995 we Committee on Banking, Housing, and Urban Affairs, formalized our strategic focus by establishing a Sys- US. Senate, July 26, 1996 tem Strategic Planning Coordinating Group to assess how the Federal Reserve can most effectively meet I appreciate this opportunity to appear before the its public policy objectives into the next century. Banking Committee today to address certain recent Our strategic focus is also reflected in recent sigreports on the Federal Reserve's operations. Of most nificant changes that the Federal Reserve has made relevance, the General Accounting Office (GAO) has in the way it carries out its major responsibilities. raised some significant issues with respect to the For example, we have undertaken a major redesign management of the Federal Reserve System. Both the and upgrade of our computer systems, communica- GAO and the Congress deserve our full response. tions networks, and critical software applications to We are strongly committed to ensuring that the improve reliability, respond more quickly to chang- Federal Reserve System is managed efficiently and ing business requirements, and improve our disastereffectively. It is most important to us at the Federal recovery capabilities. We have placed an increasing Reserve Board and the Reserve Banks not only to run reliance on automation to provide a more flexible a "tight ship" but to foster the attitudes and pro- approach to bank examinations—an approach that is cesses that will ensure continuous improvement in risk-oriented, cost-effective, and sensitive to the burthe effectiveness of the Federal Reserve's operations. den placed on banks. We have also consolidated We recognize that spending nonappropriated funds certain fiscal agency functions that we provide for the places a special obligation on us to be particularly government in order to improve cost-effectiveness and quality, and a Reserve Bank policy committee diligent in the use and application of those funds. has been established to coordinate the provision of Accordingly, even though we may ultimately dis- Federal Reserve financial services. agree with some of the specific suggestions of the GAO, we welcome all of them and their insights In addition, the Federal Reserve already had under because they require us to rethink our positions and way several specific initiatives related to recommenchange them if appropriate. Certain GAO recommen- dations made by the GAO. For example, we recently dations for review of specific aspects of our manage- engaged an independent accounting firm to audit and ment clearly have merit, and reviews of a number of certify the combined financial statements of the issues highlighted in the GAO's report are currently Reserve Banks. The firm issued an unqualified opinunder way. These reviews may lead to changes in the ion on the 1995 financial statements, as prepared in Federal Reserve's administration that will further accordance with the financial accounting manual for enhance our effectiveness. the Reserve Banks. In addition, we are actively reviewing the appropriate infrastructure for providing It is most important for any organization, including certain financial services, taking into consideration the Federal Reserve, periodically to reassess its both cost-efficiency and service quality. One difficult businesses and how they are carried out. Strategic issue that has confronted, and will confront, the Fedplanning is particularly critical given our rapidly eral Reserve Board in our oversight of the System is changing environment in which technology is the appropriate degree of consolidation of various advancing at an extraordinary pace and the financial activities. Certain Systemwide activities do appear to services industry is becoming ever more complex. It be more cost-effective if consolidated. For example, is essential that the Federal Reserve adapt to this Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

820 Federal Reserve Bulletin • September 1996 we anticipate that the consolidation of our critical knowledge and operational expertise we have gained electronic payment applications will reduce our costs as a service provider strengthens our efforts in conof providing these services. But it is also evident that taining systemic risks and is crucial in managing the element of autonomy that is accorded to the potential financial crises. Reserve Banks has created an environment within We regard the wholesale payments services we the Federal Reserve that attracts highly qualified provide, such as Fedwire and net settlement, as essenstaff who contribute importantly to the effectiveness tial central bank services and important in limiting and efficiency of the Federal Reserve System over the payments system risk. Our role in providing these long run. The advantages of this environment must services probably will not change significantly as the be balanced against the possible savings from marketplace evolves, although the nature of the serconsolidation. vices themselves might. It is quite possible, if not likely, that as changes occur in the financial services marketplace over time, FEDERAL RESERVE'S ROLE AS or owing to other considerations, our role in provid- SERVICE PROVIDER ing other services, such as check collection, may change as well. In this regard, we must be sensitive to Many of our resources are devoted to providing the fact that, as the nation's central bank, we have an priced payment services. The Federal Reserve has unsurpassable credit rating that must not be used to played an integral role in the nation's payments sys- unfairly compete with private-sector providers. We tem since the System's inception. Indeed, one of the are continually assessing our available means of Congress's original goals in establishing the Federal achieving our payments system goals, including our Reserve System was to improve the efficiency of regulatory authority and our role as a direct particicheck clearing. Before the passage of the Monetary pant in the payments system, with our public service Control Act (MCA) in 1980, the Federal Reserve role always kept paramount. For example, the Fedprovided payment services to its member banks; the eral Reserve has adopted regulations that have fosbanks paid for these services implicitly with non- tered competition and efficiency in the provision of interest-bearing reserves rather than through explicit check collection services, even though they resulted fees. The MCA fundamentally changed the manner in a reduction in the Federal Reserve's direct particiin which the Federal Reserve provided and received pation in the check system. At the same time, the payment for these services. Federal Reserve has encouraged other efficiencies in Because the act expanded reserve requirements to the payments system through innovations in its serall depository institutions, it also required that the vice offerings. To the extent that we can achieve our Federal Reserve offer its payment services to all payments system goals most effectively through our depository institutions. To offset the act's reduction direct participation, our continued provision of these in the level of required reserves, as well as to broaden services will remain appropriate. and level the competitive market for interbank payment services, the Congress required us to price our services at full cost with a rate of return comparable FEDERAL RESERVE COST-EFFECTIVENESS to that of private firms. I believe that the increased competition resulting from the MCA requirements In considering the cost structure of the Federal has benefited the payments system. Reserve, it is necessary to keep in mind the unique The GAO has recommended that we review our combination of responsibilities that have been future role in providing payment services. We are assigned to this institution. The Federal Reserve is in the process of conducting such a review in the responsible for conducting monetary policy, superviscontext of our overall strategic plan. In general, we ing and regulating certain financial institutions, proview our role as a payments service provider as moting the efficiency and integrity of the payments crucial in carrying out our overall central bank system, and providing fiscal agency services to the mission. We believe it is important for the Federal Treasury and other government agencies at their Reserve to foster the integrity, efficiency, and acces- direction. sibility of the U.S. dollar payments system, which Different factors affect the cost structure of each of in turn is important to maintain financial stability and these functions. For example, priced services are maximize sustainable economic growth. The subject to the inherent discipline of the marketplace, provision of services by the Federal Reserve has as the Federal Reserve must control costs in order to contributed directly to these goals. In addition, the meet the statutory directives for cost recovery in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 821 Monetary Control Act. On the other hand, in provid- The risk-management decisions that we make coning depository and fiscal services to the Treasury, the cerning the way we provide payment services to Federal Reserve must respond to the instructions of depository institutions are tested directly in the marthe Treasury. We endeavor to carry out the Trea- ketplace. These services comprise more than onesury's directives in a cost-effective manner but can- third of the Federal Reserve Banks' total budget, and not refuse legitimate requests because of their effect the Monetary Control Act requires that, over the long on our costs or because they are inconsistent with run, we price these services to recover their costs as other Federal Reserve plans. In the areas of monetary well as costs that would be borne by private busipolicy and financial institution supervision, there are nesses, such as taxes and a return on equity. If we fewer external constraints on our expenses. Here we provide these services inefficiently, we price ourmust be particularly vigilant. selves out of the market. Given the critical nature of the Federal Reserve's Over the past decade, our track record has been responsibilities, particularly in the areas of monetary good. The Reserve Banks have recovered 101 percent policy, financial stability, and financial institution of their total cost of providing priced services, includsupervision, our major initiatives must be judged not ing the targeted return on equity. I should also note only in terms of cost but also in the context of risk that, by recovering not only our actual costs but also management and the appropriate level of resources to the imputed costs that a private firm would incur, the be devoted to each function. For example, the Con- Federal Reserve's priced services have consistently gress, in enacting the Foreign Bank Supervision contributed to the amount we have transferred to Enhancement Act in 1991, clearly concluded that the the Treasury. During the past decade, priced seradditional costs of expanding the Federal Reserve's vices revenue has exceeded operating costs by almost supervisory responsibilities for U.S. operations of $1 billion. foreign banks were justified by the greater financial Our fiscal agency services, which comprise another stability and protection that the enhanced supervision one-sixth of the Reserve Banks' total budget, are would bring. provided at the direction of the Treasury and other We focus our banking examination resources based federal government agencies for whom we provide on risk assessments, with the expectation that areas these services and whose reimbursements to us are not covered extensively in the examinations will not made primarily with appropriated funds. Here our become serious problems. Had we devoted more difficulty has been in obtaining full reimbursement resources to Daiwa, and perhaps less elsewhere, over the years. We understand that, as part of its would we have uncovered its wrongdoing at an early funding request for fiscal year 1997, the Treasury stage? We can't know for sure, but the odds would sought a permanent indefinite appropriation, similar have been higher. But if we had had the foresight to that in place for the Bureau of the Public Debt, for to divert these resources from other activities, would services provided to its Financial Management Serwe have increased our risk exposure elsewhere? vice. The Federal Reserve and our fiscal principals As another example, the Federal Reserve's recent continue to work closely to identify and implement investment in a major upgrade of our computer initiatives that improve further the efficiency of these systems and personnel to adapt our surveillance operations. and payments technologies to the major changes With respect to staff compensation and some other that have occurred in private financial markets aspects of our infrastructure that are necessary to was also driven in large part to improve risk manage- support our varied responsibilities, only indirect ment. While the costs of these improvements were market criteria are available to judge the Federal not trivial, they have enhanced our ability to ensure Reserve's costs. For example, we try to set salary the smooth functioning of the financial markets, even structures that can attract and retain the personnel during periods of financial or operational disruptions. with skills necessary to run the Federal Reserve Sys- To hold the risk of systemic crises to acceptably tem in a highly effective manner. To acquire and hold low levels in both U.S. markets and U.S. dollar such personnel, we strive to provide salaries and markets abroad requires some redundancy of benefits competitive with local private- and publicresources. Given the vast scale of the value of sector markets, tempered by the willingness of many payment transactions that flow through our systems— professionals to accord a nonmonetary premium to our Fedwire volume alone averages almost $1.5 tril- Federal Reserve employment. Although the GAO lion a day—we believe that the benefits of this report suggests that the Federal Reserve does not redundancy far exceed the associated incremental adequately review Federal Reserve employee salary costs. and benefit levels to determine whether they continue Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

822 Federal Reserve Bulletin • September 1996 to be justified, I can assure the committee that these More generally, we believe that the GAO is costs are scrutinized regularly to ensure that they are mistaken in its notion that the Federal Reserve does appropriate. not regularly assess certain ongoing programs to We believe that the GAO's comparison of growth determine whether they are reasonable and justified. in Federal Reserve employee benefits with those of In particular, we do not use a "current services" the federal government is incorrect. The problem is approach to develop the Board and Reserve Bank that although we accrue such benefits according to budgets. The significant reallocation of System generally accepted accounting principles, the federal resources among the various responsibility areas durgovernment does not. Were the federal government ing recent years clearly demonstrates that this is not to use accrual accounting, presumably the compari- the case. sons would be straightforward. The federal govern- In summary, although the Board believes that much ment, however, employs an outmoded cash account- of the GAO's analysis and recommendations have ing system, which makes it difficult for us to reverse merit, we take exception to the broad implication of our accruals in a manner consistent with it. As best the GAO report that the Federal Reserve has not we can judge, when calculated on a comparable basis exercised appropriate budget constraint and that it using federal government accounting principles, the has not adequately addressed the changing technocost of benefits per employee for the Federal Reserve logical and financial environment in which it operand the federal government increased by approxi- ates. In my experience, the Federal Reserve is as well mately the same percentage during the 1988 to 1994 run an organization as any with which I have been period—64 percent and 62 percent respectively. We associated, private or public, over the decades. Is believe the GAO significantly overstated the increase there nonetheless room for improvement? Certainly. I in Federal Reserve benefit costs by including the cost am not aware of any complex organization for which of future pension benefits related to Federal Reserve this is not the case. In particular, the Board plans early retirement plans on an accrual basis without to review several specific areas highlighted by considering the associated future savings attributable the GAO related to management of health care to those programs. Each of the early retirement pro- benefits, Reserve Bank procurement and contracting grams has a positive net present value, indicating a procedures, and Reserve Bank travel reimbursement net cost savings from such plans. Including the policies. present value cost of early retirement plans without considering the present value of cost savings skews any comparison of the increase in total benefits costs THE FEDERAL RESERVE SURPLUS for the Federal Reserve and the federal government. Applying peer analysis more broadly, during the One area discussed in the GAO report—the elimina- 1988 to 1994 period reviewed by the GAO, the tion or reduction of the Federal Reserve's surplus— increase in Federal Reserve operating costs was has received substantial, and often misleading, media slightly less than the 51 percent increase in federal coverage. I agree with the assessment of the Conferdiscretionary nondefense spending, which has been ence Report on the fiscal 1997 budget resolution on subject to increasing congressional restraint in recent this matter. The report concluded that a transfer of the years. The GAO makes this as one of its compari- Federal Reserve's surplus to the Treasury would be a sons. The Federal Reserve effectively contained its "gimmick" that "has no real economic impact on the costs despite a significant expansion in its mandated deficit." While a transfer of Federal Reserve surplus responsibilities and expanded resources required to would increase "unified receipts" (because the Fedmonitor and contain the financial market turmoil of eral Reserve, for technical reasons, is not included in that period. To also compare, however, as the GAO the unified budget), it would nonetheless be an did in its report, the rate of our expense increases intragovernmental transfer that would not change the with that of total federal discretionary outlays, which government's true economic and financial position are dominated by the major post-cold war retrench- with respect to the private sector. ment in defense, is clearly inappropriate. Moreover, The Federal Reserve holds government securities with the significant expansion of our computer sysas the asset counterpart to its surplus, interest on tems now close to completion and our adjustment to which it returns to the Treasury. If the Federal our expanded supervisory mandates reaching frui- Reserve decreased its surplus, it would do so by tion, our costs during the past two years and those selling government securities and transferring the projected for the immediate future are definitely on a proceeds to the Treasury. Consequently, the Federal flattening trajectory. Reserve's future payments to the Treasury would Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 823 decline permanently by the foregone amount of inter- balancing efforts to improve service, reduce float, and est on the surplus funds transferred, exactly offsetting control operating costs. In hindsight, are there some the Treasury's savings on gross interest payments. decisions that should have been made differently? The surplus is part of our capital account. In that Almost surely. But from a broad perspective, ITS has context, I believe retention by the Federal Reserve of been managed effectively in our judgment. some level of surplus is desirable, but I acknowledge Finally, I would like to put in context the errors that the appropriate level of the Federal Reserve's made by the Los Angeles Branch of the Federal surplus is debatable. We would welcome the opportu- Reserve Bank of San Francisco in reporting certain nity to work with the Congress to review this issue. statistical cash information to the Federal Reserve Board. Unfortunately, the press coverage of this matter, in our judgment, has significantly overstated the problem. OTHER RECENT INQUIRIES First, these reports are used for informational purposes only. No taxpayer money has been lost. No key I would like to conclude my testimony by comment- decisionmaking has been compromised. The errors ing on several recent inquiries into certain aspects of have not affected the usefulness of the information the Reserve Banks' operations—specifically, the derived from the Federal Reserve's financial statemanagement of our Interdistrict Transportation Sys- ments, nor have they affected the Federal Reserve's tem (ITS) and cash statistical reporting problems calculation of the money supply, its conduct of moneexperienced by the Los Angeles Branch of the Fed- tary policy, or the amount of shipments of currency eral Reserve Bank of San Francisco. and coin to or from the Branch. Earlier this year, Representative Henry Gonzalez Second, although there were reports of mistakes issued a report on the administration of the Federal amounting to $178 million, the errors changed the Reserve's ITS network. The report asserts that the Branch's reported production volume by less than Federal Reserve may have violated the Monetary one-half of 1 percent. If the mistakes had not been Control Act to the extent that it does not fully recover discovered, at worst there would have been slight the costs of ITS through revenue attributable to its errors in forecasting future currency demand, which use. The GAO and the courts reviewed this issue in could have caused a slight increase to the Federal the mid-1980s and concluded that such cost recovery Reserve's order to the Treasury to print new curwas not required by the act. rency. The cost of this higher currency print order No integrated company in the private sector (such would have been offset, however, by a lower print as one that provides check collection services) prices order in the following year. individual segments of its operation to achieve a Third, the Los Angeles Branch had identified the uniform rate of return. Optimum profitability, that is, problems internally and was in the process of resolvminimum consolidated costs, is enhanced through ing them before Representative Gonzalez began his transfer pricing flexibility. Even aside from the impre- inquiry. The Los Angeles Branch is working dilicisions associated with allocating fixed costs, it would gently to ensure that all of the data used to prepare not make sense for us to separately recover the costs the cash statistical reports transmitted to the Board of each input to a service, such as transportation, data are accurate. processing, or labor, as implied by Representative In closing, let me state that we appreciate the Gonzalez. Rather, all of the costs the Reserve Banks GAO's review in that it assists us in our ongoing incur in providing check services to depository insti- evaluation of the Federal Reserve's structure and tutions, including ITS costs (which represent less functions and our efforts to continually improve than 5 percent of the costs of our check service), are operations. As I noted, many recommendations are recovered through fees for their various check useful, and we are pursuing them. In my opinion, products. however, the general tenor of the report does not Representative Gonzalez's report also alleges that reflect the high level of effectiveness with which the certain contracting practices used by the Boston Federal Reserve has fulfilled its mission. While, as is Reserve Bank in managing ITS were improper and likely the case with any organization, the Federal wasteful. Administration of ITS requires Federal Reserve has opportunities for further improvement, I Reserve management to make numerous, rapid, and believe these opportunities should be put in the concomplex business decisions every day, constantly text of our significant accomplishments. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

824 Announcements NOMINATIONS SOUGHT FOR APPOINTMENTS TO Act of 1978 by adding a new provision regarding the THE CONSUMER ADVISORY COUNCIL management of shell branches of foreign banks by such banks' U.S. offices. The Federal Reserve Board announced on July 2, The provision prohibits foreign banks from using 1996, that it is seeking nominations of qualified indi- their U.S. branches or agencies to manage types of viduals for eight appointments to its Consumer Advi- activities through offshore offices that could not be sory Council. managed by a U.S. bank at its foreign branches or The Consumer Advisory Council consists of thirty subsidiaries. This prohibition applies with respect to representatives of consumer and community interests those offshore offices that are "managed or conand of the financial services industry. The council trolled" by a foreign bank's U.S. branches or was established by the Congress in 1976, at the agencies. suggestion of the Board, to advise the Board on the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Board seeks its advice. The council by law PROPOSED ACTIONS represents the interests both of consumers and of the financial community. The group meets in The Federal Reserve Board on July 11, 1996, Washington, D.C., three times a year. extended the comment period from August 1 to Sep- Eight new members will be selected to serve three- tember 6 on its proposal to amend Regulation E year terms that will begin in January 1997. The (Electronic Fund Transfers). Board expects to announce the selection of new mem- The Federal Reserve Board on July 31, 1996, bers by year-end 1996. requested comment on three proposals to modify the Nominations must be submitted in writing and conditions under which section 20 subsidiaries of should include information about nominees' past and bank holding companies may underwrite and deal in present positions held and about their special knowl- securities. edge, interests, or experience related to community The first proposal would increase the amount of reinvestment, consumer credit, or other consumer revenue that a section 20 subsidiary may derive from financial services. underwriting and dealing in securities from 10 per- Nominations must be received by August 31, 1996, cent to 25 percent of its total revenue. Comments on and should be addressed to Dolores S. Smith, Associ- this proposal were requested by September 30, 1996. ate Director, Division of Consumer and Community The second proposal would amend or eliminate Affairs, Board of Governors of the Federal Reserve three of the prudential limitations, or firewalls, System, Washington, DC 20551. imposed on the operations of the section 20 subsidiaries as listed below: • The prohibition on director, officer, and REGULATION K: FINAL RULE employee interlocks between a section 20 subsidiary and its affiliated banks or thrift institutions (the inter- The Federal Reserve Board announced on July 23, locks restriction) 1996, a final rule amending Regulation K (Interna- • The restriction on a bank or thrift institution tional Banking Operations) regarding the manage- acting as an agent for, or engaging in marketing ment of offshore offices by U.S. branches and agen- activities on behalf of, an affiliated section 20 subsidcies of foreign banks. The final rule was effective iary (the cross-marketing restriction) August 28, 1996. • The restriction on the purchase and sale of finan- The rule implements a provision of the Riegle- cial assets between a section 20 subsidiary and its Neal Interstate Banking and Branching Efficiency affiliated bank or thrift institution (the financial assets Act of 1994 that amended the International Banking restriction). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

825 The third proposal would clarify, in an accounting • Sixty-seven stocks have been removed for reachange to the revenue limit, that the Board will not sons such as listing on a national securities exchange consider interest income earned on securities that a or involvement in an acquisition. member bank could hold for its own account toward a section 20 subsidiary's revenue limit. The OTC list is composed of OTC stocks that have Comments on the second and third proposals were been determined by the Board to be subject to margin requested by September 3, 1996. requirements in Regulations G (Securities Credit by Persons Other Than Banks, Brokers, or Dealers), T, and U (Credit by Banks for Purchasing or Carrying AVAILABILITY OF REVISED LISTS OF Margin Stocks). It includes OTC stocks qualifying OVER-THE-COUNTER STOCKS AND OF FOREIGN under Board criteria and also includes all OTC stocks MARGIN STOCKS designated as NMS securities. Additional NMS securities may be added in the interim between quarterly The Federal Reserve Board on July 26, 1996, pub- Board publications; these securities are immediately lished a revised list of over-the-counter stocks that marginable upon designation as NMS securities. are subject to its margin regulations (OTC list). Also The foreign list specifies those foreign equity secupublished was a revised list of foreign equity securi- rities that are eligible for margin treatment at brokerties (foreign list) that meet the margin criteria in dealers. The Board recently amended Regulation T, Regulation T (Credit by Brokers and Dealers). The effective July 1, 1996, to provide that foreign stocks lists became effective August 12, 1996, and super- may be included on the foreign list either by meeting sede the previous lists that were effective May 13, the existing Regulation T criteria for foreign securi- 1996. The next revision of the lists is scheduled to be ties or by being deemed to have a "ready market" for effective November 1996. These lists are published purposes of the net capital rule of the Securities and for the information of lenders and the general public. Exchange Commission (SEC). Since 1993, the SEC The changes that were made to the revised OTC has effectively treated all stocks included in the list, which now contains 4,614 OTC stocks, are as Financial Times/Standard & Poor's Actuaries World follows: Indices as having a "ready market" for capital purposes. The Board is therefore adding 1,261 foreign • Two hundred eighty-two stocks have been stocks currently included on the World Indices List included for the first time, 233 under National Market that were not on the previous foreign list. The revised System (NMS) designation. foreign list now contains 1,961 securities displayed • Sixty-one stocks previously on the list have been by order of country. • removed for substantially failing to meet the requirements for continued listing. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

826 Minutes of the Federal Open Market Committee Meeting Held on May 21, 1996 A meeting of the Federal Open Market Committee Mr. Rives, First Vice President, Federal Reserve was held in the offices of the Board of Governors of Bank of St. Louis Mr. Beebe, Ms. Browne, Messrs. Davis, Dewald, the Federal Reserve System in Washington, D.C., on Eisenbeis, Goodfriend, and Hunter, Senior Tuesday, May 21, 1996, at 9:00 a.m. Vice Presidents, Federal Reserve Banks of San Francisco, Boston, Kansas City, St. Louis, Present: Atlanta, Richmond, and Chicago respectively Mr. Greenspan, Chairman Mr. Altig, Mses. Chen and Rosenbaum, Mr. McDonough, Vice Chairman Vice Presidents, Federal Reserve Banks of Mr. Boehne Cleveland, New York, and Atlanta respectively Mr. Jordan Mr. Kelley Mr. Lindsey By unanimous vote, the minutes of the meeting Mr. McTeer of the Federal Open Market Committee held on Ms. Phillips March 26, 1996, were approved. Mr. Stern The Manager of the System Open Market Account Ms. Yellen reported on developments in foreign exchange mar- Messrs. Broaddus, Guynn, Moskow, and Parry, kets during the period March 26 through May 20, Alternate Members of the Federal Open Market 1996. There were no open market transactions in Committee foreign currencies for System account during this period, and thus no vote was required of the Messrs. Hoenig and Melzer, and Ms. Minehan, Committee. Presidents of the Federal Reserve Banks of The Manager also reported on developments in Kansas City, St. Louis, and Boston respectively domestic financial markets and on System open market transactions in government securities and federal Mr. Kohn, Secretary and Economist Mr. Bernard, Deputy Secretary agency obligations during the period March 26 Mr. Coyne, Assistant Secretary through May 20, 1996. By unanimous vote, the Com- Mr. Gillum, Assistant Secretary mittee ratified these transactions. Mr. Mattingly, General Counsel The Committee then turned to a discussion of the Mr. Baxter, Deputy General Counsel economic and financial outlook and the implementa- Mr. Prell, Economist Mr. Truman, Economist tion of monetary policy over the intermeeting period ahead. A summary of the economic and financial Messrs. Lang, Lindsey, Mishkin, Promisel, Rolnick, information available at the time of the meeting and Rosenblum, Siegman, Simpson, and Stockton, of the Committee's discussion is provided below, Associate Economists followed by the domestic policy directive that was approved by the Committee and issued to the Federal Mr. Fisher, Manager, System Open Market Account Reserve Bank of New York. The information reviewed at this meeting sug- Mr. Ettin, Deputy Director, Division of Research and gested that economic activity had expanded moder- Statistics, Board of Governors Mr. Slifman, Associate Director, Division of ately on balance in recent months. Final demand, Research and Statistics, Board of Governors which had been quite robust early in the year, was Mr. Madigan, Associate Director, Division of showing some signs of slowing in recent data. Con- Monetary Affairs sumer spending appeared to be growing at a moder- Ms. Low, Open Market Secretariat Assistant, ate pace; business expenditures on durable equipment Division of Monetary Affairs, Board of Governors had registered further large gains, though new orders Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

827 had flattened out; and housing demand seemed to ment remained robust and spending on other durable be holding up well despite the increase in mortgage equipment increased. Nonresidential construction interest rates this year. Business inventories, most activity also advanced further in the first quarter; notably in the automotive industry, had been brought however, construction of office buildings continued into better alignment with sales, and industrial pro- to lag, and construction of other commercial buildduction and employment had risen appreciably. ings slowed after recording strong gains for several Upward pressures on food and energy prices years. accounted for somewhat larger increases in consumer Business inventories declined in March after rising prices. appreciably on average over January and February; Nonfarm payroll employment was essentially inventory accumulation over the quarter as a whole unchanged in April after rising substantially in the was of modest proportions, as firms sought to bring first quarter; part of the slowdown resulted from an stocks into better balance with sales. In manufacturunwinding of special factors that had boosted job ing, inventories changed little in March and the ratio growth in the first quarter. Payrolls continued to of stocks to sales was not far above historical lows. expand in April in retail trade; finance, insurance, and In the wholesale sector, inventories declined a little real estate; and the services industries. In contrast, further in March, reflecting a reduction in stocks employment in construction fell sharply, reversing of motor vehicles, and the inventory-sales ratio much of the large first-quarter gain. In manufactur- remained near the middle of its range in recent years. ing, employment declined further in April despite the Retail inventories also declined in March, with cuts settlement of a major strike in the automotive sector in stocks of motor vehicles more than accounting for and the return of affected workers to their jobs. The the drop. The inventory-sales ratio for the retail seccivilian unemployment rate fell to 5.4 percent. tor was near the low end of its range in recent years. Industrial production rebounded in April from an The nominal deficit on U.S. trade in goods and appreciable decline in March. The changes in indus- services in the first quarter was substantially larger trial output over the two-month period largely than in the fourth quarter of last year. The value of reflected fluctuations in motor vehicle assemblies imports increased sharply in the first quarter after associated with a strike and its subsequent settlement. declining in the two previous quarters. Moreover, Manufacturing of products other than motor vehicles growth in the value of exports slowed considerably in rose moderately in April on the strength of further the first quarter from the pace of other recent quarlarge advances in the output of office and computing ters. Available data indicated that the performance of equipment and of construction supplies. Utilization the economies of the major foreign industrial counof total industrial capacity, which had varied in recent tries was mixed in the first quarter. The recovery in months in concert with movements in production, Japan was still under way while economic activity climbed in April to a rate slightly above that of the in continental Europe remained generally weak, with fourth quarter of 1995. the German economy apparently having contracted Retail sales declined somewhat in April after post- further and the French economy exhibiting signs of ing a strong gain in the first quarter. Sales of durable only a modest upturn after a fourth-quarter decline. goods, which had increased substantially in the first Moderate further expansion in economic activity quarter, retraced part of that advance in April; the evidently was occurring in Canada and the United drop more than offset a further rise in sales of non- Kingdom. durable goods. Housing activity was well sustained Rising crude oil and, to a lesser extent, food prices in April, with the run-up in mortgage rates that began led to somewhat larger increases in consumer and in February having had little perceptible effect to producer price indexes in March and April. For nondate. Single-family housing starts were up consider- food, non-energy items, however, consumer prices ably in April, and sales of new and existing homes rose only slightly in April after three months of remained brisk in March (latest data available). somewhat faster advances; over the twelve months Business fixed investment accelerated sharply in ended in April, this measure of consumer inflation the first quarter of 1996 following three quarters of increased a little less than the rise over the comparelatively moderate expansion; however, recent data rable year-earlier period. At the producer level, prices on orders and contracts pointed, on balance, to some of finished goods other than food and energy items deceleration in business spending on both durable recorded a third straight small increase in April. Over equipment and nonresidential structures. Much of the the twelve months ended in April, this measure of first-quarter pickup reflected stronger spending for producer prices rose slightly less than over the comdurable equipment; purchases of computing equip- parable year-earlier period. Hourly compensation of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

828 Federal Reserve Bulletin • September 1996 private industry workers expanded in the first quarter in the year. Weakness in demand deposits after at the average rate for all of 1995; the growth was unusually rapid first-quarter expansion and sluggishassociated with a decline in benefit costs and a sharp ness in currency demand were factors in the slowrise in wages and salaries. down. In addition, the rise in market interest rates in At its meeting on March 26, 1996, the Committee recent months, which had increased the opportunity adopted a directive that called for maintaining the costs of holding retail deposits, likely had a restrainexisting degree of pressure on reserve positions and ing effect on these deposits. For the year through that did not include a presumption about the likely April, both aggregates grew at rates somewhat above direction of any adjustments to policy during the the upper bounds of their respective ranges for the intermeeting period. The directive stated that in the year. Expansion in total domestic nonfinancial debt context of the Committee's long-run objectives for remained moderate on balance over recent months, price stability and sustainable economic growth, and and this aggregate stayed near the middle of its giving careful consideration to economic, financial, monitoring range for the year. and monetary developments, slightly greater reserve The staff forecast prepared for this meeting sugrestraint or slightly lesser reserve restraint would be gested that the economy would remain generally acceptable during the intermeeting period. The around its estimated potential. Consumer spending reserve conditions associated with this directive were was expected to grow in line with disposable income; expected to be consistent with moderate growth in the favorable effect of higher equity prices on house- M2 and M3 over coming months. hold wealth and the still-ample availability of credit Open market operations were directed toward were expected to outweigh persisting consumer conmaintaining the existing degree of pressure on reserve cerns about job security and the influence of alreadypositions throughout the intermeeting period, and the high household debt burdens. Homebuilding was federal funds rate averaged near 5lA percent, the level projected to decline a little in response to the recent expected to be associated with that unchanged policy backup in residential mortgage rates but to remain at stance. Other short-term market interest rates changed a relatively high level because of generally supportlittle over the period, and because the Committee's ive employment and income conditions and the stilldecision had been largely anticipated in financial favorable cash flow affordability of homeownership. markets, longer-term rates also were little changed Business spending on equipment and structures was initially. Over the remainder of the period, however, expected to grow less rapidly in light of the projected intermediate- and long-term rates came under upward moderate growth of sales and profits and the lower pressure when incoming economic data were seen by rate of utilization of production capacity now prevailmarket participants as pointing to stronger growth in ing. The external sector was projected to exert a output and employment and therefore to a somewhat small restraining influence on economic activity over tighter monetary policy stance than previously had the projection period, even though an anticipated been expected. Despite the increase in bond yields, firming of economic activity abroad would bolster most indexes of stock prices rose on balance over the demand for U.S. exports. Little additional fiscal conintermeeting period, apparently reflecting generally traction was anticipated over the projection period. favorable first-quarter earnings reports and the Inflation recently had been lifted by adverse developimproved economic outlook. ments in the energy market and was projected to In foreign exchange markets, the rise of U.S. inter- remain above the levels of recent years, given the est rates contributed to a considerable appreciation of high level of resource utilization and the effects of the trade-weighted value of the dollar in terms of the tight grain supplies on food prices. Further risks of other G-10 currencies. The dollar was particularly inflationary pressure were associated with a possible strong against the German mark, reflecting incoming elevation of the federal minimum wage. data that suggested continued weakness in economic In their discussion of current and prospective ecoactivity in Germany and, accordingly, a greater like- nomic conditions ^ members commented that the lihood of further monetary policy easing by the economy had been stronger this year than they had Bundesbank. The dollar rose less against the yen, anticipated and appeared to be growing at a quite partly owing to information indicating a strengthen- robust pace. However, they generally expected the ing of the economic recovery in Japan and height- expansion to slow, keeping the economy close to its ened market expectations of a near-term tightening of potential. Views differed to some extent with regard monetary policy by the Bank of Japan. to the risks surrounding such an outlook. Some saw Growth of M2 and M3 slowed substantially in those risks as fairly evenly balanced, given prospec- April after having recorded sizable increases earlier tive restraint from the rise in bond yields and the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 829 foreign exchange value of the dollar since early this In their review of recent developments and the year. Others expressed concern that economic growth outlook for key sectors of the economy, members might continue at a pace that could increase pressures noted that consumer spending had strengthened conon resources, with adverse implications for inflation siderably this year after a period of sluggish growth in an economy already operating in the neighborhood in late 1995. The recent data on consumer spending of its estimated long-term potential. Moreover, faster were reinforced by anecdotal reports from various increases in energy and food prices could contribute parts of the country. The wealth effects from the to higher overall inflation, both directly and by boost- further gains that had occurred in stock market prices, ing inflationary expectations, and the proposed along with sustained increases in employment and a increase in the minimum wage would add to cost ready availability of consumer financing, were seen pressures if it were enacted into law. Nonetheless, as playing a positive role in boosting consumer while the chances of a pickup in inflation later had expenditures. Barring changes in these underlying risen to some extent, a number of members empha- factors, continued growth in consumer spending sized that no firm evidence had surfaced thus far to seemed likely, although members referred to developsignal that labor compensation was increasing at a ments that could begin to slow such growth over the faster rate or that core inflation was worsening, and months ahead. The latter included the satisfaction of even the early signs of increased pressures on costs much of the earlier pent-up demand for consumer and prices were mixed. The past few years had wit- durables and fairly elevated levels of consumer debt. nessed significantly lower cost pressures and more On balance, moderate expansion in consumer expensubdued inflation than typically would have been ditures, perhaps in line with the growth in incomes, experienced in earlier years with similar rates of seemed likely over the projection period. resource utilization, but whether this favorable out- Business fixed investment was believed likely to come would persist was an open question. remain a source of considerable strength in the expan- Members observed that the stronger-than-expected sion, though growth in this sector of the economy performance of the economy thus far this year also was expected to moderate from the elevated pace reflected relatively rapid growth in final demand. thus far this year. The desire of many business firms Favorable financial conditions, notably the relatively and other users of capital equipment to take advanlow interest rates of the latter part of 1995 and early tage of new, more effective, and less expensive com- 1996 and increases in wealth stemming from sizable puter and other technologies and more generally to advances in stock market prices, evidently were add further to capital in an effort to reduce costs in undergirding the expansion. Indications of improving highly competitive markets would continue to underor continuing high levels of economic activity were pin investment spending. In addition, equity and other widespread across the nation according to recent financing remained available on relatively attractive anecdotal reports and regional data, though agricul- terms. On the other hand, the rise in business investtural conditions in many areas were cited as a signifi- ment in recent years had brought capital stocks into cant exception. While the economy appeared to have more acceptable alignment with expected sales, solid and balanced momentum that pointed to sus- damping the need for further sizable additions. tained growth, a number of factors were seen as Business firms appeared to have completed, or likely to foster more moderate expansion beginning nearly completed, their efforts to bring inventories in the second half of the year. These included the into better balance with sales, including the rebuildeffects of higher intermediate- and long-term interest ing of motor vehicle stocks after the strike at a major rates on interest-sensitive sectors of the economy manufacturer was settled in March. On the basis of such as housing, consumer durables, and business recent experience, subdued growth in inventories fixed investment. The appreciation of the dollar over could be anticipated in the context of the projected the past year and near-term moderation in federal expansion of overall economic activity at a pace near government spending also were expected to exert the economy's long-run potential. It was suggested, some restraint on economic activity over the forecast however, that such an expectation implied relatively horizon. Some members also questioned the sustain- restrained inventory investment in comparison with ability of the performance of the stock market; a past cyclical patterns. Accordingly, much stronger correction in this market would help to restrain aggre- growth in such investment could occur, with congate demand. Nonetheless, the continued strength in comitant effects on incomes and the growth of overall economic activity raised questions about whether spending. these developments would damp demand sufficiently With regard to the outlook for housing, the rise in to keep resource utilization at sustainable levels. mortgage rates in the past few months could be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

830 Federal Reserve Bulletin • September 1996 expected to retard residential construction activity to part, worker willingness to accept comparatively some extent. Thus far, however, increased interest limited increases in compensation could be attributed costs did not appear to have had any perceptible to the apparent rise in insecurity about the permaeffects on housing sales or construction. Indeed, the nence of jobs or the availability of alternative jobs, housing sector was continuing to display a good deal but the reasons were not fully understood. From the of strength in many parts of the country. Some mem- standpoint of the inflation outlook, it therefore was bers observed that the appreciable momentum in uncertain how long the period of relatively restrained housing activity reflected strength in the underlying increases in labor compensation would last. Against fundamentals, including continued afifordability, that this background, a number of members indicated that seemed likely to sustain a high level of housing they perceived an appreciable risk of rising labor construction for a considerable period of time despite costs and related inflation, even though there was somewhat higher mortgage rates. little evidence to date of such developments; others In the area of fiscal policy, legislative agreement noted that they could not rule out the possibility that had not yet been reached on how to implement the the favorable experience would be extended. objective of a balanced federal budget over time, but In the Committee's discussion of policy for the decisions covering the nearer term implied continued intermeeting period ahead, all the members supported budget restraint. On the foreign trade side of the a proposal to maintain an unchanged degree of preseconomy, an anticipated firming of economic condi- sure in reserve markets. The members agreed that the tions abroad would provide impetus to real net balance of risks on inflation had shifted substantially exports. At the same time, however, imports were since early in the year. At that time, the economy had expected to rise appreciably in response to the expan- seemed sluggish and inflation was seen as possibly sion of domestic economic activity and the apprecia- easing, but more recent developments indicated that tion of the dollar, and on balance the external sector the economy was stronger and rising inflation down probably would not be boosting real GDP. the road could not be ruled out. Nonetheless, while The outlook for inflation was of key importance to policy might need to be firmed at some point to head the formulation of monetary policy at this time, but it off emerging inflation pressures, financial conditions was clouded by substantial uncertainty. One source were not so obviously stimulative as to counsel a of uncertainty was the behavior of food and energy need for any immediate tightening of policy. The real prices. Increases in these prices largely accounted for federal funds rate probably was not greatly out of line the more rapid rise in consumer prices thus far this with its appropriate level, and the rise in longer-term year, and they likely would continue to add to infla- interest rates and the exchange rate meant that finantion in the months ahead. Retail energy prices had cial conditions were now exerting more restraint than risen appreciably, but at least some of that increase earlier this year. More information might provide a was expected to be reversed over the near term. better sense of how the higher interest rates were Retail food prices did not yet display any significant affecting aggregate demand and perhaps also effects from the sizable rise in grain prices in recent help—to a small degree—to shed light on the considmonths, and while some effects on retail prices were erable uncertainties surrounding the relationship of likely, their extent and duration were difficult to output to inflation. In any event, actual inflation gauge at this point. Moreover, it was difficult to data—apart from food and energy prices—and many anticipate how much the higher food and energy of the usual early warning signs of mounting price prices might affect inflation expectations and wage pressures did not yet indicate a pickup in the underdemands and thereby potentially become embedded lying trend of prices. Accordingly, the members more generally in the price structure. viewed policy as appropriately positioned under cur- Also of concern to the members were the possible rent circumstances, though ongoing developments effects on inflation of continued pressures on would need to be reassessed at the upcoming meeting resources, especially if the current pace of the expan- in early July. Some members noted that the Commitsion should fail to moderate as much as projected. In tee would need to anticipate, and act to preclude, a recent years, the relationship between resource use rise in the core rate of inflation that, if it were to and inflation had not followed earlier patterns. In materialize, would be difficult and costly to reverse. particular, increases in labor compensation had been In this regard, the view was expressed that a firming comparatively subdued over an extended period of in policy sooner rather than later was likely to end up what seemed to be relatively full employment high- promoting stability in output and prices. lighted by anecdotal reports of scarcities of various In the Committee's discussion of possible intertypes of labor in numerous parts of the country. In meeting adjustments to policy, all the members indi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 831 cated at least some preference for retaining a sym- ing a strong gain in the first quarter. Single-family housing metric directive. Members commented that the starts rose considerably in April. Orders and contracts point to some deceleration in spending on business equipprobability of developments during this period that ment and nonresidential structures after a very rapid expanwould warrant a change in policy before the next sion in the first quarter. The nominal deficit on U.S. trade in meeting was quite low. Moreover, symmetry did not goods and services widened significantly in the first quarter rule out an intermeeting adjustment, and the Chair- from its rate in the fourth quarter of last year. Upward man could call for a Committee consultation should pressures on food and energy prices have led to somewhat larger increases in the consumer price index over recent the incoming information raise questions about the months. stance of monetary policy. Some members felt that it Short-term market interest rates have changed little was especially appropriate that a policy action that while long-term rates have risen somewhat further since represented a reversal of the previous move be made the Committee meeting on March 26. In foreign exchange with a full discussion at a regular meeting. Some markets, the trade-weighted value of the dollar in terms of the other G-10 currencies has appreciated considerably members also commented that an asymmetric direcover the intermeeting period. tive toward restraint would imply a predisposition on Growth of M2 and M3 slowed substantially in April the part of the Committee to tighten policy at some after recording sizable increases earlier in the year. For the point, possibly at the next meeting. While they would year through April, both aggregates grew at rates somebe prepared to take such a step if the evidence war- what above the upper bounds of their respective ranges for the year. Expansion in total domestic nonfinancial debt ranted, their preference was to come into the July remained moderate on balance over recent months. meeting without such a presumption. The Federal Open Market Committee seeks monetary At the conclusion of the Committee's discussion, and financial conditions that will foster price stability and all the members indicated a preference for a directive promote sustainable growth in output. In furtherance of that called for maintaining the existing degree of these objectives, the Committee at its meeting in January established ranges for growth of M2 and M3 of 1 to pressure on reserve positions and that did not include 5 percent and 2 to 6 percent respectively, measured from a presumption about the likely direction of any the fourth quarter of 1995 to the fourth quarter of 1996. adjustments to policy during the intermeeting period. The monitoring range for growth of total domestic nonfi- Accordingly, in the context of the Committee's long- nancial debt was set at 3 to 7 percent for the year. The run objectives for price stability and sustainable eco- behavior of the monetary aggregates will continue to be evaluated in the light of progress toward price level stabilnomic growth, and giving careful consideration to ity, movements in their velocities, and developments in the economic, financial, and monetary developments, the economy and financial markets. Committee decided that slightly greater or slightly In the implementation of policy for the immediate future, lesser reserve restraint would be acceptable during the Committee seeks to maintain the existing degree of the intermeeting period. The reserve conditions con- pressure on reserve positions. In the context of the Committee's long-run objectives for price stability and sustaintemplated at this meeting were expected to be consisable economic growth, and giving careful consideration to tent with moderate growth in M2 and M3 over comeconomic, financial, and monetary developments, slightly ing months. greater reserve restraint or slightly lesser reserve restraint At the conclusion of the meeting, the Federal would be acceptable in the intermeeting period. The con- Reserve Bank of New York was authorized and templated reserve conditions are expected to be consistent with moderate growth in M2 and M3 over coming months. directed, until instructed otherwise by the Committee, to execute transactions in the System Account Votes for this action: Messrs. Greenspan, in accordance with the following domestic policy McDonough, Boehne, Jordan, Kelley, Lindsey, McTeer, Ms. Phillips, Mr. Stern, and Ms. Yellen. Votes against directive: this action: None. The information reviewed at this meeting suggests that, It was agreed that the next meeting of the Commiton balance, economic activity has grown moderately in tee would be held on Tuesday-Wednesday, July 2-3, recent months. Nonfarm payroll employment changed little 1996. in April after rising substantially in the first quarter; the civilian unemployment rate fell to 5.4 percent. Industrial The meeting adjourned at 1:15 p.m. production increased sharply in April, largely reflecting a rebound in motor vehicle assemblies after a strike in Donald L. Kohn March. Retail sales declined somewhat in April after post- Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

833 Legal Developments Statement by the Board of Governors of the Federal ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT Reserve System Regarding the Application by Banco Orders Issued Under Section 3 of the Bank Holding Santander, SA., to Acquire Banco Central Hispano Company Act Puerto Rico By Order dated July 31, 1996, the Board approved the application of Banco Santander, S.A., Madrid, Spain Banco Santander, S.A. ("Santander"), a foreign bank subject to the Bank Holding Madrid, Spain Company Act ("BHC Act"), under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire 99.2 percent of the voting shares of Banco Central Hispano Puerto Rico, Hato Order Approving the Acquisition of a Bank Rey, Puerto Rico ("BCH-PR").1 The Board hereby issues this Statement regarding its approval Order. Notice of the proposal, affording interested persons an Banco Santander, S.A., Madrid, Spain ("Santander"), a opportunity to submit comments, has been published foreign bank subject to the Bank Holding Company Act (61 Federal Register 19,626 (1996)). The time for filing ("BHC Act"), has requested the Board's approval under comments has expired, and the Board has considered the section 3 of the BHC Act (12 U.S.C. § 1842) to acquire application and all comments received in light of the 99.2 percent of the voting shares of Banco Central Hispano factors set forth in section 3(c) of the BHC Act. Puerto Rico, Hato Rey, Puerto Rico ("BCH-PR"). Santander, with total consolidated assets equivalent to Notice of the proposal, affording interested persons an approximately $136 billion, is the largest banking organiopportunity to submit comments, has been published zation in Spain.2 Santander is the second largest commer- (61 Federal Register 19,626 (1996)). The time for filing cial banking organization in Puerto Rico, controlling total comments has expired, and the Board has considered the deposits of approximately $3.1 billion, representing application and all comments received in light of the 14 percent of total deposits in commercial banks in the factors set forth in section 3(c) of the BHC Act. Commonwealth. On the basis of all the facts of record, the application is BCH-PR is the fourth largest commercial banking orgaapproved for the reasons set forth in the Board's Statement, nization in Puerto Rico, controlling deposits of approxiwhich will be released at a later date. The Board also has mately $1.7 billion, representing 7.6 percent of total dedenied a request for a public hearing or meeting on this posits in commercial banks in the commonwealth. On proposal. The Board's approval is specifically conditioned consummation of the proposal, Santander would remain on compliance by Santander with all the commitments the second largest commercial banking organization in made in connection with this application. For purposes of Puerto Rico, controlling deposits of approximately this action, the commitments and conditions relied on by $4.8 billion, representing 21.6 percent of total deposits in the Board in reaching its decision are deemed to be condicommercial banks in the commonwealth. tions imposed in writing by the Board in connection with its findings and decisions and, as such, may be enforced in proceedings under applicable law. The proposed acquisition shall not be consummated before the fifteenth day following the effective date of this order or later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of New York, 1. Santander's subsidiary bank, Banco Santander Puerto Rico, San Juan, Puerto Rico ("BS-PR"), also proposes to purchase substantially acting pursuant to delegated authority. all the assets and assume substantially all the liabilities of BCH-PR in By order of the Board of Governors, effective July 31, a transaction subject to approval by the Federal Deposit Insurance 1996. Corporation ("FDIC") under section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(c) ("FDI Act")) (the "Bank Merger Act"). Immediately after this transaction, BCH-PR would be liqui- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and dated and all minority shareholders of BCH-PR would receive a Governors Kelley, Lindsey, Phillips, Yellon, and Meyer. pro rata distribution of proceeds from the purchase and assumption transaction. JENNIFER J. JOHNSON 2. Asset data are as of December 31, 1995. Deposit data are as of Deputy Secretary of the Board June 30, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

834 Federal Reserve Bulletin • September 1996 Competitive Considerations thresholds would be exceeded in the San Juan and Aguadilla banking markets.8 The BHC Act prohibits the Board from approving an The Board notes that HHI thresholds are only guidelines application under section 3 of the BHC Act if the proposal that are used by the Board, the Department of Justice, and would result in a monopoly or if the effect of the proposal the other banking agencies to help identify cases in which a may be substantially to lessen competition in any relevant more detailed competitive analysis is appropriate to ensure market, unless the Board finds that the anticompetitive that the proposal would not have a significantly adverse effects of the proposal are clearly outweighed in the public effect on competition in any relevant banking market. A interest by the probable effect of the proposal in meeting proposal that fails to pass the HHI market screen may the convenience and needs of the community to be served. nevertheless be approved because other information may In evaluating the competitive effect of a proposed trans- indicate that the proposal would not have a significantly action, the Board must determine the appropriate product adverse effect on competition. In this case, the Department market and the relevant geographic market.3 Based on all of Justice has reviewed the proposal and advised the Board the facts of record, the Board concludes that the appropri- that consummation of the proposal would not likely have ate geographic markets for analyzing the combination of any significantly adverse competitive effects in the San Santander and BHC-PR are the Aguadilla, Mayaguez, Juan and Aguadilla banking markets or in any other rele- Ponce, and San Juan banking markets as defined in the vant banking markets. The Puerto Rico banking commis- Appendix.4 In reaching this decision, the Board has, as in sioner and the FDIC also have not objected to the proposal. previous cases, considered the location of the relevant The Board believes that a number of factors mitigate the banks, worker commuting patterns (as indicated by census potential anticompetitive effects of the proposal in the San data), and other indicia of economic integration and the Juan and Aguadilla banking markets. Sixteen commercial transmission of competitive forces among depository insti- banks and two thrifts (together, "depository institutions") tutions.5 would remain in the San Juan banking market, and six The traditional product market for analyzing the compet- commercial banks would remain in the Aguadilla banking itive effects of a bank acquisition or merger is the cluster of market following consummation of this proposal. banking products and services approximated by market In addition, 55 savings and credit union cooperative deposits.6 Using this approach, consummation of this pro- societies ("cooperatives") compete in the San Juan bankposal would not have a significantly adverse effect on ing market and six cooperatives compete in the Aguadilla competition in any relevant banking market. In the May- banking market.9 The Board has previously recognized that aguez and Ponce banking markets, the proposal would not cooperatives are significant competitors of commercial exceed the threshold levels of market concentration as banks in Puerto Rico.10 Cooperatives are commonwealthmeasured by the Herfindahl-Hirschman Index ("HHI") insured depository institutions that are unique to Puerto under the Department of Justice Merger Guidelines.7 The Rico. Although cooperatives are membership organizations, few impose membership restrictions, and cooperatives are authorized to provide a full range of products and 3. Chemical Banking Corporation, 82 Federal Reserve Bulletin 239, 241 (1996) ("Chemical Order"); See United States v. Philadelphia National Bank, 374 U.S. 321, 357 (1963). United States v. Phillipsburg National Bank, 399 U.S. 350 (1969). acquisition generally will not be challenged (in the absence of other 4. Based on the factors discussed below, which the Board believes factors indicating anticompetitive effects) unless the post-merger HHI are the appropriate delineators of the market, the relevant market is is at least 1800 and the merger increases the HHI by 200 points. The not the entire island of Puerto Rico, as argued by Santander, or small Department of Justice has stated that the higher than normal HHI geographic areas, as argued by Inner City Press/Community on the thresholds for screening bank mergers for anticompetitive effects Move ("Protestant"). implicitly recognize the competitive effect of limited-purpose lenders 5. For a detailed discussion of the methodology and commuting data and other nondepository financial entities. used in defining the banking markets, see David Holdsworth, "Defini- Market share data are contained in the appendix and are as of June tion of Banking Markets in Puerto Rico," manuscript, Federal Reserve 30, 1995. These data are based on calculations in which the deposits Bank of New York, February 1995. In defining the scope of the of thrift institutions are included at 50 percent. The Board previously Aguadilla banking market, the Board has included the municipality of has indicated that thrift institutions have become, or have the potential Rincon. Rincon is located approximately 13 miles from the city of to become, significant competitors of commercial banks. See Midwest Aguadilla and approximately 30 percent of its residents reported that Financial Group, 75 Federal Reserve Bulletin 386 (1989); National they commute to the Aguadilla MSA or to the municipalities of City Corporation, 70 Federal Reserve Bulletin 743 (1984). Isabela and San Sebastian within the Aguadilla banking market. 8. The HHI would increase for the San Juan banking market by 231 6. Chemical Banking Corporation, 82 Federal Reserve Bulletin points to 1896 and for the Aguadilla banking market by 253 points to 239, 241 (1996) ("Chemical Order")-, See United States v. Philadel- 3001. phia National Bank, 374 U.S. 321, 357 (1963). 9. Cooperatives in the Aguadilla banking market control 31.7 per- 7. The HHI would increase for the Mayaguez banking market by cent of total deposits in insured depository organizations. 147 points to 2096 and for the Ponce banking market by 51 points to 10. For a detailed discussion of the activities of cooperatives, 2412. Under the revised Department of Justice Merger Guidelines, incorporated herein by reference, see BanPonce Corporation, 77 49 Federal Register 26,823 (June 29, 1984), a market in which the Federal Reserve Bulletin 43, 45 (1991) ("BanPonce Order"). There post-merger HHI is above 1800 is considered to be highly concen- are 180 cooperatives controlling approximately $2.2 billion in depostrated. In such markets, the Department of Justice is likely to chal- its, representing approximately 8.9 percent of deposits in depository lenge a merger that increases the HHI by more than 50 points. The institutions in Puerto Rico. All data for cooperatives are as of Decem- Department of Justice has informed the Board that a bank merger or ber 31, 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 835 services to nonmembers.11 Cooperatives provide transac- Other Factors Under the BHC Act tion accounts and are authorized to lend to both members and nonmembers for any purpose, including home pur- The BHC Act also requires the Board to consider the chases and improvements and business purposes. In addi- financial and managerial resources and future prospects of tion, the Puerto Rico Inspector of Cooperatives is autho- the companies and banks involved, the convenience and rized to grant broad lending authority, and cooperatives needs of the community to be served, and certain other were recently authorized by statute to make small business supervisory factors. loans to individuals.12 If cooperatives are factored into the calculation of the market indexes, the proposal does not A. Supervisory Factors exceed the thresholds in the Department of Justice Merger Guidelines in the San Juan or Aguadilla banking markets.13 The Board previously has determined that Santander is The Board has considered Protestant's contention that subject to comprehensive supervision or regulation on a consummation of this proposal would have a significantly consolidated basis by its home country supervisor.14 The adverse effect on competition for small business loans in Board also has carefully considered the financial and manareas of Puerto Rico. Based on an analysis of the record, agerial resources and future prospects of Santander, the Board concludes that this proposal would not have a BS-PR, BCH-PR, and BCH-PR's parent company, Banco significantly adverse effect on small business lending even Central Hispanoamericano, S.A., Madrid, Spain ("Banco if that product were analyzed apart from the cluster of Central"), as well as other supervisory factors in light of banking products and services. Available data indicate that, all the facts of record.15 These facts include supervisory upon consummation of this transaction, the HHI for small reports of examination assessing the financial and managebusiness lending in San Juan would increase by 440 points rial resources of the organizations and confidential manageto 3095. However, the effect of the proposal on small rial and financial information provided by Santander.16 business lending would be significantly mitigated by a Based on these and all other facts of record, the Board number of factors. A large U.S. bank holding company concludes that all the supervisory factors under the BHC with a substantial branch network in Puerto Rico has Act, including financial and managerial resources, weigh in recently entered the market for small business lending and favor of approving this proposal.17 has already rapidly increased its share of small business lending. In 1994, several large thrift institutions headquartered in Puerto Rico converted to commercial banks and 14. See First Fidelity Bancorporation and Banco Santander; S.A., also entered the market for small business loans. In addi- 79 Federal Reserve Bulletin 622 (1993). The Board has determined tion, cooperatives are authorized to make small business that Santander has provided adequate assurances of access to informaloans to individuals and provide a meaningful amount of tion necessary to determine compliance with U.S. law. small business credit. Moreover, there are a large number 15. Protestant maintains that Santander has violated the terms of of other commercial banks in the relevant markets with certain passivity commitments made in connection with its acquisition of a minority interest in First Union Corporation, Charlotte, North significant capacity, as measured by deposits, that could be Carolina ("First Union") by making public statements regarding the used to make small business loans. value of this investment and implying that its passive investments in other bank holding companies are of greater importance. See Banco Santander, S.A., 81 Federal Reserve Bulletin 1139 (1995) ("Santander Order"). Protestant also argues that Santander, through a representative on the First Union board of directors authorized under the commitments, is exercising a controlling influence over First Union's expansion strategies as evidenced by the board's decision to enter a market favored by the Santander representative. Santander denies any 11. Deposits in cooperatives are insurd to a maximum of $50,000 violations of the commitments. Based on all the facts of record, the per person under the Shares and Deposits Insurance Program, an Board does not believe that Protestant's allegations support the conagency of the commonwealth. See P.R. Stat. Ann. tit. 7, § 1151(b). clusion that Santander has violated its passivity commitments. 12. The record indicates that cooperatives were a significant source 16. The Board has reviewed comments from several minority shareof small business credit even before the legislation was enacted holders of BCH-PR criticizing the performance of bank's managebecause many personal loans were used to purchase or repair equip- ment in a number of areas, including allegations that bank's management and provide working capital. ment has not provided them enough information on the proposal, has 13. Protestant contends that deposits in cooperatives should be not provided an adequate return on their investment, and has diminweighted at 25 percent, and Santander contends that these deposits ished the value of their investment by selling the bank's branches should be weighted at 100 percent. The Board has not weighted before this proposal. The Board has considered these comments in cooperatives at 100 percent because of their limited ability to make light of reports of examination assessing the managerial resources of medium- and large-sized commercial loans. Based on the asset com- BCH-PR and the fact that the bank's management will be substanposition of cooperatives, the Board believes that cooperatives are at tially replaced by Santander managers after consummation of the least as significant as thrift institutions as competitors of commercial proposal. The Board also believes that complaints concerning the banks, and should be weighted at 50 percent. If deposits of coopera- value of their investment do not relate to factors specified in the BHC tives are weighted at 50 percent, the HHI would increase for the San Act and are therefore beyond the jurisdiction of the Board to consider Juan banking market by 215 points to 1761, and for the Aguadilla in reviewing applications under section 3 of the BHC Act. See banking market by 167 points to 2212. If deposits of cooperatives are Western Bancshares, Inc. v. Board of Governors, 480 F.2d 749 (10th weighted at 25 percent, the HHI would increase for the San Juan Cir. 1973). banking market by 223 points to 1831, and for the Aguadilla banking 17. Protestant has provided publicly available information regarding market by 203 points to 2429. possible violations of securities laws in connection with Santander's Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

836 Federal Reserve Bulletin • September 1996 B. Convenience and Needs Factor ceived a "satisfactory" rating for CRA performance from the FDIC, as of August 15, 1994.20 The Board has long held that consideration of the conve- CRA performance record of BS-PR. After consummation nience and needs factor includes a review of the records of of the proposal, Santander will implement its policies and the relevant depository institutions under the Community programs in the communities previously served by Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As BCH-PR. The FDIC Examination found that BS-PR enprovided in the CRA, the Board has evaluated this factor in gaged in extensive efforts to ascertain and serve the credit light of examinations by the primary federal supervisor of needs of all segments of its community, including low- and the CRA performance records of the relevant institutions. moderate-income areas. For example, BS-PR's Pequenas y The Board also has carefully considered comments from Medianas Empresas program ("PYMES"), developed Protestant criticizing Santander's record of performance jointly with the University of Puerto Rico and the United under the CRA in meeting the credit needs of the delin- Retailers Center, provided small- and medium-sized busieated community of its branch in New York. nesses with free technical, administrative, and financial An institution's most recent CRA performance evalua- advice. PYMES used a touring bus and a toll-free teletion is a particularly important consideration in the applica- phone number to reach additional members of the commutions process because it represents a detailed on-site evalu- nity, and met with local government officials in all ation of the institution's overall record of performance 78 municipalities in Puerto Rico. During 1994, through under the CRA by its primary federal supervisor.18 In PYMES, BS-PR made $65 million of small business loans, provided financial advice to 1,261 small businesses, and addition, the Board considers an institution's policies and developed loan programs to meet specific small business practices for compliance with applicable fair lending laws. requirements. BS-PR also is a Small Business Administra- The Board also takes into account information on an instition preferred lender and originated more than $10 million tution's lending activities that assist in meeting the credit of SB A guaranteed loans between October 1993 and Sepneeds of low- and moderate-income neighborhoods, intember 1994. In addition, BS-PR participated with several cluding programs and activities initiated since its most commonwealth housing agencies during 1994, and exrecent CRA performance examination. tended 13 residential construction loans for $83.8 million. Performance Examinations. BS-PR received an "outstanding" rating for CRA performance from its primary The FDIC Examination found that CRA performance federal supervisor, the Federal Deposit Insurance Corpora- was a management priority of BS-PR and noted favorably tion ("FDIC"), as of September 18, 1995 ("FDIC Exami- the close supervision of CRA programs by the bank's nation"). In addition, the New York branch of BS-PR board of directors, the bank's extensive fair lending train- ("Branch") received a "satisfactory" rating for CRA per- ing, monitoring, and compliance auditing programs, and formance from its primary supervisor, the New York State the incorporation of CRA objectives into strategic market- Banking Department ("Department"), as of November 22, ing decisions. Several forms of mass media and direct 1995 ("Department Examination").19 BCH-PR also re- advertising were used to promote retail banking products in all areas of the bank's delineated community, including consumer loan products specifically developed for lowand moderate-income borrowers.21 The bank's branches purchase of stock in First Fidelity Bancorporation, Lawrenceville, were considered to be readily accessible by all areas of its New Jersey, prior to First Fidelity's acquisition by First Union. The delineated community, and 27.7 percent of all loans were Board has carefully reviewed this information in light of all facts of record, including information provided by federal regulatory agencies, originated in low- and moderate-income areas. Examiners and concludes that all supervisory factors relating to Santander are found no evidence of any practices intended to discourage consistent with approval. Protestant also asserts that Santander's relationship with The Royal Bank of Scotland Group pic, Edinburgh, Scotland ("Royal Bank"), is inconsistent with approval of this proposal. The Board approved Santander's retention of its minority ies serving low- and moderate-income neighborhoods, such as Neighinterest in Royal Bank under section 3 of the BHC Act. See Banco de borhood Housing Services of New York City, Inc., and the National Santander, S.A., 78 Federal Reserve Bulletin 60 (1992). Federation of Community Development Credit Unions. Through its 18. The Board notes that the Statement of the Federal Financial community development contacts, Branch has committed $1 million Supervisory Agencies Regarding the Community Reinvestment Act toward the rehabilitation of a foreclosed property in the Bronx in order provides that a CRA examination is an important and often controlling to produce approximately 20 new housing units, and maintains a factor in the consideration of an institution's CRA record and that $100,000 certificate of deposit in an institution in Brooklyn that reports of these examinations will be given great weight in the engages in community development activities. In addition, total loans applications process. 54 Federal Register 13,742, 13,745 (1989). by Branch within its delineated community exceed $12.4 million, 19. Protestant's criticisms of the Department Examination were including $ 1.2 million in loans to businesses owned by minorities. considered by the Board in the Santander Order, and for the reasons 20. The New York branch of Banco Central received a "needs to discussed in the Santander Order and incorporated herein by refer- improve" rating in its most recent CRA performance evaluation from ence, the Board believes that the examination is sufficient. See San- the FDIC. The branch is separately owned by BCH-PR's foreign bank tander Order, 81 Federal Reserve Bulletin at 1141 n. 19 (1995). parent and would not be acquired in connection with this proposal. Protestant also maintains that Branch makes an inadequate amount of Protestant argues that a current management interlock between the loans within its delineated service area. Branch, with total assets of branch and BCH-PR would adversely affect Santander's CRA perforapproximately $67 million, has no retail banking operations and meets mance after consummation of the proposal. community credit needs by supporting the community development 21. BS-PR made 30,324 consumer loans totalling $270.6 million in projects of community-based organizations and financial intermediar- 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 837 or prescreen applicants, and no violations of fair lending provided by Santander and CRA performance examinalaws were noted. tions, the Board concludes that the efforts of Santander and Branch Closings. Santander has identified three branches BCH-PR to help meet the credit needs of all segments of of BCH-PR located in low- or moderate-income census the communities served, including residents of low- and tracts that would be closed as a result of this proposal. Two moderate-income areas, are consistent with approval. In of these branches are located less than one-tenth of a mile this light, the Board concludes that convenience and needs from BS-PR branches. The third branch is within one-half considerations, including the CRA performance records of mile of a BS-PR branch that is also equipped with an Santander, BS-PR, and BCH-PR, are consistent with apautomated teller machine. The Board notes that all branch proval.23 closings resulting from this proposal would be subject to Santander's branch closing policy and the Joint Agency Conclusion Policy Statement on Branch Closings ("Joint Policy Statement").22 Based on the foregoing and all other facts of record, the Santander's branch closing policy at BS-PR has been Board has determined that the application should be, and reviewed by FDIC examiners and found to be satisfactory. hereby is, approved.24 The Board's approval is specifically Under the policy, the impact of any proposed branch clos- conditioned on compliance by Santander with all the coming on the ability of the bank to serve its community, mitments made in connection with this application. For the including low- and moderate-income areas, is assessed. purpose of this action, the commitments and conditions This assessment includes meeting with representatives of relied on by the Board in reaching its decision are deemed affected communities and considering alternatives that to be conditions imposed in writing by the Board in conminimize the adverse impact of the proposed branch clos- nection with its findings and decisions and, as such, may be ing. The FDIC Examination found that the two branches enforced in proceedings under applicable law. closed and seven branches consolidated under this policy during the period covered by the examination did not August 1, 1996 adversely affect the availability of banking products and services in the communities involved. The Board also JENNIFER J. JOHNSON notes that any branch closings by BS-PR, particularly in Deputy Secretary of the Board low- and moderate-income neighborhoods, would be assessed by examiners as part of the institution's future CRA performance evaluations, and would be reviewed by the Board in future applications to acquire a depository facil- 23. Protestant also has requested that the Board hold public hearings ity. or meetings in Puerto Rico and New York to consider public testimony concerning the convenience and needs and managerial factors. Conclusion on Convenience and Needs Factor. The Section 3(b) of the BHC Act does not require the Board to hold a Board has carefully considered the entire record in its public hearing or meeting unless the appropriate supervisory authority review of the convenience and needs factor under the BHC for the bank to be acquired makes a timely written recommendation of Act. Based on all the facts of record, including information denial of the application. In this case, neither the FDIC nor the Puerto Rico banking commissioner has recommended denial. Under the Board's rules, the Board may, in its discretion, hold a public hearing or meeting on an application to clarify factual issues 22. Protestant contends that Santander should be required, in con- related to the application and to provide an opportunity for testimony, nection with the proposal, to determine all branches of the resulting if appropriate. 12C.F.R. 262.3(e) and 262.25(d). The Board has institution that would be closed within the next 12 months and submit carefully considered Protestant's request in light of all the facts of this list. Santander has not yet determined all the branches of the record. In the Board's view, Protestant has had ample opportunity to resulting institution that would be closed. As discussed above, the submit its views and has, in fact, submitted substantial materials that Board has carefully reviewed the policies that Santander applies in have been considered by the Board in acting on the application. determining whether to close a branch. In addition, under the FDI Act, Protestant fails to demonstrate why its written submissions do not all insured depository institutions are required to submit a notice of adequately present its allegations and what, if any, additional matters any proposed branch closing to the appropriate federal banking agency would be addressed in a public hearing or meeting. Based on all the no later than 90 days before the date of closure that contains: facts of record, the Board has determined that public hearings or (1) The identity of the branch to be closed and the proposed meetings are not necessary to clarify the factual record or otherwise closing date; warranted in this case. Accordingly, Protestant's request for public (2) A detailed statement of the reasons for the decision to close the hearings or meetings on the application is denied. branch; and 24. Protestant requests that action on this proposal be delayed (3) Statistical or other information supporting the reasons for clo- pending an on-site investigation of the competitive effects of this sure, consistent with the institution's written policy for branch proposal, an investigation of Santander's compliance with its passivity closings. commitments, and an on-site investigation of the New York branch of Movement of branches within the same immediate neighborhood Banco Central (or until the results of a forthcoming FDIC examination that do not substantially affect the nature of the business or the of the branch are made available for public comment). The Board is customers served are considered consolidations or relocations under required under applicable law and its processing procedures to act on the Joint Policy Statement and, as such, do not require prior notice. applications submitted under the BHC Act within specified time See section 228 of the Federal Deposit Insurance Corporation Im- periods. Based on all the facts of record, and for the reasons discussed provement Act of 1991, which added a new section 42 to the FDI Act above, the Board concludes that the record is sufficient to act on the (12 U.S.C. § 1831r-l). See also Joint Policy Statement, 58 Federal proposal at this time and that delay or denial of this proposal on the Register 49,083 (1993). grounds of informational insufficiency is not warranted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

838 Federal Reserve Bulletin • September 1996 Appendix representing 8.1 percent of market deposits. On consummation of the proposal, Santander would remain the second largest depository institution in the San Juan banking mar- Banking Markets in Puerto Rico ket, controlling deposits of approximately $4.2 billion, representing 22.4 percent of market deposits. Aguadilla Aguadilla Metropolitan Statistical Area and the municipalities of Isabela, Rincon, and San Sebastian. Hibernia Corporation New Orleans, Louisiana Santander is the third largest depository institution in the market, controlling deposits of approximately $93.4 mil- Order Approving the Merger of Bank Holding lion, representing 16.2 percent of deposits in depository Companies institutions in the market ("market deposits"). BCH-PR is the fourth largest depository institution in the market, Hibernia Corporation, New Orleans ("Hibernia"), a bank controlling deposits of approximately $45.1 million, repreholding company within the meaning of the Bank Holding senting 7.8 percent of market deposits. On consummation Company Act ("BHC Act"), has requested the of the proposal, Santander would remain the third largest Board's approval under section 3 of the BHC Act depository institution in the Aguadilla banking market, (12 U.S.C. § 1842) to merge CM Bank Holding Company, controlling deposits of approximately $138.5 million, rep- Lake Charles ("CM Company") into Hibernia, and thereby resenting 24 percent of market deposits. indirectly acquire CM's subsidiary bank, Calcasieu Marine National Bank of Lake Charles, Lake Charles ("Calcasieu Mayaguez Mayaguez Metropolitan Statistical Area and Bank"), all in Louisiana.1 the municipalities of Lajas, Las Marias, and Maricao. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published Santander is the fourth largest depository institution in (61 Federal Register 29,101 (1996)). The time for filing the market, controlling deposits of approximately comments has expired, and the Board has considered the $118.9 million, representing 9.9 percent of market deposproposal and all comments received in light of the factors its. BCH- PR is the fifth largest depository institution in the set forth in section 3 of the BHC Act. market, controlling deposits of approximately $88.7 mil- Hibernia, with total consolidated assets of approximately lion, representing 7.4 percent of market deposits. On con- $7.5 billion, operates Hibernia Bank in Louisiana.2 Hibersummation of the proposal, Santander would become the nia is the second largest commercial banking organization third largest depository institution in the Mayaguez bankin Louisiana, controlling approximately $6.3 billion in ing market, controlling deposits of approximately $207.8 deposits, representing approximately 17 percent of the total million, representing 17.3 percent of market deposits. deposits in commercial banks in the state ("state deposits").3 CM Company is the eighth largest commercial Ponce Ponce Metropolitan Statistical Area and the mu- banking organization in Louisiana, controlling $624.6 milnicipalities of Adjuntas, Arroyo, Coamo, Guanica, lion in deposits, representing approximately 1.7 percent of Guayama, Patillas, Salinas, and Santa Isabel. state deposits. On consummation of the proposal, Hibernia would become the largest commercial banking organiza- Santander is the third largest depository institution in the tion in Louisiana, controlling approximately $7.1 billion in market, controlling deposits of approximately $176.5 mil- deposits, representing approximately 19.3 percent of state lion, representing 11.4 percent of market deposits. BCH- deposits.4 PR is the ninth largest depository institution in the market, controlling deposits of approximately $35 million, repre- Competitive Considerations senting 2.3 percent of market deposits. On consummation of the proposal, Santander would remain the third largest Section 3 of the BHC Act prohibits the Board from approvdepository institution in the Ponce banking market, controling an application if the proposal would result in a monopling deposits of approximately $211.5 million, representing oly, or would substantially lessen competition in any rele- 13.7 percent of market deposits. vant market unless such anticompetitive effects are clearly San Juan San Juan-Caguas-Arecibo Consolidated Metropolitan Statistical Area and the municipalities of Aibonito, Barranquitas, Ciales, Jayuya, Lares, Maunabo, Oro- 1. Calcasieu Bank would be merged with and into Hibernia National Bank, New Orleans, Louisiana ("Hibernia Bank") immediately covis, Quebradillas, Utuado, and Vieques. after the merger of the parent holding companies. The Office of the Comptroller of the Currency ("OCC") has approved the merger of the Santander is the second largest depository institution in banks under section 18(c) of the Federal Deposit Insurance Act the market, controlling deposits of approximately (12 U.S.C. § 1828(c) (the "Bank Merger Act"). 2. Total consolidated assets data are as of June 30, 1996. $2.7 billion, representing 14.3 percent of market deposits. 3. Asset and state deposit data are as of March 31, 1996. BCH-PR is the fourth largest depository institution in the 4. These data reflect the pending acquisition of St. Bernard Bank & market, controlling deposits of approximately $1.5 billion, Trust Co., Arabi, Louisiana. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 839 outweighed in the public interest by the probable effects of residents, and to comply with fair lending laws.6 Protestant the transaction in meeting the convenience and needs of also contends that Hibernia Bank's 1992 and 1993 lending the community to be served. Hibernia and CM Company data reported under the Home Mortgage Disclosure Act do not compete in any banking market. In light of all the (12 U.S.C. § 2801 et seq.) ("HMDA") indicate disparities facts of record, the Board has concluded that consumma- in the rates of home-related loan applications from and tion of the proposal would not result in any significantly loan originations to African Americans compared to those adverse effect on competition or the concentration of bank- for nonminority residents, and contends that these data ing resources in any relevant banking market. demonstrate that Hibernia Bank engages in illegal discriminatory practices.7 Other Factors Under the BHC Act An institution's most recent CRA performance evaluation is a particularly important consideration in the applica- The BHC Act also requires the Board to consider the tions process because it represents a detailed on-site evalufinancial and managerial resources and future prospects of ation of the institution's overall record of performance the companies and banks involved, the convenience and under the CRA by its primary federal supervisor.8 In addineeds of the community to be served, and certain other tion, the Board considers an institution's policies and pracsupervisory factors. tices for compliance with applicable fair lending laws. The Board also takes into account information on an institu- A. Supervisory Factors tion's lending activities that assist in meeting the credit needs of low- and moderate-income neighborhoods, in- The Board has carefully considered the financial and man- cluding programs and activities initiated since its most agerial resources and future prospects of Hibernia, CM recent CRA performance examination. Company, and their respective subsidiaries, as well as Performance Examinations. Hibernia Bank received a other supervisory factors, in light of all the facts of record. "satisfactory" rating from its primary federal supervisor, These facts include supervisory reports of examination the OCC, at its most recent CRA performance examination assessing the financial and managerial resources of the as of August 10, 1995 ("1995 Examination"). Calcasieu organizations and confidential financial information pro- Bank also received a "satisfactory" rating from the OCC vided by Hibernia. The Board notes that Hibernia would at its most recent CRA performance examination as of not incur or assume any debt in connection with the pro- January 9, 1995. posal and would conform the loan and investment portfo- The 1995 Examination found no evidence of prohibited lios of Calcasieu Bank to Hibernia's lending and invest- discrimination or any practices or procedures that discourment policies. Based on these and all the facts of record, the Board concludes that all the supervisory factors under the BHC Act, including financial and managerial resources, 6. Protestant alleges that Hibernia and Hibernia Bank have failed to: weigh in favor of approving this proposal. (1) Develop and implement CRA policies that assist African Americans; B. Convenience and Needs Factor (2) Provide capital and financing to African-American homeowners; (3) Provide funds, grants, and loans to African-American com- The Board has long held that consideration of the convemunity organizations; nience and needs factor includes a review of the records of (4) Provide capital to businesses owned by African Americans; the relevant depository institutions under the Community (5) Participate in community development projects to improve Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As economic opportunities in African-American communities; and (6) Locate branches in African-American communities. provided in the CRA, the Board has evaluated this factor in 7. Protestant believes that several factors contribute to the alleged light of examinations by the primary federal supervisor of failure to comply with fair lending laws, including the following: the CRA performance records of the relevant institutions. (1) Delineation of service areas to exclude the African-American The Board also has carefully considered the comments community; (2) Solicitation of real estate agents and developers serving from the Plaisance Development Corporation ("Protespredominately nonminority residential areas; tant") that maintain that Hibernia and its subsidiary bank, (3) Employment of few African-American loan officers; Hibernia Bank, have failed to meet the banking needs of all (4) Use of a compensation program for lending officers that segments of the bank's delineated communities,5 particu- provides incentives to solicit and originate mortgages only on higher-priced homes; larly communities with predominately African-American (5) Failure to use media and images oriented to the African- American community in advertising its loan products; and (6) Infrequent marketing of its Federal Housing Administration, 5. Hibernia's delineated communities include Greater New Orleans Veterans Administration, and Small Business Administration (Orleans, Jefferson, Lafourche, St. Tammany, St. Bernard, St. Charles, loan products in the African-American community. St. John the Baptist, Terrebone and Washington Parishes), South 8. The Board notes that the Statement of the Federal Financial Central Louisiana (East Baton Rouge, Lafayette, Livingston, Ascen- Supervisory Agencies Regarding the Community Reinvestment Act sion, Vermillion, Iberia and St. Mary Parishes), Northeast Louisiana provides that a CRA examination is an important and often controlling (Avoyelles, East Carroll, Morehouse, Madison, Ouachita, Rapides and factor in the consideration of an institution's CRA record and that West Carroll Parishes), and Northwest Louisiana (Caddo and Bossier these examinations will be given great weight in the applications Parishes). process. 54 Federal Register 13,742, 13,745 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

840 Federal Reserve Bulletin • September 1996 aged applications for available credit from any segment of Administration ("VA"), and Farmers Home Administra- Hibernia Bank's delineated communities. As part of the tion ("FmHA") loan programs. In 1995, Hibernia origiexamination, OCC examiners conducted a fair lending nated 599 FHA, VA, and FmHA loans, totalling more than review of home improvement loan files and found no $37 million, including 157 loans totalling $8.5 million to evidence of illegal discrimination or other illegal credit African-American borrowers. practices.9 In addition, examiners noted that Hibernia Bank The 1995 Examination also discussed two affordable has in place written policies, audit and review procedures, housing programs in the New Orleans area. In January and regularly scheduled training programs for all employ- 1995, Hibernia Bank initiated a Community Lending Proees to ensure compliance with fair lending laws and regula- gram ("CLP"), which uses flexible underwriting standards tions. Hibernia Bank also has a second review process for in evaluating consumer loan applications from low- and all housing-related and small commercial loan applications moderate-income applicants, as a pilot lending program in that are recommended for denial to ensure that all relevant the Greater New Orleans area. As of May 31, 1996, Hiberinformation has been considered and that there are no nia had originated through the program 2,882 loans totalalternative means of extending credit to the applicant. ling approximately $17.6 million. In addition, Hibernia Hibernia Bank recently established a pilot second review Bank participated in the East Baton Rouge Mortgage Fiprogram for all consumer loan applications that are recom- nance Authority ("EBRMFA"), which provides funding to mended for denial. low- and moderate-income home buyers. Hibernia Bank The OCC examiners found that the community delinea- serves as the master servicer and lead lender in the tions of Hibernia Bank were reasonable and did not ex- EBRMFA bond program for low- and moderate-income, clude any low- and moderate-income areas. Examiners first-time home buyers. Hibernia Bank was a participant in also reported that the geographic distribution of Hibernia a $21 million bond issue for home mortgages through Bank's loan applications, approvals, and denials repre- EBRMFA and, as of June 30, 1995, Hibernia Bank funded sented a reasonable penetration of all segments of its through this program 71 loans totalling $3.5 million. delineated communities. The 1995 Examination stated that Hibernia Bank created the Small Business Banking Divi- Hibernia Bank's efforts to ascertain credit needs and to sion in 1992 to enhance its services to small businesses, solicit credit applications from all segments of its commu- and OCC examiners noted a number of Hibernia Bank's nity had been effective.10 In addition, Hibernia Bank's small business lending activities. For example, Hibernia branch network, with 25 percent of the bank's branches Bank made 68 Small Business Administration ("SBA") located in low- and moderate income ares, were considered loans totalling $8.7 million, in 1994, and in the first two to be reasonably accessible to all segments of its delineated quarters of 1995, Hibernia Bank made 32 SBA loans community. totalling more than $5 million. Hibernia also participates in Lending activities. Examiners noted that Hibernia Bank the Lafayette Capital Certified Development Company participated in a variety of housing-related and other lend- ("LCCDC"), which makes direct loans to businesses uning programs that assist in meeting the credit needs of all der the SBA 504 program. Since April 1993, Hibernia has its communities, including areas with low- and moderate- made over $5 million in loans through this program in the income and predominately minority residents. For exam- Acadiana region of Louisiana. Hibernia also is involved ple, Hibernia Bank initiated its Affordable Home Program with the Regional Loan Corporation ("RLC"), a nonin May 1995 to assist low- and moderate-income families profit, government-sponsored organization offering small to purchase their first homes in all of its delineated commu- business loans to stimulate the economy and create jobs. nities by offering flexible underwriting criteria and below Hibernia has made several small business loans through market interest rates.11 As of May 31, 1996, the program this program under the SBA 504 Loan Program. By originated approximately 630 loans totalling approximately May 31, 1996, Hibernia had made 10 loans under the $38 million. The bank also made a number of loans through program, totaling $1.4 million. Hibernia has established the Federal Housing Administration ("FHA"), Veterans programs to facilitate lending to small businesses, and has invested in loan pools for economic development corporations and foundations in each of its designated regions. As of June 1996, loans closed through these economic devel- 9. Examiners previously conducted a fair lending examination of Hibernia Bank's residential mortgage loan applications as part of the opment corporations and foundations were approximately bank's 1993 CRA performance examination and found no evidence of $8 million. illegal discrimination. Hibernia Bank also actively participated in programs 10. The 1995 Examination noted that Hibernia's marketing efforts that focus on lending to businesses owned by minorities included advertising in newspapers and on radio stations that focused on communities with predominately low- and moderate-income and and businesses in low- and moderate-income areas.12 Himinority residents. Hibernia's advertising campaigns also have used minority models. 11. In connection with the program, Hibernia worked closely with several non-profit housing organizations that offer homebuyer training 12. Hibernia supports a number of organizations that provide trainand education programs for low- to moderate-income residents, in- ing, educational seminars and technical expertise to small businesses, cluding the New Orleans Neighborhood Development Foundation, including businesses owned by minorities. Hibernia participates in the Alexandria Budget Management Services, Monroe Homeownership, Economic Freedom Association, New Orleans Minority Business Inc., and St. Tammany Community Housing Resource Board. Development Center, Northwestern State University Small Business Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 841 bernia Bank invested $300,000 in the Gulf Coast Business limitations of HMDA data, the Board has carefully reand Industry Development Corporation ("Gulf Coast"), a viewed other information, particularly examination reports minority-owned and operated company that provides mez- that provide an on-site evaluation of compliance by Hiberzanine financing to existing small businesses, including nia with fair lending laws as discussed above. minority-owned businesses. By June 24, 1996, Gulf Coast had funded nine loans for approximately $1.2 million. Conclusion on Convenience and Needs Factor OCC examiners also noted that Hibernia Bank supported a variety of community development organizations. Hiber- The Board has carefully reviewed the relevant CRA examnia Bank donated more than $100,000 to the New Orleans ination information, the programs implemented by the releand Baton Rouge offices of the Local Initiatives Support vant institutions, the policies in place to ensure fair lend- Corporation ("LISC"), a national non-profit organization ing, relevant HMDA and other lending data, comments and that assists in organizing community development compa- concerns raised by Protestants, and other facts of record in nies to redevelop low- and moderate-income neighbor- its consideration of the effect of this transaction on the hoods.13 Hibernia also provided funding and other support convenience and needs of the community. Based on this to the Holy Cross CDC, Creole Cottage Coalition, and the review, and for the reasons discussed above, the Board Highland Area Partnership to finance the renovation of concludes that convenience and needs considerations, inhomes located in low- and moderate-income communities, cluding Hibernia's record of performance and its plans for and to the Baton Rouge Mid City Fix-Up and the operating Calcasieu Bank, are consistent with approval of ShreveCorp, two community organizations that focus on the application. neighborhood clean-up, renovation and beautification projects. Conclusion The Board has carefully reviewed HMDA data covering the period 1993 through 1995 in light of Protestant's Based on the foregoing and all the other facts of record, the contentions that Hibernia illegally discriminates on the Board has determined that the application should be, and basis of race. These data show that, as a percentage of total hereby is, approved.15 The Board's approval is expressly applications, Hibernia's applications from African- conditioned on Hibernia's compliance with all the commit- American applicants, from minority census tracts, and from ments made in connection with this application. For purlow- to moderate-income areas, has increased over the poses of this action, these commitments and conditions in 1993-1995 period. In 1995, Hibernia's percentage of total this order shall be deemed to be conditions imposed in applications from minority census tracts and from low- to writing by the Board in connection with its findings and moderate-income tracts approximated that of the aggregate decision, and, as such, may be enforced in proceedings of other lenders. In other respects, however, the data show under applicable law. disparities in the denial rates to minority loan applicants as This transaction shall not be consummated before the compared to nonminority applicants. fifteenth calendar day following the effective date of this The Board is concerned when the record of an institution order, or later than three months after the effective date of indicates disparities in lending to minority applicants, and this order, unless such period is extended for good cause by believes that all banks are obligated to ensure that their the Board or by the Federal Reserve Bank of Atlanta, lending practices are based on criteria that assure not only acting pursuant to delegated authority. safe and sound lending, but also assure equal access to credit by creditworthy applicants, regardless of race. The Board recognizes, however, that HMDA data alone provide 15. Protestant believes that Hibernia's record of employing Africanan incomplete measure of an institution's lending in its American loan officers and originators is insufficient. Because Hibercommunity because these data cover only a few categories nia employs more than 50 people, serves as a depository of governof housing-related lending and provide limited information ment funds, and acts as agent in selling or redeeming U.S. savings about the covered loans.14 HMDA data therefore have bonds and notes, it is required by Department of Labor regulations to: limitations that make the data an inadequate basis, absent (1) File annual reports with the Equal Employment Opportunity Commission ("EEOC"); and other information, for concluding that an institution has (2) Have in place a written affirmative action compliance program engaged in illegal lending discrimination. Because of the which states its efforts and plans to achieve equal opportunity in the employment, hiring, promotion, and separation of personnel. See 41 C.F.R. 60-1.7(a), 60-1.40. Development Center, Central Louisiana Business League, and several The EEOC has jurisdiction to investigate and determine whether chambers of commerce. companies are in compliance with federal equal employment laws. 13. Hibernia has provided funding and other assistance to several of The Board has noted that unsubstantiated allegations of improper the community development corporations that have received LISC's actions under a statute administered by another federal agency are support. As of June 24, 1996, Hibernia had made ten loans through beyond the scope of the Board's review under the factors specified in LISC. the BHC Act. On the other hand, substantiated improper actions may 14. For example, these data do not provide a basis for an indepen- be considered by the Board in light of all the facts of record of an dent assessment of whether an applicant who was denied credit was in application under the factors in the BHC Act or in the context of the fact creditworthy. Thus, credit history problems and excessive debt Board's general supervisory authority over bank holding companies. levels relative to income—reasons most frequently cited for credit See Norwest Corporation, 82 Federal Reserve Bulletin 580, 582 denial—are not available from the HMDA data. (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

842 Federal Reserve Bulletin • September 1996 By order of the Board of Governors, effective July 31, in the New Orleans banking market, controlling market 1996. deposits of approximately $3.1 billion, representing approximately 24.2 percent of total deposits in depository Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and institutions in the market ("market deposits").6 The market Governors Kelley, Lindsey, Phillips, Yellen, and Meyer. would remain moderately concentrated, as measured by the Herfindahl-Hirschman Index ("HHI"),7 and numerous JENNIFER J. JOHNSON competitors would remain in this market. Based on all the Deputy Secretary of the Board facts of record, the Board concludes that consummation of Hibernia Corporation this proposal would not result in any significantly adverse New Orleans, Louisiana effect on competition or concentration of banking resources in the New Orleans or any other relevant banking Order Approving the Acquisition of a Bank market. The Board has carefully considered the financial and Hibernia Corporation, New Orleans ("Hibernia"), a bank managerial resources and future prospects of Hibernia and holding company within the meaning of the Bank Holding St. Bernard Bank as well as other supervisory factors in Company Act ("BHC Act"), has requested the light of all the facts of record. These facts include supervi- Board's approval under section 3 of the BHC Act sory reports of examination assessing the financial and (12 U.S.C. § 1842) to acquire St. Bernard Bank & Trust managerial resources of the organizations and confidential Co., Arabi ("St. Bernard Bank"), both in Louisiana.1 financial information provided by Hibernia. The Board Notice of this proposal, affording interested persons an notes that Hibernia would not incur or assume any debt in opportunity to submit comments, has been published connection with the proposal and would conform the loan (61 Federal Register 29,101 (1996)). The time for filing and investment portfolios of St. Bernard Bank with Hibercomments has expired, and the Board has considered the nia's lending and investment policies. Based on these and proposal and all comments received in light of the factors all the facts of record, the Board concludes that all the set forth in section 3 of the BHC Act. supervisory factors under the BHC Act, including financial Hibernia, with total consolidated assets of approximately and managerial resources, weigh in favor of approving this $7.5 billion, operates Hibernia Bank in Louisiana.2 Hiber- proposal. The Board also concludes that considerations nia is the second largest commercial banking organization relating to the convenience and needs of the community to in Louisiana, controlling approximately $6.3 billion in be served, are also consistent with approval.8 deposits, representing approximately 17 percent of the total deposits in commercial banks in the state ("state deposits").3 St. Bernard Bank is the 15th largest commercial 6. Market data are as of June 30, 1995. Market share data are based on calculations in which the deposits of thrift institutions are included banking organization in Louisiana, controlling $231.7 milat 50 percent. The Board previously has indicated that thrift institulion in deposits, representing less than one percent of state tions have become, or have the potential to become, significant deposits. On consummation of the proposal, Hibernia competitors of commercial banks. See Midwest Financial Group, would become the largest commercial banking organiza- 75 Federal Reserve Bulletin 386 (1989); National City Corporation, tion in Louisiana, controlling $7.1 billion in deposits, rep- 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly resenting approximately 19.3 percent of state deposits.4 included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Hibernia Bank and St. Bernard Bank each operate offices Reserve Bulletin 52 (1991). in the New Orleans banking market.5 On consummation of 7. The HHI would increase by 81 points to 1783. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 this proposal, Hibernia Bank would remain the second (June 29, 1984)), a market in which the post-merger HHI is between largest commercial bank or thrift ("depository institution") 1000 and 1800 is considered to be moderately concentrated. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other 1. Hibernia would merge St. Bernard Bank, a state member bank, factors indicating anti-competitive effects) unless the post-merger with and into a wholly owned interim state chartered bank. Immedi- HHI is at least 1800 and the merger increases the HHI by 200 points. ately after this merger, St. Bernard Bank would merge with and into The Justice Department has stated that the higher than normal HHI Hibernia National Bank, New Orleans, Louisiana ("Hibernia Bank"). thresholds for screening bank mergers for anti-competitive effects The Office of the Comptroller of the Currency ("OCC"), has ap- implicitly recognize the competitive effects of limited-purpose lenders proved the merger of St. Bernard Bank and Hibernia Bank under and other non-depository financial entities. section 18(c) of the Federal Deposit Insurance Act 8. The Board received comments from the Plaisance Development (12 U.S.C. § 1828(c)) (the "Bank Merger Act"). In light of all the Corporation criticizing Hibernia's record of performance under the facts of record, the Board believes that no regulatory purpose would Community Reinvestment Act and fair lending laws. These comments be served by requiring an application under the Bank Merger Act for are identical to the comments considered by the Board in Hibernia's the interim merger. application to acquire CM Bank Holding Company ("CM Compa- 2. Total consolidated assets data are as of June 30, 1996. ny"), and thereby indirectly acquire Calcasieu Marine National Bank 3. Asset and state deposit data are as of March 31, 1996. of Lake Charles, both in Lake Charles, Louisiana. In light of all the 4. These data reflect the pending acquisition of CM Bank Holding facts of record, and for the reasons stated in the Board's order Company, Lake Charles, Louisiana. approving the CM Company acquisition dated today, which are incor- 5. The New Orleans banking market is comprised of Jefferson, porated herein by reference, the Board concludes that all the factors Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist, required to be considered under the BHC Act are consistent with and St. Tammany Parishes, all in Louisiana. approving the St. Bernard Bank acquisition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 843 Based on the foregoing and all the other facts of record, the state.2 Based on all the facts of record, the Board the Board has determined that the application should be, concludes that consummation of this proposal would not and hereby is, approved. The Board's approval is expressly have a significantly adverse effect on competition or on the conditioned on Hibernia's compliance with all the commit- concentration of banking resources in any relevant banking ments made in connection with this application. For pur- market, and that competitive considerations are consistent poses of this action, these commitments and the conditions with approval. in this order shall be deemed to be conditions imposed in In every application under section 3 of the BHC Act, the writing by the Board in connection with its findings and Board is required to consider the financial and managerial decision, and, as such, may be enforced in proceedings resources and future prospects of the companies and banks under applicable law. concerned, and the convenience and needs of the communi- This transaction shall not be consummated before the ties to be served. The Board previously has noted that fifteenth calendar day following the effective date of this ownership of stock in a converted mutual bank by a mutual order, or later than three months after the effective date of bank holding company and minority shareholders could this order, unless such period is extended for good cause by raise significant issues under the managerial and convethe Board or by the Federal Reserve Bank of Atlanta, nience and needs factors in the BHC Act, if this structure acting pursuant to delegated authority. was used to transfer economic value from the mutual By order of the Board of Governors, effective July 31, holding company to the minority shareholders.3 Although 1996. there are no minority shareholders in this proposal and applicants have no current plans to issue additional shares in Bancorp or NVE Bank, stock issuances are contem- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Lindsey, Phillips, Yellen, and Meyer. plated for the future. Under the proposed structure, therefore, the potential exists that shares owned by minority JENNIFER J. JOHNSON shareholders could raise the same concerns as those identi- Deputy Secretary of the Board fied in Northwest. In order to address those concerns, MHC and Bancorp NVE Bancorp, MHC have made a number of commitments,4 including the fol- Englewood, New Jersey lowing: (1) MHC and Bancorp will obtain prior Board approval NVE Bancorp, Inc. for the issuance of securities by Bancorp or NVE Bank Englewood, New Jersey to third parties and for the conversion of MHC from mutual to stock form; and Order Approving the Formation of Bank Holding (2) In any subsequent transfer or issuance of shares to Companies shareholders other than MHC, the depositors of NVE Bank will be accorded the same share purchase priorities NVE Bancorp, MHC ("MHC"), and its wholly owned as if MHC were a mutual savings bank converting to subsidiary NVE Bancorp, Inc. ("Bancorp") have requested stock form. the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to become bank holding companies by These constraints would give the Board the opportunity to acquiring all the voting shares of NVE Savings Bank review any future conversion or issuance of securities in ("NVE Bank"),1 all of Englewood, New Jersey. light of the concerns discussed above. Accordingly, based Notice of this proposal, affording interested persons an opportunity to submit comments, has been published (61 Federal Register 17,703 (1996)). The time for filing 2. All banking data are as of June 30, 1995. In this context, comments has expired, and the Board has considered the depository institutions include commercial banks, savings banks, and proposal and all comments received in light of the factors savings and loan associations. set forth in section 3 of the BHC Act. 3. See Northwest Bancorp, MHC, 80 Federal Reserve Bulletin 1131 MHC is a company organized in mutual form, and it (1994) {"Northwest"). In Northwest, the Board concluded that a waiver of dividends by the mutual holding company shareholder would become a bank holding company by acquiring all could have the effect of transferring economic value from the mutual the voting shares of Bancorp, which in turn would acquire holding company to the minority shareholders and depriving the all the voting shares of NVE Bank. NVE Bank is the 54th holding company of resources necessary to serve as a source of largest depository institution in New Jersey, controlling strength for the bank. The decision to waive the dividends would be approximately $339.2 million in deposits, representing less made by the trustees of the mutual holding company, who were also minority shareholders of the bank, and the decision would not be than 1 percent of all deposits in depository institutions in reviewable by the mutual owners of the holding company. The Board, therefore, viewed this potential conflict of interest as raising adverse considerations under the factors in the BHC Act. The Board relied on a number of commitments to address these issues, including commitments to ensure that any dividends waived by the mutual holding 1. NVE Bank currently operates as a mutual savings bank, and has company would be retained by the bank and would not inure to the applied to the Federal Deposit Insurance Corporation ("FDIC") to benefit of the bank's minority shareholders. convert to a stock savings bank. 4. The commitments are listed in the Appendix. 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844 Federal Reserve Bulletin • September 1996 on all the facts of record, including commitments made by (3) In connection with Commitments 1 and 2, Applicant MHC and Bancorp, the Board concludes that the financial agrees with the following: and managerial resources and future prospects of MHC, (A) In any sale, transfer or issuance of shares of Bank or Bancorp, and NVE Bank, and other supervisory factors the Bancorp to any person other than the MHC, the deposi- Board must consider under section 3 of the BHC Act, are tors of Bank will be accorded the same stock purchase consistent with approval, as are considerations relating to priorities given to depositors of a mutual savings associthe convenience and needs of the communities to be ation in connection with such association converting to served. stock form. In making such sale, or transferring or Based on the foregoing and other facts of record, the issuing such shares, Applicants and their management Board has determined that the applications should be, and will comply with any fiduciary duty they owe. hereby are, approved. The Board's approval of this pro- (B) The Board will take into account the extent to which posal is expressly conditioned on compliance with all the the proposed transactions conform with the provisions commitments made by Applicants in connection with these and purpose of the regulations of the Office of Thrift applications, and is conditioned on receipt by Applicants Supervision ("OTS") (12 C.F.R. Part 563b and 575) and and NVE Bank of all necessary approvals from all relevant the Federal Deposit Insurance Corporation ("FDIC") regulators, and compliance with the requirements imposed (12 C.F.R. 303.15 and 333.4), as currently in effect at the by those regulators. For purposes of this action, the com- time the Board reviews the required materials related to mitments and conditions relied on by the Board in reaching the proposed transactions. Any nonconformity with this decision are deemed to be conditions imposed in those provisions will be closely scrutinized. Conformity writing and, as such, may be enforced in proceedings under with the OTS and FDIC requirements, however, will not applicable law. be sufficient for Board regulatory purposes if the Board This proposal shall not be consummated before the thir- determines that the proposed transaction would pose a tieth calendar day after the effective date of this order or risk to the institution's safety and soundness, violate any later than three months after the effective date of this order, law or regulation or present a breach of fiduciary duty. unless such period is extended for good cause by the Board or by the Federal Reserve Bank of New York, acting Perryton Bancshares, Inc. pursuant to delegated authority. Perryton, Texas By order of the Board of Governors, effective July 15, 1996. Order Approving Formation of a Bank Holding Company Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Perryton Bancshares, Inc., ("Perryton"), has requested the Governors Kelley, Lindsey, Yellen, and Meyer. Absent and not voting: Board's approval under section 3 of the Bank Holding Governor Phillips. Company Act ("BHC Act") to become a bank holding company by acquiring all the voting shares of Perryton JENNIFER J. JOHNSON National Bank, both in Perryton, Texas ("Bank").1 Deputy Secretary of the Board Notice of the proposal, affording interested persons an opportunity to submit comments, has been published Appendix (61 Federal Register 21,113 (1996)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the (1) After the reorganization, the NVE Bancorp MHC factors set forth in section 3 of the BHC Act. ("MHC") will not sell, transfer, or otherwise dispose of Perryton is a nonoperating corporation formed for the any of its shares in NVE Bancorp, Inc., ("Bancorp") or purpose of acquiring Bank. Bank is the 417th largest NVE Savings Bank ("Bank") (together "Applicant") to commercial banking organization in Texas, controlling deany person (including Employee Stock Ownership Plan) posits of approximately $41.5 million, representing less and Bancorp will not sell, transfer or otherwise dispose of than 1 percent of total deposits in commercial banking any of its shares of Bank without the prior approval of the Board of Governors of the Federal Reserve System (the "Board"). If, subsequent to the reorganization, Bancorp or 1. Perryton proposes to acquire Bank by chartering a wholly owned Bank issues equity securities or any securities that would interim national bank ("Interim Bank") and merging Bank with and accord the holder the right to acquire equity securities or into Interim Bank with Interim Bank surviving under the title of that would bestow upon the holder an interest in the Perryton National Bank. On June 12, 1996, the Office of the Comptroller of the Currency ("OCC") approved the merger of Bank and retained earnings of the issuer to persons other than MHC, Interim Bank under the provisions of section 18(c) of the Federal MHC and Bancorp will make prior application to the Deposit Insurance Act (the "Bank Merger Act", 12 U.S.C. § 1828(c)). Board for approval for the issuance of the securities. On consummation of the merger and conversion of shares, Perryton would own all the voting stock of Interim Bank. Bank shareholders (2) In any conversion of the MHC from mutual to stock would be entitled to receive cash or to tender their Bank stock in form, the holding company will file an application for exchange for the number of Perryton shares set forth in the merger approval of the conversion with the Board (to the extent agreement. Untendered Bank stock would represent evidence of the the mutual holding company is a bank holding company). shareholder's ownership of Perryton shares. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 845 organizations in the state.2 In this light, the Board concludes pressly conditioned on compliance with all the committhat consummation of the proposal would not have a signifi- ments made by Perryton in connection with the proposal. cantly adverse effect on competition or on the concentration The commitments and conditions relied on by the Board in of banking resources in any relevant banking market and that reaching this decision are deemed to be conditions imcompetitive considerations are consistent with approval. posed in writing by the Board in connection with its The Board has also considered the other factors set forth findings and decision, and, as such, may be enforced in in the BHC Act in light of all the facts of record, including proceedings under applicable law. the reasonableness of the financial projections for satisfy- The transaction shall not be consummated before the ing the debt to be acquired by Perryton, and the reports of fifteenth calendar day following the effective date of this examination by Bank's primary federal supervisor, the order, or later than three months after the effective date of OCC, that assess the financial and managerial resources of this order, unless such period is extended for good cause by Bank and its record of performance under the Community the Board or by the Federal Reserve Bank of Dallas, acting Reinvestment Act. Based on all these facts, the Board pursuant to delegated authority. concludes that the financial and managerial resources and By order of the Board of Governors, effective July 22, future prospects of Perryton and Bank are consistent with 1996. approval, as are convenience and needs considerations and other supervisory factors that the Board is required to Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and consider under section 3 of the BHC Act.3 Governors Lindsey, Yellen, and Meyer. Absent and not voting: Gover- Based on the foregoing and all the other facts of record, nors Kelley and Phillips. the Board has determined that the application should be, and hereby is, approved.4 The Board's approval is ex- JENNIFER J. JOHNSON Deputy Secretary of the Board Texas Financial Bancorporation, Inc. 2. All banking data are as of June 30, 1995. Minneapolis, Minnesota 3. The Board has carefully reviewed comments received from a minority shareholder and director of Bank ("Commenter") maintain- First Bancorp, Inc. ing that there are no valid reasons for forming a bank holding company and that he should be permitted to retain his Bank stock. Denton, Texas Commenter also contends that the proposal would adversely affect his personal finances. Applicant asserts that a bank holding company First Delaware Bancorp, Inc. provides tax advantages to shareholders and operational flexibility to Dover, Delaware engage in nonbanking activities. Bank's shareholders must approve the formation of the bank holding company and, as noted, the merger transaction approved by the OCC over the objections of Commenter Order Approving the Acquisition of a Bank would convert Commenter's Bank stock into a right to receive Perryton stock. Commenter may also exercise dissenting shareholder rights Texas Financial Bancorporation, Inc., Minneapolis, Minneunder the procedures provided in the National Bank Act if he believes sota ("Bancorporation"), and its subsidiaries, First Banthat the consideration offered for his Bank stock (cash or Perryton corp, Inc., Denton, Texas ("Texas Company"), and First shares) is unreasonable. See 12 U.S.C. §§ 215 and 215a. The Board, moreover, is limited to considering specific statutory factors in review- Delaware Bancorp Inc., Dover, Delaware ("Delaware Baning applications under section 3 of the BHC Act, and courts have corp") (collectively, "Applicants"), bank holding compadetermined that the Board does not have the authority to consider nies within the meaning of the Bank Holding Company share pricing and similar matters unless they directly relate to a factor Act ("BHC Act"), have requested the Board's approval specified in the BHC Act. See Western Bancshares, Inc. v. Board of under section 3 of the BHC Act (12 U.S.C. § 1842) to Governors, 480 F.2d 749 (10th Cir. 1973). In light of all the facts of record, and for the reasons discussed above, the Board concludes that acquire all the voting shares of Riverside National Bank, these factors are consistent with approval. Grand Prairie, Texas ("Riverside Bank").1 4. Commenter has requested the opportunity to speak if a public Notice of the proposal, affording interested persons an meeting or hearing is held in connection with the application. Section 3(b) of the BHC Act does not require the Board to hold a public opportunity to submit comments, has been published meeting or hearing unless the appropriate supervisory authority for the (61 Federal Register 18,731 (1996)). The time for filing bank to be acquired makes a timely written recommendation of denial comments has expired, and the Board has considered the of the application. As noted, the OCC has approved the merger of the national banks involved in the transaction. The Board may also, in its discretion, hold a public meeting or hearing on an application under its Rules of Procedure to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 1. Bancorporation owns 87.8 percent of the voting shares of Texas 12 C.F.R. 262.3(e) and 262.25(d). The Board notes that Commenter Company which owns all of the voting shares of Delaware Bancorp. has had ample opportunity to submit his views and has, in fact, Texas Company would acquire all the voting shares of Riverside Bank submitted comments that have been carefully considered by the Board. and then contribute the bank's stock to Delaware Bancorp. After The record fails to demonstrate why Commenter's written submis- consummation of these transactions, Riverside Bank would merge sions do not adequately present his allegations or why a public with and into First State Bank of Denton, Denton, Texas ("Denton meeting or hearing is otherwise warranted in this case. After a careful Bank"), a wholly owned subsidiary of Applicants. The merger is review of all the facts of record, the Board concludes that a public subject to the approval of the Federal Deposit Insurance Corporation meeting or hearing is not necessary to clarify the factual record in the ("FDIC") under section 18(c) of the Federal Deposit Insurance Act application and is not otherwise warranted in this case. (the "Bank Merger Act", 12 U.S.C. § 1828(c)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

846 Federal Reserve Bulletin • September 1996 proposal and all comments received in light of the factors adverse effects on competition or concentration of banking set forth in section 3 of the BHC Act. resources in the Dallas banking market or any other rele- Applicants, with total consolidated assets of $1.3 billion, vant banking market. operate subsidiary banks in Illinois and Texas.2 Applicants The Board has carefully considered the financial and are the 23d largest commercial banking organization in managerial resources and future prospects of Applicants, Texas, controlling approximately $952 million in deposits, Riverside Bank, and their respective subsidiaries, and other representing less than 1 percent of all deposits in commer- supervisory factors in light of all the facts of record. These cial banking organizations in the state ("state deposits").3 facts include supervisory reports of examination assessing Riverside Bank is the 468th largest commercial banking the financial and managerial resources of the organizations. organization in Texas, controlling approximately $40 mil- Based on these and all other facts of record, the Board lion in deposits. After consummation of the proposal, Ap- concludes that all the supervisory factors under the BHC plicants would remain the 23d largest commercial banking Act, including financial and managerial resources and fuorganization in Texas, controlling approximately $993 mil- ture prospects of the institutions involved, weigh in favor lion in deposits, representing less than 1 percent of state of approving this proposal. deposits. The Board has long held that consideration of the convenience and needs factor includes a review of the records of Considerations under the BHC Act the relevant depository institutions in assisting to meet the credit needs of all the communities served by an institu- Applicants and Riverside Bank compete in the Dallas, tion, including low- and moderate-income communities, Texas, banking market ("Dallas banking market").4 On under the Community Reinvestment Act (12 U.S.C. § 2901 consummation of the proposal, Applicants would operate et seq.) ("CRA"). As provided in the CRA, the Board has the 12th largest commercial banking organization in the evaluated the convenience and needs factor in light of Dallas banking market, controlling deposits of approxi- examinations by the primary federal supervisor of the CRA mately $644.6 million, representing 2.1 percent of total performance records of the relevant institutions. deposits in depository institutions in the market.5 The The Board also has carefully reviewed this factor in light market would remain moderately concentrated, as mea- of comments from the African American Council for Emsured by the Herfindahl-Hirschman Index ("HHI"),6 and powerment ("Protestant") which contends that Riverside numerous competitors would remain in the market. Based Bank has not adequately assisted in meeting the housingon all the facts of record, the Board concludes that consum- related and small business credit needs of the Dalworth mation of the proposal would not result in any significantly community in Grand Prairie, Texas.7 As noted, Riverside Bank would be merged with and into Denton Bank, Applicants' lead subsidiary bank in Texas, and Applicants have 2. Asset data are as of March 31, 1996. committed to implement the CRA-related policies, proce- 3. State deposit data are as of June 30, 1995. Data has been updated for structural changes in commercial banking organizations that have dures, and programs of Denton Bank in the communities occurred through May 15, 1996. now served by Riverside Bank, including the Dalworth 4. The Dallas banking market is approximated by McKinney and community. The Board has carefully considered Denton Piano in Collin County, Denton and Lewisville in Denton County, the Bank's record of performance under the CRA in this light. northern half of Rockwall County, the communities of Forney and An institution's most recent CRA performance evalua- Terrel in Kaufman County, Midlothian, Waxahachie, and Ferris in Ellis County, and Grapevine and Arlington in Tarrant County, all in tion is a particularly important consideration in the applica- Texas. tions process because it represents a detailed on-site evalu- 5. Market data are as of June 30, 1995. Market share data are based ation of the institution's overall record of performance on calculations in which the deposits of thrift institutions are included under the CRA by its primary federal supervisor.8 Denton at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant Bank, which comprises approximately 40 percent of Bancompetitors of commercial banks. See Midwest Financial Group, corporation's consolidated assets, received an "outstand- 75 Federal Reserve Bulletin 386 (1989); National City Corporation, ing" rating from the Federal Deposit Insurance Corpora- 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly tion ("FDIC") in its most recent evaluation for CRA included thrift deposits in the calculation of market share on a performance in 1994 ("Denton Examination").9 The Den- 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). 6. On consummation of this proposal, the HHI would remain unchanged at 1330 points. Under the revised Department of Justice 7. Dalworth is a low- and moderate-income community with a Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a predominately minority population that encompasses parts of Dallas market in which the post-merger HHI is between 1000 and 1800 is County census tract 161.00 and Tarrant County census tract 1130.02. considered moderately concentrated. The Justice Department has in- 8. The Board notes that the Statement of the Federal Financial formed the Board that a bank merger or acquisition generally will not Supervisory Agencies Regarding the Community Reinvestment Act be challenged (in the absence of other factors indicating anticompeti- provides that a CRA examination is an important and often controlling tive effects) unless the post-merger HHI is at least 1800 and the factor in the consideration of an institution's CRA record and that merger increases the HHI by more than 200 points. The Justice reports of these examinations will be given great weight in the Department has stated that the higher than normal threshold for an applications process. 54 Federal Register 13,742, 13,745 (1989). increase in the HHI when screening bank mergers and acquisitions for 9. Bancorporation's other subsidiary banks all received a CRA anticompetitive effects implicitly recognizes the competitive effects of performance rating of "satisfactory" or "outstanding" in their most limited-purpose lenders and other non-depository financial entities. recent examinations by their primary federal supervisor. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 847 ton Examination found that the Bank's delineated commu- mance as of 1995 ("Riverside Bank Examination"). Examnity is reasonable and did not exclude any low- and iners found that the bank made reasonable efforts to ascermoderate-income areas. The geographic distribution of tain the credit needs of the community and to market its Denton Bank's credit extensions, applications, and denials products and services in newspapers that focus on Africanalso were found to be reasonable. Examiners noted that American and Hispanic communities. According to the senior management of the bank maintained ongoing con- examination, the geographic distribution of loans within tact with community leaders and government officials and the community reflected a reasonable penetration of all used written surveys to ascertain the credit needs of the segments within the community. For calendar year 1995, community. According to the examination, the bank's Riverside Bank originated 86 loans in low- and moderatestrong marketing program which utilized publications that income areas totalling approximately $6.8 million and 115 reach all areas of the community, including African- small business loans totalling approximately $9.8 million. American and low- and moderate-income residents, indi- In addition, Riverside Bank offered loans with flexible cated that Denton Bank affirmatively solicits applications underwriting guidelines that allowed consideration of utilfrom all segments of its community. ity and rent payment records for customers without formal A fair lending review conducted in connection with the credit histories. The Riverside Bank Examination noted Denton Examination did not reveal any evidence of dis- that the bank solicited credit applications from all segcriminatory or other illegal credit practices. Denton Bank ments of its local community, including low- and has developed policies and procedures to prevent illegal moderate-income neighborhoods, and that the bank was in discrimination, and examiners noted that Denton Bank had compliance with anti-discrimination laws and regulaaudit and review procedures to ensure compliance with tions.11 anti-discrimination laws and regulations. The examiners The Board has carefully reviewed all the facts of record noted that the bank also conducted a second review of all in light of the convenience and needs factor, including credit denials. Protestant's comments, the banks's most recent evalua- After consummation of the merger with Riverside Bank, tions for CRA performance and other supervisory informa- Denton Bank will ascertain the credit needs of the bank's tion provided by their primary federal supervisors, and the new communities with the assistance of the Denton Bank policies and programs of Denton Bank to be implemented Community Reinvestment Act Advisory Board, and will after its merger with Riverside Bank. Based on this review, expand the lending programs currently offered by River- the Board concludes that considerations relating to conveside Bank. For example, Denton Bank will initiate the nience and needs, including the CRA performance records following lending programs to assist low- and moderate- of the relevant institutions, are consistent with approval of income borrowers: the application. (1) Urban Homesteading Program, which offers home improvement loans to eligible low- and moderate- Conclusion income residents; (2) Federal National Mortgage Association's Commu- Based on the foregoing and all other facts of record, the nity Homebuyer's Program, which offers alternative un- Board has determined that the proposal should be, and derwriting standards for eligible applicants; and hereby is, approved. The Board's approval is expressly (3) Homebuyer Assistance Program, which lends money conditioned on compliance by Applicants with all the to eligible low- and moderate-income, first-time home commitments made in connection with the proposal. For buyers who have received municipal government assis- purposes of this action, the commitments relied on by the tance to pay the down payment and closing costs to Board in reaching this decision are deemed to be condipurchase a home.10 tions imposed in writing and, as such, may be enforced in proceedings under applicable law. Denton Bank also will offer loans sponsored through the Small Business Administration. Riverside Bank received a "satisfactory" rating in its most recent evaluation from its primary supervisor, the 11. Protestant alleges that Riverside Bank's management lacks Office of the Comptroller of the Currency, for CRA perfor- racial diversity which has significantly impaired its ability to serve the credit needs of its communities, particularly the Dalworth community. Based on all the facts of record and for the reasons discussed above, 10. As a member of the Federal Home Loan Bank of Dallas, Denton the Board does not believe that Protestant's allegations of poor perfor- Bank also would be eligible to participate in the Community Invest- mance by Riverside Bank in helping to meet the credit needs of all its ment Program ("CIP") and the Affordable Housing Program communities, including low- and moderate-income areas, are sup- ("AHP"). CIP funds help finance affordable housing, small busi- ported by the record. The Board also notes that Riverside Bank would nesses, industrial development, health care facilities, and the revital- be merged with and into Denton Bank, and Denton Bank is required ization of downtown business and shopping areas. AHP funds help under regulations of the Department of Labor to file annual reports finance the construction or rehabilitation of low- and moderate- with the Equal Employment Opportunity Commission and to have in income housing, and finance closing costs, partial down payments, or place a written affirmative action compliance program which states the reduced interest rates for low- and moderate-income individuals. Both bank's efforts to achieve equal opportunity in the employment, hiring, of these programs would be available to assist Denton Bank in promotion, and separation of personnel. See 41 C.F.R. 60-1.7(a), addressing ascertained credit needs in Riverside Bank's communities. 60-1.40. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

848 Federal Reserve Bulletin • September 1996 This proposal shall not be consummated before the fif- cards, and other documents evidencing a prepayment for teenth calendar day following the effective date of this goods or services.1 order or later than three months following the effective date Notice of the proposal, affording interested persons an of this order, unless such period is extended for good cause opportunity to submit comments, has been published by the Board or by the Federal Reserve Bank of Dallas, (61 Federal Register 27,352 (1996)). The time for filing acting pursuant to delegated authority. comments has expired, and the Board has considered the By order of the Board of Governors, effective July 22, proposal and all comments received in light of the factors 1996. set forth in section 4(c)(8) of the BHC Act. Applicants are large commercial banking organizations Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and headquartered in Ohio and Pennsylvania, and engage di- Governors Lindsey, Yellen, and Meyer. Absent and not voting: Gover- rectly and through subsidiaries in a broad range of banking nors Kelley and Phillips. and permissible nonbanking activities in the United States.2 EPS currently provides data processing and transmission JENNIFER J. JOHNSON services to banks and retail merchants that are members of Deputy Secretary of the Board its branded ATM and point-of-sale ("POS") networks. EPS also is engaged in developing and providing a variety Orders Issued Under Section 4 of the Bank Holding of electronic payment, benefit transfer, and data inter- Company Act change services.3 Proposed Activities Banc One Corporation Columbus, Ohio EPS proposes to provide data processing services to ATM Deployers in connection with the distribution through ATMs of tickets, gift certificates, prepaid telephone cards, CoreStates Financial Corp and other documents evidencing a prepayment for goods or Philadelphia, Pennsylvania services.4 EPS would provide the software and telecommunications channels necessary to transmit cardholder re- PNC Bank Corp. quests and card issuer authorizations, and related switching Pittsburgh, Pennsylvania and account reconciliation services.5 KeyCorp Cleveland, Ohio 1. For purposes of this order, ATM Deployers include depository financial institutions, retail merchants, and independent sales organizations that package and sell ATM services to merchants. In addition, a National City Corporation financial institution means a bank, bank holding company, thrift Cleveland, Ohio institution, thrift holding company, and subsidiaries of any of these companies. 2. Asset and deposit information for each of the Applicants is Order Approving a Proposal to Engage in Certain Data contained in the Appendix. Processing Activities 3. See Banc One Corporation et al., 79 Federal Reserve Bulletin 1158 (1993). 4. The tickets contemplated by this proposal would include public Banc One Corporation, Columbus, Ohio; CoreStates Finan- transportation tickets and tickets to entertainment events. Gift certificial Corp, Philadelphia, Pennsylvania; PNC Bank Corp., cates and prepaid telephone cards would be issued in fixed denominations for a specific merchant or group of merchants, and would Pittsburgh, Pennsylvania; KeyCorp, Cleveland, Ohio; and evidence prepayment of the purchase price of merchandise or services National City Corporation, Cleveland, Ohio (collectively, to be selected by the bearer at some time in the future. ATM Deploy- "Applicants"), bank holding companies within the mean- ers also would sell products that could be offered for sale directly by a ing of the Bank Holding Company Act ("BHC Act"), have financial institution such as mutual fund shares or insurance policies where permitted by applicable law. requested the Board's approval under section 4(c)(8) of the 5. Specifically, EPS would provide "terminal driving services" BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23(a) which include: of the Board's Regulation Y (12 C.F.R. 225.23(a)) for their (1) Establishing and maintaining an electronic link between an joint subsidiary, Electronic Payment Services, Inc., Wil- ATM and a telecommunications switch to transmit cardholder remington, Delaware ("EPS"), to engage in certain data quests and card issuer authorizations; and processing activities pursuant to section 225.25(b)(7) of (2) Operating the feature and function displays on an ATM screen using computer software to permit an ATM to dispense various Regulation Y (12 C.F.R. 225.25(b)(7)). products in addition to currency. Applicants, through EPS, would provide data processing EPS also would provide switching services and transaction proand related services to banks and other automated teller cessing to transmit account debiting, transaction authorization, and settlement between the ATM Deployer, or its bank, and the cardholdmachine ("ATM") owners ("ATM Deployers") in connecer's bank. In certain cases, some of these services may be provided by tion with the distribution through ATMs of tickets to conthird-parties, such as national ATM networks or third-party procerts and other events, gift certificates, prepaid telephone cessors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 849 In a typical transaction, an ATM cardholder would select that support the use of credit cards by consumers in the a particular product from a menu offered at an ATM. direct purchase of goods and services from merchants.10 Electronic commands transmitted by EPS would verify that The data processing activity proposed in this case inthe deposit account or line of credit designated by the volves providing the same type of data processing support cardholder holds sufficient funds to make the purchase. as the Board previously has approved for credit card trans- After the authorization is received, the ATM then would actions and other more traditional types of ATM transacdispense the product and a receipt in accordance with the tions. Based on all the facts of record, the Board has Board's Regulation E (Electronic Fund Transfers).6 Fi- concluded that the activities proposed by EPS in this case nally, the card-issuing bank would debit an amount equal are permissible data processing and transmission services to the cost of the purchase from the cardholder's desig- encompassed within the Board's data processing regulation nated account and transfer the funds to the account of the and, therefore, the activities are closely related to banking merchant or ATM Deployer, as appropriate, using settle- within the meaning of the BHC Act. ment procedures established by the ATM network. Proper Incident to Banking Analysis Closely Related to Banking Analysis In order to approve this proposal, the Board also must Section 4(c)(8) of the BHC Act provides that a bank determine that the proposed activities are a proper incident holding company may, with Board approval, engage in any to banking; that is, that the proposal "can reasonably be activity that the Board determines to be "so closely related expected to produce benefits to the public, such as greater to banking or managing or controlling banks as to be a convenience, increased competition, or gains in efficiency, proper incident thereto."7 The Board previously has deter- that outweigh possible adverse effects, such as undue conmined by regulation that processing and transmitting finan- centration of resources, decreased or unfair competition, cial, banking, or economic data are activities that are conflicts of interests, or unsound banking practices."11 closely related to banking and, therefore, permissible for As part of its review of these factors, the Board has bank holding companies under section 4(c)(8) of the BHC considered the financial and managerial resources of Appli- Act.8 The Board also has specifically determined that a cants and their respective subsidiaries and the effect the bank holding company may provide data processing and proposal would have on such resources.12 Based on all the related services necessary to permit customers to use an facts of record, the Board has concluded that financial and ATM card to debit a deposit account or line of credit at an managerial considerations are consistent with approval of ATM terminal for cash and credit transactions, and for the this proposal. purchase of travelers checks, money orders, and postage The Board expects that the proposed activities would stamps.9 In addition, the Board has determined that a bank result in benefits to consumers, merchants, and ATM Deholding company may provide data processing services ployers. The proposed activities would allow consumers to purchase products at additional locations and during nonbusiness hours, and would facilitate convenient payment for such products. The proposed activities also would enhance the ability of merchants to distribute products 6. 12 C.F.R. 205. through new channels and would provide ATM Deployers 7. 12 U.S.C. § 1843(c)(8). See National Courier Association v. Board of Governors, 516 F.2d 1229, 1237 (D.C. Cir 1975). In addi- with additional sources of transaction volume and resulting tion, the Board may consider any other basis that may demonstrate fee income. In addition, the proposed activities would that the proposed activity has a reasonable or close connection or increase the level of competition among existing providers relationship to banking or managing or controlling banks. See Board of these services. Statement Regarding Regulation Y, 49 Federal Register 806 (1984); Securities Industry Association v. Board of Governors, 468 U.S. 207, There is no evidence in the record that consummation of 210-11, n.5 (1984). this proposal would result in any significantly adverse 8. See 12 C.F.R. 225.25(b)(7). Regulation Y also requires that the effects, such as undue concentration of resources, dedata processing services be provided pursuant to a written agreement creased or unfair competition, conflicts of interests, or and places certain limitations on the facilities and hardware provided unsound banking practices, that are not outweighed by the with the data processing services. Specifically, the facilities must be designed, marketed, and operated for the processing and transmission public benefits of this proposal. Accordingly, and based on of financial, banking, or economic data; hardware must be provided all the facts of record, the Board has concluded that the only in conjunction with permissible software; and general purpose balance of the public interest factors it is required to hardware must not constitute more than 30 percent of the cost of any consider under the proper incident to banking standard of packaged offering. EPS has committed that it will provide the proposed services pursuant to a written agreement and will provide facilities and hardware within the limitations established by Regulation Y. 10. See Banc One Corporation, 81 Federal Reserve Bulletin 492 9. See The Bank of New York Company, et al., 80 Federal Reserve (1995); Citicorp, 76 Federal Reserve Bulletin 549 (1990); and Bar- Bulletin 1107, 1109 (1994). EPS currently conducts these activities. clays Bank PLC, 71 Federal Reserve Bulletin 113 (1985). See Letters dated February 13, 1996, from the Federal Reserve Bank 11. 12 U.S.C. § 1843(c)(8). of Cleveland to Phyllis Dietz, Esq., and from the Federal Reserve 12. See 12 C.F.R. 225.24. See also The Fuji Bank, Limited, 75 Bank of Philadelphia to John F. Stefanowicz, CoreStates Financial Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Corp. Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

850 Federal Reserve Bulletin • September 1996 section 4(c)(8) of the BHC Act is favorable and consistent Kentucky, Indiana, New Jersey, Massachusetts, and Delawith approval of this proposal. ware. KeyCorp, with $66.3 billion in total consolidated assets, is the 14th largest commercial banking organization in the Conclusion United States, controlling $47.3 billion in deposits. Key- Corp operates subsidiary banks in Ohio, Indiana, Michi- Based on the foregoing and all the facts of record, the gan, New York, Washington, Maine, Oregon, Idaho, Utah, Board has determined to, and hereby does, approve this Colorado, Wyoming, and Alaska. proposal subject to all the terms and conditions set forth in National City, with $36.2 billion in total consolidated this order. The Board's determination also is subject to all assets, is the 24th largest commercial banking organization the terms and conditions set forth in Regulation Y, includin the United States, controlling $25.2 billion in deposits. ing those in sections 225.7 and 225.23(g) (12 C.F.R. 225.7 National City operates subsidiary banks in Ohio, Indiana, and 225.23(g)), and to the Board's authority to require and Kentucky. such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board Dresdner Bank AG finds necessary to assure compliance with, and to prevent Frankfurt, Germany evasion of, the provisions of the BHC Act and the Board's regulations and orders issued thereunder. The Board's deci- Order Approving Notice to Engage in Nonbanking sion is specifically conditioned on compliance with all the Activities commitments made in connection with this proposal. These commitments and conditions shall both be deemed to be Dresdner Bank AG, Frankfurt, Germany ("Dresdner"), a conditions imposed in writing by the Board in connection foreign banking organization subject to the provisions of with its findings and decision, and, as such, may be enthe Bank Holding Company Act ("BHC Act"), has reforced in proceedings under applicable law. quested Board approval under section 4(c)(8) of the BHC This transaction shall not be consummated later than Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the three months after the effective date of this order, unless Board's Regulation Y (12 C.F.R. 225.23) to retain its ownsuch period is extended for good cause by the Board or by ership interest in the United States operations of Kleinwort the Federal Reserve Banks of Cleveland or Philadelphia, Benson Group pic, London, England,1 and thereby engage acting pursuant to delegated authority. in the following activities: By order of the Board of Governors, effective July 1, (1) Underwriting and dealing in, to a limited extent, all 1996. types of debt and equity securities other than interests in open-end investment companies through Dresdner Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Kleinwort Benson North America LLC, New York, New Governors Kelley, Lindsey, Phillips, Yellen, and Meyer. York ("Company"); (2) Acting as agent in the private placement of all types JENNIFER J. JOHNSON of securities, and buying and selling all types of securi- Deputy Secretary of the Board ties on the order of customers as a "riskless principal" through Company; Appendix (3) Providing securities brokerage services pursuant to 12 C.F.R. 225.25(b)(15) through Company; Asset and Deposit Data as of December 31, 1995. (4) Providing investment advisory services pursuant to 12 C.F.R. 225.25(b)(4) through Company and Kleinwort Benson Investment Management ("KBIMA"); Klein- Banc One Corporation, with $90.2 billion in total consoliwort Benson (USA), Inc.; and KB-LPL Holdings, Inc., dated assets, is the tenth largest commercial banking orgaall of New York, New York; nization in the United States, controlling $67.4 billion in (5) Serving as general partner for unregistered limited deposits. Banc One operates subsidiary banks in Ohio, partnerships now existing or to be established in the Kentucky, Indiana, Michigan, Illinois, Wisconsin, Texas, future; and Colorado, Arizona, California, Oklahoma, Utah, and West (6) Leasing personal or real property or acting as agent, Virginia. broker, or adviser in leasing such property, pursuant to CoreStates Financial Corp, with $29.7 billion in total 12 C.F.R. 225.25(b)(5) through Pare Tec Inc., New York, consolidated assets, is the 31st largest commercial banking New York. organization in the United States, controlling $21.5 billion in deposits. CoreStates operates subsidiary banks in Pennsylvania, New Jersey, and Delaware. PNC Bank Corp., with $73.5 billion in total consolidated 1. Dresdner previously received approval under section 4(c)(9) of assets, is the 12th largest commercial banking organization the BHC Act to retain temporarily the United States operations of in the United States, controlling $21.5 billion in deposits. Kleinwort Benson. See Letter dated July 13, 1995, from Jennifer J. PNC operates subsidiary banks in Pennsylvania, Ohio, Johnson, Deputy Secretary of the Board, to David M. Huggin, Esq. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 851 Dresdner would establish Company through the merger Underwriting and Dealing in Bank-Ineligible Securities of Kleinwort Benson North America Inc. ("KBNAI") and Dresdner Securities (USA), Inc. ("DSI"), both of New The Board has determined that, subject to the prudential York, New York. KBNAI and DSI are, and Company framework of limitations established in previous decisions would be, registered as a broker-dealer with the Securities to address the potential for conflicts of interests, unsound and Exchange Commission ("SEC") under the Securities banking practices, or other adverse effects, the proposed Exchange Act of 1934 (15 U.S.C. § 78a et seq.).2 Accord- activities of underwriting and dealing in bank-ineligible ingly, Company would be subject to the recordkeeping and securities are so closely related to banking as to be a proper reporting obligations, fiduciary standards, and other re- incident thereto within the meaning of section 4(c)(8) of quirements of the Securities Exchange Act of 1934 and the the BHC Act.7 Dresdner has committed that Company will SEC. conduct the proposed underwriting and dealing activities Notice of this proposal, affording interested persons an using the same methods and procedures and subject to the opportunity to submit comments, has been published same prudential limitations established by the Board in the (60 Federal Register 62,093 (1995)). The time for filing Section 20 Orders. comments has expired, and the Board has considered the The Board also has determined that the conduct of these notice and all comments received in light of the factors set securities underwriting and dealing activities is consistent forth in section 4(c)(8) of the BHC Act. with section 20 of the Glass-Steagall Act Dresdner, with total consolidated assets of approxi- (12 U.S.C. § 377), provided that the company engaged in mately $338 billion, is the second largest banking organiza- the underwriting and dealing activities derives no more tion in Germany.3 In the United States, Dresdner operates than 10 percent of its total gross revenue from underwritbranches in New York, New York, and Chicago, Illinois, ing and dealing in bank-ineligible securities over any twoand an agency in Los Angeles, California.4 Dresdner also year period.8 Dresdner has committed that Company will controls several subsidiaries that engage in various non- conduct its underwriting and dealing activities in bankbanking activities in the United States. Kleinwort Benson ineligible securities subject to the 10-percent revenue test.9 Group pic, with total consolidated assets of $14.2 billion, is a merchant bank based in the United Kingdom that engages in a variety of securities-related, advisory and other registered as an investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 et seq.) ("Advisers Act"). Pursuant to the nonbanking activities worldwide. Advisers Act, if Company provides advice to a customer on the purchase or sale of a security for which Company is acting as Activities Approved by Regulation principal, Company must disclose to the client that it is acting as a principal in the transaction and obtain the client's written consent The Board previously has determined by regulation that before the transaction occurs. See 15 U.S.C. § 80b-6(3); Investment Advisers Act Release No. 40, reprinted in 6 Fed. Sec. L. Rep. (CCH) the proposed investment advisory, leasing and securities 56,374 (Jan. 5, 1940). brokerage activities are closely related to banking for pur- 7. See Canadian Imperial Bank of Commerce, et al., 76 Federal poses of section 4(c)(8) of the BHC Act.5 Dresdner pro- Reserve Bulletin 158 (1990); J.P. Morgan & Co. Incorporated, et al., poses to conduct these activities in accordance with the 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, Board's regulations and prior Board decisions relating to 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve these activities.6 Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert, denied, 486 U.S. 1059 (1988) (collectively, "Section 20 2. Dresdner currently operates DSI pursuant to grandfather rights Orders"). established by section 8(c)(1) of the International Banking Act of 8. See Section 20 Orders. Compliance with the 10-percent revenue 1978 ("IBA"). 12 U.S.C. § 3106(c). Dresdner's grandfather rights limitation shall be calculated in accordance with the method stated in with respect to DSI will terminate on the merger of DSI with and into the Section 20 Orders, as modified by the Order Approving Modifica- Company. tions to the Section 20 Orders, 75 Federal Reserve Bulletin 751 3. Asset and ranking data are as of December 31, 1995, and use (1989); the Order Approving Modifications to the Section 20 Orders, exchange rates then in elfect. 79 Federal Reserve Bulletin 226 (1993); and the Supplement to Order 4. Deutsche-Suedamerikanische Bank AG, Hamburg, Germany, a Approving Modifications to Section 20 Orders, 79 Federal Reserve wholly owned subsidiary of Dresdner, also operates an agency in Bulletin 360 (1993) (collectively, "Modification Orders"). In light of Miami, Florida. the fact that Dresdner acquired a going concern, the Board believes 5. See 12 C.F.R. 225.25(b)(4), (5) and (15). that allowing Company to calculate compliance with the revenue 6. Because Company would provide investment advisory and bro- limitation on an annualized basis during the first year after consummakerage services with respect to ineligible securities that it may hold as tion of the acquisition and thereafter on a rolling quarterly basis would a principal, Dresdner has committed that Company would inform its be consistent with the Section 20 Orders. See Dauphin Deposit customers at the commencement of the relationship that, as a general Corporation, 77 Federal Reserve Bulletin 672 (1991). The Board matter, it may be a principal or may be engaged in underwriting with notes that Dresdner has not adopted the Board's alternative indexedrespect to, or may purchase from an affiliate, those securities for which revenue test to measure compliance with the 10-percent limitation on brokerage or advisory services are provided. In addition, Dresdner has bank-ineligible securities activities, and, absent such election, will committed that the confirmations sent by Company to customers continue to employ the Board's original 10-percent revenue test. would state whether Company acted as agent or as principal in the 9. As an incident to the proposed underwriting and dealing activitransaction. See PNC Financial Corp., 75 Federal Reserve Bulletin ties, Company would participate in certain derivative transactions for 396 (1989); Bankers Trust New York Company, 74 Federal Reserve hedging purposes in accordance with the Board's policy statement on Bulletin 695 (1988). The Board also notes that Company would be derivative transactions. See 12 C.F.R. 225.142. The Board also notes Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

852 Federal Reserve Bulletin • September 1996 Private Placement and "Riskless Principal" Activities Dresdner has committed that Company will conduct its private placement activities using the same methods and Private placement involves the placement of new issues of procedures and subject to the same prudential limitations securities with a limited number of sophisticated purchas- as those established by the Board in Bankers Trust and J.P. ers in a nonpublic offering. A financial intermediary in a Morgan,13 including the comprehensive framework of reprivate placement transaction acts solely as an agent of the strictions imposed by the Board in connection with underissuer in soliciting purchasers and does not purchase the writing and dealing in bank-ineligible securities, which securities and attempt to resell them. Securities that are were designed to avoid potential conflicts of interests, privately placed are not subject to the registration require- unsound banking practices, and other adverse effects. ments of the Securities Act of 1933, and are offered only to Dresdner also has committed that Company will conduct financially sophisticated institutions and individuals and its riskless principal activities subject to the limitations not to the public. Company will not privately place regis- previously established by the Board.14 tered securities and will only place securities with customers that qualify as accredited investors. Other Activities "Riskless principal" is the term used in the securities business to refer to a transaction in which a broker-dealer, Dresdner also proposes that Company act as general partafter receiving an order to buy (or sell) a security for a ner of, and maintain an equity interest in, limited partnercustomer, purchases (or sells) the security for its own ships that now exist or that may be established in the future account to offset a contemporaneous sale to (or purchase ("Partnerships").15 Interests in Partnerships would be exfrom) the customer.10 Riskless principal transactions are empt from the registration and prospectus requirements of understood in the industry to include only transactions in the Securities Act of 1933 (15 U.S.C. § 77a et seq.) and the the secondary market. Thus, Company would not act as a Partnerships would be exempt from registration as investriskless principal in selling bank-ineligible securities at the ment companies under the Investment Company Act of order of a customer that is the issuer of the securities to be 1940 (15 U.S.C. § 80a-1 et seq.).16 sold, or in any transaction where Company has a contractual agreement to place the securities as agent of the issuer. Company also would not act as a riskless principal in any transaction involving a bank-ineligible security for which it 13. Among the prudential limitations discussed more fully in Bankor an affiliate makes a market. ers Trust and J.P. Morgan are that Company will not privately place The Board has determined that, subject to the limitations open-end investment company securities or securities of investment established by the Board in prior orders, the proposed companies that are advised by Dresdner or any of its affiliates. In private placement and riskless principal activities are so addition, Company will make no general solicitation or general advertising for securities it places. closely related to banking as to be a proper incident thereto 14. See The Bank of New York Company, Inc., 82 Federal Reserve within the meaning of section 4(c)(8) of the BHC Act.11 Bulletin 748 (1996). Neither Company nor its affiliates will hold The Board also has determined that acting as agent in the themselves out as making a market in the bank-ineligible securities private placement of securities, and purchasing and selling that Company buys and sells as riskless principal, or enter quotes for specific bank-ineligible securities in any dealer quotation system in securities on the order of investors as a riskless principal, connection with Company's riskless principal transactions, except that do not constitute underwriting and dealing in securities for Company and its affiliates may enter bid or ask quotations, or publish purposes of section 20 of the Glass-Steagall Act, and that "offering wanted" or "bid wanted" notices on trading systems other revenue derived from these activities is not subject to the than NASDAQ or an exchange, if Company or the affiliate does not 10-percent revenue limitation on bank-ineligible securities enter price quotations on different sides of the market for a particular underwriting and dealing.12 security for two business days. In other words, Company or its affiliate must wait at least two business days after entering a "bid" quote on a security before entering an "ask" quote on the same security and vice versa. Company will not act as riskless principal for registered investment company securities or for any securities of investment companies that are advised by Dresdner or its affiliates. In addition, because that Company may engage in activities that are necessary incidents to Company proposes to provide riskless principal services in combinathe proposed underwriting and dealing activities, provided that they tion with investment advisory services, Company will conduct its are treated as part of the bank-ineligible securities activities, unless riskless principal activities in accordance with the limitations estab- Company has received specific approval under section 4(c)(8) of the lished by the Board for the full-service brokerage activities of bank BHC Act to conduct the activities independently. Until such approval holding companies. See 12 C.F.R. 225.25(b)(15)(ii). is obtained, any revenues from the incidental activities must be 15. DSI currently serves as general partner of a single Partnership counted as ineligible revenues subject to the 10-percent revenue with 20 limited partners. Dresdner may hold a small equity interest in limitation. a Partnership to enable the Partnership to be treated as a partnership 10. See SEC Rule 10b-10(a)(8)(i) (17 C.F.R. 240.10b-10(a)(8)(i)). for tax purposes. The Board notes that Company, as a registered broker-dealer, must 16. Dresdner also proposes that Company act as investment adviser conduct its riskless principal activities in accordance with the cus- to the Partnerships and privately place interests in the Partnerships tomer disclosure and other requirements of the federal securities laws. with institutional customers. As discussed above, the Board has ap- 11. See J.P. Morgan & Company Incorporated, 76 Federal Reserve proved these activities by regulation or order and Dresdner will Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corpo- conduct the activities in accordance with the limitations previously ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). established by the Board with respect to such activities. See 12 C.F.R. 12. See Bankers Trust. 225.25(b)(4); J. P. Morgan; and Bankers Trust. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 853 The Board previously has determined that Dresdner's ing in debt and equity securities, and has determined that proposed Partnership activities are permissible, and Dresd- Company has established an adequate operational and manner has committed to conduct those activities subject to the agerial infrastructure to ensure compliance with the relimitations established by the Board in its prior decisions.17 quirements of the Section 20 Orders. On the basis of the For example, the Partnerships, together with Dresdner and Reserve Bank's review and all the facts of record, the its affiliates, will hold not more than 5 percent of any class Board concludes that financial and managerial considerof voting securities of any issuer and not more than ations are consistent with approval of this proposal. 25 percent of the total equity, including subordinated debt, In evaluating the public interest factors in this case, the of any issuer. In addition, Dresdner has committed that no Board considered that Dresdner, through Dresdner-NY Indirectors, officers, or employees of Dresdner or its affiliates corporated, New York, New York ("DNY"), engages in will serve as directors, officers, or employees of any issuer bank-ineligible securities activities in the United States of which the Partnerships, Dresdner and its affiliates hold pursuant to grandfather rights established by section 8(c)(1) more than 10 percent of the total equity.18 of the IBA.20 Dresdner, however, has committed that DNY and the operations of Dresdner authorized under section 4 Financial Factors, Managerial Resources, and Other of the BHC Act will remain completely separate and will Considerations not engage in any business with or on behalf of each other.21 Under the proper incident to banking standard of section In light of these commitments, and under the framework 4(c)(8) of the BHC Act, in order to approve this notice, the and conditions established by the Board in the Section 20 Board must determine that the performance of the pro- Orders and this order, the Board concludes that consummaposed activities by Dresdner can reasonably be expected to tion of this proposal is not likely to result in significantly produce public benefits that would outweigh possible ad- adverse effects, such as undue concentration of resources, verse effects. As part of the Board's evaluation of these decreased or unfair competition, conflicts of interest, or factors, the Board considers the financial and managerial unsound banking practices, and that Dresdner would not resources of the notificant and its subsidiaries and the effect gain an unfair competitive advantage in conducting its the transaction would have on such resources.19 The Board grandfathered activities. Moreover, the Board expects that notes that Dresdner's capital ratios satisfy applicable risk- consummation of the proposal would provide added convebased standards under the Basle Accord, and are consid- nience to Dresdner's customers and would increase the ered equivalent to the capital levels that would be required level of competition among existing providers of these of a United States banking organization. The Board also has reviewed the capitalization of Dresdner and Company in accordance with the standards set forth in the Section 20 20. DNY acts as a specialist for certain stocks listed on the New York Stock Exchange ("NYSE"). Although DNY currently operates Orders and finds the capitalization of each to be consistent as a subsidiary of DSI, Dresdner does not propose to merge DNY into with approval. The determination of the capitalization of Company, and Dresdner would continue to hold DNY as a separate Company is based on all the facts of record, including subsidiary pursuant to section 8(c)(1) of the IBA after consummation Dresdner's projections of the volume of Company's under- of the proposal. The IBA authorizes Dresdner to retain its interest in writing and dealing activities in bank-ineligible securities. DNY unless the Board, after notice and opportunity for a hearing, finds that the continuation of the activities would give rise to adverse The Federal Reserve Bank of New York ("Reserve Bank") effects, such as undue concentration of resources, decreased or unfair has reviewed the operational and managerial infrastructure competition, conflicts of interest, or unsound banking practices in the of Company, including its computer, audit, and accounting United States. systems and internal risk management procedures and con- 21. In furtherance of this commitment, and not in limitation thereof, Dresdner also has committed that there will be no director, officer or trols, with respect to the proposed underwriting and dealemployee interlocks of any kind between DNY and Dresdner's U.S. subsidiaries authorized under section 4 of the BHC Act; there will be no joint marketing efforts between DNY and Dresdner's subsidiaries 17. See Meridian Bancorp, Inc., 80 Federal Reserve Bulletin 736 authorized under section 4 of the BHC Act; and DNY and Dresdner's (1994). Because Dresdner would indirectly serve as general partner of subsidiaries authorized under section 4 of the BHC Act will not share the Partnerships, Dresdner would be required, for regulatory purposes, fees, profits or customer information with, will not make customer to hold capital and present financial information relating to Company referrals to, and will not engage in cross-marketing with, each other. and the Partnerships on a consolidated basis. See The Bessemer Dresdner has requested that the Board permit Dresdner's subsidiaries Group, Incorporated, 82 Federal Reserve Bulletin 569 (1996). authorized under section 4 of the BHC Act to execute trades through 18. The Partnerships will not invest in futures contracts or options DNY on the NYSE in stocks for which DNY acts as a specialist. The on futures contracts on any financial or nonfinancial commodity, or Board notes that DNY is the only specialist on the NYSE for the knowingly acquire debt securities that are in default at the time of stocks at issue. Dresdner has committed that all transactions effected acquisition, without prior approval from the Federal Reserve System. by DNY for its affiliates authorized under section 4 will be conducted The Partnerships, however, might invest in futures contracts based on on an arm's length basis and on terms no more favorable than those foreign exchange, U.S. Government and agency securities, and money offered to unaffiliated third parties. In light of the unique facts of this market instruments solely for hedging purposes and in conformance case and the limited nature of the proposed relationship between DNY with the Board's policy statement on derivative transactions. See and its affiliates authorized under section 4 of the BHC Act, the Board 12 C.F.R. 225.142. concludes that Dresdner's request is consistent with the public interest 19. See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 factors the Board must consider in this case. The Board expects Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Dresdner to ensure that DNY and its affiliates authorized under sec- Federal Reserve Bulletin 155 (1987). tion 4 are operated entirely separately in all other respects. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

854 Federal Reserve Bulletin • September 1996 services. The Board has determined, therefore, that the First Southern Bancorp, Inc. performance of the proposed activities by Dresdner can Stanford, Kentucky reasonably be expected to produce public benefits that outweigh possible adverse effects under the proper incident Order Approving the Acquisition of a Savings to banking standard of section 4(c)(8) of the BHC Act. Association Accordingly, and for the reasons set forth in this order and in the Section 20 Orders, the Board has concluded that First Southern Bancorp, Inc., Stanford, Kentucky ("First Dresdner's proposal to engage in the proposed activities is Southern"), a bank holding company within the meaning consistent with the Glass-Steagall Act, and that the pro- of the Bank Holding Company Act ("BHC Act"), has posed activities are so closely related to banking as to be applied for the Board's approval under section 4 of the proper incidents thereto within the meaning of section BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of 4(c)(8) of the BHC Act, provided that Dresdner limits the Board's Regulation Y (12 C.F.R. 225.23) to acquire Company's activities as specified in this order and the Lincoln Financial Bancorp, Inc. ("Lincoln"), and thereby Section 20 Orders, as modified by the Modification Orders. acquire Lincoln Federal Savings Bank ("Lincoln FSB"), On the basis of all the facts of record, the Board has also in Stanford, Kentucky.1 determined to, and hereby does, approve this notice subject Notice of the proposal, affording interested persons an to all the terms and conditions discussed in this order and opportunity to submit comments, has been published in the Section 20 Orders, as modified by the Modification (61 Federal Register 21 fill (1996)). The time for filing Orders. The Board's approval of this proposal extends only comments has expired, and the Board has considered the to activities conducted within the limitations of those or- notice and all comments received in light of the factors set ders and this order, including the Board's reservation of forth in section 4 of the BHC Act. authority to establish additional limitations to ensure that The Board has determined that the operation of a savings Company's activities are consistent with safety and sound- association by a bank holding company is closely related to ness, avoiding conflicts of interests, and other relevant banking for purposes of section 4(c)(8) of the BHC Act.2 considerations under the BHC Act. Underwriting and deal- The Board requires savings associations acquired by bank ing in any manner other than as approved in this order and holding companies to conform their direct and indirect the Section 20 Orders, as modified by the Modification activities to those permissible for bank holding companies Orders, is not authorized for Company. under section 4(c)(8) of the BHC Act and Regulation Y. The Board's determination also is subject to all the terms First Southern has committed to conform all activities of and conditions set forth in Regulation Y, including those in Lincoln FSB to those requirements.3 sections 225.7 and 225.23(g) (12 C.F.R. 225.7 and First Southern is the 34th largest commercial bank or 225.23(g)), and to the Board's authority to require modifi- thrift institution ("depository institution") in Kentucky, cation or termination of the activities of a bank holding controlling deposits of approximately $172.4 million, repcompany or any of its subsidiaries as the Board finds resenting less than 1 percent of total deposits in depository necessary to assure compliance with and to prevent evasion of the provisions of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on Dresdner's compliance 1. First Southern proposes to transfer the main office and one branch with all the commitments made in connection with this of Lincoln FSB, accounting for 84 percent of the thrift's total deposits, notice, including the commitments discussed in this order to First Southern's subsidiary bank, First Southern National Bank of and the conditions set forth in the Board regulations and Lincoln County, Hustonville, Kentucky ("First Southern Bank"). Lincoln FSB would continue to operate at the location of its single orders noted above. The commitments and conditions shall remaining branch. The transaction is subject to the approval of the be deemed to be conditions imposed in writing by the Office of the Comptroller of the Currency ("OCC") under sec- Board in connection with its findings and decisions, and tion 18(c) of the Federal Deposit Insurance Act ("FDI Act") may be enforced in proceedings under applicable law. (12 U.S.C. § 1828(c) (the "Bank Merger Act")) and section 5(d)(3) of the FDI Act. Lincoln also has granted First Southern an option to This transaction shall not be consummated later than purchase up to 19.9 percent of the voting shares of Lincoln under three months after the effective date of this order unless certain circumstances. The option would be cancelled on consummasuch period is extended for good cause by the Board or the tion of the proposal. Reserve Bank, acting pursuant to delegated authority. 2. See 12 C.F.R. 225.25(b)(9). 3. First Southern has committed that all impermissible real estate By order of the Board of Governors, effective July 15, activities will be divested within two years of consummation of the 1996. proposal, that no new impermissible projects or investments will be undertaken during this period, and that capital adequacy guidelines for Lincoln FSB will be met excluding impermissible real estate invest- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and ments. First Southern also has committed that all impermissible Governors Kelley, Lindsey, Yellen, and Meyer. Absent and not voting: insurance activities will be divested or terminated within two years of Governor Phillips. consummation of the proposal and that no new impermissible insurance activities will be undertaken during this period except for the renewal of existing insurance policies. In addition, First Southern has JENNIFER J. JOHNSON committed that all impermissible securities activities will cease on or Deputy Secretary of the Board before consummation of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 855 institutions in the state.4 Lincoln is the 169th largest depos- tion in the market, controlling deposits of approximately itory institution in Kentucky, controlling deposits of ap- $40.8 million, representing 3.3 percent of market deposits. proximately $40.8 million. On consummation of the pro- On consummation of the proposal, First Southern would posal, First Southern would become the 27th largest remain the largest depository institution in the market, depository institution in Kentucky, controlling deposits of controlling deposits of approximately $212.5 million, repapproximately $213.2 million, representing less than resenting 33.3 percent of market deposits. Market concen- 1 percent of total deposits in depository institutions in the tration, as measured by the Herfindahl-Hirschman Index state. ("HHI"), would increase 272 points to 1914.9 The Board notes, however, that HHI levels are only Competitive Considerations guidelines that are used by the Board, the Department of Justice, and the other banking agencies to help identify Under section 4(c)(8) of the BHC Act, the Board is re- cases in which a more detailed competitive analysis is quired to consider whether a proposal is likely to result in appropriate to assure that the proposal would not have a any significantly adverse effects, such as undue concentra- significantly adverse effect on competition in any relevant tion of resources or unfair competition, conflicts of inter- market. A proposal that fails to pass the HHI market screen ests, or unsound banking practices. First Southern, through may nonetheless be approved because other information its two subsidiary banks, and Lincoln compete directly in may indicate that the proposal would not have a signifithe Danville, Kentucky, banking market ("Danville bank- cantly adverse effect on competition. The Department of ing market").5 In addition, the Board has approved First Justice has reviewed the proposal and advised the Board Southern to acquire up to 24.9 percent of the voting shares that consummation of the proposal would not likely have of Casey County Bancorp, Inc., Liberty, Kentucky ("Casey any significantly adverse competitive effects in the Dan- County"), which also competes in the Danville banking ville banking market or any other relevant banking market. market, as a noncontrolling passive investment.6 The Board In addition, a number of factors indicate that the market has noted previously that one company need not acquire concentration as measured by the HHI tends to overstate control of another in order substantially to lessen competi- the competitive effects of the proposal. After consummation between them. It is possible, for example, that the tion of the proposal, for example, ten competitors would acquisition of a substantial ownership interest in a compet- remain in a relatively small banking market.10 Six of these itor or a potential competitor of the acquiring firm may competitors are commercial banking organizations, two of alter the market behavior of both firms in such a way as to which each control more than 10 percent of market deposweaken or eliminate independence of action between the its and three others of which each control more than organizations and increase the likelihood of cooperative 5 percent of market deposits. In addition, two of these operations.7 commercial banking organizations are large regional bank When the deposits of Casey County are combined with holding companies. First Southern, First Southern is the largest depository Based on these and all the other facts of record, the institution in the market, controlling deposits of approxi- Board concludes that consummation of the proposal is not mately $171.7 million, representing 27.8 percent of total likely to have a significantly adverse effect on competition deposits in depository institutions in the market ("market or the concentration of banking resources in any relevant deposits").8 Lincoln is the tenth largest depository institu- banking market. 4. Deposit data are as of June 30, 1995. 5. The Danville banking market is approximated by Boyle and Lincoln Counties, the Lancaster and Bryantsville census divisions of Garrard County, and the northern portion of Casey County, all in Kentucky. 6. See First Southern Bancorp, Inc., 82 Federal Reserve Bulletin ian, Inc., 77 Federal Reserve Bulletin 52 (1991). Because the deposits 424 (1996). In connection with acquiring the interest in Casey County, of Lincoln FSB would be controlled by a commercial banking organi- First Southern agreed to abide by certain commitments, set forth in the zation after consummation of the proposal, they have been included at appendix to the Board's order, that previously had been relied on by 100 percent in the calculation of the market share of First Southern the Board in cases involving passive minority investments. See, e.g., after consummation of the proposal. See Norwest Corporation, 78 Mansura Bancshares, Inc., 79 Federal Reserve Bulletin 37 (1993) Federal Reserve Bulletin 452 (1992); First Banks, Inc., 76 Federal ("Mansura"). First Southern has acquired approximately 5.3 percent Reserve Bulletin 669, 670 n.9 (1990). of the voting shares of Casey County. 9. Under the revised Department of Justice Merger Guidelines, 49 7. First Banks, Inc., 80 Federal Reserve Bulletin 34 (1994); Man- Federal Register 26,823 (June 29, 1984), a market in which the sura, supra. post-merger HHI is above 1800 is considered highly concentrated. 8. Market share data are based on calculations in which the deposits The Department of Justice has informed the Board that a bank merger of thrift institutions are included at 50 percent. The Board previously or acquisition generally will not be challenged (in the absence of other has indicated that thrift institutions have become, or have the potential factors indicating anticompetitive effects) unless the post-merger HHI to become, major competitors of commercial banks. See Midwest is at least 1800 and the merger increases the HHI by at least 200 Financial Group, 75 Federal Reserve Bulletin 386 (1989); National points. City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the 10. The Danville banking market has a population of 56,700 resi- Board has regularly included thrift deposits in the calculation of dents and total deposits in depository institutions of approximately market share on a 50 percent weighted basis. See, e.g., First Hawai- $617 million. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

856 Federal Reserve Bulletin • September 1996 Other Considerations Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act The Board also concludes that consummation of the proposal would result in a broader financial network through Bank of Boston Corporation which First Southern could serve its customers and former Boston, Massachusetts Lincoln customers. Former Lincoln customers would have increased services, including access to Small Business Order Approving the Acquisition of a Bank Holding Administration loans, and, for the majority of depositors Company whose accounts would be transferred to First Southern Bank, expanded access to automated teller machines in the Bank of Boston Corporation, Boston, Massachusetts Danville banking market. The Board also concludes that ("Bank of Boston"), a bank holding company within the the financial and managerial resources of First Southern meaning of the Bank Holding Company Act ("BHC Act"), and Lincoln FSB are consistent with approval of the pro- has requested the Board's approval under section 3 of the posal. In light of all the facts of record, the Board finds that BHC Act (12 U.S.C. § 1842) to acquire BayBanks, Inc. consummation of the proposal is not likely to result in any ("BayBanks"), also in Boston, Massachusetts.1 Bank of significantly adverse effects, such as undue concentration Boston would indirectly acquire the subsidiary banks of of resources, decreased or unfair competition, conflicts of BayBanks, BayBank, N.A., Boston, Massachusetts ("Bayinterest, or unsound banking practices that would outweigh Bank MA"), and BayBank NH, National Association, the public benefits of the proposal. Accordingly, the Board Derry, New Hampshire ("BayBank NH").2 has determined that the performance of the proposed activ- Bank of Boston also has requested the Board's approval ities by First Southern can reasonably be expected to under section 4(c)(8) of the BHC Act (12 U.S.C. produce public benefits that outweigh possible adverse § 1843(c)(8)) and section 225.23(a) of the Board's Regulaeffects under the proper incident to banking standard of tion Y (12 C.F.R. 225.23(a)) to: section 4(c)(8) of the BHC Act. (1) Acquire all the voting shares of BayBank FSB, Nashua, New Hampshire ("BayBank FSB"), and Conclusion thereby engage in the operation of a savings association pursuant to section 225.25(b)(9) of Regulation Y Based on the foregoing and all the facts of record, the (12 C.F.R. 225.25(b)(9)); and Board has determined that this notice should be, and hereby (2) Increase Bank of Boston's ownership interest from is, approved. The Board's approval is specifically condi- 6 percent to 16.53 percent of the voting shares of NYCE tioned on compliance by First Southern with all commit- Corporation, Hackensack, New Jersey ("NYCE Corpoments made in connection with this notice. The Board's ration"), which engages in operating retail electronic determination is also subject to all the conditions in Regu- funds transfer networks and data processing activities lation Y, including those in sections 225.7 and 225.23(g) pursuant to section 225.25(b)(7) of Regulation Y (12 C.F.R. 225.7 and 225.23(g)) and to the Board's author- (12 C.F.R. 225.25(b)(7)).3 ity to require such modification or termination of the activities of a holding company or any of its subsidiaries as Notice of the proposals, affording interested persons an the Board finds necessary to assure compliance with, or to opportunity to submit comments, has been published prevent evasion of, the provisions and purposes of the (61 Federal Register 14,308 (1996)). The time for filing BHC Act and the Board's regulations and orders issued comments has expired, and the Board has considered the thereunder. These commitments and conditions relied on proposals and all comments received in light of the factors by the Board in reaching this decision are deemed to be set forth in sections 3(c) and 4(c)(8) of the BHC Act. conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law. The transaction shall not be consummated later than 1. Bank of Boston also has requested the Board's approval to three months following the effective date of this order, acquire options for up to 19.9 percent of the voting stock of Bayunless such period is extended for good cause by the Banks, and BayBanks has requested the Board's approval to acquire Federal Reserve Bank of Cleveland, acting pursuant to options for up to 19.9 percent of the voting stock of Bank of Boston. 2. Bank of Boston proposes to merge its wholly owned subsidiary delegated authority. Boston Merger Corp., Boston, Massachusetts, into BayBanks with By order of the Board of Governors, effective July 22, BayBanks to be the surviving company. Bank of Boston would be 1996. renamed BankBoston Corporation. After consummation of this proposal, Bank of Boston would merge BayBank MA with and into Bank of Boston's lead subsidiary bank, The First National Bank of Boston, Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Boston, Massachusetts ("FNBB"). The bank merger is subject to the Governors Lindsey, Yellen, and Meyer. Absent and not voting: Goverapproval of the Office of the Comptroller of the Currency ("OCC") nors Kelley and Phillips. under the Bank Merger Act (12 U.S.C. § 1828(c)). 3. Bank of Boston also has provided notice of its intention to JENNIFER J. JOHNSON acquire a branch of BayBank MA located in the Cayman Islands, Deputy Secretary of the Board B.W.I., pursuant to the Board's Regulation K (12 C.F.R. 211.3(a)(3)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 857 Bank of Boston, with total consolidated assets of view of all the facts of record, the Board is permitted to $47.4 billion, operates subsidiary banks in Massachusetts, approve this proposal under section 3(d) of the BHC Act.9 Connecticut, Florida, and Rhode Island, and a special purpose bank in Maine that provides cash management Competitive Considerations services.4 Bank of Boston is the 17th largest commercial banking organization in the United States and the largest The BHC Act prohibits the Board from approving an commercial banking organization in Massachusetts. Bank application under section 3 of the BHC Act if the proposal of Boston controls deposits of $16.8 billion in Massachu- would result in a monopoly, or if the proposal would setts, representing 16.5 percent of all deposits in depository substantially lessen competition in any relevant banking institutions in the state ("state deposits").5 Bank of Boston market, unless such anticompetitive effects are clearly outalso engages in a number of permissible nonbanking activ- weighed in the public interest by the probable effect of the ities nationwide. transaction in meeting the convenience and needs of the BayBanks, with total consolidated assets of $12.1 bil- community to be served. Bank of Boston and BayBanks lion, operates a subsidiary bank in Massachusetts, and a compete directly in nine banking markets in New Ensubsidiary bank and a thrift institution in New Hampshire.6 gland.10 The Board has carefully considered the effects that BayBanks is the 51st largest commercial banking organiza- consummation of this proposal would have on competition tion in the United States and the third largest commercial in these banking markets in light of all the facts of record, banking organization in Massachusetts. BayBanks controls including characteristics of each market,11 the increase in deposits of $9.2 billion in Massachusetts, representing approximately 9 percent of state deposits. On consummation of this proposal, Bank of Boston United States and less than 30 percent of the total amount of deposits would become the 15th largest commercial banking organi- of insured depository institutions in the relevant states. On consummazation in the United States, with total consolidated assets of tion of this transaction, which includes the divestiture of approximately $860 million in deposits in Massachusetts, Bank of Boston $59.5 billion and would control less than 1 percent of the would control less than 25 percent of the total deposits of all state- and total deposits in banks and savings associations insured by federally-chartered banks in Massachusetts. See M.G.L.A. c. 167, § the Federal Deposit Insurance Corporation ("FDIC"). On 2 (Supp. 1996). The Board's determination on this proposal is specificonsummation of this proposal and completion of the pro- cally conditioned on Bank of Boston obtaining approval under applicable state law. posed branch divestitures, Bank of Boston would remain 9. BayBanks has filed several applications with the OCC for permisthe largest commercial banking organization in Massachusion to merge BayBank FSB into BayBank NH, relocate the main setts, controlling $25.1 billion in deposits, representing office of BayBank NH a distance of less than 30 miles into Massachuapproximately 24.7 percent of state deposits. setts, and merge BayBank NH into BayBank MA, with BayBank MA retaining BayBank NH's New Hampshire branches. The New Hampshire Bank Commissioner ("New Hampshire Commissioner") con- Interstate Analysis tends that these applications would permit BayBank MA illegally to establish interstate branches, and has joined a lawsuit filed in the Section 3(d) of the BHC Act allows the Board to approve a Federal District Court for the Northern District of Texas to challenge proposal by a bank holding company to acquire control of the OCC's approval of these types of relocation and merger transactions for national banks. On May 22, 1996, the district court ruled that a bank located in a state other than the home state of such upon the relocation of the main office of a national bank, the bank is bank holding company, if certain conditions are met. For authorized to establish an interstate branch only to the extent authopurposes of the BHC Act, the home state of Bank of rized under state law. Ghiglieri v. Ludwig, No. 3:95-CV-2001-H, 1996 Boston is Massachusetts, and BayBanks operates banks U.S. Dist. LEXIS 8321, at *49 (N.D. Tex. May 22, 1996). The Board located outside Massachusetts.7 The conditions for an inter- notes that the OCC has not approved the BayBanks relocation, branchstate acquisition under section 3(d) are met in this case.8 In ing, and merger applications, and that this matter is solely within the OCC's jurisdiction to consider in light of all applicable legal precedent. If the OCC disapproves the applications, or if the OCC's approval of the applications is later overturned by a court, Bank of 4. Asset data are as of December 31, 1995. Boston would nevertheless be permitted to own BayBank NH as a 5. Depository institutions include commercial banks, savings banks, separate New Hampshire bank under section 3(d) of the BHC Act. and savings associations. State deposit data are as of June 30, 1995, The Board has forwarded the New Hampshire Commissioner's comadjusted to reflect acquisitions and sales consummated by Bank of ments to the OCC. Boston through June 30, 1996. 10. The banking markets are described in the Appendix. Market 6. BayBank MA operates two branches in Connecticut. share data are as of June 30, 1995. 7. 12 U.S.C. § 1842(d). Pub. L. No. 103-328, 108 Stat. 2338 (1994). 11. Based on the particular characteristics of the institutions and A bank holding company's home state is that state in which the markets involved, the Board previously has determined that certain operations of the bank holding company's banking subsidiaries were savings associations in New England offer significant competition to principally conducted on July 1, 1966, or the date on which the commercial banks in the provision of the full range of financial company became a bank holding company, whichever is later. services, and has weighted the deposits of those savings associations 8. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). at more than 50 percent in calculating market share. See Fleet Finan- Bank of Boston is adequately capitalized and adequately managed. cial Group, Inc., 82 Federal Reserve Bulletin 50 (1996); Fleet/Norstar The subsidiary banks of BayBanks have been in existence and contin- Financial Group, Inc., 77 Federal Reserve Bulletin 750 (1991); Cenuously operated for the minimum periods of time required under vest, Inc., 74 Federal Reserve Bulletin 807 (1988); and Hartford applicable state law. In addition, on consummation of this proposal, National Corporation, 73 Federal Reserve Bulletin 720 (1987). The Bank of Boston and its affiliates would control less than 10 percent of Board has determined to include the deposits of savings associations the total amount of deposits of insured depository institutions in the in Connecticut, Massachusetts, New Hampshire, and Rhode Island Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

858 Federal Reserve Bulletin • September 1996 the concentration of total deposits in depository institutions to have a significantly adverse effect on competition or in these markets as measured by the Herfindahl-Hirschman concentration of banking resources in any relevant banking Index ("HHI"), and the HHI levels set out in the revised market. Department of Justice Merger Guidelines ("DOJ Guidelines").12 As part of this proposal, Bank of Boston would Other Factors Under the BHC Act divest a total of 20 branches of the subsidiary banks of Bank of Boston and BayBanks in the Boston metropolitan The BHC Act also requires the Board to consider the area. These branches represent deposits of approximately financial and managerial resources and future prospects of $860 million.13 the companies and banks involved, the convenience and Consummation of this proposal would not exceed the needs of the community to be served, and certain other DOJ Guidelines in any relevant banking market and nu- supervisory factors. merous competitors would remain in each market.14 The Department of Justice has reviewed the proposal and ad- A. Supervisory Factors vised the Board that, subject to completion of the proposed divestitures, the proposal would not likely have any signif- The Board has carefully considered the financial and manicantly adverse effects on competition in any banking mar- agerial resources and future prospects of Bank of Boston ket.15 The Office of the Massachusetts Attorney General and BayBanks and their respective subsidiaries, and other has reached the same conclusion on the competitive effects supervisory factors, in light of all the facts of record. These of this proposal in the Massachusetts banking markets. In facts include supervisory reports of examination assessing this light, and based on all the facts of record, the Board the financial and managerial resources of the organizations, concludes that consummation of this proposal is not likely and confidential financial information provided by Bank of Boston. Bank of Boston would incur no additional debt in connection with this proposal and has sufficient financial and managerial resources to accomplish this transaction banking markets at up to 100 percent based on a number of factors indicating their commitment to commercial lending, including their without impairing these resources. After consummation of ratio of commercial and industrial loans (other than those secured by this proposal, Bank of Boston's subsidiary banks all would real estate) to total assets, percentage of small business loans in the remain well capitalized. Based on these and all the facts of market, resources committed to commercial lending, and the legal record, the Board concludes that the supervisory factors authority of the association to make commercial loans. under the BHC Act, including financial and managerial 12. Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is less than 1000 is resources, weigh in favor of approval of this proposal.16 considered unconcentrated and a market in which the post-merger HHI is between 1000 and 1800 is considered moderately concen- B. Convenience and Needs Factor trated. A market in which the post-merger HHI is above 1800 is considered to be highly concentrated. In such markets, the Department of Justice is likely to challenge a merger that increases the HHI by The Board has long held that consideration of the convemore than 50 points. The Department of Justice has informed the nience and needs factor includes a review of the records of Board that a bank acquisition or merger generally will not be chal- the relevant depository institutions under the Community lenged (in the absence of other factors indicating anti-competitive Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As effects) unless the post-merger HHI is at least 1800 and the merger or provided in the CRA, the Board has evaluated this factor in acquisition increases the HHI by at least 200 points. The Department of Justice has stated that the higher than normal threshold for anti- light of examinations by the primary federal supervisor of competitive effects implicitly recognizes the competitive effect of the CRA performance records of the relevant institutions. limited-purpose lenders and other non-depository financial entities. The Board also has carefully considered all comments 13. Bank of Boston has committed to execute a sales agreement to submitted on this proposal, including comments from the accomplish this divestiture before consummation of this proposal and to complete the divestiture within 180 days of consummation. Bank of Rhode Island Community Reinvestment Association Boston also has committed that, if it is unsuccessful in completing the ("RICRA") criticizing the CRA performance record of divestiture within 180 days of consummation, it will transfer the unsold branches to an independent trustee that is acceptable to the Board and that will be instructed to sell the assets promptly. In addition, Bank of Boston has committed to submit to the Board, 16. The Board has received comments from an individual contendbefore consummation of the acquisition, an executed trust agreement ing, without providing any supporting evidence, that mergers of local acceptable to the Board stating the terms of the divestiture. banking organizations have a number of adverse effects, including 14. Based on all the facts of record, including the proposed divesti- decreased competition, increased risk of failure to the banking system, tures, the HHI increases in the banking markets in which Bank of increased collusion to set fees for banking products and services, and Boston and BayBanks compete would be as follows: in Massachu- higher fees for fewer services to customers, particularly small busisetts, Amherst-Northampton (141 points to 1723); Boston (423 points nesses. The Board considered identical comments made by this comto 1467); Cape Cod (74 points to 1597); New Bedford (27 points to menter in connection with its evaluation of Bank of Boston's acquisi- 2819); Springfield (219 points to 1356); Taunton (156 points to 2558); tion of The Boston Bancorp and its subsidiary South Boston Savings and Worcester (171 points to 2258); in the Hartford, Connecticut, Bank, both in Boston, Massachusetts. See Bank of Boston Corporabanking market (7 points to 3011); and in the Providence, Rhode tion, 82 Federal Reserve Bulletin 733 (1996) ("South Boston Order"). Island, banking market (30 points to 3277). The HHI calculations in This commenter has presented no new considerations relevant to the the Boston, Massachusetts, banking market include the deposits of BayBanks proposal. The Board has incorporated the analysis and BayBank FSB. findings discussed in the South Boston Order in its consideration of 15. The OCC also has not objected to the proposal. this transaction. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 859 Bank of Boston's subsidiary bank, Rhode Island Hospital 1994 ("Hospital Trust Examination").20 All the subsidiary Trust National Bank, Providence, Rhode Island ("Hospital banks and thrifts of BayBanks received ratings of "out- Trust"), in serving the credit needs of low- and moderate- standing" or "satisfactory" in their most recent examinaincome ("LMI") areas, particularly in Providence. In addi- tions for CRA performance by their primary federal supertion, RICRA maintains that Hospital Trust does not ade- visors, and BayBanks's lead subsidiary bank, BayBank quately support community initiatives through charitable MA, received an "outstanding" rating from the OCC, as of contributions. RICRA and other individual commenters March 1996.21 also speculate that branch closings resulting from the pro- Record of CRA Performance in Rhode Island. The Hosposal would have an adverse effect on LMI areas through- pital Trust Examination reflects substantial efforts by the out New England.17 bank to help address the housing, consumer, and small An institution's most recent CRA performance evalua- business credit needs of all its communities, including LMI tion is a particularly important consideration in the applica- areas. Examiners found that Hospital Trust solicited credit tions process because it represents a detailed on-site evalu- applications from all segments of its community, and that ation of the institution's overall record of performance there was no evidence of illegal discriminatory credit pracunder the CRA by its primary federal supervisor.18 In tices in the bank's lending activities. The bank also has in addition, the Board considers an institution's policies and place effective policies, procedures, and training to support practices for compliance with applicable fair lending laws. equal treatment of applicants in lending and credit activi- The Board also takes into account information on an insti- ties. tution's lending activities that assist in meeting the credit The Hospital Trust Examination noted that Hospital needs of LMI neighborhoods, including programs and ac- Trust had developed credit products specifically designed tivities initiated since its most recent CRA performance to address the credit needs of LMI individuals and geograexamination. phies. The bank developed the "First Step" residential real Performance Examinations. Bank of Boston's subsid- estate lending products, including a purchase money mortiary banks all received ratings of "outstanding" or "satis- gage loan offering flexible terms and low down payments factory" in their most recent examinations for CRA perfor- for first-time home buyers, and a home improvement loan mance by their primary federal supervisors. Bank of providing extended loan terms, lower repayment require- Boston's lead subsidiary bank, FNBB, received an "out- ments, and flexible underwriting criteria.22 In addition, standing" rating from its primary federal supervisor, the Hospital Trust created "First Community Bank" which is OCC, as of December 1994.19 Hospital Trust also received a special program with marketing and retail strategies an "outstanding" rating from the OCC, as of December focused on providing credit and banking needs to predominantly LMI communities in Rhode Island. Examiners also indicated that Hospital Trust actively participated in local-based lending programs designed to 17. RICRA and other commenters contend that projected job losses resulting from the proposal also would adversely effect LMI areas. address the credit needs of LMI individuals, including The BHC Act specifically enumerates the factors the Board may those sponsored by the Rhode Island Housing and Mortconsider in reviewing a proposal under that Act. As previously noted, these factors relate to the effect of the proposal on competition, the financial and managerial resources of the institutions involved, certain supervisory factors, and the convenience and needs of the communities served by the institutions involved. The effect of the proposed acquisition on employment in a community is not among the factors 20. Bank of Boston's subsidiary bank in Connecticut, Bank of the Board is required to consider under the BHC Act. The conve- Boston, Connecticut, Hartford, Connecticut ("BKB CT"), received an nience and needs factor, moreover, has been consistently interpreted "outstanding" rating from its primary federal supervisor, the FDIC, as by the federal banking agencies, the courts, and Congress to relate to of June 1994. Bank of Boston, Florida, N.A., a trust-oriented instituthe effect of a proposal on the availability and quality of banking tion received a "satisfactory" rating from the OCC, as of February services in the community. See Wells Fargo & Company, 82 Federal 1995. Bank of Boston (Maine), N.A., Portland, Maine, a cash dis- Reserve Bulletin 445, 457 (1996). The Board notes that Bank of bursement bank with no public operations, has not been evaluated for Boston has taken several steps to minimize any adverse effects of this CRA performance. FNBB, Hospital Trust, and BKB CT together proposal on employment or the economy in New England, and has account for 99.84 percent of the total assets held by Bank of Boston's indicated that it will provide support to displaced employees. For subsidiary banks. example, Bank of Boston and BayBanks initiated a hiring freeze in 21. BayBank NH and BayBank FSB have not been examined for January 1996 that has reduced the combined workforce of BayBanks CRA performance since they were acquired by BayBanks. In its most and Bank of Boston by 700 employees. Bank of Boston also estab- recent examination for CRA performance, however, BayBank NH lished an Enhanced Severance Program, in which certain employees received a "satisfactory" rating from the FDIC, as of May 1994 are offered early retirement and other employees whose jobs are (BayBank NH, formerly known as Cornerstone Bank, recently coneliminated receive enhanced severance and transition assistance. verted from a state-chartered bank to a national bank). The two 18. The Board notes that the Statement of the Federal Financial savings associations that merged to become BayBank FSB (NFS Supervisory Agencies Regarding the Community Reinvestment Act Savings Bank, FSB, Nashua, New Hampshire; and Plaistow Cooperaprovides that a CRA examination is an important and often controlling tive Bank, FSB, Plaistow, New Hampshire) received "outstanding" factor in the consideration of an institution's CRA record and that and "satisfactory" ratings from the Office of Thrift Supervision, as of reports of these examinations will be given great weight in the July 1994 and May 1993, respectively. See BayBanks, Inc., 81 Fedapplications process. 54 Federal Register 13,742, 13,745 (1989). eral Reserve Bulletin 723 (1995). 19. The Board reviewed in detail FNBB's CRA performance record 22. Since 1989, Hospital Trust has approved First Step mortgage in the South Boston Order and that review is incorporated herein. loans totalling $58.8 million. 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860 Federal Reserve Bulletin • September 1996 gage Finance Corporation ("RIHMFC").23 The Hospital all branch closings resulting from this proposal would be Trust Examination indicated that Hospital Trust also was subject to Bank of Boston's branch closing policy and the actively involved in FHA and VA guaranteed mortgage Joint Agency Policy Statement on Branch Closings ("Joint programs through its affiliate mortgage company, BancBos- Policy Statement").27 ton Mortgage Corporation, Boston, Massachusetts. Bank of Boston's Corporate Branch Closing Policy, Hospital Trust offers traditional consumer products such particularly at FNBB and Hospital Trust, has been reas home equity and auto loans, and a "First Step" personal viewed by examiners and found to be satisfactory. Before loan program that provides unsecured loans for LMI bor- proposing to close a branch, under this policy, Bank of rowers. Furthermore, the Hospital Trust Examination indi- Boston would evaluate whether it or BayBanks had other cated that the bank offered a wide variety of small business branches in the community, the plans of either institution to loans throughout its delineated community and has in- open additional offices (including supermarket branches) in creased its involvement with the Small Business Adminis- the community, and other relevant factors. Bank of Boston tration through direct lending programs and through loan also would consult with community leaders to determine pools with other financial intermediaries.24 ways to minimize any adverse impact of a branch closure. The Hospital Trust Examination also indicated that Hos- The Board also notes that any branch closings by Bank of pital Trust designed programs to market its products and Boston, particularly in LMI neighborhoods, would be asservices to its entire community, including LMI areas. In sessed by examiners as part of the institution's CRA perforaddition, Hospital Trust participated in local community mance evaluation, and would be reviewed by the Board in development projects to improve LMI areas, including future applications to acquire a depository facility. projects that emphasize affordable housing and job cre- Conclusion on the Convenience and Needs Factor. The ation. Examiners specifically found that Hospital Trust Board has carefully considered the entire record in its maintained a high level of participation in development review of the convenience and needs factor under the BHC and redevelopment programs in the local community, in- Act. Based on all the facts of record, including information cluding projects sponsored by organizations such as The provided by Bank of Boston and the commenters in this Business Development Corporation of Rhode Island, East case, CRA performance examinations and other informa- Providence Housing Services, Inc., and Local Initiatives tion from the primary federal supervisors of Bank of Bos- Support Corporation.25 ton and BayBanks, and for the reasons discussed above and Branch Closings. Bank of Boston has stated that it in the South Boston Order, the Board concludes that the continues to evaluate whether branches in close proximity efforts of Bank of Boston and BayBanks to help meet the could be combined in the interest of efficiency without credit needs of all segments of the communities served, disrupting existing customer relationships or the ability of including LMI neighborhoods, are consistent with approvthe combined organization to continue to serve its commu- al.28 In this light, the Board concludes that convenience nities, including LMI communities.26 The Board notes that Rhode Island and that Hospital Trust has no plans to close any of its 23. RICRA's comments primarily focus on data filed under the branches that serve LMI neighborhoods. Home Mortgage Disclosure Act (12 U.S.C. § 2801 et seq.) ("HMDA") 27. See section 228 of the Federal Deposit Insurance Corporation for RIHMFC's loan programs. These data were previously considered Improvement Act of 1991, which added a new section 42 to the by the Board in connection with Bank of Boston's acquisition of Federal Deposit Insurance Act (12 U.S.C. § 1831r-l). See also Joint Bank Vermont Corporation, Burlington, Vermont. See Bank of Boston Policy Statement, 58 Federal Register 49,083 (1993). Under these Corporation, 75 Federal Reserve Bulletin 35 (1989) ("BankVermont provisions, all insured depository institutions are required to submit a Order"). RICRA also has provided updated HMDA data for notice of any proposed branch closing to the appropriate federal RIHMFC's loan programs in selected census tracts. The Board notes banking agency no later than 90 days before the date of closure that that since the BankVermont Order, Hospital Trust has become one of contains: RIHMFC's top three mortgage originators. In addition, Hospital Trust (1) The identity of the branch to be closed and the proposed closing was a partner with RIHMFC in 1993 in introducing the "Opening date, Doors" program for minority first-time home buyers, and allocated (2) A detailed statement of the reasons for the decision to close the $1 million to this program in 1993, 1994, and 1995. The Board also branch, and notes that HMDA data for 1993 and 1994 indicate that Hospital Trust (3) Statistical or other information supporting the reasons, consiscompares favorably to its competitors in the percentage of loans tent with the institution's written policy for branch closings. originated to borrowers in LMI areas and individuals in its delineated Movement of branches within the same immediate neighborhood community. that do not substantially affect the nature of the business or the 24. Examiners indicated that Hospital Trust's volume of residential customers served are considered consolidations or relocations under mortgage, housing rehabilitation, home improvement, and small busi- the Joint Policy Statement and, as such, do not require prior notice. ness loan originations or purchases was significant throughout Rhode 28. RICRA alleges that Hospital Trust charges higher fees for basic Island. banking services than its competitors. Bank of Boston disputes this 25. Bank of Boston indicates that at least 30 percent of grants made allegation and states that Hospital Trust has a competitive fee strucby Hospital Trust are to non-profit community development organiza- ture that provides consumers, including residents in LMI areas, with tions that support local economic development and affordable housing various options to meet individual deposit and credit needs. The initiatives, banking and credit education programs for consumers and record indicates that Hospital Trust has an established record of small businesses, and other financing and technical assistance pro- providing a full range of banking services in its delineated communigrams. ties, including substantial lending services and a full range of retail 26. In response to RICRA's concerns about branch closings in banking services. Examiners noted, for example, that the bank offered Rhode Island, Bank of Boston notes that BayBanks has no branches in low-cost basic banking services, did not charge for cashing govern- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 861 and needs considerations, including the CRA performance In order to approve this proposal, the Board also must records of the companies and banks involved in this pro- determine that the acquisition of the nonbanking subsidiarposal, are consistent with approval.29 ies of BayBanks and the performance of the proposed activities by Bank of Boston "can reasonably be expected Other Considerations to produce benefits to the public .. . that outweigh possible adverse effects, such as undue concentration of resources, Bank of Boston also has requested the Board's approval decreased or unfair competition, conflicts of interests, or under section 4(c)(8) of the BHC Act to acquire BayBank unsound banking practices."33 FSB and thereby engage in the operation of a savings Bank of Boston and BayBank FSB compete directly in association pursuant to section 225.25(b)(9) of Regula- the Boston, Massachusetts, banking market. As noted tion Y, and to increase its ownership interest in NYCE above, consummation of this proposal would not result in Corporation, a joint venture with other banking organiza- concentration levels in that market that would exceed the tions, that operates retail electronic funds transfer networks threshold standards of market concentration, as measured and engages in other data processing activities. The Board by the HHI under the DOJ Guidelines. Based on all the has determined that the operation of a savings association facts of record, the Board concludes that the acquisition of by a bank holding company is closely related to banking BayBank FSB by Bank of Boston would not result in any for purposes of section 4(c)(8) of the BHC Act.30 The significantly adverse effects on competition or the concen- Board also has determined that the activities of NYCE tration of banking resources in the Boston, Massachusetts, Corporation are closely related to banking within the mean- banking market or any other relevant banking market. ing of section 4(c)(8) of the BHC Act.31 Bank of Boston The Board also has further determined that the acquisihas committed to conduct these activities in accordance tion of BayBank FSB and the increased investment in with, and subject to the limitations of, the Board's regula- NYCE Corporation by Bank of Boston would not result in tions and orders approving these activities for bank holding any significantly adverse effects, such as undue concentracompanies.32 tion of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. Bank of Boston indicates that consummation of the proposed transaction would result in benefits to the public. In particular, the proposed transaction would combine the retail strength of ment checks, and processed food stamps. The record also does not BayBanks with the corporate and global banking operasupport the conclusion that the fees charged by Hospital Trust for checking accounts or other banking services are based in any way on a tions of Bank of Boston. The combined institution would factor prohibited by law. Based on all the facts of record, RICRA's be able to provide a large customer base with a broader allegations regarding the bank's fees do not raise adverse consider- range of products and services. In addition, Bank of Boston ations under the convenience and needs factor. maintains that the proposal would improve the risk profile 29. RICRA has requested that the Board hold a public meeting or of the combined institution and achieve significant cost hearing on the proposal and several of the individual commenters have expressed their interest in attending if such a hearing or meeting savings. Accordingly, the Board has determined that the were scheduled. The Board notes that a hearing is required under balance of public interest factors it is required to consider section 3(b) of the BHC Act (12 U.S.C. § 1842(b)) only if the appro- under section 4(c)(8) of the BHC Act is favorable and priate supervisory authority for the bank to be acquired makes a consistent with approval.34 timely written recommendation of denial. The subsidiary banks of BayBanks that would be acquired by Bank of Boston are national banks and the OCC has not recommended denial of this proposal. Conclusion Generally, under the Board's Rules of Procedure, the Board may, in its discretion, hold a public meeting or hearing on an application to Based on the foregoing, including the commitments made clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 252.3(e) and to the Board by Bank of Boston in connection with this 262.25(d). All interested parties have had an opportunity to present proposal, and in light of all the facts of record, the Board their views and several commenters, including RICRA, have submit- has determined that this proposal should be, and hereby is, ted comments that have been considered by the Board. On the basis of approved. The Board's approval is specifically conditioned all the facts of record, the Board has determined that a public meeting on compliance by Bank of Boston with all commitments or hearing is not necessary to clarify the factual record in this proposal or otherwise warranted in this case. Accordingly, RICRA's request for made in connection with this proposal as well as the a public meeting or hearing on this matter is denied. conditions discussed in this order. 30. See 12 C.F.R. 225.25(b)(9). The Board requires savings associa- The Board's determination on the nonbanking activities tions acquired by bank holding companies to conform their direct and to be conducted by Bank of Boston is subject to all the indirect activities to those permissible for bank holding companies under section 4(c)(8) of the BHC Act and Regulation Y. Bank of conditions in the Board's Regulation Y, including those in Boston has committed that all activities of BayBank FSB will conform to those requirements. 31. See The Bank of New York Company, Inc., et al., 80 Federal Reserve Bulletin 1107 (1994); 12 C.F.R. 225.25(b)(7). 33. 12 U.S.C. § 1843(c)(8). 32. Bank of Boston also has requested the Board's approval to 34. Bank of Boston also has provided notice of its intention to acquire three inactive subsidiaries of BayBanks. Bank of Boston has establish a branch in the Cayman Islands, B.W.I., at the location of the committed that it will not reactivate these subsidiaries without the current branch of BayBank MA under the Board's Regulation K prior approval of the Federal Reserve System. (12 C.F.R. 211.3(a)(3)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

862 Federal Reserve Bulletin • September 1996 sections 225.7 and 225.23(g) (12 C.F.R. 225.7 and Connecticut 225.23(g)), and to the Board's authority to require such modification or termination of the activities of a bank Hartford Hartford RMA plus the Windham County holding company or any of its subsidiaries as the Board township of Ashford, the Hartford County finds necessary to assure compliance with or to prevent township of Hartland, and the Tolland evasion of the provisions and purposes of the BHC Act and County township of Union the Board's regulations and orders issued thereunder. The commitments and conditions relied on by the Board in reaching this decision are deemed to be conditions im- Rhode Island posed in writing by the Board in connection with its findings and decision, and as such may be enforced in Providence Providence-Warwick RMA plus the proceedings under applicable law. towns of Charlestown and West Green- The acquisition of the subsidiary banks of BayBanks wich shall not be consummated before the fifteenth calendar day after the effective date of this order, and the banking and nonbanking transactions shall not be consummated later ORDERS ISSUED UNDER INTERNATIONAL BANKING ACT than three months after the effective date of this order, unless such period is extended for good cause by the CBG Compagnie Bancaire Geneve Board, or by the Federal Reserve Bank of Boston, acting Geneva, Switzerland pursuant to delegated authority. By order of the Board of Governors, effective July 10, Order Approving Establishment of a Representative 1996. Office Voting for this action: Chairman Greenspan and Governors Kelley, CBG Compagnie Bancaire Geneve ("Bank"), Geneva, Lindsey, Yellen, and Meyer. Absent and not voting: Vice Chair Rivlin Switzerland, a foreign bank within the meaning of the and Governor Phillips. International Banking Act ("IBA"), has applied under section 10(a) of the IBA (12 U.S.C. § 3107(a)) to establish a JENNIFER J. JOHNSON representative office in Miami, Florida. The Foreign Bank Deputy Secretary of the Board Supervision Enhancement Act of 1991 ("FBSEA"), which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish a representative Appendix office in the United States. Notice of the application, affording interested persons an opportunity to submit comments, Description of Local Banking Markets in Which Bank of has been published in a newspaper of general circulation in Boston and BayBanks Compete Miami, Florida (The Miami Herald, January 4, 1996). The time for filing comments has expired, and all comments have been considered. Massachusetts Bank, with total consolidated assets of approximately $288 million,1 provides private banking and related commercial banking services from offices in Switzerland. Amherst- Amherst Ranally Metropolitan Area Banque Cantonale de Geneve, Geneva, Switzerland Northampton ("RMA") plus Northampton RMA plus ("Banque Cantonale"), owns 40 percent of the shares of the towns of Chesterfield, Cummington, Bank.2 The remaining shares are controlled by two individ- Deerfield, Goshen, Plainfield, Shutesbury, uals who together own directly and indirectly 60 percent of Westhampton, and Whaley the shares of Bank.3 Boston Boston RMA plus the New Hampshire towns of Greenville, Lyndeboro, Mason, and New Ipswich Cape Cod Barnstable County 1. Asset data are as of December 31, 1995. New Bedford New Bedford RMA plus the town of 2. The Canton of Geneva, the City of Geneva and 44 municipalities Wareham located in the Canton of Geneva own all of the registered shares of Springfield Springfield RMA plus the towns of Banque Cantonale, representing more than 82 percent of the voting rights of Banque Cantonale. The remaining shares of Banque Canto- Blandford, Chester, Granville, Hardwick, nale, representing less than 18 percent of voting rights, are held in Otis, Tolland, Ware, Warren, and Worth- bearer form. ington 3. Mr. Rene de Picciotto owns directly 7.6 percent of the shares of Taunton Taunton RMA Bank, and an additional 34.7 percent through Covest Holding, S.A., Luxembourg ("Covest"), a company wholly owned by Mr. de Pic- Worcester Worcester RMA plus the towns of Hubciotto. Mr. Philippe Setton holds directly 3.4 percent of the shares of bardston, New Braintree, Oakham, and Bank, and another 14.3 percent through Phos Holding S.A., Luxem- West Brookfield bourg ("Phos"), a company wholly owned by Mr. Setton. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 863 Bank operates two branches and one nonbanking subsid- In this case, the Board has considered the following iary in Switzerland and a representative office in London, information with respect to the issue of supervision by England. Bank provides asset management and investment home country authorities. Bank is supervised and regulated advisory services, primarily to customers who reside out- by the Swiss Federal Banking Commission ("SFBC"). side Switzerland, and also engages in foreign exchange The SFBC is responsible for the prudential supervision and operations and precious metals trading. Bank's primary regulation of credit institutions. The Board previously has purpose for establishing the proposed representative office determined, in connection with an application involving is to provide enhanced service to its existing customers in another Swiss bank, Coutts & Co., AG ("Coutts"), that South America and the Caribbean and to facilitate the Coutts was subject to home country supervision on a expansion of its private banking business in those markets. consolidated basis.6 Based on the information provided by The proposed representative office would perform repre- Bank and the SFBC, the Board has determined that Bank is sentational and administrative functions related to Bank's subject to substantially similar supervision by the SFBC. private banking activities at the direction of Bank's head Consequently, based on all the facts of record, the Board office in Geneva. has determined that factors relating to the supervision of In acting on an application to establish a representative Bank by its home country supervisor are consistent with office, the IBA and Regulation K provide that the Board approval of the proposed representative office. shall take into account whether the foreign bank engages The Board also has taken into account the additional directly in the business of banking outside of the United standards set forth in section 7 of the IBA (see 12 U.S.C. States and has furnished to the Board the information it § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). The SFBC has needs to assess the application adequately. The Board also indicated that it has no objection to the establishment of the shall take into account whether the foreign bank and any proposed representative office. foreign bank parent is subject to comprehensive supervi- With respect to the financial and managerial resources of sion or regulation on a consolidated basis by its home Bank, taking into consideration Bank's record of operacountry supervisor (12 U.S.C. § 3105(d)(2); 12 C.F.R. tions in its home country, its overall financial resources, 211.24). The Board may also take into account additional and its standing with its home country supervisors, the standards as set forth in the IBA and Regulation K Board also has determined that financial and managerial (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)). factors are consistent with approval of the proposed repre- The Board previously has stated that the standards that sentative office. Bank appears to have the experience and apply to the establishment of a branch or agency need not capacity to support the proposed representative office and in every case apply to the establishment of a representative also has established controls and procedures for the prooffice, because representative offices do not engage in a posed representative office to ensure compliance with U.S. banking business and cannot take deposits or make loans.4 law. In evaluating an application to establish a representative Finally, with respect to access to information about office under the IBA and Regulation K, the Board will take Bank's operations, the Board has reviewed the restrictions into account the standards that apply to the establishment on disclosure under applicable law, and has communicated of branches and agencies, subject generally to the follow- with relevant government authorities about access to inforing considerations. With respect to supervision by home mation. Bank, Banque Cantonale, Covest and Phos have country authorities, a foreign bank that proposes to estab- committed to make available to the Board such informalish a representative office should be subject to a significant tion on the operations of Bank and any affiliate of Bank degree of supervision by its home country supervisor.5 A that the Board deems necessary to determine and enforce foreign bank's financial and managerial resources will be compliance with the IBA, the Bank Holding Company Act, reviewed to determine whether its financial condition and as amended, and other applicable federal law. To the extent performance demonstrate that it is capable of complying that the provision of such information may be prohibited with applicable laws and has an operating record that by law, Bank, Banque Cantonale, Covest and Phos have would be consistent with the establishment of a representa- committed to cooperate with the Board to obtain any tive office in the United States. Finally, all foreign banks, necessary consents or waivers that might be required from whether operating through branches, agencies or represen- third parties for disclosure. In addition, subject to certain tative offices, will be required to provide adequate assur- conditions, the SFBC may share information on Bank's ances of access to information on the operations of the operations with other supervisors, including the Board. In bank and its affiliates necessary to determine compliance light of these commitments and other facts of record, and with U.S. laws. subject to the condition described below, the Board concludes that Bank has provided adequate assurances of Mr. de Picciotto and Mr. Setton are parties to an agreement among the shareholders of Bank. 4. See 58 Federal Register 6348, 6351 (1993). 5. See Citizens National Bank, 79 Federal Reserve Bulletin 805 6. See Coutts & Co., AG, 79 Federal Reserve Bulletin 636 (1993). (1993). See also Promstroybank of Russia, 82 Federal Reserve Bulle- See also Union Bank of Switzerland, 82 Federal Reserve Bulletin 370 tin 599 (1996) (addressing standards applicable to representative (1996); Swiss Bank Corporation, 82 Federal Reserve Bulletin 690 offices with limited activities). (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

864 Federal Reserve Bulletin • September 1996 access to any necessary information the Board may re- Board in connection with its decision, and may be enforced quest. in proceedings under 12 U.S.C. § 1818 or 12 U.S.C. § 1847 On the basis of all the facts of record, and subject to the against Bank, its offices, and its affiliates. commitments made by Bank, as well as the terms and By order of the Board of Governors, effective July 29, conditions set forth in this order, the Board has determined 1996. that Bank's application to establish a representative office Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and should be, and hereby is, approved. Should any restrictions Governors Kelley, Lindsey, Phillips, Yellen, and Meyer. on access to information on the operations or activities of Bank and its affiliates subsequently interfere with the JENNIFER J. JOHNSON Board's ability to obtain information to determine and Deputy Secretary of the Board enforce compliance by Bank or its affiliates with applicable Federal statutes, the Board may require termination of any 7. The Board's authority to approve the establishment of the proof the Bank's direct or indirect activities in the United posed representative office parallels the continuing authority of the States. Approval of the application is also specifically Florida Department of Banking and Finance to license offices of a conditioned on Bank's compliance with the commitments foreign bank. The Board's approval of the application does not made in connection with the application and with the supplant the authority of the State of Florida, and its agent, the Florida Department of Banking and Finance, to license the proposed represenconditions in this order.7 The commitments and conditions tative office of Bank in accordance with any terms or conditions that referred to above are conditions imposed in writing by the the State of Florida 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 CU Bancorp, Home Interstate Bancorp, July 24, 1996 Encino, California Signal Hill, California Home Bank, Signal Hill, California First United Banc shares, Inc. Carlisle Bancshares, Inc., July 1, 1996 El Dorado, Arkansas Little Rock, Arkansas Citizens Bank and Trust Company, Carolisle, Arkansas First Bank of Arkansas, Brinkley, Arkansas Hazen First State Bank, Hazen, Arkansas Old National Bancorp, Workingmens Capital Holdings, Inc., July 12, 1996 Evansville, Indiana Bloomington, Indiana Workingmens Federal Savings Bank, Bloomington, Indiana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 865 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 ABC Bancorp, Central Bankshares, Inc., Atlanta July 5, 1996 Moultrie, Georgia Cordele, Georgia Central Bank & Trust, Cordele, Georgia ABC Bancorp, First National Financial Corporation, Atlanta July 18, 1996 Moultrie, Georgia Albany, Georgia First National Bank of South Georgia, Albany, Georgia Appalachian Bancshares, Inc., Gilmer County Bank, Atlanta July 24, 1996 Ellijay, Georgia Ellijay, Georgia Arkansas Banking Company, Mercantile Bank of Batesville, N.A., St. Louis July 18, 1996 Jonesboro, Arkansas Batesville, Arkansas Bancorp of Lucedale, Inc., Bank of Lucedale, Atlanta June 28, 1996 Lucedale, Mississippi Lucedale, Mississippi Bradford Bancorp, Inc., The Bradford National Bank of St. Louis July 10, 1996 Greenville, Illinois Greenville, Greenville, Illinois Carroll County Bancorporation, Inc., Nevada Community Bancshares, Inc., Chicago July 12, 1996 Carroll, Iowa Nevada, Iowa Centura Banks, Inc., First Community Bank, Richmond July 19, 1996 Rocky Mount, North Carolina Gastonia, North Carolina Dartmouth Capital Group, Inc., SC Acquisition Corp., San Francisco July 22, 1996 Encinitas, California Huntington Beach, California Dartmouth Capital Group, L.P., Encinitas, California Duke Financial Group, Inc., Inland Empire National Bank, Minneapolis June 21, 1996 St. Paul, Minnesota Riiverside, California Farmers State Bancshares, Inc., Farmers State Bank, Chicago July 25, 1996 Mason City, Iowa Northwood, Iowa First Banking Company of FNB Bancshares, Inc., Atlanta July 18, 1996 Southeast Georgia, Springfield, Georgia Statesboro, Georgia First Fidelity Bancorp, Inc., Comban Shares, Inc., Kansas City July 24, 1996 Oklahoma City, Oklahoma Warr Acres, Oklahoma First Financial Corporation, Crawford Bancorp, Inc., Chicago June 25, 1996 Terre Haute, Indiana Robinson, Illinois First La Grange Bancshares, Inc., LGF Bancshares, Inc., Dallas June 21, 1996 La Grange, Texas Dover, Delaware The First National Bank of La Grange, La Grange, Texas First National Banc, Inc., First National Bank, Atlanta July 18, 1996 St. Marys, Georgia St. Marys, Georgia First Savings Bank of Washington Inland Empire Bank, San Francisco June 28, 1996 Bancorp, Inc., Hermiston, Oregon Walla Walla, Washington FNB Corporation, Southwest Banks, Inc., Cleveland July 12, 1996 Hermitage, Pennsylvania Naples, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

866 Federal Reserve Bulletin • September 1996 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Frontier Financial Corporation, Washington Banking Corporation, San Francisco July 9, 1996 Everett, Washington Oak Harbor, Washington The M.B. and I.M. Hampton Family Morris County Bankshares, Inc., Dallas July 17, 1996 Partnership, Ltd., Naples, Texas Mt. Pleasant, Texas Morris County National Bank, Naples, Texas Hills Bancorporation, Hills Bank Kalona, Chicago July 10, 1996 Hills, Iowa Kalona, Iowa HNB Corporation, Home National Bank, Kansas City July 16, 1996 Arkansas City, Kansas Scottsdale, Arizona HUB CO, Inc., Hometown Bancorporation, Inc., New York July 19, 1996 Mahwah, New Jersey Darien, Connecticut The Bank of Darien, Darien, Connecticut Inter-Mountain Bancorp, Inc., First Security Bank of Belgrade, Minneapolis July 9, 1996 Bozeman, Montana Belgrade, Montana Landmark Financial Group, Inc., Alpine Bancorporation, Inc., Chicago July 23, 1996 Belvidere, Illinois Rockford, Illinois Alpine Bank of Illinois, Rockford, Illinois LGF Bancshares, Inc., The First National Bank of La Grange, Dallas June 21, 1996 Dover, Delaware La Grange, Texas LNB Financial Corp., The Liberty National Bank in Paris, Dallas July 2, 1996 Dover, Delaware Paris, Texas Magnolia Midlands Bankshares, Bank of Eastman, Atlanta June 25, 1996 Inc., Eastman, Georgia Eastman, Georgia MainS treet BankGroup The First National Bank of Clifton Richmond July 19, 1996 Incorporated, Forge, Martinsville, Virginia Clifton Forge, Virginia Mercantile Bancorp, Inc., First Lansing Bancorp, Inc., Chicago June 21, 1996 Hammond, Indiana Lansing, Illinois Meriwether Bank Shares, Inc., The Greenville Banking Company, Atlanta July 25, 1996 Greenville, Georgia Greenville, Georgia Nevada Community Bancshares, Community Bank, July 12, 1996 Inc., Nevada, Iowa Nevada, Iowa Paris Bancshares, Inc., LNB Financial Corp., Dallas July 2, 1996 Paris, Texas Dover, Delaware The Liberty National Bank in Paris, Paris, Texas Pembroke Bancshares, Inc., Missouri Valley Bancshares, Inc., July 16, 1996 Kansas City, Missouri Kansas City, Missouri Union Bancshares, Inc., Kansas City, Missouri Peterka Family Partnership, M&H Financial Services, Inc., Minneapolis July 23, 1996 Miller, South Dakota Miller, South Dakota Platte Valley Banc, Inc., Platte Valley National Bank, Kansas City July 8, 1996 Scottsbluff, Nebraska Scottsbluff, Nebraska SC Acquisition Corp., Commerce Security Bank, San Francisco July 22, 1996 Huntington Beach, California Sacramento, California SDN Bancorp, Inc., Encinitas, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 867 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Texas Financial Bancorporation, Community Bank of Arizona, Dallas June 21, 1996 Inc., Wickenburg, Arizona Minneapolis, Minnesota Thera Holding Partners, Ltd., Citizens Bankers, Inc., Dallas July 5, 1996 Houston, Texas Baytown, Texas Citizens Banks of Delaware, Inc., Wilmington, Delaware Baytown State Bank, Baytown, Texas Citizens Bank & Trust Company, Baytown, Texas Pasadena State Bank, Pasadena, Texas TIB Financial Corp., TIB Bank of the Keys, Atlanta June 24, 1996 Key Largo, Florida Key Largo, Florida UnionBancorp, Inc., Country Bancshares, Inc., Chicago June 28, 1996 Streator, Illinois Hull, Illinois Prairie Bancorp, Inc., Princeton, Illinois Union Bancorp, Inc., King George State Bank, Inc., Richmond July 25, 1996 Bowling Green, Virginia King Georgia, Virginia United Community Bankshares, The Bank of Franklin, Richmond July 10, 1996 Inc., Franklin, Virginia Franklin, Virginia The Bank of Sussex and Surry, Wakefield, Virginia Vogel Bancshares, Inc., Ireton Bancorp, Chicago July 3, 1996 Orange City, Iowa Ireton, Iowa Security Savings Bank, Ireton, Iowa Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date BancFirst Ohio Corp., County Savings Bank, Cleveland July 12, 1996 Zanesville, Ohio Newark, Ohio Bankers Trust New York Wolfensohn & Co., Inc., New York July 19, 1996 Corporation, New York, New York New York, New York Fuji-Wolfensohn International, New York, New York BT Securities Corporation, New York, New York Canadian Imperial Bank of CIBC Inc., New York June 27, 1996 Commerce, New York, New York Toronto, Ontario, Canada Canadian Imperial Holdings Inc. New York, New York Capital Corp of the West, Town and Country Finance and Thrift San Francisco June 28, 1996 Merced, California Company, Turlock, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

868 Federal Reserve Bulletin • September 1996 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date FBOP Corporation, Torrance Bank, S.S.B., Chicago June 26, 1996 Oak Park, Illinois Torrance, California Regency Savings Bank, F.S.B., Naperville, Illinois FCFT, Inc., South Oakwood Plaza Limited Richmond July 16, 1996 Princeton, West Virginia Partnership, III, Princeton, West Virginia First Southern Bancshares, Inc., American Financial Mortgage Corp., Atlanta July 22, 1996 Lithonia, Georgia Decatur, Georgia FSB Mortgage Services, Inc., Lithonia, Georgia Friendship Bancorp, Independent Bankers Life Insurance Chicago July 5, 1996 Friendship, Indiana Company of Indiana, Phoenix, Arizona Gulf West Banks, Inc., Liberty Leasing Corporation, Atlanta July 25, 1996 St. Petersburg, Florida Tampa, Florida Hinsbrook Bancshares, Inc., Northrn Illinois Financial Services, Chicago July 23, 1996 Willowbrook, Illinois LLC, Hinsbrook Bank and Trust, Willowbrook, Illinois Willowbrook, Illinois Serve Corps Mortgage Services, LLC, Downers Grove, Illinois J.P. Morgan & Co., Incorporated, J.P. Morgan Trust Company of Illinois, New York July 1, 1996 New York, New York Chicago, Illinois Libertyville Bancorp, Inc., To engage in making and servicing Chicago July 11, 1996 Lake Forest, Illinois loans Marshall & Ilsley Corporation, EastPoint Technology, Inc., Chicago July 19, 1996 Milwaukee, Wisconsin Bedford, New Hampshire Middle Georgia Bankshares, Inc., Prolmage, Inc., Atlanta July 12, 1996 Unadilla, Georgia Macon, Georgia Macon Bank & Trust, Macon, Georgia Provesa, Inc., Macon, Georgia MidSouth Bancorp, Inc., Financial Services of the South, Inc., Atlanta June 27, 1996 Lafayette, Louisiana Lafayette, Louisiana Nationsbank Corporation Commerce Finance Company, Richmond June 24, 1996 Charlotte, North Carolina Germantown, Tennessee NationsBank Corporation, TAC Bancshares, Inc., Richmond June 27, 1996 Charlotte, North Carolina Miami, Florida NationsCredit Consumer Corporation, Allentown, Pennsylvania NB Holdings Corporation, Chase Federal Bank, FSB, Charlotte, North Carolina Miami, Florida Newnan Holdings, Inc., Newnan Financial Services, Inc., Atlanta June 28, 1996 Newnan, Georgia Newnan, Georgia Citizens Mortgage Group, Inc., Newnan, Georgia Norwest Corporation, DUMAE Insurance Agency, Inc., Minneapolis July 9, 1996 Minneapolis, Minnesota Dell Rapids, South Dakota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 869 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Otto Bremer Foundation, To engage de novo in making, Minneapolis July 5, 1996 St. Paul, Minnesota acquiring, and servicing loans and Bremer Financial Corporation, other extensions of credit; and leasing St. Paul, Minnesota personal and real property Palos Bancshares, Inc., Northern Illinois Financial Services, Chicago July 23, 1996 Palos Heights, Illinois LLC, Palos Bank and Trust Company, Willowbrook, Illinois Palos Heights, Illinois Serve Corps Mortgage Services, LLC, Downers Grove, Illinois Santa Barbara Bancorp, To engage de novo directly in San Francisco June 19, 1996 Santa Barbara, California community development activities Societe Generale, To engage de novo in making equity New York July 10, 1996 Paris, France and debt investments in corporations or projects designed primarily to promote community welfare Southeast Bancorp of Texas, Inc., Bonnet Finance Corporation, Dallas July 12, 1996 Winnie, Texas Winnie, Texas Southwest Financial Group of Iowa, To engage de novo in making and Chicago June 26, 1996 Inc., servicing loans Red Oak, Iowa Star Banc Corporation, DJJ Leasing Ltd., Cleveland July 10, 1996 Cincinnati, Ohio Cincinnati, Ohio Summit Financial Corporation, Academy Finance, Inc., Richmond July 17, 1996 Greenville, South Carolina Lake City, South Carolina Summit Financial Corporation, Berkeley Loans, Inc., Richmond June 20, 1996 Greenville, South Carolina Moncks Corner, South Carolina Synovus Financial Corp., Canterbury Trust Company, Atlanta July 10, 1996 Columbus, Georgia Birmingham, Alabama TB&C Bancshares, Inc., Columbus, Georgia B&C Bancshares, Inc., Columbus, Georgia UnionBancorp, Inc., LaSalle County Collections, Inc. Chicago July 16, 1996 Streator, Illinois Ottawa, Illinois WesBanco, Inc., WesBanco Mortgage Company, Cleveland July 18, 1996 Wheeling, West Virginia Wheeling, West Virginia Universal Mortgage Company, Bridgeport, West Virginia West Coast Bancorp, West Coast Trust Company, Inc. San Francisco July 10, 1996 Lake Oswego, Oregon Salem, Oregon Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Finlayson Bancshares, Inc., Wood Lake Bancorporation, Minneapolis July 12, 1996 Finlayson, Minnesota Wood Lake, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

870 Federal Reserve Bulletin • September 1996 APPLICATIONS APPROVED UNDER BANK MERGER 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. Applicant(s) Bank(s) Effective Date Home Bank, California United Bank, N.A., July 24, 1996 Signal Hill, California Encino, California 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 Centura Bank, First Community Bank, Richmond July 19, 1996 Rocky Mount, North Carolina Gastonia, North Carolina DeMotte State Bank, NBD Bank, N.A., Chicago July 23, 1996 DeMotte, Indiana Indianapolis, Indiana F & M Bank-Hallmark, F & M Bank-Potomac, Richmond July 10, 1996 Springfield, Virginia Herndon, Virginia Fairfax Bank & Trust Company, Fairfax, Virginia Silsbee State Bank, First Bank of Texas, Dallas July 11, 1996 Silsbee, Texas Tomball, Texas Tri-City Bank & Trust Company, National Bank of Commerce, Atlanta July 18, 1996 Blountville, Tennessee Memphis, Tennessee PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the the district court ruling on July 17, 1996; the Board's Federal Reserve Banks in which the Board of Governors is not opposition was filed on July 23, 1996. named a party. Interamericas Investments, Ltd. v. Board of Governors, No. 96-60326 (5th Cir., filed May 8, 1996). Petition for review of order imposing civil money penalties and cease and Long v. Board of Governors, No. 96-9526 (10th Cir., filed desist order in enforcement case. Petitioners' brief was filed July 31, 1996). Petition for review of Board order dated on July 26, 1996. July 2, 1996, assessing a civil money penalty and cease and Kuntz v. Board of Governors, No. 96-1137 (D.C. Cir., filed desist order for violations of the Bank Holding Company April 25, 1996). Petition for review of a Board order dated Act. March 25, 1996, approving an application by CoreStates Esformes v. Board of Governors, No. 96-1916 (S.D. Fla., filed Financial Corp., Philadelphia, Pennsylvania to acquire Me- July 12, 1996). Complaint challenging Board denial of ridian Bancorp, Inc., Reading, Pennsylvania. The Board's administrative request for confidential supervisory informa- motion to dismiss was filed on June 3, 1996. tion. On July 12, 1996, plaintiffs moved for an expedited Kuntz v. Board of Governors, No. 96-1079 (D.C. Cir., filed hearing on the complaint. March 7, 1996). Petition for review of a Board order dated Board of Governors v. Interamericas Investments, Ltd., No. February 7, 1996, approving applications by The Fifth 96-7108 (D.C. Cir., filed June 14, 1996). Appeal of district Third Bank, Cincinnati, Ohio, and he Firth Third Bank of court ruling granting, in part, the Board's application to Columbus, Columbus, Ohio, to acquire certain assets and enforce an adminstrative investigatory subpoena for docu- assume certain liabilities of 25 branches of NBD Bank, ments and testimony. Appellants filed a motion for a stay of Columbus, Ohio. Petitioner has moved to consolidate the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 871 case with Kuntz v. Board of Governors, No. 95-1495. On Corporation, Cleveland, Ohio, through a joint venture sub- April 8, 1996, the Board filed a motion to dismiss the sidiary. On April 23, 1996, the court vacated the Board's action. order. On July 31, 1996, the full court granted the Board's Henderson v. Board of Governors, No. 96-1054 (D.C. Cir., suggestion for rehearing in banc, and vacated the April 23 filed February 16, 1996). Petition for review of a Board panel decision. order dated January 17, 1996, approving the merger of First In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed Citizens BancShares, Inc., Raleigh, North Carolina, with January 6, 1995). Action to enforce subpoena seeking pre- Allied Bank Capital, Inc., Sanford, North Carolina. Petition- decisional supervisory documents sought in connection with ers' motion for a stay was denied on March 7, 1996. an action by Bank of New England Corporation's trustee in Research Triangle Institute v. Board of Governors, No. bankruptcy against the Federal Deposit Insurance Corporation. The Board filed its opposition on January 20, 1995. 1:96CV00102 (M.D.N.C., filed February 12, 1996). Con- Oral argument on the motion was held July 14, 1995. tract dispute. On May 3, 1996, the Board filed a motion to dismiss the action. Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New Inner City Press/Community on the Move v. Board of Gover- York, filed September 17, 1991). Action to freeze assets of nors, No. 96-4008 (2nd Cir., filed January 19, 1996). Peti- individual pending administrative adjudication of civil money penalty assessment by the Board. On September 17, tion for review of a Board order dated January 5, 1996, 1991, the court issued an order temporarily restraining the approving the applications and notices by Chemical Banktransfer or disposition of the individual's assets. ing Corporation to merge with The Chase Manhattan Corporation, both of New York, New York, and by Chemical Bank to merge with The Chase Manhattan Bank, N.A., both of New York, New York. Petitioners' motion for an emer- FINAL ENFORCEMENT DECISIONS ISSUED BY THE gency stay of the transaction was denied following oral BOARD OF GOVERNORS argument on March 26, 1996. The case has been consoli- In the Matter of dated for oral argument and decision with Lee v. Board of Governors, No. 95-4134 (2d Cir.). Cedar Vale Bank Holding Company, Inc., Menick v. Greenspan, No. 95-CV-01916 (D. D.C., filed Octo- Wellington, Kansas ber 10, 1995). Complaint alleging sex, age, and handicap discrimination in employment. Kuntz v. Board of Governors, No. 95-1495 (D.C. Cir., filed Docket Nos. September 21, 1995). Petition for review of Board order dated August 23, 1995, approving the applications of The 91-027-B-HC Fifth Third Bank, Cincinnati, Ohio, to acquire certain assets 91-027-B-I1 and assume certain liabilities of 12 branches of PNC Bank, 91-027-CMP-I1 Ohio, N.A., Cincinnati, Ohio, and to establish certain branches. The Board's motion to dismiss was filed on Final Decision and Order October 26, 1995. Lee v. Board of Governors, No. 95-4134 (2nd Cir., filed This is an administrative proceeding initiated by the Board August 22, 1995). Petition for review of Board orders dated of Governors of the Federal Reserve System (the "Board") July 24, 1995, approving certain steps of a corporate reorgaon February 7, 1994, by the issuance of a Notice of nization of U.S. Trust Corporation, New York, New York, Charges and of Hearing Pursuant to Section 8(b) of the and the acquisition of U.S. Trust by Chase Manhattan Federal Deposit Insurance Act, as Amended ("FDI Act"), Corporation, New York, New York. On September 12, and Notice of Assessment of Civil Money Penalty Pursu- 1995, the court denied petitioners' motion for an emergency ant to Section 8(b) of the Bank Holding Company Act, as stay of the Board's orders. The Board's brief was filed on Amended (the "BHC Act") (the "Notice") against Cedar April 16, 1996. Vale Bank Holding Company, Inc., Wellington, Kansas Beckman v. Greenspan, No. 95-35473 (9th Cir., filed May 4, ("Cedar Vale") and W.C. Long, Jr. ("Long"), Cedar Vale's 1995). Appeal of dismissal of action against Board and chairman, president and sole shareholder.1 The Notice alothers seeking damages for alleged violations of constituleged that Cedar Vale, at Long's direction, violated sectional and common law rights. The appellants' brief was tions 3(a)(1) and 4 of the BHC Act, and Regulation Y filed on June 23, 1995; the Board's brief was filed on July (12 C.F.R. Part 225), by its unlawful acquisition of Sumner 12, 1995. County Bancshares, Inc. ("Sumner County"), its subsid- Money Station, Inc. v. Board of Governors, No. 95-1182 iary bank, the Bank of Commerce and Trust Company (the (D.C. Cir., filed March 30, 1995). Petition for review of a Board order dated March 1, 1995, approving notices by Bank One Corporation, Columbus, Ohio; CoreStates Finan- 1. The Notice of Assessment of Civil Money Penalty was also issued against James J. Long ("J. Long"), Cedar Vale's attorney and cial Corp., Philadelphia, Pennsylvania; PNC Bank Corp., W.C. Long's son. On June 12, 1995, J. Long consented to the issuance Pittsburgh, Pennsylvania; and KeyCorp, Cleveland, Ohio, of an Order of Assessment of Civil Money Penalty in settlement of the to acquire certain data processing assets of National City Board's proceeding against him. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

872 Federal Reserve Bulletin • September 1996 "Bank"), and Tri-County Financial Corporation ("Tri- ular, Long argued that the ALJ erred in his penalty determi- County"), an insurance agency. The Notice sought the nation because he failed to apply the civil money penalty entry of a cease and desist order prohibiting Long and matrix used by the Board; incorrectly concluded that Long Cedar Vale from further violations of law and requiring or Cedar Vale benefitted as a result of the violation and that Cedar Vale and Long to correct Cedar Vale's violations by Long acted in bad faith; and failed to consider the benefit reversing the unauthorized acquisitions, and sought a to the Bank as a result of the merger. Long's exception to $300,000 civil money penalty from Long. the finding that Cedar Vale illegally retained control of Upon review of the administrative record, including all Tri-County was based on his contention that Board appost-hearing submissions of the parties, the Board hereby proval was not required because Tri-County was a dormant makes its Final Decision, assessing a civil money penalty company. against Long in the amount of $717,941 and ordering that Long be prohibited from future violations of the BHC Act. Statutory and Regulatory Authority Procedural History Section 3(a) requires prior Board approval before a company can become a bank holding company. Following the issuance of the Notice, Board Enforcement 12 U.S.C. § 1842(a). A "bank holding company" is any Counsel ("Enforcement Counsel") and Respondents filed company that has control over any bank or over any cross-motions for summary disposition. On February 21, company that is or becomes a bank holding company. 1994, Administrative Law Judge Walter J. Alprin (the 12 U.S.C. § 1841(a)(1). Section 11(a) of the Board's Reg- "ALJ") issued a partial summary disposition order in favor ulation Y implements this statutory provision by requiring of Enforcement Counsel finding that Cedar Vale violated a prior application to the Board for the formation of a bank section 3 of the BHC Act and Regulation Y by acquiring holding company. 12 C.F.R. 225.11(a). Section 4 of the Sumner County and the Bank without Board approval and BHC Act requires prior Board approval before a bank section 4 of the BHC Act and Regulation Y by retaining holding company may acquire or retain control of any control of Tri-County without Board approval. The ALJ company which is not a bank or which engages in nonfurther found that Long caused Cedar Vale's violations of banking activities. 12 U.S.C. §§ 1841(a) and (c)(8). Secthe BHC Act and Regulation Y. The ALJ recommended tion 21(a) of the Board's Regulation Y implements this summary disposition on the cease and desist relief sought section by providing that a bank holding company or a in the Notice, but found that there were issues of fact subsidiary may only engage in activities that are closely regarding the assessment of a civil money penalty that related to banking when it obtains prior Board approval for required adjudication at hearing. such activities. 12 C.F.R. 225.21(a). Any company that Thereafter, a formal adjudicatory hearing to determine violates, and any individual who participates in a violation the appropriateness and amount of a penalty was held of, the BHC Act may be assessed a penalty of up to before the ALJ in Wichita, Kansas from June 12-15, 1995. $25,000 per day for each day the violation continues. 12 After receiving the parties' post-hearing briefs, the ALJ U.S.C. § 1847(b)(1). issued his Recommended Decision on November 21, 1995, including his proposed Findings of Fact and Conclusions Summary of Findings of Fact of Law. The Recommended Decision incorporated the findings of the ALJ's summary disposition order that Ce- The Board adopts the ALJ's Recommended Decision and dar Vale violated the BHC Act and that Long caused such Recommended Findings of Fact and Conclusions of Law, violations. Based on his finding that Long had received a except as specifically supplemented or modified herein. benefit of at least $567,941 as a result of the violations, the At all relevant times to the Notice, Long was the presi- ALJ recommended a civil money penalty in the amount of dent and chairman of Cedar Vale, Sumner County, the $717,941. Bank and Tri-County, as well the sole shareholder of Cedar The ALJ also recommended that a cease and desist order Vale, Sumner County and Tri-County. Prior to his ownerbe issued prohibiting Cedar Vale and Long from further ship of Cedar Vale and Sumner County, Long had extenviolations of the BHC Act. The ALJ did not recommend a sive experience in the banking industry dating back to reversal of the unlawful transactions because none of the original entities remained.2 1955 that included running, owning and serving as a director for several other banks. Long also had prior experience On January 31, 1996, Long filed Exceptions to the with the Federal Reserve's application process, having Recommended Decision pursuant to Section 263.39(a) of filed other applications, including his 1976 application the Uniform Rules of Practice and Procedure, 12 C.F.R. seeking approval for Sumner County to become a bank 263.39(a). Long's Exceptions were directed only to the holding company and engage in permissible insurance amount of the penalty and the finding of a violation with activities, and his 1984 change-of-control notice in connecrespect to the retention of control of Tri-County. In partiction with his acquisition of Cedar Vale. When Long acquired Cedar Vale in 1984, he financed the acquisition with bank financing (the "Debt") for which 2. In January 1995, Long merged Cedar Vale, Sumner County and Tri-County into the Bank. Cedar Vale was the principal obligor and Long and Sumner Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 873 County were guarantors. From 1985 to 1989, Long himself of the Bank. In the application, Long falsely represented serviced the debt using personal funds, including dividends that he personally owned all of Tri-County's voting shares, paid to him by Sumner County. In 1988, Cedar Vale's sole when in fact he had previously transferred all of its shares subsidiary bank, Cedar Vale State Bank, failed and was to Cedar Vale in mid-1989. closed by the Kansas State Banking Department. This The Reserve Bank advised Long that the chances for caused Cedar Vale to cease to be a bank holding company, approval of his applications were poor because the staff since it no longer controlled a bank. Cedar Vale was left had the same concerns as they did with his earlier applicawith Debt with a principal amount of approximately tion. Although the Reserve Bank advised him that he could $904,000 and no source of income with which to service it. withdraw the applications without prejudice to refiling if In 1989, Long was required to change his status from the Bank's condition improved, Long elected to have the guarantor to co-maker of the Debt. applications processed as filed. In later providing notice to Due to its heavy losses prior to the failure of Cedar Vale Long that the applications had been accepted, the Reserve State Bank, Cedar Vale had accumulated $1.3 million in Bank stated in a letter that the applications would be net operating loss carry-forwards ("NOLs"). NOLs can be processed according to a 60-calendar day schedule and that used to offset taxable income and thereby reduce corporate "a decision regarding your application will be forthcoming income tax liability. With no source of income, however, on or before December 22, 1989, unless you are notified to Cedar Vale was unable to use its NOLs. the contrary." Reserve Bank staff continued to communi- Accordingly, Long sought a means of utilizing the NOLs cate with Long and his son regarding the applications.5 and creating a source of repayment of the Debt by causing On December 28, 1989, having received no decision on Cedar Vale to acquire an income-producing subsidiary. In his applications, Long held special meetings of the share- January 1989, Long began a series of contacts with the holders and directors of Sumner County and Cedar Vale at Federal Reserve Bank of Kansas City (the "Reserve which resolutions approving the merger of Sumner County Bank") with regard to merging Cedar Vale and Sumner into Cedar Vale were unanimously ratified. The following County. Long advised the Reserve Bank staff that such a day, Long received an undated letter from Board staff, merger would allow Sumner County to assume Cedar postmarked December 26, 1989, informing him that the Vale's debt and also generate over $400,000 in tax sav- Board needed additional time to evaluate the financial and ings.3 Early on in these discussions, the Reserve Bank policy issues raised by the applications, and that the Board advised Long that it could not sanction a merger of Cedar would act within the 91-day period set forth in Regula- Vale into Sumner County because Sumner County's as- tion Y. Upon receipt of the letter, J. Long telephoned Board sumption of Cedar Vale's debt would hamper Sumner staff and stated his view that the applications had been County's ability to serve as a source of strength to the approved by operation of law by virtue of the Board's Bank. Several months later, in June 1989, Long filed an failure to act within the 60 day period set forth in the application (the "June Application") with the Reserve Reserve Bank's letter. Board staff explained that the 60-day Bank for approval for Cedar Vale to acquire and then period referenced in the Reserve Bank's letter was only an merge with Sumner County, with Cedar Vale as the surviv- internal processing period and that an application is only ing corporation. The Reserve Bank returned the application granted by operation of law if the Board fails to act within advising Long that it had several concerns which made 91 days of receipt of a complete application.6 Board staff approval of the application "highly unlikely."4 told J. Long that the proposed transactions should not be Thereafter, on or about August 29, 1989, Cedar Vale consummated because the Board had not acted on the filed another application, this time under section 3(a)(1) of applications. J. Long thereafter reported to his father that the BHC Act to become a bank holding company by Board staff did not agree with their view that the transacacquiring 90.5 percent of the stock of the Bank. Cedar Vale tions had been approved because the 60 day period had also filed an application under section 4(c)(8) of the BHC passed. Act for approval to engage in non-banking activities by The day following Board's staff instructions not to conacquiring all of the shares of Tri-County, which according summate the transactions, Long announced at meetings of to Cedar Vale's representations to the Board had been Sumner County's and Cedar Vale's boards of directors that engaged in the business of selling insurance to customers he would be transferring his shares of Sumner County to 3. According to Long, he planned for Sumner County to pay Cedar Vale's debt with income derived from the Bank, as well as deduct Cedar Vale's NOLs from its income, thus reducing the merged enti- 5. In one such conversation in November 1989, Respondent inty's tax liability. formed Board and Reserve Bank staff that the purpose of the applica- 4. The Reserve Bank's letter dated June 26, 1989 explained that the tions was to enable Cedar Vale to utilize the NOLs and that he proposed transaction was inconsistent with the Board's policy regard- anticipated tax savings of approximately $435,000 as a result of the ing the formation of small one-bank holding companies because the NOLs. debt which would be incurred as a result of the transaction had not 6. The 91 -day rule is a statutory requirement which provides that if been used to acquire the proposed subsidiary bank, the Bank. The the Board fails to act within 91 days of the date when the Board has Reserve Bank also stated that, in light of the Bank's financial condi- received the complete application under sections 3 or 4(c)(8) of the tion, the Board would likely have concerns about the Bank's ability to BHC Act, the application is deemed approved by operation of law. service the Debt. 12 U.S.C. §§ 1842(b)(1), 1843(c). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

874 Federal Reserve Bulletin • September 1996 Cedar Vale.7 He did so four days later, on January 3, 1990.8 occasions thereafter, the Reserve Bank and Board staff Long never notified the Board or Reserve Bank staff that he instructed Long that his actions violated the BHC Act and had consummated the transaction, although he continued to that if his transfers were not reversed he could face subcommunicate with both staffs with respect to their requests stantial penalties. Long took no action to reverse the transfor additional information needed in the Board's consider- fers. On January 1, 1995, during the course of this proceedation of the applications. During this same period, J. Long ing, Long merged Cedar Vale into Tri-County, and then wrote a letter to Board staff suggesting that the acquisitions Tri-County and Sumner County into the Bank. Long took had not yet occurred.9 In response, Board staff again ad- these actions without consulting the Board. As a result, as vised J. Long, by letter dated January 30, 1990, that "Ce- of January 1, 1995, Cedar Vale, Tri-County and Sumner dar Vale should not take any action to consummate either County ceased to exist. of the transactions represented in Cedar Vale's applications Between 1990 and 1994, as a result of the violations, until the Board has taken final action on Cedar Vale's Cedar Vale/Sumner County saved $567,941 in federal applications and Cedar Vale has received notice of the taxes as a result of being able to deduct Cedar Vale's NOLs Board's decision in these matters."10 from Sumner County's taxable income.12 The violations On February 9, 1990, the Board issued an order denying also enabled Cedar Vale, rather than Long, to service the Cedar Vale's applications. The Cedar Vale Bank Holding Debt by using estimated tax payments and dividends that it Company, 76 Federal Reserve Bulletin 257 (1990). The received from the Bank, thereby reducing Long's liability Board found, among other things, that Cedar Vale would as a co-maker on the Debt.13 not have sufficient financial resources or flexibility to service the outstanding debt without straining the resources of Violations of the BHC Act and Regulation Y the combined organization and the Bank.11 Although Long received the Board's order, he neither reversed the trans- The Board adopts the ALJ's finding that Cedar Vale viofers nor informed the Board or Reserve Bank that the lated section 3(a)(1) of the BHC Act, and Regulation Y transfers had occurred. On February 15, 1990, Cedar Vale thereunder by becoming a bank holding company without requested reconsideration of the Board's order but did not Board approval through its acquisition of all of the shares challenge the Board's finding that its action on the applica- of Sumner County, a registered bank holding company, on tions had been timely. Nor did Cedar Vale disclose it had January 3, 1990. Cedar Vale remained an illegal bank already acquired Sumner County. The Board denied the holding company until January 1, 1995. The Board also request for reconsideration and no judicial review was finds, as the ALJ did, that by transferring all of Sumner sought. County's shares to Cedar Vale on January 3, 1990, Long The transaction went undetected until May 1990 when participated in Cedar Vale's violations of section 3(a)(1) of Reserve Bank examiners, during an inspection of Sumner the BHC Act and Regulation Y within the meaning of County, discovered that Long had transferred the Sumner section 8(b)(1) of the BHC Act. County shares to Cedar Vale on January 3, 1990. At an The ALJ also concluded that Cedar Vale violated section inspection the following year, examiners discovered that 4 of the BHC Act and Regulation Y by retaining control of Long had transferred his ownership of Tri-County to Cedar Tri-County, without Board approval, after January 3, 1990, Vale before the end of 1989, when the applications were the day when Cedar Vale effectively became an illegal still outstanding. Starting in June 1990, and on a number of bank holding company. Long has objected to that finding based on his contention that Board approval was not required because Tri-County was a "dormant" company, not 7. This transaction was essentially that described in the June Appli- engaged in any activities, after January 3, 1990. cation which had been returned to Long by the Reserve Bank. The The Board finds that Long's objection is without merit application before the Board involved the acquisition by Cedar Vale of the stock of the Bank, not of its parent, Sumner County. Thus, even because the record does not demonstrate that Tri-County if the application had been approved by operation of law, the transac- was a dormant company. Just four months prior to the time tion effected by Long would have been unapproved. Long claims Tri-County was dormant, Long had repre- 8. Long testified that he wanted to transfer the shares at the sented that Tri-County was actively engaged in the insurbeginning of 1990 so that he could get a full year's tax benefits from the NOLs. 9. In his letter dated January 24, 1990, J. Long stated that because, in his view, the Board's 91-day period had expired, he would be 12. The ALJ found that between 1990 and 1994, Sumner County's advising his clients to "proceed with and consummate [the] acquisi- stand-alone taxable income would have been $1,684,330. Its total tax tion." liability on this income would have been $567,941. However, because 10. The Board's letter further stated that "[consummation of the the violations enabled the combined Cedar Vale/Sumner County enproposed transactions without the prior approval of the Board and tity to offset Sumner County's taxable income with Cedar Vale's prior to the expiration of the statutory ninety-one day period would NOLs, the combined entity paid no taxes between 1990 and 1994. constitute a violation of the BHC Act and would subject Cedar Vale Accordingly, the tax benefit accruing to the combined entity through and its principals to possible penalties under the Act." 1994 totalled $567,941. In his Exceptions, Long does not take issue 11. The Board considered and rejected Long's contention that the with these tax calculations. applications had been approved by operation of law, finding that in 13. From January 3, 1990 through December 31, 1994, Cedar Vale light of the Board's receipt of information necessary to its decision on made payments totalling $956,205 on the Debt, consisting of $282,205 the applications as late as January 19, 1990, the 91-day period had not of interest and $674,000 of principal. The outstanding principal expired. 76 Federal Reserve Bulletin at 258 n.9. amount of the Debt was thereby reduced to $230,000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 875 ance business and would continue to sell insurance.14 Tri- a significant consideration should be the financial or eco- County also had income and some assets, as Long admitted nomic benefit the respondent obtained from the violation .... The removal of economic benefit will, however, usually be at the hearing. Moreover, even if there had been an interinsufficient by itself to promote compliance with the statutory ruption in its active operations in January 1990, Tri-County provisions. The penalty may, therefore, in appropriate circumcould have resumed its insurance sales at the whim of stances reflect some additional amount beyond the economic Long, who was a licensed insurance agent. benefit derived to provide a deterrent to future conduct. Id. Accordingly, the Board finds that Cedar Vale, through its retention of control of Tri-County without Board approval, In his Exceptions, Long argues that the ALJ erred in his violated section 4 of the BHC Act and Regulation Y. The penalty assessment because he failed to apply a civil Board also adopts the ALJ's finding that Long participated money penalty matrix included in an "SR Letter" issued in Cedar Vale's violations of section 4 of the BHC Act and by Board staff in 1991.16 Long contends that the matrix Regulation Y within the meaning of section 8(b)(1) of the must be used in determining the amount of civil money BHC Act by failing to reverse the transfer of Tri-County's penalties. The Board finds no merit in this argument. First, shares to Cedar Vale after Cedar Vale became a bank contrary to Long's assertion, the SR Letter was not "proholding company on January 3, 1990. mulgated by the Board" but was issued by Board staff to the staff of the Federal Reserve Banks for their use in Imposition of A Civil Money Penalty evaluating proposed civil money penalty assessments. Consequently, it has no binding effect on the Board.17 More- Finding that Long's violations subject him to the penalty over, the SR Letter states that the matrix does not include provisions of the BHC Act, the Board now considers the consideration of the amount of gain to the respondent, and appropriateness and amount of such penalty. Under appli- that this factor "must be considered separately before cable law, an individual who participates in a violation of setting the final penalty amount." SR 91-13 (FIS) at 4. the BHC Act may be assessed a civil money penalty of up Finally, the matrix and the suggested civil money penalty to $25,000 per day for each day the violation continues. assessments it includes relate to so-called "tier 1" penal- 12 U.S.C. § 1847(b)(1). The violations were outstanding ties under section 8(i)(2)(A) of the FDI Act, for 1824 days between January 3, 1990 and January 1, 12 U.S.C. § 1818(i)(2)(A). Tier 1 penalties are set at $5,000 1995. Accordingly, the maximum penalty that may be per day, in contrast to the $25,000 per day penalties permitassessed under the BHC Act is $45,600,000. ted for the violations of the BHC Act found in this case. In determining the appropriate amount of a penalty, the Thus, even if the Board were required to consider the applicable statutes require the Board to "take into ac- matrix, which it is not, the penalty amount recommended count" the financial resources and good faith of the person by the ALJ would be permissible under that matrix.18 charged, the gravity of the violation, the history of previ- The Board notes that the civil money penalty recomous violations, and such other matters as justice may re- mended by the ALJ exceeds that assessed in the Notice. It quire. 12 U.S.C. §§ 1847(b)(2), 1818(i)(2)(G). The Board's is undisputed that the Board has the authority to increase regulations require that it also consider the "economic the penalty amount from that originally assessed. Section benefit derived by the person from the misconduct." 8(i)(2)(F) of the FDI Act, applicable to this proceeding 12 C.F.R. 263.62 (1995). In addition, the Board has under section 8(b)(2) of the BHC Act, expressly permits adopted an Interagency Policy Regarding Assessment the Board to "compromise, modify or remit any penalty" of Civil Money Penalties ("Policy Statement"), assessed. 12 U.S.C. § 1818(i)(2)(F). The Board's rules for 1 F.R.R.S. § 3-1605 at 3.635-37 (1995), which provides assessments of civil money penalties also explicitly authoadditional guidance on the proper assessment of penal- rize the Board to "modify the amount of the penalty ties.15 The Policy Statement states that the agencies believe that in determining the amount of a civil money penalty, of the violation or its voluntary disclosure; threat of or actual loss or harm to the institution; whether respondent received a financial or other gain or benefit; evidence of restitution; history of prior viola- 14. Cedar Vale's application to acquire Tri-County, dated August tions; previous criticisms by regulators for similar violations; presence 29, 1989, stated: "[Tri-County] is now engaged and, upon [consum- or absence of a compliance program and its effectiveness; tendency to mation] of the proposed acquisition, will continue to engage in, the create an unsafe or unsound banking practice or a breach of a fiduciary insurance business (SIC Code 641) from the offices of the Bank of duty; and the existence of agreements, commitments or orders in- Commerce & Trust Co., in Wellington, Kansas. The types of insur- tended to prevent the subject violations. 1 F.R.R.S. § 3-1605 at 3-637. ance being and to be offered are credit life, accident and health and 16. An "SR letter" is a supervisory memorandum issued by the staff crop insurance written in connection with loans to bank customers." of the Board's Division of Banking Supervision and Regulation to 15. The Policy Statement includes thirteen factors (the "Policy provide guidance to the supervisory staffs of the Federal Reserve Statement Factors") to be used by the banking agencies in determin- Banks. The matrix included in SR Letter 91-13 (FIS), to which Long ing whether a violation is of sufficient gravity to warrant the initiation refers, identifies most of the statutory and Policy Statement factors of civil money penalty assessment proceedings. Those factor are: and provides for a numerical weight to be given to each factor. evidence of wilfulness or disregard of the law or the consequences to 17. See Rapp v. Office of Thrift Supervision, 52 F.3d 1510 (10th Cir. the institution; frequency of the violation and the length of time the 1995) (Office of Thrift Supervision is not bound by methodology of violation has been outstanding; whether the violation continued after civil money penalty matrix). respondent became aware of it; failure to cooperate with the agency in 18. Long concedes that even under his calculations the matrix yields effecting an early resolution of the problem; evidence of concealment a penalty—exclusive of his gain—in excess of $100,000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

876 Federal Reserve Bulletin • September 1996 specified in the notice of assessment" following a hearing. Board concludes that Long's willful and deceptive con- 12 C.F.R. 263.63. See Lovgren v. Byrne, 787 F.2d 857, 867 duct, motivated by personal gain, overwhelmingly demon- (3d Cir. 1986) (where agency decision-maker took into strates that his actions were in bad faith. account the required statutory factors, no abuse of discre- The statute also requires the Board to consider "such tion in increasing penalty following hearing). other matters as justice may require." As noted above, the Such an increase may be particularly appropriate where Board gives considerable weight in assessing penalties to evidence is available at the time of the hearing that was not the financial or economic benefit derived by the respondent available when the notice was issued. In this case, the facts from the illegal activity. The Policy Statement provides leading to the ALJ's recommendation of an increase in the that a civil money penalty should require the respondent to penalty principally involve the tax benefits derived from disgorge the benefits from the violation, and in appropriate the illegal transaction. Those benefits for the years 1993 circumstances, the penalty may include an additional and 1994 were unknown at the time the Notice was issued amount in order to provide a deterrent to future misconin February 1994. Accordingly, the Board may appropri- duct. 1 F.R.R.S. § 3-1605 at 3-637. ately increase the penalty from that originally assessed to The ALJ found that Long, at a minimum, directly benetake into account the full record with respect to the benefits fitted from the $567,941 that Cedar Vale saved in taxes as a derived from the transaction. result of his status as its sole shareholder. Long argues that With respect to the statutory factors that the Board is the ALJ erred in such finding because Cedar Vale's "parequired to consider, the record indicates that Long, whose per" tax savings did not result in any "actual monetary net worth as of March 10, 1994 was $2,342,700, has benefit" to Long.21 considerable financial resources.19 The Board views Long's The Board finds that the record supports the ALJ's conduct, in knowingly transferring the shares of Sumner determination that Long benefitted in an amount of at least County to Cedar Vale without Board approval, attempting $567,941. As the ALJ found, Long's equity investment to hide the transaction, and blatantly disregarding the regu- increased in value because of the $567,941 in tax savings lators' instructions to unwind the transfer, to be egregious. and the resulting additional funds that accrued to the com- Although there is no history of previous violations, the bined entity. Furthermore, as the sole shareholder, chairviolations continued over five years, despite repeated no- man and president of the bank holding company, Long had tices to reverse the violative transactions. direct control of how those additional funds were spent.22 Under both the statutory and Policy Statement factors, In addition to the benefits stemming from the $567,941 the Board is required to consider is whether respondent in tax savings, Long derived other benefits from the violaacted in good faith. Long objected to the ALJ's finding of tion. Long benefitted from Cedar Vale's ability to service bad faith, claiming that his actions were based on his good the $904,000 Debt, thus relieving Long, as co-maker, of faith belief that the applications had been approved by this obligation.23 Only as a result of the illegal transaction operation of law. was Cedar Vale able to service the Debt through its receipt After careful review of the record, the Board adopts the of the Bank's dividends and estimated tax payments, which ALJ's finding that Long acted in bad faith. It is uncontro- were Cedar Vale's principal source of income between verted that before Long transferred Sumner County to 1990 and 1994. During this time, the principal on the Debt, Cedar Vale, he saw the Board's letter stating that more time would be needed to consider the applications. In addition, prior to the transfer Board staff had instructed Cedar Vale not to complete the transactions. Furthermore, Long testified that his motivation in transferring the shares counsel that Long is relying on came after Long had consummated the in January 1990 was to get the tax benefits of the transactransactions. Moreover, these discussions do not evidence that Long tion for the full year. was advised to disregard the Board's order denying the applications or The record is also replete with other instances of Long's the Board's staff's instructions to reverse the transactions. Accordbad faith. Most notable are Long's concealment of the ingly, the Board need not consider whether such a defense has merit, as the record in this case is insufficient. transaction and his disregard of Board and Reserve Bank 21. Long also argues that Cedar Vale had no benefit from the tax staff's instructions to correct the violations.20 In short, the savings because it could have achieved similar results by using the NOLs in some other way. Long failed to present any evidence suggesting a realistic alternative available to him to utilize the NOLs. Had 19. Long claims in his brief accompanying his Exceptions that there such alternatives existed, it seems likely that Long would have availed was no analysis of the liquidity of his assets. The statute does not himself of them to avoid engaging in the illegal transaction found require the Board to consider only liquid assets in determining the size here. Consequently, the Board rejects this argument. of a respondent's financial resources. Moreover, the record reflects 22. Long could further control how Cedar Vale's funds were spent that Long holds over $3 million in stocks and bonds. through his control of its board of directors, which consisted of him, 20. The Board finds Long's claim that he failed to reverse the his son and one other family member. transactions because of the adverse consequences that would have 23. Long claims that Sumner County, as guarantor of the Debt, and resulted to be meritless. The only adverse consequences evident from not Long, would have been liable on the Debt had Cedar Vale not the record are that Long would not have enjoyed the tax benefits that been able to make the Debt payments. Long's argument obliterates the the Board's denial order withheld from him. In addition, Long's claim distinction between the primary liability of a principal debtor and the that he did not reverse the transactions because he was following secondary liability of a guarantor. Accordingly, the Board rejects this advice of counsel is not supported by the record. The discussions with contention. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 877 for which Long was liable, was reduced by $674,000.24 Bank to service the debt would have been inappropriate, Thus, had the violations not occurred, Long would have and the removal of such inappropriate pressures can hardly been responsible for making those payments, as he had be counted as a benefit. done from 1985 through 1989. The Board believes this is an appropriate case for sub- Moreover, Cedar Vale's ability to pay the Debt using stantial penalties to assure that the respondent does not funds derived from the Bank resulted in additional tax benefit from his wrongdoing and is deterred from such savings to Long. In the absence of the illegal transaction, action in the future. Long sought to combine Cedar Vale had Long been required to service the Debt, he would have and Sumner County through his application to the Board in had to have done so, at least in part, with after-tax income order to utilize Cedar Vale's NOLs and reduce his obligaderived from Sumner County dividends.25 Thus, in addi- tion on the Debt. The Board refused to permit the transaction to the dollar amount needed to service the Debt, Long tion, citing its concern about the effect of such a combinawould have had to pay income tax on the dividend income tion on the Bank. Long nonetheless proceeded with the from Sumner County. Instead, the illegal transaction al- transaction and reaped substantial benefits as a result. It is lowed Long to satisfy Cedar Vale's Debt with funds from entirely fitting that he should be deprived of those benefits the Bank transferred tax free to Sumner County.26 In sum, and that some additional penalty should be imposed to the Board finds that Long derived a benefit in an amount of deter such action in the future. at least $567,941. Accordingly, the Board also affirms the additional In addition to the factor of personal gain, the other $150,000 penalty that the ALJ recommended in order to Policy Statement factors also weigh heavily in favor of deter others from engaging in similar conduct. As a general assessment of a significant penalty. The violation was, as rule, the Board accords considerable weight to the recomdiscussed above, intentional. It was outstanding for five mendations of administrative law judges with respect to years, during which time Long was not only aware of the penalties.27 This is appropriate here where the ALJ had the violation but was repeatedly urged to correct it. Long's opportunity to assess Long's credibility and demeanor. actions in the application process indicate concealment of Moreover, the Board finds that severity of Long's conduct the violation. Finally, the illegal transaction tended to cre- supports the additional $150,000 penalty. Although Long ate an unsafe or unsound practice. The Board's Order argues that his conduct was "neither outrageous nor incomdenying Cedar Vale's application noted that the Bank prehensible," the Board cannot agree. The Board views might not have the financial strength to service the Debt Long's conduct as demonstrating a total disregard for the without undue strain on its resources. The Board's concern regulatory process entrusted to the Board. Furthermore, the was borne out in the record, which indicates that examina- Board finds that $150,000 penalty is justified because Long tion reports for the Bank evidenced concern that the large had benefits in addition to the $567,941 in tax savings. dividends paid by the Bank to service the Debt adversely For these reasons, the Board affirms the ALJ's penalty affected its capital. determination and assesses a civil money penalty against In his Exceptions, Long argues that the Bank benefitted Long in the amount of $717,941. from his illegal transactions and that his penalty should be reduced as a result. The Board rejects this contention. In Cease and Desist Order brief, Long asserts that because of the tax benefits associated with the availability of Cedar Vale's NOLs and the The ALJ recommended that Long and Cedar Vale be fact that Cedar Vale could service the Debt with before-tax prohibited from engaging in future violations of the BHC earnings, the transaction "in fact reduced financial pres- Act. However, the ALJ did not order that the violative sures on the Bank's holding company and reduced the transactions be reversed because Cedar Vale, Sumner amount of [Bank] funds necessary to service the Cedar County and Tri-County no longer exist as independent Vale debt." Exceptions at 6. This argument ignores the fact entities. The Board adopts the ALJ's recommendation with that neither the Bank nor its parent, Sumner County, was respect to Long. As Cedar Vale no longer exists, it cannot liable on the Debt. The Debt was incurred to permit Long be subject to a cease and desist order. to acquire a separate bank, Cedar Vale State Bank. The Bank obtained no benefit from Long's acquisition of Cedar Conclusion Vale, and was in no way responsible for servicing the Debt. Any financial pressures that might have been placed on the For the foregoing reasons, the Board orders that the attached Combined Order to Cease and Desist and of Assessment of Civil Money Penalty issue against Long. 24. The reduction in Cedar Vale's underlying debt would have had a corresponding effect of increasing the value of Long's equity investment in Cedar Vale. 25. The record reflects that the payments on the Debt made by Long between 1985 and 1989 were funded at least in part by Sumner County dividends. 27. See In the matter ofEvco, Inc., 76 Federal Reserve Bulletin 679 26. Had Long been required to pay off the Debt and used only (1990); In the Matter ofCBC, Inc., 79 Federal Reserve Bulletin 247 dividends from Sumner County, he would have incurred $292,857 in (1993); In the Matter of Vic Sather & Associates, Inc., 79 Federal personal income taxes. Reserve Bulletin 160 (1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

878 Federal Reserve Bulletin • September 1996 By Order of the Board of Governors, this 2nd day of merce and Trust, Wellington, Kansas, or any successors July, 1996. or assigns. 4. The penalty assessed by this Order shall be remitted in Board of Governors of the full on or before the thirtieth day following the effective Federal Reserve System date of the Order. Payment of the penalty shall be made to the "Board of Governors of the Federal Reserve System," and shall be forwarded to William W. Wiles, WILLIAM W. WILES Secretary, Board of Governors of the Federal Reserve Secretary of the Board System, Washington, D.C. 20551, who shall make remittance of the same to the Treasury of the United States, as required by statute. Combined Order to Cease and Desist and of 5. The provisions of this Order shall not bar, estop, or Assessment of Civil Money Penalty otherwise prevent the Board of Governors, or any other federal or state agency or department, from taking any WHEREAS, the Board of Governors of the Federal Reother action affecting Long. serve System (the "Board of Governors"), on February 7, 6. This Order, and each and every provision thereof, is 1994, issued a Notice of Charges and Hearing and of and shall remain fully effective and enforceable until Assessment of Civil Money Penalties (the "Notice") expressly stayed, modified, terminated or suspended in against, inter alia, Cedar Vale Bank Holding Company, writing by the Board of Governors. Inc., Wellington, Kansas ("Cedar Vale") and W. C. Long, 7. This Order shall become effective upon service. Jr. ("Long"), an institution-affiliated party of Cedar Vale, By Order of the Board of Governors, this 2nd day of as defined by sections 3(u) and 8(b)(3) of the Federal July, 1996. Deposit Insurance Act, as amended (the "FDI Act") (12 U.S.C. §§ 1813(u) and 1818(b)(3)); Board of Governors of the WHEREAS, the Notice alleged that Cedar Vale, with the Federal Reserve System direct participation of Long, violated sections 3(a)(1) and 4 of the Bank Holding Company Act of 1956, as amended WILLIAM W. WILES (the "BHC Act") (12 U.S.C. §§ 1842(a)(1) and 1843) by Secretary of the Board failing to obtain prior approval of the Board of Governors before acquiring control of a bank, and thereby becoming a In the Matter of bank holding company, and by retaining control of a nonbank subsidiary; United Security Bancorporation WHEREAS, on January 1, 1995, Cedar Vale was merged Lincoln, Nebraska into the Bank of Commerce and Trust Company, Wellington, Kansas; WHEREAS, on June 12-15, 1995, a public administra- Docket Nos. tive hearing was conducted in Wichita, Kansas, before an administrative law judge (the "ALJ") concerning the matters alleged in the Notice, and, thereafter, the ALJ certified 94-031-B-HC to the Board of Governors the record of this proceeding, 94-031-B-I1 including his Recommended Decision dated November 21, 94-031-B-I2 1995, proposed findings of fact and conclusions of law; WHEREAS, upon consideration of the record in this proceeding, the Board of Governors is of the opinion, for Final Decision the reasons set forth in the accompanying Final Decision in this matter, that this Combined Order to Cease and Desist This is an administrative enforcement proceeding instituted and of Assessment of Civil Money Penalty (the "Order") by the Board of Governors of the Federal Reserve System should be issued against Long. (the "Board") pursuant to section 8(b) of the Federal NOW, THEREFORE, IT IS HEREBY ORDERED, pur- Deposit Insurance Act (the "FDI Act") against United suant to section 8(b)(2) and (3) of the FDI Act Security Bancorporation, Lincoln, Nebraska, a registered (12 U.S.C. §§ 1818(b)(2) and (3)) and section 8(b) of the bank holding company ("United"), and Harold S. Myers BHC Act (12 U.S.C. 1847(b)), that: and David C. Myers, United's principal officers, directors 1. Long shall not, directly or indirectly, engage in any and controlling shareholders (collectively, "the Myers"). violation of the BHC Act. On March 20, 1995, the Board issued a Notice of Charges 2. Long is assessed and shall forfeit and pay a civil and of Hearing alleging, inter alia, that respondents viomoney penalty of $717,941. lated section 23A of the Federal Reserve Act, 3. No portion of the civil money penalty assessed by this 12 U.S.C. § 371c, by selling low quality assets to Security Order shall be, directly or indirectly, paid, advanced, National Bank of Superior, Superior, Nebraska ("Security" reimbursed or otherwise funded by the Bank of Com- or "the Bank"), United's bank subsidiary. The Notice Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 879 sought a cease and desist order against the respondents the ALJ's recommended decision with the Board, and the prohibiting further violations of section 23A. Board makes final findings of fact, conclusions of law and In a Recommended Decision issued on February 15, determination whether to issue a cease and desist order. 1996, Administrative Law Judge Arthur L. Shipe (the 12 C.F.R. 263.40. "ALJ") recommended that the Board grant, in part, a motion for summary disposition filed by the enforcement B. Standards for Summary Disposition staff of the Board ("Enforcement Counsel"). The ALJ found that the respondents violated section 23A, but rec- The Rules of Practice specifically provide that where there ommended that the Board limit a cease and desist order to is no genuine issue as to any material fact and a moving United because the Office of the Comptroller of the Curparty is entitled to a decision in its favor as a matter of law, rency ("OCC") had already issued a similar order against the ALJ shall recommend that the Board issue a final Security.1 decision granting a party's motion for summary disposi- Respondents filed exceptions to the Recommended Decition. 12 C.F.R. 263.29. The ALJ's decision may be based sion arguing that the Board does not have authority under on undisputed pleadings, admissions, affidavits, stipulathe FDI Act to issue a cease and desist order against tions, documentary evidence, matters as to which official respondents for violations of section 23A. Enforcement notice may be taken, and any other evidentiary materials Counsel did not file exceptions to the ALJ's Recomproperly submitted in connection with a motion for summended Decision. mary disposition. Upon review of the administrative record, the Board Motions for summary disposition should be decided by hereby makes its Final Decision and adopts the ALJ's essentially the same standards as motions for summary Recommended Decision, Recommended Findings of Fact, judgment under Rule 56(c) of the Federal Rules of Civil and Recommended Conclusions of Law as they relate to Procedure.2 The nonmovant's evidence is to be accepted as the section 23A violations, except as specifically suppletrue and all justifiable inferences are to be drawn in its mented or modified herein. The Board therefore deterfavor. Eastman Kodak Co. v. Image Technical Services, mines that the attached Cease and Desist Order shall issue Inc., 504 U.S. 451 (1992). In general, summary disposition against the respondents prohibiting further violations of should be granted where the evidence is so one-sided that section 23A. one can reasonably arrive at only one conclusion.3 Statement of the Case Findings and Conclusions A. Standards for Cease and Desist Orders A. Findings The FDI Act provides that the appropriate Federal banking agency may issue a cease and desist notice against a 1. Relevant Individuals and Business Entities. United is a depository institution or institution-affiliated party within registered bank holding company which is owned and its jurisdiction if it has reasonable cause to believe that the controlled by Harold S. Myers and David C. Myers. Its institution or party has engaged in an unsafe or unsound primary asset is the stock of Security, its sole bank subsidpractice, or has violated a law, rule, regulation, or certain iary. Security is a small rural community bank that had conditions imposed in writing. 12 U.S.C. § 1818(b)(1). assets of approximately $41.7 million as of December 31, The FDI Act further provides that the Board is the appro- 1994. At all times relevant to this case, United's only priate Federal banking agency with respect to bank holding operations were through Security. companies, 12 U.S.C. § 1813(q)(2), and that the notice and At all times relevant to this case, the Myers controlled cease and desist provisions of subsection (b)(1) shall apply United through their ownership of 96 percent of its stock to any bank holding company in the same manner as they and their power to vote all of its shares. Harold Myers apply to a State member insured depository institution. served as United's president and director, and David Myers 12 U.S.C. § 1818(b)(3). served as United's vice president, secretary and director. After the Board issues a Notice under the FDI Act, the United had one other director and no other officers. The Board's Rules of Practice assign responsibility to an ALJ Myers also served as directors of Security.4 to hear the matter and make a recommended decision to the 2. United's Sale of Loans to Security. On November 11, Board. 12 C.F.R. 263.5. The parties may file exceptions to 1990, Security sold loans to United for $200,000. On March 18, 1991, United sold the loans back to the Bank for $163,000. At the time of the resale to the Bank, the loans 1. The ALJ also recommended that the Board grant summary disposition for Enforcement Counsel in connection with certain unsafe and unsound practices that were alleged in the Notice. The Board 2. Accord, In the Matter of David L. Paul, OTS Order No. 93-104, has remanded that portion of the case to the ALJ pursuant to a separate n.27 (Dec. 15, 1993). Order. Therefore, this Decision and the Cease and Desist Order issued 3. E.g., Allstate Ins. Co. v. Brown, 920 F.2d 664, 668 (10th Cir. pursuant to it constitute the Board's final determination and order only 1990). in connection with the issues relating to respondents' section 23A 4. At all times relevant to this case, Harold Myers served as violations. Chairman of Security. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

880 Federal Reserve Bulletin • September 1996 were on a nonaccrual status and were, by definition, "low respect to State member banks equally applicable to bank quality assets" under the terms of section 23A of the holding companies and their nonbank subsidiaries. S. Rep. Federal Reserve Act. 12 U.S.C. § 371c. United repurchased No. 902, 93rd Cong., 2d Sess. 10 (1974), reprinted in, these loans from the Bank on April 4, 1994. 1974 U.S.C.C.A.N. 6128. Congress later amended section 8(b)(3) so that the suspension, removal, and prohibi- B. Conclusions tion provisions contained in sections 8(e), (f), and (g) were also made applicable to bank holding companies and their Respondents do not challenge the ALJ's conclusion that nonbank subsidiaries in the same manner that they previthey violated section 23A when they resold loans to Secu- ously applied to State member banks.6 Because the provirity in 1991. The record establishes that the loans were on sions of sections 8(e), (f), and (g) deal exclusively with nonaccrual status and section 23A by its terms defines such actions against persons affiliated with depository instituan asset as a "low quality asset" that may not be trans- tions, as opposed to the institutions themselves, the amendferred to a bank by a company controlling the bank. ments making these sections applicable to bank holding 12 U.S.C. § 371c(b)(10). Instead, respondents have ex- companies would have been meaningless if they were not cepted to the ALJ's conclusions that the Board has author- intended to permit actions against individuals affiliated ity under section 8(b)(3) of the FDI Act to issue a cease with bank holding companies. and desist order against institution-affiliated parties of bank The Board has on a number of occasions issued enforceholding companies, and argue that because the Bank has ment orders against persons affiliated with bank holding agreed with the OCC not to violate section 23A in the companies under the authority of section 8(b)(3). See, e.g., future, the issue of a cease and desist order against the Interamericas, supra, 82 Federal Reserve Bulletin at 620 Myers and United is "moot." The Board rejects these (cease and desist order against bank holding company arguments. IAP); In the Matter of Northwest Indiana Bancshares, Inc. Section 8(b)(3) of the FDI Act, 12 U.S.C. § 1818(b)(3), (orders dated September 7, 1990), affirmed sub nom., Stanprovides, among other things, that the provisions of section ley v. Board of Governors, 940 F.2d 267 (7th Cir. 1991) 8(b)(1), authorizing cease and desist proceedings against (civil money penalties against bank holding company IAPs depository institutions and their institution-affiliated par- based in part on section 8(i) of FDI Act); In the Matter of ties, "shall apply to any bank holding company ... in the EVCO, Inc. (orders dated January 30, 1990), affirmed sub same manner as they apply to a State member insured nom., Burke v. Board of Governors, 940 F.2d 1360 (10th depository institution." Respondents argue that this provi- Cir. 1991) (prohibition orders against bank holding comsion only supports cease and desist actions against the bank pany IAPs). holding company itself, and does not authorize such ac- Accordingly, the Board declines to adopt the reading of tions against institution-affiliated parties like the Myers. section 8(b)(3) advanced by respondents, and holds that It is not disputed that the term "institution-affiliated that section authorizes the Board to take the same enforceparty" ("IAP") includes directors, officers, agents, and ment measures identified in the section against IAPs of employees of bank holding companies. See bank holding companies that it may take against IAPs of 12 U.S.C. § 1813(u) (definition of IAP); In the Matter of State member banks. Interamericas Investments, Ltd., 82 Federal Reserve Bulle- Finally, respondents argue that the Board is without tin 609 at n.l (1996).5 Accordingly, respondents' sole authority to issue a cease and desist order based on the contention here is that section 8(b)(3) of the FDI Act, section 23A violations because Security has already agreed which applies a number of provisions of section 8 to "any not to purchase assets from United pursuant to a written bank holding company ... in the same manner as they agreement with the OCC. Respondents contend that the apply to a State member insured depository institution," OCC agreement effectively precludes further section 23A does not extend the remedies of section 8 to IAPs of bank violations by the Myers and their corporate interests, and holding companies. that Enforcement Counsel's request for an order directing The Board finds that this reading is inconsistent with the United to cease and desist from the same conduct is now purpose of the statute and would render some of its provi- moot. The Board disagrees. sions a nullity. Congress enacted section 8(b)(3) in 1974 to A review of the written agreement between Security and make the Board's existing cease and desist authority with the OCC reveals that it does not provide complete protec- 5. See also 12 U.S.C. § 1847(c), which explicitly applies the IAP 6. In 1978, Congress amended section 8(b)(3) to make the suspendefinition in 12 U.S.C. § 1813(u) to "an institution-affiliated party .. . sion and removal provisions of section 8(e) applicable to bank holding with respect to a bank holding company." Respondents argued before companies and their subsidiaries. Pub. L. 95-630, § 107(b). See, the ALJ that the term "institution-affiliated party" in the FDI Act did S. Rep. 95-323, 95th Cong., 1st Sess. (1977) at 19 ("The amendment not apply to persons affiliated solely with bank holding companies. further makes it clear that the Board of Governors has similar powers That argument has been abandoned in respondents' exceptions, which with respect to bank holding companies and their officers, directors, urge only that section 8(b)(3) of the FDI Act does not authorize the employees, and agents."). In 1989, Congress again amended section Board to seek cease and desist orders "against institution affiliated 8(b)(3) so that the provisions of section 8(g) relating to the suspension parties like the Myers." Brief in Support of Respondents' Exceptions, or removal of a person charged with a felony were made applicable to at 7. these entities. Pub. L. 101-73, § 902(a)(1)(A). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 881 tion against further violations of section 23A by either of the FR Act and submitted a recommended decision to United or the Myers. The written agreement prohibits the that effect to the Board; Bank from acquiring low-quality assets from the Myers or WHEREAS, the Board of Governors has determined, United. The written agreement does not, and cannot, gov- upon review of the record, that United and H.S. Myers and ern the conduct of United, which is beyond the OCC's D.C. Myers, institution-affiliated parties as defined by secjurisdiction. Nor does it purport to govern the conduct of tions 3(u) and 8(b)(3) of the FDI Act (12 U.S.C. §§ 1813(u) the Myers individually. The cease and desist order entered and 1818(b)(3)), have engaged in, and will continue, unless by the Board, by contrast, prevents United and the Myers restrained, to engage in certain violations of law; from engaging in violations of section 23A with Security IT IS HEREBY ORDERED, pursuant to section 8(b) of or any other institution.7 the Federal Deposit Insurance Act (the "FDI Act") Therefore, the Board rejects respondents' argument that (12 U.S.C. § 1818(b)) that United and its institutionthe OCC's action divested the Board of authority to take affiliated parties and H.S. Myers and D.C. Myers cease and enforcement action. For similar reasons, the Board rejects desist and take affirmative action as follows: the ALJ's suggestion that a cease and desist order solely 1. United shall take all actions necessary to ensure that against United would be appropriate. all transactions entered into with the Bank, or with any bank subsidiary that it directly or indirectly controls, fully Conclusion comply with the requirements of section 23A of the FR Act, and shall not, directly or indirectly, engage in any For the foregoing reasons, the Board orders that the at- violations of section 23A of the FR Act. tached Cease and Desist Order prohibiting further viola- 2. H.S. Myers and D.C. Myers shall take all actions tions of section 23A shall issue against the respondents. necessary to ensure that United does not violate section By Order of the Board of Governors, this 15th day of 23A of the FR Act, and shall not directly or indirectly July, 1996. engage in any violations of section 23A of the FR Act. 3. All communications regarding this Order shall be sent Board of Governors of the to: Federal Reserve System (a) Mr. James H. Jonson Vice President WILLIAM W. WILES Federal Reserve Bank of Kansas City Secretary of the Board 925 Grand Boulevard Kansas City, Missouri 64198 Cease and Desist Order (b) Mr. Harold S. Myers President WHEREAS, on March 20, 1995, the Board of Governors United Security Bancorporation of the Federal Reserve System (the "Board of Gover- 635 South 14th, Suite 320 nors"), issued a Notice of Charges and Hearing (the "No- Lincoln, Nebraska 68508 tice") against United Security Bancorporation ("United"), (c) Mr. Harold S. Myers a registered bank holding company, which owns and con- United Security Bancorporation trols the Security National Bank of Superior, Superior, 635 South 14th, Suite 320 Nebraska (the "Bank"), and Harold S. Myers ("H.S. My- Lincoln, Nebraska 68508 ers") and David C. Myers ("D.C. Myers"), United's prin- (d) Mr. David C. Myers cipal officers, directors and controlling shareholders; United Security Bancorporation WHEREAS, the Notice alleged, inter alia, that United, 635 South 14th, Suite 320 H.S. Myers and D.C. Myers caused a violation of sec- Lincoln, Nebraska 68508 tion 23A of the Federal Reserve Act (the "FR Act") 4. The provisions of paragraph 1 this Order shall be (12 U.S.C. 371c) as a result of United's sale of low quality binding upon United and each of its institution-affiliated assets to the Bank; parties in their capacities as such, and their successors and WHEREAS, on February 15, 1996, pursuant to sec- assigns; the provisions of paragraph 2 of this Order shall be tion 263.29 of the Uniform Rules of Practice and Proce- binding upon H.S. Myers and D.C. Myers in their individdure, upon consideration of Board Enforcement Counsel's ual capacities. motion for summary disposition, the Administrative Law 5. Each provision of this Order shall remain effective Judge determined that Board Enforcement Counsel was and enforceable until stayed, modified, terminated or susentitled to summary disposition of the matters alleged in pended by the Board of Governors. the Notice relating to the alleged violations of section 23A 6. The provisions of this Order shall not bar, stop or otherwise prevent the Board of Governors, or any federal or state agency or department, from taking any other action affecting H.S. Myers, D.C. Myers or United or any of 7. In addition, the Order would be enforceable in United States United's current or former institution-affiliated parties or district court pursuant to 12 U.S.C. § 1818(i)(l) while the OCC's their successors or assigns. written agreement would not. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

882 Federal Reserve Bulletin • September 1996 By Order of the Board of Governors of the Federal teeny, a former officer of Somerset Trust Company, Somer- Reserve System, effective this 15th day of July, 1996. set, Pennsylvania. Board of Governors of the Federal Reserve System Scott A. Noyes WILLIAM W. WILES Colorado Springs, Colorado Secretary of the Board The Federal Reserve Board announced on July 29, 1996, the issuance of a combined Order of Prohibition and Order FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD of Assessment of a Civil Money Penalty against Scott A. OF GOVERNORS Noyes, a former vice president and secretary/treasurer of Peoples Bancshares, Inc., Colorado Springs, Colorado. Bangkok Metropolitan Bank, PCL. Bangkok, Thailand The Federal Reserve Board announced on July 25, 1996, the issuance of an Order to terminate United States Bank- TERMINATION OF ENFORCEMENT ACTIONS ing Activities against the Bangkok Metropolitan Bank, The Federal Reserve Board announced on July 1, 1996, the PCL., Bangkok, Thailand. The Order was issued jointly termination of the following enforcement actions: with the New York State Banking Department and the California State Banking Department. William B. Black, III Merchants Bancshares, Inc. Houston, Texas Burlington, Vermont The Federal Reserve Board announced on July 1, 1996, the issuance of an Order of Assessment of a Civil Money Written Agreement dated February 18, 1994—terminated Penalty against William B. Black, III, the Chairman of the June 3, 1996. Board and President of The State Bank of Texas, Houston, Texas. First Bancorp of Oklahoma, Inc. Mark E. Marteeny Tonkawa, Oklahoma Somerset, Pennsylvania The Federal Reserve Board announced on July 3, 1996, the Written Agreement dated June 30, 1992—terminated issuance of an Order of Prohibition against Mark E. Mar- May 6, 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance 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 A34 Mortgage markets Monetary and Credit Aggregates A35 Mortgage debt outstanding A12 Aggregate reserves of depository institutions and monetary base Consumer Installment Credit A13 Money stock, liquid assets, and debt measures A15 Deposit interest rates and amounts outstanding— A36 Total outstanding commercial and BIF-insured banks A3 6 Terms A16 Bank debits and deposit turnover Flow of Funds Commercial Banking Institutions A37 Funds raised in U.S. credit markets A17 Assets and liabilities, Wednesday figures A39 Summary of financial transactions A40 Summary of credit market debt outstanding 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 • September 1996 DOMESTIC NONFINANCIAL STATISTICS- Reported by Nonbanking Business CONTINUED Enterprises in the United States A58 Liabilities to unaffiliated foreigners Selected Measures—Continued A59 Claims on unaffiliated foreigners A48 Gross domestic product and income A49 Personal income and saving Securities Holdings and Transactions A60 Foreign transactions in securities INTERNATIONAL STATISTICS A61 Marketable U.S. Treasury bonds and notes—Foreign transactions Summary Statistics A50 U.S. international transactions—Summary Interest and Exchange Rates A51 U.S. foreign trade A61 Discount rates of foreign central banks A51 U.S. reserve assets A61 Foreign short-term interest rates A51 Foreign official assets held at Federal Reserve A62 Foreign exchange rates Banks A52 Selected U.S. liabilities to foreign official institutions A63 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES Reported by Banks in the United States A52 Liabilities to and claims on foreigners SPECIAL TABLES A53 Liabilities to foreigners A64 Assets and liabilities of U.S. branches and agencies A55 Banks' own claims on foreigners of foreign banks, March 31, 1996 A56 Banks' own and domestic customers' claims on A68 Residential lending reported under the Home foreigners Mortgage Disclosure Act, 1995 A56 Banks' own claims on unaffiliated foreigners A57 Claims on foreign countries— Combined domestic offices and foreign branches A76 INDEX TO STATISTICAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

A4 Domestic Nonfinancial Statistics • September 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 Q3 Q4 Q1 Q2 Feb. Mar. Apr. May June Reserves of depository institutions' 1 Total -1.5 -6.9 -7.9 -6.4 -16.4 19.2 -11.7 -20.8' -2.5 2 Required -2.5 -7.7 -8.5 -5.7 -2.7 13.2 -11.6 -15.4 -9.2 3 Nonborrowed -2.4 -6.4 -6.5 -7.6 -16.3 19.6 -13.2 -21.6r -8.2 4 Monetary base3 1.7 2.7 1.5 2.1 -4.2r 8.9' -,6r 1.0 5.7 Concepts of money, liquid assets, and debt4 5 Ml -1.5 -5.1 -2.7 -.5 -2.0 10.0 -3.1 -6.5r -.4 6 M2 6.9 4.1 5.9 4.1 5.4 11.7 2.0 -1.6 5.6 7 M3 8.0 4.5 7.2 5.5 io.r 11.r 1.9r 3.r 4.7 8 L 9.1 5.9 5.1 n.a. 4.4 12.6r 4.6r -.9 n.a. 9 Debt 4.9r 4.7r 4.7' n.a. 6.6r 6.0r 4.6r 3.7 n.a. Nontransaction components 10 In M25 10.9 8.3 9.7 6.2 8.6 12.4 4.2 .6 8.2 11 In M3 only6 12.1 6.3 12.6r 10.6 28.6r 9.0r 1.5r 21.4r 1.4 Time and savings deposits Commercial banks 12 Savings, including MMDAs 9.0 13.1 22.6 12.7 16.5 25.2 8.8 4.2r 12.3 13 Small time7 11.0 4.8 2.5 -2.7 -1.2 -4.5 -3.5 -2.3 1.0 14 Large time8'9 13.0 19.4 8.9r 17.4 20. lr 27.4 7.8r 19.9r 16.6 Thrift institutions 15 Savings, including MMDAs -7.3 -2.8 -.3 8.1 6.0 5.7 14.3 4.9 2.9 16 Small time7 4.1 5.0 -2.5r -3.4 ,0r -8.4r -1.7 -2.7 -3.1 17 Large time8 13.7 8.0 6.2 -2.8 1.6 -9.5 1.6 -9.5 6.4 Monev market mutual funds 18 Retail 36.9 16.5 14.7 11.5 15.6 32.6 2.7 -3.2 21.2 19 Institution-only 27.6 10.3 27.9 8.7 69.2 21.6 -13.0 -10.3 29.1 Repurchase agreements and Eurodollars 20 Repurchase agreements10 -5.0 -14.6 1.3 5.4 11.7 -13.5 -7.8 80.0r -67.0 21 Eurodollars10 9.4 -6.7 17.0r 11.9 12.6r —29.8r 35.7r 18.6r 11.0 Debt components4 22 Federal 4.6 2.3 2.7 n.a. 7.6 11.2 3.6r 1.8 n.a. 23 Nonfederal 5.0r 5.5r 5.4r n.a. 6.3r 4.1r 4.9r 4.4 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 May 15 May 22 May 29 June 5 June 12 June 19 June 26 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 418,391 416,807 420,910 415,263 416,944 416,366r 420,290 417,340 422,869 420,635 U.S. government securities2 2 Bought outright—System account 378,891 380,178 382,000 379,272 380,634 380,439 380,367 380,762 382,857 382,495 3 Held under repurchase agreements 4,566 1,983 4,456 727 2,315 2,176 5,772 2,402 5,418 3,086 Federal agency obligations 4 Bought outright 2,492 2,442 2,401 2,444 2,444 2,439 2,428 2,414 2,388 22,,338888 5 Held under repurchase agreements 180 503 524 2 876 686 1,118 511 256 747 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 57 24 185 27 26 25 12 7 586 22 8 Seasonal credit 33 106 190 92 113 133 142 152 193 227 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 315 517 384 867 393 156r 73 642 312 730 11 Other Federal Reserve assets 31,857 31,054 30,769 31,832 30,143 30,313 30,378 30,451 30,861 30,941 12 Gold stock 11,052 11,051 11,051 11,051 11,051 11,051 11,051 11,051 11,051 11,050 13 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 24,330r 24,408r 24,469 24,400r 24,414r 24,428r 24,442 24,456 24,470 24,484 ABSORBING RESERVE FUNDS 15 Currency in circulation 418,294r 420,043r 423,432 419,451r 419,729r 422,170r 423,021 423,295 423,204 423,290 16 Treasury cash holdings 312 276 281 265 265 264 269 288 285 279 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 7,318 5,714 6,162 5,673 5,127 5,175 4,276 5,697 6,022 7,184 18 Foreign 187 196 177 185 224 196 171 179 173 171 19 Service-related balances and adjustments 5,938 6,188 6,161 6,037 6,006 6,714 6,237 6,123 6,117 6,184 20 Other 370 362 330 381 365 348 311 330 336 332 21 Other Federal Reserve liabilities and capital 12,813 12,885 13,224 12,930 12,929 12,971 13,153 13,088 13,304 13,252 22 Reserve balances with Federal Reserve Banks' .. . 18,709 16,771 16,830 15,961 17,932 14,176r 18,515 14,016 19,117 15,646 End-of-month figures Wednesday figures Mar. Apr. May May 15 May 22 May 29 June 5 June 12 June 19 June 26 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 416,892 420,959r 425,289 418,328 423,609 419,893r 422,764 418,454 433,333 421,389 U.S. government securities2 2 Bought outright—System account 381,806 381,346 383,914 380,134 380,661 381,789 379,748 382,860 382,761 338822,,552222 3 Held under repurchase agreements 0 5,704 7,086 5,089 7,903 3,365 7,412 2,160 12,711 4,226 Federal agency obligations 4 Bought outright 2,444 2,428 2,388 2,444 2,444 2,428 2,428 2,388 2,388 22,,338888 5 Held under repurchase agreements 0 1,350 0 15 1,867 850 1,428 95 195 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 21 8 388 23 18 22 6 2 3,644 17 8 Seasonal credit 71 148 248 103 124 139 137 170 207 241 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 821 —342r -178 573 62 649r 1,215 189 92 919 11 Other Federal Reserve assets 31,728 30,318 31,443 29,948 30,529 30,652 30,391 30,590 31,334 31,076 12 Gold stock 11,052 11,051 11,050 11,051 11,051 11,051 11,051 11,051 11,051 11,050 13 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 14 Treasury currency outstanding 24,372r 24,442r 24,498 24,400r 24,414r 24,428r 24,442 24,456 24,470 24,484 ABSORBING RESERVE FUNDS 15 Currency in circulation 417,746r 422,397r 424,767 420,447r 421,086r 423,794r 423,832 424,231 423,817 424,817 16 Treasury cash holdings 288 265 280 265 264 265 288 287 279 280 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 11,042 3,757 7,701 4,079 4,906 5,381 5,588 5,562 6,142 7,290 18 Foreign 166 160 183 229 175 180 164 166 167 163 19 Service-related balances and adjustments 6,055 6,237 6,172 6,037 6,006 6,714 6,237 6,123 6,117 6,184 20 Other 360 300 326 376 353 357 329 336 326 326 21 Other Federal Reserve liabilities and capital 12,559 13,148 13,374 12,712 12,805 12,781 12,896 13,093 13,141 13,024 22 Reserve balances with Federal Reserve Banks3 . . 14,268 20,357r 18,203 19,803 23,648 16,067r 19,090 14,332 29,033 15,009 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 • September 1996 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1993 1994 1995 1995 1996 Dec. Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June 1 Reserve balances with Reserve Banks" 29,374 24,658 20,440 20,440 17,763 16,792 18,426 19,181 16,753 16,593 2 Total vault cash3 36,818 40,378 42,088r 42,088r 44,676r 42,115r 40,892r 40,889r 41,146 41,979 3 Applied vault cash4 33,484 36,682 37,460 37,460 39,170 36,957 36,458 36,688 36,382 37,095 4 Surplus vault cash5 3,334 3,696 4,628r 4.628r 5,506r 5,158r 4,435r 4,20 r 4,764 4,883 5 Total reserves6 62,858 61,340 57,900 57,900 56,934 53,749 54,884 55,869 53,135 53,688 6 Required reserves 61,795 60,172 56,622 56.622 55,449 52,898 53,747 54,750 52,275 52,534 7 Excess reserve balances at Reserve Banks7 1,063 1,168 1,278 1,278 1,485 851 1,137 1,120 860 1,155 8 Total borrowings at Reserve Banks8 82 209 257 257 38 35 21 91 127 386 9 Seasonal borrowings 31 100 40 40 7 7 10 34 105 192 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 Feb. 28 Mar. 13 Mar. 27 Apr. 10 Apr. 24 May 8 May 22 June 5r June 19 July 3 1 Reserve balances with Reserve Banks2 17,938 18,192 18,492 18,954 20,331 16,876 16,946 16,341 16,565 16,743 2 Total vault cash"1 40.242r 41,461r 40,362r 40,903r 40,398r 42,013r 40,823r 40,879 42,824 41,403 3 Applied vault cash4 35,468 36,845 36,011 36,767 36,417 37,190 36,091 36,117 37,747 36,712 4 Surplus vault cash5 4,774r 4,616r 4,352r 4,136r 3,98 lr 4,823r 4,732r 4,762 5,078 4,692 5 Total reserves6 53,406 55,037 54,502 55,721 56,748 54,065 53,037 52,458 54,311 53,455 6 Required reserves 52,436 53,926 53.346 54,567 55,629 53,002 52,201 51,743 53,234 52,003 7 Excess reserve balances at Reserve Banks7 970 1,111 1,156 1,154 1,119 1,063 836 715 1,078 1,451 8 Total borrowings at Reserve Banks8 47 15 20 47 122 92 129 156 469 386 9 Seasonal borrowings 8 8 12 16 30 71 103 138 173 241 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. 29 May 6 May 13 May 20 May 27 June 3 June 10 June 17 June 24 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 81,920 90,634 90,281 87,271 83.461 85,577 82,179 80,092 73,503 2 For all other maturities 17,657 17.658 18,091 17,719 18.158 18,873 17,876 18,253 18,306 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 19,054 19.876 26,513 22,613 21,793 21,158 19,602 17,394 24,776 4 For all other maturities 19,418 21.270 21,738 21,868 23,296 22,206 21,054 21,183 21,932 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 16.707 19,490 20.268 24,202 21,354 22,706 20,440 19,331 19,183 6 For all other maturities 40,479 41.910 44.427 38,923 40,445 39,758 39,534 38,917 3388,,117733 All other customers 7 For one day or under continuing contract 35,314 36,149 37,594 38,331 39,166 39,439 38,153 37,560 35,588 8 For all other maturities 13,962 13,732 14.125 14,259 14,130 13,652 13,611 14,195 14,362 MEMO Federal funds loans and resale agreements in immediately available funds in maturities of one day or under continuing contract 9 To commercial banks in the United States 68,117 74,721 68.708 65,644 65,153 68,874 68,559 70,490 66,112 10 To all other specified customers" 26,548 29,922 26,396 26,432 25,647 27,136 25,847 27,762 24,775 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 credit3 Federal Reserve Bank On On On Effective date Previous rate 8/2/96 8/2/96 8/2/96 Boston 2/1/96 8/1/96 8/1/96 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 8/1/96 8/1/96 Range of rates for adjustment credit in recent years Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Bar Effective date level)—All of level)—All of Effective date level)—All of F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks N.Y. In effect Dec. 31, 1977 1981—Nov. 2 13-14 13 1988—Aug. 9 6-6.5 6.5 6 13 13 11 6.5 6.5 1978—Jan. 9 6-6.5 6.5 Dec. 4 12 12 20 6.5 6.5 1989—Feb. 24 6.5-7 7 May 11 6.5-7 7 1982—July 20 11.5-12 11.5 27 7 7 12 7 7 23 11.5 11.5 July 3 7-7.25 7.25 Aug. 2 11-11.5 11 1990—Dec. 19 6.5 6.5 10 7.25 7.25 3 11 11 Aug. 21 7.75 7.75 16 10.5 10.5 1991—Feb. 1 6-6.5 6 Sept. 22 8 27 10-10.5 10 4 6 6 Oct. 16 8-8.5 30 10 10 Apr. 30 5.5-6 5.5 20 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. 6 4.5-5 4.5 1979—July 20 10 10 Dec. 14 8.5-9 9 7 4.5 4.5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 Dec. 20 3.5^.5 3.5 20 10.5 10.5 17 8.5 8.5 24 3.5 3.5 Sept. 19 10.5-11 11 21 11 11 1984—Apr. 9 8.5-9 9 1992—July 2 3-3.5 3 Oct. 8 11-12 12 13 9 9 7 3 3 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 1994—May 17 3-3.5 3.5 1980—Feb. 15 12-13 13 Dec. 24 8 8 18 3.5 3.5 19 13 13 Aug. 16 3.5-4 4 May 29 12-13 13 1985—May 20 7.5-8 7.5 18 4 4 30 12 12 24 7.5 7.5 Nov. 15 4-4.75 4.75 June 13 11-12 11 17 4.75 4.75 16 11 11 1986—Mar. 7 7-7.5 7 July 28 10-11 10 10 7 7 1995—Feb. 1 4.75-5.25 5.25 29 10 10 Apr. 21 6.5-7 6.5 9 5.25 5.25 Sept. 26 11 11 23. 6.5 6.5 Nov. 17 12 12 July 11 6 6 1996—Jan. 31 5.00-5.25 5.00 Dec. 5 8 121-133 1 1 3 3 Aug. 2 2 1 2 5 5 .5 .5 -6 5 5 . . 5 5 Feb. 5 5.00 5.00 1981—May 5 13-14 14 In effect Aug. 2, 1996 5.00 5.00 14 14 1987—Sept. 4 5.5-6 6 11 6 6 1. Available on a short-term basis to help depository institutions meet temporary needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate established flexible rate somewhat above rates charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans of unusual size ordinarily is reestablished on the first business day of each two-week reserve maintenance that result from a major operating problem at the borrower's facility. period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs for points. funds that arise from a clear pattern of intrayearly movements in their deposits and loans and 4. For earlier data, see the following publications of the Board of Governors: Banking and that cannot be met through special industry lenders. The discount rate on seasonal credit takes Monetary Statistics, 1914-1941, and 1941-1970; and the AnnuaI 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 NonfinancialS tatistics • September 1996 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Requirement TTyyppee ooff ddeeppoossiitt Percentage of Effective date deposits Net transaction accounts2 1 $0 million-$52.0 million3 33333 1111122222/////1111199999/////9999955555 1111100000 1111122222/////1111199999/////9999955555 00000 1111122222/////2222277777/////9999900000 00000 1111122222/////2222277777/////9999900000 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For corresponding adjustment is made in the event of a decrease. The exemption applies only to previous reserve requirements, see earlier editions of the 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 xfi years was reduced from 3 percent to 1 l/i 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 1 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 'A 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 l/i years (see note 5). Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the amount of reservable liabilities subject to a zero percent reserve requirement each year for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1995 1996 TTyypp aa ee nn dd oo ff mm ttrr aa aa tt nn uu ss rrii aa tt cc yy tt iioonn 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. May U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 17,717 17,484 10,932 4,271 0 0 0 0 88 0 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 332,229 376,277 398,487 39,057 31,535 31,476 39,332 30,556 32,218 40,467 4 Redemptions 0 0 900 0 0 0 0 0 0 0 Others within one year 5 Gross purchases 1,223 1,238 390 0 390 0 0 0 35 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shifts 31,368 0 0 6,108 0 2,048 2,746 0 3,511 5,107 8 Exchanges -36,582 -21,444 0 -4,937 0 -3,287 -7,575 0 -4,824 -5,448 9 Redemptions 0 0 0 0 0 1,228 0 0 787 0 One to five years 10 Gross purchases 10,350 9,168 4,966 0 2,317 0 0 0 1,899 0 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shifts -27,140 -6,004 0 -5,292 0 -2,048 -1,908 0 -3,511 -4,049 13 Exchanges 0 17,801 0 3,237 0 3,287 5,175 0 4,824 3,748 Five to ten years 14 Gross purchases 4,168 3,818 1,239 400 0 0 0 0 479 0 15 Gross sales 0 0 0 0 0 0 0 0 0 0 16 Maturity shifts 0 -3,145 0 -816 0 0 -818 0 0 -1,058 17 Exchanges 0 2,903 0 1,700 0 0 1,500 0 0 1,700 More than ten years 18 Gross purchases 3,457 3,606 3,122 0 1,884 0 0 0 1,065 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shifts 0 -918 0 0 0 0 -20 0 0 0 21 Exchanges 0 775 0 0 0 0 900 0 0 0 All maturities 22 Gross purchases 36,915 35,314 20,649 4,671 4,591 0 0 0 3,566 0 23 Gross sales 0 0 0 0 0 0 0 0 0 0 24 Redemptions 767 2,337 2,376 0 0 1,228 0 0 787 0 Matched transactions 25 Gross purchases 1,475,941 1,700,836 2,197,736 226,340 227,858 260,425 274,290 251,623 253,482 259,135 26 Gross sales 1,475,085 1,701,309 2,202,030 228,419 228,071 259,186 275,979 251,086 251,510 259,595 Repurchase agreements 27 Gross purchases 475,447 309,276 331,694 44,569 34,325 16,040 6,230 31,602 4488,,886699 30,688 28 Gross sales 470,723 311,898 328,497 39,876 28,546 28,802 6,230 27,706 50,345 23,703 29 Net change in U.S. Treasury securities 41,729 29,882 17,175 7,285 10,157 -12,751 -1,689 4,433 3,274 6,525 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 1,303 120 58 0 0 108 82 16 Repurchase agreements M Gross purchases 35,063 52,696 36,851 3,763 2,888 9,793 765 5,640 2,372 5,222 34 Gross sales 34,669 52,696 36,776 3,973 1,788 10,893 765 4,640 3,372 3,122 35 Net change in federal agency obligations -380 -1,002 -1,228 -330 1,042 -1,100 0 892 -1,082 2,084 36 Total net change in System Open Market Account... 41,348 28,880 15,948 6,955 11,199 -13,851 -1,689 5,325 2,192 8,609 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 NonfinancialS tatistics • September 1996 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1996 1996 May 29 June 5 June 12 June 19 June 26 Apr. 30 May 31 June 30 Consolidated condition statement ASSETS 1 Gold certificate account 11,051 11,051 11,051 11,051 11,050 11,052 11,051 11,050 2 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 3 538 529 538 542 536 574 552 552 Loans 4 To depository institutions 161 142 172 3,851 258 93 155 636 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 2,428 2,428 2,388 2,388 2,388 2,444 22,,442288 2,388 8 Held under repurchase agreements 850 1,428 95 195 0 0 1,350 0 9 Total U.S. Treasury securities 385,154 387,160 385,020 395,472 386,748 381,806 387,050 391,000 10 Bought outright" 381,789 379,748 382,860 382,761 382.522 381,806 381,346 383,914 n Bills 185,244 183,203 186,315 186,216 185,978 185,262 184,801 187,370 i? Notes 150,102 150,102 150,102 150,102 150,102 150,102 150,102 150,102 13 Bonds 46,443 46,443 46,443 46,443 46,443 46,443 46,443 46,443 14 Held under repurchase agreements 3,365 7,412 2,160 12,711 4,226 0 5,704 7,086 15 Total loans and securities 388,593 391,159 387,675 401,906 389,394 384,343 390,983 394,025 16 Items in process of collection 8,200 7,708 6,098 6,384 6,162 8,452 4,007 4,152 17 Bank premises 1,170 1,171 1,181 1,182 1,182 1,158 1,171 1,182 Other assets 18 Denominated in foreign currencies3 19,737 19,567 19,574 19,583 19,591 19,705 19,561 19,554 19 All other4 9,693 9,589 9,780 10,524 10,328 10,760 9,538 10,726 20 Total assets 449,151 450,941 446,065 461,339 448,412 446,211 447,032 451,409 LIABILITIES 21 Federal Reserve notes 400,169 400,208 400,599 400,168 401,149 394,236 398,773 401,101 22 Total deposits 28,579 31,494 26,672 42,090 28,845 31,975 30,901 32,804 23 Depository institutions 22.660 25,412 20,608 35,456 21,067 20,407 26,685 24,594 24 U.S. Treasury—General account 5,381 5,588 5,562 6,142 7,290 11,042 3,757 7,701 25 Foreign—Official accounts 180 164 166 167 163 166 160 183 26 Other 357 329 336 326 326 360 300 326 27 Deferred credit items 7,622 6,343 5,701 5,940 5,393 7,441 4,210 4,130 28 Other liabilities and accrued dividends5 4,153 4,411 4,391 4,415 4,314 4,061 4,542 4,464 29 Total liabilities 440,523 442,456 437,363 452,614 439,701 437,713 438,426 442,499 CAPITAL ACCOUNTS 30 Capital paid in 4,100 4,155 4,139 4,147 4,138 4,023 4,154 4,138 31 Surplus 3,966 3,966 3.966 3,966 3,966 3,957 3,960 3,966 32 Other capital accounts 562 364 598 611 607 518 492 806 33 Total liabilities and capital accounts 449,151 450,941 446,065 461,339 448,412 446,211 447,032 451,409 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 553,973 563,166 561,601 553,403 549,345 550,662 556,832 551,797 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 513,943 514,449 516,488 518,280 518,513 507,928 514,098 519,234 36 LESS: Held by Federal Reserve Banks 113,774 114,241 115,889 118,112 117,364 113,691 115,325 118,133 37 Federal Reserve notes, net 400,169 400,208 400.599 400,168 401,149 394,236 398,773 401,101 Collateral held against notes, net 38 Gold certificate account 11,051 11,051 11.051 11,051 11,050 11,052 11,051 11,050 39 Special drawing rights certificate account 10,168 10,168 10,168 10,168 10,168 10,168 10,168 10,168 4C Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 378,950 378,989 379,380 378,949 379,931 373,017 377,554 379,883 42 Total collateral 400,169 400,208 400,599 400,168 401,149 394,236 398,773 401,101 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 29 June 5 June 12 June 19 June 26 Apr. 30 May 31 June 30 1 Total loans 161 143 172 3,851 258 92 156 249 2 Within fifteen days' 148 31 37 3,833 245 59 75 231 3 Sixteen days to ninety days 12 112 135 19 13 33 80 18 4 Total U.S. Treasury securities 385,154 387,160 385,020 395,472 386,748 381,806 381,346 383,914 5 Within fifteen days' 20,249 15,453 14,548 21,867 18,573 15,945 2,926 4,410 6 Sixteen days to ninety days 92,031 93,546 89,860 93,144 92,629 91,464 98,950 99,558 7 Ninety-one days to one year 109,536 114,805 117,256 117,106 112,191 111,381 116,114 116,591 8 One year to five years 91,676 91,694 91,694 91,694 91,694 91,995 91,694 91,694 9 Five years to ten years 32,941 32,941 32,941 32,941 32,941 32,299 32,941 32,941 10 More than ten years 38,721 38,721 38,721 38,721 38,721 38,721 38,721 38,721 11 Total federal agency obligations 3,278 3,856 2,483 2,582 2,387 2,443 2,428 2,388 12 Within fifteen days' 1,222 1,458 95 465 307 154 372 307 13 Sixteen days to ninety days 473 770 800 530 493 685 473 495 14 Ninety-one days to one year 575 610 612 612 612 577 575 610 15 One year to five years 512 512 485 485 485 512 512 485 16 Five years to ten years 472 472 467 467 467 492 472 467 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 • September 1996 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1995 1996 1992 1993 1994 1995 IItteemm Dec. Dec. Dec. Dec. Nov. Dec. Jan. Feb. Mar. Apr. Mayr June Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS- 1 Total reserves3 54.37 60.52 59.36 56.36 56.33 56.36 55.61 54.85 55.73 55.18 54.23 54.12 2 Nonborrowed reserves4 54.24 60.44 59.16 56.11 56.13 56.11 55.57 54.81 55.71 55.09 54.10 53.73 3 Nonborrowed reserves plus extended credit5 54.24 60.44 59.16 56.11 56.13 56.11 55.57 54.81 55.71 55.09 54.10 53.73 4 Required reserves 53.21 59.46 58.20 55.09 55.39 55.09 54.12 54.00 54.59 54.06 53.37 52.96 5 Monetary base6 351.24 386.88 418.72 435.01 433.21 435.01 435.18r 433.67 436.87r 436.64r 437.00 439.07 Not seasonally adjusted 6 Total reserves7 56.06 62.37 61.13 58.02 56.57 58.02 56.95 53.80 54.97 56.00 53.29 53.87 7 Nonborrowed reserves 55.93 62.29 60.92 57.76 56.37 57.76 56.91 53.77 54.95 55.90 53.16 53.49 8 Nonborrowed reserves plus extended credit' 55.93 62.29 60.92 57.76 56.37 57.76 56.91 53.77 54.95 55.90 53.16 53.49 9 Required reserves8 54.90 61.31 59.96 56.74 55.63 56.74 55.47 52.95 53.84 54.88 52.43 52.72 10 Monetary baseJ 354.55 390.59 422.51 439.03 433.22 439.03 436.01 430.29 434.86r 437.12r 436.13 439.87 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 56.54 62.86 61.34 57.90 56.40 57.90 56.93 53.75 54.88 55.87 53.14 53.69 12 Nonborrowed reserves 56.42 62.78 61.13 57.64 56.19 57.64 56.90 53.72 54.86 55.78 53.01 53.30 13 Nonborrowed reserves plus extended credit5 56.42 62.78 61.13 57.64 56.19 57.64 56.90 53.72 54.86 55.78 53.01 53.30 14 Required reserves 55.39 61.80 60.17 56.62 55.45 56.62 55.45 52.90 53.75 54.75 52.28 52.53 15 Monetary base1- 360.90 397.62 427.25 444.45 438.19 444.45 441.96 436.26 440.77r 442.96r 442.16 445.93 16 Excess reserves13 1.16 1.06 1.17 1.28 .94 1.28 1.49 .85 1.14 1.12 .86 1.16 17 Borrowings from the Federal Reserve .12 .08 .21 .26 .20 .26 .04 .04 .02 .09 .13 .39 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. Mar. Apr. May June Seasonally adjusted Measures2 1 Ml 1,024.4 1,128.6 1,148.7 1,124.9 1,126.6 1,123.7 1,117.6' 1,117.2 2 M2 3,438.7 3,494.1 3,509.4 3,662.6 3,729.9 3,736.2' 3,731.2' 3,748.7 3 M3 4,187.3 4,249.6 4,319.7 4,576.0 4,686.2r 4,693.7' 4,705.8' 4,724.4 4 L 5,075.8 5,164.5 5,303.7 5,685.5 5,785.2r 5,807.3' 5,803.1 n.a. 5 Debt 1 l,880.5r 12,517.4r 13,159.3r 13,894.8r 14,080.9r 14,134.3' 14,178.2 n.a. Ml components 6 Currency3 292.9 322.4 354.9 373.2 375.2 376.0' 377.1' 337799..44 7 Travelers checks4 8.1 7.9 8.5 8.9 8.9 8.9 8.7 8.6 8 Demand deposits5 339.1 384.3 382.4 389.8 407.1 406.3 409.6' 413.6 9 Other checkable deposits6 384.2 414.0 402.9 353.0 335.4 332.6 322.1 315.6 Nontransaclion components 10 In M27 2,414.3 2,365.4 2,360.7 2,537.7 2,603.3 2,612.4 2,613.6 2,631.5 11 In M3 only8 748.6 755.6 810.3 913.4 956.3r 957.5' 974.6' 975.7 Commercial banks 12 Savings deposits, including MMDAs 754.1 785.0 751.9 775.0 821.0 827.0 829.9' 838.4 13 Small time deposits9 509.3 470.4 505.4 578.5 578.1 576.4 575.3 575.8 14 Large time deposits10- " 286.6 272.3 298.7 342.4 354.2r 356.5' 362.4' 367.4 Thrift institutions 15 Savings deposits, including MMDAs 433.0 433.8 397.0 359.5 362.1 366.4 367.9 368.8 16 Small time deposits9 361.9 317.6 318.2 359.6 354.5 354.0 353.2 352.3 17 Large time deposits10 67.1 61.5 64.8 75.0 75.5 75.6 75.0 75.4 Money market mutual funds 18 Retail 356.0 358.7 388.1 465.1 487.6 488.7 487.4 496.0 19 Institution-only 199.8 197.9 183.7 227.2 248.3 245.6 243.5 249.4 Repurchase agreements and Eurodollars 20 Repurchase agreements12 128.1 157.5 180.8 177.6 184.1 182.9 195.1' 184.2 21 Eurodollars'2 66.9 66.3 82.3 91.2 94.2r 97.0' 98.5' 99.4 Debt components 22 Federal debt 3,068.6 3,328.3 3,497.6 3,644.6 3,696.0 3,707.0' 33,,771122..66 n.a. 23 Nonfederal debt 8,812.0r 9,189.1r 9,661.7r 10,250.2r 10,384.9r 10,427.3' 10,465.6 n.a. Not seasonally adjusted Measures2 24 Ml 1,046.0 1,153.7 1,174.2 1,150.7 1,115.9 1,130.1' 1,104.4' 1,113.3 25 M2 3,455.1 3,514.1 3,529.8 3,682.3 3,722.7 3,749.1' 3,716.6 3,747.0 26 M3 4,205.3 4,271.3 4,341.5 4,597.1 4,676. lr 4,698.5' 4,690.6' 4,721.6 27 L 5,103.1 5,194.2 5,333.2 5,715.0 5,786.0r 5,812.9' 5,783.9 n.a. 28 Debt ll,881.5r 12,509.6' 13,150.2' 13,878.0'' 14,032.7' 14,061.0' 14,070.0 n.a. Ml components 29 Currency3 295.0 324.8 357.5 376.1 374.3 375.8 337777..55 338800..55 30 Travelers checks4 7.8 7.6 8.1 8.5 8.6 8.6 8.6 8.9 31 Demand deposits5 354.4 401.8 400.1 407.9 397.5 406.1 399.5 409.8 32 Other checkable deposits6 388.9 419.4 408.4 358.1 335.6' 339.6' 318.7 314.2 Nontransaclion components 33 In M27 2,409.1 2,360.4 2,355.6 2,531.5 2,606.8 2,619.0 2,612.3 2,633.7 34 In M3 only8 750.2 757.1 811.7 914.8 953.4' 949.4' 974.0' 974.6 Commercial banks 35 Savings deposits, including MMDAs 752.9 784.3 751.6 775.0 819.0 826.0 827.9' 840.1 36 Small time deposits9 507.8 468.2 502.5 574.5 579.3 578.3 577.4 577.9 37 Large time deposits10, " 286.2 272.1 298.5 342.3 352.6 353.8' 364.7' 368.1 Thrift institutions 38 Savings deposits, including MMDAs 432.4 433.4 396.9 359.5 361.2 365.9 367.0 369.6 39 Small time deposits9 360.9 316.1 316.4 357.1 355.2' 355.2 354.5 353.5 40 Large time deposits10 67.0 61.5 64.8 75.0 75.2 75.0 75.5 75.5 Money market mutual funds 41 Retail 355.1 358.3 388.2 465.4 492.1 493.5 485.5 492.5 42 Institution-only 201.1 199.4 185.5 229.4 248.7 242.8 241.1 244.5 Repurchase agreements and Eurodollars 43 Repurchase agreements'2 127.2 156.6 179.6 176.1 182.3 182.3 195.4' 187.9 44 Eurodollars'2 68.7 67.6 83.4 91.9 94.6' 95.6' 97.3' 98.6 Debt components 45 Federal debt 3,069.8 3,329.5 3,499.0 3,645.9 3,698.1 3,699.5' 3,692.1 n.a. 46 Nonfederal debt 8,811.7r 9,180.1r 9,651.2' 10,232. lr 10,334.5' 10,361.5' 10,378.0 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic NonfinancialS tatistics • September 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 Ml. 7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more) money fund balances. issued by all depository institutions, (2) balances in institutional money funds (money funds 8. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities with minimum initial investments of $50,000 or more), (3) RP liabilities (overnight and term) (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and issued by all depository institutions, and (4) Eurodollars (overnight and term) held by U.S. term) of U.S. addressees. residents at foreign branches of U.S. banks worldwide and at all banking offices in the United 9. Small time deposits—including retail RPs—are those issued in amounts of less than Kingdom and Canada. Excludes amounts held by depository institutions, the U.S. govern- $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are ment, money market funds, and foreign banks and official institutions. Seasonally adjusted subtracted from small time deposits. M3 is calculated by summing large time deposits, institutional money fund balances, RP 10. Large time deposits are those issued in amounts of $ 100,000 or more, excluding those liabilities, and Eurodollars, each seasonally adjusted separately, and adding this result to booked at international banking facilities. seasonally adjusted M2. 11. Large time deposits at commercial banks less those held by money market funds, L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury depository institutions, the U.S. government, and foreign banks and official institutions. securities, commercial paper, and bankers acceptances, net of money market fund holdings of 12. Includes both overnight and term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A15 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1995 1996 IItteemm D 19 e 9 c 3 . 1 D 9 e 9 c 4 . R Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Interest rates (annual effective yields)2 INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts 1.86 1.96 1.91 1.93 1.91 1.90 1.91 1.85 1.89 1.88 1.90 2 Savings deposits3 2.46 2.92 3.11 3.13 3.10 3.01 2.98 2.91 2.91 2.89 2.85 Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days 2.65 3.79 4.11 4.13 4.10 4.02 3.99 4.02 4.01 3.99 4.05 4 92 to 182 days 2.91 4.44 4.75 4.74 4.68 4.57 4.45 4.49 4.51 4.51 4.55 5 183 days to 1 year 3.13 5.12 5.15 5.11 5.02 4.91 4.79 4.83 4.86 4.89 4.94 6 More than 1 year to 2 l/i years 3.55 5.74 5.31 5.27 5.17 5.03 4.89 4.94 5.03 5.11 5.18 7 More than 2 Vi years 4.28 6.30 5.56 5.49 5.40 5.26 5.10 5.19 5.28 5.36 5.46 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts 1.87 1.94 1.98 1.94 1.91 1.85 1.84 1.83 1.84 1.82 1.80 9 Savings deposits3 2.63 2.87 2.96 2.99 2.98 2.95 2.92 2.86 2.85 2.84 2.85 Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 2.81 3.80 4.32 4.43 4.43 4.38 4.26 4.37 4.42 4.49 4.54 11 92 to 182 days 3.02 4.89 5.05 5.02 4.95 4.86 4.77 4.76 4.77 4.83 4.91 12 183 days to 1 year 3.31 5.52 5.31 5.28 5.18 5.06 4.91 4.89 4.91 4.96 5.02 13 More than 1 year to 2[A years 3.67 6.09 5.51 5.47 5.33 5.22 5.10 5.15 5.23 5.25 5.35 14 More than 2 Vl years 4.62 6.43 5.68 5.64 5.46 5.34 5.24 5.24 5.32 5.38 5.51 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts 305,237 304,896 258,175 257,098 248,417 245,749 242,930 218,604 228,736 208,881' 202,948 16 Savings deposits3 767,035 737,068 745,936 753,139 776,466 768,071 784,035 827,666 805,431 839,457' 844,223 17 Personal 598,276 580,438 585,896 588,995 615,113 612,321 623,110 661,919 640,003 670,124' 673,452 18 Nonpersonal 168,759 156,630 160,040 164,144 161,353 155,750 160,925 165,748 165,428 169,333' 170,771 Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 29,362 32,265 29,906 31,093 32,170 33,783 35,719 35,377 34,076 33,414r 30,636 20 92 to 182 days 109,050 96,650 93,390 95,513 93,941 95,350 97,219 97,141 96,064 96,264' 93,809 21 183 days to 1 year 145,386 163,062 187,727 184,704 183,834 184,046 184,095 186,158 190,045 193,021' 195,384 22 More than 1 year to 21/2 years 139,781 164,395 206,579 208,315 208,601 212,394 210,493 208,915 208,277 207,826' 210,216 23 More than 2 Vi years 180,461 192,712 199,471 199,389 199,002 199,254 198,922 198,980 197,797 196,542' 199,405 24 IRA and Keogh plan deposits 144,011 144,155 150,101 149,647 150,546' 150,366 149,965 150,496 150,586 150,084' 150,537 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts 11,191 11,175 10,789 11,088 11,918 11,139 11,597 11,703 11,492 11,744 11,234 26 Savings deposits3 80,376 70,082 67,732 68,345 68,643 66,702 67,614 67,276 66,808 67,715 66,886 27 Personal 77,263 67,159 64,432 64,932 65,366 63,377 64,524 64,208 63,559 64,199 63,554 28 Nonpersonal 3,113 2,923 3,300 3,413 3,277 3,325 3,090 3,068 3,249 3,516 3,331 Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 2,746 2,144 1,691 1,819 2,001 2,009 2,131 2,140 2,179 2,345 2,226 30 92 to 182 days 12,974 11,361 10,790 11,394 12,140 12,334 13,247 13,477 13,911 13,934 13,702 31 183 days to 1 year 17,469 18,391 24,006 24,833 25,686 26,304 26,863 26,534 27,265 28,079 27,907 32 More than 1 year to years 16,589 17,787 26,678 27,149 27,482 26,582 26,945 25,934 25,684 25,422 25,492 33 More than 2Vi years 20,501 21,293 22,411 22,552 22,866 22,449 21,819 22,646 22,526 22,638 22,568 34 IRA and Keogh plan accounts 19,791 19,013 21,042 21,231 21,321' 20,827 20,845 20,615 20,553 20,543 20,709 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 NonfinancialS tatistics • September 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 1996r BBaannkk ggrroouupp,, oorr ttyyppee ooff ddeeppoossiitt 1199993322 Nov. Dec. Jan. Feb. Mar. Apr. DEBITS Seasonally adjusted Demand deposits3 1 All insured banks 334,784.1 369,029.1 397,649.3 409,460.9 397,538.3 430,421.2 447,869.0 422,696.7 463,745.4 2 Major New York City banks 171,224.3 191,168.8 201,161.4 204,484.0 203,977.5 229,379.2 238,538.4 224,066.5 245,449.1 3 Other banks 163,559.7 177,860.3 196,487.9 204,976.9 193,560.8 201,042.0 209,330.6 198,630.2 218,296.3 4 Other checkable deposits4 3,481.5 3,798.6 4,207.4 4,891.5 4,595.5 4,975.7 5,034.6 5,023.9 5,355.8 5 Savings deposits (including MMDAs)5 3,497.4 3,766.3 4,507.8 5,679.4 5,703.6 6,029.4 6,397.6 6,340.6 7,325.5 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 785.9 817.4 874.1 905.5 852.7 916.8 950.6 881.0 970.1 7 Major New York City banks 4,198.1 4.481.5 4,867.3 5,222.3 5,069.7 5,368.0 5,852.3 5,608.2 5,884.4 8 Other banks 424.6 435.1 475.2 496.3 454.4 471.1 486.4 451.6 500.3 9 Other checkable deposits4 11.9 12.6 15.4 19.1 18.6 20.8 21.6 22.1 23.6 10 Savings deposits (including MMDAs)5 4.6 4.9 6.1 7.5 7.4 7.7 8.1 7.8 9.0 DEBITS Not seasonally adjusted Demand deposits3 11 All insured banks 334,899.2 369,121.8 397,657.8 398,219.1 411,802.7 429,213.3 414,819.1 442,977.6 457,392.9 12 Major New York City banks 171,283.5 191,226.0 201,182.6 202,744.5 210,780.0 227,293.7 222,007.5 236,954.2 238,335.3 13 Other banks 163,615.7 177,895.7 196.475.3 195,474.6 201,022.7 201,919.6 192,811.6 206,023.4 219,057.6 14 Other checkable deposits4 3,481.7 3,795.6 4,202.6 4,566.6 4,784.8 5,402.5 4,638.5 5,072.5 5,659.7 15 Savings deposits (including MMDAs)5 3,498.3 3,764.4 4,500.8 5,388.7 6,013.9 6,302.9 5,790.7 6,503.7 7,657.1 DEPOSIT TURNOVER Demand deposits3 16 All insured banks 786.1 818.2 874.6 860.5 847.5 895.4 900.9 947.0 956.6 17 Major New York City banks 4,197.9 4,490.3 4,873.1 5,046.6 4,900.9 5,109.7 5,427.5 6,060.5 5,774.9 18 Other banks 424.8 435.3 475.4 462.5 453.9 464.3 459.6 480.6 501.4 19 Other checkable deposits4 11.9 12.6 15.3 17.8 19.0 22.1 19.9 22.2 24.4 20 Savings deposits (including MMDAs)5 4.6 4.9 6.1 7.1 7.8 8.1 7.3 8.0 9.4 1. Historical tables containing revised data for earlier periods can be obtained from the 4. As of January 1994, other checkable deposits (OCDs), previously defined as automatic Publications Section, Division of Support Services, Board of Governors of the Federal transfer to demand deposits (ATSs) and negotiable order of withdrawal (NOW) accounts, Reserve System, Washington, DC 20551. were expanded to include telephone and preauthorized transfer accounts. This change Data in this table also appear in the Board's G.6 (406) monthly statistical release. For redefined OCDs for debits data to be consistent with OCDs for deposits data. ordering address, see inside front cover. 5. Money market deposit accounts. 2. Annual averages of monthly figures. 3. Represents accounts of individuals, partnerships, and corporations and of states and political subdivisions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A17 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 Billions of dollars Monthly averages Wednesday figures Account 1995 1995 1996 1996 June Dec. Jan.r Feb/ Mar/ Apr/ Mayr June June 5 June 12 June 19 June 26 ALL COMMERCIAL Seasonally adjusted BANKING INSTITUTIONS Assets 1 Bank credit 3,515.1 3,606.1r 3,631.8 3,642.0 3,632.5 3,647.8 3,651.9 3,656.8 3,643.8 3,666.0 3,651.2 3,661.0 2 Securities in bank credit 987.8 991.5r 991.0 996.6 980.3 978.1 984.8 976.6 978.5 982.9 971.4 976.2 3 U.S. government securities 709.9 710.9r 703.0 715.9 705.1 704.5 713.2 706.8 706.4 708.7 703.6 708.1 4 Other securities 277.9 280.6r 288.0 280.6 275.1 273.7 271.5 269.8 272.1 274.2 267.8 268.1 5 Loans and leases in bank credit2 . . . 2,527.3 2,614.6r 2,640.8 2,645.5 2,652.2 2,669.7 2,667.2 2,680.2 2,665.3 2,683.1 2,679.9 2,684.8 6 Commercial and industrial 692.1 716.6 722.6 725.5 723.2 729.1 731.3 734.0 730.7 733.8 733.6 736.8 7 Real estate 1,052.9 1,079.3 1,086.4 1,089.4 1,094.0 1,095.2 1,096.6 1,099.5 1,096.4 1,100.1 1,100.2 1,099.9 8 Revolving home equity 77.8 79.1 79.7 79.9 79.9 80.0 79.7 79.2 78.9 78.9 79.1 79.8 9 Other 975.2 1,000.2 1,006.7 1,009.6 1,014.1 1,015.2 1,016.9 1,020.3 1,017.5 1,021.2 1,021.1 1,020.1 10 Consumer 478.6 495.7 499.5 499.2 502.1 504.6 502.2 507.7 506.6 508.3 507.0 507.8 11 Security3 88.0 83.8r 85.0 85.8 85.0 86.1 82.7 82.2 80.9 86.1 81.6 79.7 12 Other 215.7 239. lr 247.3 245.5 247.8 254.7 254.3 256.7 250.7 254.9 257.4 260.5 13 Interbank loans4 188.0 196.8 204.0 194.2 205.7 212.9 212.4 209.5 215.8 207.5 208.6 210.3 14 Cash assets5 211.2 223.7 233.1 219.1 215.6 221.7 218.5 215.8 210.8 214.2 222.0 219.2 15 Other assets6 223.7 239.6 237.0 242.6 241.6 244.1 243.3 253.4 261.4 253.2 250.4 248.5 16 Total assets7 4,081.2 4,209.7r 4,249.1 4,241.4 4,238.8 4,269.7 4,269.4 4,278.5 4,275.0 4,284.1 4,275.5 4,282.0 Liabilities 17 Deposits 2,587.0 2,659.2 2,687.2 2,681.0 2,701.3 2,717.8 2,715.9 2,720.1 2,719.7 2,721.3 2,711.8 2,727.9 18 Transaction 782.2 773.9 783.3 766.6 768.3 772.0 758.1 752.2 751.8 753.7 751.3 766.8 19 Nontransaction 1,804.8 1,885.3 1,903.9 1,914.4 1,933.0 1,945.8 1,957.8 1,967.9 1,967.9 1,967.6 1,960.5 1,961.0 20 Large time 397.7 421.3 421.7 425.8 428.3 432.5 439.1 444.4 443.0 444.0 443.6 443.1 21 Other 1,407.2 1,464.0 1,482.1 1,488.6 1,504.8 1,513.3 1,518.7 1,523.5 1,524.9 1,523.6 1,516.8 1,517.9 22 Borrowings 675.1 690.5 704.4 690.1 686.2 708.0 707.0 697.5 685.0 692.9 708.8 708.2 23 From banks in the U.S 187.0 198.4 207.3 194.2 206.6 209.3 208.5 203.8 211.1 203.5 199.8 204.8 24 From nonbanks in the U.S 488.1 492.2 497.1 495.9 479.7 498.7 498.5 493.7 473.9 489.4 509.0 503.4 25 Net due to related foreign offices 244.9 262.6 270.1 276.5 261.3 254.4 255.8 255.0 248.2 254.2 260.0 253.6 26 Other liabilities8 222.8 239.5r 231.9 235.2 226.3 234.1 222.3 228.9 238.6 231.3 228.0 222.4 27 Total liabilities 3,729.9 3,851.8r 3,893.7 3,882.7 3,875.3 3,914.2 3,901.0 3,901.4 3,891.5 3,899.7 3,908.7 3,912.0 28 Residual (assets less liabilities)9 351.3 357.9"" 355.4 358.6 363.5 355.4 368.4 377.0 383.4 384.4 366.8 369.9 Not seasonally adjusted Assets 29 Bank credit 3,514.0 3,613.8r 3,622.5 3,633.7 3,626.9 3,649.0 3,648.8 3,653.6 3,646.7 3,660.4 3,651.5 3,649.3 30 Securities in bank credit 990.5 981.7' 978.7 991.6 984.8 983.5 989.2 977.8 985.3 984.1 973.6 974.6 31 U.S. government securities 710.7 1063' 697.7 711.3 709.5 710.6 714.1 706.9 709.2 708.9 704.9 706.8 32 Other securities 279.8 215.4' 281.0 280.3 275.3 272.9 275.1 270.8 276.1 275.2 268.7 267.8 33 Loans and leases in bank credit2 . . . 2,523.5 2,632. lr 2,643.9 2,642.1 2,642.0 2,665.5 2,659.6 2,675.8 2,661.5 2,676.4 2,677.9 2,674.7 34 Commercial and industrial 694.8 714.8r 719.6 723.7 727.1 735.0 736.8 737.0 734.7 734.5 737.4 738.6 35 Real estate 1,051.7 1,084. lr 1,086.1 1,086.3 1,088.4 1,091.4 1,093.5 1,098.1 1,094.1 1,099.0 1,098.1 1,098.5 36 Revolving home equity 77.7 79.2 79.5 79.4 79.1 79.5 79.6 79.2 78.7 78.8 79.0 79.9 37 Other 974.0 1,004.9 1,006.6 1,006.9 1,009.3 1,011.9 1,014.0 1,019.0 1,015.4 1,020.2 1,019.1 1,018.7 38 Consumer 475.1 501.5 504.1 499.8 497.9 501.8 500.5 504.0 503.3 504.1 503.1 504.7 39 Security3 86.0 87.7r 86.9 88.8 84.9 86.9 78.5 80.1 77.4 85.0 82.4 75.3 40 Other 215.8 244.0 247.1 243.6 243.6 250.5 250.3 256.6 252.0 253.8 256.8 257.6 41 Interbank loans4 184.5 209.2 213.0 196.1 203.6 209.9 205.7 205.7 215.6 207.2 200.7 198.0 42 Cash assets5 209.5 238.4 240.6 219.9 208.4 216.2 215.9 213.8 214.1 207.0 222.4 204.8 43 Other assets6 223.1 239.3 237.7 242.0 240.1 241.6 244.2 252.9 262.4 251.4 247.7 246.2 44 Total assets7 4,074.2 4v244.0r 4.2573 4,235.1 4,222.2 4,260.1 4,257.8 4,268.9 4,281.9 4,269.0 4,2653 4,241.4 Liabilities 45 Deposits 2,583.9 2,690.4 2,694.0 2,672.0 2,687.6 2,714.6 2,705.5 2,716.9 2,737.3 2,724.4 2,702.9 2,685.0 46 Transaction 775.9 809. lr 795.1 759.4 753.5 770.9 745.7 745.7 757.7 746.5 740.3 729.8 47 Nontransaction 1,808.0 1,881.2 1,898.9 1,912.6 1,934.1 1,943.7 1,959.8 1,971.2 1,979.5 1,977.9 1,962.6 1,955.2 48 Large time 397.7 420.3 418.8 426.4 429.8 432.4 444.5 444.3 447.1 446.9 443.6 440.4 49 Other 1,410.3 1,461.0 1,480.1 1,486.2 1,504.3 1,511.3 1,515.3 1,527.0 1,532.5 1,530.9 1,519.0 1,514.9 50 Borrowings 685.3 695.2 691.3 684.1 677.9 693.6 704.2 707.0 700.2 698.0 719.8 712.6 51 From banks in the U.S 188.4 211.4 214.3 195.9 201.7 208.0 205.6 205.4 215.6 207.1 200.7 198.7 52 From nonbanks in the U.S 496.9 483.8 477.0 488.2 476.2 485.5 498.7 501.7 484.6 490.8 519.2 513.9 53 Net due to related foreign offices 238.3 263.8 277.2 278.2 262.1 254.7 258.3 247.5 237.4 245.6 248.6 254.2 54 Other liabilities8 223.3 234.6r 233.7 235.7 227.8 230.4 224.9 229.7 241.0 232.8 226.5 223.8 55 Total liabilities 3,730.9 3,883.9r 3,896.2 3,870.0 3,855.5 3,8933 3,893.0 3,901.0 3,915.8 3,900.8 3,897.9 3,875.6 56 Residual (assets less liabilities)' 343.3 360. r 361.0 365.2 366.8 366.9 364.9 367.8 366.1 368.2 367.4 365.8 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • September 1996 1.26 ASSETS AND LIABILITIES OF COMMERCIAL BANKS1 -Continued Billions of dollars Monthly averages Wednesday figures Account 1995 1995 1996 1996 June Dec. Jan.r Feb.r Mar.r Apr/ Mayr June June 5 June 12 June 19 June 26 DOMESTICALLY CHARTERED Seasonally adjusted COMMERCIAL BANKS Assets 57 Bank credit 3,099.2 3,176.5r 3,197.0 3,195.2 3,195.8 3,207.0 3,209.1 3,206.5 3.200.1 3,207.8 3,204.0 3,210.3 58 Securities in bank credit 857.0 855.0 854.6 853.3 843.6 841.5 845.3 835.8 836.8 837.4 832.5 837.2 59 U.S. government securities 645.9 644.0r 640.2 643.5 635.5 634.6 637.1 629.3 629.5 630.0 626.7 631.0 60 Other securities 211.0 211.0r 214.4 209.8 208.1 206.9 208.3 206.5 207.3 207.4 205.9 206.3 61 Loans and leases in bank credit2 2,242.2 2.321.5r 2,342.4 2,341.9 2,352.2 2,365.5 2,363.7 2,370.7 2,363.3 2,370.4 2,371.4 2,373.1 62 Commercial and industrial 518.8 535.3r 540.2 540.6 540.8 545.4 547.5 547.7 546.3 546.7 547.7 549.0 63 Real estate 1,014.7 1,043.0 1,051.1 1,055.1 1.060.7 1,062.0 1,063.5 1,066.7 1,063.9 1,067.4 1,067.6 1,066.8 64 Revolving home equity 77.8 79.1 79.6 79.8 79.8 80.0 79.7 79.2 78.9 78.9 79.1 79.8 65 Other 936.9 963.9 971.5 975.3 980.9 982.0 983.9 987.5 985.0 988.5 988.6 987.0 66 Consumer 478.6 495.7 499.5 499.2 502.1 504.6 502.2 507.7 506.6 508.3 507.0 507.8 67 Security3 54.4 56.2 55.6 52.3 51.4 53.1 50.8 46.9 47.5 47.4 47.3 45.5 68 Other 175.7 191.2 196.0 194.7 197.1 200.4 199.6 201.6 199.0 200.6 201.8 204.0 69 Interbank loans4 165.5 173.7 182.2 173.5 184.9 191.9 191.0 187.1 190.9 185.4 180.9 192.6 70 Cash assets5 184.6 193.6 202.0 189.8 188.3 195.5 192.4 190.6 184.9 189.2 196.4 194.4 71 Other assets6 169.8 184.4 182.6 186.0 186.6 189.2 187.9 201.2 205.6 198.1 199.7 198.9 72 Total assets7 3,562.3 3,671.8r 3,707.0 3,687.9 3,699.0 3,726.7 3,723.7 3,728.5 3,724.7 3,723.7 3,724.2 3,7393 Liabilities 73 Deposits 2,424.9 2,491.8r 2,523.3 2,516.2 2,533.4 2,548.2 2,543.3 2,548.0 2,546.2 2,547.6 2,540.7 2,558.6 74 Transaction 772.8 763.4 772.6 755.9 758.5 761.4 747.1 741.3 740.7 742.8 739.9 756.3 75 Nontransaction 1,652.1 1,728.4 1,750.7 1,760.3 1,774.9 1,786.8 1,796.1 1,806.7 1,805.5 1,804.8 1,800.7 1,802.3 76 Large time 247.4 270.1 272.1 273.9 272.5 274.8 278.5 282.1 280.2 280.8 282.0 282.5 77 Other 1,404.6 1,458.3 1,478.7 1,486.4 1,502.4 1,511.9 1,517.6 1,524.5 1,525.3 1,524.0 1,518.8 1,519.8 78 Borrowings 562.6 577.5 590.1 572.4 574.4 588.6 582.1 577.5 565.7 568.9 588.0 589.0 79 From banks in the U.S 168.5 179.9 185.9 174.7 186.1 186.1 185.1 183.5 187.7 183.2 180.0 184.3 80 From nonbanks in the U.S 394.1 397.6 404.3 397.7 388.4 402.4 397.0 393.9 378.0 385.7 408.0 404.7 81 Net due to related foreign offices .... 90.8 91.0 93.0 90.5 81.2 84.6 88.0 79.7 72.9 79.7 80.7 81.5 82 Other liabilities8 142.6 155.3 153.5 155.7 149.7 157.6 149.2 157.8 164.1 156.1 159.5 154.6 83 Total liabilities 3,221.0 3,315.7 3360.0 3,334.7 3338.7 3378.9 3362.5 3362.9 3,348.8 33523 3368.9 3,383.7 84 Residual (assets less liabilities)9 341.3 356. lr 346.9 353.2 360.3 347.8 361.2 365.5 375.8 371.4 355.2 355.6 Not seasonally adjusted Assets 85 Bank credit 3,100.9 3,182.5r 3,185.3 3,187.1 3,188.7 3,209.8 3,209.4 3,206.7 3,205.7 3,208.7 3,206.2 3,203.0 86 Securities in bank credit 861.0 848.5 843.6 849.4 847.0 846.8 848.6 839.1 843.7 842.0 837.2 838.1 87 U.S. government securities 647.6 640.2 633.0 639.4 638.7 640.3 638.7 630.5 633.3 631.8 628.7 630.6 88 Other securities 213.5 208.3r 210.5 210.0 208.3 206.4 209.9 208.6 210.3 210.1 208.5 207.5 89 Loans and leases in bank credit2 2,239.9 2,334.0r 2,341.7 2,337.7 2,341.8 2,363.1 2,360.8 2,367.6 2,362.0 2,366.7 2,369.0 2,364.9 90 Commercial and industrial 521.1 533.3r 537.1 539.8 543.9 551.3 553.0 550.1 550.1 548.1 550.9 550.1 91 Real estate 1,013.5 l,047.8r 1,051.0 1,051.8 1,055.0 1,058.6 1,060.6 1,065.4 1,061.6 1,066.3 1,065.4 1,065.6 92 Revolving home equity 77.7 79.2 79.5 79.4 79.1 79.4 79.5 79.2 78.7 78.8 79.0 79.8 93 Other 935.8 968.6 971.5 972.5 975.9 979.1 981.1 986.2 983.0 987.5 986.4 985.7 94 Consumer 475.1 501.5 504.1 499.8 497.9 501.8 500.5 504.0 503.3 504.1 503.1 504.7 95 Security3 54.7 56.9 54.0 53.3 51.4 54.0 49.7 47.1 47.5 49.1 48.8 43.4 96 Other 175.4 194.5 195.6 193.0 193.5 197.3 197.0 201.0 199.5 199.0 200.7 201.2 97 Interbank loans4 163.2 184.7 189.9 177.2 183.5 189.7 184.2 185.0 193.5 187.1 177.9 178.9 98 Cash assets5 182.1 208.5 209.8 191.7 181.4 190.6 190.1 187.8 187.9 181.1 196.0 179.0 99 Other assets6 169.5 183.7 183.5 184.9 185.9 188.4 188.1 200.9 206.1 195.9 197.6 197.3 100 Total assets7 3,558.8 3,702.7r 3,712.0 3,6843 3,682.9 3,722.0 3,715.2 3,723.4 3,736.2 3,715.8 3,720.7 3,701.4 Liabilities 101 Deposits 2,419.4 2,522.1 2,529.2 2,507.5 2,519.3 2,547.4 2,531.5 2,542.6 2,560.6 2,547.4 2,529.4 2,513.1 102 Transaction 766.8 798.3 784.2 748.8 743.8 760.9 735.4 735.1 747.2 736.3 729.5 719.2 103 Nontransaction 1,652.6 1,723.8 1,744.9 1,758.7 1,775.4 1,786.5 1,796.1 1,807.5 1,813.4 1,811.1 1,799.9 1,794.0 104 Large time 247.3 265.8 269.4 275.3 273.0 276.2 281.8 282.0 282.7 282.6 281.9 280.0 105 Other 1,405.3 1,458.1 1,475.5 1,483.4 1,502.5 1,510.3 1,514.3 1,525.5 1,530.7 1,528.5 1,518.0 1,514.0 106 Borrowings 569.1 584.0 580.8 571.2 566.7 573.2 581.1 582.8 577.3 570.1 594.1 591.0 107 From banks in the U.S 168.6 191.8 192.8 177.2 181.1 185.8 183.8 183.5 190.7 184.5 179.7 178.1 108 From nonbanks in the U.S 400.5 392.2 388.0 394.0 385.6 387.5 397.2 399.3 386.6 385.7 414.4 412.9 109 Net due to related foreign offices .... 89.6 89.3 92.9 92.3 84.5 85.0 93.2 78.5 73.0 79.5 77.2 82.8 110 Other liabilities8 142.7 153.3 154.2 154.1 151.5 155.6 150.6 158.2 165.2 156.6 158.6 154.9 111 Total liabilities 3,220.8 3348.8 3357.1 3325.1 3322.0 3361.2 3356.4 3362.0 3376.1 3,353.6 3359.4 3,341.8 112 Residual (assets less liabilities)9 337.9 353.9r 355.0 359.2 360.9 360.8 358.9 361.4 360.0 362.2 361.3 359.6 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 May lr May 8 May 15 May 22 May 29 June 5 June 12 June 19 June 26 ASSETS 1 Cash and balances due from depository institutions 117,983 118,580r 119,739r lll,089r 122,997r 114,726 110,322 125,851 110,485 2 U.S. Treasury and government securities 281,227 283,773 284,139 280,103 279,703 277,713 273,645 271,603 272,833 3 Trading account 18,987 21,981 23,863 22,017 22,965 21,150 18,954 18,345 17,982 4 Investment account 262,240 261,792 260,276 258,086 256,737 256,563 254,691 253,258 254,851 5 Mortgage-backed securities' 116,013 115,626 116,568r 116,008' 115,61 r 115,964 115,590 114,558 115,923 All others, by maturity ft One year or less 35,918 35,602 33,388r 32,719r 33,333r 33,750 34,018 33,613 3333,,664455 7 One year through five years 62,094 62,703 62,704r 61,837r 60,857r 59,892 57,885 57,577 59,462 8 More than five years 48,215 47,860 47,616r 47,523r 46,937r 46,956 47,198 47,510 45,821 9 Other securities 124,004 123,818r 124,623r 122,294 123,354 124,631 124,182 123,464 122,014 10 Trading account 2,014 1,830 2,481 1,123 1,237 1,657 1,794 2,360 2,242 11 Investment account 63,379 63,387 63,557 63,397 63,411 63,475 63,743 64,111 63,689 12 State and local government, by maturity 18,941 18,800 18,789 18,815 18,829 18.444 18,543 18,775 18.845 13 One year or less 4,083 4,037 4,016 4,032 4,019 3,909 3,915 3,995 4,012 14 More than one year 14,857 14,762 14,773 14,784 14,811 14,535 14,627 14,779 14,833 15 Other bonds, corporate stocks, and securities 44,438 44,588 44,768 44,581 44,582 45,030 45,200 45,336 44,844 16 Other trading account assets 58,611 58,600r 58,586r 57,775 58,706 59,499 58,645 56,992 56,084 17 Federal funds sold2 126,298 121,656 119,912 112,698 106,695 112,854 115,303 110,919 111,917 18 To commercial banks in the United States 87,625 83,777 87,610 78,385 74,940 81,728 82,091 79,256 83,254 19 To nonbank brokers and dealers in securities 34,526 33,468 26,860 28,966 26,801 26,224 28,326 26,292 22,608 20 To others3 4,146 4,412 5,443 5,348 4,953 4,902 4,885 5,371 6,055 21 Other loans and leases, gross 1,302,972 1,297,559 1,295,818r l,293,796r l,296,133r 1,298,990 1,298,139 1,305,751 1,306,656 ?.?. Commercial and industrial 363,164 360,605r 360,776r 359,043r 356,856r 355,609 353,369 357,817 357,599 23 Bankers acceptances and commercial paper 1,499 1,489 1,432 1,373 1,418 1,369 1,401 1,390 1,324 24 All other 361,665 359,117r 359,343r 357,670r 355,438r 354,240 351,968 356,427 356,274 25 U.S. addressees 358,868 356,309r 356,52 lr 354,857r 352,663r 351,643 349,359 353,791 353,669 26 Non-U.S. addressees 2,797 2,807r 2,822 2,812 2,775 2,597 2,609 2,637 2,605 27 Real estate loans 506,452 506,655r 505,46 lr 503,656r 504,150r 506,019 507,727 508,668 508,198 28 Revolving, home equity 48,816 48,095 48,097r 47,990r 48,04 r 48,092 48,135 48,594 48,854 29 All other 457,636 458,560r 457,363r 455,665r 456,109r 457,927 459,592 460,074 459,343 30 To individuals for personal expenditures 250,435 250,763 249,910r 250,274r 251,668r 253,104 254,143 253,398 255,344 31 To depository and financial institutions 74,328 74,70 r 73,416r 72,467r 75,176r 75,897 75,821 75,057 75,479 32 Commercial banks in the United States 42,512 42,332 42,673 41,619 43,517 44,109 43,194 43,189 43,596 33 Banks in foreign countries 4,099 3,813 2,877 3,532 3,780 3,174 3,456 3,339 3,254 34 Nonbank depository and other financial institutions 27,717 28,556r 27,866r 27,316r 27,879r 28,614 29,171 28,529 28,629 35 For purchasing and carrying securities 15,885 14,031 14,604r 16,701r 15,105r 15,356 15,196 17,183 15,602 36 To finance agricultural production 6,694 6,762 6,814 6,902 6,913 6,833 6,893 7,065 7,243 37 To states and political subdivisions 10,189 10,260 10,359 10,507 10,461 10,384 10,163 10,392 10,520 38 To foreign governments and official institutions 1,124 1,080 1,117 1,096 1,086 1,095 1,106 1,207 1,066 39 All other loans 28,794 26,235r 26,748r 26,443r 27,838r 27,321 25,707 26,479 26,723 40 Lease-financing receivables 45,907 46,467 46,614 46,707 46,880 47,373 48,013 48,486 48,883 41 LESS: Unearned income 1,805 1,869 1,877 1,880 1,865 1,935 1,987 2,002 2,003 42 Loan and lease reserve3 33,111 33,228 33,181 33,087 33,033 33,291 33,244 33,284 33,153 43 Other loans and leases, net 1,268,056 1,262,462 l,260,760r l,258,829r l,261,235r 1,263,764 1,262,908 1,270,465 1,271,500 44 All other assets 145,869 147,118r 149,016r 140,917r 143,508r 169,655 155,524 158,979 157,831 45 Total assets 2,063,437 2,057,405r 2,058,189r 2,025,931r 2,037,492r 2,063,343 2,041,883 2,061,280 2,046,580 Footnotes appear on the following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • September 1996 1.27 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS—Continued Millions of dollars, Wednesday figures 1996 AAccccoouunntt May lr May 8 May 15 May 22 May 29 June 5 June 12 June 19 June 26 LIABILITIES 46 Deposits 1,232,707 l,215,603r l,236,838r l,202,154r 1,221,199' 1,238,748 1,230,539 1,230,209 1,221,262 47 Demand deposits 322,792 301,004r 322,941r 294,012r 315,480' 317,013 311,611 311,034 305,247 48 Individuals, partnerships, and corporations 274,470 258,108r 275,635r 252,286r 267,745' 271,951 267,381 262,712 260,886 49 Other holders 48,322 42,896 47,306 41,726' 47,735' 45,061 44,230 48,323 44,361 50 States and political subdivisions 9,846 8,264 8,914 8,303 8,535 8,238 7,790 9,318 9,059 51 U.S. government 3,107 1,731 3,075 1,740r 1,471' 2,147 2,432 4,319 2,095 52 Depository institutions in the United States 21,821 20,457 22,383 19,637 24,101 22,222 20,565 21,596 19,480 53 Banks in foreign countries 5,042 5,293 5,443 5,004 5,546 5,172 5,933 5,464 5,892 54 Foreign governments and official institutions 663 594 691 590 776 564 588 569 555 55 Certified and officers' checks 7,844 6,557 6,800 6,452 7,306 6,718 6,922 7,057 7,279 56 Transaction balances other than demand deposits4 80,873 80,250 76,766 71,437 72,032 73,194 72,100 73,684 72,220 57 Nontransaction balances 829,042 834,349 837,131 836,705 833,687 848,541 846,828 845,491 843,795 58 Individuals, partnerships, and corporations 799,967 804,613 807,569 806,910 804,219 818,924 817,297 816,880 815,778 59 Other holders 29,075 29,736 29,562 29,795 29,468 29,618 29,531 28,611 28,017 60 States and political subdivisions 22,815 23,440r 23,261 23,478 23,225 23,619 23,587 22,663 21,938 61 U.S. government 4,014 4,019 4,042 4,040 4,040 4,030 4,014 4,009 4,050 62 Depository institutions in the United States 1,941 1,966 1,948 1,958 1,884 1,669 1,631 1,633 1,724 63 Foreign governments, official institutions, and banks . . 306 310 311 318 319 300 299 305 306 64 Liabilities for borrowed money5 411,596 421,002 406,865 405,249r 406,708' 408,777 400,126 419,678 413,207 65 Borrowings from Federal Reserve Banks 0 0 0 0 0 0 0 3,522 0 66 Treasury tax and loan notes 24,225 14,238 3,648 2,782 3,355 580 2,710 24,581 22,963 67 Other liabilities for borrowed money6 387,371 406,764 403,217 402,467r 403,353' 408,197 397,416 391,575 390,244 68 Other liabilities (including subordinated notes and debentures) . . . 224,157 225,60 lr 219,273r 222,648r 213,367' 218,946 213,405 213,780 214,996 69 Total liabilities 1,868,461 l,862,206r l,862,976r l,830,051r l,841,274r 1,866,471 1,844,069 1,863,667 1,849,464 70 Residual (total assets less total liabilities)7 194,977 195,199 195,213r 195,880' 196,218' 196,872 197,814 197,613 197,115 MEMO 71 Total loans and leases, gross, adjusted, plus securities8 1,704,364 l,700,696r l,694,209r 1,688,888' 1,687,427' 1,688,351 1,685,983 1,689,292 1,686,570 72 Time deposits in amounts of $100,000 or more 121,493 123,988 125,319 125,591 124,714 126,160 126,540 126,910 126,032 73 Loans sold outright to affiliates9 1,080 1,056 1,048 1,039 1,032 1,020 1,014 1,000 989 74 Commercial and industrial 268 268 268 268 268 264 264 264 263 75 Other 812 789 780 771 765 755 750 736 725 76 Foreign branch credit extended to U.S. residents10 27,527 27,113 28,057 27,880 28,262 28,415 28,332 29,051 28,633 77 Net owed to related institutions abroad 91,145 93,087 83,508 97,840 87,464 68,820 74,965 72,643 78,224 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 May 1 May 8 May 15 May 22 May 29 June 5 June 12 June 19 June 26 ASSETS 1 Cash and balances due from depository institutions 1155,,113333 15,613 15,215 15,727 15,991 15,943 15,613 15,994 15,533 2 U.S. Treasury and government agency securities 47,839 49,834 48,825 49,549 49,983 49,899 50,413 50,018 49,962 3 Other securities 43,659r 42,162r 43,153r 43,239r 43,942r 43,525 42,793 40,347 40,278 4 Federal funds sold' 29,435r 27,443r 21,673r 25,940r 28,270r 26,267 30,215 29,399 27,389 5 To commercial banks in the United States 7,079 6,889 5,720 7,242 10,570 7,320 6,078 7,787 6,285 6 To others2 22,356r 20,554r 15,954r 18,697r 17,700r 18,947 24,138 21,612 21,104 7 Other loans and leases, gross 185,595 183,506 185,905 187,250 187,162 186,845 188,543 190,727 190,777 8 Commercial and industrial 119,407 118,350 119,599 119,906 119,734 120,260 120,539 121,100 121,958 9 Bankers acceptances and commercial paper . 4,735 4,792 4,787 4,756 4,912 4,942 5,066 4,887 4,969 10 All other 114,671 113,558 114,812 115,150 114,823 115,318 115,473 116,214 116,989 11 U.S. addressees 108,344 107,269 108,613 108,953 108,625 109,080 109,233 109,935 109,927 12 Non-U.S. addressees 6,327 6,288 6,199 6,197 6,197 6,239 6,241 6,279 7,061 13 Loans secured by real estate 2200,,332222 20,374 20,389 20,612 20,533 20,195 20,201 20,294 20,438 14 Loans to depository and financial institutions 33,015r 33,129r 33,789r 33,874r 34,332r 33,676 35,306 35,978 36,044 15 Commercial banks in the United States 2,138 2,171 2,466 2,627 2,895 3,100 3.253 3,007 2,735 16 Banks in foreign countries 3,271 3,089 3,328 3,008 3,021 3,062 3,075 3,075 3,129 17 Nonbank financial institutions 27,605r 27,868r 27,995r 28,239r 28,417r 27,514 28,978 29,896 30,181 18 For purchasing and carrying securities 5,818r 4,667r 4,758r 5,475r 5,186r 5,387 5,143 5,742 4,994 19 To foreign governments and official institutions 575 585 584 601 596 587 599 791 783 20 All other 4,462 4,423 4,687 4,685 4,684 4,656 4,666 4,712 4,531 21 Other assets (claims on nonrelated parties) 38,649 39,085 40,867 39,636 39,469 39,804 38,917 34,646 33,640 22 Total assets3 395,636 393,997 394,132 397,039 401,131 397,261 398,942 391,895 388,800 LIABILITIES 23 Deposits or credit balances owed to other than directly related institutions 108,436 108,354 109,334 111.375 112,528 111,088 110,595 108,608 108,311 24 Demand deposits4 4,202 4,253 4,203 4,104 4,355 4,325 4,145 4,462 4,380 25 Individuals, partnerships, and corporations .... 3,481 3,422 3,550 3,510 3,573 3,617 3,487 3,563 3,684 26 Other 721 831 652 594 783 708 658 899 696 27 Nontransaction accounts 104,234 104,100 105,131 107,271 108,172 106,763 106,450 104,146 103,931 28 Individuals, partnerships, and corporations .... 75,123 74,808 77,091 79,368 79,222 78,147 77,787 75,870 76,005 29 Other 2299,,111100 29,293 28,040 27,903 28,951 28,616 28,663 28,276 27,927 30 Borrowings from other than directly related institutions 88,351 85,024 83,075 82,707 79,485 81,729 86,177 84,714 81,610 31 Federal funds purchased5 55,066 50,405 49,206 46,632 45,657 49,330 52,350 50,509 49,987 32 From commercial banks in the United States . . 16,175 10,602 13,804 8,888 8,760 11,993 11,234 11,002 10,202 33 From others 38,890 39,804 35,402 37,744 36,897 37,337 41,116 39,507 39,786 34 Other liabilities for borrowed money 33,285 34,619 33,869 36,075 33,828 32,399 33,827 34,206 31,623 35 To commercial banks in the United States 4,068 4,221 4,201 4,472 4,100 3,812 3,970 4,024 4,241 36 To others 29,218 30,398 29,667 31,604 29,728 28,587 29,856 30,181 27,382 37 Other liabilities to nonrelated parties 60,558 60,368 62,440 60,571 61,855 61,982 61,878 55,315 56,293 38 Total liabilities6 395,636 393,997 394,132 397,039 401,131 397,261 398,942 391,895 388,800 MEMO 39 Total loans (gross) and securities, adjusted7 297,312 293,884 291,371 296,109 295,893 296,117 302,634 299,696 299,386 40 Net owed to related institutions abroad 102,966 103,897 100,790 106,688 110,949 107,485 107,845 112,493 111,364 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 • September 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 Dec. Jan. Feb. Mar. Apr. May Commercial paper (seasonally adjusted unless noted otherwise) 11 AAllll iissssuueerrss 528,832 545,619 555,075 595,382 674,904r 674,904r 685,791r 687,669 695,201 710,749 719,116 FFiinnaanncciiaall ccoommppaanniieess'' 22 DDeeaalleerr--ppllaacceedd ppaappeerr22,, ttoottaall 212,999 226,456 218,947 223,038 275,815r 275,815r 288,368 293,313 292,533 303,567 302,709 33 DDiirreeccttllyy ppllaacceedd ppaappeerr33,, ttoottaall 182,463 171,605 180,389 207,701 210,829r 210,829r 208,159r 208,046 208,880 211,833 221,463 44 NNoonnffiinnaanncciiaall ccoommppaanniieess44 133,370 147,558 155,739 164,643 188,260 188,260 189,264 186,310 193,788 195,349 194,944 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 11,,445588 11,,771144 1,321 Federal Reserve Banks6 9 Foreign correspondents 1,739 1,276 725 410 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 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 Loans1 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 6.00 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 Mav 6.00 Sept 7.75 Sept 8.75 July 7 8.75 June 6.00 Oct 7.75 Oct 8.75 Dec. 20 8.50 July 6.00 Nov 8.15 Nov 8.75 6.00 Dec 88..5500 Dec 88..6655 1996—Feb. 1 8.25 Sept 6.00 Oct 6.00 1996—Jan 8.50 Nov 6.00 Feb 8.25 Dec 66..0000 8 25 Apr 8.25 May 8.25 June 8.25 July 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 Mar. Apr. May June May 31 June 7 June 14 June 21 June 28 MONEY MARKET INSTRUMENTS 1 Federal funds1'2'3 3.02 4.21 5.83 5.31 5.22 5.24 5.27 5.19 5.33 5.24 5.45 5.21 2 Discount window borrowing2,4 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 paper3,5,6 3 1-month 3.17 4.43 5.93 5.39 5.40 5.38 5.45 5.38 5.42 5.43 5.46 5.50 4 3-month 3.22 4.66 5.93 5.31 5.39 5.39 5.49 5.38 5.44 5.50 5.50 5.51 5 6-month 3.30 4.93 5.93 5.26 5.38 5.42 5.57 5.41 5.49 5.60 5.60 5.61 Finance paper, directly placed3'5'7 6 1-month 3.12 4.33 5.81 5.29 5.31 5.29 5.35 5.27 5.32 5.34 5.36 5.38 7 3-month 3.16 4.53 5.78 5.18 5.28 5.29 5.37 5.28 5.32 5.38 5.39 5.40 8 6-month 3.15 4.56 5.68 5.04 5.20 5.23 5.35 5.24 5.29 5.38 5.37 5.38 Bankers acceptances3,5,8 9 3-month 3.13 4.56 5.81 5.21 5.28 5.29 5.38 5.30 5.34 5.40 5.39 5.40 10 6-month 3.21 4.83 5.80 5.17 5.28 5.31 5.47 5.33 5.42 5.49 5.48 5.49 Certificates of deposit, secondary market3,9 11 1-month 3.11 4.38 5.87 5.31 5.34 5.32 5.37 5.31 5.35 5.36 5.36 5.39 12 3-month 3.17 4.63 5.92 5.29 5.36 5.36 5.46 5.36 5.42 5.48 5.47 5.49 13 6-month 3.28 4.96 5.98 5.30 5.42 5.47 5.64 5.47 5.59 5.67 5.65 5.66 14 Eurodollar deposits, 3-month3,10 3.18 4.63 5.93 5.28 5.36 5.36 5.46 5.35 5.43 5.48 5.45 5.48 U.S. Treasury bills Secondary market3'5 15 3-month 3.00 4.25 5.49 4.96 4.95 5.02 5.09 5.04 5.09 5.11 5.09 5.09 16 6-month 3.12 4.64 5.56 4.96 5.06 5.12 5.25 5.14 5.22 5.30 5.25 5.22 17 1-year 3.29 5.02 5.60 5.06 5.23 5.33 5.48 5.39 5.46 5.52 5.48 5.47 Auction average3'5'" 18 3-month 3.02 4.29 5.51 4.96 4.99 5.02 5.11 5.03 5.09 5.16 5.08 5.10 19 6-month 3.14 4.66 5.59 4.96 5.08 5.12 5.26 5.14 5.21 5.34 5.27 5.23 20 1-year 3.33 5.02 5.69 4.98 5.17 5.31 5.56 5.32 n.a. n.a. n.a. 5.56 U.S. TREASURY NOTES AND BONDS Constant maturities'2 21 1-year 3.43 5.32 5.94 5.34 5.54 5.64 5.81 5.70 5.78 5.86 5.82 5.79 22 2-year 4.05 5.94 6.15 5.66 5.96 6.10 6.30 6.17 6.26 6.36 6.32 6.25 23 3-year 4.44 6.27 6.25 5.79 6.11 6.27 6.49 6.34 6.44 6.56 6.50 6.44 24 5-year 5.14 6.69 6.38 5.97 6.30 6.48 6.69 6.55 6.63 6.77 6.73 6.63 25 7-year 5.54 6.91 6.50 6.19 6.48 6.66 6.83 6.69 6.77 6.93 6.87 6.76 26 10-year 5.87 7.09 6.57 6.27 6.51 6.74 6.91 6.77 6.85 6.99 6.95 6.86 27 20-year 6.29 7.49 6.95 6.74 6.98 7.11 7.22 7.09 7.16 7.30 7.25 7.16 28 30-year 6.59 7.37 6.88 6.60 6.79 6.93 7.06 6.93 6.99 7.13 7.10 7.02 Composite 29 More than 10 years (long-term) 6.45 7.41 6.93 6.72 6.94 7.08 7.20 7.07 7.14 7.28 7.23 7.14 STATE AND LOCAL NOTES AND BONDS Moody's series'3 30 Aaa 5.38 5.77 5.80 5.33 5.62 5.75 5.67 5.70 5.15 5.89 5.72 5.90 31 BBaaaa 5.83 6.17 6.10 5.72 5.94 5.97 5.98 6.01 5.75 6.18 6.02 5.96 32 BBoonndd BBuuyyeerr sseerriieess1144 5.60 6.18 5.95 5.79 5.94 5.98 6.02 5.94 5.94 6.12 6.06 5.97 CORPORATE BONDS 33 Seasoned issues, all industries15 7.54 8.26 7.83 7.65 7.80 7.91 8.00 7.89 7.95 8.07 8.03 7.96 Rating group 34 Aaa 7.22 7.97 7.59 7.35 7.50 7.62 7.71 7.61 7.67 7.78 7.74 7.66 35 Aa 7.40 8.15 7.72 7.52 7.68 7.77 7.87 7.75 7.81 7.93 7.90 7.83 36 A 7.58 8.28 7.83 7.68 7.83 7.94 8.02 7.92 7.98 8.09 8.04 7.97 37 BBaaaa 7.93 8.63 8.20 8.03 8.19 8.30 8.40 8.27 8.34 8.47 8.44 8.36 38 AA--rraatteedd,, rreecceennttllyy ooffffeerreedd uuttiilliittyy bboonnddss''66 7.46 8.29 7.86 7.75 7.90 8.02 8.13 8.08 8.12 8.20 8.20 7.97 MEMO Dividend-price ratio17 39 Common stocks 2.78 2.82 2.56 2.22 2.24 2.21 2.21 2.22 2.17 2.22 2.22 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. Al 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 • September 1996 1.36 STOCK MARKET Selected Statistics 1995 1996 IInnddiiccaattoorr 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Prices and trading volume (averages of daily figures) CCCCCCCooooooommmmmmmmmmmmmmooooooonnnnnnn ssssssstttttttoooooooccccccckkkkkkk ppppppprrrrrrriiiiiiiccccccceeeeeeesssssss (((((((iiiiiiinnnnnnndddddddeeeeeeexxxxxxxeeeeeeesssssss))))))) 1111111 NNNNNNNeeeeeeewwwwwww YYYYYYYooooooorrrrrrrkkkkkkk SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee (((((((DDDDDDDeeeeeeeccccccc....... 33333331111111,,,,,,, 1111111999999966666665555555 ======= 55555550000000))))))) 249.71 254.16 291.18 311.78 317.58 327.90 329.22 346.46 346.73 347.50 354.84 358.32 2222222 IIIIIIInnnnnnnddddddduuuuuuussssssstttttttrrrrrrriiiiiiiaaaaaaalllllll 300.10 315.32 367.40 389.63 398.66 412.11 413.05 435.92 439.55 441.99 452.63 458.30 3333333 TTTTTTTrrrrrrraaaaaaannnnnnnssssssspppppppooooooorrrrrrrtttttttaaaaaaatttttttiiiiiiiooooooonnnnnnn 242.68 247.17 270.14 291.16 300.06 303.53 300.43 315.29 324.77 326.42 334.66 331.57 4444444 UUUUUUUtttttttiiiiiiillllllliiiiiiitttttttyyyyyyy 114.55 104.96 114.61 123.59 119.49 123.95 127.09 135.51 122.83 122.44 124.86 123.60 5555555 FFFFFFFiiiiiiinnnnnnnaaaaaaannnnnnnccccccceeeeeee 216.55 209.75 238.48 265.12 266.12 273.36 274.96 290.97 290.44 287.92 290.43 294.42 6666666 SSSSSSStttttttaaaaaaannnnnnndddddddaaaaaaarrrrrrrddddddd &&&&&&& PPPPPPPoooooooooooooorrrrrrr'''''''sssssss CCCCCCCooooooorrrrrrrpppppppooooooorrrrrrraaaaaaatttttttiiiiiiiooooooonnnnnnn (((((((1111111999999944444441111111-------44444443333333 ======= 11111110000000)))))))1111111 451.63 460.42 541.72 582.92 595.53 614.57 614.42 649.54 647.07 647.17 661.23 668.50 7777777 AAAAAAAmmmmmmmeeeeeeerrrrrrriiiiiiicccccccaaaaaaannnnnnn SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee (((((((AAAAAAAuuuuuuuggggggg....... 33333331111111,,,,,,, 1111111999999977777773333333 ======= 55555550000000)))))))2222222 438.77 449.49 498.13 530.26 529.93 538.01 540.48 562.34 565.69 580.60 600.93 591.99 VVVVVVVooooooollllllluuuuuuummmmmmmeeeeeee ooooooofffffff tttttttrrrrrrraaaaaaadddddddiiiiiiinnnnnnnggggggg (((((((ttttttthhhhhhhooooooouuuuuuusssssssaaaaaaannnnnnndddddddsssssss ooooooofffffff ssssssshhhhhhhaaaaaaarrrrrrreeeeeeesssssss))))))) 8888888 NNNNNNNeeeeeeewwwwwww YYYYYYYooooooorrrrrrrkkkkkkk SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee 263,374 290,652 345,729 365,108 360,199 384,310 416,048 434,607 426,198 419,941 404,184 392,413 9999999 AAAAAAAmmmmmmmeeeeeeerrrrrrriiiiiiicccccccaaaaaaannnnnnn SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee 18,188 17,951 20,354 17,672 16,724 21,085 21,069 27,107 22,988 24,886 28,127 23,903 Customer financing (millions of dollars, end-of-period balances) 11111110000000 MMMMMMMaaaaaaarrrrrrrgggggggiiiiiiinnnnnnn cccccccrrrrrrreeeeeeedddddddiiiiiiittttttt aaaaaaattttttt bbbbbbbrrrrrrroooooookkkkkkkeeeeeeerrrrrrr-------dddddddeeeeeeeaaaaaaallllllleeeeeeerrrrrrrsssssss3333333 60,310 61,160 76,680 75,005 77,875 76,680 73,530 77,090 78,308 81,170 86,100 87,160 FFFFFFFrrrrrrreeeeeeeeeeeeee cccccccrrrrrrreeeeeeedddddddiiiiiiittttttt bbbbbbbaaaaaaalllllllaaaaaaannnnnnnccccccceeeeeeesssssss aaaaaaattttttt bbbbbbbrrrrrrroooooookkkkkkkeeeeeeerrrrrrrsssssss4444444 11111111111111 MMMMMMMaaaaaaarrrrrrrgggggggiiiiiiinnnnnnn aaaaaaaccccccccccccccooooooouuuuuuunnnnnnntttttttsssssss5555555 12,360 14,095 16,250 14,753 15,590 16,250 14,950 15,840 15,770 15,780 16,890 16,600 11111112222222 CCCCCCCaaaaaaassssssshhhhhhh aaaaaaaccccccccccccccooooooouuuuuuunnnnnnntttttttsssssss 27,715 28,870 34,340 29,908 30,340 34,340 32,465 34,700 33,113 33,100 33,760 32,930 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 11111113333333 MMMMMMMaaaaaaarrrrrrrgggggggiiiiiiinnnnnnn ssssssstttttttoooooooccccccckkkkkkksssssss 70 80 65 55 65 50 11111114444444 CCCCCCCooooooonnnnnnnvvvvvvveeeeeeerrrrrrrtttttttiiiiiiibbbbbbbllllllleeeeeee bbbbbbbooooooonnnnnnndddddddsssssss 50 60 50 50 50 50 11111115555555 SSSSSSShhhhhhhooooooorrrrrrrttttttt sssssssaaaaaaallllllleeeeeeesssssss 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 1996 11999933 11999944 11999955 Jan. Feb. Mar. Apr. May June U.S. budget1 1 Receipts, total 1,153,535 1,257,737 1,355,213 142,922 89,349 89,011 203,386 90,044 151,919 2 On-budget 841,601 922,711 1,004,134 110,615 60,912 56,677 160,774 60,106 116,718 3 Off-budget 311,934 335,026 351,079 32,307 28,437 32,334 42,612 29,938 35,201 4 Outlays, total 1,408,675 1,460,841 1,519,133 123,647 133,644 136,286 130,993 143,342 117,818 5 On-budget 1,142,088 1,181,469 1,230,469 98,057 105,711 108,365 105,131 114,486 104,161 6 Off-budget 266,587 279,372 288,664 25,591 27,933 27,921 25,862 28,856 13,657 7 Surplus or deficit (-), total -255,140 -203,104 -163,920 19,274 -44,295 -47,275 72,393 -53,298 34,101 8 On-budget -300,487 -258,758 -226,335 12,558 -44,799 -51,688 55,643 -54,380 12,557 9 Off-budget 45,347 55,654 62,415 6,716 504 4,413 16,750 1,082 21,544 Source of financing (total) 10 Borrowing from the public 248,619 185,344 171,288 -4,747 47,022 39,189 -35,466 20,633 -8,619 11 Operating cash (decrease, or increase (-)) 6,283 16,564 -2,007 -16,959 6,297 9,283 -26,449 43,809 -33,519 12 Other2 238 1,196 -5,361 2,432 -9,024 -197 -10,478 -11,144 8,037 MEMO 13 Treasury operating balance (level, end of period) 52,506 35,942 37,949 37,454 31,157 21,874 48,323 4,514 38,033 14 Federal Reserve Banks 17,289 6,848 8,620 8,210 5,632 7,021 11,042 3,757 7,701 15 Tax and loan accounts 35,217 29,094 29,329 29,243 25,525 14,853 37,281 757 30,332 1. Since 1990, off-budget items have been the social security trust funds (federal old-age net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF loansurvivors insurance and federal disability insurance) and the U.S. Postal Service. valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCE. Monthly totals: U.S. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • September 1996 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1994 1995 1996 1996 11999944 11999955 H2 HI H2 HI Apr. May June RECEIPTS 1 All sources 1,257,737 1,355,213 625,556 710,542 656,402 766,631 203,386 90,044 151,919 2 Individual income taxes, net 543,055 590,244 273,315 307,498 292,393 347,285 107,513 29,914 60,816 3 Withheld 459,699 499,927 240,063 251,398 256,916 264,177 38,930 45,399 35,941 4 Nonwithheld 160,433 175,855 42,029 132,001 43,100 162,782 89,392 6,352 26,926 5 Refunds 77,077 85,538 8,787 75,959 10,058 79,735 20,822 21,850 2,061 Corporation income taxes 6 Gross receipts 154,205 174,422 78,393 92,132 88,302 96,480 26,912 3,647 37,950 7 Refunds 13,820 17,418 7,747 10,399 7,518 9,704 1,975 1,077 992 8 Social insurance taxes and contributions, net .. . 461,475 484,473 220,140 261,837 224,269 277,767 60,588 48,676 45,583 9 Employment taxes and contributions2 428,810 451,045 206,615 241,557 211,323 257,446 56,615 38,104 44,888 10 Unemployment insurance 28,004 28,878 11,177 18,001 10,702 18,068 3,628 10,155 400 11 Other net receipts3 4,661 4,550 2,349 2,279 2,247 2,254 346 417 295 12 Excise taxes 55,225 57,484 30,178 27,452 30,014 25,682 4,577 4,113 4,310 13 Customs deposits 20,099 19,301 11,041 8,848 9,849 8,731 1,388 1,427 1,450 14 Estate and gift taxes 15,225 14,763 7,067 7,425 7,718 8,775 2,704 1,415 1,141 15 Miscellaneous receipts4 22,274 31,944 13,169 15,750 11,374 11,620 1,680 1,929 1,663 OUTLAYS 16 All types 1,460,841 1,519,133 752,150 760,824 752,511 785,730 130,993 143,342 117,818 17 National defense 281,642 272,066 141,885 135,648' 132,954 133,516 2222,,772255 26,609 19,769 18 International affairs 17,083 16,434 11,889 4,797 6,994 8,074 998888 1,165 837 19 General science, space, and technology 16,227 16,724 7,604 8,611 8,810 8,897 1,534 1,584 1,536 20 Energy 5,219 4,936 2,923 2,358' 2,203 1,355 17 216 822 21 Natural resources and environment 21,064 22,105 11,911 I0,273r 12,633 10,238 1,660 1,757 1,543 22 Agriculture 15,046 9,773 7,623 4,039' 3,062 71 -249 -175 -124 23 Commerce and housing credit -5,118 -14,441 -4,270 -13,937 -4,412 -7,334 -1,741 256 -1,368 24 Transportation 38,066 39,350 21,835 18,193' 19,931 18,291 2,864 3,324 3,185 25 Community and regional development 10,454 10,641 6,283 5,073' 6,085 5,160 1,026 826 896 26 Education, training, employment, and social services 46,307 54,263 27,450 25,893' 24,894 26,137 4,014 3,961 3,903 27 Health 107,122 115,418 54,147 59,057' 57,078 59,957 10,458 11,201 9,762 28 Social security and Medicare 464,312 495,701 236,817 251,975 251,387 264,649 44,216 46,727 44,731 29 Income security 214,031 220,449 101,806 117,190' 104,078 121,032 21,417 21,407 11,332 30 Veterans benefits and services 37,642 37,938 19,761 19,269' 18,684 18,164 2,974 5,254 1,570 31 Administration of justice 15,256 16,223 7,753 8,051' 8,117 9,021 1,585 1,683 1,327 32 General government 11,303 13,835 7,355 5,796' 7,621 4,641 -25 180 1,755 33 Net interest5 202,957 232,173 109,434 116,169 119,350 120,579 20,463 20,359 18,977 34 Undistributed offsetting receipts6 -37,772 -44,455 -20,066 -17,631' -26,994 -16,716 -2,932 -2,991 -2,636 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 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 1 Federal debt outstanding 4,673 4,721 4,827 4,891 4,978 5,001 5,017 5,153 5,197 2 Public debt securities 4,646 4,693 4,800 4,864 4,951 4,974 4,989 5,118 5,161 3 Held by public 3,443 3,480 3,543 3,610 3,635 3,653 3,684 3,764 n.a. 4 Held by agencies 1,203 1,213 1,257 1,255 1,317 1,321 1,305 1,354 n.a. 5 Agency securities 28 29 27 27 27 27 28 36 36 6 Held by public 27 29 27 26 27 27 28 28 n.a. 7 Held by agencies 0 0 0 0 0 0 0 8 n.a. 8 Debt subject to statutory limit 4,559 4,605 4,711 4,775 4,861 4,885 4,900 5,030 5,073 9 Public debt securities 4,559 4,605 4,711 4,774 4,861 4,885 4,900 5,030 5,073 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 5,500 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 Q3 Q4 Q1 Q2 1 Total gross public debt 4,177.0 4,535.7 4,800.2 4,988.7 4,974.0 4,988.7 5,117.8 5,161.1 By type 2 Interest-bearing 4,173.9 4,532.3 4,769.2 4,964.4 4,950.6 4,964.4 5,083.0 5,126.8 3 Marketable 2,754.1 2,989.5 3,126.0 3,307.2 3,260.5 3,307.2 3,375.1 3,348.4 4 Bills 657.7 714.6 733.8 760.7 742.5 760.7 811.9 773.6 5 Notes 1,608.9 1,764.0 1,867.0 2,010.3 1,980.3 2,010.3 2,014.1 2,025.8 6 Bonds 472.5 495.9 510.3 521.2 522.6 521.2 534.1 534.1 7 Nonmarketable' 1,419.8 1,542.9 1,643.1 1,657.2 1,690.2 1,657.2 1,707.9 1,778.3 8 State and local government series 153.5 149.5 132.6 104.5 113.4 104.5 96.5 97.8 9 Foreign issues2 37.4 43.5 42.5 40.8 41.0 40.8 40.4 37.8 10 Government 37.4 43.5 42.5 40.8 41.0 40.8 40.4 37.8 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 155.0 169.4 177.8 181.9 181.2 181.9 183.0 183.8 13 Government account series3 1,043.5 1,150.0 1,259.8 1,299.6 1,324.3 1,299.6 1,357.7 1,428.5 14 Non-interest-bearing 3.1 3.4 31.0 24.3 23.3 24.3 34.8 34.3 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 1,320.8 1,304.5 1,353.8 16 Federal Reserve Banks 302.5 334.2 374.1 391.0 374.1 391.0 381.0 17 Private investors 2,839.9 3,047.4 3,168.0 3,294.9 3,279.5 3,294.9 3,382.8 18 Commercial banks 294.4 322.2 290.1 280. lr 289.0 280. lr 281.0 19 Money market funds 79.7 80.8 67.6 71.3 64.2 71.3 87.3 20 Insurance companies 197.5 234.5 240.1 252.6r 249.8r 252.6r 254.5 21 Other companies 192.5 213.0 226.5 228.8r 224.1 228.8r 229.0 n a. 22 State and local treasuries5,6 563.3r 605.9r 483.4r 343.8r 384.9r 343.8r 343.0 Individuals 23 Savings bonds 157.3 171.9 180.5 185.0 183.5 185.0 185.8 24 Other securities 131.9 137.9 150.7 162.7 162.4 162.7 161.4 25 Foreign and international7 549.7 623.0 688.6 861.8 848.1 861.8 930.1 26 Other miscellaneous investors6'8 673.5r 658.3r 840.5r 908.8' 873.5r 908.8' 910.7 1. Includes (not shown separately) securities issued to the Rural Electrification Administra- 7. Consists of investments of foreign balances and international accounts in the United tion, depository bonds, retirement plan bonds, and individual retirement bonds. States. 2. Nonmarketable series denominated in dollars, and series denominated in foreign cur- 8. Includes savings and loan associations, nonprofit institutions, credit unions, mutual rency held by foreigners. savings banks, corporate pension trust funds, dealers and brokers, certain U.S. Treasury 3. Held almost entirely by U.S. Treasury and other federal agencies and trust funds. deposit accounts, and federally sponsored agencies. 4. Data for Federal Reserve Banks and U.S. government agencies and trust funds are actual SOURCE. U.S. Treasury Department, data by type of security, Monthly Statement of the holdings; data for other groups are Treasury estimates. Public Debt of the United States; data by holder, Treasury Bulletin. 5. Includes state and local pension funds. 6. In March 1996, in a redefinition of series, fully defeased debt backed by nonmarketable federal securities was removed from "Other miscellaneous investors" and added to "State and local treasuries." The data shown here have been revised accordingly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic NonfinancialS tatistics • September 1996 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1996 1996, week ending IItteemm Mar. Apr. May May 1 May 8 May 15 May 22 May 29 June 5 June 12 June 19 June 26 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 56,391 55,901 47,278 54,108 46,741 46,521 40,748 50,427 57,129 53,849 55,294 47,770 Coupon securities, by maturity 2 Five years or less 107,071 97,216r 94,636 86,613 108,826 94,074 83,123 92,097 98,440 108,694 96,599 92,456 3 More than five years 49,903 41,971r 49,383 43,591 60,332 52,906 46,403 38,724 44,864 48,800 42,796 36,010 4 Federal agency 27,395 28,936 29,131 35,186 28,211 30,051 28,324 28,629 29,123 30,317 35,178 35,464 5 Mortgage-backed 42,087 34,788 35,929 28,855 53,716 42,084 23,317 23,526 35,943 56,857 31,260 21,376 By type of counterparty With interdealer broker 6 U.S. Treasury 124,458 112,758 111,032 107,725 126,461 113,545 98,482 104,682 111,907 126,241 113,458 101,372 7 Federal agency 671 795 661 907 616 824 710 474 496 752 828 707 8 Mortgage-backed 16,622r 11,979r 13,422r 9,199r 18,940r 14,839 8,941 10,361 15,522 19,210 11,399 8,498 With other 9 U.S. Treasury 88,907 82,330r 80,265 76,586 89,438 79,956 71,792 76,566 88,526 85,103 81,230 74,864 10 Federal agency 26,725 28,141 28,470 34,279 27,595 29,227 27,615 28,155 28,626 29,565 34,350 34,757 11 Mortgage-backed 25.465r 22,808r 22,507r 19.655r 34,777r 27,245 14,376 13,165 20,421 37,647 19,861 12,878 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 487 369 410 131 426 859 96 256 481 779 866 121 Coupon securities, by maturity 13 Five years or less 2,055 1,203 1,550 876 1.645 1,532 1,327 1,598 2,158 2,064 1,946 1,026 14 More than five years 14,824 11,717 12,854 10,736 17.060 12,218 10,771 10,765 14,370 15,346 13,997 8,484 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 2,775 1,582 2,294 1,526 1,328 3,217 2,640 2,126 2,255 4,289 2,502 2,329 19 More than five years 3,073 3,773 4,057 3.391 4.099 3,982 4,878 2,987 4,562 5,585 4,753 3,252 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 1,125 1,110 1,046 868 1.565 1,417 625 541 971 1,288 467 510 1. Transactions are market purchases and sales of securities as reported to the Federal Forward transactions are agreements made in the over-the-counter market that specify Reserve Bank of New York by the U.S. government securities dealers on its published list of delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt primary dealers. Monthly averages are based on the number of trading days in the month. securities are included when the time to delivery is more than five business days. Forward Transactions are assumed evenly distributed among the trading days of the report week. contracts for mortgage-backed agency securities are included when the time to delivery is Immediate, forward, and futures transactions are reported at principal value, which does not more than thirty business days. include accrued interest; options transactions are reported at the face value of the underlying 3. Futures transactions are standardized agreements arranged on an exchange. All futures securities. transactions are included regardless of time to delivery. Dealers report cumulative transactions for each week ending Wednesday. 4. Options transactions are purchases or sales of put and call options, whether arranged on 2. Outright transactions include immediate and forward transactions. Immediate delivery an organized exchange or in the over-the-counter market, and include options on futures refers to purchases or sales of securities (other than mortgage-backed federal agency securi- contracts on U.S. Treasury and federal agency securities. ties) for which delivery is scheduled in five business days or less and "when-issued" NOTE, "n.a." indicates that data are not published because of insufficient activity. securities that settle on the issue date of offering. Transactions for immediate delivery of mortgage- Major changes in the report form filed by primary dealers induced a break in the dealer data backed agency securities include purchases and sales for which delivery is scheduled in thirty business series as of the week ending July 6, 1994. days or less. Stripped secunties are reported at market value by matunty 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 Mar. Apr. May May 1 May 8 May 15 May 22 May 29 June 5 June 12 June 19 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 20,889 17,119 15,447 11,554 12,031 16,296 14,951 15,433 28,159 22,380 8,845 Coupon securities, by maturity 2 Five years or less 6,296 7,771 2,210 6,523 6,242 1,796 -462 1,554 —961 -3,042 -10,342 3 More than five years -24,377 -27,702 -23,291 -26,268 -25,003 -23,338 -22,041 -22,635 -22,315 -21,501 -21,006 4 Federal agency 25,754 26,566 23,921 31,139 28,135 23,321 24,464 19,096 22,655 24,935 22,365 5 Mortgage-backed 36,887 32,583 34,206 32,543 30,376 35,251 35,657 35,190 36,270 35,104 35,001 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -2,842 -3,560 -4,625 -4,547 -4,610 -4,898 -4,563 -4,765 -3,484 -2,941 -1,157 Coupon securities, by maturity 7 Five years or less 623 1,073 632 788 1,062 1,267 401 -45 7 466 1,617 8 More than five years -4,361 -4,285 -3,598 -5,351 -2,783 -2,466 -4,541 -3,975 -4,910 -5,945 -5,821 9 Federal agency 0 0 0 0 0 0 0 0 0 0 0 10 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 NET OPTIONS POSITIONS By type of deliverable security 11 U.S. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 12 Five years or less 1,381 1,542 -139 1,023 691 676 -307 -1,287 -1,868 -2,276 -3,099 13 More than five years 177 1,081 -703 429 -1,491 -1,366 688 -797 -735 235 70 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 4,949 4,435 3,902 4,808 4,570 3,688 3,603 3,741 3,465 3,479 2,941 Financing5 Reverse repurchase agreements 16 Overnight and continuing 258,213 256,694 251,988 252,381 245,232 271,735 252,858 242,766 235,548 238,277 248,074 17 Term 435,402 467,590 453,182 478,354 499,560 416,344 448,774 451,521 428,448 470,543 471,190 Securities borrowed 18 Overnight and continuing 172,347 166,490 173,105 166,473 168,222 175,434 178,128 168,867 182,616 181,178 182,894 19 Term 66,212 67,330 63,987 69,357 69,339 62,296 62,976 62,021 58,906 61,003 60,316 Securities received as pledge 20 Overnight and continuing 4,477 3,275 2,488 2,241 2,063 2,487 2,446 2,414 4,501 4,446 5,423 21 Term 65 53 52 27 39 29 41 102 47 91 112 Repurchase agreements 22 Overnight and continuing 557,094 577,949 559,390 567,907 560,778 577,866 564,022 534,374 556,952 561,144 545,801 23 Term 393,406 399,259 392,946 413,066 426,042 357,241 392,652 401,719 362,346 403,262 415,376 Securities loaned 24 Overnight and continuing 5,202 4,728 4,804 4,812 4,803 4,579 4,769 4,841 5,577 5,711 5,890 25 Term 2,362 2,611 3,094 3,242 3,223 3,086 n.a. 2,952 n.a. n.a. n.a. Securities pledged 26 Overnight and continuing 40,936 37,160 41,591 36,547 36,965 41,397 43,031 44,627 45,317 45,388 47,466 27 Term 8,343 8,518 6,797 8,465 8,025 6,738 6,163 6,249 6,016 6,063 6,060 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 12,176 14,045r 12,091 10,602r 13,316 12,567 12,697 9,708 13,097 13,550 12,200 MEMO: Matched book6 Securities in 31 Overnight and continuing 239,030 244,480 244,668 245,137 236,730 259,949 250,282 233,953 236,593 236,204 250,199 32 Term 433,861 464,018 441,772 480,346 488,139 407,901 437,150 436,335 413,953 459,074 453,905 Securities out 33 Overnight and continuing 328,321 348,557 334,416 344,315 341,079 345,621 334,007 314,633 337,593 356,820 350,654 34 Term 338,096 349,263 337,119 365,614 372,213 303,369 332,831 343,905 309,423 345,288 360,676 1. Data for positions and financing are obtained from reports submitted to the Federal 4. Futures positions reflect standardized agreements arranged on an exchange. All futures Reserve Bank of New York by the U.S. government securities dealers on its published list of positions are included regardless of time to delivery. primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar 5. Overnight financing refers to agreements made on one business day that mature on the days of the report week are assumed to be constant. Monthly averages are based on the next business day; continuing contracts are agreements that remain in effect for more than one number of calendar days in the month. business day but have no specific maturity and can be terminated without advance notice by 2. Securities positions are reported at market value. either party; term agreements have a fixed maturity of more than one business day. Financing 3. Net outright positions include immediate and forward positions. Net immediate posi- data are reported in terms of actual funds paid or received, including accrued interest. tions include securities purchased or sold (other than mortgage-backed agency securities) that 6. Matched-book data reflect financial intermediation activity in which the borrowing and have been delivered or are scheduled to be delivered in five business days or less and lending transactions are matched. Matched-book data are included in the financing break- "when-issued" securities that settle on the issue date of offering. Net immediate positions for downs given above. The reverse repurchase and repurchase numbers are not always equal mortgage-backed agency securities include securities purchased or sold that have been because of the "matching" of securities of different values or different types of collateralizadelivered or are scheduled to be delivered in thirty business days or less. tion. Forward positions reflect agreements made in the over-the-counter market that specify NOTE, "n.a." indicates that data are not published because of insufficient activity. delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt Major changes in the report form filed by primary dealers induced a break in the dealer data securities are included when the time to delivery is more than five business days. Forward series as of the week ending July 6, 1994. contracts for mortgage-backed agency securities are included when the time to delivery is more than thirty business days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic NonfinancialS tatistics • September 1996 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1995 1996 AAggeennccyy 11999922 11999933 11999944 11999955 Dec. Jan. Feb. Mar. Apr. 1 Federal and federally sponsored agencies 483,970 570,711 738,928 844,611 844,611 836,820 840,384 846,807 2 Federal agencies 41,829 45,193 39,186 37,347 37,347 37,273 31,986 31,284 3 Defense Department' 7 6 6 6 6 6 6 6 4 Export-Import Bank2'1 7,208 5,315 3,455 2,050 2,050 2,050 2,050 2,015 5 Federal Housing Administration4 374 255 116 97 97 31 35 52 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 5,765 5,765 300 300 8 Tennessee Valley Authority 23,580 29,885 27,536 29,429 29,429 29,421 29,595 28,911 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 442,141 523,452 699,742 807,264 807,264 799,547 808,398 815,523 11 Federal Home Loan Banks 114,733 139,512 205,817 243,194 243,194 234,664 233,404 239,253 242,437 12 Federal Home Loan Mortgage Corporation 29,631 49,993 93,279 119,961 119,961 120,868 123,777 124,278 136,185 13 Federal National Mortgage Association 166,300 201,112 257,230 299,174 299,174 297,657 304,159 306,815 306,361 14 Farm Credit Banks8 51,910 53,123 53,175 57,379 57,379 58,659 57,536 59,428 60,815 15 Student Loan Marketing Association9 39,650 39,784 50,335 47,529 47,529 47,673 49,495 45,723 n a. 16 Financing Coiporation10 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation" 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 154,994 128,187 103,817 78,681 78,681 78,512 68,037 66,725 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 7,202 5,309 3,449 2,044 2,044 2,044 2,044 2,009 21 Postal Service6 10,440 9,732 8,073 5,765 5,765 5,765 300 300 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 n.a. 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 17,144 17,026 17,040 17,049 27 Other 64,436 45,864 37,984 29,513 29,513 29,462 27,638 26,352 1. Consists of mortgages assumed by the Defense Department between 1957 and 1963 10. The Financing Corporation, established in August 1987 to recapitalize the Federal under family housing and homeowners assistance programs. Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation, established in January 1988 to 3. On-budget since Sept. 30, 1976. provide assistance to the Farm Credit System, undertook its first borrowing in July 1988. 4. Consists of debentures issued in payment of Federal Housing Administration insurance 12. The Resolution Funding Corporation, established by the Financial Institutions Reform, claims. Once issued, these securities may be sold privately on the securities market. Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government National 13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations Mortgage Association acting as trustee for the Farmers Home Administration, the Department issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt solely for the of Health, Education, and Welfare, the Department of Housing and Urban Development, the purpose of lending to other agencies, its debt is not included in the main portion of the table to Small Business Administration, and the Veterans Administration. avoid double counting. 6. Off-budget. 14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loans 7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. Includes guaranteed by numerous agencies, with the amounts guaranteed by any one agency generally Federal Agricultural Mortgage Corporation; therefore details do not sum to total. Some data being small. The Farmers Home Administration entry consists exclusively of agency assets, are estimated. whereas the Rural Electrification Administration entry consists of both agency assets and 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is guaranteed loans. shown on line 17. 9. Before late 1982, the association obtained financing through the Federal Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 22. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A31 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1995 1996 TTyyppee ooff iissssuuee oorr iissssuueerr,, 11999933 11999944 11999955 oorr uussee Nov. Dec. Jan. Feb. Mar. Apr. May June 1 All issues, new and refunding1 279,945 153,950 143,101 16,839 16,978 11,545 11,598 15,244 13,199 14,991 16,533 By type of issue 2 General obligation 90,599 54,404 55,737 6,194 5,489 6,074 2,063 4,846 5,083 5,476 6,493 3 Revenue 189,346 99,546 86,555 10,645 11,489 5,471 9,535 10,398 8,116 9,515 10,040 By type of issuer 4 State 27,999 19,186 14,215 1,491 951 1,630 695 904 926 2,807 1,047 5 Special district or statutory authority2 178,714 95,896 91,419 10,736 11,678 7,052 7,820 10,141 9,571 9,824 9,899 6 Municipality, county, or township 73,232 38,868 36,658 4,612 4,349 2,863 3,083 4,199 2,702 2,360 5,587 7 Issues for new capital 91,434 105,972 94,412 11,415 11,070 6,517 6,383 10,621 9,487 9,594 13,864 By use of proceeds 8 Education 16,831 21,267 24,926 3,377 2,968 2,065 2,226 1,847 2,142 2,442 3,453 9 Transportation 9,167 10,836 11,887 1,469 1,178 573 359 1,417 682 778 1,390 10 Utilities and conservation 12,014 10,192 9,618 554 1,664 439 582 892 592 1,368 974 11 Social welfare 13,837 20,289 18,612 2,177 1,614 935 904 2,715 1,669 1,764 3,152 12 Industrial aid 6,862 8,161 6,566 650 1,325 322 110 785 751 302 414 13 Other purposes 32,723 35,227 26,518 3,188 2,321 2,183 2,202 2,965 3,651 2,940 4,481 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 1 All issues' 769,088 583,240 n.a. 52,112 55,349 40,149 47,499r 60,784r 54,980r 45,000r 59,890 2 Bonds2 646,634 498,039 n.a. 43,452 47,568 34,619 42,743r 51,624r 47,587r 32,500 46300 By type of offering 3 Public, domestic 487,029 365,222 408,806 36,692 43,336 32,219 33,982r 44,969r 40,763' 27,000 39,300 4 Private placement, domestic3 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 6,760 4,232 2,399 8,761 6,656 6,824' 5,500 7,000 By industry group 6 Manufacturing 88,160 43,423 42,950 3,397 4,017 3,205 3,809 2,472 3,335' 2,210 5,646 7 Commercial and miscellaneous 58,559 40,735 37,139 3,532 4,178 3,099 2,151 2,601 3,852 3,064 4,810 8 Transportation 10,816 6,867 5,727 187 225 1,240 664 584 137' 120 565 9 Public utility 56,330 13,322 11,974 1,241 485 685 1,821 955 678 465' 611 10 Communication 31,950 13,340 18,158 2,389 3,333 648 748 2,691 2,073' 535 1,187 11 Real estate and financial 400,820 380,352 369,769 32,706 35,330 25,742 33,550r 42,323r 37,512' 26,106' 33,481 12 Stocks2 122,454 85,155 n.a. 8,660 7,781 5,530 4,756 9,160 7,393 12,500r 13,590 By type of offering 13 Public preferred 18,897 12,570 10,964 836 2,210 890 2,167 3,258 967 2,000 1,660 14 Common 82,657 47,828 57,809 7,824 5,571 4,640 2,589 5,902 6,426 10,500' 11,930 15 Private placement 20,900 24,800 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 22,271 17,798 1,815 2,209 681 295 1,543 2,036 3,968' 2,777 17 Commercial and miscellaneous 25,761 15,713 n.a. 4,628 3,274 2,632 2,521 2,659 3,577 4,122' 5,349 18 Transportation 2,237 2,203 39 97 156 38 141 232 37 322 19 Public utility 7,050 2,214 60 36 322 115 809 319 149 147 20 Communication 3,439 494 0 0 0 200 122 100 144 1,205 21 Real estate and financial 61,004 46,733 2,118 2,166 1,739 1,588 3,719 1,130 4,079' 3,789 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 Financial Statistics • September 1996 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1995 1996 IItteemm 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr.r May 1 Sales of own shares2 841,286 871,415 72,730 70,499 94,719 112,332 90,370 93,856 101,310 96,501 2 Redemptions of own shares 699,823 699,497 56,174 52,727 67,945 75,354 60,398 65,748 81,005 69,419 3 Net sales3 141,463 171,918 16,556 17,772 26,774 36,978 29,972 28,108 20,305 27,082 4 Assets4 1,550,490 2,067,337 1,963,496 2,032,958 2,067,337 2,143,185 2,181,711 2,212,517 2,293,491 2,356,307 5 Cash5 121,296 142,572 133,653 141,489 142,572 150,772 144,520 142,697 148,777 145,554 6 Other 1,429,195 1,924,765 1,829,843 1,891,470 1,924,765 1,992,414 2,037,191 2,069,820 2,144,713 2,201,752 1. Data on sales and redemptions exclude money market mutual funds but include 4. Market value at end of period, less current liabilities. limited-maturity municipal bond funds. Data on asset positions exclude both money market 5. Includes all U.S. Treasury securities and other short-term debt securities. mutual funds and limited-maturity municipal bond funds. SOURCE. Investment Company Institute. Data based on reports of membership, which 2. Includes reinvestment of net income dividends. Excludes reinvestment of capital gains comprises substantially all open-end investment companies registered with the Securities and distributions and share issue of conversions from one fund to another in the same group. Exchange Commission. Data reflect underwritings of newly formed companies after their 3. Excludes sales and redemptions resulting from transfers of shares into or out of money initial offering of securities. market mutual funds within the same fund family. 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data at seasonally adjusted annual rates 1994 1995 1996 AAccccoouunntt 11999933 11999944 11999955 Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql 1 Profits with inventory valuation and capital consumption adjustment 464.5 526.5 588.6 531.5 549.8 568.9 559.6 561.1 614.9 618.6 652.0 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 -17.4 8 Capital consumption adjustment 6.7 11.6 15.9 18.1 18.8 21.3 17.4 15.0 14.6 16.5 20.4 SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A3 3 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1994 1995 1996 AAccccoouunntt 11999933 11999944 11999955 Q3 Q4 Q1 Q2 Q3 Q4 Q1 ASSETS 1 Accounts receivable, gross2 482.8 551.0 614.6 524.1 551.0 568.5 586.9 594.7 614.6 623.3 2 Consumer 116.5 134.8 152.0 130.3 134.8 135.8 141.7 146.2 152.0 153.2 3 Business 294.6 337.6 375.9 317.2 337.6 351.9 361.8 362.4 375.9 381.0 4 Real estate 71.7 78.5 86.6 76.6 78.5 80.8 83.4 86.1 86.6 89.1 5 LESS; Reserves for unearned income 50.7 55.0 63.2 51.1 55.0 58.9 62.1 61.2 63.2 61.8 6 Reserves for losses 11.2 12.4 14.1 12.1 12.4 12.9 13.7 13.8 14.1 14.2 7 Accounts receivable, net 420.9 483.5 537.3 460.9 483.5 496.7 511.1 519.7 537.3 547.3 8 All other 170.9 183.4 210.7 177.2 183.4 194.6 198.1 198.1 210.7 211.6 9 Total assets 591.8 666.9 748.0 638.1 666.9 691.4 709.2 717.8 748.0 758.9 LIABILITIES AND CAPITAL 10 Bank loans 25.3 21.2 23.1 21.6 21.2 21.0 21.5 21.8 23.1 23.5 11 Commercial paper 159.2 184.6 184.5 171.0 184.6 181.3 181.3 178.0 184.5 184.8 Debt 12 Owed to parent 42.7 51.0 62.3 50.0 51.0 52.5 57.5 59.0 62.3 62.3 13 Not elsewhere classified 206.0 235.0 284.7 228.2 235.0 254.4 264.4 272.1 284.7 291.4 14 All other liabilities 87.1 99.5 106.2 95.0 99.5 102.5 102.1 102.4 106.2 105.7 15 Capital, surplus, and undivided profits 71.4 75.7 87.2 72.3 75.7 79.7 82.5 84.4 87.2 91.1 16 Total liabilities and capital 591.8 666.9 748.0 638.1 666.9 691.4 709.2 717.8 748.0 758.9 1. Includes finance company subsidiaries of bank holding companies but not of retailers 2. Before deduction for unearned income and losses, and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. 1.52 DOMESTIC FINANCE COMPANIES Consumer, Real Estate, and Business Credit1 Millions of dollars, amounts outstanding, end of period 1995 1996 TTyyppee ooff ccrreeddiitt 11999933 11999944 11999955 Dec. Jan. Feb. Mar. Apr. May Seasonally adjusted 1 Total 546,103 615,618 691,616 691,616 696,099 700,977 703,398r 708,343r 710,367 2 Consumer 160,227 176,085 198,861 198,861 200,162 202,548 203,280 205,184 207,027 3 Real estate2 72,043 78,910 87,077 87,077 88,084 88,188 89,502 89,943 90,180 4 Business 313,833 360,624 405,678 405,678 407,853 410,241 410,616r 413,216r 413,160 Not seasonally adjusted 5 Total 550,751 620,975 697,340 697,340 697,312 701,576 705,650r 710,762r 712,429 6 Consumer 162,770 178,999 202,101 202,101 201,774 202,108 202,337 203,532 205,678 7 Motor vehicles 56,057 61,609 70,061 70,061 71,420 73,312 72,129 73,810 74,327 8 Other consumer3 60,396 73,221 81,988 81,988 81,186 81,214 79,779 79,489 80,435 9 Securitized motor vehicles4 36,024 31,897 33,633 33,633 32,128 30,364 31,093 30,476 31,435 10 Securitized other consumer4 10,293 12,272 16,419 16,419 17,040 17,218 19,336 19,757 19,481 11 Real estate2 71,727 78,479 86,606 86,606 88,495 88,520 89,056 89,975 90,182 12 Business 316,254 363,497 408,633 408,633 407,043 410,948 414,257r 417,255r 416,569 13 Motor vehicles 95,173 118,197 133,277 133,277 132,062 132,153 134,098' 134,500' 134,196 14 Retail5 18,091 21,514 25,304 25,304 25,906 26,591 27,140r 27,954' 27,151 15 Wholesale6 31,148 35,037 36,427 36,427 34,198 33,386 33,910 32,155 31,360 16 Leasing 45,934 61,646 71,546 71,546 71,958 72,176 73,048 74,391 75,685 17 Equipment 145,452 157,953 177,297 177,297 175,984 176,461 177,285 178,507 178,151 18 Retail 35,513 39,680 48,843 48,843 48,737 48,660 48,696 47,913 46,941 19 Wholesale6 8,001 9,678 10,266 10,266 9,260 8,914 9,213 9,663 10,386 20 Leasing 101,938 108,595 118,188 118,188 117,987 118,887 119,376 120,931 120,824 21 Other business7 53,997 61,495 65,363 65,363 66,643 68,070 69,497 69,193 68,112 22 Securitized business assets4 21,632 25,852 32,696 32,696 32,354 34,264 33,377 35,055 36,110 23 Retail 2,869 4,494 4,723 4,723 4,467 4,252 4,067 4,367 4,790 24 Wholesale 10,584 14,826 21,327 21,327 21,130 23,460 22,622 24,327 25,028 25 Leasing 8,179 6,532 6,646 6,646 6,757 6,552 6,688 6,361 6,292 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 • September 1996 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1995 1996 IItteemm 11999933 11999955 Dec. Jan. Feb. Mar. Apr. May June Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 163.1 170.4 175.8 181.7 179.2 181.7 184.5 175.2 179.5 180.1 2 Amount of loan (thousands of dollars) 123.0 130.8 134.5 140.9 135.8 143.2 141.5 133.2 137.6 139.4 3 Loan-to-price ratio (percent) 78.0 78.8 78.6 79.1 77.3 80.3 77.8 78.4 79.3 78.7 4 Maturity (years) 26.1 27.5 27.7 27.6 27.7 27.8 26.4 27.1 27.2 25.8 5 Fees and charges (percent of loan amount)2 1.30 1.29 1.21 1.21 1.07 1.24 1.30 1.17 1.16 1.31 Yield (percent per year) 6 Contract rate' 7.03 7.26 7.65 7.20 7.15 7.00 7.25 7.57 7.61 7.75 7 Effective rate1,3 7.24 7.47 7.85 7.40 7.32 7.20 7.49 7.76 7.80 8.05 8 Contract rate (HUD series)4 7.37 8.58 8.05 7.30 7.23 7.56 7.97 8.22 8.34 8.37 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 7.46 8.68 88..1188 7.52 77..1111 77..5577 8.09 88..5522 8.57 88..5555 10 GNMA securities6 6.65 7.96 7.57 6.82 6.71 6.85 7.40 7.63 7.81 7.91 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 190,861 222,057 253,511 253,511 255,619 257,970 262,014 263,809 267,330 270,042 12 FHA/VA insured 23,857 27,558 28,762 28,762 28,622 28,502 28,744 29,132 30,442 30,936 13 Conventional 167,004 194,499 224,749 224,749 226,997 229,468 233,270 234,677 236,888 239,106 14 Mortgage transactions purchased (during period) 92,037 62,389 56,598 6,243 4,810 5,371 7,681 5,339 6,720 5,421 Mortgage commitments (during period) 15 Issued7 92,537 54,038 56,092 4,765 5,750 7,013 6,293 5,599 5,228 5,280 16 To sell8 5,097 1,820 360 0 3 0 29 0 13 0 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 17 Total 55,012 72,693 107,424 107,424 111,143 114,793 117,420 119,520 121,058 123,806 18 FHA/VA insured 321 276 267 267 226 223 220 216 212 212 19 Conventional 54,691 72,416 107,157 107,157 110,917 114,570 117,200 119,304 120,846 123,594 Mortgage transactions (during period) 20 Purchases 229,242 124,697 98,470 13,108 13,357 10,891 11,984 12,740 12,385 10,266 21 Sales 208,723 117,110 85,877 11,712 11,624 9,733 11,384 11,958 11,904 9,969 22 Mortgage commitments contracted (during period)9 274,599 136,067 118,659 14,609 12,765 10,378 14,520 13,009 11,075 11,164 1. Weighted averages based on sample surveys of mortgages originated by major institu- 6. Average net yields to investors on fully modified pass-through securities backed by tional lender groups for purchase of newly built homes; compiled by the Federal Housing mortgages and guaranteed by the Government National Mortgage Association (GNMA), Finance Board in cooperation with the Federal Deposit Insurance Corporation. assuming prepayment in twelve years on pools of thirty-year mortgages insured by the 2. Includes all fees, commissions, discounts, and "points" paid (by the borrower or the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby commitments 3. Average effective interest rate on loans closed for purchase of newly built homes, converted. assuming prepayment at the end of ten years. 8. Includes participation loans as well as whole loans. 4. Average contract rate on new commitments for conventional first mortgages; from U.S. 9. Includes conventional and government-underwritten loans. The Federal Home Loan Department of Housing and Urban Development (HUD). Based on transactions on the first Mortgage Corporation's mortgage commitments and mortgage transactions include activity day of the subsequent month. under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured exclude swap activity. by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A35 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1995 1996 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999922 11999933 11999944 Ql Q2 Q3 Q4 Qlp 1 All holders 4,092,984 4,268,420 4,473,100 4,515,854 4,584,566 4,663,864 4,715,884 4,773,998 By type of property 2 One- to four-family residences 3,037,408 3,227,134 3,430,023 3,465,065 3,524,378 3,593,966 3,634,698 3,682,610 3 Multifamily residences 274,234 270,796 275,303 276,398 280,390 284,238 288,090 292,448 4 Nonfarm, nonresidential 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 By 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 banks2 894,513 940,444 1,004,280 1,024,854 1,053,048 1,072,780 1,080,373 1,087,174 8 One- to four-family 507,780 556,538 611,697 625,378 648,705 662,126 663,588 666,306 9 Multifamily 38,024 38,635 38,916 39,746 40,593 43,003 43,846 45,201 10 Nonfarm, nonresidential 328,826 324,409 331,100 336,795 340,176 343,826 349,109 351,736 11 Farm 19,882 20,862 22,567 22,936 23,575 23,824 23,829 23,931 12 Savings institutions3 627,972 598,330 596,199 601,777 599,745 604,614 596,789 595,903 13 One- to four-family 489,622 469,959 477,499 483,625 482,005 489,150 482,765 484,020 14 Multifamily 69,791 67,362 64,400 63,778 64,404 63,569 61,926 60,494 15 Nonfarm, nonresidential 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 four-family 11,441 9,458 7,910 7,892 7,911 8,006 7,833 7,815 19 Multifamily 27,770 25,814 24,306 24,250 24,310 24,601 24,070 24,013 20 Nonfarm, nonresidential 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 286,263 327,014 319,401 317,753 315,722 319,923 320,828 322,131 23 Government National Mortgage Association 30 22 6 15 7 2 2 2 24 One- to four-family 30 15 6 15 7 2 2 2 25 Multifamily 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-family 16,912 15,303 13,826 13,507 13,217 12,914 12,643 12,327 28 Multifamily 10,575 10,940 11,319 11,418 11,512 11,557 11,617 11,636 29 Nonfarm, nonresidential 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 Multifamily 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-family 12,960 7,203 5,200 4,755 2,870 2,299 691 0 36 Multifamily 9,621 5,327 2,859 2,494 1,940 1,420 647 0 37 Nonfarm, nonresidential 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-family 0 2,367 1,049 840 731 618 492 1,848 41 Multifamily 0 1,426 1,595 1,310 1,135 722 428 560 42 Nonfarm, nonresidential 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 Multifamily 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-family 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 46,892 41,786 43,239 44,738 48,243 50,849 54,120 51 One- to four-family 31,032 44,345 38,956 40,105 41,477 44,809 46,997 50,058 52 Multifamily 2,633 2,547 2,830 3,134 3,261 3,434 3,852 4,062 53 Mortgage pools or trusts5 1,434,264 1,564,571 1,718,297 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 Multifamily 8,841 9,202 9,736 9,769 10,246 10,540 10,845 11,179 57 Federal Home Loan Mortgage Corporation 407,514 447,147 490,851 492,194 498,216 503,370 515,051 524,326 58 One- to four-family 401,525 442,612 487,725 489,114 495,182 500,417 512,238 521,721 59 Multifamily 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 Administration 38 28 19 14 13 12 11 10 64 One- to four-family 8 5 3 2 2 2 2 1 65 Multifamily 0 0 0 0 0 0 0 0 66 Nonfarm, nonresidential 17 13 9 7 6 5 5 5 67 Farm 13 10 7 5 5 5 4 4 68 Private mortgage conduits 162,217 207,806 246,150 251,597 260,093 268,420 283,294 295,604 69 One- to four-family 140,718 173,635 194,451 198,040 202,718 207,679 214,635 220,022 70 Multifamily 6,305 8,701 14,925 15,743 17,281 18,903 21,279 24,477 71 Nonfarm, nonresidential 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 603,270 609,000 619,592 624,819 641,578 653,615 650,904 660,680 74 One- to four-family 447,871 455,676 461,157 465,111 480,447 491,463 486,660 494,495 75 Multifamily 64,688 65,397 69,601 70,305 71,050 71,897 73,243 74,354 76 Nonfarm, nonresidential 75,441 73,917 76,153 76,667 77,284 77,384 78,152 78,861 77 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 • September 1996 1.55 CONSUMER INSTALLMENT CREDIT' Millions of dollars, amounts outstanding, end of period 1995 1996 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999933 11999944 11999955 Dec. Jan. Feb. Mar. Apr. May Seasonally adjusted 1 Total 844,118 966,457 1,103,164 1,103,164 1,113,509 1,124,253 1,133,642 1,140,181 1,145,061 2 Automobile 279,786 317,182 351,052 351,052 352,461 354,810 356,310 359,507 360,539 3 Revolving 287,011 339,337 413,894 413,894 419,030 425,778 431,196 438,460 444,389 4 Other2 277,321 309,939 338,218 338,218 342,018 343,666 346,136 342,214 340,133 Not seasonally adjusted 5 Total 863,924 990,247 1,131,747 1,131,747 1,123,813 1,121,348 1,123,315 1,129,433 1,135,310 By major holder 6 Commercial banks 399,683 462,923 507,414 507,414 502,400 500,140 499,762 504,652 503,951 7 Finance companies 116,453 134,830 152,624 152,624 152,606 154,365 151,749 153,299 154,762 8 Credit unions 101,634 119,594 131,939 131,939 131,257 130,839 130,837 131,873 133,354 9 Savings institutions 37,855 38,468 40,106 40,106 40,000 40,000 40,000 39,999 40,000 10 Nonfinancial business3 77,229 86,621 85,061 85,061 80,733 78,138 76,681 73,765 74,680 11 Pools of securitized assets4 131,070 147,811 214,603 214,603 216,817 217,866 224,286 225,845 228,563 By major type of credit 12 Automobile 281,538 319,715 354,260 354,260 351,969 352,583 352,634 355,073 357,868 13 Commercial banks 122,000 141,895 149,094 149,094 148,186 147,703 148,455 150,455 151,038 14 Finance companies 56,057 61,609 70,626 70,626 71,420 73,312 72,129 73,810 74,327 15 Pools of securitized assets4 39,561 36,376 44,616 44,616 42,569 41,755 42,868 40,596 41,021 16 Revolving 302,201 357,307 435,674 435,674 426,024 424,657 425,823 431,733 438,507 17 Commercial banks 149,920 182,021 210,298 210,298 200,080 198,886 196,836 201,858 205,011 18 Nonfinancial business3 50,125 56,790 53,525 53,525 50,520 48,613 47,416 44,526 45,182 19 Pools of securitized assets4 80,242 96,130 147,934 147,934 151,640 153,390 157,690 161,185 163,774 20 Other 280,185 313,225 341,813 341,813 345,820 344,108 344,858 342,627 338,935 21 Commercial banks 127,763 139,007 148,022 148,022 154,134 153,551 154,471 152,339 147,902 22 Finance companies 60,396 73,221 81,998 81,998 81,186 81,053 79,620 79,489 80,435 23 Nonfinancial business3 27,104 29,831 31,536 31,536 30,213 29,525 29,265 29,239 29,498 24 Pools of securitized assets4 11,267 15,305 22,053 22,053 22,608 22,721 23,728 24,064 23,768 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 Nov. Dec. Jan. Feb. Mar. Apr. May INTEREST RATES Commercial banks2 1 48-month new car 8.09 8.12 9.57 9.36 n.a. n.a. 9.12 n.a. 8.93 2 24-month personal 13.47 13.19 13.94 13.80 n.a. n.a. 13.63 n.a. n.a. 13.52 Credit card plan 3 All accounts n.a. 15.69 16.02 15.81 n.a. n.a. 15.82 n.a. 15.44 4 Accounts assessed interest n.a. 15.77 15.79 15.71 n.a. n.a. 15.41 n.a. n.a. 15.41 Auto finance companies 5 New car 9.48 9.79 11.19 10.84 10.52 9.74 9.86 9.77 9.64 9.37 6 Used car 12.79 13.49 14.48 13.98 13.83 13.27 13.28 13.19 13.26 13.49 OTHER TERMS3 Maturity (months) 1 New car 54.5 54.0 54.1 54.5 53.6 51.8 52.3 51.8 51.5 50.8 8 Used car 48.8 50.2 52.2 52.2 51.8 52.2 52.1 52.0 51.8 51.7 Loan-to-value ratio 9 New car 91 92 92 92 92 92 91 91 91 91 10 Used car 98 99 99 99 99 99 98 98 99 99 Amount financed (dollars) 11 New car 14,332 15,375 16,210 16,583 17,034 16,698 16,627 16,520 16,605 16,686 12 Used car 9,875 10,709 11,590 12,012 12,152 12,059 11,990 11,934 12,024 12,233 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 1995 1996 Q3 Q4 01 Q2 Q3 Q4 Ql Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 481.7 543.0 628.5 618.9 732.9 587.6 634.8 880.4 888.3 584.8 578.2 863.5 By sector and instrument 2 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 3 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 203.5 239.0 372.3 463.1 588.5 452.0 484.7 613.6 685.6 519.1 535.9 574.8 By instrument 6 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 158.4 130.9 157.2 194.3 237.5 205.5 210.6 222.5 239.6 290.5 197.4 285.4 9 Home mortgages 173.6 187.6 187.9 202.4 204.7 210.3 216.8 196.8 207.2 256.8 157.8 250.1 10 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 11 Commercial -10.0 -47.8 -25.0 -11.1 20.1 -12.7 -3.4 21.2 16.3 17.7 25.2 17.4 1? Faim .4 1.4 .5 1.8 1.7 2.2 1.4 1.7 1.8 2.3 .8 2.2 13 Consumer credit -13.7 5.0 61.5 124.9 142.9 133.8 141.8 138.3 156.9 158.5 118.2 121.7 14 Bank loans n.e.c -40.9 -13.7 3.8 73.1 103.0 92.1 76.7 152.5 96.8 76.8 86.0 52.8 15 Commercial paper -18.4 8.6 10.0 21.4 18.1 28.5 30.7 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 183.8 198.4 249.1 362.2 383.5 385.3 392.4 358.6 393.0 448.1 334.5 387.7 IS Noniinancial business -61.9 19.5 61.0 144.3 250.6 132.1 160.8 300.1 303.6 181.5 217.4 190.7 19 Farm 2.1 1.3 2.0 2.8 2.0 2.4 -2.0 .9 3.6 4.3 -.8 .9 20 Nonfarm noncoiporate -11.0 -16.0 7.0 12.1 35.9 8.8 16.5 51.3 34.4 29.8 28.2 29.3 21 Corporate -53.0 34.1 52.0 129.3 212.7 120.9 146.3 247.9 265.6 147.4 190.0 160.5 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 23 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 74 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 25 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.S 565.6 697.3 598.6 800.7 607.2 668.3 941.8 928.8 678.9 653.3 900.4 Financial sectors 29 Total net borrowing by financial sectors 15S.6 240.0 291.1 467.9 444.9 428.7 536.8 273.1 436.1 490.0 580.4 313.6 By instrument 30 U.S. government-related 145.7 155.8 164.2 288.6 205.1 250.3 321.2 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 32 Mortgage pool securities 136.6 115.6 83.6 116.5 98.2 98.3 72.2 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 9.8 84.2 126.9 179.2 239.8 178.3 215.6 183.7 244.0 268.6 262.9 166.4 35 Corporate bonds 69.9 82.7 120.1 117.5 185.5 103.9 84.9 167.5 182.3 208.1 184.0 136.2 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 83.6 116.5 98.2 98.3 72.2 26.4 64.9 119.9 181.4 109.8 47 Private financial sectors 9.8 84.2 126.9 179.2 239.8 178.3 215.6 183.7 244.0 268.6 262.9 166.4 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 46 Savings institutions -44.7 -7.0 11.3 12.8 2.6 14.8 36.1 -18.9 -7.2 5.1 31.5 10.9 47 Credit unions .0 .0 .2 .2 -.1 .5 .2 -.3 -.1 .1 .0 -.1 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 11..11 -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 66..33 5.2 5.2 5.2 6.0 5.9 57 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) 54.0 58.5 83.3 68.5 133.0 59.8 62.8 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 NonfinancialS tatistics • September 1996 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued 1994 1995 1996 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 11999955 Q3 Q4 Q1 Q2 Q3 Q4 Q1 All sectors 55554444 TTTToooottttaaaallll nnnneeeetttt bbbboooorrrrrrrroooowwwwiiiinnnngggg,,,, aaaallllllll sssseeeeccccttttoooorrrrssss 652.1 805.6 988.4 1,066.5 1,245.6 1,035.9 1,205.2 1,214.8 1,364.9 1,169.0 1,233.7 1,214.0 55555555 UUUU....SSSS.... ggggoooovvvveeeerrrrnnnnmmmmeeeennnntttt sssseeeeccccuuuurrrriiiittttiiiieeeessss 424.0 459.8 420.3 449.3 349.5 386.0 471.3 356.2 394.9 287.2 359.9 435.9 55556666 MMMMuuuunnnniiiicccciiiippppaaaallll sssseeeeccccuuuurrrriiiittttiiiieeeessss 87.8 30.5 74.8 -29.3 -41.3 -58.4 -53.8 -45.8 -4.3 -107.4 -7.6 -6.4 55557777 CCCCoooorrrrppppoooorrrraaaatttteeee aaaannnndddd ffffoooorrrreeeeiiiiggggnnnn bbbboooonnnnddddssss 163.6 166.0 276.6 147.9 305.3 140.1 118.8 234.0 330.6 320.0 336.7 240.5 55558888 MMMMoooorrrrttttggggaaaaggggeeeessss 158.9 131.5 160.8 204.1 242.8 217.5 215.5 227.7 244.8 295.7 202.9 290.9 55559999 CCCCoooonnnnssssuuuummmmeeeerrrr ccccrrrreeeeddddiiiitttt -13.7 5.0 61.5 124.9 142.9 133.8 141.8 138.3 156.9 158.5 118.2 121.7 66660000 BBBBaaaannnnkkkk llllooooaaaannnnssss nnnn....eeee....cccc -29.1 -9.3 -8.5 62.2 114.5 85.1 78.1 157.6 123.7 92.1 84.5 69.0 66661111 OOOOppppeeeennnn mmmmaaaarrrrkkkkeeeetttt ppppaaaappppeeeerrrr -44.0 13.1 -5.1 35.7 74.3 61.7 122.5 88.8 61.9 88.1 58.5 46.6 66662222 OOOOtttthhhheeeerrrr llllooooaaaannnnssss aaaannnndddd aaaaddddvvvvaaaannnncccceeeessss -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 66663333 TTTToooottttaaaallll nnnneeeetttt sssshhhhaaaarrrreeee iiiissssssssuuuueeeessss 209.4 294.9 442.1 150.8 159.3 113.2 -81.1 40.0 156.7 196.1 244.3 273.4 66664444 MMMMuuuuttttuuuuaaaallll ffffuuuunnnnddddssss 147.2 209.1 323.7 128.9 173.9 129.7 -12.6 78.5 173.3 195.3 248.6 290.9 66665555 CCCCoooorrrrppppoooorrrraaaatttteeee eeeeqqqquuuuiiiittttiiiieeeessss 62.2 85.8 118.4 21.9 -14.7 -16.4 -68.5 -38.5 -16.6 .7 -4.3 -17.6 66666666 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 18.3 27.0 21.3 -44.9 -74.2 -50.0 -118.0 -60.0 -71.3 -92.8 -72.8 -118.0 66667777 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 13.3 28.1 36.6 24.1 12.3 10.5 16.3 8.7 17.7 9.7 13.3 11.5 66668888 FFFFoooorrrreeeeiiiiggggnnnn sssshhhhaaaarrrreeeessss ppppuuuurrrrcccchhhhaaaasssseeeedddd bbbbyyyy UUUU....SSSS.... rrrreeeessssiiiiddddeeeennnnttttssss 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. 1 (780) quarterly statistical release, tables F.2 through F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1994 1995 1996 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999911 11999922 11999933 11999944 11999955 Q3 Q4 Q1 Q2 Q3 Q4 QL NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 652.1 805.6 988.4 1,066.5 1,245.6 1,035.9 1,205.2 1,214.8 1,364.9 1,169.0 1,233.7 1,214.0 2 Private domestic nonfinancial sectors 105.2 87.9 65.6 258.9 -84.8 213.4 227.8 35.3 -142.3 -54.9 -177.3 -133.6 3 Households 29.0 81.7 52.2 304.7 51.5 292.3 343.4 170.8 -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 9.1 48.1 -3.5 37.3 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 523.1 631.5 812.8 697.4 1,080.0 696.3 790.8 951.6 1,205.3 889.8 1,273.1 1,044.5 10 Government sponsored enterprises 15.1 68.8 90.2 119.1 94.7 121.9 171.4 28.2 97.5 61.5 191.7 42.3 11 Federally related mortgage pools 136.6 115.6 83.6 116.5 98.2 98.3 72.2 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 -43.4 -4.2 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 63.8 81.7 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) 50.0 53.7 80.8 61.9 112.3 50.6 42.6 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 652.1 805.6 988.4 1,066.5 1,245.6 1,035.9 1,205.2 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 3/ 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 49.4 50.5 89.7 10.1 4.1 99.9 -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 54.4 111.0 106.0 97.2 149.4 113.6 30.5 183.2 96.8 129.7 50 Taxes payable -7.4 9.7 5.2 3.2 1.3 10.2 4.2 15.3 -4.3 4.0 -9.8 9.5 51 Noncorporate proprietors' equity .5 16.7 3.4 22.6 38.7 46.0 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 278.2 280.5 364.6 236.8 461.9 264.8 303.4 327.2 505.1 347.6 667.6 466.0 54 Total financial sources 1,473.9 1,790.4 2,351.7 2,113.5 2,730.1 1,979.2 2,245.7 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 -6.6 -7.8 -14.8 12.6 -44.0 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 31.5 11.0 -53.5 86.7 64.4 -47.3 39.6 -12.7 -76.7 61 Foreign deposits -24.0 -2.8 -7.0 36.9 -1.5 39.5 55.7 45.6 81.6 -93.6 -39.5 -41.5 62 Taxes payable -2.2 11.9 11.1 8.6 8.7 10.8 -.9 -8.9 31.6 10.8 1.4 -24.0 63 Miscellaneous 9.7 -.1 -126.1 -138.7 -29.8 -44.3 -107.3 -230.6 -36.9 -4.8 153.1 123.3 64 Total identified to sectors as assets 1,446.8 1,769.3 2,444.9 2,193.7 2,769.8 2,000.1 2,284.2 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.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. F.6 and F.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Financial Statistics • September 1996 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1994 1995 1996 lyyz Q3 Q4 Q1 Q2 Q3 Q4 Q1 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 11,894.5 12,537.8 13,163.0 13,895.9 12,965.8 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 8,814.2 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 y 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 17 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 2b 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 by nonfinancial sectors, domestic and foreign 12,207.6 12,919.7 13,524.6 14,325.3 13,318.3 13,524.6 13,716.1 13,935.9 14,117.7 14,325.3 14,510.7 Financial sectors 29 Total credit market debt owed by financial sectors 3,025.0 3,321.5 3,794.6 4,242.1 3,656.2 3,794.6 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 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 By borrowing sector 40 Government-sponsored entetpnses 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.... 15,232.6 16,241.2 17,319-2 18,567.4 16,974.5 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 57 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.l (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES' Billions of dollars except as noted, end of period 1994 1995 1996 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944 11999955 Q3 Q4 Ql Q2 Q3 Q4 Ql CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 15,232.6 16,241.2 17,319.2 18,567.4 16,974.5 17,319.2 17,577.5 17,907.8 18,211.5 18,567.4 18,827.8 2 Private domestic nonfinancial sectors 2,671.6 2,730.1 3,019.3 2,930.4 2,900.6 3,019.3 2,984.8 2,935.1 2,942.2 2,930.4 2,858.6 3 Households 1,618.5 1,658.9 1,993.9 2,041.3 1,857.7 1,993.9 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 257.8 271.5 319.7 316.1 295.3 319.7 291.0 302.8 290.4 316.1 306.6 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 11,303.2 12,133.8 12,837.7 13,924.3 12,620.6 12,837.7 13,065.2 13,372.9 13,585.1 13,924.3 14,172.5 10 Government-sponsored enterprises 457.8 548.0 667.1 761.8 624.3 667.1 673.5 698.6 714.0 761.8 771.7 11 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 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 162.5 149.2 129.5 138.3 130.2 129.5 140.8 137.4 143.1 138.3 174.9 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) 378.0 458.8 520.7 632.9 507.3 520.7 531.5 555.2 593.2 632.9 657.6 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 33 Total credit market debt 15,232.6 16,241.2 17,319.2 18,567.4 16,974.5 17,319.2 17,577.5 17,907.8 18,211.5 18,567.4 18,827.8 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 138.5 189.3 280.0 290.7 250.1 280.0 273.0 265.9 267.4 290.7 266.2 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 ,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 1,049.4 1,160.5 1,266.5 1,099.8 1,160.5 1,159.8 1,174.2 1,217.3 1,266.5 1,269.7 50 Taxes payable 79.7 84.9 88.0 89.3 87.1 88.0 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 4,785.2 5,165.2 5,397.3 5,769.9 5,373.0 5,397.3 5,459.7 5,537.2 5,626.9 5,769.9 5,836.4 53 Total liabilities 32,716.4 35,248.7 37,271.6 40,757.9 36,732.4 37,271.6 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 -251.1 -251.4 -260.1 -274.9 -323.2 -260.1 -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 77.3 108.8 119.8 100.7 108.8 132.9 114.5 136.4 119.8 108.7 63 Foreign deposits 217.6 218.4 258.7 257.2 241.3 258.7 270.1 290.5 267.1 257.2 246.8 64 Taxes payable 25.2 26.8 25.0 33.7 22.8 25.0 10.0 25.6 28.7 33.7 13.5 65 Miscellaneous -514.5 -667.2 -830.5 -859.2 -688.2 -830.5 -892.2 -878.5 -884.9 -859.2 -896.0 66 Total identified to sectors as assets 41,102.3 44,583.2 46,819.3 52,483.9 46,156.5 46,819.3 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.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L.6 and L.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • September 1996 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1987=100, except as noted 1995 1996 MMeeaassuurree 11999933 11999944 11999955 Oct. Nov. Dec. Jan. Feb. Mar. Apr.r Mayr June 1 Industrial production1 111.5 118.1 121.9 122.2 122.6 122.8 122.5 124.2 123.6 124.5 125.1 125.7 Market groupings 2 Products, total 110.0 115.6 118.3 118.3 118.8 119.2 118.6 120.7 120.0 120.7 121.1 121.5 3 Final, total 112.7 118.3 121.4 121.3 121.9 122.1 121.9 124.5 123.4r 124.8 125.1 125.5 4 Consumer goods 109.5 113.7 115.1 114.9 115.9 115.7 114.6 116.6 115.3 115.8 116.1 116.2 5 Equipment 117.5 125.3 131.4 131.5 131.4 132.3 133.7 137.3 136.5r 139.2 139.6 140.6 6 Intermediate 101.8 107.3 109.0 109.2 109.3 110.1 108.5 109.3 I09.6r 108.6 109.1 109.5 / Materials 113.8 122.0 127.4 128.1 128.4 128.4 128.5 129.4 129.1r 130.2 131.2 132.3 Industry groupings 8 Manufacturing 112.3 119.7 123.9 124.4 124.5 124.8 124.5 126.2 125.2 126.5 126.9 127.6 9 Capacity utilization, manufacturing (percent)2.. 80.6 83.3 83.0 82.2 82.0 81.9 81.4 82.3 81.3 81.8 81.8 82.0 10 Construction contracts3 105.lr 114.2 118.3r 120.0 122.0r 117.0r 119.0 113.0 125.0r 126.0 122.0 118.0 11 Nonagricultural employment, total4 108.6 112.0 115.0 115.5 115.6 115.9 115.8 116.3 116.5 116.7 117.0 117.2 12 Goods-producing, total 94.6r 96.9r 98.T 97.9 97.8 97.9 97.7 98.3 98.1 98.1 98.3 98.4 13 Manufacturing, total 95.lr 96.4r 97.2r 96.7 96.6 96.7 96.4 96.5 96.2 96.2 96.3 96.3 14 Manufacturing, production workers 95.3 97.5r 98.7r 98.1 98.0 98.1 97.7 97.8 97.4 97.5 97.5 97.5 15 Service-producing 113.1r 116.8' 120.3' 121.1 121.3 121.6 121.6 122.1 122.3 122.6 123.0 123.3 16 Personal income, total 141.3 148.3 157.4 159.6 160.1 161.1 161.2 162.4r 163.0r 163.8 164.5 17 Wages and salary disbursements 136.0 142.6 150.5 153.0 152.9 153.7 153.5r 155.2r 155.9r 156.7 157.6 n.a. 18 Manufacturing 119.3 125.0 129.3 129.5 129.5 129.8 128.6r 130.0r 129.3r 131.6 132.0 n.a. 19 Disposable personal income5 142.4 149.2 157.8 160.0 160.6 161.7 161.6r 162.6r 163.lr 162.3 164.4 n.a. 20 Retail sales5 134.7 144.8 152.2 153.0 154.3 155.3 155.3 158.6 159.3 159.1 160.4 160.0 Prices6 21 Consumer (1982-84=100) 144.5 148.2 152.4 153.7 153.6 153.5 154.4 154.9 155.7 156.3 156.6 156.7 22 Producer finished goods (1982=100) 124.7 125.5 127.9 128.7 128.7 129.1 129.4 129.4 130.2 130.8 131.0 131.6 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 5. Based on data from US. Department of Commerce, Survey of Current Business. the ordering address, see the inside front cover. The latest historical revision of the industrial 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price production index and the capacity utilization rates was released in November 1995. See "A indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, Revision to Industrial Production and Capacity Utilization, 1991-95," Federal Reserve Monthly Labor Review. Bulletin, vol. 82 (January 1996), pp. 16—25. For a detailed description of the industrial NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series production index, see "Industrial Production: 1989 Developments and Historical Revision," mentioned in notes 3 and 6, can also be found in the Survey of Current Business. Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. Figures for industrial production for the latest month are preliminary, and many figures for 2. Ratio of index of production to index of capacity. Based on data from the Federal the three months preceding the latest month have been revised. See "Recent Developments in Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pp. 3. Index of dollar value of total construction contracts, including residential, nonresiden- 411-35. See also "Industrial Production Capacity and Capacity Utilization since 1987," tial, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. Dodge Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. Division. 4. Based on data from U.S. Department of Labor, Employment and Earnings. Series covers employees only, excluding personnel in the armed forces. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted 1995 1996 CCaatteeggoorryy 11999933rr 11999944rr 11999955rr Nov. Dec. Jan. Feb. Mar. Apr.r Mayr June HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 129,200 131,056 132,304 132,471 132,352 113322,,990033 113333,,001188 133,655 113333,,336611 113333,,991100 113333,,666699 Employment 2 Nonagricultural industries3 117,144 119,651 121,460 121,739 121,656 121,698 122,143 122,664 122,726 122,971 123,228 3 Agriculture 3,115 3,409 3,440 3,323 3,325 33,,552299 33,,551199 33,,448877 33,,336688 33,,449911 33,,338822 Unemployment 4 Number 8,940 7,996 7,404 7,409 7,371 7,677 7,355 7,504 7,266 7,448 7,060 5 Rate (percent of civilian labor force) 6.9 6.1 5.6 5.6 5.6 5.8 5.5 5.6 5.4 5.6 5.3 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 110,730 114,172 117,203 117,899 118,136 118,070 118,579 118,737 118,928 119,293 119,532 7 Manufacturing 18,075 18,321 18,468 18,353 18,367 18,309 18,332 18,282 18,283 18,299 18,292 8 Mining 610 601 580 569 570 569 573 574 573 576 576 9 Contract construction 4,668 4,986 5,158 5,211 5,223 5,234 5,349 5,340 5,353 5,383 5,406 10 Transportation and public utilities 5,829 5,993 6,165 6,233 6,249 6,254 6,270 6,289 6,294 6,315 6,331 11 Trade 25,755 26,670 27,585 27,778 27,832 27,780 27,869 27,891 27,972 28,037 28,124 12 Finance 6,757 6,896 6,830 6,871 6,887 6,894 6,919 6,932 6,942 6,963 6,974 13 Service 30,197 31,579 33,107 33,546 33,661 33,694 33,902 34,035 34,114 34,270 34,369 14 Government 18,841 19,128 19,310 19,338 19,347 19,336 19,365 19,394 19,397 19,450 19,460 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 Q3 Q4 Qlr Q2 Q3 Q4 Ql Q2 Q3 Q4 Qlr Q2 Output (1987=100) Capacity (percent of 1987 output) Capacity utilization rate (percent)2 1 Total industry 122.3 122.5 123.4 125.1 146.3 147.7 149.1 150.6 83.6 82.9 82.8 83.1 2 Manufacturing 124.1 124.6 125.3 127.0 150.2 151.9 153.5 155.1 82.6 82.0 81.6 81.9 3 Primary processing3 117.1 117.1 116.7 117.8 135.2 136.1 136.9 137.8 86.6 86.1 85.2 85.6 4 Advanced processing4 127.5 128.1 129.4 131.3 157.5 159.5 161.5 163.5 80.9 80.3 80.1 80.3 5 Durable goods 133.0 134.2 136.0 139.3 161.7 164.2 166.7 169.4 82.3 81.7 81.6 82.2 6 Lumber and products 104.6 105.8 104.6 108.7 119.8 120.9 121.7 122.4 87.3 87.5 85.9 88.8 7 Primary metals 118.2 118.8 118.9 118.9 128.8 129.5 130.3 131.4 91.8 91.8 91.2 90.5 8 Iron and steel 121.3 121.3 122.6 122.2 132.9 133.5 134.4 135.7 91.3 90.9 91.2 90.0 9 Nonferrous 113.9 115.3 113.8 114.4 123.3 124.0 124.8 125.5 92.4 93.0 91.2 91.1 10 Industrial machinery and equipment 178.9 186.8 195.3 201.3 206.1 212.0 218.1 224.5 86.8 88.1 89.5 89.7 11 Electrical machinery 178.4 182.9 186.3 189.1 206.3 213.9 221.8 229.9 86.5 85.5 84.0 82.3 12 Motor vehicles and parts 140.7 140.5 132.6 144.7 176.8 179.2 181.3 182.9 79.6 78.4 73.2 79.1 13 Aerospace and miscellaneous transportation equipment.. . 86.9 79.0 84.0 86.2 130.1 129.3 128.6 128.1 66.8 61.1 65.3 67.3 14 Nondurable goods 114.3 113.9 113.5 113.5 137.7 138.4 139.0 139.6 83.0 82.3 81.7 81.3 15 Textile mill products 110.9 109.4 106.4 108.5 131.6 132.8 133.7 134.2 84.3 82.4 79.6 80.8 16 Paper and products 119.5 118.1 114.6 118.6 132.8 133.9 134.9 135.8 90.0 88.2 85.0 87.3 17 Chemicals and products 124.6 126.4 126.9 126.0 155.6 156.5 157.5 158.5 80.1 80.7 80.6 79.5 18 Plastics materials 118.3 123.1 126.9 135.4 137.1 138.6 87.3 89.7 91.6 19 Petroleum products 109.2 107.7 109.7 109.7 116.4 116.6 116.8 117.1 93.8 92.4 93.9 93.7 20 Mining 100.2 98.2 98.7 101.3 111.9 111.9 111.9 111.8 89.5 87.8 88.2 90.6 21 Utilities 124.7 124.1 126.7 127.6 135.2 135.6 136.0 136.5 92.3 91.5 93.2 93.5 22 Electric 125.0 123.7 126.4 128.2 132.5 133.0 133.4 133.9 94.3 93.1 94.8 95.7 1973 1975 Previous cycle5 Latest cycle6 1995 1996 High Low High Low High Low June Jan. Feb. Mar.r Apr.' May Junep Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.8 84.9 78.0 83.5 82.4 83.3 82.6 82.9 83.1 83.2 2 Manufacturing 88.9 70.8 87.3 70.0 85.2 76.6 82.7 81.4 82.3 81.3 81.8 81.8 82.0 3 Primary processing3 92.2 68.9 89.7 66.8 89.0 77.9 87.0 85.4 84.9 85.3 85.3 85.6 85.7 4 Advanced processing4 87.5 72.0 86.3 71.4 83.5 76.1 80.8 79.7 81.1 79.6 80.4 80.2 80.4 5 Durable goods 88.8 68.5 86.9 65.0 84.0 73.7 82.1 81.3 82.5 80.9 82.1 82.1 82.4 6 Lumber and products 90.1 62.2 87.6 60.9 93.3 76.1 86.5 84.8 84.8 88.2 89.2 88.3 88.8 7 Primary metals 100.6 66.2 102.4 46.8 92.8 74.2 91.5 93.5 89.8 90.3 90.7 90.2 90.7 8 Iron and steel 105.8 66.6 110.4 38.3 95.7 72.0 89.9 95.6 88.9 89.1 90.4 89.3 90.4 9 Nonferrous 92.9 61.3 90.5 62.2 88.7 75.2 93.6 90.7 91.0 91.8 91.0 91.3 91.1 10 Industrial machinery and equipment 96.4 74.5 92.1 64.9 84.0 71.8 86.2 88.8 89.9 89.9 89.6 89.6 89.9 11 Electrical machinery 87.8 63.8 89.4 71.1 84.9 77.0 85.9 83.2 85.1 83.7 82.6 82.0 82.2 12 Motor vehicles and parts 93.4 51.1 93.0 44.5 85.1 56.6 79.7 75.0 77.9 66.7 79.1 78.8 79.5 13 Aerospace and miscellaneous transportation equipment 77.0 66.6 81.1 66.9 88.4 78.8 67.5 63.8 65.5 66.7 67.0 67.3 67.6 14 Nondurable goods 87.9 71.8 87.0 76.9 86.7 80.3 83.3 81.4 81.9 81.6 81.4 81.4 81.3 15 Textile mill products 92.0 60.4 91.7 73.8 92.1 78.8 84.4 78.0 79.4 81.4 80.7 80.6 81.2 16 Paper and products 96.9 69.0 94.2 82.0 94.8 86.7 90.8 85.3 84.1 85.4 87.7 87.6 86.7 17 Chemicals and products 87.9 69.9 85.1 70.1 85.9 79.0 80.3 80.8 80.7 80.1 79.5 79.4 79.6 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 90.2 90.8 91.3 92.6 93.4 19 Petroleum products 96.7 81.1 89.5 68.2 88.5 84.6 93.4 93.3 94.3 94.0 93.7 93.7 93.6 20 Mining 94.4 88.4 96.6 80.6 86.5 86.1 90.2 86.8 87.6 90.3 89.9 90.3 91.7 71 Utilities 95.6 82.5 88.3 76.2 92.6 83.1 89.7 92.4 93.1 94.0 92.4 94.6 93.3 22 Electric 99.0 82.7 88.3 78.7 94.8 86.7 91.6 94.2 94.9 95.2 94.0 97.2 95.9 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 • September 1996 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1995 1996 pro- 1995 por- avg. tion June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.r Apr/ May Junep Index (1987 = 100) MAJOR MARKETS 1 Total index 100.0 121.9 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 124.2 123.6 124.5 125.1 125.7 2 Products 60.6 118.3 117.9 118.0 119.2 119.4 118.3 118.8 119.2 118.6 120.7 120.0 120.7 121.1 121.5 3 Final products 46.3 121.4 121.1 121.2 122.4 122.6 121.3 121.9 122.1 121.9 124.5 123.4 124.8 125.1 125.5 4 Consumer goods, total 28.6 115.1 114.8 114.6 115.9 116.0 114.9 115.9 115.7 114.6 116.6 115.3 115.8 116.1 116.2 Durable consumer goods 5.6 124.2 122.3 121.4 124.0 125.8 123.4 124.9 126.3 120.3 125.1 119.3 125.4 125.6 127.7 6 Automotive products 2.5 130.7 129.1 125.3 130.7 132.9 128.5 130.5 132.8 125.9 133.1 120.3 133.6 134.2 136.1 7 Autos and trucks 1.6 131.4 129.5 123.9 132.0 133.1 128.6 129.8 132.1 124.1 133.5 111.1 135.9 135.4 138.2 8 Autos, consumer .9 103.1 99.2 101.0 100.6 102.6 100.2 100.2 99.5 92.8 99.7 77.0 104.1 106.2 109.2 y Trucks, consumer .7 181.7 183.6 163.9 188.2 187.7 179.1 182.8 190.6 180.4 194.4 173.1 192.7 187.3 189.5 10 Auto parts and allied goods .9 127.8 126.8 126.6 126.6 130.8 126.7 130.2 132.7 128.1 130.7 137.2 127.5 130.0 130.2 n Other 3.0 118.6 116.3 118.1 118.1 119.6 118.9 119.9 120.5 115.5 118.1 118.5 118.2 118.2 120.3 12 Appliances, televisions, and air conditioners .7 135.5 131.4 132.2 135.8 139.4 140.1 145.3 141.9 132.2 137.5 138.3 138.8 135.1 143.6 13 Carpeting and furniture .8 105.8 101.8 107.9 104.4 106.9 105.6 104.1 107.4 101.1 103.4 105.7 104.6 105.4 105.4 14 Miscellaneous home goods 1.5 118.2 118.0 117.4 118.0 117.8 116.9 117.6 118.3 116.2 117.7 116.9 116.6 117.9 118.4 15 Nondurable consumer goods 23.0 112.9 113.1 113.0 113.9 113.7 112.9 113.8 113.2 113.3 114.5 114.4 113.6 113.8 113.4 16 Foods and tobacco 10.3 111.3 113.1 112.8 111.8 111.6 111.1 110.9 110.6 110.6 112.0 112.3 112.0 111.4 111.1 17 Clothing 2.4 94.8 94.6 93.6 93.9 93.4 92.9 91.5 89.7 88.2 90.3 88.9 88.8 89.2 89.3 18 Chemical products 4.5 131.3 128.6 128.6 132.6 134.0 135.7 135.0 136.5 138.1 138.1 136.7 134.0 134.1 134.5 19 Paper products 2.9 106.6 106.3 107.6 106.7 107.3 106.6 108.4 106.3 104.9 106.0 105.8 106.1 107.1 106.2 20 Energy 2.9 116.5 115.8 116.1 122.3 119.0 113.1 121.1 119.5 121.0 122.6 123.9 121.7 124.8 122.4 21 Fuels .9 108.8 108.8 108.2 108.4 111.4 107.3 108.2 108.6 108.6 111.8 112.2 111.5 112.4 110.9 22 Residential utilities 2.1 119.6 118.7 119.4 128.2 122.2 115.4 126.6 124.1 126.1 127.2 128.8 126.0 130.0 127.2 23 Equipment 17.7 131.4 131.2 131.6 132.9 133.1 131.5 131.4 132.3 133.7 137.3 136.5 139.2 139.6 140.6 24 Business equipment 13.7 155.7 155.1 155.7 157.5 158.2 156.5 156.9 158.4 160.5 164.8 162.7 166.4 166.5 168.3 25 Information processing and related 5.7 198.1 196.0 197.2 201.0 203.0 206.5 208.1 209.4 213.3 220.5 221.6 225.0 226.4 230.3 26 Computer and office equipment 1.4 373.5 363.2 371.7 379.6 390.0 402.9 417.8 431.7 442.9 463.3 476.0 491.9 503.5 513.6 27 Industrial 4.0 127.5 126.2 127.1 129.1 128.7 128.6 129.1 129.5 129.6 131.3 130.3 130.1 130.1 130.1 28 Transit 2.6 136.3 140.3 139.8 138.0 137.9 122.3 119.6 124.5 128.1 133.2 121.2 136.1 135.3 136.6 29 Autos and trucks 1.2 140.1 139.5 139.9 141.3 143.3 135.7 134.2 135.3 129.1 136.0 113.6 140.0 138.2 138.4 30 Other 1.4 123.2 122.6 122.6 122.2 123.3 120.9 121.4 121.7 122.1 123.5 122.5 122.1 120.5 120.7 31 Defense and space equipment 3.3 65.9 66.8 66.5 66.1 65.2 64.4 62.9 62.0 61.6 63.1 64.2 64.0 64.4 63.9 32 Oil and gas well drilling .6 87.1 86.8 88.4 89.5 88.3 83.5 83.1 83.8 85.1 89.7 96.3 100.6 104.3 102.3 33 Manufactured homes .2 152.7 149.6 148.6 155.9 158.0 158.9 161.8 164.4 158.1 157.8 168.2 170.7 170.4 34 Intermediate products, total 14.3 109.0 108.2 108.5 109.4 109.5 109.2 109.3 110.1 108.5 109.3 109.6 108.6 109.1 109.5 35 Construction supplies 5.3 108.2 107.2 107.3 107.0 108.4 108.3 108.7 110.5 107.2 109.3 111.5 109.5 110.6 111.5 36 Business supplies 9.0 109.6 109.1 109.5 111.0 110.3 109.9 109.9 110.0 109.6 109.5 108.6 108.2 108.4 108.4 37 Materials 39.4 127.4 126.8 126.8 128.1 128.1 128.1 128.4 128.4 128.5 129.4 129.1 130.2 131.2 132.3 38 Durable goods materials 20.8 141.5 139.7 140.2 142.3 144.1 143.9 145.3 144.8 145.8 147.3 145.5 147.5 148.6 150.1 39 Durable consumer parts 4.0 138.5 135.8 133.9 138.4 139.8 138.6 140.1 139.3 140.6 141.1 132.5 142.3 142.5 144.0 40 Equipment parts 7.5 163.0 161.7 164.4 167.1 169.1 169.4 171.0 170.8 171.7 176.3 176.8 177.5 179.3 181.9 41 Other 9.2 126.2 124.5 124.4 124.9 126.8 126.5 127.9 127.2 128.2. 127.8 127.4 126.8 127.8 128.5 42 Basic metal materials 3.1 125.7 123.5 124.9 123.1 127.0 124.3 128.1 126.6 125.7 123.7 124.4 123.8 124.1 125.3 43 Nondurable goods materials 8.9 119.8 120.4 118.9 118.8 117.8 118.7 116.6 117.4 115.7 116.1 116.3 118.3 118.3 118.5 44 Textile materials 1.1 109.2 109.0 102.6 109.2 106.2 107.3 104.8 103.3 100.3 101.8 103.0 104.9 105.5 106.2 45 Paper materials 1.8 120.5 121.0 123.9 120.4 117.0 121.4 114.3 115.2 113.4 113.4 113.7 118.9 118.2 116.3 46 Chemical materials 3.9 124.4 125.2 124.4 123.1 123.3 122.9 122.7 121.9 121.8 121.3 121.6 122.4 122.6 123.2 47 Other 2.1 116.5 117.4 113.8 114.6 115.1 114.6 114.1 118.9 115.2 117.1 116.4 117.8 117.6 118.6 48 Energy materials 9.7 106.6 107.2 107.5 108.5 105.8 105.5 105.7 106.0 105.9 106.1 108.2 106.8 108.6 109.3 49 Primary energy 6.3 101.9 103.0 102.3 101.4 101.2 101.7 100.8 101.0 100.6 101.3 103.9 103.1 104.6 105.8 50 Converted fuel materials 3.3 116.0 115.5 118.1 122.8 115.0 113.1 115.4 116.2 116.6 115.5 116.7 114.2 116.5 116.2 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.2 121.5 121.1 121.2 122.3 122.4 121.9 122.3 122.5 122.4 123.8 123.9 124.1 124.7 125.3 52 Total excluding motor vehicles and parts 95.2 120.9 120.5 120.7 121.7 121.8 121.3 121.7 121.9 121.9 123.3 123.7 123.5 124.1 124.7 53 Total excluding computer and office equipment 98.2 118.2 117.8 117.8 118.9 118.9 118.1 118.4 118.5 118.0 119.5 118.7 119.5 120.0 120.5 54 Consumer goods excluding autos and trucks . 27.0 114.0 113.9 114.0 114.8 114.9 114.0 115.0 114.7 114.0 115.5 115.6 114.5 114.9 114.7 55 Consumer goods excluding energy 25.7 114.9 114.7 114.5 115.1 115.7 115.1 115.3 115.3 113.9 115.9 114.3 115.2 115.1 115.5 56 Business equipment excluding autos and trucks 12.5 157.0 156.5 157.2 158.9 159.5 158.4 159.0 160.5 163.5 167.5 167.5 168.9 169.2 171.1 57 Business equipment excluding computer and office equipment 12.2 133.0 133.2 133.2 134.4 134.3 131.6 130.8 131.3 132.6 135.5 132.3 134.9 134.2 135.2 58 Materials excluding energy 29.7 134.9 133.8 133.7 135.1 136.1 136.2 136.6 136.4 136.6 137.8 136.6 138.6 139.3 140.5 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 SIC pro- 1995 Group code por- avg. tion July Aug. Sept. Mar.r Apr/ May Junep Index (1987 = 100) MAJOR INDUSTRIES 59 Total index 100.0 121.9 121.4 121.5 122.7 122.8 122.2 122.6 122.8 122.5 124.2 123.6 124.5 125.1 125.7 60 Manufacturing 85.4 123.9 123.3 123.3 124.2 124.9 124.4 124.5 124.8 124.5 126.2 125.2 126.5 126.9 127.6 61 Primary processing 26.6 117.6 117.1 116.9 116.6 117.8 117.0 117.1 117.3 116.7 116.3 117.1 117.3 117.9 118.3 62 Advanced processing 58.9 126.8 126.3 126.3 127.8 128.2 127.9 128.0 128.4 128.2 131.0 129.0 130.9 131.1 132.0 63 Durable goods 45.0 132.5 131.5 131.5 133.2 134.4 133.5 134.3 134.8 134.9 137.5 135.6 138.4 139.0 140.4 64 Lumber and products 24 2.0 104.5 103.0 103.7 103.7 106.2 105.7 104.8 106.9 103.1 103.3 107.5 108.9 108.1 108.9 65 Furniture and fixtures 25 1.4 111.6 111.3 111.1 110.9 112.0 110.9 109.8 109.3 109.3 110.5 107.7 109.0 111.4 110.8 66 Stone, clay, and glass products 32 2.1 104.1 103.8 103.2 103.0 103.8 104.5 104.9 104.3 105.5 104.1 102.9 103.1 104.0 104.8 67 Primary metals 33 3.1 119.2 117.5 118.3 115.4 121.0 115.7 120.8 120.0 121.5 117.1 118.0 118.8 118.5 119.5 68 Iron and steel 331,2 1.7 122.4 119.2 119.3 117.7 127.0 115.1 126.1 122.7 128.1 119.5 120.2 122.3 121.2 123.1 69 Raw steel 331PT .1 114.7 112.9 111.5 114.2 118.6 111.3 116.4 118.0 113.9 112.5 114.9 112.9 113.2 70 Nonferrous 333-6,9 1.4 114.8 114.9 116.5 111.9 113.2 115.8 113.8 116.2 113.0 113.6 114.8 114.0 114.6 1146 71 Fabricated metal products.. . 34 5.0 113.9 113.7 112.4 114.3 115.1 114.0 114.5 115.0 115.6 117.0 116.1 115.6 116.3 117.0 72 Industrial machinery and equipment 35 8.0 177.8 174.4 176.0 179.5 181.3 183.8 186.5 190.1 191.9 196.1 197.8 199.1 201.1 203.7 73 Computer and office equipment 357 1.8 373.5 363.2 371.7 379.6 390.0 402.9 417.8 431.7 442.9 463.3 476.0 491.9 503.5 513.6 74 Electrical machinery 36 7.2 174.9 173.0 175.7 178.7 180.8 182.4 183.6 182.8 182.4 188.7 187.9 187.6 188.5 191.3 75 Transportation equipment. .. 37 9.5 113.3 113.4 111.6 114.1 114.1 109.3 108.6 109.7 108.3 112.1 103.1 114.6 114.6 115.6 76 Motor vehicles and parts . 371 4.8 141.9 139.7 136.7 142.1 143.3 139.7 140.7 141.2 135.5 141.1 121.3 144.3 144.1 145.8 77 Autos and light trucks . 371PT 2.5 131.3 129.2 124.3 131.6 132.8 128.4 129.6 131.5 123.5 132.8 109.9 135.5 135.3 138.2 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.7 85.8 88.1 87.6 87.2 85.9 80.0 77.7 79.4 82.2 84.2 85.7 85.9 8866..22 86.5 79 Instruments 38 5.4 110.7 110.9 110.2 111.4 111.3 111.4 111.5 109.7 111.0 113.4 112.9 112.8 113.0 113.7 80 Miscellaneous 39 1.3 122.7 123.1 121.4 122.4 122.9 122.2 123.3 123.5 122.1 124.0 124.0 122.6 122.9 124.1 81 Nondurable goods 40.5 114.3 114.3 114.3 114.3 114.4 114.3 113.7 113.8 113.1 113.8 113.6 113.4 113.6 113.6 82 Foods " ' 20 9.4 115.3 116.1 115.3 115.5 115.5 115.4 114.8 114.8 114.8 116.0 115.6 115.4 115.1 114.6 83 Tobacco products 21 1.6 90.2 96.4 99.1 91.3 90.2 88.2 88.9 88.4 87.1 90.9 92.6 94.2 91.1 92.0 84 Textile mill products 22 1.8 112.6 110.4 109.9 112.4 110.5 111.1 108.9 108.3 104.1 106.2 109.0 108.1 108.2 109.2 85 Apparel products 23 2.2 95.7 95.5 94.8 94.5 94.5 93.3 92.4 91.5 89.2 90.9 89.7 90.1 90.6 90.9 86 Paper and products 26 3.6 119.8 119.9 121.3 118.6 118.5 119.7 116.2 118.2 114.9 113.5 115.5 118.8 119.1 118.0 87 Printing and publishing 27 6.8 99.4 98.6 99.0 100.5 99.8 98.9 99.3 98.8 97.9 98.7 96.7 96.2 96.5 96.5 88 Chemicals and products .... 28 9.9 125.0 124.4 124.0 124.4 125.3 126.7 126.0 126.5 127.1 127.1 126.5 125.8 125.8 126.4 89 Petroleum products 29 1.4 108.3 108.6 109.0 108.5 110.0 106.9 107.4 108.9 108.9 110.2 109.9 109.6 109.7 109.7 90 Rubber and plastic products . 30 3.5 139.4 137.8 137.7 138.7 139.8 139.7 140.3 139.3 139.0 139.7 140.5 137.6 141.0 141.3 91 Leather and products 31 .3 81.3 81.2 78.7 80.8 80.5 79.7 78.2 76.8 75.6 77.1 76.7 76.2 75.7 76.5 92 Mining 6.9 99.9 101.0 100.7 100.0 100.0 98.2 98.3 98.1 97.1 98.0 101.1 100.5 101.0 102.5 93 Metal 10 .5 169.3 166.8 172.2 172.1 170.8 178.3 175.9 172.8 159.5 157.1 166.1 163.0 165.4 167.5 94 Coal 12 1.0 112.9 112.2 117.0 109.7 116.2 112.3 109.5 108.5 103.3 108.0 114.8 109.5 111.9 113.2 95 Oil and gas extraction 13 4.8 91.9 93.6 91.9 92.4 91.2 89.2 90.1 90.1 90.8 90.2 92.6 93.3 93.6 95.0 96 Stone and earth minerals 14 .6 112.3 111.9 113.5 111.6 113.1 112.4 110.9 112.4 108.9 117.2 117.4 115.5 113.2 115.9 97 Utilities 7.7 122.0 121.0 122.7 128.8 122.7 121.6 125.4 125.1 125.6 126.6 128.0 126.0 129.2 127.6 98 Electric 491,493PT 6.1 122.1 121.2 122.2 130.0 122.7 123.7 123.6 123.9 125.5 126.6 127.1 125.7 130.2 128.7 99 Gas 492.493PT 1.6 121.7 120.6 124.5 124.3 122.4 113.6 132.5 129.9 125.6 126.3 131.5 126.9 125.0 123.2 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.6 122.8 122.3 122.5 123.1 123.8 123.4 123.6 123.9 123.9 125.4 125.4 125.4 125.9 126.6 101 Manufacturing excluding office and computing machines . . . 83.7 119.5 119.1 118.9 119.8 120.3 119.6 119.6 119.7 119.3 120.7 119.5 120.6 120.9 121.5 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,002.9 2,245.6 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 2,269.5 2,300.2 2,304.5 2,310.7 103 Final 1,552.2 1,748.7 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 1,766.8 1,801.2 1,804.6 1,808.7 104 Consumer goods 1,033.4 1,130.5 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 1,129.5 1,144.2 1,145.7 1,145.7 105 Equipment 518.8 618.3 617.1 619.2 624.8 627.1 616.7 617.5 622.9 628.4 645.8 637.3 656.9 658.9 663.0 106 Intermediate 450.7 496.9 493.5 495.6 497.3 499.9 498.4 499.0 503.8 495.9 498.8 502.7 499.0 499.8 502.0 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 • September 1996 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1995 1996' Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,199 1,372 1,332 1,379 1,427 1,393 1,450 1,487 1,378 1,417 1,423 1,459 1,452 2 One-family 987 1,068 997 1,046 1,079 1,050 1,073 1,123 1,056 1,087 1,097 1,115 1,098 3 Two-family or more 213 303 335 333 348 343 377 364 322 330 326 344 354 4 Started 1,288 1,457 1,354 1,401 1,401 1,351 1,458 1,425 1,453 1,514 1,439 1,511 1,461 5 One-family 1,126 1,198 1,076 1,135 1,130 1,109 1,129 1,150 1,146 1,183 1,163 1,209 1,141 6 Two-family or more 162 259 278 266 271 242 329 275 307 331 276 302 320 7 Under construction at end of period1 680 762 776 772 783 781 790 800 803 800 816 828 836 8 One-family 543 558 547 547 555 560 562 569 569 565 581 592 598 9 Two-family or more 137 204 229 225 228 221 228 231 234 235 235 236 238 10 Completed 1,193 1,347 1,313 1,247 1,267 1,320 1,360 1,225 1,403 1,328 1,391 1,345 1,366 11 One-family 1,040 1,160 1,066 1,019 1,009 1,039 1,081 1,003 1,113 1,052 1,112 1,067 1,087 12 Two-family or more 153 187 247 228 258 281 279 222 290 276 279 278 279 13 Mobile homes shipped 254 304 340 344 352 354 355 352 352 341 364 378 369 Merchant builder activity in one-family units 14 Number sold 666 670 665 707 684 673 679 683 743 784 727 770 828 15 Number for sale at end of period1 293 337 372 349 350 360 368 372 370 355 366 366 360 Price of units sold (thousands of dollars)2 16 Median 126.1 130.4 133.4 134.9 130.0 135.2 137.0 138.6 131.9 139.4 136.8 139.9 135.0 17 Average 147.6 153.7 157.6 162.0 155.6 156.2 160.7 165.6 155.3 163.7 161.2 168.7 162.3 EXISTING UNITS (one-family) 18 Number sold 3,800 3,946 3,801 4,050 4,090 4,070 4,000 3,870 3,720 3,940 4,200 4,200 4,280 Price of units sold (thousands of dollars)2 19 Median 106.5 109.6 112.2 117.6 114.8 113.2 114.3 113.9 114.8 114.0 115.7 116.5 117.6 20 Average 133.1 136.4 138.4 144.5 140.2 138.7 139.5 138.7 141.2 138.7 140.1 141.9 144.4 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 482,737r 527,063r 547,079r 542,324r 550,467r 549,952r 549,745r 555,701r 558,952 544,577 556,983 568,334 563,352 22 Private 362,587' 400,007' 410,197' 405,911' 411,326' 410,550' 411,015' 417,191' 418,896 411,248 419,726 427,707 420,192 23 Residential 210,455 238,873' 236,598' 234,464' 237,663' 237,952' 239,938' 243,104' 242,474 238,558 245,881 251,920 248,904 24 Nonresidential 152,132' 161,134' 173,599' 171,447' 173,663' 172,598' 171,077' 174,087' 176,422 172,690 173,845 175,787 171,288 25 Industrial buildings 26,482' 28,947' 32,301' 31,809' 32,427' 31,422' 32,032' 31,996' 32,495 30,792 30,593 30,285 28,805 26 Commercial buildings 53,375' 59,728' 67,528' 67,911' 67,660' 67,259' 65,555' 66,447' 66,475 66,461 65,503 67,424 65,524 27 Other buildings 26,219' 26,961' 26,923' 26,475' 27,340' 27,899' 27,418' 28,197' 28,103 27,470 27,884 27,339 27,561 28 Public utilities and other 46,056' 45,498' 46,847' 45,252' 46,236' 46,018' 46,072' 47,447' 49,349 47,967 49,865 50,739 49,398 29 Public 120,151' 127,056' 136,884' 136,413' 139,140' 139,402' 138,729' 138,510' 140,056 133,329 137,257 140,627 143,160 30 Military 2,454 2,319 3,005' 3,131' 3,218' 2,295' 3,217' 3,211' 3,554 3,982 3,126 3,182 3,017 31 Highway 34,342' 37,673' 38,161' 38,809' 38,209' 40,125R 38,344' 40,402' 39,444 40,956 39,527 39,866 38,875 32 Conservation and development 5,908' 6,370' 6,389' 7,003' 6,212' 5,222' 5,888' 6,014' 5,352 5,455 5,811 5,173 4,755 33 Other 77,447' 80,694' 89,329' 87,470' 91,501' 91,760' 91,280' 88,883' 91,706 82,936 88,793 92,406 96,513 1. Not at annual rates. SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are 2. Not seasonally adjusted. private, domestic shipments as reported by the Manufactured Housing Institute and season- 3. Recent data on value of new construction may not be strictly comparable with data for ally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are previous periods because of changes by the Bureau of the Census in its estimating techniques. published by the National Association of Realtors. All back and current figures are available For a description of these changes, see Construction Reports (C-30-76-5), issued by the from the originating agency. Permit authorizations are those reported to the Census Bureau Census Bureau in July 1976. from 19,000 jurisdictions beginning in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (annual rate) IIInnndddeeexxx llleeevvveeelll,,, IIIttteeemmm 1995 1996 1996 JJJuuunnneee 11999955 11999966 111999999666 111 JJuunnee JJuunnee Sept. Dec. Mar. June Feb. Mar. Apr. May June CONSUMER PRICES2 (1982-84=100) 1 All items 3.0 2.8 1.6 2.4 4.0 3.1 .2 .4 .4 .3 .1 156.7 ?. 3.1 3.2 2.7 1.9 3.2 4.6 .1 .6 .3 .1 .7 152.6 3 Energy items 3.4 3.5 -10.5 1.9 15.8 8.4 .4 1.4 3.2 1.1 -2.2 113.1 4 All items less food and energy 3.0 2.7 2.8 2.2 3.5 2.2 .2 .3 .1 .2 .2 165.2 5 Commodities 1.2 1.5 2.0 1.7 2.6 -.3 -.1 .4 -.1 .0 .0 141.0 6 Services 3.8 3.2 3.0 2.5 3.4 3.9 .3 .2 .3 .3 .3 179.0 PRODUCER PRICES (1982=100) 7 Finished goods 2.1 2.7 1.6 4.4 2.5 1.9 -.1 .5 .4 -.1 .2 131.6 8 Consumer foods 1.2 4.6 8.8 4.4 .3 5.3 -.2 .1' -.3 .0 1.6 133.3 9 Consumer energy 4.0 4.1 -10.2 10.8 17.8 .0 -.9' 2.6' 2.8 -.6 -2.1 84.7 10 Other consumer goods 2.0 2.0 2.3 3.4 .3 2.0 .1 .1 .0 .1 .3 144.5 11 Capital equipment 1.6 1.2 1.8 2.9 -.3 .0 ,0r ,0r .2 -.1 -.1 138.0 Intermediate materials 12 Excluding foods and feeds 7.0 -.6 -.6 -.6 -1.0 .0 -,5r .2' .3 .2 -.6 125.9 13 Excluding energy 7.4 -1.2 1.5 -2.9 -3.2 -.3 -A' -A' -.2 .2 -.1 134.1 Crude materials 14 Foods -5.3 26.1 • 34.8 20.8 -3.8 57.5 — ,7r .2' 4.0 6.3 1.4 128.7 15 Energy -4.9 8.3 -21.0 33.9 38.1 -6.0 5.9r -5.0' 10.9 -3.8 -7.7 77.4 16 Other 18.5 -13.8 -17.6 -18.4 -10.2 -8.3 -.2' -2.2' -.5 -.3 -1.4 155.7 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 • September 1996 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1995 1996 AAccccoouunntt 11999933 11999944 11999955 Ql Q2 Q3 Q4 Ql GROSS DOMESTIC PRODUCT 1 Total 6,550.2 6,931.4 7,245.8 7,147.8 7,196.5 7,298.5 7,340.4 7,417.8 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 5 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 7 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 9 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 25 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 27 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 Q1 Q2 Q3 Q4 Q1 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 5 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 professional1 388.1 415.9 449.3 443.5 447.1 451.5 454.9 461.1 11 Farm1 32.0 35.0 29.0 28.5 27.6 28.1 31.8 38.4 12 Rental income of persons2 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 profits1 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 417.0 441.0 454.0 444.4 451.3 456.9 463.6 465.6 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 CuiTent 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 • September 1996 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1995 1996 Item credits or debits 11999933 11999944 11999955 Qi 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 5 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 9 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 11 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 1 1 7 8 Ch B an an ge k -r in e p U or .S te . d p r c i l v a a i t m e s a 3 ssets abroad (increase, -) -19 2 2 9 , , 8 9 8 4 9 7 -15 -8 5 , , 1 7 6 0 1 0 -2 -6 9 9 7 , , 1 83 4 4 6 - - 5 2 6 9 , , 2 1 7 1 5 4 -1 -4 0 1 5 , ,3 2 9 3 8 6 -37 8 , , 9 4 5 7 4 6 -9 -7 8 , , 2 2 7 0 2 6 -55 4 , , 8 5 0 1 1 0 19 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 26 Other US. liabilities reported by 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 2 2 8 9 Ch U an .S ge . b in a n f k o - re re ig p n o r p t r e i d v at l e ia a b s i s l e it t i s e i s n 3 United States (increase, +) 1 2 7 0 8 , , 8 8 5 4 9 3 2 1 4 1 5 1 , , 1 8 2 4 3 2 3 2 14 5 , , 7 2 0 8 5 3 69 3 , , 1 8 7 6 3 0 7 1 8 0 , , 0 2 4 0 1 0 -2 7 1 9 , , 5 6 4 3 2 0 8 32 7 , , 7 8 6 6 5 0 -2 4 9 7 , , 4 2 4 3 9 4 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 i 1,734 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 3 3 5 6 Dis D c u re e p t a o n c s y e asonal adjustment 43,550 13,724 31,548 9 6 , , 8 5 0 1 6 9 3 - 3 2 ,8 6 5 6 4 -4 -7 1 , , 4 5 0 3 7 3 29 1 , , 4 1 2 5 0 3 -7 6 , , 4 3 9 6 6 5 37 Before seasonal adjustment 43,550 i 3,724 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 -5,318 -2,722 -1,893 191 17 39 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 1995 1996 IItteemm 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. Mayp 1 Goods and services, balance -72,037 -104,381 -105,064 -6,098 -6,399 -9,686 -6,654 -8,012 -9,606 -10,877 2 Merchandise -132,607 -166,123 -173,424 -12,324 -12,601 -15,505 -12,784 -14,450 -15,585 -16,860 3 Services 60,570 61,742 68,360 6,226 6,202 5,819 6,130 6,438 5,979 5,983 4 Goods and services, exports 642,953 698,301 786,529 67,997 68,088 66,493 69,163 69,277 68,990 69,762 5 Merchandise 456,834 502,462 575,939 49,777 50,120 48,645 50,883 50,490 50,740 51,292 6 Services 186,119 195,839 210,590 18,220 17,968 17,848 18,280 18,787 18,250 18,470 7 Goods and services, imports -714,990 -802,682 -891,593 -74,095 -74,487 -76,179 -75,817 -77,289 -78,596 -80,639 8 Merchandise -589,441 -668,585 -749,363 -62,101 -62,721 -64,150 -63,667 -64,940 -66,325 -68,152 9 Services -125,549 -134,097 -142,230 -11,994 -11,766 -12,029 -12,150 -12,349 -12,271 -12,487 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 Nov. Dec. Jan. Feb. Mar. Apr. May Junep 1 Total 71,323 73,442 74,335 85,755 85,832 82,717 84,270 84,212 83,710 83,468 83,455 2 Gold stock, including Exchange Stabilization Fund1 11,056 11,053 11,051 11,050 11,050 11,052 11,053 11,053 11,052 11,051 11,050 3 Special drawing rights2'3 8,503 9,039 10,039 11,034 11,037 10,778 11,106 11,049 10,963 11,037 11,046 4 Reserve position in International Monetary Fund2 11,759 11,818 12,030 14,572 14,649 14,312 14,813 15,249 15,117 15,227 15,282 5 Foreign currencies4 40,005 41,532 41,215 49,099 49,096 46,575 47,298 46,861 46,578 46,153 46,077 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—$717million; 1972—$710million; 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 Nov. Dec. Jan. Feb. Mar. Apr. May Junep 1 Deposits 205 386 250 194 386 165 209 191 166 160 182 Held in custody 2 U.S. Treasury securities2 314,481 379,394 441,866 522,950 522,170 532,776 559,741 573,435 573,924 578,608 572,839 3 Earmarked gold3 13,118 12,327 12,033 11,702 11,702 11,702 11,689 11,590 11,445 11,339 11,296 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 • September 1996 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1995 1996 IItteemm 11999933 11999944 Nov/ Dec/ Jan/ Feb/ Mar/ Apr. Mayp 1 Total1 482,915 520,934 632,860 630,775 644,570 670,229 682,952 687,277 689,773 By type 2 Liabilities reported by banks in the United States2 69,721 73,386 109,646 107,258 103,919 103,242 103,994 111,079 104,993 3 U.S. Treasury bills and certificates3 151,100 139,571 117711,,336666 116688,,553344 173,949 119911,,118888 119988,,338822 118866,,663388 118888,,332211 U.S. Treasury bonds and notes 4 Marketable 212,237 254,059 291,033 293,684 306,299 314,980 319,728 327,981 334,463 5 Nonmarketable4 5,652 6,109 6,449 6,491 6,120 6,159 6,199 6,236 5,898 6 U.S. securities other than U.S. Treasury securities5 44,205 47,809 54,366 54,808 54,283 54,660 54,649 55,343 56,098 By area 7 Europe1 207,034 215,374 228,180 222,314 223,569 231,389 242,589 241,161 244,294 8 Canada 15,285 17,235 19,535 19,473 19,078 18,850 20,846 20,878 21,670 9 Latin America and Caribbean 55,898 41,492 62,474 66,720 70,281 70,497 73,039 71,135 67,799 10 Asia 197,702 236,824 311,638 310,966 320,512 338,999 335,006 341,360 343,418 11 Africa 4,052 4,180 6,086 6,296 6,924 6,574 6,584 7,388 7,173 12 Other countries 2,942 5,827 4,945 5,004 4,204 3,918 4,886 5,353 5,417 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 89,284 106,621 102,147 112,556 109,620 2 Banks' claims 62,799 62,017 60,689 77,042r 69,48 lr 74,830r 69,522r 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 48,133r 43,769r 52,142r 47,302r 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 US. dollars Millions of dollars, end of period 1995 1996 IItteemm 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. Mayp BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 926,672 1,014,808 l,095,568r 1,104,705 l,095,568r l,098,719r l,101,991r l,100,530r 1,100,720 1,096,433 2 Banks' own liabilities 626,919 718,440 749,448r 755,089 749,448r 747,540r 733,oor 729,909r 735,880 723,994 3 Demand deposits 21,569 23,386 24,460 23,114 24,460 22,182 23,507 23,371r 23,958 23,337 4 Time deposits2 175,106 186,512 192,700r 193,719r 192,700' 198,513 192,195r 193,653r 192,179 181,579 5 Other3 111,971 112,984 139,780r 154,280r 139,780r 141,963 149,009r 138,31 r 146,539 144,332 6 Own foreign offices4 318,273 395,558 392,508r 383,976 392,508r 384,882r 368,290r 374,574r 373,204 374,746 7 Banks' custodial liabilities5 299,753 296,368 346,120 349,616 346,120 351,179 368,990 370,621 364,840 372,439 8 U.S. Treasury bills and certificates6 176,739 162,908 197,341 220011,,884455 119977,,334411 203,478 223,395 228,705 221177,,110066 222200,,880022 9 Other negotiable and readily transferable instruments7 36,289 42,532 52,246 49,969 52,246 46,973 43,404 40,483 44,823 49,618 10 Other 86,725 90,928 96,533 97,802 96,533 100,728 102,191 101,433 102,911 102,019 11 Nonmonetary international and regional organizations8. . . 10,936 8,606 11,039 9,794 11,039 10,622 11,109r 9,476 11,216 11,914 12 Banks' own liabilities 5,639 8,176 10,347 8,339 10,347 9,628 10,314r 8,558 10,390 11,127 13 Demand deposits 15 29 21 33 21 30 43 16 28 34 14 Time deposits2 2,780 3,298 4,656 3,631 4,656 4,385 3,479 3,527 3,979 3,482 15 Other3 2,844 4,849 5,670 4,675 5,670 5,213 6,792r 5,015 6,383 7,611 16 Banks' custodial liabilities5 5,297 430 692 1,455 692 994 795 918 826 787 17 U.S. Treasury bills and certificates6 4,275 281 350 962 350 764 555 564 426 376 18 Other negotiable and readily transferable instruments7 1,022 149 341 493 341 230 230 298 400 390 19 Other 0 0 1 0 1 0 10 56 0 21 20 Official institutions9 220,821 212,957 275,792r 281,012 275,792' 277,868 294,430 302,376r 297,717 293,314 21 Banks' own liabilities 64,144 59,935 83,31 r 85,681 83,311r 85,040 84,077 88,537r 91,664 81,961 22 Demand deposits 1,600 1,564 2,098 1,690 2,098 1,522 1,655 1,423 1,679 1,504 23 Time deposits2 21,653 23,511 30,716r 30,597r 30,716r 28,069 29,904r 32,404r 36,487 32,656 24 Other3 40,891 34,860 50,497r 53,394' 50,497r 55,449 52,518r 54,710r 53,498 47,801 25 Banks' custodial liabilities5 156,677 153,022 192,481 195,331 192,481 192,828 210,353 213,839 206,053 211,353 26 U.S. Treasury bills and certificates6 151,100 139,571 116688,,553344 117711,,336666 116688,,553344 173,949 191,188 119988,,338822 118866,,663388 118888,,332211 27 Other negotiable and readily transferable instruments7 5,482 13,245 23,603 23,610 23,603 18,532 18,138 14,970 19,065 22,661 28 Other 95 206 344 355 344 347 1,027 487 350 371 29 Banks10 592,171 678,367 687,458r 687,285 687,458r 687,259r 670,806r 666,843' 665,596 662,308 30 Banks' own liabilities 478,755 563,466 563,883r 561,985 563,883r 559,030r 541,500r 539,761r 537,533 533,016 31 Unaffiliated foreign banks 160,482 167,908 171,375r 178,009 171,375r 174,148 173,210 165,187r 164,329 158,270 32 Demand deposits 9,718 10,633 11,756 11,232 11,756 10,247 10,948 10,971r 11,453 10,660 33 Time deposits2 105,262 111,171 103,554r 105,266r 103,554r 110,515 104,309 101,117 96,540 89,543 34 Other3 45,502 46,104 56,065r 61,51 LR 56,065r 53,386 57,953 53,099' 56,336 58,067 35 Own foreign offices4 318,273 395,558 392,508r 383,976 392,508r 384,882r 368,290r 374,574r 373,204 374,746 36 Banks' custodial liabilities5 113,416 114,901 123,575 125,300 123,575 128,229 129,306 127,082 128,063 129,292 37 U.S. Treasury bills and certificates6 10,712 11,251 15,869 16,687 15,869 15,992 17,947 15,967 1166,,880011 1177,,559966 38 Other negotiable and readily transferable instruments7 17,020 14,505 13,035 13,070 13,035 13,590 12,094 11,864 10,814 11,738 39 Other 85,684 89,145 94,671 95,543 94,671 98,647 99,265 99,251 100,448 99,958 40 Other foreigners 102,744 114,878 121,279r 126,614 121,279r 122,970 125,646 121,835r 126,191 128,897 41 Banks' own liabilities 78,381 86,863 91,907r 99,084 91,907r 93,842 97,110 93,053' 96,293 97,890 42 Demand deposits 10,236 11,160 10,585 10,159 10,585 10,383 10,861 10,961' 10,798 11,139 43 Time deposits2 45,411 48,532 53,774r 54,225 53,774r 55,544 54,503 56,605' 55,173 55,898 44 Other3 22,734 27,171 27,548r 34,700 27,548r 27,915 31,746 25,487 30,322 30,853 45 Banks' custodial liabilities5 24,363 28,015 29,372 27,530 29,372 29,128 28,536 28,782 29,898 31,007 46 U.S. Treasury bills and certificates6 10,652 11,805 12,588 12,830 1122,,558888 12,773 1133,,770055 13,792 1133,,224411 1144,,550099 47 Other negotiable and readily transferable instruments7 12,765 14,633 15,267 12,796 15,267 14,621 12,942 13,351 14,544 14,829 48 Other 946 1,577 1,517 1,904 1,517 1,734 1,889 1,639 2,113 1,669 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,567 17,895 9,099 9,837 9,099 10,479 10,544 10,005 8,306 9,284 1. Reporting banks include all types of depository institutions as well as some brokers and 6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official dealers. Excludes bonds and notes of maturities longer than one year. institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in "Other negotia- 7. Principally bankers acceptances, commercial paper, and negotiable time certificates of ble and readily transferable instruments." deposit. 3. Includes borrowing under repurchase agreements. 8. Principally the International Bank for Reconstruction and Development, the Inter- 4. For U.S. banks, includes amounts owed to own foreign branches and foreign subsidiar- American Development Bank, and the Asian Development Bank. Excludes "holdings of ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory dollars" of the International Monetary Fund. agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists 9. Foreign central banks, foreign central governments, and the Bank for International principally of amounts owed to the head office or parent foreign bank, and to foreign Settlements. branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. 10. Excludes central banks, which are included in "Official institutions." 5. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks for foreign customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • September 1996 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued 1995 1996 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. Mayp AREA 50 Total, all foreigners 926,672 1,014,808 L,095,568R 1,104,705 L,095,568R L,098,719R L,101,991R L,100,530R L,100,720R 1,096,433 51 Foreign countries 915,736 1,006,202 L,084,529R 1,094,911 L,084,529R L,088,097R L,090,882R L,091,054R L,089,504R 1,084,519 52 Europe 377,911 390,710 362,786 384,013 362,786 368,325 374,048 370,58 lr 375,575' 367,874 53 Austria 1,917 3,588 3,537 4,755 3,537 3,437 2,996 2,848 3,477 3,624 54 Belgium and Luxembourg 28,670 21,877 24,842 28,357 24,842 24,881 27,182 25,584 27,572 25,955 55 Denmark 4,517 2,884 2,921 3,418 2,921 2,979 3,861 2,876 2,787 2,645 56 Finland 1,872 1,436 2,831 2,315 2,831 2,421 2,409 1,768 2,203 2,188 57 France 40,316 44,361 39,204 40,415 39,204 39,697 41,099 41,332r 41,354' 39,690 58 Germany 26,685 27,109 24,035 26,798 24,035 25,988 24,695 25,229 24,854 23,950 59 Greece 1,519 1,393 2,011 2,265 2,011 1,998 2,063 1,966 1,714 1,665 60 Italy 11,759 10,885 10,875 10,759 10,875 9,616 12,468 11,475 10,178 11,045 61 Netherlands 16,096 16,033 13,724 15,317 13,724 11,350 12,173 12,839 12,397 12,578 62 Norway 2,966 2,338 1,394 1,287 1,394 1,067 1,246 1,034 915 828 63 Portugal 3,366 2,846 2,761 2,718 2,761 3,055 2,931 2,843 2,529 1,858 64 Russia 2,511 2,726 7,950 8,979 7,950 7,858 9,180 9,321 8,798 7,260 65 Spain 20,496 14,675 10,012 10,809 10,012 11,838 11,589 18,976 19,548 19,010 66 Sweden 2,738 3,094 3,245 3,720 3,245 2,555 2,813 2,256 3,943 2,410 67 Switzerland 41,560 40,515 43,627 41,178 43,627 40,806 42,010 39,083 36,805 37,099 68 Turkey 3,227 3,341 4,124 4,010 4,124 4,350 4,559 4,103 4,453 4,669 69 United Kingdom 133,993 163,795 139,127 148,384 139,127 152,654 146,985 144,136r 146,612' 146,385 70 Yugoslavia" 372 245 177 171 177 163 163 143 145 146 71 Other Europe and other former U.S.S.R.12 33,331 27,769 26,389 28,358 26,389 21,612 23,626 22,769 25,291 24,869 72 Canada 20,235 24,768 26,373 27,450 26,373 33,012r 32,03 lr 31,500' 31,285' 33,178 73 Latin America and Caribbean 362,238 423,830 440,216 436,580 440,216 435,703 422,029 433,703' 431,051' 433,385 74 Argentina 14,477 17,203 12,236 13,031 12,236 13,524 11,764 11,985 14,117 11,650 75 Bahamas 73,820 104,002 94,991 87,719 94,991 96,850 91,203 88,091 85,887' 86,671 76 Bermuda 8,117 8,424 4,897 6,561 4,897 4,633 4,702 5,035 4,262 4,998 77 Brazil 5,301 9,145 23,797 27,364 23,797 22,715 21,761 21,489 20,222' 20,105 78 British West Indies 193,699 229,599 239,083 240,353 239,083 233,383 227,438 240,605' 239,129' 243,088 79 Chile 3,183 3,127 2,825 2,696 2,825 2,978 2,772 2,815 2,882' 2,867 80 Colombia 3,171 4,615 3,666 3,443 3,666 3,505r 3,682r 3,637' 3,790' 33,,443300 81 Cuba 33 13 8 8 8 7 7 7 13' 88 82 Ecuador 880 875 1,315 1,307 1,315 1,236 1,201 1,274 1,265 1,284 83 Guatemala 1,207 1,121 1,275 1,210 1,275 1,058 1,075 1,060 1,085 1,073 84 Jamaica 410 529 481 447 481 500 495 503 516 550 85 Mexico 28,019 12,227 24,555 20,993 24,555 23,643 23,899 24,577' 23,330 23,214 86 Netherlands Antilles 4,686 5,217 4,672 5,644 4,672 4,448 4,461 4,402 5,272 4,722 87 Panama 3,582 4,551 4,265 4,287 4,265 4,030 4,166 4,026 3,887' 3,846 88 Peru 929 900 974 916 974 1,025 1,092 962 1,081 1,064 89 Uruguay 1,611 1,597 1,835 1,912 1,835 1,799 1,726 1,908 1,748 1,757 90 Venezuela 12,786 13,985 11,810 11,622 11,810 12,662 12,611 13,255 14,244 14,672 91 Other 6,327 6,700 7,531 7,067 7,531 1,101' 7,974r 8,072' 8,321' 8,386 92 Asia 144,527 154,334 240,740r 232,222 240,740' 238,175 249,447 241,958' 237,705' 235,906 China 93 People's Republic of China 4,011 10,066 33,750 29,875 33,750 35,733 32,200 24,430 25,861 24,857 94 Republic of China (Taiwan) 10,627 9,844 11,714 11,365 11,714 12,311 12,955 15,513 14,953 14,598 95 Hong Kong 17,132 17,104 20,303r 20,287 20,303r 20,307 22,286 20,187 18,379' 18,605 96 India 1,114 2,338 3,373 3,272 3,373 3,263 3,527 3,990 3,752 3,938 97 Indonesia 1,986 1,587 2,708 2,485 2,708 2,011 2,349 2,169 2,627 2,374 98 Israel 4,435 5,157 4,073 4,090 4,073 4,348 5,780 5,344 5,450 5,123 99 Japan 61,466 62,981 109,193 105,546 109,193 106,728 113,361 117,325' 111,635' 111,498 100 Korea (South) 4,913 5,124 5,749r 5,593 5,749' 5,092 5,607 5,875 5,860 5,664 101 Philippines 2,035 2,714 3,089 2,880 3,089 2,394 2,366 2,336 2,467' 2,897 102 Thailand 6,137 6,466 12,279 12,144 12,279 13,121 13,389 12,158 12,905 13,387 103 Middle Eastern oil-exporting countries13 15,822 15,482 15,582 16,238 15,582 14,417 13,491 13,741 14,895 14,234 104 Other 14,849 15,471 18,927r 18,447 18,927r 18,450 22,136 18,890' 18,921 18,731 105 Africa 6,633 6,524 7,641 7,793 7,641 7,679 7,818 7,089 7,832 7,404 106 Egypt 2,208 1,879 2,136 1,907 2,136 1,848 2,375 2,057 2,002 1,873 107 Morocco 99 97 104 60 104 99 52 65 114 113 108 South Africa 451 433 739 1,206 739 1,217 665 413 11,,000011 745 109 Zaire 12 9 10 9 10 11 8 9 88 16 110 Oil-exporting countries14 1,303 1,343 1,797 1,826 1,797 1,774 1,968 1,706 1,904 1,887 111 Other 2,560 2,763 2,855 2,785 2,855 2,730 2,750 2,839 2,803 2,770 112 Other 4,192 6,036 6,773 6,853 6,773 5,203 5,509 6,223 6,056 6,772 113 Australia 3,308 5,142 5,644 5,758 5,644 4,326 4,503 5,239 4,896 5,757 114 Other 884 894 1,129 1,095 1,129 877 1,006 984 1,160 1,015 115 Nonmonetary international and regional organizations. 10,936 8,606 11,039 9,794 11,039 10,622 ll,109r 9,476 11,216 11,914 116 International15 6,851 7,537 9,300 8,470 9,300 9,639 10,075r 7,938 9,932 10,547 117 Latin American regional16 3,218 613 893 371 893 349 292 758 422 594 118 Other regional17 867 456 846 953 846 634 742 780 862 773 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 Nov. Dec. Jan. Feb. Mar.r Apr. Mayp 1 Total, all foreigners 488,497 483,242 525,836r 533,891 525,836r 527,317r 520,790r 529,485 524,889 516,734 2 Foreign countries 486,092 478,651 523,905r 532,470 523,905r 525,015r 518,011r 525,671 522,173 513,240 3 Europe 123,741 123,380 130,315r 131,660 130,315r 133,923 138,574 137,465 134,379 133,087 4 Austria 412 692 565 639 565 683 773 792 1,083 1,072 5 Belgium and Luxembourg 6,532 6,738 7,599 10,691 7,599 8,365 8,519 5,778 8,678 8,711 6 Denmark 382 1,129 403 602 403 541 599 398 293 232 7 Finland 594 512 1,055 1,097 1,055 1,397 1,313 1,782 1,305 1,282 8 France 11,822 12,146 14,798r 15,259 14,798r 12,253 13,161 13,740 11,404 11,591 9 Germany 7,724 7,608 8,864 8,431 8,864 8,072 8,774 9,260 8,647 8,003 10 Greece 691 604 449 378 449 555 603 507 622 554 11 Italy 8,834 6,043 5,364 5,390 5,364 5,010 4,838 5,855 5,696 6,166 12 Netherlands 3,063 2,959 5,051 4,909 5,051 4,305 4,722 5,565 6,276 5,548 13 Norway 396 504 665 1,376 665 1,098 1,408 1,016 793 933 14 Portugal 834 938 888 862 888 853 743 773 889 813 15 Russia 2,310 973 660 949 660 678 775 868 741 482 16 Spain 3,717 3,530 2,166 3,191 2,166 3,811 4,041 5,420 5,092 3,158 17 Sweden 4,254 4,098 2,060 2,362 2,060 2,315 2,151 2,056 3,514 2,506 18 Switzerland 6,605 5,746 7,074 5,925 7,074 4,613 4,016 4,841 6,370 8,713 19 Turkey 1,301 878 785 926 785 732 707 810 973 867 20 United Kingdom 62,013 66,846 67,388 66,911 67,388 75,147 78,040 73,191 68,571 69,136 21 Yugoslavia2 473 265 147 237 147 481 118 120 208 204 22 Other Europe and other former U.S.S.R.3 1,784 1,171 4,334 1,525 4,334 3,014 3,273 4,693 3,224 3,116 23 Canada 18,617 18,490 16,095 17,000 16,095 20,068r 18,421r 17,540 21,661 20,485 24 Latin America and Caribbean 225,238 223,523 256,910r 266,635 256,910r 257,146 248,483r 252,727 245,186 237,512 25 Argentina 4,474 5,844 6,439 6,090 6,439 6,185 6,057 6,216 6,187 6,034 26 Bahamas 63,353 66,410 58,770r 60,030 58,770r 60,284 63,240r 65,628 54,251 55,475 27 Bermuda 8,901 8,481 5,111' 8,096 5,111' 5,011 4,742 4,829 5,031 2,993 28 Brazil 11,848 9,583 13,297 12,984r 13,297 13,252 13,915 13,813 14,175 14,190 29 British West Indies 99,319 95,741 123,914 129,468r 123,914 122,759 108,833 113,239 118,599 110,924 30 Chile 3,643 3,820 5,024 4,775 5,024 4,996 4,593 4,559 4,605 4,363 31 Colombia 3,181 4,004 4,550 4,516 4,550 4,622 4,492 4,547 4,518 4,523 32 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 681 682 825 847 825 841 842 977 959 942 34 Guatemala 288 366 457 424 457 439 461 465 473 460 35 Jamaica 195 258 323 285 323 299 362 332 335 345 36 Mexico 15,879 17,749 18,028 16,829r 18,028 17,114 17,167 16,953 17,071 16,857 37 Netherlands Antilles 2,683 1,396 9,229 12,048 9,229 11,043 12,973 10,902 8,728 8,674 38 Panama 2,894 2,198 3,018 3,049 3,018 2,845 2,820 2,612 2,503 2,397 39 Peru 657 997 1,829 1,577 1,829 1,762 1,928 1,936 2,042 2,348 40 Uruguay 969 503 466 434 466 422 463 623 579 602 41 Venezuela 2,910 1,831 1,661 1,695 1,661 1,575 1,572 1,559 1,376 1,279 42 Other 3,363 3,660 3,363 3,488 3,363 3,697 4,023 3,537 3,754 5,106 43 Asia 111,775 107,079 115,391r 111,438 115,391r 108,989 107,056r 111,390 114,841 115,954 China 44 People's Republic of China 2,271 836 1,023 1,069 1,023 1,014 1,351 2,439 3,405 2,857 45 Republic of China (Taiwan) 2,625 1,448 1,713 1,484 1,713 1,407 1,404 1,729 1,626 1,514 46 Hong Kong 10,828 9,161 12,895 10,713 12,895 13,254 13,867 15,545 15,329 14,738 47 India 589 994 1,846 1,823 1,846 1,864 1,859 1,869 1,787 1,786 48 Indonesia 1,527 1,470 1,678 1,578 1,678 1,458 1,478 1,604 1,526 1,539 49 Israel 826 688 739 728 739 668 683 665 642 615 50 Japan 60,032 59,151 61,308 60,522 61,308 55,897 55,077 52,776 54,657 54,685 51 Korea (South) 7,539 10,286 14,119r 14,115 14,119r 14,501 15,523r 17,362 17,061 17,854 52 Philippines 1,410 662 1,350 789 1,350 814 779 1,202 779 836 53 Thailand 2,170 2,902 2,599r 2,538 2,599r 2,397 3,256 3,060 2,970 3,015 54 Middle Eastern oil-exporting countries4 15,115 13,748 9,639 9,604 9,639 8,053 6,410 7,145 7,252 8,976 55 Other 6,843 5,733 6,482 6,475 6,482 7,662 5,369 5,994 7,807 7,539 56 Africa 3,861 3,050 2,727 2,732 2,727 2,798 2,879 2,884 2,743 2,691 57 Egypt 196 225 210 268 210 208 237 247 225 217 58 Morocco 481 429 514 433 514 514 561 585 594 628 59 South Africa 633 671 465 462 465 483 520 567 493 458 60 Zaire 4 2 1 1 1 1 1 1 1 11 61 Oil-exporting countries5 1,129 856 552 578 552 589 526 516 501 478 62 Other 1,418 867 985 990 985 1,003 1,034 968 929 899 63 Other 2,860 3,129 2,467 3,005 2,467 2,091 2,598 3,665 3,363 3,511 64 Australia 2,037 2,186 1,622 1,969 1,622 1,822 2,243 2,645 2,620 2,333 65 Other 823 943 845 1,036 845 269 355 1,020 743 1,178 66 Nonmonetary international and regional organizations6.. . 2,405 4,591 1,931 1,421 1,931 2,302 2,779 3,814 2,716 3,494 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 • September 1996 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1995 1996 TTyyppee ooff ccllaaiimm Nov. Dec/ Jan/ Feb/ Mar/ Apr. Mayp 1 Total 575,818 599,521 648,603r 648,603 655,376 2 Banks' claims 488,497 483,242 525,836r 533,891 525,836 527,317 520,790 529,485 524,889 516,734 3 Foreign public borrowers 29,228 23,416 22,522 19,368 22,522 23,148 24,383 27,759 25,205 21,753 4 Own foreign offices2 285,510 283,183 303,397r 308,660r 303,397 305,118 295,217 297,601 298,235 300,405 5 Unaffiliated foreign banks 100,865 109,228 98,702r 99,556r 98,702 97,240 98,139 101,654 99,368 96,553 6 Deposits 49,892 59,250 37,343 42,905 37,343 35,520 37,565 41,609 37,411 35,318 / Other 50,973 49,978 61,359r 56,65 lr 61,359 61,720 60,574 60,045 61,957 61,235 8 All other foreigners 72,894 67,415 101,215' 106,307r 101,215 101,811 103,051 102,471 102,081 98,023 9 Claims of banks' domestic customers3 87,321 116,279 122,767 122,767 125,891 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 3399,,227744 12 Outstanding collections and other claims 14,401 15,442 20,087 20,087 17,817 MEMO 13 Customer liability on acceptances 7,920 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 31,355 30,717 27,830 32,777 33,113 32,309 n.a. 1. For banks' claims, data are monthly; for claims of banks' domestic customers, data are principally of amounts due from the head office or parent foreign bank, and from foreign for quarter ending with month indicated. branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. Reporting banks include all types of depository institution as well as some brokers and 3. Assets held by reporting banks in the accounts of their domestic customers. dealers. 4. Principally negotiable time certificates of deposit, bankers acceptances, and commercial 2. For U.S. banks, includes amounts due from own foreign branches and foreign subsidiar- paper. ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory 5. Includes demand and time deposits and negotiable and nonnegotiable certificates of agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists deposit denominated in U.S. dollars issued by banks abroad. 3.20 BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1995 1996 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999922 11999933 11999944 June Sept. Dec. Mar. 1 Total 195,119 202,566 200,042 220,289 216,966 222,338 231,746 By borrower 2 Maturity of one year or less 163,325 172,662 168,331 186,312 178,666 176,172r 191,958 3 Foreign public borrowers 17,813 17,828 15,435 15,822 14,192 15,015 19,569 4 All other foreigners 145,512 154,834 152,896 170,490 164,474 161,157r 172,389 5 Maturity of more than one year 31,794 29,904 31,711 33,977 38,300 46,166r 39,788 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 26,085 30,080 38,660r 31,678 By area Maturity of one year or less 8 Europe 53,300 57,413 55,742 60,323 52,045 53,897 56,656 9 Canada 6,091 7,727 6,690 7,838 7,135 6,089 4,973 10 Latin America and Caribbean 50,376 60,490 58,877 68,630 71,319 72,393r 84,297 11 Asia 45,709 41,418 39,851 43,945 42,536 40,133 40,332 12 Africa 1,784 1,820 1,376 1,447 1,261 l,271r 1,302 13 Allother3 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 3,571 2,731 2,563 16 Latin America and Caribbean 15,312 14,025 15,717 17,557 20,224 27,81 lr 19,532 17 Asia 5,038 5,606 5,318 6,058 7,373 8,023 8,461 18 Africa 2,380 1,935 1,583 1,389 1,389 1,430' 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

Bank-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 344.7 407.7 475.7 484.8 485.7 495.6 540.9 525.0 526.3 549.2r 568.8 2 G-10 countries and Switzerland 131.3 161.8 177.8 172.4 182.2 189.9 210.1 201.6 196.6 203.7 201.3 3 Belgium and Luxembourg .0 7.4 7.9 8.6 9.6 7.0 10.2 9.4 10.7 13.5 10.5 4 France 15.3 12.0 16.6 18.6 20.7 19.1 19.8 19.3 17.4 19.2 17.9 5 Germany 9.1 12.6 29.7 24.7 24.0 24.7 31.2 29.8 27.2 26.8 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 .0 4.7 3.8 3.4 3.4 3.6 3.5 4.3 4.1 3.4 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 6.3 6.3 5.2 10 United Kingdom 59.7 84.3 69.4 64.0 78.1 85.2 89.4 85.9 79.8 82.4 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 42.0 42.5 42.5 45.0 43.9 43.1 50.0 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 1.0 1.1 .9 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 3.7 4.6 4.2 4.4 4.8 4.9 5.0 5.6 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 1.9 1.3 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 1.9 1.8 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 21.6 23.8 19.5 20.2 22.4 22.1 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 4.8 4.7 29 Middle East countries 6.2 7.4 13.2 12.4 13.0 15.0 10.7 11.4 13.6 13.3 12.3 30 African countries 1.1 1.2 1.1 1.1 1.1 .8 .7 .5 .6 .6 .5 31 Non-OPEC developing countries 72.6 83.1 94.5 94.7 93.1 95.9 98.4 103.6 104.0 112.5 116.2 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 9.9 13.6 13.7 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 2.1 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 .3 .4 .3 .3 .4 .4 .4 .4 .2 49 Morocco .6 .7 .8 .7 .7 .6 .6 .9 .8 .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 78.5 80.5 77.1 71.3 84.3 82.1 85.9 99.0r 100.2 57 Bahamas 6.9 10.9 13.7 13.3 13.8 10.3 12.5 8.4 12.6 11.0r 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 1.8 1.3 1.1 1.3 1.2 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 22.4 23.1 23.7 25.1 25.6 64 Singapore 6.5 11.2 13.0 10.6 11.8 10.1 19.1 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 69.6 65.7 66.6 82.2 72.3 63.9 57.4 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 • September 1996 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1994 1995 1996 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999922 11999933 11999944 Dec. Mar. June Sept. Dec. Mar.p 1 Total 45,511 50,597 54,309 54,309 50,187 49,973 47,673 46,448r 49,608 2 Payable in dollars 37,456 38,728 38,298 38,298 35,903 34,281 33,908 33,903r 36,314 3 Payable in foreign currencies 8,055 11,869 16,011 16,011 14,284 15,692 13,765 12,545 13,294 By type 4 Financial liabilities 23,841 29,226 32,954 32,954 29,775 29,282 26,237 24,24 lr 26,225 5 Payable in dollars 16,960 18,545 18,818 18,818 16,704 15,028 13,872 12,903r 13,826 6 Payable in foreign currencies 6,881 10,681 14,136 14,136 13,071 14,254 12,365 11,338 12,399 7 Commercial liabilities 21,670 21,371 21,355 21,355 20,412 20,691 21,436 22,207 23,383 8 Trade payables 9,566 8,802 10,005 10,005 9,844 10,527 10,061 11,013 10,815 9 Advance receipts and other liabilities 12,104 12,569 11,350 11,350 10,568 10,164 11,375 11,194 12,568 10 Payable in dollars 20,496 20,183 19,480 19,480 19,199 19,253 20,036 21,000 22,488 11 Payable in foreign currencies 1,174 1,188 1,875 1,875 1,213 1,438 1,400 1,207 895 By area or country Financial liabilities 12 Europe 13,387 18,810 21,703 21,703 17,541 18,223 16,401 15,622 16,605 13 Belgium and Luxembourg 414 175 495 495 612 778 347 369 483 14 France 1,623 2,539 1,727 1,727 2,046 1,101 1,365 999 1,679 15 Germany 889 975 1,961 1,961 1,755 1,589 1,670 1,974 2,161 16 Netherlands 606 534 552 552 633 530 474 466 479 17 Switzerland 569 634 688 688 883 1,056 948 895 957 18 United Kingdom 8,610 13,332 15,543 15,543 10,764 12,138 10,518 10,138 10,241 19 Canada 544 859 629 629 1,817 893 797 632 1,166 20 Latin America and Caribbean 4,053 3,359 2,034 2,034 2,065 1,950 1,904 l,783r 1,876 21 Bahamas 379 1,148 101 101 135 81 79 59r 78 22 Bermuda 114 0 80 80 149 138 144 147r 126 23 Brazil 19 18 207 207 58 58 111 57 57 24 British West Indies 2,850 1,533 998 998 1,068 1,030 930 866r 946 25 Mexico 12 17 0 0 10 3 3 12 16 26 Venezuela 6 5 5 5 5 4 3 2 2 27 5,818 5,956 8,403 8,403 8,156 8,023 6,947 5,988 6,390 28 Japan 4,750 4,887 7,314 7,314 7,182 7,141 6,308 5,436 5,980 29 Middle Eastern oil-exporting countries' 19 23 35 35 27 25 25 27 26 30 Africa 6 133 135 135 156 151 149 150 131 31 Oil-exporting countries2 0 123 123 123 122 122 122 122 122 32 All other3 33 109 50 50 40 42 39 66 57 Commercial liabilities 33 Europe 7,398 6,827 6,773 6,773 6,642 6,776 7,263 7,700 8,444 34 Belgium and Luxembourg 298 239 241 241 271 311 349 331 370 35 France 700 655 728 728 642 504 528 481 648 3b Germany 729 684 604 604 482 556 660 767 870 37 Netherlands 535 688 722 722 536 448 566 500 659 38 Switzerland 350 375 327 327 327 432 255 413 432 39 United Kingdom 2,505 2,039 2,444 2,444 2,848 2,902 3,351 3,568 3,525 40 Canada 1,002 879 1,037 1,037 1,235 1,146 1,219 1,040 960 41 Latin America and Caribbean 1,533 1,658 1,857 1,857 11,,336688 1,836 11,,660077 11,,774400 2.114 42 Bahamas 3 21 19 19 88 3 11 11 28 43 Bermuda 307 350 345 345 260 397 219 205 570 44 Brazil 209 214 161 161 96 107 143 98 129 45 British West Indies 33 27 23 23 29 12 5 56 10 46 Mexico 457 481 574 574 356 420 357 416 470 47 Venezuela 142 123 276 276 273 204 175 221 243 48 10,594 10,980 10,741 10,741 10,151 9,978 10,275 10,421 10,496 49 Japan 3,612 4,314 4,555 4,555 4,110 3,531 3,475 3,315 3,726 50 Middle Eastern oil-exporting countries1 1,889 1,534 1,576 1,576 1,787 1,790 1,647 1,912 1,747 51 Africa 568 453 428 428 463 481 589 619 708 52 Oil-exporting countries2 309 167 256 256 248 252 241 254 254 53 Other3 575 574 519 519 553 474 483 687 661 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 1996 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999922 11999933 11999944 Dec. Mar. June Sept. Dec. Mar.p 1 Total 45,073 49,159 57,888 57,888 52,218 58,051 53,424 52,509r 55,398 2 Payable in dollars 42,281 45,161 53,805 53,805 48,425 54,138 49,696 48,71 r 50,999 3 Payable in foreign currencies 2,792 3,998 4,083 4,083 3,793 3,913 3,728 3,798r 4,399 By type 4 Financial claims 26,509 27,771 33,897 33,897 29,606 34,574 29,891 27,398 30,810 5 Deposits 17,695 15,717 18,507 18,507 17,115 22,046 17,974 15,133 17,595 6 Payable in dollars 16,872 15,182 18,026 18,026 16,458 21,351 17,393 14,654 17,044 7 Payable in foreign currencies 823 535 481 481 657 695 581 479 551 8 Other financial claims 8,814 12,054 15,390 15,390 12,491 12,528 11,917 12,265 13,215 9 Payable in dollars 7,890 10,862 14,306 14,306 11,275 11,370 10,689 10,976 11,328 10 Payable in foreign currencies 924 1,192 1,084 1,084 1,216 1,158 1,228 1,289 1,887 11 Commercial claims 18,564 21,388 23,991 23,991 22,612 23,477 23,533 25,lllr 24,588 12 Trade receivables 16,007 18,425 21,158 21,158 20,415 21,326 21,409 22,998r 22,077 13 Advance payments and other claims 2,557 2,963 2,833 2,833 2,197 2,151 2,124 2,113r 2,511 14 Payable in dollars 17,519 19,117 21,473 21,473 20,692 21,417 21,614 23,08 r 22,627 15 Payable in foreign currencies 1,045 2,271 2,518 2,518 1,920 2,060 1,919 2,030r 1,961 By area or country Financial claims 16 Europe 9,331 7,299 7,936 7,936 7,630 7,927 7,840 7,609 8,929 17 Belgium and Luxembourg 8 134 86 86 146 155 160 193 159 18 France 764 826 800 800 808 730 753 803 1,015 19 Germany 326 526 540 540 527 356 301 436 320 20 Netherlands 515 502 429 429 606 601 522 517 486 21 Switzerland 490 530 523 523 490 514 530 498 470 22 United Kingdom 6,252 3,585 4,649 4,649 4,040 4,790 4,924 4,303 5,568 23 Canada 1,833 2,032 3,581 3,581 3,848 3,705 3,526 2,851 5,269 24 Latin America and Caribbean 13,893 16,224 19,536 19,536 16,109 21,159 15,345 14,500 13,865 25 Bahamas 778 1,336 2,424 2,424 940 2,355 1,552 1,965 1,588 26 Bermuda 40 125 27 27 37 85 35 81 77 27 Brazil 686 654 520 520 528 502 851 830 1,943 28 British West Indies 11,747 12,699 15,228 15,228 13,531 17,013 11,816 10,393 9,164 29 Mexico 445 872 723 723 583 635 487 554 461 30 Venezuela 29 161 35 35 27 27 50 32 40 31 Asia 864 1,657 1,871 1,871 1,504 1,235 2,160 1,579 1,890 32 Japan 668 892 953 953 621 471 1,404 871 1,171 33 Middle Eastern oil-exporting countries' 3 3 141 141 4 3 4 3 13 34 Africa 83 99 373 373 141 138 188 276 277 35 Oil-exporting countries2 9 1 0 0 9 9 6 5 5 36 All other3 505 460 600 600 374 410 832 583 580 Commercial claims 37 Europe 8,451 9,105 9,540 9,540 8,947 9,200 8,862 9,824r 9,757 38 Belgium and Luxembourg 189 184 213 213 199 218 224 231 247 39 France 1,537 1,947 1,881 1,881 1,790 1,669 1.706 1,830 1,803 40 Germany 933 1,018 1,027 1,027 977 1,023 997 1,070 1,407 41 Netherlands 552 423 311 311 324 341 338 452 442 42 Switzerland 362 432 557 557 556 612 438 520 575 43 United Kingdom 2,094 2,377 2,556 2,556 2,388 2,469 2,479 2,656r 2,607 44 Canada 1,286 1,781 1,988 1,988 2,010 2,003 1,971 1,951r 2,044 45 Latin America and Caribbean 3,043 3,274 4,117 4,117 4,140 4,370 4,359 4,364r 4,147 46 Bahamas 28 11 9 9 17 21 26 30 30 47 Bermuda 255 182 234 234 208 210 245 272 273 48 Brazil 357 460 612 612 695 777 745 898r 808 49 British West Indies 40 71 83 83 55 83 66 79 106 50 Mexico 924 990 1,243 1,243 1,106 1,109 1,026 993r 868 51 Venezuela 345 293 348 348 295 319 325 285 308 52 Asia 4,866 6,014 6,982 6,982 6,200 6,516 6,826 7,312r 7,078 53 Japan 1,903 2,275 2,655 2,655 1,911 2,011 1,998 l,870r 2,009 54 Middle Eastern oil-exporting countries' 693 704 708 708 689 707 775 974 1,024 55 Africa 554 493 454 454 468 478 544 654 667 56 Oil-exporting countries 78 72 67 67 71 60 74 87 107 57 Other3 364 721 910 910 847 910 971 l,006r 895 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 • September 1996 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1996 1995 1996 Transaction, and area or country 1994 1995R J M an a . y - Nov. Dec/ Jan.r Feb/ Mar.r Apr. Mayp U.S. corporate securities STOCKS 1 Foreign purchases 350,593 462,950 259,987 42,003R 46,479 43,574 52,260 55,281 53,047 55,825 2 Foreign sales 348,716 451,710 250,747 39,071 44,372 41,948 51,083 54,450 48,774 54,492 3 Net purchases, or sales (—) 1,877 11,240 9,240 2,932r 2,107 1,626 1,177 831 4,273 1,333 4 Foreign countries 1,867 11,445 9,263 2,943r 2,109 1,623 1,306 877 4,129 1,328 5 Europe 6,714 4,912 3,340 l,020R 1,028 1,954 -1,072 1,377 1,429 -348 6 France -201 -1,099 17 -58 -382 164 -161 661 -336 -311 V Germany 2,110 -1,837 425 -131 -11 239 -37 86 174 -37 8 Netherlands 2,251 3,507 1,070 230 373 660 20 208 237 -55 9 Switzerland -30 -2,283 1,299 227 191 639 -441 566 618 -83 10 United Kingdom 840 8,066 34 609R 1,277 -165 -223 -241 345 318 11 Canada -1,160 -1,517 724 405 -175 645 518 -90 52 -401 1 1 2 3 L M a i t d in d le A m Ea e s r t i 1 c a and Caribbean - - 2 1 , , 1 1 1 4 1 2 5 -3 ,8 3 1 7 4 -1 3 , , 0 9 6 0 9 6 1 - ,3 6 6 3 1 2 1 1 4 9 8 - - 4 5 8 0 7 7 2 -2 ,6 8 9 5 4 -3 -3 1 3 8 8 - 0 6 8 - 1 2 ,2 3 0 8 9 14 Other Asia -1,234 2,503 2,388 342 883 -40 -336 -291 1,852 1,203 15 Japan 1,162 -2,725 691 -406 1,231 94 -131 -749 1,446 31 16 Africa 29 2 -63 -26 -1 6 -62 -44 31 6 1/ Other countries 771 68 37 -96 7 52 -151 276 -37 -103 18 Nonmonetary international and regional organizations 10 -205 -23 -11 -2 3 -129 -46 144 5 BONDS2 19 Foreign purchases 289,586 293,533 157,617 31,642 22,020 26,598 32,759 39,808 24,107 34,345 20 Foreign sales 229,665 206,951 108,783 20,741 21,117 17,726 23,608 25,113 18,693 23,643 21 Net purchases, or sales (—) 59,921 86,582 48,834 10,901 903 8,872 9,151 14,695 5,414 10,702 22 Foreign countries 59,036 87,036 48,747 10,948 875 8,830 9,230 14,607 5,383 10,697 23 Europe 37,065 70,318 32,202 9,759 1,631 5,631 8,968 6,476 3,947 7,180 24 France 242 1,143 2,721 101 137 839 314 670 785 113 25 Germany 657 5,938 3,799 894 236 -26 1,859 467 721 778 26 Netherlands 3,322 1,463 777 219 101 163 365 -66 -52 336677 2/ Switzerland 1,055 494 76 101 -381 56 -86 -38 -144 228888 28 United Kingdom 31,642 57,591 21,419 6,999 1,247 3,854 6,280 4,745 2,264 4,276 29 Canada 2,958 2,569 1,749 20 181 104 235 149 359 902 3 3 0 1 L M a i t d in d le A m Ea e s r t i 1 c a and Caribbean 5, 7 4 7 4 1 2 6 1 , , 1 8 4 6 1 9 9 -2 ,7 6 7 4 8 1,4 18 2 8 6 -8 1 4 8 8 7 2 -1 ,0 9 9 4 6 - - 7 3 1 3 3 4 7,14 1 0 3 1 3 2 3 2 1,2 1 2 2 2 9 32 Other Asia 12,153 5,659 5,639 -705 -293 1,272 1,161 831 1,085 1,290 33 Japan 5,486 2,250 1,578 -899 -904 338 336 245 126 533 34 Africa -7 234 137 240 86 -16 -40 37 49 107 35 Other countries 654 246 -494 20 -69 -63 -47 -39 -212 -133 36 Nonmonetary international and regional organizations 885 -454 87 -47 28 42 -79 88 31 5 Foreign securities 37 Stocks, net purchases, or sales (—) -48,071 -50,291 -32,239 — L,718R -6,602 -6,434 -5,704 -10,345 -6,706 -3,050 38 Foreign purchases 386,106 345,540 187,773 30,317R 32,369 33,481 37,464 36,115 37,764 42,949 39 Foreign sales 434,177 395,831 220,012 32,035R 38,971 39,915 43,168 46,460 44,470 45,999 40 Bonds, net purchases, or sales (—) -9,224 -48,545 -12,477 -6,519R -4,050 -4,584 -1,404 -6,038 -153 -298 41 Foreign purchases 848,368 889,471 436,517 78,647R 80,328 84,638 95,201 93,345 81,256 82,077 42 Foreign sales 857,592 938,016 448,994 85,166R 84,378 89,222 96,605 99,383 81,409 82,375 43 Net purchases, or sales (—), of stocks and bonds .... -57,295 -98,836 -44,716 —8,237r -10,652 -11,018 -7,108 -16,383 -6,859 -3,348 44 Foreign countries -57,815 -98,031 -44,460 -8,159r -10,711 -11,049 -6,983 —16,387 -6,802 -3,239 45 Europe -3,516 -48,125 -11,441 —4,699R -5,926 -4,068 -2,552 -4,508 -1,949 1,636 46 Canada -7,475 -7,952 -4,230 -494 -14 -2,668 -58 -1,865 614 -253 4/ Latin America and Caribbean -18,334 -7,634 -6,839 -377R -802 -3 -1,031 -2,582 -1,190 -2,033 4488 -24,275 -34,056 -19,354 -L,992R -4,391 -4,685 -2,557 -5,756 -4,094 -2,262 4499 Japan -17,427 -25,072 -10,111 -L,389R -3,687 -3,427 -1,592 -3,224 -950 -918 50 Africa -467 -327 -740 19 -44 -96 -161 -436 -14 -33 51 Other countries -3,748 63 -1,856 -616' 466 471 -624 -1,240 -169 -294 52 Nonmonetary international and regional organizations 520 -805 -256 -78 59 31 -125 4 -57 -109 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.— Nov. Dec. Jan. Feb. Mar. Apr. Mayp May 1 Total estimated 78,801 133,991 66,243 15,307 -9,454 14,018r 15,451 7,025r 15,742 14,007 2 Foreign countries 78,637 133,552 67,206 14,936 -9,016 13,713r 16,192 6,414r 17,117 13,770 3 Europe 38,542 50,000 36,165 821 -1,120 7,291r 8,462 4,083r 8,712 7,617 4 Belgium and Luxembourg 1,098 591 363 81 171 149 -120 81 399 -146 5 Germany 5,709 6,136 7,680 52 452 1,385 1,829 958 1,833 1,675 6 Netherlands 1,254 1,891 -3,330 833 381 807 354 -1,597 -2,137 -757 7 Sweden 794 358 1,758 -30 -285 -45 803 372 286 342 8 Switzerland 481 -472 2,235 -568 -664 76 84 65 1,329 681 9 United Kingdom 23,365 34,778 14,510 1,309 -4,377 l,177r 1,644 2,270r 6,070 3,349 10 Other Europe and former U.S.S.R 5,841 6,718 12,949 -856 3,202 3,742 3,868 1,934 932 2,473 11 Canada 3,491 252 4,862 -43 208 1,867 1,863 35 1,766 -669 17 Latin America and Caribbean -10,383 48,609 -9,799 13,496 3,762 -2,648 -2,931 -4,985 1,984 -1,219 13 Venezuela -319 -2 -314 232 61 -142 -93 -44 4 -39 14 Other Latin America and Caribbean -20,493 25,152 5,939 3,723 4,710 8,922 -1,896 -2,696 3,856 -2,247 15 Netherlands Antilles 10,429 23,459 -15,424 9,541 -1,009 -11,428 -942 -2,245 -1,876 1,067 16 47,317 32,319 35,017 -107 -11,843 6,920 8,616 6,941 4,478 8,062 17 Japan 29,793 16,863 15,074 1,316 -5,695 2,619 3,069 2,443 2,382 4,561 18 Africa 240 1,464 928 458 252 515 -100 311 250 -48 19 Other -570 908 33 311 -275 -232 282 29 -73 27 20 Nonmonetary international and regional organizations 164 439 -963 371 -438 305 -741 611 -1,375 237 71 International 526 9 125 368 -347 210 -308 647 -414 -10 22 Latin American regional -154 261 -1,286 -43 -115 -45 -254 12 -1,008 9 MEMO 73 Foreign countries 78,637 133,552 67,206 14,936 -9,016 13,713r 16,192 6,414' 17,117 13,770 74 Official institutions 41,822 39,625 40,779 -915 2,651 12,615 8,681 4,748 8,253 6,482 25 Other foreign 36,815 93,927 26,427 15,851 -11,667 l,098r 7,511 l,666r 8,864 7,288 Oil-exporting countries 76 Middle East2 -38 3,075 3,615 -826 -1,085 -658 122 1,127 863 2,161 27 0 2 2 0 0 0 1 0 0 1 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 July 31, 1996 Rate on July 31, 1996 Country Country Month effective Austria... 2.5 Apr. 1996 Germany ... 2.5 Belgium. , 2.5 Apr. 1995 Italy 8.75 Canada. .. 4.75 July 1996 Japan .5 Denmark . 3.25 Apr. 1996 Netherlands . 2.5 France2 .. 3.55 July 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 RATES1 Percent per year, averages of daily figures 1996 TTyyppee oorr ccoouunnttrryy 11999933 11999944 11999955 Jan. Feb. Mar. Apr. May June July 1 Eurodollars 3.18 4.63 5.93 5.40 5.14 5.28 5.36 5.36 5.46 5.49 2 United Kingdom 5.88 5.45 6.63 6.31 6.13 6.02 5.97 6.03 5.80 5.69 3 Canada 5.14 5.57 7.14 5.58 5.22 5.23 5.03 4.82 4.87 4.76 4 Germany 7.17 5.25 4.43 3.51 3.26 3.25 3.22 3.19 3.29 3.29 5 Switzerland 4.79 4.03 2.94 1.65 1.61 1.68 1.68 1.99 2.53 2.52 6 Netherlands 6.73 5.09 4.30 3.20 3.00 3.09 2.83 2.61 2.81 2.99 7 France 8.30 5.72 6.43 4.56 4.29 4.14 3.87 3.78 3.85r 3.73 8 Italy 10.09 8.45 10.43 10.05 9.90 9.82 9.60 8.88 8.73 8.72 9 Belgium 8.10 5.65 4.73 3.47 3.23 3.25 3.23 3.19 3.23 3.29 10 Japan 2.96 2.24 1.20 .55 .61 .60 .61 .62 .57 .67 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 • September 1996 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1996 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999933 11999944 11999955 Feb. Mar. Apr. May June July 1 Australia/dollar2 67.993 73.161 74.073 75.557 77.136 78.566 79.700 79.122 78.974 2 Austria/schilling 11.639 11.409 10.076 10.321 10.391 10.580 10.782 10.755 10.576 3 Belgium/franc 34.581 33.426 29.472 30.115 30.371 30.902 31.502 31.433 30.947 4 Canada/dollar 1.2902 1.3664 1.3725 1.3752 1.3656 1.3592 1.3693 1.3658 1.3697 5 China, P.R./yuan 5.7795 8.6404 8.3700 8.3338 8.3495 8.3583 8.3479 8.3424 8.3409 6 Denmark/krone 6.4863 6.3561 5.5999 5.6749 5.7074 s.sostf 5.9160 5.8941 5.8014 7 Finland/markka 5.7251 5.2340 4.3763 4.5532 4.6066 4.7288 4.7541 4.6710 4.5812 8 France/franc 5.6669 5.5459 4.9864 5.0440 5.0583 5.1049 5.1855 5.1787 5.0881 9 Germany/deutsche mark 1.6545 1.6216 1.4321 1.4669 1.4776 1.5048 1.5324 1.5282 1.5025 10 Greece/drachma 229.64 242.50 231.68 242.21 241.54 242.00 243.27 241.75 237.65 11 Hong Kong/dollar 7.7357 7.7290 7.7357 7.7323 7.7325 7.7345 7.7363 7.7404 7.7379 12 India/rupee 31.291 31.394 32.418 36.595 34.485 34.320 35.025 35.100 35.667 13 Ireland/pound2 146.47 149.69 160.35 158.10 157.21 156.51 156.29 158.31 160.31 14 Italy/lira 1,573.41 1,611.49 1,629.45 1,570.00 1,562.43 1,565.60 1,556.71 1,542.30 1,526.82 15 Japan/yen 111.08 102.18 93.96 105.79 105.94 107.20 106.34 108.96 109.19 16 Malaysia/ringgit 2.5738 2.6237 2.5073 2.5487 2.5417 2.5113 2.4936 2.4967 2.4915 17 Netherlands/guilder 1.8585 1.8190 1.6044 1.6424 1.6540 1.6805 1.7135 1.7120 1.6862 18 New Zealand/dollar2 54.127 59.358 65.625 67.495 68.079 68.242 68.571 67.650 69.001 19 Norway/krone 7.1009 7.0553 6.3355 6.4103 6.4277 6.4901 6.5748 6.5376 6.4465 20 Portugal/escudo 161.08 165.93 149.88 152.49 152.93 154.51 157.54 157.40 154.56 21 Singapore/dollar 1.6158 1.5275 1.4171 1.4115 1.4095 1.4082 1.4074 1.4090 1.4160 22 South Africa/rand 3.2729 3.5526 3.6284r 3.7420 3.9293 4.2130 4.3679 4.3519 4.3963 23 South Korea/won 805.75 806.93 772.69r 780.12 781.31 780.42 780.86 798.45 813.03 24 Spain/peseta 127.48 133.88 124.64 123.65 124.39 125.49 127.97 128.87 126.96 25 Sri Lanka/rupee 48.211 49.170 51.047 53.716 53.748 54.163 54.868 55.529 55.293 26 Sweden/krona 7.7956 7.7161 7.1406 6.8775 6.7318 6.7141 6.7984 6.6807 6.6394 27 Switzerland/franc 1.4781 1.3667 1.1812 1.1967 1.1959 1.2180 1.2539 1.2579 1.2320 28 Taiwan/dollar 26.416 26.465 26.495 27.485 27.400 27.188 27.352 27.674 27.573 29 Thailand/baht 25.333 25.161 24.921 25.250 25.251 25.290 25.289 25.354 25.355 30 United Kingdom/pound2 150.16 153.19 157.85 153.60 152.71 151.60 151.52 154.16 155.30 MEMO 31 United States/dollar3 93.18 91.32 84.25 86.41 86.57 87.46 88.28 88.16 87.25 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, industrial countries. The weight for each of the ten countries is the 1972-76 average world see inside front cover. trade of that country divided by the average world trade of all ten countries combined. Series 2. Value in U.S. cents. revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 (August 1978), p. 700). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A63 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases June 1996 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks March 31, 1993 August 1993 A70 June 30, 1993 November 1993 A70 September 30, 1993 February 1994 A70 December 31,1993 May 1994 A68 Terms of lending at commercial banks 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 June 30, 1995 November 1995 A72 September 30, 1995 February 1996 A72 December 31, 1995 May 1996 A72 March 31,1996 September 1996 A64 Pro forma balance sheet and income statements for priced service operations March 31, 1995 August 1995 A76 June 30, 1995 October 1995 All 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 All Residential lending reported under the Home Mortgage Disclosure Act 1994 September 1995 A68 1995 September 1996 A68 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Special Tables • September 1996 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 1996'—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm in I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u F t d a s i l n g I o B n F ly s inc T I l B o u F t d a s i l n g I o B n F ly s 1 Total assets4 759,735 289,394 583,365 236,590 71,880 29,215 60,322 14,505 2 Claims on nonrelated parties 675,492 145,316 516,839 119,807 66,936 12,738 55,529 6,774 Cash and balances due from depository institutions 115,640 85,737 102,963 74,694 5,305 4,720 5,472 5,043 4 Cash items in process of collection and unposted debits 2,543 0 2,452 0 11 0 53 0 5 Currency and coin (U.S. and foreign) 22 n.a. 15 n.a. 1 n.a. 1 n.a. 6 Balances with depository institutions in United States 66,078 44,771 5588,,996600 3388,,884422 22,,998877 2,462 33,,443388 33,,110000 7 U.S. branches and agencies of other foreign banks (including IBFs) 61,730 43,592 55,233 37,740 2,700 2,462 3,296 3,033 8 Other depository institutions in United States (including IBFs).... 4,349 11,,117799 33,,772277 11,,110022 287 0 142 67 9 Balances with banks in foreign countries and with foreign central banks 46,666 40,967 41,355 35,852 22,,226688 2,258 1,967 1,943 10 Foreign branches of U.S. banks 2,094 1,174 1,859 962 11 0 201 201 11 Other banks in foreign countries and foreign central banks 44,572 39,793 39,496 34,890 2,267 2,258 1,766 1,742 12 Balances with Federal Reserve Banks 330 n.a. 181 n.a. 38 n.a. 14 n.a. 13 Total securities and loans 419,467 47,150 288,767 33,955 56,924 7,452 41,152 1,445 14 Total securities, book value 97,210 9,554 89,261 8,438 4,075 644 3,299 452 15 U.S. Treasury 29,197 n.a. 28,053 n.a. 605 n.a. 420 n.a. 16 Obligations of U.S. government agencies and corporations 26,354 n.a. 25,780 n.a. 392 n.a. 61 n.a. 17 Other bonds, notes, debentures, and corporate stock (including state and local securities) 41,658 9,554 35,427 8,438 3,078 644 2,818 452 18 Securities of foreign governmental units 13,405 4,338 12,061 3,846 690 261 571 211 19 All Other 28,254 5,216 23,366 4,592 2,388 384 2,247 240 20 Federal funds sold and securities purchased under agreements to resell 46,236 8,870 4433,,111122 8,384 564 124 1,701 20 21 U.S. branches and agencies of other foreign banks 9,982 4,236 88,,999999 4,038 402 124 252 0 22 Commercial banks in United States 7,825 81 7,309 71 79 0 174 0 23 Other 28,430 4,553 26,804 4,275 83 0 1,276 20 24 Total loans, gross 322,398 37,606 199,589 25,523 52,895 6,810 37,857 994 25 LESS: Unearned income on loans 141 9 83 5 47 2 4 0 26 EQUALS: Loans, net 322,257 37,597 199,506 25,517 52,848 6,808 37,853 994 Total loans, gross, by category 27 Real estate loans 32,495 204 19,107 50 9,387 152 2,041 0 28 Loans to depository institutions 34,585 21,945 21,768 13,356 6,817 5,055 977 535 29 Commercial banks in United States (including IBFs) 13,406 7,394 7,801 3,929 4,713 3,159 516 255 30 U.S. branches and agencies of other foreign banks 12,102 7,126 6,890 3,720 4,571 3,119 340 241 31 Other commercial banks in United States 1,304 268 912 209 142 40 176 14 32 Other depository institutions in United States (including IBFs) 74 0 74 0 0 0 0 0 33 Banks in foreign countries 21,105 14,551 13,893 9,427 2,104 1,896 461 280 34 Foreign branches of U.S. banks 463 347 373 339 0 0 0 0 35 Other banks in foreign countries 20,642 14,204 13,520 9,088 2,104 1,896 461 280 36 Loans to other financial institutions 34,449 804 27,433 531 2,415 88 3,837 94 37 Commercial and industrial loans 199,177 12,540 112,649 9,593 33,379 1,467 29,376 357 38 U.S. addressees (domicile) 172,087 80 93,301 46 30,336 29 28,110 1 39 Non-U.S. addressees (domicile) 27,090 12,460 19,348 9,546 3,043 1,438 1,266 356 40 Acceptances of other banks 518 39 250 37 112 0 102 0 41 U.S. banks 72 0 47 0 15 0 0 0 42 Foreign banks 446 39 202 37 97 0 101 0 43 Loans to foreign governments and official institutions (including foreign central banks) 3,250 1,785 2,755 1,678 164 48 84 8 44 Loans for purchasing or carrying securities (secured and unsecured) . . . 10,010 142 9,833 142 86 0 43 0 45 All other loans 6,090 120 4,001 109 507 0 1,394 0 46 Lease financing receivables (net of unearned income) 1,824 28 1,794 28 27 0 3 0 47 U.S. addressees (domicile) 1,272 0 1,242 0 27 0 3 0 48 Non-U.S. addressees (domicile) 552 28 552 28 0 0 0 0 49 Trading assets 50,443 290 44,963 262 629 21 4,851 8 50 All other assets 43,705 3,267 37,035 2,512 3,514 422 2,352 258 51 Customers' liabilities on acceptances outstanding 9,339 n.a. 6,636 n.a. 1,926 n.a. 469 n.a. 52 U.S. addressees (domicile) 6,814 n.a. 4,551 n.a. 1,760 n.a. 334 n.a. 53 Non-U.S. addressees (domicile) 2,525 n.a. 2,085 n.a. 166 n.a. 135 n.a. 54 Other assets including other claims on nonrelated parties 34,366 3,267 30,399 2,512 1,588 422 1,884 258 55 Net due from related depository institutions5 84,243 144,079 66,525 116,783 4,944 16,477 4,793 7,731 56 Net due from head office and other related depository institutions5... 84,243 n.a. 6666,,552255 n.a. 44,,994444 n.a. 44,,779933 n.a. 57 Net due from establishing entity, head offices, and other related depository institutions5 n.a. 144,079 n.a. 116,783 n.a. 16,477 n.a. 7,731 58 Total liabilities4 759,735 289,394 583,365 236,590 71,880 29,215 60,322 14,505 59 Liabilities to nonrelated parties 619,156 271,325 518,575 222,329 46,489 27,864 34,720 13,246 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A65 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 1996 —Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s 60 Total deposits and credit balances 168,711 204,044 144,088 185,231 5,790 5,8 38 9,421 6,550 61 Individuals, partnerships, and corporations 113,077 15,226 94,628 10,407 4,891 677 6,055 59 67, U.S. addressees (domicile) 98 718 130 86,380 130 3,250 0 5,312 0 63 Non-U.S. addressees (domicile) 14,359 15,096 8,248 10,277 1,641 677 743 59 64 Commercial banks in United States (including IBFs) 31,091 44,766 26,491 42,073 483 1,431 2,822 1,113 65 U.S. branches and agencies of other foreign banks 17,836 41,555 15,272 39,211 127 1,222 1,574 990 66 Other commercial banks in United States 13,254 3,211 11,219 2,861 356 209 1,248 123 67 Banks in foreign countries 9,182 114,929 8,704 106,692 192 2,825 39 3,962 68 Foreign branches of U.S. banks 2,527 5,338 2,526 4,137 0 297 0 859 69 Other banks in foreign countries 6,655 109,591 6,178 102,555 192 2,528 39 3,103 70 Foreign governments and official institutions (including foreign central banks) 5,126 29,080 4,742 26,037 202 8855 1188 1,415 71 All other deposits and credit balances 9,963 44 9,294 23 3 2200 480 1 72 Certified and official checks 272 229 19 8 73 Transaction accounts and credit balances (excluding IBFs) 8,280 6,622 367 338 74 Individuals, partnerships, and corporations 6,513 5,138 303 311 75 U.S. addressees (domicile) 4,618 3,982 227 307 76 Non-U.S. addressees (domicile) 1,895 1,156 76 5 77 Commercial banks in United States (including IBFs) 90 86 2 0 78 U.S. branches and agencies of other foreign banks 8 7 0 0 79 Other commercial banks in United States 82 79 1 0 80 Banks in foreign countries 770 604 35 16 81 Foreign branches of U.S. banks 12 11 0 0 82 Other banks in foreign countries 758 593 35 16 83 Foreign governments and official institutions (including foreign central banks) 386 332244 5 2 84 All other deposits and credit balances 249 240 3 0 85 Certified and official checks 272 229 19 8 86 Demand deposits (included in transaction accounts and credit balances) 7,634 6,250 312 325 87 Individuals, partnerships, and corporations 6,094 4,973 251 298 88 U.S. addressees (domicile) 4,441 3,877 189 294 89 Non-U.S. addressees (domicile) 1,653 1,096 62 4 90 Commercial banks in United States (including IBFs) 80 77 1 0 91 U.S. branches and agencies of other foreign banks 8 n a. 7 n.a. 0 n.a. 0 n.a. 92 Other commercial banks in United States 72 70 0 0 93 Banks in foreign countries 750 586 35 16 94 Foreign branches of US. banks 12 11 0 0 95 Other banks in foreign countries 738 575 35 16 96 Foreign governments and official institutions (including foreign central banks) 366 319 5 2 97 All other deposits and credit balances 72 66 2 0 98 Certified and official checks 272 229 19 8 99 Nontransaction accounts (including MMDAs, excluding IBFs) 160,431 137,466 5,422 9,083 100 Individuals, partnerships, and corporations 106,564 89,490 4,5 88 5,744 101 U.S. addressees (domicile) 94,100 82,398 3,023 5,006 102 Non-U.S. addressees (domicile) 12,464 7,092 1,565 738 103 Commercial banks in United States (including IBFs) 31,001 26,405 482 2,822 104 U.S. branches and agencies of other foreign banks 17,828 15,265 127 1,574 105 Other commercial banks in United States 13,172 11,140 355 1,248 106 Banks in foreign countries 8,412 8,099 156 23 107 Foreign branches of U.S. banks 2,515 2,515 0 0 108 Other banks in foreign countries 5,897 5,584 156 23 109 Foreign governments and official institutions (including foreign central banks) 4,740 4,418 197 15 110 All other deposits and credit balances 9,714 9,054 0 479 111 IBF deposit liabilities 204 044 185 231 5,8 38 6,5 50 112 Individuals, partnerships, and corporations 15,226 10,407 677 59 113 U.S. addressees (domicile) 130 130 0 0 114 Non U.S. addressees (domicile) 15,096 10,277 677 59 115 Commercial banks in United States (including IBFs) 44,766 42,073 1,431 1,113 116 U.S. branches and agencies of other foreign banks 41,555 39,211 1,222 990 117 Other commercial banks in United States n.a. 3,211 n.a. 2,861 n.a. 209 n.a. 123 118 Banks in foreign countries 114,929 106,692 2,825 3,962 119 Foreign branches of U.S. banks 5,338 4,137 297 859 120 Other banks in foreign countries 109,591 102,555 2,528 3,103 121 Foreign governments and official institutions (including foreign central banks) 29,080 26,037 85 1,415 122 All other deposits and credit balances 44 23 20 1 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Special Tables • September 1996 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 1996'—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm in I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s m Federal funds purchased and securities sold under agreements to repurchase 72,301 14,486 61,605 11,844 5,859 1,519 44,,440066 1,014 124 U.S. branches and agencies of other foreign banks 10,363 3,045 7,805 1,990 1,854 790 687 257 125 Other commercial banks in United States 9,086 89 5,409 37 2,832 15 627 35 176 52,852 11,352 48,391 9,816 1,172 714 3,092 722 127 Other borrowed money 93,377 48,745 55,297 21,867 25,577 20,113 10,069 5,476 178 Owed to nonrelated commercial banks in United States (including 129 Ow IB ed F s t ) o U.S. offices of nonrelated U.S. banks 26 7 , , 9 8 6 7 3 3 13 1 , , 2 1 0 6 6 1 1 4 2 , , 7 70 2 7 3 4,4 3 9 2 1 3 1 2 0 , , 2 97 0 9 8 7,1 7 4 2 2 5 1, 4 9 1 6 9 8 1,11 n 0 no Owed to U.S. branches and agencies of nonrelated foreign banks 19,090 12,044 7,985 4,168 8,771 6,418 1,549 1,038 ni Owed to nonrelated banks in foreign countries 35,773 32,678 18,252 15,579 12,390 12,284 4,204 3,9 88 137 Owed to foreign branches of nonrelated U.S. banks 1,644 1,345 507 448 680 665 428 232 133 Owed to foreign offices of nonrelated foreign banks 34,129 31,333 17,744 15,131 11,710 11,619 3,777 3,756 134 Owed to others 30,641 2,862 24,338 1,797 2,207 687 3,896 378 135 All other liabilities 80,723 4,050 72,353 3,387 3,426 394 4,275 206 136 Branch or agency liability on acceptances executed and outstanding 99,,662266 n. a. 66,,887799 n.a. 11,,992277 n.a. 447722 n.a. 137 Trading liabilities 40,429 Ill 37,542 83 530 21 2,335 6 138 Other liabilities to nonrelated parties 30,668 3,939 27,932 3,304 969 373 1,468 200 139 Net due to related depository institutions5 140,579 18,069 64,790 14,261 25,392 1,351 25,601 1,259 140 Net owed to head office and other related depository institutions ... 140,579 n.a. 64,790 n.a. 25,392 n.a. 25,601 n a. 141 Net owed to establishing entity, head office, and other related depository institutions5 n.a. 18,069 n.a. 14,261 n.a. 1,351 n.a. 1,259 MEMO 142 Non-interest-bearing balances with commercial banks in United States 1,037 0 849 00 80 00 4499 00 143 Holding of commercial paper included in total loans 1,462 1,253 15 I 174 144 Holding of own acceptances included in commercial and industrial loans 5,266 3,719 1,359 7722 145 Commercial and industrial loans with remaining maturity of one year or less 115,858 64,602 20,394 18,040 146 Predetermined interest rates 65,688 n a. 36,110 n.a. 11,367 n.a. 12,586 n.a. 147 Floating interest rates 50,170 28,492 9,026 5,454 148 Commercial and industrial loans with remaining maturity of more than one year 82,638 47,670 12,866 11,324 149 Predetermined interest rates 20,319 11,889 2,795 3,912 150 Floating interest rates 62,319 35,782 10,071 7,413 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A67 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 1996 —Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s exc T IB l o u F t d a s i l n g I o B n F ly s 111155551111 CCCCoooommmmppppoooonnnneeeennnnttttssss ooooffff ttttoooottttaaaallll nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ttttoooottttaaaallll ddddeeeeppppoooossssiiiittttssss aaaannnndddd ccccrrrreeeeddddiiiitttt bbbbaaaallllaaaannnncccceeeessss ooooffff nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddiiiinnnngggg IIIIBBBBFFFFssss 164,025 1 141,967 1 5,575 i 9,043 1 111155552222 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 123,150 105,410 3,740 7,408 111155553333 OOOOtttthhhheeeerrrr ttttiiiimmmmeeee ddddeeeeppppoooossssiiiittttssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 111155554444 TTTTiiiimmmmeeee CCCC oooorrrr DDDD mmmm ssss oooo iiiinnnn rrrreeee ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 33,013 n1.a. 29,562 nJ.a. 1,283 n1.a. 1,411 n1.a. wwwwiiiitttthhhh rrrreeeemmmmaaaaiiiinnnniiiinnnngggg mmmmaaaattttuuuurrrriiiittttyyyy ooooffff mmmmoooorrrreeee tttthhhhaaaannnn 11112222 mmmmoooonnnntttthhhhssss 7,863 6,995 552 225 All states2 New York California Illinois inc T l o u t d a i l n g I o B n F ly s inc T l o u t d a i l n g I o B n F ly s inc T l o u t d a i l n g I o B n F ly s inc T l o u t d a i l n g I o B n F ly s IBFs IBFs IBFs IBFs 111155555555 IIIImmmmmmmmeeeeddddiiiiaaaatttteeeellllyyyy aaaavvvvaaaaiiiillllaaaabbbblllleeee ffffuuuunnnnddddssss wwwwiiiitttthhhh aaaa mmmmaaaattttuuuurrrriiiittttyyyy ggggrrrreeeeaaaatttteeeerrrr tttthhhhaaaannnn oooonnnneeee ddddaaaayyyy iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ooootttthhhheeeerrrr bbbboooorrrrrrrroooowwwweeeedddd mmmmoooonnnneeeeyyyy 53,779 n.a. 26,734 n.a. 20,155 n.a. 5,424 n.a. 111155556666 NNNNuuuummmmbbbbeeeerrrr ooooffff rrrreeeeppppoooorrrrttttssss ffffiiiilllleeeedddd6666 511 n.a. 250 n.a. 114 n.a. 45 n.a. 1. Data are aggregates of categories reported on the quarterly form FFIEC 002, "Report of either because the item is not an eligible IBF asset or liability or because that level of detail is Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks." The form was first not reported for IBFs. From December 1981 through September 1985, IBF data were used for reporting data as of June 30, 1980, and was revised as of December 31, 1985. From included in all applicable items reported. November 1972 through May 1980, U.S. branches and agencies of foreign banks had filed a 4. Total assets and total liabilities include net balances, if any, due from or owed to related monthly FR 886a report. Aggregate data from that report were available through the Federal banking institutions in the United States and in foreign countries (see note 5). On the former Reserve monthly statistical release G. 11, last issued on July 10, 1980. Data in this table and in monthly branch and agency report, available through the G.ll monthly statistical release, the G. 11 tables are not strictly comparable because of differences in reporting panels and in gross balances were included in total assets and total liabilities. Therefore, total asset and total definitions of balance sheet items. liability figures in this table are not comparable to those in the G.l 1 tables. 2. Includes the District of Columbia. 5. Related depository institutions includes the foreign head office and other U.S. and 3. Effective December 1981, the Federal Reserve Board amended Regulations D and Q to foreign branches and agencies of a bank, a bank's parent holding company, and majoritypermit banking offices located in the United States to operate international banking facilities owned banking subsidiaries of the bank and of its parent holding company (including (IBFs). Since December 31, 1985, data for IBFs have been reported in a separate column. subsidiaries owned both directly and indirectly). These data are either included in or excluded from the total columns as indicated in the 6. In some cases two or more offices of a foreign bank within the same metropolitan area headings. The notation "n.a." indicates that no IBF data have been reported for that item, file a consolidated report. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • September 1996 4.34 RESIDENTIAL LENDING ACTIVITY OF FINANCIAL INSTITUTIONS COVERED BY HMDA, 1982-95 Number Item 1983 1984 1985 1986 1987 1988 1989 19901 1991 1992 1993 1994 1995 1 Loans or applications (millions)2 1.71 1.86 1.98 2.83 3.42 3.39 3.13 6.59 7.89 12.01 15.38 12.19 11.23 2 Reporting institutions 8,050 8,491 8,072 8,898 9,431 9,319 9,203 9,332 9,358 9,073 9,650 9,858 9,539 3 Disclosure reports 10,970 11,799 12,567 12,329 13,033 13,919 14,154 24,041 25,934 28,782 35,976 38,750 36,611 1. Before 1990, includes only home purchase, home refinancing, and home improvement 2. Revised from preliminary data published in Glenn B. Canner and Dolores S. Smith, loans originated by covered institutions; beginning in 1990 (first year under revised reporting "Home Mortgage Disclosure Act: Expanded Data on Residential Lending," Federal Reserve system), includes such loans originated and purchased, applications approved but not ac- Bulletin, vol. 77 (November 1991), p. 861, to reflect corrections and the reporting of cepted by the applicant, applications denied or withdrawn, and applications closed because additional data. information was incomplete. SOURCE. FFIEC, Home Mortgage Disclosure Act. 4.35 APPLICATIONS FOR HOME LOANS REPORTED UNDER HMDA By Type of Dwelling, Purpose of Loan, and Loan Program, 1995 Thousands One- to four-family dwellings MMuullttiiffaammiillyy LLooaann pprrooggrraamm ddwweelllliinnggss11 AAllll Home purchase Home refinancing Home improvement All 1 FHA 699.7 93.7 168.8 962.2 * 962.5 2 VA 272.5 50.5 3.0 326.0 * 326.0 3 FmHA 14.8 .5 * 15.4 * 15.4 4 Conventional 4497.3 2548.1 1577.4 8622.8 28.5 8651.3 5 Total 5484.3 2692.8 1749.3 9926.4 28.7 9955.2 *Fewer than 500. SOURCE. FFIEC, Home Mortgage Disclosure Act. 1. Multifamily dwellings are those for five or more families. 4.36 HOME LOANS ORIGINATED BY LENDERS REPORTING UNDER HMDA By Type of Dwelling, Purpose of Loan, and Type of Lender, 1995 Percent One- to four-family dwellings Home purchase MMMuuullltttiiifffaaammmiiilllyyy TTTyyypppeee ooofff llleeennndddeeerrr HHoommee HHoommee dddwwweeelllllliiinnngggsss111 AAAllllll rreeffiinnaanncciinngg iimmpprroovveemmeenntt AAllll FHA-insured gua V ra A nt - eed F in m su H r A ed - Conventional All 1 Commercial bank 8.7 9.6 17.1 25.2 21.7 30.5 68.9 31.7 51.4 31.8 2 Savings association. . . . 9.7 9.4 13.5 22.0 19.3 17.2 7.5 16.8 42.3 16.9 3 Credit union .2 1.7 .2 1.8 1.5 4.1 11.8 3.9 .5 3.9 4 Mortgage company2.. . . 81.5 79.2 69.2 51.1 57.5 48.1 11.8 47.6 5.8 47.4 5 Total 100 100 100 100 100 100 100 100 100 100 MEMO Distribution of loans 6 Number 538,697 210,379 10,548 2,736,125 3,495,749 1,638,858 997,395 6,132,002 19,234 6,151,236 7 Percent 8.8 3.4 .2 44.5 56.8 26.6 16.2 99.7 .3 100.0 *Less than 0.05 percent. 2. Comprises all covered mortgage companies, including those affiliated with a commer- 1. Multifamily dwellings are those for five or more families. cial bank, savings association, or credit union. SOURCE. FFIEC, Home Mortgage Disclosure Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A69 4.37 APPLICATIONS FOR LOANS FOR ONE- TO FOUR-FAMILY HOMES REPORTED UNDER HMDA By Purpose of Loan and Characteristics of Applicant and Census Tract, 1995 Home purchase Home refinancing Home improvement Government-backed Characteristic MEMO MEMO Percentage of Percentage of Number characteristic's characteristic's home purchase home purchase loans loans Racial/ethnic identity 1 American Indian or Alaskan Native . . . 4,051 .4 12.9 27,351 .6 87.1 10,578 9,617 .7 2 Asian or Pacific Islander 15,172 1.6 11.1 121,089 2.8 88.9 65,964 3.0 20,414 1.4 3 Black 146,717 15.4 31.0 325,849 7.5 69.0 189,379 8.6 171,075 12.1 4 Hispanic 106,687 11.2 29.3 257,826 6.0 70.7 128,399 5.8 115,237 8.2 5 White 643,050 67.4 15.7 3,462,366 80.0 84.3 1,740,552 78.9 1,054,827 74.7 6 Other 5,933 .6 12.6 41,107 .9 87.4 27,321 1.2 14,633 1.0 7 All 32,652 3.4 25.7 94,386 2.2 74.3 44,033 2.0 25,527 1.8 8 Total 954,262 100.0 18.1 4,329,974 100.0 81.9 2,206,226 100.0 1,411,330 100.0 Income (percentage of MSA median)2 9 Less than 80 314,092 39.1 26.1 890,953 29.3 73.9 541,331 27.8 482,376 35.7 10 80-99 172,951 21.5 29.1 420,408 13.8 70.9 272,217 14.0 196,614 14.6 11 100-119 126,099 15.7 25.2 374,235 12.3 74.8 251,248 12.9 174,783 12.9 12 120 or more 189,610 23.6 12.3 1,357,489 44.6 87.7 885,912 45.4 496,706 36.8 13 Total 802,752 100.0 20.9 3,043,085 100.0 79.1 1,950,708 100.0 1,350,479 100.0 CENSUS TRACT Racial/ethnic compostion (minorities as percentage of population) 14 Less than 10 295,903 37.1 15.9 1,562,872 52.1 84.1 975,894 47.4 617,724 46.9 15 10-19 186,689 23.4 22.5 641,595 21.4 77.5 396,944 19.3 233,098 17.7 16 20-49 206,070 25.8 28.4 518,268 17.3 71.6 366,150 17.8 228,549 17.3 17 50-79 64,117 8.0 27.5 168,716 5.6 72.5 155,564 7.6 103,062 7.8 18 80-100 44,770 5.6 29.3 108,084 3.6 70.7 163,603 7.9 135,092 10.3 19 Total 797,549 100.0 21.0 2,999,535 100.0 79.0 2,058,155 100.0 1,317,525 100.0 Income 3 20 Low or moderate 144,546 17.9 26.1 409,030 13.6 73.9 358,685 17.4 296,817 22.1 21 Middle 463,961 57.5 23.6 1,500,430 50.0 76.4 1,033,298 50.0 694,042 51.8 22 Upper 197,731 24.5 15.3 1,092,905 36.4 84.7 674,890 32.7 349,440 26.1 23 Total 806,238 100.0 3,002,365 2,066,873 1,340,299 100.0 Location 4 24 Central city 379,043 46.3 24.2 1,186,518 38.6 75.8 833,506 39.5 606,417 44.2 25 Non-central city 439,447 53.7 18.9 1,886,593 61.4 81.1 1,276,772 60.5 765,234 55.8 26 Total 818,490 100.0 3,073,111 2,110,278 1,371,651 NOTE. Lenders reported 9,926,444 applications for home loans in 1995. Not all character- median family income for the MSA in which the tract is located. Categories are defined as istics were reported for all applications; thus the number of applications being distributed by follows: Low or moderate income, median family income for census tract less than 80 percent characteristic varies by characteristic. of median family income for MSA; Middle income, median family income at least 80 percent 1. Loans backed by the Federal Housing Administration, the Department of Veterans and less than 120 percent of MSA median; Upper income, median family income 120 percent Affairs, or the Farmers Home Administration. and greater of MSA median. 2. MSA median is median family income of the metropolitan statistical area (MSA) in 4. For census tracts located in MSAs. which the property related to the loan is located. SOURCE. FFTEC, Home Mortgage Disclosure Act. 3. Census tracts are categorized by the median family income for the tract relative to the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • September 1996 4.38 APPLICATIONS FOR LOANS FOR ONE- TO FOUR-FAMILY HOMES REPORTED UNDER HMDA By Purpose of Loan, with Denial Rate, and by Characteristic of Applicant, 1995 Home purchase HHoommee rreeffiinnaanncciinngg HHoommee iimmpprroovveemmeenntt ccchhh AAA aaarrr ppp aaa ppp cccttt lll eee iiiccc rrr aaa iiisss nnn ttt ttt iii ccc111 Government-backed2 Conventional Distribution Denial rate Distribution Denial rate Distribution Denial rate Distribution Denial rate American Indian or Alaskan Native 1 One male 32.30 12.40 27.20 42.10 27.50 21.10 28.90 35.30 2 Two males 1.60 15.40 1.70 35.30 1.50 17.20 1.40 28.70 3 One female 25.90 14.40 27.60 43.30 22.70 22.00 27.60 36.50 4 Two females 2.90 9.40 2.40 43.10 1.80 15.90 1.20 29.80 5 One male and one female 37.20 13.50 41.20 39.80 46.50 17.40 41.00 27.90 6 Total3 100.00 13.30 100.00 41.40 100.00 19.70 100.00 32.60 Asian or Pacific Islander 1 One male 20.70 9.70 18.60 15.20 15.80 21.00 22.50 36.80 8 Two males 3.70 10.10 3.00 14.90 1.90 19.30 1.40 33.50 9 One female 13.10 9.00 13.60 15.20 13.70 21.90 16.10 34.10 10 Two females 2.30 8.90 1.90 14.80 1.70 18.10 1.10 33.30 11 One male and one female 60.20 8.00 62.90 10.50 67.00 18.40 59.00 24.90 12 Total3 100.00 8.70 100.00 12.50 100.00 19.30 100.00 29.40 Black 13 One male 26.80 14.90 25.00 40.80 23.40 25.80 26.60 40.10 14 Two males 1.00 14.00 1.00 40.80 .70 25.00 .50 42.10 15 One female 30.60 14.20 34.60 42.20 30.70 25.80 36.80 40.70 16 Two females 2.80 16.60 2.90 45.80 2.00 26.80 1.80 44.20 17 One male and one female 38.90 16.20 36.50 38.10 43.20 23.70 34.30 35.50 18 Total3 100.00 15.30 100.00 40.50 100.00 24.90 100.00 38.80 Hispanic 19 One male 21.00 9.70 24.70 34.00 19.20 23.80 28.90 43.60 20 Two males 6.80 6.60 3.80 28.10 1.70 28.00 1.30 42.00 21 One female 11.00 10.20 15.00 31.00 16.30 22.80 21.30 45.20 22 Two females 2.20 9.10 2.00 31.40 1.50 26.80 1.10 44.40 23 One male and one female 59.10 9.70 54.40 26.90 61.30 23.70 47.40 35.40 24 Total3 100.00 9.50 100.00 29.50 100.00 23.70 100.00 40.10 White 25 One male 23.10 8.90 20.80 25.70 18.10 16.60 21.20 24.30 26 Two males 1.40 9.00 1.50 21.00 1.20 13.40 .60 24.20 27 One female 15.00 7.80 16.00 24.40 14.00 15.10 17.20 24.10 28 Two females 1.10 9.60 1.20 27.90 .80 15.40 .80 27.90 29 One male and one female 59.40 8.50 60.50 17.60 65.90 12.00 60.10 17.90 30 Total3 100.00 8.50 100.00 20.60 100.00 13.30 100.00 20.40 All 31 One male 23.50 10.10 21.30 27.60 18.60 18.20 22.60 28.90 32 Two males 2.00 8.50 1.60 22.70 1.20 15.60 .70 28.90 33 One female 17.00 9.90 17.40 27.50 15.60 17.60 20.00 30.10 34 Two females 1.50 11.60 1.40 30.70 1.00 18.60 1.00 33.40 35 One male and one female 56.00 9.50 58.20 19.00 63.50 13.60 55.70 20.70 36 Total3 100.00 9.80 100.00 22.60 100.00 15.20 100.00 24.60 1. Applicants are categorized by race of first applicant listed on Loan Application Register, 3. Includes all applicants from racial or ethnic group regardless of whether gender was except for joint white and minority applications, which are not shown in this table. reported. 2. Loans backed by the Federal Housing Administration, the Department of Veterans SOURCE. FFIEC, Home Mortgage Disclosure Act. Affairs, or the Farmers Home Administration. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A71 4.39 APPLICATIONS FOR HOME LOANS REPORTED UNDER HMDA By Loan Program and Size of Dwelling, 1995 Percent One- to four-family dwellings Home purchase Home refinancing Type of loan Approved Approved Approved Approved and but not Denied Withdrawn File closed Total and but not Denied Withdrawn File closed Total accepted accepted accepted accepted 1 FHA 77.0 1.5 9.8 10.2 1.6 100 68.6 4.1 8.2 14.0 5.2 100 2 VA 77.2 1.3 10.0 10.2 1.4 100 76.9 3.0 6.0 11.1 3.0 100 3 FmHA 71.2 1.7 15.1 10.5 1.5 100 51.3 .4 39.4 8.4 .6 100 4 Conventional 60.8 8.0 22.6 7.2 1.3 100 60.3 6.1 19.9 11.7 2.1 100 5 All 63.7 6.8 20.3 7.7 1.3 100 60.9 5.9 19.2 11.8 2.2 100 One- to four-family dwellings Home improvement Approved Approved Approved Approved and but not Denied Withdrawn File closed Total and but not Denied Withdrawn File closed Total accepted accepted accepted accepted 1 FHA 33.1 13.4 41.6 10.8 1.0 100 79.4 .9 12.0 7.3 .4 100 2 VA 32.3 8.9 42.2 16.4 .2 100 74.1 * 14.8 11.1 * 100 3 FmHA 64.0 2.2 22.5 7.9 3.4 100 91.7 * * 8.3 * 100 4 Conventional 59.6 7.7 27.3 4.7 .7 100 66.8 3.8 17.4 10.2 1.8 100 5 All 57.0 8.2 28.7 5.3 .7 100 67.0 3.7 17.4 10.1 1.8 100 NOTE. Loans approved and accepted were approved by the lender and accepted by the *Less than 0.05 percent, applicant. Loans approved but not accepted were approved by the lender but not accepted by 1. Multifamily dwellings are those for five or more families, the applicant. Applications denied were denied by the lender, and applications withdrawn SOURCE. FFIEC, Home Mortgage Disclosure Act. were withdrawn by the applicant. When an application was left incomplete by the applicant, the lender reported file closed and took no further action. > Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • September 1996 4.40 APPLICATIONS FOR ONE- TO FOUR-FAMILY HOME LOANS REPORTED UNDER HMDA By Disposition of Loan and Characteristics of Applicant and Census Tract, 1995 A. Home Purchase Loans Percent Government-backed 1 Conventional Characteristic Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total APPLICANT Racial or ethnic identity 1 American Indian or Alaskan Native 71.9 13.3 12.7 2.1 100 50.7 41.4 6.8 1.1 100 2 Asian or Pacific Islander. . 79.4 8.7 10.6 1.4 100 75.9 12.5 9.7 1.9 100 3 Black 71.1 15.3 11.4 2.2 100 51.1 40.5 6.7 1.7 100 4 Hispanic 77.6 9.5 11.2 1.6 100 60.2 29.5 8.3 2.0 100 5 White 81.1 8.5 9.1 1.3 100 71.8 20.6 6.5 1.1 100 6 Other 76.7 10.7 10.8 1.9 100 59.4 29.6 8.9 2.0 100 7 Joint2 79.1 10.1 9.6 1.2 100 68.5 22.4 7.7 1.3 100 Income ratio (percentage of MSA median)3 8 Less than 80 79.1 10.9 8.8 1.3 100 63.1 29.9 5.9 1.1 100 9 American Indian or Alaskan Native . . . 72.4 14.1 11.1 2.4 100 52.6 40.8 5.5 1.1 100 10 Asian or Pacific Islander 79.0 9.6 10.2 1.2 100 73.6 16.5 8.2 1.7 100 11 Black 72.1 15.6 10.4 1.9 100 54.2 37.3 6.6 1.8 100 12 Hispanic 79.1 10.0 9.4 1.5 100 59.1 32.4 6.8 1.8 100 13 White 82.0 9.2 7.9 1.0 100 65.5 28.4 5.2 .9 100 14 Other 76.2 12.0 10.2 1.6 100 54.3 37.4 6.9 1.4 100 15 Joint2 77.8 12.3 8.9 1.0 100 57.4 35.6 6.0 1.0 100 16 80-99 83.6 7.6 7.8 1.0 100 74.0 18.0 6.8 1.2 100 17 American Indian or Alaskan Native . . . 78.0 10.2 10.5 1.4 100 64.8 26.4 7.7 1.1 100 18 Asian or Pacific Islander 82.9 7.4 8.8 1.0 100 78.2 11.2 9.0 1.6 100 19 Black 77.2 11.8 9.4 1.6 100 61.8 27.9 8.4 1.9 100 20 Hispanic 81.6 8.2 9.1 1.1 100 65.7 24.6 7.9 1.8 100 21 White 85.8 6.3 7.1 .8 100 76.5 16.4 6.1 1.0 100 22 Other 80.8 9.3 8.9 1.0 100 67.3 22.7 8.3 1.6 100 23 Joint2 83.2 8.4 7.6 .8 100 68.0 24.1 6.7 1.1 100 24 100-119 84.7 6.8 7.6 .9 100 77.7 13.9 7.2 1.2 100 25 American Indian or Alaskan Native . . . 77.5 9.4 11.8 1.3 100 69.2 19.6 9.6 1.6 100 26 Asian or Pacific Islander 84.0 6.0 8.7 1.2 100 78.7 10.4 9.2 1.6 100 27 Black 78.0 11.3 9.3 1.4 100 64.8 23.9 9.0 2.2 100 28 Hispanic 82.0 7.4 9.5 1.1 100 67.2 22.4 8.5 1.9 100 29 White 86.8 5.7 6.8 .7 100 80.3 12.3 6.4 1.0 100 30 Other 79.4 9.1 9.8 1.7 100 69.8 19.2 9.1 2.0 100 31 Joint2 84.5 7.1 7.8 .7 100 74.2 17.5 7.1 1.2 100 32 120 or more 84.4 6.4 8.2 .9 100 82.2 8.7 7.9 1.2 100 33 American Indian or Alaskan Native . . . 80.5 7.6 10.3 1.6 100 74.7 13.4 10.4 1.5 100 34 Asian or Pacific Islander 83.6 6.7 8.8 .9 100 79.0 9.5 9.8 1.7 100 35 Black 79.1 10.5 8.9 1.5 100 70.7 17.5 9.6 2.1 100 36 Hispanic 80.7 7.0 11.1 1.2 100 72.2 15.6 10.1 2.2 100 37 White 86.5 5.4 7.3 .8 100 84.2 7.6 7.3 1.0 100 38 Other 81.9 7.1 9.5 1.5 100 73.7 13.6 10.5 2.2 100 39 Joint2 84.0 7.2 8.0 .8 100 79.9 10.7 8.3 1.2 100 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 40 Less than 10 84.4 7.4 7.3 .9 100 79.2 13.2 6.6 .9 100 41 10-19 82.7 8.0 8.3 1.0 100 74.7 16.1 7.9 1.2 100 42 20-49 80.1 9.3 9.4 1.2 100 69.6 20.8 8.2 1.5 100 43 50-79 76.8 11.1 10.6 1.6 100 65.2 24.0 8.9 1.9 100 44 80-100 74.5 11.6 11.8 2.1 100 59.5 28.1 9.9 2.5 100 Income4 45 Low or moderate 77.6 10.9 10.0 1.6 100 64.4 26.3 7.7 1.6 100 46 Middle 82.4 8.3 8.2 1.0 100 73.9 18.0 6.9 1.1 100 47 Upper 83.0 7.4 8.7 .9 100 80.8 10.1 8.0 1.1 100 Location5 48 Central city 80.5 9.5 8.8 1.2 100 73.4 17.6 7.6 1.3 100 49 Non-central city 82.7 7.8 8.5 1.0 100 75.9 15.7 7.2 1.1 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A73 4.40 APPLICATIONS FOR ONE- TO FOUR-FAMILY HOME LOANS REPORTED UNDER HMDA By Disposition of Loan and Characteristics of Applicant and Census Tract, 1995—Continued B. Home Refinancing and Home Improvement Loans Percent Home refinancing Home improvement CChhaarraacctteerriissttiicc Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total APPLICANT Racial or ethnic identity 1 American Indian or Alaskan Native 62.4 19.7 15.0 2.9 100 62.0 32.6 4.7 .7 100 2 Asian or Pacific Islander. . 66.2 19.3 12.0 2.5 100 62.7 29.4 6.0 1.9 100 3 Black 58.9 24.9 13.1 3.0 100 56.4 38.8 4.2 .6 100 4 Hispanic 60.5 23.7 13.0 2.9 100 54.9 40.1 4.1 .9 100 5 White 75.9 13.3 8.8 1.9 100 75.2 20.4 3.8 .5 100 6 Other 55.1 25.3 16.6 3.0 100 54.0 33.7 11.4 .9 100 7 Joint2 70.8 17.7 9.4 2.1 100 71.2 23.6 4.4 .7 100 Income ratio (percentage of MSA median)3 8 Less than 80 59.3 26.5 12.2 2.0 100 55.6 38.7 5.0 .7 100 9 American Indian or Alaskan Native . . . 59.4 23.6 14.4 2.6 100 55.7 39.1 4.5 .8 100 10 Asian or Pacific Islander 60.1 24.1 13.0 2.8 100 51.4 41.4 5.4 1.8 100 11 Black 56.2 28.3 12.8 2.7 100 50.7 44.6 4.1 .6 100 12 Hispanic 56.1 28.9 12.3 2.7 100 48.3 46.5 4.2 .9 100 13 White 71.1 18.0 9.1 1.8 100 67.3 28.3 3.9 .5 100 14 Other 47.4 32.7 17.0 2.9 100 48.2 41.6 9.1 1.0 100 15 Joint2 62.5 25.7 9.8 2.0 100 55.9 38.8 4.7 .6 100 16 80-99 67.1 20.0 10.9 2.0 100 64.8 29.6 4.9 .7 100 17 American Indian or Alaskan Native . . . 64.3 19.8 14.3 1.7 100 68.6 25.7 5.2 .5 100 18 Asian or Pacific Islander 67.3 19.4 11.2 2.1 100 60.7 30.9 6.7 1.7 100 19 Black 59.8 24.6 12.7 2.9 100 58.0 37.4 4.0 .6 100 20 Hispanic 59.5 25.9 11.7 2.9 100 54.5 39.9 4.6 1.0 100 21 White 76.7 13.3 8.2 1.7 100 74.7 21.2 3.6 .5 100 22 Other 57.9 24.1 14.4 3.6 100 54.5 33.9 10.9 .6 100 23 Joint2 69.8 18.8 9.0 2.4 100 65.9 28.9 4.5 .8 100 24 100-119 69.7 18.0 10.4 1.8 100 68.4 25.9 5.0 .7 100 25 American Indian or Alaskan Native . . . 65.2 18.4 14.1 2.2 100 70.1 23.6 5.5 .8 100 26 Asian or Pacific Islander 68.9 18.4 10.6 2.1 100 63.4 28.1 6.6 1.8 100 27 Black 61.3 23.8 12.3 2.6 100 60.5 35.0 4.0 .4 100 28 Hispanic 59.9 25.3 12.0 2.8 100 55.9 38.5 4.7 .9 100 29 White 78.4 12.1 7.9 1.6 100 77.7 18.2 3.6 .5 100 30 Other 59.7 23.8 13.2 3.4 100 52.1 33.7 13.6 .5 100 31 Joint2 70.8 18.7 8.7 1.7 100 72.0 23.6 3.9 .5 100 32 120 or more 73.7 14.7 9.7 1.9 100 74.3 19.9 4.8 .9 100 33 American Indian or Alaskan Native . . . 66.3 15.6 15.2 2.8 100 73.9 19.9 5.4 .8 100 34 Asian or Pacific Islander 69.1 17.4 10.9 2.5 100 69.6 22.5 5.8 2.1 100 35 Black 62.4 22.9 11.9 2.8 100 65.8 29.5 4.1 .6 100 36 Hispanic 66.1 19.4 11.9 2.6 100 62.7 33.1 3.3 .9 100 37 White 79.6 10.8 7.9 1.7 100 82.3 13.6 3.5 .7 100 38 Other 62.1 21.8 13.0 3.1 100 60.4 26.1 12.0 1.4 100 39 Joint2 73.3 16.0 8.8 1.9 100 77.1 18.0 4.2 .8 100 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 40 Less than 10 73.7 14.8 9.7 1.8 100 74.1 20.7 4.6 .5 100 41 10-19 67.4 18.7 11.5 2.4 100 66.4 27.3 5.3 1.0 100 42 20-49 61.6 22.6 13.2 2.6 100 59.4 33.9 5.6 1.1 100 43 50-79 55.5 27.0 14.8 2.7 100 52.4 40.9 5.6 1.1 100 44 80-100 51.1 30.3 15.8 2.8 100 48.2 45.1 5.8 1.0 100 Income4 45 Low or moderate 56.2 26.9 14.5 2.5 100 54.2 39.9 5.1 .8 100 46 Middle 68.1 18.6 11.1 2.2 100 67.1 27.3 4.9 .7 100 47 Upper 71.8 15.5 10.6 2.2 100 71.9 21.8 5.2 1.0 100 Location5 48 Central city 63.8 21.2 12.7 2.4 100 62.1 32.1 5.0 .8 100 49 Non-central city 69.7 17.5 10.7 2.1 100 68.4 25.8 5.0 .7 100 NOTE. Applicant income ratio is applicant income as a percentage of MSA median. MSA 4. Census tracts are categorized by the median family income for the tract relative to the median is median family income of the metropolitan statistical area (MSA) in which the median family income for the MSA in which the tract is located. Categories are defined as property related to the loan is located. follows: Low or moderate income, median family income for census tract less than 80 percent 1. Loans backed by the Federal Housing Administration, the Department of Veterans of median family income for MSA; Middle income, median family income at least 80 percent Affairs, or the Farmers Home Administration. and less than 120 percent of MSA median; Upper income, median family income 120 percent 2. White and minority. and greater of MSA median. 3. MSA median is median family income of the metropolitan statistical area (MSA) in 5. For census tracts located in MSAs. which the property related to the loan is located. SOURCE. FFIEC, Home Mortgage Disclosure Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • September 1996 4.41 HOME LOANS SOLD By Purchaser and Characteristics of Borrower and Census Tract, 1995 Fannie Mae Ginnie Mae Freddie Mac FmHA Commercial bank CChhaarraacctteerriissttiicc Number Percent Number Percent Number Percent Number Percent Number Percent 1 All 974,528 100.0 630,742 100.0 589,130 100.0 4,832 100.0 109,889 100.0 BORROWER Racial or ethnic identity 2 American Indian or Alaskan Native .... 3,300 .4 1,984 .4 1,566 .3 13 .3 384 .4 3 Asian or Pacific Islander 33,327 3.8 7,648 1.6 16,320 3.1 116 2.7 1,996 2.0 4 Black 39,457 4.6 64,647 13.7 18,289 3.5 299 7.0 9,931 10.1 5 Hispanic 48,216 5.6 50,380 10.6 20,412 3.9 516 12.0 7,427 7.5 6 White 716,818 82.7 329,672 69.7 458,543 86.7 3,224 75.3 75,839 77.0 7 Other 6,444 .7 2,961 .6 3,370 .6 30 .7 710 .7 8 Joint 19,379 2.2 15,860 3.4 10,639 2.0 85 2.0 2,151 2.2 9 Total 866,941 100.0 473,152 100.0 529,139 100.0 4,283 100.0 98,438 100.0 Income ratio (percentage of MSA median) 10 Less than 80 153,849 20.9 135,399 35.4 80,395 19.3 1,197 43.4 23,040 25.4 11 80-99 112,007 15.2 83,691 21.9 60,698 14.6 711 25.8 14,534 16.0 12 100-119 110,791 15.1 65,105 17.0 63,857 15.3 352 12.8 12,920 14.2 13 120 or more 359,305 48.8 98,646 25.8 212,033 50.8 499 18.1 40,296 44.4 14 Total 735,952 100.0 382,841 100.0 416,983 100.0 2,759 100.0 90,790 100.0 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 15 Less than 10 427,204 53.7 200,880 37.6 271,474 60.3 1,779 47.2 46,625 49.6 16 10-19 168,129 21.1 127,528 23.9 90,454 20.1 983 26.1 19,570 20.8 17 20-49 130,785 16.4 136,795 25.6 62,239 13.8 702 18.6 17,851 19.0 18 50-79 42,855 5.4 41,075 7.7 16,789 3.7 175 4.6 5,291 5.6 19 80-100 26,561 3.3 27,526 5.2 9,162 2.0 134 3.6 4,681 5.0 20 Total 795,534 100.0 533,804 100.0 450,118 100.0 3,773 100.0 94,018 100.0 Income 21 Low or moderate 80,537 10.1 88,904 16.4 38,772 8.6 638 16.9 12,459 13.1 22 Middle 397,045 49.9 315,846 58.4 228,226 50.7 2,223 58.9 47,562 50.0 23 Upper 317,978 40.0 135,715 25.1 183,183 40.7 916 24.3 35,158 36.9 24 Total 795,560 100.0 540,465 100.0 450,181 100.0 3,777 100.0 95,179 100.0 Location 25 Central city 299,737 37.6 242,436 44.8 158,869 35.3 979 25.9 37,672 39.5 26 Non-central city 496,568 62.4 298,320 55.2 291,712 64.7 2,799 74.1 57,636 60.5 27 Total 796,305 100.0 540,756 100.0 450,581 100.0 3,778 100.0 95,308 100.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A75 4.41 HOME LOANS SOLD By Purchaser and Characteristics of Borrower and Census Tract, 1995—Continued Savings bank or savings and loan Life insurance company Affiliate association CChhaarraacctteerriissttiicc Number Percent Number Percent Number Percent Number 1 All 44,587 100.0 6,433 100.0 389,980 100.0 1,036,012 BORROWER Racial or ethnic identity 1 American Indian or Alaskan Native .... 86 .2 18 .3 1,741 .5 4,193 3 Asian or Pacific Islander 766 1.9 123 2.0 7,530 2,2 24,089 4 Black 2,782 7.0 726 11.7 26,491 7.7 94,321 5 Hispanic 1,568 3.9 406 6.6 18,268 5.3 70,252 6 White 33,549 84.4 4,757 76.8 279,339 81.1 716,203 7 Other 233 .6 34 .5 3,356 1.0 10,302 8 Joint 753 1.9 128 2.1 7,628 2.2 25,228 9 Total 39,737 100.0 6,192 100.0 344,353 100.0 944,588 Income ratio (percentage of MSA median) 10 Less than 80 8,377 23.0 1,605 28.3 71,678 27.6 236,104 11 80-99 5,361 14.7 968 17.1 34,586 13.3 127,709 12 100-119 5,036 13.8 843 14.9 29,687 11.4 104,946 13 120 or more 17,606 48.4 2,246 39.7 123,716 47.6 307,577 14 Total 36,380 100.0 5,662 100.0 259,667 100.0 776,336 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 15 Less than 10 24,295 63.8 3,069 52.7 156,068 5533..99 362,771 16 10-19 6,498 17.1 1,214 20.9 65,387 22.6 188,767 17 20-49 4,562 12.0 928 15.9 47,479 16.4 176,808 18 50-79 1,448 3.8 359 6.2 12,651 4.4 57,415 19 80-100 1,253 3.3 252 4.3 8,038 2.8 49,423 20 Total 38,056 100.0 5,822 100.0 289,623 100.0 835,184 Income 21 Low or moderate 4,573 12.0 783 13.5 36,422 12.4 132,639 22 Middle 18,334 48.0 3,076 52.9 137,963 47.0 436,930 23 Upper 15,302 40.0 1,956 33.6 119,015 40.6 269,138 24 Total 38,209 100.0 5,815 100.0 293,400 100.0 838,707 Location 25 Central city 12,941 33.8 2,181 37.5 115,675 39.4 345,319 26 Non-central city 25,314 66.2 3,641 62.5 177,954 60.6 494,282 27 Total 38,255 100.0 5,822 100.0 293,629 100.0 839,601 Note. Includes securitized loans. See also notes to table 4.40. FmHA—Farmers Home Administration Fannie Mae—Federal National Mortgage Association Affiliate—Affiliate of institution reporting the loan Ginnie Mae—Government National Mortgage Association SOURCE. FFIEC, Home Mortgage Disclosure Act. Freddie Mac—Federal Home Loan Mortgage Corporation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Index to Statistical Tables References are to pages A3-A75 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Deposits—Continued Agricultural loans, commercial banks, 19, 20 Interest rates, 15 Assets and liabilities (See also Foreigners) Turnover, 16 Banks, by classes, 17-21 Discount rates at Reserve Banks and at foreign central banks and Domestic finance companies, 33 foreign countries (See Interest rates) Federal Reserve Banks, 10 Discounts and advances by Reserve Banks (See Loans) Financial institutions, 25 Dividends, corporate, 32 Foreign banks, U.S. branches and agencies, 21, 64-67 Automobiles EMPLOYMENT, 42 Consumer installment credit, 36 Eurodollars, 23 Production, 44, 45 BANKERS acceptances, 10, 11, 19-22, 23 FARM mortgage loans, 35 Bankers balances, 17-21, 64-67. (See also Foreigners) Federal agency obligations, 5, 9, 10, 11, 28, 29 Bonds (See also U.S. government securities) Federal credit agencies, 30 New issues, 31 Federal finance Rates, 23 Debt subject to statutory limitation, and types and ownership Branch banks, 21 of gross debt, 27 Business activity, nonfinancial, 42 Receipts and outlays, 25, 26 Business loans (See Commercial and industrial loans) Treasury financing of surplus, or deficit, 25 Treasury operating balance, 25 CAPACITY utilization, 43 Federal Financing Bank, 30 Capital accounts Federal funds, 6, 19, 20, 21, 23, 25 Banks, by classes, 17 Federal Home Loan Banks, 30 Federal Reserve Banks, 10 Federal Home Loan Mortgage Corporation, 30, 34, 35 Central banks, discount rates, 61 Federal Housing Administration, 30, 34, 35 Certificates of deposit, 23 Federal Land Banks, 35 Commercial and industrial loans Federal National Mortgage Association, 30, 34, 35 Commercial banks, 19, 20 Federal Reserve Banks Weekly reporting banks, 19-21 Condition statement, 10 Commercial banks Discount rates (See Interest rates) Assets and liabilities, 17-21 U.S. government securities held, 5, 10, 11, 27 Commercial and industrial loans, 17-21 Federal Reserve credit, 5, 6, 10, 11 Consumer loans held, by type and terms, 36 Federal Reserve notes, 10 Deposit interest rates of insured, 15 Federally sponsored credit agencies, 30 Loans sold outright, 20 Finance companies Real estate mortgages held, by holder and property, 35, 74 Assets and liabilities, 33 Time and savings deposits, 4 Business credit, 33 Commercial paper, 22, 23, 33 Loans, 36 Condition statements (See Assets and liabilities) Paper, 22, 23 Construction, 42, 46 Financial institutions, loans to, 19, 20, 21 Consumer installment credit, 36 Float, 5 Consumer prices, 42 Flow of funds, 37^1 Consumption expenditures, 49, 50 Foreign banks, assets and liabilities of U.S. branches and agencies, Corporations 20, 21, 64-67 Profits and their distribution, 32 Foreign currency operations, 10 Security issues, 31, 61 Foreign deposits in U.S. banks, 5, 20 Cost of living (See Consumer prices) Foreign exchange rates, 62 Credit unions, 36 Foreign trade, 51 Currency in circulation, 5,13 Foreigners Customer credit, stock market, 24 Claims on, 52, 55, 56, 57, 59 Liabilities to, 20, 51, 52, 53, 58, 60, 61 DEBITS to deposit accounts, 16 Debt (See specific types of debt or securities) GOLD Demand deposits Certificate account, 10 Banks, by classes, 17-21 Stock, 5, 51 Ownership by individuals, partnerships, and Government National Mortgage Association, 30, 34, 35 corporations, 20, 21 Gross domestic product, 48 Turnover, 16 Depository institutions Reserve requirements, 8 HOME Mortgage Disclosure Act Reserves and related items, 4, 5, 6, 12 Applications for home loans, 68-73 Deposits (See also specific types) Home loans by lenders, 68, 74, 75 Banks, by classes, 4, 17—21 Residential lending by financial institutions, 68, 71, 74, 75 Federal Reserve Banks, 5, 10 Housing, new and existing units, 46 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A77 INCOME, personal and national, 42, 48, 49 REAL estate loans Industrial production, 42, 44 Banks, by classes, 19, 20, 35 Installment loans, 36 Terms, yields, and activity, 34 Insurance companies, 27, 35 Type of holder and property mortgaged, 35 Interest rates Repurchase agreements, 6 Bonds, 23 Reserve requirements, 8 Consumer installment credit, 36 Reserves Deposits, 15 Commercial banks, 17 Federal Reserve Banks, 7 Depository institutions, 4, 5, 6, 12 Foreign central banks and foreign countries, 61 Federal Reserve Banks, 10 Money and capital markets, 23 U.S. reserve assets, 51 Mortgages, 34 Residential mortgage loans, 34, 68-75 Prime rate, 22 Retail credit and retail sales, 36, 42 International capital transactions of United States, 50-61 International organizations, 52, 53, 55, 58, 59 SAVING Inventories, 48 Flow of funds, 37-41 Investment companies, issues and assets, 32 National income accounts, 48 Investments (See also specific types) Savings institutions, 35, 36, 37 Banks, by classes, 17-21 Savings deposits (See Time and savings deposits) Commercial banks, 4, 17-21 Securities (See also specific types) Federal Reserve Banks, 10, 11 Federal and federally sponsored credit agencies, 30 Financial institutions, 35 Foreign transactions, 60 New issues, 31 LABOR force, 42 Prices, 24 Life insurance companies (See Insurance companies) Special drawing rights, 5, 10, 50, 51 Loans (See also specific types) State and local governments Banks, by classes, 17-21 Deposits, 19, 20 Commercial banks, 17-21, 74, 75 Holdings of U.S. government securities, 27 Conventional, 68, 71 New security issues, 31 Fannie Mae, 74 Ownership of securities issued by, 19, 21 Federal Reserve Banks, 5, 6, 7, 10, 11 Rates on securities, 23 FHA, 68, 71 Stock market, selected statistics, 24 Financial institutions, 35 Stocks (See also Securities) FmHA, 68, 71, 74 New issues, 31 Freddie Mac, 74 Prices, 24 Ginnie Mae, 74 Home purchase, 72 Student Loan Marketing Association, 30 Insured or guaranteed by United States, 34, 35 VA, 68, 71 TAX receipts, federal, 26 Thrift institutions, 4. (See also Credit unions and Savings MANUFACTURING institutions) Capacity utilization, 43 Time and savings deposits, 4, 13, 15, 17-21 Production, 43, 45 Trade, foreign, 51 Margin requirements, 24 Treasury cash, Treasury currency, 5 Member banks (See also Depository institutions) Treasury deposits, 5, 10, 25 Federal funds and repurchase agreements, 6 Treasury operating balance, 25 Reserve requirements, 8 UNEMPLOYMENT, 42 Mining production, 45 U.S. government balances Mobile homes shipped, 46 Commercial bank holdings, 17-21 Monetary and credit aggregates, 4, 12 Treasury deposits at Reserve Banks, 5, 10, 25 Money and capital market rates, 23 U.S. government securities Money stock measures and components, 4, 13 Bank holdings, 17-21, 27 Mortgages (See Real estate loans) Dealer transactions, positions, and financing, 29 Mutual funds, 32 Federal Reserve Bank holdings, 5, 10, 11, 27 Mutual savings banks (See Thrift institutions) Foreign and international holdings and transactions, 10, 27, 61 NATIONAL defense outlays, 26 Open market transactions, 9 National income, 48 Outstanding, by type and holder, 27, 28 Rates, 23 OPEN market transactions, 9 U.S. international transactions, 50-62 Utilities, production, 45 PERSONAL income, 49 Prices VETERANS Administration, 34, 35 Consumer and producer, 42, 47 Stock market, 24 Prime rate, 22 WEEKLY reporting banks, 17-21 Producer prices, 42, 47 Wholesale (producer) prices, 42, 47 Production, 42, 44 Profits, corporate, 32 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 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 DIVISION OF BANKING CHARLES S. STRUCKMEYER, Assistant Director SUPERVISION AND REGULATION ALICE PATRICIA WHITE, Assistant Director RICHARD SPILLENKOTHEN, Director JOYCE K. ZICKLER, Assistant Director STEPHEN C. SCHEMERING, Deputy Director JOHN J. MINGO, Senior Adviser WILLIAM A. RYBACK, Associate Director GLENN B. CANNER, Adviser HERBERT A. BIERN, Deputy Associate Director ROGER T. COLE, Deputy Associate Director DIVISION OF MONETARY AFFAIRS JAMES I. GARNER, Deputy Associate Director DONALD L. KOHN, Director HOWARD A. AMER, Assistant Director DAVID E. LINDSEY, Deputy Director GERALD A. EDWARDS, JR., Assistant Director BRIAN F. MADIGAN, Associate Director STEPHEN M. HOFFMAN, JR., Assistant Director RICHARD D. PORTER, Deputy Associate Director JAMES V. HOUPT, Assistant Director VINCENT R. REINHART, Assistant Director JACK P. JENNINGS, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board MICHAEL G. MARTINSON, Assistant Director RHOGER H PUGH, Assistant Director DIVISION OF CONSUMER SIDNEY M. SUSSAN, Assistant Director AND COMMUNITY AFFAIRS MOLLY S. WASSOM, Assistant Director GRIFFITH L. GARWOOD, Director WILLIAM SCHNEIDER, Project Director, GLENN E. LONEY, Associate Director National Information Center DOLORES S. SMITH, Associate Director MAUREEN P. ENGLISH, Assistant Director IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

80 Federal Reserve Bulletin • September 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

A81 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

A82 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, 1995-96. 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 Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF 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

A83 STAFF STUDIES: Only Summaries Printed in the 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, BULLETIN Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary Studies and papers on economic and financial subjects that are of Ann Taylor. March 1992. 37 pp. general interest. Requests to obtain single copies of the full text or to be added to the mailing list for the series may be sent to 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by James T. Fergus and John L. Goodman, Jr. July 1993. Publications Services. 20 pp. 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF Staff Studies 1-157 are out of print. MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- 1993. 18 pp. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by PRODUCTS, by Mark J. Warshawsky with the assistance of Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Dietrich Earnhart. September 1989. 23 pp. January 1994. Ill pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING Donald Savage. February 1990. 12 pp. PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, 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. 21pp. 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A84 Maps of the Federal Reserve System 1 M M M M g ^J ^ BO^ON MINNEAPOLIS • WMSMBBBB. llpll II 12 — ^ W A A II i ^ ^ • NEW YORK CHICAGO • CLEVELAND PSLADELPHIA • SAN FRANCISCO 10 . „ 4 g RICHMOND KANSAS CITY H ^ 5 ST. LOUIS JM I!IIIIHOIS PIS;BSrii!: iiilllillllliilll IIIIIIIH1 11 • ^ATLANTA 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

A85 1-A 2-B 3-C 4-D 5-E Baltimore MD Ii /CT VA • VT jtf NH •Cincinnati Buffalo MA ^ / I / NY CT NJ BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H •Nashville KY Birmingham^ M * " '), in / Louisville MS LA Jacksonville •Memphis New Orleans Little > Miami ATLANTA CHICAGO ST. LOUIS 9-1 MT MINNEAPOLIS 10-J 12-L WY 1 w lu Omaha* ^ MO KS Denver ALASKA WA • Seattle Oklahoim City Portland OK OR ) KANSAS CITY D> N VL 11-K Salt iSke City U K ( GJGG •T os Anp HAWAII * AZ DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A86 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 Florine Mark David R. Allardice1 ST. LOUIS 63166 John F. McDonnell Thomas C. Melzer Susan S. Elliott W. LeGrande Rives Little Rock 72203 Janet M. Jones Robert A. Hopkins Louisville 40232 John A. Williams Thomas A. Boone Memphis 38101 John V. Myers John P. Baumgartner MINNEAPOLIS 55480 Jean D. Kinsey Gary H. Stern David A. Koch Colleen K. Strand Helena 59601 Lane W. Basso John D.Johnson KANSAS CITY 64198 Herman Cain Thomas M. Hoenig A. Drue Jennings Richard K. Rasdall Denver 80217 Peter I. Wold Carl M. Gambs1 Oklahoma City 73125 Barry L. Eller Kelly J. Dubbert Omaha 68102 LeRoy W. Thorn Harold L. Shewmaker DALLAS 75201 Cece Smith Robert D. McTeer, Jr. Roger R. Hemminghaus Helen E. Holcomb El Paso 79999 Patricia Z. Holland-Branch Sammie C. Clay Houston 77252 Issac H Kempner III Robert Smith, III1 San Antonio 78295 Carol L. Thompson James L. Stull1 SAN FRANCISCO .... 94120 Judith M. Runstad Robert T. Parry James A. Vohs John F. Moore Los Angeles 90051 Anita E. Landecker Mark Mullinix1 Portland 97208 Ross R. Runkel Raymond H. Laurence1 Salt Lake City 84125 Gerald R. Sherratt Andrea P. Wolcott Seattle 98124 George F. Russell, Jr. Gordon Werkema3 •Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; East Rutherford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; Milwaukee, Wisconsin 53202; and Peoria, Illinois 61607. 1. Senior Vice President. 2. Assistant Vice President. 3. Executive Vice President Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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 fiWMWMNNftl A Consumer's Guide to Business Mortgage Credit Lock-Ins for Women, Minorities, and Small Businesse SHOP The Card You Pick Can Save You Money 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 US. 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